Westminster Hall

Tuesday 16th December 2014 Westminster Hall

Tuesday 16 December 2014

[Mr David Crausby in the Chair]

UK Company Supply Chains

Tuesday 16th December 2014 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Damian Hinds.)

09:30

[Ian Lavery (Wansbeck) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Crausby.

This issue—human rights abuses in the UK supply chain—is an extremely live one. Whether it is the children of the Colombian coalfields, abuse in the sweatshop economies in Bangladesh, the exploitation of the workers in India in relation to the blood bricks, or the migrant workers in Qatar working in construction in the most inhumane of conditions, and whether it is British American Tobacco, BHP Billiton, Rio Tinto, Glencore or many other multinationals, it is essential that everyone works together within the supply chain authorities to eradicate violations of human rights, from one end of the chain to the other.

We have an absolute moral duty to tackle and stamp out legally the human rights abuses that we see on an almost daily basis. They take many forms. We see women forced into prostitution, and children, men and often entire families forced to work in agriculture, domestic work, factories or sweatshops producing goods for global supply chains. As I say, this abuse needs to be stamped out.

In recent years, the extent of human rights abuses in the overseas supply chains of UK companies has come to light in a way that has emphasised the urgency around tackling modern slavery. At this early stage of the debate, I want to place on the record my thanks to Unite the union for its outstanding work on such issues. Had it not been for Unite, my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) and I would not have joined the fact-finding trip to the tobacco fields of North Carolina, which I will now discuss.

My hon. Friend and I were invited as part of a delegation to North Carolina by the American farm workers’ union, the Farm Labor Organizing Committee. We had the opportunity to witness at first hand some of the many human rights abuses endured by tobacco industry workers in the fields of America. We heard disturbing stories of what is essentially daily life for them—instances of child labour, sexual exploitation of women and human trafficking. It was a world away from what we would expect in a developed country and the so-called “land of the free”, which is one of the richest nations in the world.

The working conditions that we saw were absolutely atrocious, with unbelievably long hours of manual labour in unbearable heat; squalid living conditions, which mean workers have a lower quality of life than inmates in UK prisons; and employers showing a total disregard for basic health and safety regulations by not providing gloves to workers picking tobacco plants, so that their skin is exposed to the toxic nicotine, which meant that many of them develop green tobacco sickness, an affliction with symptoms including nausea, intense headaches, vomiting and insomnia.

We visited about five farms. We also met many people working in the tobacco fields; men, women and even children. I have to say that it was quite harrowing. We listened to the testimonies of many people who were working in the fields. I will take just a little time this morning to outline what some of these people had to say. They were workers who were being exploited in the tobacco fields.

There was Hector, aged 49, who was from Wilson county. He said:

“I had an accident and the farmer didn’t take responsibility. I don’t agree with that…they made me suffer there in the field. I was working the tobacco and a harvesting machine cut off part of my finger. The farmer told me that someone was going to take me”—

to the hospital—

“but the hours went by and I couldn’t tell if he was telling me straight and there I was with my finger bleeding all the while.”

We visited Hector where he lived and at that time his hand was bandaged but he still had not been seen by anyone, days after the accident. At the same time, he was not being paid any wages, even though the accident was because of the negligence of his employer in the tobacco field. Many people were scared to speak out, in case there was retaliation by their employer; that is a huge issue in many of the places that I have mentioned.

There was also Sandra, who is only 13 and from Wayne county. She said:

“I started working in tobacco when I was seven. I work in tobacco because I’m thinking of my future. I want to go to college. My parents have a hard time paying for high school…and I have younger brothers and sisters that want to go to college, too. It’s important for me to work to help my parents, but there are many problems.”

There was Lorenzo, who was 26 and from Nash county. He said:

“If you have a contract”—

commonly known as an H2A visa—

“they treat you differently, but for us they lower the weekly wage. There’s no bathroom and if there is, you can’t use them; you can’t even go in because they are so dirty, and they don’t clean them.”

He said that when the inspectors come around the employers

“bring the bathrooms”—

that is, the portable bathrooms—

“and clean, too, but the inspectors leave and nothing changes”.

So the employers change things when the inspectors arrive to make them look an awful lot better than the dismal situation that workers usually face.

We visited some of these camps and saw some of these toilets. Can you imagine the squalid conditions that these people are living in? I said that those conditions were worse than those in UK prisons. However, to say that is a bit of a nonsense; you would not keep hens on an allotment in places such as those where these human beings reside, seven days a week and 24 hours a day. They were ashamed of the conditions themselves. And to see the toilets, one after another without any privacy shields between them for example, not cleaned for months on end—what sort of way is that to treat ordinary human beings?

We spoke to Gloria, who was 23 and from Duplin county. She said:

“Women with children have it harder. We have no support. If you go out with the contractor, in every way you get treated better. If you go out with him, you’ll get a lot of hours in the good jobs and if you don’t, your pay will suffer. We have to take care of our children! All I ask is that women get treated equally as men in the fields.”

Just for clarification, when she said that women have to “go out” with the contractor, that is what she means—women must give the contractor sexual favours to ensure that they get equality in employment with the men in the tobacco fields. It is an absolute disgrace that that is continuing in what is, I must add, the land of milk and honey.

There was also Maria, who was 26 and from Greene county. She said:

“We get pesticides sprayed near us when we work and we don’t know what they are. This season—”

the 2014 season—

“I got sick from the chemicals and one day I was sick in the bathroom and the supervisor came and told me I had to get back to work. When I couldn’t, he told me he didn’t need me anymore and that was my last day working there.”

Those are a few of the testimonies we heard.

There was also the case, which has become well-known now in North Carolina, of a chap who was feeling pretty poorly after working in the 110° or 120° temperatures in the tobacco fields. The farmer said, “Well, you cannot leave: this is your job,” and sent him to sit under a tree in the shadows in the hope that he would recover. At the end of the day, everybody went home and did not realise that this chap had not come back to the camp with them. They were not too concerned, but as the days went on they realised that this chap had not come back and were slightly worried. So they decided to go back and look, following his traces from where he was in the tobacco field to the tree under which he was supposed to recover, only to find that his corpse was still sitting there, decomposed. Nobody had been to see whether he was recovering. That is why we raise these issues today.

Of course, a lack of regulation causes these poor conditions. Here we have a catalogue of atrocities that amounts to less of an American dream and more of an American nightmare. This is largely due to the lack of regulation in the tobacco farming industry. Labour standards are generally weaker in America. This, coupled with the inadequate resources provided at both state and federal level, means that it is near impossible to ensure that employment rights are enforced.

It is equally damaging that agricultural workers are excluded from the National Labor Relations Act, which denies them the fundamental right of the freedom of association. With no collective bargaining structures in place and with the precariousness of their employment, workers see no alternative to withstanding the appalling conditions and abusive treatment, particularly as many of them are undocumented workers, originally from central American countries, such as Guatemala and El Salvador, with the overwhelming majority hailing from Mexico.

FLOC, with its president Baldemar Velasquez, has for many years been playing a leading role in trying to get these abuses eradicated. It estimates that at least 20,000 tobacco farm workers are not unionised, in an industry where joining a union would be essential in providing the necessary protection in the workplace. With this in mind, it is of the utmost concern that, as workers in those tobacco fields supply companies such as British American Tobacco, many people in this country could be unwittingly supporting this form of modern slavery.

My hon. Friends the Members for Paisley and Renfrewshire North and for Birmingham, Erdington (Jack Dromey) met representatives from BAT on 29 October, and although BAT expressed sympathy with the workers in question, it refused to be proactive in regulating its own practices, as confirmed in writing in its letter of 10 November 2014. BAT has also ignored calls for it to use its influence as an owner and customer of Reynolds American to urge that company to sign up to the Dunlop Commission, a mechanism already in place in America, which would give guarantees to tobacco farm workers on Reynolds American contract farms, a source of tobacco for BAT.

BAT was prepared to meet colleagues who had been on the delegation, and others, but there seems to be some difference in views about how that meeting concluded. My hon. Friend the Member for Paisley and Renfrewshire North believes that although BAT listened it would not be happy to do very much about using its influence, as I have suggested. BAT says that the meeting was quite helpful. Does the Minister think that this is the way that a modern company should operate, waiting for legislation to compel it to protect employment rights and the human rights of tobacco farm workers on contract farms in its US supply chain?

Urgency is needed to tackle this issue. Worryingly, stories such as those I have mentioned from North Carolina are not uncommon. The reality is that, over the last decade, current measures have failed to tackle modern slavery in our supply chains. We have seen first hand how the lack of regulation of the industry in America breeds worker exploitation, so the focus must be on imposing regulations on all companies throughout the world that feed into supply chains in Britain. Companies should have to report on their working conditions and those of their suppliers, to ensure that we have transparency in our supply chains and that we can help reduce the risk of modern slavery.

We should be focusing on this issue through the Modern Slavery Bill, which is currently going through Parliament. We need to look at procedures for the investigation and monitoring of modern slavery risks, both in UK organisations and their global supply chains; we need support and access to remedy for victims of forced labour and modern slavery; and we need to train staff and suppliers to draw on expertise and advice to remove confusion over lines of accountability with companies down the chain. We need greater clarity in lines of accountability of businesses of all sizes, which could be achieved through introducing minimum reporting standards, effective scrutiny bodies and enforced penalties. These functions should be monitored as part of the anti-slavery commissioner’s duties.

Like most hon. Members in this House, I welcome the vital role played by the Gangmasters Licensing Authority in managing and mitigating risks of slavery in the food and agricultural sectors, but I urge its expansion to deal with other high-risk areas, such as fisheries, apparel, construction, cleaning, care and hospitality. All authorities responsible for inspection, monitoring and enforcement of labour standards should work proactively to identify abuses of labour standards and act effectively if modern slavery is found. Truly to tackle modern slavery, the Bill must address this.

Thousands of temporary workers in the UK fall between the cracks of labour inspection and regulation because they are not covered by the GLA. UK labour inspectorates should take proactive measures to ensure protection of workers from abusive and fraudulent recruitment practices. Companies should also seek to ensure that migrant workers do not pay a recruitment fee, including in their country of origin. These fees put them in debt bondage, which is a critical factor in forced labour and trafficking for labour exploitation.

In conclusion, I hope that the Minister shares the view that I have wholeheartedly expressed here, which is that Britain should not tolerate human rights abuses in our overseas supply chains or indeed modern slavery in any form—a view shared by many of my hon. Friends in the House. Does the Minister agree with me that freedom of association agreements would make all the difference in improving the rights of employees of multinational companies? Will the Minister support the extension of the GLA and its use as a model for good industrial relations practices?

Greater scrutiny and regulation in our supply chains are long overdue. We need to take a stand on the world stage to show that Britain will not profit from exploitation. With this in mind and Britain’s industrial reputation at stake, I invite the Minister to say why the UK does not insist on proper legally binding corporate social responsibility reporting, and why we do not push harder for better regulation at the international level to hold multinational companies to account. I finish by saying that anyone who saw the things that my hon. Friend the Member for Paisley and Renfrewshire North and I saw in the tobacco fields of North Carolina would be truly ashamed that the supply chain in the UK is contributing to modern-day slavery. Those individuals were treated like animals and worked like animals.

09:50

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

I congratulate my hon. Friend the Member for Wansbeck (Ian Lavery) on securing this debate. He has eloquently spoken about what we saw in North Carolina, which was depressing. I put on record my thanks to president Velasquez of the Farm Labor Organizing Committee and his team of volunteers who work tirelessly every day to try to identify and expose what is happening in that part of America. I also put on record my thanks to the local communities, the Churches and the faith groups that we met in North Carolina. They told us clearly that they do not want British American Tobacco, Reynolds or any of these companies operating in their communities and treating people in the way that they do.

My hon. Friend mentioned the meeting that I and others had with BAT. We were offered all the empathy in the world, but nothing of substance to help people. We have multinational companies that are quite prepared to spend hundreds of thousands, if not millions of dollars in courts trying to defend themselves against having to give workers a say at the workplace so that they can lead a decent life, with respect. Those companies would rather pay fancy lawyers hundreds of thousands, if not millions of dollars to continue to treat their workers in the way that they do. From what we have seen, the situation is depressing.

Another company that is coming on to the radar for behaving in that way is the bus company National Express. It is well respected and well established in the UK, but when it goes abroad to America, the first thing it tries to do is indulge in union busting, which is a complete waste of people’s time. The most important thing from a British perspective is that the company has the contract to take kids in America to and from school. A number of safety concerns have been raised, and the last thing we want is a UK company being responsible for fatalities in America. Anyone who complains or highlights those safety issues suddenly finds themselves unemployed. National Express is a well-respected, well-established company, but when it goes abroad I am reminded of the television programme, “An Idiot Abroad”. That is exactly what it is. It behaves like an idiot and does nothing until such time as legislation forces it to, which is not a progressive way forward.

I will focus on the Blood Bricks campaign—it is a difficult name to say and I have been caught out a few times by mispronouncing it—and early-day motion 362. Union Solidarity International, working in partnership with Prayas, ActionAid and Thompsons solicitors, has developed an international campaign to highlight forced labour and child labour in the global brick construction sector. The Blood Bricks campaign focuses on India, where trade union organisations, non-governmental organisations and human rights campaigners have been organising, educating and mobilising thousands of workers to raise wages and access to public services and to combat child labour and sexual exploitation.

The issues of forced labour are not restricted to India. Recent case examples in Brazil and Qatar highlighted problems with the work on the infrastructure for the football World cups of 2014 and 2022. However, bonded labour, forced labour, child labour and infringements of domestic and international legislation are widespread in India. According to the International Labour Organisation, almost 21 million people across the world are victims of forced labour: 11.4 million women and girls and 9.5 million men and boys. Those who exact forced labour generate vast illegal profits. Domestic work, agriculture, construction, manufacturing and entertainment are among the sectors of most concern. Migrant workers and indigenous people are particularly vulnerable to forced labour.

The early-day motion, which stands in my name and has a significant number of signatures, focuses on the workers who were faced with choosing which limb they wanted cut off when they tried to escape from bonded labour, as featured in a BBC story by Humphrey Hawksley only a few weeks ago. The USi has identified a company operating in the UK with ties to bonded labour. Those workers were said to have been working for Jai and Raj Group, a subcontractor of Indian engineering and construction giant Larsen and Toubro Ltd. In 2010, Renfrew firm Howden Group entered into a multimillion pound joint venture with L&T to manufacture equipment for power plants. The USi has written to Howden Group, alerting it to the allegations that have been passed to the Indian Government’s Ministry of Labour and Employment, but its response is completely inadequate. The Howden Group, despite being controlled by L&T on this site—a fact it acknowledges—says we should raise our complaints directly with Larsen and Toubro.

The workers, who are from the state of Uttar Pradesh, were said to have been lured to work on a construction site in Delhi by an advance of 1,000 rupees, which is approximately £10.26, and promised wages of 12,000 rupees, which is £123.08 a month. We believe that the allegations, which potentially implicate L&T—it has major operations in the UK—are a serious breach of domestic and international law. If companies want to operate in the UK, that must come at the price of proactively ensuring that their supply chains are free from slavery. UK companies operating around the world have a legal duty to uphold the law.

In a statement, Howden confirmed that it was in a joint venture with Larsen and Toubro in the power industry in India, but added:

“However, we are not aware of any issues around bonded or forced labour (or allegations thereof) in connection with L&T or a subcontractor of L&T in India.”

A spokesman for L&T denied the allegations of bonded labour and said the company had the highest standards of labour welfare at all establishments and job sites, and was compliant with Indian labour laws and Acts. He added:

“Among other rules and regulations, there are specific checks in place that prohibit the use of bonded labour. We understand from our project site that we hire various equipment from the agency (Jai and Raj), and confirm that no bonded labour is deployed at our project site, directly or indirectly.”

However, USi has evidence directly to the contrary, which it believes to be the tip of the iceberg of companies operating in the UK with ties to modern-day slavery and of UK companies operating in countries such as India that are implicated in those practices. That is why we need a robust response.

Analysis of the records of workers across three states shows that average wages over the working period of six months range between $2 and $3 a day. Those rates are significantly lower than the statutory minimum wage. Even to earn that level of wage, workers have to put in 12 or more hours of work every day. Even children are forced to work, as the food expenses given to workers are correlated with production levels. Lower production can simply mean that a family does not have enough to eat.

A significant change in law is needed. We need obligations with teeth. As the UN recognised in its guiding principles, it is not enough to encourage companies. If companies do not ensure respect, protection and human rights compliance, there must be proceedings that can be brought against them and remedies available through the courts.

Accordingly, the following obligations are a minimum for any company wanting to be registered to do business in the United Kingdom. First, they must do more than simply produce a report; there must be a positive obligation upon the company to proactively audit and carry out due diligence to ensure no human rights breaches within its operation in the United Kingdom or anywhere else it does business. Secondly, the same positive obligation must apply to subsidiary companies, joint ventures and supply chains, when the supply represents a minimum financial limit or a minimum percentage of a company’s turnover. Thirdly, any company that is linked to human rights breaches by its own operation, joint ventures, subsidiaries or supply chains will not be entitled to any Government subsidy or export credits. Fourthly, when a company knew or ought to have known about negligence or was recklessly indifferent to human rights breaches, it shall be liable to pay compensation for the extent of the human rights breaches against individuals in claims brought in the United Kingdom, irrespective of where the human rights breaches took place. Finally, deliberate, grossly negligent or reckless indifference to human rights breaches in such circumstances shall also be a basis upon which criminal proceedings may be brought against the company or individual directors.

I have referred to just one example, which is the tip of the iceberg of the total exploitation of vulnerable workers around the world. The British taxpayer is clearly saying that such exploitation should not be done in their name. They want no part of it. I ask the current Government, or whatever new Government we have after May, to take forward legislation to ensure that people are not exploited and that Britain and companies registered here play by the rules.

10:01

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

It is a pleasure to take part in this important debate. I thank my hon. Friend the Member for Wansbeck (Ian Lavery) for a good opening speech, in which he highlighted the severe exploitation of workers in the tobacco industry, particularly under British American Tobacco and R. J. Reynolds. My hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) made specific reference to the Blood Bricks campaign, and there are many other examples. My comments will centre on the food industry.

As the debate is focused on the UK’s supply chain, I will consider not only what we could do with regulations, but what we should tell supermarkets. There are effectively only six major buyers among the supermarkets and retailers in the UK. Those buyers sit in offices alongside people who are responsible for corporate responsibility and ethical trading. If they wanted to, they could drive a race to the top, rather than a race to the bottom. There is case for regulation, as I will describe in a moment, but there is also a case for going beyond regulation and actually telling companies, “You should be showing British leadership and world leadership.” We should go far beyond what regulations can deliver and seek far higher standards right along global supply chains.

[Anas Sarwar (Glasgow Central) (Lab)]

My hon. Friend mentioned global leadership. The UK shows such leadership with our international development objectives in many of the countries where supply chains are located. Does it not make sense for us—a partnership of our business community, our public and our Government—to ensure that we are helping development in such countries with measures such as fair pay, decent work and decent working standards?

[Huw Irranca-Davies]

I agree entirely. While today’s focus has been on the deplorable gross exploitation of workers in different parts of the world, there is also routine, daily exploitation through the suppression of wages and the absence of terms and conditions and protections. There is no recognition not only of unions, but of grievances in the workplace. Many workers experience a dampening effect that keeps them under control, having to do what the employer says because they have no voice.

My hon. Friend is right to suggest what our cross-Government international development approach should be on the food and clothing sectors and so on. We should not only look to see where regulation can work, but work with the sectors and say, “As an island nation, we have such global reach that we should be forcing standards up.” We should not be waiting to be told to do that; we should be working at it now, whether in Africa, India or South America. Ultimately, if we have products on our shelves that are being produced extremely cheaply, we know that somebody or something is being exploited somewhere. In the food sector, that could mean exploitation of animals, communities or workers.

I ask hon. Members to cast their minds back to 2004 when some of this debate began. In the Morecambe bay tragedy, 32 Chinese cockle pickers died out on the mud banks. It was a horrendous incident that woke the country up to something that we thought could not happen in a modern society. Chinese workers, trafficked by rogue gangmasters into the UK, were exploited in terms of pay and conditions and then placed in hazardous and ultimately fatal conditions. They were paid £5 for 25 kg of cockles while being left to the ravages of the tide. In the eyes of the gangmasters, they were expendable. As a result of a cross-party and cross-sector approach, many people came together and said, “We must deal with this,” and the Gangmasters Licensing Authority was established as a result.

The GLA has done tremendous work on tackling exploitation in a lean and mean way, but it is still happening. Back in 2012, two people were arrested in Kent following the exploitation 17 Lithuanian workers, who were being moved around the country in minivans to work. Sometimes they went without pay for weeks on end. Sometimes they received a pittance, but with deductions. They slept in a van as they travelled. When they were not sleeping in vans, they slept on floors in the most basic of portakabin accommodation. It was complete exploitation. What surprised people after it was picked up by the GLA was that it was occurring in our supposedly reputable food supply chain. It involved Noble Foods, which supplied companies such as McDonald’s, Tesco, Asda, M&S and Sainsbury’s. The products that Noble Foods supplied to those companies included—with no irony—chicken bearing the Freedom Food mark, yet people working for the company were being exploited and had no freedom themselves. It was debt bondage. They worked 17-hour shifts and slept on buses. It was crazy.

Well done to the GLA on that, but the point has already been well made by my colleagues that the GLA needs to follow its intelligence whenever exploitation is taking place. We know that it happens in the social care and construction sectors. It is a lean, mean organisation that now needs to target sectors where its nose suggests there is a stink and where exploitation is occurring.

I want to consider a more recent case that brings the issue right back home and into the produce that we take off the shelves and put on our plates. It has been reported that abuse and exploitation are widespread in the Thai fishing industry. It looks very much like slavery, but certainly involves human rights abuses. Thailand produces 4.2 million tonnes of seafood each year, 90% of which is exported. The main markets are the USA, the EU and the UK—we do like our seafood. The Guardian reported this year that people were forced to work 20 hours a day and endured regular beatings if they complained. They received one plate of rice a day to keep them going. People were purchased by boat captains from brokers for between £450 and £640—direct, old-fashioned slavery and exploitation of human beings. At every stage officials were bribed, so that the slaves could be brought in. The Guardian reported that a slave trafficker called the Thai police “business partners”, while the people forced to do the work were seen as expendable. Kevin Bales, an anti-trafficking activist, estimates that slaves cost 95% less than they did at the height of the 19th-century slave trade.

The vessels that use those slaves each year catch roughly 350,000 tonnes of so-called “trash fish”, turned into fishmeal for multinationals such as CP Foods, which supplies major retailers in the UK, including Asda, Iceland, Tesco, Morrisons and the Co-op. Many of those retailers—I come back to the point about the power of the retailers and the six major buyers in the UK—were not aware of what was going on, but many people would say, “You did not show due diligence in looking at what was happening in your supply chain.” The case has woken many retailers up, but the question is, why did it take that to wake them up?

CP Foods has stated that it requires its factories to buy trash fish only from legal and licensed boats. Captains, however, often fail to record where their fish comes from, so how can we have a trail for where the fish is being purchased? Tesco says that it regards slavery as unacceptable, and it is working with international organisations such as the ILO to achieve a broader change in the Thai fishing industry. All the retailers who were caught out have responded rigorously, in part to deal with reputational damage.

Exploitation remains a major concern. The two biggest industries in which exploitation, trafficking and slave labour are rife are the garment industry and the food industry. A tremendous amount could be done by the British food sector. My hon. Friends have already mentioned asks that go beyond where the Government are with the Modern Slavery Bill. We want to see elements from the Ethical Trading Initiative brought forward. We want to see comparability between different companies on reporting along the long line of their supply chains; we need to be able to compare Marks & Spencer, Tesco and everyone else in the UK—apples with apples, not apples with pears. We want to see directors having individual fiduciary duties to ensure the accuracy of reporting; we do not want another Thai fishing industry exploitation case to come up and a director to say, “I knew nothing about it. I did my best, but someone lower down the chain is responsible”—that is not good enough. Things have to stop right at the top; leadership has to come from the top. We also want not only large public, but privately listed companies included.

A lot more can be done, not only with regulation, but by working with such companies, so that we go way beyond regulation and so that the UK shows real leadership in ending exploitation in the food sector and every other sector mentioned by my colleagues. Consumers can also play a role, because the consumer voice, as we have seen in recent history, frequently shames sectors into taking action. Let us get on with it.

10:13

[Chris Williamson (Derby North) (Lab)]

It is a pleasure to be serving under your chairmanship this morning, Mr Crausby.

I congratulate my hon. Friend the Member for Wansbeck (Ian Lavery) on securing this vital debate, and him and my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) on their excellent work in highlighting the appalling abuse in the tobacco fields of North Carolina. The exploitation of the workers there shocked me. One hears about the American dream, but those workers were clearly not living the American dream; they were living what can only be described as an American nightmare, as my hon. Friend the Member for Wansbeck pointed out.

Depressingly, such exploitation is happening all around the world, not only in the most powerful nation on the planet, the United States of America. Exploitation is happening not only in developing nations, but in so-called highly developed western democracies. It is also happening, as my hon. Friends mentioned in their contributions, in what is, per capita, the richest nation on earth—Qatar.

I visited Qatar earlier this year with a delegation led by the construction workers’ union UCATT—the Union of Construction, Allied Trades and Technicians—and by the Building and Woodworkers’ International. We went to look at the impact of the World cup, the transformation taking place in that country and the terrible abuses to which construction workers and migrant workers across the piece are being subjected there. Again, I was absolutely shocked. When my hon. Friend the Member for Wansbeck was talking about the squalid circumstances in which the tobacco workers in North Carolina were living, it struck a chord, because that was precisely the kind of thing that I witnessed in Qatar. The working conditions, too, were appalling.

At one level, we can look at Qatar and say, “An amazing transformation is being made in that nation.” I visited what I believe to be the largest construction site anywhere in the world and it is incredible what is being done in the country, but there is absolutely no excuse for the kind of exploitation that migrant workers are being subjected to in order to make the transformation. Money cannot be the reason why people are being exploited, because Qatar is the richest nation on the planet, as I said. Nevertheless, it is subjecting workers to terrible working conditions, such as the heat of the day, and terrible living conditions.

When we arrived in Qatar, 1,200 workers had already lost their lives since the World cup had been awarded to the country. At an attrition rate of that level, 4,000 construction workers will have lost their lives before a ball is kicked in the World cup. That cannot be right and cannot be allowed to go on. There can be no excuse. What saddened me most of all was the fact that British companies are implicated in such exploitation.

On our trip, we visited Balfour Beatty, which at the time was carrying out some work in Qatar. A senior Balfour Beatty representative to whom we spoke told us, when we put it to him that workers were being subjected to such terrible exploitation, “You mustn’t look at this through western eyes. These people like to live together—in these appalling squalid circumstances.” He did not say the last bit, but that is what the circumstances in which they are living are like.

People are brought to Qatar by disreputable recruitment agencies, who lie to them about how they will be able to earn riches beyond their dreams, to send money back to their families and in effect to be set up for life. They are charged up to £1,500 for the privilege of getting there, but when they arrive they are told, “The salary you were told you were going to earn is not true. We will rip up that contract that you thought you had signed and give you this one. You can’t go back to your home country, by the way, because we will have your passport off you.” So people are trapped and, before they start to earn anything, they have to pay back the recruitment agency up to £1,500. They were told that they would earn a huge sum, but they are only earning about £30 a week. Those are skilled people—skilled tradesmen—who at best are earning about £30 to £35 a week. That is completely wrong and it is disgraceful that British companies are involved in that process.

My hon. Friend the Member for Ogmore (Huw Irranca-Davies) hit the nail on the head when he talked about how the senior representatives in companies say, “We didn’t know anything about it.” I took it upon myself to get the House of Commons Library to provide me with a list, as best they could, of all the British companies operating in Qatar today. I have written to each and every single one of them demanding to know what steps they are taking to stop that exploitation.

When people are working incredibly hard, they are entitled to live in decent accommodation. In Qatar, not only do they work long days, but the labour camps are miles away from the construction sites; before people even start their day’s work, they have a one or two-hour bus journey and they have another at the end of the day. I was absolutely shocked. Yes, the conditions were squalid and filthy, but people have also not even got mattresses to sleep on, and there were eight, 10 or 12 people to a tiny room.

I could not believe what I was seeing—people did not even have mattresses. They were sleeping on bunk beds of hard, solid planks of wood. After a long, hard day of grafting in the heat of the day—I used to work in the construction industry so I know what a hard job it is, although we did not work those hours or in that kind of heat—they go home to appalling filth and squalor and they cannot even get a decent night’s sleep because they have to sleep on a hard plank of wood. Then the representative of Balfour Beatty tells us, “You mustn’t look at this through western eyes.” That kind of colonial mentality still seems to pervade these British companies.

The other point my hon. Friends referred to was the lack of trade union recognition in the tobacco fields. We put that to the Qatari authorities. It is vital that there should be freedom of association and the right to form a trade union in order to secure workers’ rights, and we want to see that. In fact, we could do with much greater trade union membership in this country, with the Government encouraging that rather than continually attacking the unions and their attempts to secure workers’ rights over here. My hon. Friend the Member for Ogmore talked about the cockle pickers—would they not have benefited from being members of a trade union? They certainly would not have been put at risk of losing their lives.

It was Ted Heath who once talked about the “unacceptable face of capitalism.” Here we have just that in the examples highlighted by my hon. Friends and what I saw in Qatar. That is the unacceptable face of capitalism and British companies are implicated in it. When I wrote to those companies, all bar one of them—I think—came back to me and effectively said, “It’s nowt to do with us, guv—we don’t employ these workers directly.” They were washing their hands of the issue in a kind of Pontius Pilate approach. They say, “You can’t blame us,” but they are happy to take the profits from this huge transformation.

It is incumbent on the Government today—I hope that the Minister will do this when she responds to the points made by my hon. Friends—to explain what they are doing about the British companies implicated in exploiting workers across the globe. From the United States of America to Qatar and beyond, that must stop and the Government have a huge and important role to play in making it stop. When we have asked questions about that, we have heard encouraging words from Ministers. They have said that human rights are sacrosanct and that they will certainly bring pressure to bear on the Governments—and, I hope, the companies—who are implicated.

However, there is a twin pressure. While on the one hand we hear welcome talk from Ministers who say, “Human rights is important and we’re going to bring pressure,” on the other hand, when we are talking about places such as Qatar, the rewards are immense because the contracts run into many billions of pounds. I know that representatives from Qatar have been here and have had meetings with the Mayor of London and, as I understand it, with Ministers too—I do not know what they spoke about, but I understand that they are keen to secure work in Qatar—so I wonder whether the Government are speaking with a forked tongue. I hope that they are not, because it is really important that their response is about not just rhetoric, but action. That is what I want to hear.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

indicated assent.

[Chris Williamson]

I am pleased to see the Minister nodding her head. I hope that, when she gets up, she will tell us about some of the positive actions that the Government have taken and those that they propose to take to ensure that we do not have, as my hon. Friend the Member for Ogmore said, the continual race to the bottom. British companies and the British Government should be about a race to the top. We should be setting standards. We have a proud tradition going back many years of standing up for human rights, so it is really important that the Government step up to the plate in all the circumstances highlighted, including those I highlighted in Qatar.

I want to close with a quotation from Thomas Piketty’s best-selling book in America, “Capital in the Twenty-First Century.” He said:

“Capitalism should be the slave of democracy, not the other way around.”

I could not have put it better myself. That is essential, because if capitalism is not the slave of democracy and it serves only the richest and most powerful people around the world, what is the point of it? If it is only about exploiting ordinary working people, I would say let us throw it aside and have a socialist state in every nation. However, I am not actually asking for that. Capitalism can work, but we need to make it work—we need to make it the slave of democracy. In conclusion, when we hear from the Minister, I hope that she will give us some indication of how the Government will ensure that workers are protected and that capitalism is indeed made to be a slave of democracy, not the other way around.

[Several hon. Members]

rose—

[Mr David Crausby (in the Chair)]

Order. I want to call the two Front-Bench Members no later than 10.40 am.

10:27

[Mark Durkan (Foyle) (SDLP)]

I congratulate my hon. Friend the Member for Wansbeck (Ian Lavery) on leading the debate and I commend him and my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) on their initiative in North Carolina and the meetings that they have held here since. I was struck that my hon. Friend the Member for Wansbeck made the trip to North Carolina having been in Columbia the previous week with me and others on a Justice for Colombia trip.

When we were in Colombia, among the things we witnessed was a major project driven by the EU-Colombia free trade agreement that is leading to the degradation of land rights and further abuse of labour rights. However, in a poignant way that project is not just throwing up issues about new dimensions of modern slavery; it saw us meet Afro-Colombian families who are the descendents of the original escaped slaves—the people who were given and found this land by the shores in Colombia—who are now being driven off that land and forced to live in concrete batteries up mountains, well away from their previous experiences. That is happening not just to them, but to indigenous peoples as well.

That mega project of a super port at Buenaventura is driven not just by the Colombian Government and big business, but by myriad vicious paramilitaries who are completely indulged by the police. That is one of the reasons why, as a member of the Modern Slavery Bill Committee, in Committee and on Report I tabled amendments that would have broadened the issues around ethical trading and supply-chain proofing. That was to make sure not just that customers were taking responsibility for what happened in the workshops from which they bought goods, but that people were taking responsibility for wider aid and trade policies that were driving wholesale, pernicious human rights abuses, affecting not only people’s labour and land rights, but their basic living conditions and even where they had the right to live.

In the Bill Committee, we did see progress on supply chains. Initially, the Bill was completely deficient in that area, but there was strong lobbying, which, I must acknowledge, came from Members on both sides of the House—from the Government Benches and the Opposition Benches, and from parties big and small—and that was reflected in the Committee. Obviously, there was also a big lobby, involving groups ranging from Anti-Slavery International to the Catholic Fund for Overseas Development, Oxfam, UNICEF and many others, and they all highlighted, among other issues, the Bill’s deficiency in that respect.

Even though all those groups and coalitions inside and outside Parliament must be commended on the strong case they made to the Government, the business voices responding to the ethical trading initiative were decisive in persuading Ministers. Although I commend the businesses involved for being ethically alert and active and for working in partnership with others, it is a poor comment on the Bill that the issue would have been missed altogether had it not been for the intensity of those business voices.

[Huw Irranca-Davies]

My hon. Friend makes a good point. Some of the more progressive, ethically aware companies see the competitive advantage in driving higher standards, which will, hopefully, drive the rogues out of the marketplace in different sectors. There is therefore an advantage in driving higher standards.

[Mark Durkan]

Exactly. That is exactly the point those businesses made, and it was clearly taken on board by Members on both sides of the House. It was also stressed by the trade union movement, which has been an active driver of the ethical trading initiative.

Whenever the Government resisted widening the Bill’s scope, they would tell us that ethical auditing was already taking place. However, ethical auditing, as talked about and supposedly practised over a number of years, is really a badge for big business, rather than a shield for vulnerable, exploited workers. My hon. Friend the Member for Ogmore (Huw Irranca-Davies) and others have quoted examples of scandals that have been identified, including the case of the Thai fishing industry, which was revealed in The Guardian. We were previously told that those things were the subject of ethical auditing—that companies were aware of the issues and would respond to any problems—but it is up to somebody else to show them the problems, and then they respond.

In the example of the Thai fishing industry, there has been some positive response subsequently. After The Guardian exposed the story, with the assistance of Anti-Slavery International, that organisation, along with Thai NGOs, retailers and seafood suppliers, embarked on a project called Issara—the Thai word for “freedom”. The inspections the project team has been able to carry out are already delivering positive results and driving change. That shows that there needs to be effective intervention, as hon. Members have said.

As my hon. Friend the Member for Paisley and Renfrewshire North said, effective intervention should be about making sure not only that companies are liable and held to account for what happens in their supply chain, but that the state has the power to ban goods. What is the point of passing legislation saying that companies will have responsibilities and liabilities in terms of knowing what is going on in their supply chains, saying that we encourage consumers to be responsible, conscientious and aware—for example, that the goods they buy may come from southern India, where young Dalit women and girls are exploited, or from Uzbekistan, where the exploitation involves not just companies, but the Government—and saying that there is a responsibility on consumers, suppliers and retailers, if there is no responsibility on the state? If it is evident that the sourcing or manufacture of a product involves slavery and human rights abuses, there should be the power to ban that product.

Such a power has existed in American law since 1930—since the Tariff Act—and it was in the scope of one of the amendments I tabled to the Bill to say that there should be the power to ban or prohibit something where there was clear evidence of abuse. That amendment would not have imposed a duty on the state to police trading practices in all parts of the world, but it would have been based on the state’s right to respond when someone else brought evidence to it. In the American system, the Department of Homeland Security can be petitioned with evidence, and it would then have the power to issue a ban. If we are serious about dealing with these issues, we should follow through.

[Chris Williamson]

My hon. Friend is right. I am closely following his point about the importance of the state being meticulous in enforcing greater protections. As my hon. Friend the Member for Paisley and Renfrewshire North said, these multinational companies are quick to resort to litigation, and they will spend a lot of money on lawyers. Chevron, for example, had a case brought against it for causing terrible pollution in the Ecuadorian rain forest, but it said it would fight the case

“until hell freezes over and then fight it out on the ice.”

When international companies have that attitude, states need to be strong and to stand up for their citizens; otherwise, these powerful companies will ride roughshod over them.

[Mark Durkan]

I fully accept my hon. Friend’s point. That is why, rather than leaving these issues to all sorts of litigation, there should be the power to ban a product where it can be specifically identified.

I have closely followed all that my hon. Friend has said today and previously about Qatar. Several Members in the Bill Committee mentioned the system of employer-tied visas for domestic workers in the UK, where the visa, which rests with the employer and is almost their property, can be abused in a way that makes the employee their chattel. The style and logic of the visa system used to exploit workers in Qatar are exactly the same, and that should give us all pause for thought.

10:38

[Ian Murray (Edinburgh South) (Lab)]

It is a pleasure to serve under your chairmanship in this important debate, Mr Crausby.

I pay tribute to my hon. Friend the Member for Wansbeck (Ian Lavery) not only for bringing this issue here for debate, but for visiting Colombia and the North Carolina tobacco fields and for his report, which I would encourage all Members of the House to read to see what he experienced. We should all reflect on the personal, real-life stories he has told us this morning and do everything we can to resolve some of the issues.

I also pay special tribute to my hon. Friend the Member for Paisley and Renfrewshire North (Jim Sheridan) for all his work on these issues not only in the UK, where he has stood up for the rights of individual workers, but across the world. It is no exaggeration to say that, without his dedication, the Gangmasters Licensing Authority may never have come into being. The authority has transformed the lives of many in the UK, and I hope it will be a blueprint for transforming many other lives across the world.

The issue is huge: global exploitation in UK companies’ supply chains cannot be tolerated and we should say that clearly. We cannot be serious about tolerating slavery in the United Kingdom if we are prepared to accept the use of slave labour for products or in construction in other parts of the world. We have heard many examples this morning of such forced labour, including blood bricks. The 1,200 people killed in the collapse of the Rana Plaza were supplying clothing to some of our main high street stores, many of which will do quite brisk trade over the festive season as the public do their Christmas shopping with them. We heard, particularly from my hon. Friend the Member for Ogmore (Huw Irranca-Davies), about prawn fishermen held in a lifetime of slavery. We have heard, and I have certainly read, about the human rights issues affecting them, and about bodies torn apart by vessels for fun. The prawns were being sold to many high street stores—Tesco, and even the Co-op. It is not good enough for those companies to say “We didn’t realise it was happening.” Our conclusion today—the whole point of the debate—should be for the Government to say it is unacceptable and that ignorance is no defence, and that we should do something about it. We should put the onus on companies to investigate their supply chains.

We have heard many times about small children being paid pennies a day for sewing sequins on to children’s clothes, and we heard reports from the tobacco fields of North Carolina. I was much struck by the wonderful speech of my hon. Friend the Member for Derby North (Chris Williamson) about serious exploitation in Qatar, in the building of World cup venues. It is the primary sporting event in the world, and those workers are being exploited. How can we possibly tolerate the possibility that in a few years’ time Scottish football fans may celebrate, in the patriotic way of passionate fans, goals scored by a Scottish football team at those venues—when the death toll for building those very terraces could be as high as 4,000? That must be unacceptable, because there is a blueprint for how to carry out such projects properly. The UK Olympics in London was a major construction project—one of the biggest in the world at the time. There was not one death. It can be done, and we should secure legislation to prevent such deaths.

There are various studies showing that the public are highly aware of the issue; 84% of the UK public want legislation and so do the overwhelming majority of companies. The Government have come some way on the question of supply chains, as we shall probably hear from the Minister, with regard to the Modern Slavery Bill; but the Opposition think that they should go an awful lot further. Some of the stories that we have heard today reinforce that.

Most large retailers are implementing policies to tackle the issue, but it is hard to see tangible progress that would enable consumers to make direct comparisons between companies, as my hon. Friend the Member for Ogmore mentioned. We must be able to compare apples with apples rather than pears. That is why we must introduce mandatory standards for reporting, to force companies to adopt standard procedures. We must be able to assess supply chains, because we want to support British businesses that act on the issue, and create a level playing field. It is a pro-business agenda, and the hon. Member for Foyle (Mark Durkan) was right to suggest that. Businesses want to stamp out the practices in question. However, we will not get to the stage where the advantage to business is clear unless there is a level playing field to allow comparisons to be made and businesses that do not take action to be exposed. Many large companies have backed legislation to create a level playing field, and so have the British Retail Consortium and the Ethical Trading Initiative, which was set up with 81 corporate members. Retailers are also acting. Sainsbury’s, Next and even Primark have complained about competitors who have not acted.

A community of NGOs and businesses has coalesced around the Ethical Trading Initiative to recognise that three fundamental things are needed. First, it concluded that there must be more regulation of national and international supply chains to establish the level playing field. Secondly, there should be a partnership with unions and non-governmental organisations; that would be essential to tackling forced labour issues in international supply chains. Thirdly, Governments would need to shoulder their portion of the burden in tackling those issues. I believe that when Governments regulate in such matters, although it is necessary, it is because there has been a significant business failure. I think that businesses have recognised that and that they must do something about it.

UK companies undoubtedly have hugely complex supply chains, as we have heard in the debate. That is particularly true of the fishing matters set out by my hon. Friend the Member for Ogmore. Even best practice in auditing is not foolproof. That is why the approach must be about changing market conditions and creating incentives for the suppliers to be shown to be fair. That would mean suppliers being able to show that they meet International Labour Organisation standards, backed up by kite marking and a proper inspection regime.

I acknowledge, as I think that everyone would, that it is hard for UK companies to implement that approach individually. They say that to us consistently; but collective action could make it the norm. The Bribery Act 2010 has reduced the burden on business by creating consistent standards and an industry to audit them. It is regulation, and the Government will talk about their one in, two out approach to regulation; but the Act has brought in consistent standards, reducing the burden on business and creating a level playing field.

As to the Modern Slavery Bill, the Government have to some extent had to be dragged along kicking and screaming. It took them until Report to introduce relevant provisions, and there was massive criticism of their proposals, questioning whether they are appropriate. My hon. Friend the Member for Wansbeck concluded that the lack of proper, enforceable regulation led to the removal of all humane conditions from the supply chain—something he witnessed on his many visits.

We proposed amendments to the Modern Slavery Bill in Committee. They would have built on proposals from the Joint Committee that dealt with the draft Bill, and would have allowed for legal reporting on the supply chain within the Companies Act 2006, and regulations including four standard reporting elements, with definitive actions for companies. It is not good enough for companies just to report on those issues. They must also show that they have taken action.

The first of the four elements was accountability for tackling modern slavery and forced labour, including policy commitments, resourcing and actions to exercise due diligence. The second was that modern slavery and forced labour risks should be investigated, monitored and audited in the UK and throughout global supply chains. The third was that victims of forced labour and modern slavery should have support, and access to remedy. It is not good enough just to deal with today’s problem. Things that have happened in the past must also be dealt with. The fourth thing on the list was, crucially, that staff and suppliers should be trained and have access to expertise and advice in dealing with the issues. Those are the critical things that we need to think about to get robust and legally enforceable reporting mechanisms.

We welcome the measures that the Government have introduced, as far as they go, but they need to go further. In the other place, Lord Rosser, who tabled some amendments, concluded:

“I can only comment that it is very difficult for civil society to make a judgment if there is not enough information in the statements in the first place.”

He added that there is no legal requirement to produce the relevant statements and that the Bill

“still does not go far enough and will not enable those judgments to be made by society, whether it be consumers, voluntary organisations, the media or others.”—[Official Report, House of Lords, 10 December 2014; Vol. 757, c. 1892.]

We can see that proper regulations work. The Gangmasters Licensing Authority works. The groceries code adjudicator is limited but seems to be working. Where there is good regulation, such as the Bribery Act 2010, it can work.

I will be interested to hear whether the Minister will respond to the debate by saying that the Government will present proper, strong, robust regulations. It is clear from what we have heard this morning that morally unjustifiable things are happening in our supply chains. As consumers in the marketplace going shopping we should know clearly where products come from and how the companies look after their employees. If we do not act we will have missed an opportunity. Not only that, but the United Kingdom will be ducking its responsibilities on the international stage to do something about what is happening.

10:49

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

It is a great pleasure to serve under your chairmanship, Mr Crausby. It is also a great pleasure to respond to this thoughtful and powerful debate. It is customary on such occasions to say that this has been a good debate, but it really has been striking, particularly the number of examples of individuals who are suffering in the most horrific conditions. Sometimes the discussion of business issues and human rights becomes abstract, and bringing it back to individuals is helpful.

I congratulate the hon. Member for Wansbeck (Ian Lavery) on securing this debate and on sharing his personal testimony and experience of the individuals he has visited. He is right that this is an issue on which there is a moral duty. Of course there are business benefits from improving human rights, as the hon. Member for Ogmore (Huw Irranca-Davies) and others have said, and it is important that we make that business case, but the hon. Member for Wansbeck put his finger on it when he said that this is a moral duty. We are all human beings, and human rights are universal. Whatever we do and whatever our role, whether we are working in business, politics or the media, we have a responsibility to other human beings and to ensure that human rights are upheld.

The Government are taking a range of action, of which I am proud and which I warmly welcome and champion, from narrative reporting to our work with different sectors, including the retail sector, to ensure that they are improving their practices. We have also amended the Modern Slavery Bill to address supply chain reporting, to which I will return. At EU level there is also non-financial reporting, and of course we support these issues at the United Nations through the business and human rights action plan, which we were the first country to create. We can take international leadership on this issue, but that does not mean that there is any room for complacency.

It is also important to recognise that, although the issue is simple in terms of morality and what is right, it unfortunately is not simple to work out how to stop human rights abuses. Various Members have mentioned that some companies sometimes offer the excuse, “We didn’t know what was going on,” but it is true that it can be difficult for companies to get to the bottom of every part of their supply chain. There is a role for sharing best practice and for helping companies to understand the best way to get that information. There is a dividend or benefit from taking the issue seriously and creating what the hon. Member for Ogmore described as a race to the top. We need to do that.

Earlier this month I was in Geneva for the UN forum on business and human rights. It was the third time the forum has taken place, which shows how international business is taking this issue more seriously. The feedback I received from the 1,900 delegates was that the forum was much more constructive and positive both for business groups and for non-governmental organisations than in the previous two years, which is a sign of progress. I met a group of UK businesses that have signed up to the UN global compact, which commits them to reporting annually on the actions they are taking on a range of issues from working conditions to environmental impacts and human rights. Businesses turning up to the UN forum on business and human rights are probably already fairly committed to taking the issue seriously, but it is good that the forum shows that a large number of UK companies are doing so.

[Anas Sarwar]

It is good to hear about that international co-ordination to ensure that multinational companies are rightly reflecting on this issue, but that principle should also apply across Government here in the UK. Is the Minister therefore disappointed that the Department for International Development has withdrawn its funding for the International Labour Organisation?

[Jo Swinson]

I will happily speak to colleagues in DFID and write to the hon. Gentleman with a fuller answer. A range of international organisations play a hugely important role, and obviously the Government always need to consider the best way to further our overall objectives. I will certainly write to him on the specifics of that point.

There were many NGO representatives in Geneva who were rightly passionate about ensuring access to justice for victims of human rights abuses. I spoke a little of my personal commitment to this issue. Indeed, one of my political heroines when I was growing up and deciding to study business was Anita Roddick. She was a pioneer in proving that business has a social responsibility that needs to be taken seriously. I remember reading her book, “Business as Unusual,” which I found incredibly inspiring on the role that business can play. Business should be, and often can be, a force for good in our society. It ought to be a way of taking humanity forward, rather than ultimately being responsible for exploitation. Capitalism goes wrong when that happens, as some Members mentioned, but business is able to be a force for good.

As I said, many UK businesses are taking this issue seriously, but some are perhaps not taking it as seriously as they should. The examples we have heard today back that up. The hon. Member for Wansbeck talked very powerfully about the squalid conditions in North Carolina. We are used to talking about such issues in other parts of the world, but we would not necessarily expect it to happen in a country such as America. That juxtaposition of such wealth with such poverty and disregard for rights is awful, particularly when he talked about the example of a seven-year-old girl or someone who had part of their finger cut off without even being able to get hospital treatment.

The hon. Member for Ogmore rightly focused on the responsibility of big companies such as supermarkets and their power to drive change. He is right that, if something is incredibly cheap, it is not always the result of wonderful business efficiency. Sometimes that might be the case, but sometimes it means that someone, somewhere is being exploited, and he is right to point that out.

The hon. Gentleman also addressed the comparability of reporting so that people can compare apples with apples, rather than with oranges, which is a useful analogy in the context of our conversation about the food industry. This is an important issue, and at the event in Geneva there were some interim results from an interesting, in-depth study by The Economist on business attitudes to human rights. One of the early indications is that, when business leaders were asked what would make the biggest difference to their behaviour, they talked about some kind of benchmarking tool so that companies can be compared. Such a tool needs to be developed with care because these are genuinely complex issues, but UK companies such as Aviva are leading the way. There is an exciting project to create a human rights benchmark so that companies across the country, and internationally, can be compared so that we may have a proper analysis of their human rights records.

The hon. Member for Derby North (Chris Williamson) relayed stories about his experiences in Qatar, and they are a hugely powerful account of disgraceful behaviour, particularly in such an incredibly rich country. What I found most breathtaking about his speech was Balfour Beatty’s reported comment that we must not look at this issue through western eyes. I was blown away by that comment. Human rights are universal. Whether someone is in squalid conditions and having to work ridiculous hours here or in another part of the world, we should be concerned and acting to change the situation—responsible UK companies will act to change the situation.

I appreciate the hon. Gentleman’s action on writing to UK companies, and I know that he wants action from the Government, which is why we are introducing the reporting requirement on supply chains so that companies have to say what they are doing on slavery and trafficking. I am delighted that that amendment has been made to the Modern Slavery Bill. I have met campaigners on that issue over the past couple of years, and there is a strong case for introducing the requirement to drive transparency and change behaviour.

The hon. Member for Foyle (Mark Durkan) mentioned the voice of business, and there is a strong voice within the business community, which wants to see progress on these issues and is supportive of many of these measures. This is a complex issue, which is why the solution cannot be easily described in a soundbite; it is about proper engagement with business, and it is about taking the UN guiding principles that were developed by Professor Ruggie over a significant course of time and therefore have the buy-in of key players. He and his team are still very involved in trying to make that a reality. The UK has published its action plan, and a handful of countries have now published their own action plans, but we must ensure that we use that leadership to do what we need to do in our own country and to encourage other countries to do the same. I fully believe that in 20 or 30 years, this will be seen as a key and obvious business issue, but we are now at the stage where it has to be established. We have made great progress compared with 10 or 15 years ago, but there is still a lot more to do. I welcome today’s debate.

UK Film Investment (Tax Relief)

Tuesday 16th December 2014 Westminster Hall

11:00

[Sir Nick Harvey (North Devon) (LD)]

I am delighted to take the opportunity today to draw the House’s attention to the serious and widespread misapprehension about the current status of the tax affairs of those who, between 1997 and 2007, invested in the increasingly successful UK film industry, at the encouragement and incentivisation of the British Government. There is a general perception, perpetuated by the media and encouraged by Her Majesty’s Revenue and Customs, that all those who invested in UK film between those years did so for the purposes of tax avoidance, rather than as genuine investments.

On 22 October this year, I raised the matter at Prime Minister’s Question Time, and the Prime Minister gave a telling response. He said that

“the things…being investigated are abuses and were known to be abuses at the time when people entered into them.”—[Official Report, 22 October 2014; Vol. 586, c. 899.]

I find that rather a worrying statement. It rather suggests that the Government have made up their mind on these partnerships, on the basis of very little evidence and next to no attempts to engage with those involved. If it is ultimately ruled that the schemes are not in order, many investors could find themselves liable for tax bills of up to 10 times their original investment. The financial stress caused by sudden and unexpected demands from HMRC is proving ruinous in some cases. I have heard accounts of marriages breaking down and people becoming sick with worry, and the consequences should be clearly understood by all those involved.

There has been no engagement with the partnerships to discuss the situation nor any attempts to engage in meaningful settlement talks, despite a settlement opportunity letter being issued to partners at the beginning of last year. Today, I would like to ask the Minister to look again at the situation and urge HMRC to bring this business to a conclusion. The lack of information and engagement has been woeful, and I would hope that in many cases, investigations can be concluded or dropped outright, or at least, that a settlement can be reached.

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

I congratulate the hon. Gentleman on securing this debate. We desperately need investment in entertainment, culture and the arts. The one bright light of the recent autumn statement was the expansion of the enterprise investment scheme up to the full level of private investment. The opportunities for investment in film, theatre and all sorts of productions in a time of austerity is wonderful, and it would be a pity if what he is pinpointing ruined all that.

[Sir Nick Harvey]

I entirely agree with the hon. Gentleman. This takes us back to 1997, in the midst of the “Cool Britannia” era, in which stars of film and pop attended parties at Nos. 10 and 11 Downing street and the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), introduced a full tax relief on investment in small-scale British films in order to encourage investment and promote growth in the British film industry.

Encouraged by a report called “A Bigger Picture” from the UK film policy review group, the Government established a 100% write-off for tax purposes on the completion of films with budgets of £15 million or less. In real terms, that meant that sale and leaseback deals for smaller films would become financially viable, vastly stimulating the market. Those reliefs were known as section 42 relief, in place from 1992, and section 48 relief, in place from 1997. They lasted for 10 years until 2007 and were arguably a large success: the size of the industry increased from £1.7 billion in 1997 to £3.2 billion in 2008; the number of films made in Britain doubled over the period and 46,000 new jobs were created.

In the Budget in March 2004, the then Chancellor was able to report on the successes of the reliefs. He said that “a minority of” third parties had abused them, but he did not see the need for an “anti-avoidance rule”, saying simply that he thought that “loopholes” needed to be closed. However, other partnerships, including the 74 Movision film partnerships, applied the terms of the Films Act 1985 and the Financial Services and Markets Act 2000 scrupulously.

The Movision film partnerships were established between 2002 and 2004, entirely in accordance with the law and with significantly different arrangements from the “minority” that was commented upon by the then Chancellor. Furthermore, the Movision film partnerships, which were established with approximately £50 million of subscription capital raised from approximately 500 partners, with an average investment of £50,000 a head, produced 13 British films and acquired another 14 British films. Those films would not have been made without the involvement of the Movision film partnerships. In the end, the partners did exactly what the Government had asked them to do; they invested in British films and claimed their tax reliefs.

[Mr Sheerman]

The hon. Gentleman is making the point brilliantly clearly. I was born in Shepperton and when I was a youngster, my family worked in Shepperton studios, and I am passionate, as he is, about the film industry. The people who misused the tax relief were a tiny minority. Most of them have done really good stuff. “The Scottsboro Boys” is a big success at the moment—one of my constituent’s sons is a star of it. This is how that production was done. Small films and big films are being produced in this way. I beg the Minister: please do not spoil that, because this is the future of the film industry in Britain.

[Sir Nick Harvey]

I entirely agree with what the hon. Gentleman says. I think that this policy was a success and that one can visibly judge the tangible uplift in small film producing in Britain during the period that the tax relief existed. I think that the then Chancellor was right in March 2004 when he observed—this is widely recognised—that a minority of partnerships were abusing the tax relief, but they were a minority. This is the point: it is completely inexplicable and totally unacceptable that 10 years later, HMRC is treating the whole lot of them as though they were crooks, and when the Prime Minister gets up to respond at Prime Minister’s questions, he has in his folder a brief that says that all those involved were involved in abuse, and that they knew at the time that they were engaged in it. That is completely different from the experience of the Movision partners to whom I have talked and of my own constituent on whose behalf I have taken an interest in the subject.

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

Does my hon. Friend agree that the important thing is to consider the future of the film industry and particularly the young people who are involved in it? Whatever is the case, it is certainly not the fault of young people looking for a future in the film industry. I spoke to a young man—a Kendal college film student—called Emilio Methven on Friday. He did a survey of his fellow students over the weekend, and they want investment in the film industry going forward and more apprenticeships. They want the UK Government to demonstrate that in backing the UK film industry, they are going to back UK film students. They do not want a sense of there being a retrospective potential attack on the film industry that makes their future much harder to establish.

[Sir Nick Harvey]

My hon. Friend makes a series of very good points. These small films are something that Britain is good at. We have an international reputation in it and the developing creative industries in this country are something that we should celebrate, and yet investment in film is an inherently precarious thing to do. If it had not been, it would not have been necessary to contemplate these sorts of tax reliefs in the first place. The reality is that this scheme was almost too much of a success. It ended up costing more in tax reliefs than had been anticipated at the outset. However, as my hon. Friend says, young people up and down the country are engaged as students and as workers in the early stages of careers in the creative industries, and it would be a very backward step if the UK Government, the Treasury and HMRC were seen to be having a crusade against this industry at the very time when we should be encouraging it further and trying to ensure that more jobs are created in this area in years to come.

Anyone who has looked at this matter will understand that a minority of those involved had, arguably, been seeking to avoid tax rather than to invest in film. There are companies—for example, Icebreaker and Eclipse 35—that have been ruled to have abused the reliefs. Rulings have been made and money has been clawed back. However, I believe that the majority, including Movision, acted in good faith, and they are now being tarred with the same brush in the eyes of HMRC, which is refusing to give them the reliefs and challenging the availability of them to those that claimed them.

HMRC’s current position is that all compliant Movision partners who entered into investment in terms of their tax returns are under inquiry for all years ending from 5 April 2003 onwards. Hon. Members will be aware of how rarely retrospective legislation is passed, yet in effect that is what HMRC is doing by applying regulations in such a way that they are having a retrospective impact on these genuine film partnerships, as they were formed and invested in before 2007, and the abolition of section 42 and 48 relief. However, the sticking point is that HMRC will not engage with the partnerships either to discuss the rationale behind its position or to engage in any meaningful settlement talks. Many of its actions could even be viewed as obstructive. HMRC’s inquiries into Movision have been going on for 10 years—since 2004. When HMRC asked Movision how it incurred 100% production expenditure on films, Movision responded in detail on 11 December 2006. HMRC did not respond to that until June 2013—more than six years later. That is completely unacceptable.

It subsequently transpired that HMRC had had a resolution discussion embargo in place from 2010 to 2013, but had chosen not to inform anyone about that; none of the partnerships was aware of it. Why was that? What was the purpose of the embargo? What benefit did it afford to HMRC or the taxpayer?

In 2013, HMRC trialled an alternative dispute resolution and found it to be successful. Following that, it offered a 55% settlement to all partners. Many phoned back and at first were told that HMRC would get back to them after 10 days. Those who phoned later were told six weeks and then two months, and those who rang after that were told that the settlement team had been disbanded—with no explanation.

Movision has made two settlement offers to HMRC: one for £2.4 million and another for £3.95 million. It was told by HMRC that its offers were unsatisfactory, but not why, which obviously makes it very difficult for it to negotiate. The latest development, in the last fortnight, is that HMRC has issued a new embargo on discussions with film partnerships if the partnership has investment in films via anything similar to sale and leaseback. Sale and leaseback is a perfectly conventional method of generating financing whereby the owner of an asset sells the asset but then leases the asset back from the inquirer, thus freeing up some capital. It is commonly used in financing films, and HMRC recognises it in its own business manuals. It is unclear why the embargo has been issued, but it will certainly delay even further any meaningful discussions.

As I said at the outset, there remains a misapprehension about film tax relief. I fully understand the importance and, indeed, the necessity of putting a stop to tax avoidance. That is more pressing than ever in the current financial climate. It is clear that a light needs to be shone on these partnerships. HMRC needs to take immediate steps to identify those who were genuine investors as opposed to those who cynically abused the tax system. The Treasury must be clear that film partnerships that applied the correct legal procedures before 2007 are and remain eligible for the tax reliefs that they were promised by Her Majesty’s Government. With 65,000 cases of tax avoidance identified and a record 27,000 tax disputes waiting to be heard at tribunal, it seems clear that HMRC should be either prosecuting or moving towards a settlement with partnerships.

As I said, for the 500 partners involved in the Movision scheme, the average individual subscription was just £50,000. We are not talking about the super-rich; we are not talking about pop stars and footballers, who are advised on how to seek opportunities for aggressive tax avoidance. With every year that passes, the impact on some of the partners, with the HMRC sword of Damocles hanging over them, will worsen. Many have already become ill, suffering nervous breakdowns and stress-induced illnesses, and have seen marriages and businesses fail. That is a very high price to pay for responding to the call of “Cool Britannia”. Furthermore, it will no doubt make investors less likely to make use of current tax reliefs to invest in industries that the Government want to grow, of the sort that the hon. Member for Huddersfield (Mr Sheerman) suggested, and let us not forget that that is how this whole business started.

HMRC should stop prevaricating and engage with the film partnerships to resolve the inquiries. That should include the aim of either settling or prosecuting within two years, because this has already gone on long enough. I hope that the Minister will consider the steps needed to bring clarity out of the current chaos and rectify unfairness caused to genuine partnerships and investors.

11:16

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

It is a great pleasure to serve under your chairmanship, Mr Crausby. I thank my hon. Friend the Member for North Devon (Sir Nick Harvey) for securing the debate. It had two key and linked themes: investment in the film industry and concerns about tax avoidance. On both those issues, the Government have a strong, clear message. We of course strongly support the UK film industry and want to encourage genuine investment in film, but equally—and unapologetically—we condemn the use of tax avoidance schemes. We want low taxes and a competitive regime, but we expect those taxes to be paid.

We have in the United Kingdom a vibrant and successful film industry, of which we should be proud. In the past three years, employment in the creative industries has grown at five times the rate of the wider economy. The past year has seen film and television production in the UK boom, with, to pick names at random, “24” being filmed in London, “Outlander” in Scotland, “Da Vinci’s Demons” in Wales and “Game of Thrones” in Northern Ireland.

It is right that as a Government we lend our support to those who want to invest in the industry. We now have a robust corporate film tax relief, which was expressly designed to minimise the risk of tax avoidance and which has been in place since 1 January 2007. The new relief goes straight to those making films—in other words, it is the production company that gets the direct benefit of the regime.

The new regime has proved very successful in attracting inward investment. It is highly popular with film-makers and has helped to make the UK one of the top film-making destinations in the world. Since the film tax relief was introduced in 2007, 1,680 film productions have become eligible to claim the new relief, and total production expenditure by films claiming the relief was £7.8 billion, of which 72% was incurred in the UK.

As a Government, we have made the relief even more effective. From 1 April 2014, we increased the rate of relief for larger budget films, reduced the level of minimum UK expenditure and modernised the system of film tax relief qualification. To ensure that our creative industry flourishes across sectors, we announced in the autumn statement that we would introduce tax relief for children’s television and for orchestras.

With regard to the concerns raised by the hon. Member for Huddersfield (Mr Sheerman) and by my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron), I should say that we have a successful record in this country. The existing film tax relief is working well and continuing to attract investment to the UK. I am pleased to confirm that there has been no reported avoidance activity with the new film tax relief.

[Mr Sheerman]

I hope the Minister takes the point that those of us who have spoken in the debate do not agree with tax avoidance, which is carried out by a minority. We are at a critical stage, having had such good news in the autumn statement—Opposition Members do not often congratulate the Minister on such things—about raising the social investment tax relief scheme to a much higher level, and about the seed investment scheme. The Minister knows that I am very keen on crowdfunding and crowdsourcing, and we are seeing a new beginning when it comes to vibrant theatre and social investment across our country. The Minister must not send a message in his response to the debate that some of that might be seen as tax avoidance. We are talking about social investment and investment in our arts, and it is to be welcomed.

[Mr Gauke]

The hon. Gentleman is nothing if not consistent; I have never known him to fail to take the opportunity to extol the virtues of crowdfunding and some of the other measures that we are taking. The point that I am making is that we have a film tax relief system that is working well and attracting investment. Nothing in what I am about to say should undermine that.

Our system is working, but I cannot, unfortunately, say the same about all investment under the film relief that was in place before 2007. The old relief was heavily exploited by partnerships of wealthy individuals. Typically, they sought to obtain tax relief out of all proportion to their economic investment. Many schemes used artificial and contrived arrangements to create excessive tax claims. In short, investors abused the relief to try to dodge paying their fair share of tax.

My hon. Friend the Member for North Devon argued that the old legislation was working well. The previous Government took significant legislative action over a number of years to try to prevent the various forms of abuse that were occurring, but they concluded in 2007 that they had to scrap the old regime and replaced it with a much better scheme that now works. HMRC is actively investigating and countering schemes under the old regime about which it has concerns.

[Sir Nick Harvey]

I am not dissenting from the Minister’s proposition that the post-2007 arrangement has been better than the arrangement that ran for the previous 10 years. Nor would I take issue with his assertion that there was some abuse of the previous system. However, when he says that investors used those schemes for the purposes of tax avoidance, is he seriously contending that every single investor who availed themselves of a tax relief that the Government had created was doing so for tax avoidance purposes, or does he accept that there were good and bad among those investors? Will HMRC please do more to distinguish between the two?

[Mr Gauke]

HMRC is not taking a blanket approach to all such schemes, and I will return to that point in a moment.

It might be helpful if I set out some of the problems with the old regime. At the extreme, the situation was so bad that some films were produced solely for the purpose of avoidance schemes, and they were never destined for release beyond the minimal qualifying requirements. Other schemes involved genuine commercial films, but the structure of the financing was designed to generate tax relief in excess of the scheme user’s genuine economic investment. Alongside the schemes that used the relief, other avoidance schemes were created that happened to use films as the avoidance vehicle of choice, even though they did not rely on the specific film relief.

Everyone should be clear that the use of films for tax avoidance is bad for the reputation of the UK film industry. I suspect that there is no dispute among us on that point. Such avoidance is unfair on the vast majority of the public who pay their fair share of tax, and it is correct for HMRC to tackle avoidance in whatever form it takes. HMRC has a strong track record in the courts, winning about 80% of tax avoidance schemes that go to litigation. In 2013-14, HMRC’s 30 wins protected some £2.7 billion of tax. HMRC has a strong track record of defeating film schemes in court. It is right for HMRC to challenge avoidance schemes, because that is its job, but it has not taken a blanket approach of opposing all schemes that involve the old film tax relief. If someone believes that HMRC’s view on a scheme is wrong, they can take the matter to the courts for a decision.

My hon. Friend the Member for North Devon has raised the concern that HMRC has not always worked the case properly. I cannot comment on specific cases or schemes, but let me reassure him that the resolution of existing tax avoidance schemes is a top priority for HMRC. During the past year, HMRC has created a dedicated counter-avoidance directorate, bringing together technical, policy and operational expertise from across the Department in one place to concentrate focus on tackling marketed tax avoidance. The Government have consistently supported HMRC’s work to counter marketed tax avoidance by introducing new legislation and investing in its resources.

That brings me to this year’s Budget, in which the Chancellor announced that from 17 July 2014, individuals and businesses involved in tax avoidance schemes must pay HMRC the disputed amount of tax up front while the dispute is being resolved. That new power, which is called accelerated payments, came into force as part of the Finance Act 2014, and it removes the cash flow advantage that those who deliberately try to bend the tax rules by avoiding tax previously had over the majority of taxpayers who pay their tax up front.

I am pleased to say that the collection of tax from avoiders has accelerated enormously since the introduction this year of accelerated payments, and avoiders have already agreed to pay more than £30 million since Parliament introduced that measure. It is quite right that the users of avoidance schemes involving films or film relief should also pay up front.

[Mr Sheerman]

Can we send the message to HMRC that although it must catch the rascals and make them pay, it needs to be more discriminating? If it is not, we on the Back Benches will put a lot of attention and focus on to making sure that it becomes so, to ensure that people who have innocently invested are not picked on. We have many powers, through Select Committees and from the Back Benches in Question Time, to keep our eye on HMRC and ensure that it does the job properly.

[Mr Gauke]

I am sure that that point has been noted, and I do not disagree that HMRC must pursue those who have engaged in tax avoidance and not pursue those who have not. However, an important part of HMRC’s role is to pursue tax avoidance thoroughly. It would be inappropriate for me to comment on any ongoing litigation, but I stress that neither accelerated payments nor any other HMRC action to tackle avoidance will stop genuine investment in UK films.

The UK film industry goes from strength to strength, supported by a successful, avoidance-free film tax relief that goes directly to film producers. We want to continue to support investment in the UK film industry so that it can grow. Tax relief, properly due, has an important place in helping to provide that support. As the hon. Member for Huddersfield has made clear, further announcements of such support were made in the autumn statement. Tax avoidance has no place in a modern film-making environment. The UK has a hard-won reputation for world-class creativity, but we want that to be expressed in the creation of films, not in the creation of tax avoidance schemes.

11:29

Sitting suspended.

Kew Gardens

Tuesday 16th December 2014 Westminster Hall

[Sir Alan Meale in the Chair]

14:30

[Zac Goldsmith (Richmond Park) (Con)]

It is a pleasure to speak under your chairmanship, Sir Alan. We have 90 minutes, but I will keep my remarks relatively short because there is an appetite for further speeches, although I admit that I would have preferred it if there were more MPs here for this debate on an important issue. I am here to defend a jewel in my constituency, but I am not here because Kew gardens is in my constituency. Kew gardens is a national, even an international, treasure, and I will briefly explain why.

Kew gardens has been a world-class centre for botanic research for nearly a quarter of a millennium—250 years. William Hooker, who was a director of Kew gardens in the mid-19th century, was Darwin’s principal sounding board for his theory of evolution, and it is said that “On the Origin of Species” would not exist without Hooker and Kew, certainly not as we know it today. Kew gardens goes back a long way, and today Kew has the world’s largest collection of living plants. It has one of the world’s largest botanical library collections, and it has more than 7 million specimens in a herbarium, including 350,000 “type specimens,” the original specimens on which new species descriptions are based.

Kew gardens is a UNESCO world heritage site. It attracts 2 million visitors a year and is one of the UK’s leading tourist destinations. Each year, 100,000-plus schoolchildren go to Kew to learn about plants. The extraordinary millennium seed bank, which I will address in a few moments, is the largest plant conservation programme in the world and I am told that by 2020 it will hold seeds from 25% of the world’s plant species. People will know what I mean when I say that Kew gardens is not just a constituency concern.

It is easy to see all that as nice to have, as of academic interest only, but at the risk of stating the blindingly obvious, plants are central to our life. Without plants we would not exist, so I will briefly focus on the world-leading science at Kew. Before this debate I received many letters from Kew’s members, staff and scientists, as well as from general lovers of Kew gardens. I had one letter from a member of Kew’s staff that cited one key area of Kew’s scientific work. She said:

“Taxonomy is something Kew excels in, in fact we are the world leaders. Taxonomy is a science that will rarely hit the news headlines or draw in funding. However; taxonomy underpins all biological scientific research. If we didn’t know one species from another, or how many species there are; or where they exist in the world, how would any other biological, conservation, climate change, ecological restoration, food security, or medicinal research take place? Taxonomy underpins science the world over, and Kew is currently the world authority. It would be a terrible mistake and an irreversible loss to science to jeopardise this.”

She is right, and that is just the start of Kew’s science. Kew has been involved in cutting-edge plant chemistry research to identify anti-cancer, anti-inflammatory and anti-diabetic properties in British plants. Kew is building a one-stop-shop register of medicinal plant names and researching medicinal uses of our own British plants. Our flora consists of some 1,600 species, of which 400 are believed to have medicinal properties. A quarter of all prescription drugs come directly from plants, and right now, as if just to prove the point, Kew is looking for potential Ebola drugs based on the tobacco plant.

Kew’s work on climate adaptation is also world-leading. It is using the natural characteristics of wild relatives of mainstream commodity crops such as coffee, which is among the most important economically, to breed climate resilience into commercial varieties. If we consider that, as a species, 80% of our calorie intake comes from just 12 dominant crops and that 50% of our calories come from just three big grasses—wheat, maize and rice—the in-built vulnerability of the global food economy is self-evident. Imagine what would happen if we were to lose any one of those crops. Kew is leading work on building resilience into the essential commodities on which we all depend.

Kew is leading studies on wild bees, which are hugely important given our dependence on pollinators and the fact that pollinators are declining rapidly in this country. Kew provides the Government with top-level advice on climate change, biodiversity and the illegal trade in wood from endangered species—the list goes on and on. We face countless challenges across the world, but the challenge that dwarfs all others is the environment. As the world’s population continues to grow, and as our appetite for resources continues to escalate, we are ravaging the very ecosystems on which we all depend. It is a mathematical certainty—this is not my opinion but a fact—that, unless we change dramatically, we will find ourselves scrambling to compete for ever-dwindling resources, and Kew is part of the solution. Kew is more important than ever, yet we have chosen this moment in our history to jeopardise its future.

I will put that in context. In 1983, 31 years ago, 90% of Kew’s funding came from Government. That has dropped below 40% this year. In April 2014, it was announced that there would be further cuts of £1.5 million and that up to 125 jobs, mostly in scientific research, would have to go, and Kew faced a £5 million hole in its budget. As of 1 December 2014, there had already been a 22% reduction in core science staff. The very small silver lining is that that appalling threat to Kew’s future has caused people from all over the world to rally to its defence. Here in the UK, 100,000 people signed a petition in a matter of weeks, and I was pleased and honoured to deliver the petition directly to No. 10 with my friend, the hon. Member for Hayes and Harlington (John McDonnell). Outside of that process, ecologists, conservationists and scientists from across the world have expressed real anger about the decision. The brilliant biologist Jane Goodall described the cuts simply as “unbelievably stupid”. I am thrilled to hear that, starting tomorrow, the influential Science and Technology Committee will be holding an inquiry into those cuts.

In the face of that storm, the Government felt compelled to offer some kind of reprieve. In September 2014, the Deputy Prime Minister was wheeled out to announce that funding would be maintained until April 2015. I think that he and other members of the Government had hoped that that would be the end of it, but it was only a pause. People could see that it was a delay, a temporary reprieve, so the campaign persisted. On the back of today’s debate, the Government have felt compelled to move yet again. This morning, just a few hours ago, they announced that a further £2.3 million will be awarded during the 2015-16 financial year, which is clearly good news. It gives Kew time to prepare and adjust, but it is only a reprieve.

It is worth noting that Kew has already lost a considerable number of its scientific staff, so the reprieve is not good news for them or, frankly, for their work. What it shows, however, is that the Government know that they massively miscalculated and misunderstood the level of anger that their decision would provoke and the value that we all attach to Kew and its work. The petition demonstrates that public campaigning can work, and I pay tribute to all the members of the public who signed it, as well as to all the celebrated ecologists, conservationists and scientists who succeeded in shifting the Government’s position.

Where now for Kew? I do not doubt that structural improvements can be made and that savings can be found. Kew has been run by scientists for many years, and it has suffered decades of underinvestment. From our conversations I know that Kew’s management and staff are up for the challenge, but the Government have to provide a realistic trajectory, over years not months. Kew is not looking for the odd reprieve. Kew cannot look to the long term if its funding arrangements are so short-term and so uncertain. Yes, Kew scientists know that they will have to look for other sources of revenue, but there is also a risk in that. There is value in, and a desperate need for, public-interest science, which does not always lend itself to commercial considerations. An obvious example of that is genetically modified food. Governments and businesses fall over themselves to invest in GM, but so far all the promises of cheap pest control, and crops that tolerate floods, salt and extreme weather, simply have not materialised. A different type of biotechnology, traditional hybridisation, has delivered those products, and at a tiny fraction of the cost. Using new technologies such as gene marker mapping and genome sequencing, conventional breeding has quietly delivered—

14:39

Sitting suspended for a Division in the House.

14:50

On resuming—

[Zac Goldsmith]

Before we were interrupted by the Division, I was making the point about the importance of pure public-interest science and saying that such science does not always lend itself to commercial considerations. The example that I was giving was GM food. As Members will know, GM food has attracted an enormous amount of Government time and commercial investment, despite the fact that it has not lived up to its hype. GM food has not delivered on the promises that have been made over the years, of cheap pest control and crops that tolerate salt, extreme weather, floods and all the rest of it. By contrast, more traditional biotechnology—traditional hybridisation—has delivered those products. For example, in recent years it has delivered drought-tolerant and flood-tolerant varieties of rice, with high yields and so on, using techniques such as gene marker mapping and genome sequencing. However, it has not received anything like the level of investment from industry or the level of energy from Government that GM food has.

The cost of bringing a single GM crop to market is roughly $136 million, but the cost of bringing a non-GM variety, through these more traditional means, costs one fiftieth of that sum. Businesses and Governments are not falling over themselves to back traditional biotech because there is very little money in it for them. Improving crop varieties that farmers can use year after year is clearly not as profitable to industry as a GM model that requires farmers to purchase patented seeds year after year, locking them into dependence on the giant companies, just three of which control a staggering 70% of global seed sales. I give this example, and there are many other such examples, simply to show why we need pure public- interest science. It is important and if we push Kew purely to the commercial, which is where I think it will head if these cuts continue, we risk losing something inherently important and valuable.

I will end by quoting Richmond’s greatest living resident, Sir David Attenborough, who, as people can imagine, has taken a keen interest in this issue. He said:

“The important thing to remember is that Kew is the premiere botanical gardens in the world scientifically. People who think it is just a place to go to look at pretty flowers and flower beds are mistaking the importance of Kew Gardens. The Seed Bank is of world importance and it should be supported by the Government like a proper institution or university. And the continuing idea that Kew Gardens is merely a playground and that it should just put up the prices to look after itself is a misguided assessment of the value of Kew. The Government and the scientific departments should recognise that and support it properly.”

Like Sir David Attenborough and so many other people, I urge the Government to rethink their plans—even further than they have this morning—and to provide a genuine, long-term plan for Kew gardens.

14:53

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest as a member of the Friends of Kew.

I congratulate the hon. Member for Richmond Park (Zac Goldsmith), who has been campaigning so hard on this particular issue—not just as a constituency matter, but as a genuine commitment to the work that Kew undertakes.

I will echo some of the expressions that the hon. Gentleman used. If Members look at the correspondence received by the House of Commons Science and Technology Committee for its hearing tomorrow, they will see that it sets out in significant detail the role that Kew has played. There are more PhDs per square inch in this correspondence than in any other Select Committee correspondence I have seen, which reflects the intensity of the scientific debate about the future of Kew, and that debate is absolutely fascinating. I am not completely sure what “Angiosperm Phylogeny (Group 3)” is all about, but the reference to it demonstrates the breadth of the work that goes on at Kew and confirms what has been already said about Kew—namely, that it is a world leader in scientific research.

I also say that for any west London MP, for any London MP and for many other MPs beyond London, Kew gardens are themselves a world heritage site. In addition, Kew is a park enjoyed by literally millions of people. Many of our constituents enjoy it as one of the most important open spaces in west London.

[Mr Andy Slaughter (Hammersmith) (Lab)]

My hon. Friend is absolutely right. Kew is important to the whole world and certainly to the whole of this country, but it has a special place of trust for those of us who have grown up and lived in west London. We want to see a sustainable future for Kew. While I acknowledge that the announcement today is welcome, there has to be a long-term future, and we have to preserve something that is unique in the world.

[John McDonnell]

I agree.

May I remark on the success of this campaign so far? It started way back in April, when concerns were being expressed by members of staff at Kew through their trade unions—PCS and Prospect, among others. As the hon. Member for Richmond Park said, we delivered a petition of more than 100,000 names. Unfortunately, we were unable to take the wheelbarrow containing the petition up to No.10, but we took the petition itself. The campaign built up a head of steam. We held a public meeting down at Kew; there were at least 200 people there, who were incredibly enthusiastic about the campaign. That effort secured £1.5 million, which the Deputy Prime Minister announced and which was very welcome, and we have received £2.3 million today. If we keep on talking, we will be up to the £5 million needed to cover the gap identified some months ago.

I am grateful for the new money but there is a long-term problem, mentioned by the hon. Member for Richmond Park: we need stability now. We cannot keep on going through these ups and downs of budgeting, in which one month a £5 million gap is found and then the Government come up with the occasional £1 million in the short term. What we are looking for is a long-term consistent plan.

The difficulty at the moment is about the funding of Kew itself. I have been looking through the figures, as set out in the House of Commons Library briefing. If we look at the funding in recent years, to be frank we see that the money has been ricocheting around, and up and down, in that time. There is the Department for Environment, Food and Rural Affairs operational budget. In 2007-08, it was £17.6 million; it went up to £19.85 million in 2008-09; then it went down in 2009-10 to £17.65 million; and it is now down to £14.4 million. Again, the message that comes across from managers, trustees and others is the inconsistency and unreliability of the funding, which means that they are unable to plan from one year to the next because many of the decisions about the funding of Kew are made quite late in the year. Consequently, the management find it almost impossible to plan.

The money I have mentioned is the core operational funding, which pays for staffing. In addition, if we look at the capital budget, which also comes from DEFRA, we see that in 2007-08 it was £7.6 million; it went up in 2012-13 to £17 million; and it is now back down to £13.6 million, but that includes some elements that take into account redundancy costs and other costs. Again, even on the basic infrastructure costs, let alone the staffing, the inability to plan for the long term is affecting the efficient management of the organisation itself.

Kew has done all it can to raise its own funds. We can see from the trust itself the operations that it has undertaken, including the charitable work that has taken place and the charitable donations that have been made. In addition, the hon. Member for Richmond Park and I met Marcus Agius, the chair of the trustees at Kew, who set out for us the discussions that had been taking place about the restructuring, which aims to secure additional funds. However, at the end of the day that was overridden—well, the backdrop to all this was the reduction in core income. So even though the restructuring is there to ensure that there is enhanced income, particularly with regard to the scientific work, it is still based on an overall cut in expenditure from DEFRA itself.

Again, part of the problem is that the income comes from DEFRA, whereas the work that Kew does actually spans a range of different Departments. Kew plays an important educational and scientific role. A range of aspects of its work could properly be funded by other Departments, particularly its work in the developing world. However, it relies on DEFRA; unfortunately, DEFRA’s budget has been cut in recent years, meaning that the cuts have followed through to Kew. There is volatility about the whole funding process, both in terms of DEFRA’s funding and Kew’s ability to secure funds from elsewhere. That means there is lack of clarity about the future of funding and an inability to plan and invest in Kew’s long-term future.

As the hon. Member for Richmond Park said, the tragedy is that this year there have been significant cuts: 125 posts have been cut, with 65 staff having already gone, and there is now a group of staff in 51 posts who, although there are 42 vacancies, are declared surplus. Although it is possible that they will able to compete for some of the 42 vacancies, not all the vacant posts are suitable alternatives for those staff.

Kew’s expertise is described as a mosaic of individuals with their own individual expertise in small teams. In recent years, that expertise has been whittled down. For example, the voluntary redundancy scheme has meant that, in certain areas of activity, the expertise has either been reduced significantly or lost altogether. I shall give some examples that have been provided to explain the situation to us.

Expertise in legumes, one of the world’s economically important plant families, has now almost entirely gone and expertise in pollen has almost gone, with implications for health, forensics, conservation and the study of pollen in the archaeological and geological contexts. Capacity in many other areas has also been reduced, meaning that potential skills shortages are being faced in a number of areas. Kew relies on some world-renowned experts in these particular fields. It is absolutely admirable that a large number of staff who have retired or gone from Kew as a result of voluntary redundancy have come back voluntarily and are now offering their expertise as volunteers. What greater commitment can be demonstrated than that?

In addition, there is concern that the gap in funding from DEFRA is having an impact as Kew desperately tries to seek funding from elsewhere.

The entrance fee for Kew is £15 and there is now a discussion about whether children should be charged. For my constituency, Kew has become an oasis of calm within west London—particularly for families, who visit and enjoy it. Any further increase in fees will, unfortunately, deter many people from visiting Kew and there will be a self-fulfilling prophecy of decline as a result. More importantly, at the moment Kew offers the opportunity for all families to be able to visit. Any increase in prices will deter those least able to afford it and possibly those who need it the most in terms of being able to break away from the duress of their everyday lives.

There are other concerns. Yes, of course fundraising activities have to take place at Kew, but there has to be a balance as well. We do not want Kew turning into a base for funfairs and other activities that crowd out the environmental enjoyment of the park itself.

I have listed the range of issues put to us in the various public meetings that we have had. There is real concern that unless we get some agreement on stable funding over the longer-term period—the next five to 10 years in particular—the additional money that came in September and the additional money today, which of course is welcome, will tide us over perhaps for another 18 months and then we will be back to square one. In the meantime, we will have lost expert staff and—pardon the pun—their expertise does not grow on trees. These people have been trained throughout their lives and have dedicated their lives to Kew. Their expertise must not be lost.

Although Kew got some investment from the significant funds that other institutions gained—particularly the museums, with free access and investment over a longer period—because of its link to DEFRA in particular it never gained the scale of funding needed to tackle its long-term issues of physical infrastructure and the long-term financing of its staffing and research, particularly its scientific research capacity. Many people feel that, as a result, Kew has been discriminated against and that now is the time to stand back and look at where we go from here.

The triennial review is coming up in the new year—the scientific review is coming back to us as well—and that will give us some opportunity to look at the long-term role of Kew, but that must be linked to a long-term financial and investment plan. If that means looking at DEFRA’s or other Departments’ budgets, that discussion needs to go on within the Government.

I have a specific request for the Minister to take away with him. Kew management are desperately keen to work closely with the Government. There has been some close liaison between Kew management, the trustees and the Government in trying to look at a long-term financial plan for Kew, but we are nowhere near securing a sufficient deal on that.

My request is that the Minister should go back to his Department and convene a meeting with all interested parties—all the stakeholders—including the Friends of Kew, the relevant local MPs, trustees, the management of Kew and the trade unions. In that way, we can get absolute clarity on the current financial position and the Government’s plans for the long-term future of Kew. We cannot have the budget ricocheting around as it has done in recent years. A long-term, stable funding plan for Kew needs to be agreed between the Government and all parties. I ask the Minister to get everyone around the table in the coming months.

The £2.3 million on top of the £1.5 million has given us the breathing space to consider long-term staffing needs and examine a long-term plan, based on the restructuring that has taken place so far, in respect of the ambitions of Kew.

When we met the chair of the trustees, he outlined the work that had gone on: the development of a scientific vision; the way in which work force activities, in individual silos at the moment, were being broken down; the co-operation across areas of expertise; and the introduction of a better career development plan for the staff. However, at the end that was all clouded by the reduction in the core income. Unfortunately, I think that the plans that Kew is putting forward will hit the financial rocks—perhaps not in the next 18 months, now that we have the additional money, but after those 18 months, unless we have a clear commitment from the Government.

We need to address the issue on a cross-party basis. Bearing in mind its international and global scientific role, Kew’s budget and long-term planning cannot be dependent on changes in Government. I would welcome the opportunity for all stakeholders to come together and for a cross-party agreement on the long-term financing of Kew, agreeing a base budget from which the fundraising activities could be developed as well as some of the scientific project work, to bring in additional funds. There should be solid agreement between parties and all stakeholders on a long-term financial plan for Kew.

I turn to the current staff difficulties. Following the £2.3 million announced today and the £1.5 million announced earlier, the message to the management now should be to hold off any further redundancies and cutbacks because there is real anxiety about the loss of expertise as a result of the cuts and the voluntary redundancies that have already taken place. It is important that the message to management is that they hold on to what staff and expertise they have until there is a much better and deeper discussion about Kew’s long-term future.

I hope tomorrow’s Select Committee visit will produce a report that gives us some indication of what the Committee sees as Kew’s long-term future. The evidence that has already been provided emphasises Kew’s scientific role and the importance of holding on to Kew’s solid bedrock of scientists. However, those presenting evidence tomorrow will present ideas about how to establish a long-term budget. There is a spirit of co-operation between all the stakeholders now, and the Government should seize that opportunity. As I say, I hope that is done on a cross-party basis.

As a friend of Kew, I know that many of us have enjoyed the gardens over the years. Kew is a world heritage site and a beautiful park. Underlying all that, however, is the magnificent role that Kew plays in scientific research. If we do not address Kew’s needs now and seize this opportunity to secure its long-term future, many of us will feel extremely guilty in years to come when it is degraded as a result of waves of cuts and the instability of its funding base.

I hope the Minister will agree to meet us all and to bring all stakeholders together. We can create a long-term plan for Kew. In that way, we will not need to have another Adjournment debate in a few months’ time. Indeed, every time we go for an early-day motion or an Adjournment debate, it produces an extra couple of million pounds, so, in the long run, it would be cheaper for the Minister to bring us all together.

15:11

[Sir Tony Baldry (Banbury) (Con)]

There are three reasons why I want to contribute to the debate. First, I was the last Minister of State in the Ministry of Agriculture, Fisheries and Food—the Labour Government abolished it when they came into office in 1997. At the time, MAFF had responsibility for Kew gardens. For a while, therefore, I had ministerial responsibility for them, and they were an oasis of calm, especially when one was having to deal with things such as BSE and slaughtering millions of cattle. However, the case of Kew makes the machinery of governance point that non-departmental public bodies ricochet from one Department of State to another, depending on how the architecture of Whitehall responsibilities is made up. I will come back to that in a second.

My second reason for wanting to contribute is that, as my hon. Friend the Member for Richmond Park (Zac Goldsmith) and the hon. Member for Hayes and Harlington (John McDonnell) have made clear, Kew is one of the country’s outstanding assets. Indeed, in an oral question about Kew—looking at the House of Commons Library brief, I think I am one of the few colleagues who has asked one—I said that we all see it as a “national treasure”.

The third, personal, reason why I want to contribute to the debate is that my very first date with my wife was at Kew gardens. I therefore have a particular sentimental reason.

The hon. Gentleman’s machinery of governance point is very much the nub of the issue. Those of us who have been fortunate enough to be Ministers know that, each year, the Chief Secretary agrees a spending provision with the Secretary of State for each Department. Once that overall spending envelope is agreed, Ministers have to go through the Department to see how it will be shared out among the various commitments and statutory provisions it has to undertake. Inevitably, non-departmental public bodies come at the tail end of those negotiations because Departments tend, understandably, to look first at their core activities and then, if one is not careful, to say, “We are having to take an x% reduction in our public spending, so we have to apply that across the Department as a whole.” That leads, even if there is a three-year review, to the figures one sometimes sees.

As the hon. Gentleman fairly observed, and as the House of Commons Library brief demonstrates, the narrative here is not one of recent sudden cuts to Kew’s funding: there has been considerable yo-yoing over the last eight years or so. For example, in 2013-14, Kew’s funding was £28 million. In 2007-08, however, it was only £25 million. In the following years, it was £26 million, £28 million, £24 million, £28 million and £32 million, so it yaws around quite considerably over the years. In those circumstances, it is difficult for any organisation or institution to plan.

If one keeps Kew as a non-departmental public body, it will be hard for the Department of State to ring-fence funding for it, as against everything else it has to provide for. Of course, the figures are not small. DEFRA provided £32.5 million in funding in the financial year 2012-13, out of Kew’s total income of nearly £60 million. Kew’s budget is therefore quite substantial; indeed, I cannot think of any similar non-departmental public body with a similar budget. The hon. Gentleman spoke about the museums, but they tend to get direct grant in aid, while other research organisations tend to be parts of universities.

One of Kew’s great assets is its seed collection. I know from my time as a Minister with responsibility for the Overseas Development Administration and from chairing the International Development Committee that the seed collection is a global resource. However, that is really the responsibility of the Department for International Development, not DEFRA.

I rather find myself agreeing with my hon. Friend and the hon. Gentleman that we need to see how Kew, which is, by every account, an exceptional body, can be removed from the non-departmental public body, machinery of governance funding process. Permanent secretaries across Whitehall—in DFID, the Department for Culture, Media and Sport, DEFRA and, indeed, in the Department for Business, Innovation and Skills, which is responsible for innovation, science and connections with universities—should put their minds to determining what value the nation places on Kew and then work backwards from that. If the nation places a value on Kew, it may be more sensible for Kew simply to get a grant in aid directly from the Treasury.

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

As a London MP, I wish to make it clear that Kew is not just a museum piece or a phenomenally important research institution, but a wonderful part of London. It is used by many of my constituents as a place for general recreation and leisure. It is very much a 21st century asset, as well as having an important history.

[Sir Tony Baldry]

I think the whole House would agree with that observation.

I do not think the House should look on this as a beat-up for the Minister who has to respond to the debate. Nor do I think anyone would disagree with the Deputy Prime Minister when he said:

“Kew gardens is one of the world’s most important botanical research and education facilities…The Millennium Seed Bank is of global scientific significance, and scientists at Kew are heavily involved in research in the vital fields of biodiversity and climate change.”

All those things go pretty much across every Department. Climate change involves the Department for Energy and Climate Change. It is very hard that the responsibility for funding the whole of Kew should come within the budget of just one Department of state.

I would therefore hope for cross-party and cross-departmental discussions, not just about the funding of Kew, because such discussions would bring us perennially back to the same issue, but—although it may be rather boring talking about the machinery of governance—about where within the machinery of governance Kew sits and who is responsible for funding it under the National Heritage Act 1983. Changing that structure might make it possible to give Kew more certainty than it has had—and not just on the present Government’s watch. In fairness, I have not looked back to before 2007, and the Library has not given the figures, but I suspect that if I look back even to the time when I was the Minister, the figures tended to yo-yo around from year to year, depending on the departmental spend. I suspect that a cross-Government and cross-departmental review is required of where Kew should fit within the machinery of government and how it can be given sustainable funding. If we regard it, as I think we all do, as a national asset, we need to treasure it as one.

15:21

[Sir Gerald Howarth (Aldershot) (Con)]

I am delighted to take part in the debate. I congratulate my hon. Friend the Member for Richmond Park (Zac Goldsmith) on presenting such a cogent and comprehensive case for the support of the Royal Botanic Gardens at Kew. I agree with every word that the hon. Member for Hayes and Harlington (John McDonnell) said. I hope the message will go out that there is substantial unanimity across the House about something that is not just a national but an international treasure—an important and fantastic resource for the United Kingdom.

I have been going to Kew gardens since the days when it cost one old penny piece to go in. I see the hon. Member for Hayes and Harlington nodding. He and I are of a similar age and I suspect that we both delved into our pockets to obtain that coin, which perhaps had Queen Victoria’s head on it. The price has gone up, of course; it is now £15 to get in, I think. I declare an interest as my wife is a friend of Kew gardens, and I have a constituent who is one of the most distinguished scientists in the world in her field, Professor Monique Simmonds. She is the deputy director of science and the director of the Kew innovation unit. She was awarded the OBE last year for the extraordinary work that she and her team have been doing, not just in the United Kingdom, in the Jodrell laboratory at Kew where they do scientific research, but around the world. She, with her team, makes a fantastic contribution through visits and making connections, and identifying plants that can produce life-saving medicines. So I wholeheartedly support the campaign to ensure that Kew is properly funded.

I am a Thatcherite Tory—I see you nodding, Sir Alan; thank you—and I recognise fully the need for the nation to balance the books. Unquestionably it is the big challenge of the Parliament to address the budget deficit, but the nation still spends £700 billion a year, and therefore how to spend that money on services, even if the amount is reduced, is a matter of legitimate political and public debate. I feel strongly that the nation needs to capitalise on one of its greatest assets: the talents of its people. We face a competitive world out there, with countries such as China and India snapping at our heels, and the only way this nation will survive is by harnessing the innovative talent that fortunately runs through it.

I argued repeatedly when I was a Defence Minister that we need to spend money on defence research. We need to be at the forefront of technology, and that also applies to Kew, in the field of medical science. We have the means to do it. We have the talented and skilled people at Kew, who are able to deliver. Rather than cutting them back we should expand them for, if I may be permitted to use the expression, they are the seed corn of our future prosperity as a nation. One of Britain’s most successful businesses, apart, of course, from the defence industry, is the pharmaceutical industry. There is a synergy; what the scientific research at Kew produces complements one of Britain’s most important industries.

Kew is not an ancient monument to be preserved, although I entirely agree with my hon. Friend the Member for Cities of London and Westminster (Mark Field) and the hon. Member for Hayes and Harlington—as well as my right hon. Friend the Member for Banbury (Sir Tony Baldry), who mentioned his personal attachment to Kew—that it is a lung in west London, serving a wider purpose beyond the one that we have predominantly discussed today. That is important, but what is fundamental to the salvation of this nation is that we harness technology. In Kew we have a jewel in our crown, and I hope that we shall continue to fund it.

Another aspect of Kew’s work is the involvement of the Royal Botanic Gardens in the fight against crime and terrorism. We face a bio-threat, and without places such as Kew we would lack some of the expertise with which to address it. Some hon. Members may remember when a boy’s torso was found in the Thames. It had no head. The origins of that child were established by the forensic work done at Kew gardens. By analysing the contents of the stomach it was possible to tell which part of Nigeria the torso came from. I use that as a graphic but simple illustration of the depth of expertise that we cannot, as a nation, afford to lose.

I will not discuss the question that my right hon. Friend the Member for Banbury raised of how we structure government. I just believe, as others do, that there must be a long-term solution. My right hon. Friend suggested direct funding from the Treasury. In a sense, I do not mind how it is done, but done it must be, in the interest of the nation and the exchange of information and samples around the world. A huge amount of work has been done through fundraising at Kew, to raise funds without relying wholly on the Treasury; but as for the director saying it can all be done by selling more, that is what Kew has already been doing, and some of what it does involves payment in kind. By giving expertise it gets access to plants and other facilities available around the world. Much more bartering, as opposed to pounds, shillings and pence, may be happening.

I am left with the words of that magnificent magazine Country Life, to which I am sure the hon. Member for Hayes and Harlington is a regular subscriber.

[Sir Tony Baldry]

Compulsory reading.

[Sir Gerald Howarth]

Absolutely; required reading. The article said:

“The nation would, of course, be mad to let this treasure go, but that, in the worst possible sense, is what our elected representatives are doing already.”

Notwithstanding the funding that has been given, which I regard as temporary plastering, we need a fundamental, long-term solution, to preserve the fantastic work being done at Kew.

15:29

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

I start with the usual courtesies. It is a pleasure to serve under your chairmanship, Sir Alan. You were a Minister who had responsibility for Kew in his time in government, so this debate will no doubt be of keen interest to you.

I apologise for the absence of my hon. Friend the Member for Brent North (Barry Gardiner). He has shadow ministerial responsibility for this brief, but he is indisposed, so I am standing in on his behalf. I wish him well for a speedy recovery. Finally, I of course congratulate the hon. Member for Richmond Park (Zac Goldsmith) on securing this debate, which has turned out to be incredibly effective. If it has served any purpose, it seems to have triggered, along with the e-petition, the decision to announce a further tranche of funding for Kew gardens. His contribution was passionate. He led the debate off with an excellent set of remarks that underlined the key point, which is the need for stability in Kew’s funding.

Kew remains one of the leading botanic gardens of the world. As my hon. Friend the Member for Hayes and Harlington (John McDonnell) pointed out, it is important not only to London, but to the whole of the UK and the world. It makes an essential contribution to our understanding of the world’s flora and to the conservation of plant and fungal biodiversity. It is clear that Kew’s committed team of scientists are highly valued internationally. Indeed, one could argue that it is difficult to overestimate the value of their contribution to plant science. They thoroughly deserve their reputation for world-leading research and for their essential conservation and curation work. In 2012, Kew was judged to be

“well placed to continue to make a significant and globally important contribution”

by the independent review panel chaired by Professor Georgina Mace. That review considered the position of Kew in 2010 and 2011. After a decade of investment from a Labour Government who understood the value of sound science, Kew was well placed to manage a slight real terms cut in its operational budget. That is where we were four years ago.

Today we have Richard Deverell, Kew’s director, warning of possible bankruptcy and a £5.5 million shortfall in Kew’s operational budget. I will refer to today’s announcement later in my remarks, because it alters things slightly. There is a stark difference between where we were and where we are, but that is what happens when we have a Tory-led Government who believe that protecting the environment holds back the economy. They seem to believe that we have to make a choice about whether we protect our economy or our natural environment.

Will the Minister clarify the evidence behind his Government’s approach to Kew, notwithstanding today’s announcement? Does he believe that Kew will be able to increase significantly its level of external funding, which seems to be the long-term plan, including for its core work? If so, why does he believe that and how will it be done? If not, he should be clear about the reasoning behind the Government’s initial decision to degrade the UK’s natural science capacity. The independent committee’s report contained a clear warning that

“Kew must guard against the risk that the allocation of its core funding is distorted by the need to chase external money.”

There is real concern that, in a context of declining resources for animal and plant science, Britain will not be able to deal with potential risks or new outbreaks of plant disease. I refer specifically to the recent outbreaks of ash dieback and oak processionary moth. Earlier this year, the Natural Capital Committee said that the incidence of disease has accelerated over the past 50 years. It also said that the current outbreak of ash dieback is expected to destroy all but a very small percentage of the total population of ash trees in Great Britain. Every time I go out walking in my constituency, I think about that and the difference that it could make to our landscapes and precious woodlands. With such a host of new pests and diseases attacking the United Kingdom’s native treescape, Kew’s scientists are more important than ever.

Climate change and the increasing presence of pests and diseases are placing additional stresses on our natural environment. We do not know exactly what impact they will have, but we must prepare properly for the increasing risks, and we simply cannot do that without Kew. Those who have a long-standing interest in the natural environment, as I do, will be asking why we are forced time and again to make basic arguments in favour of maintaining the levels of investment in environmental science. The Government clearly just do not get it, so it is worth rehearsing some of the basic points.

As many Members have said, Kew is a leader in plant conservation. It plays a major role in global assessments for the International Union for Conservation of Nature’s red list. The millennium seed bank supports the long-term conservation of wild species and the use of seed for innovation and adaptation in agriculture, horticulture, forestry and habitat restoration. Kew has a long tradition of global leadership and influence in plant discovery and description and in pure and applied research.

The Government’s failure to appreciate the value of Kew is one of the clearest signs that they do not take the environment seriously. Despite the sensible recommendations of the 2010 Chalmers independent review of Kew and the 2012 independent science review, Kew has been left on an unsustainable footing. That key point has been raised in, and crystallised by, today’s debate—the instability that Kew faces in the long term. It was illustrated perfectly by the hon. Member for Richmond Park and my hon. Friend the Member for Hayes and Harlington.

Today the Chief Secretary to the Treasury and the Deputy Prime Minister announced that an extra £2.3 million of Government funding has been secured through to April 2016. The right hon. Member for Banbury (Sir Tony Baldry) made the point that Kew should perhaps be funded by the Treasury, but some of us might argue that it already is effectively being funded by the Treasury, because this is the second time that the Treasury has bailed Kew out. That leads, however, to a few questions. Is the money additional grant funding or has it been moved from another part of DEFRA’s budget? If so, which programme is the money being transferred from? Does the £2.3 million include expected efficiency savings either from Kew or from elsewhere? Is the £2.3 million for operational or capital budget purposes? Will Kew receive all the £2.3 million in 2015-16?

The key point is that the announcement today—let’s face it, our Deputy Prime Minister is quite good at these kinds of announcements—does not negate the hand-to-mouth feel of the Government’s approach, which is one of the key reasons why the Science and Technology Committee is conducting an inquiry into the issue. I hope the Government will do more than just pay lip service to the Science and Technology Committee and its deliberations, because the £2.3 million does not deal with the issue, as Members here today have said repeatedly. As John Wood from the department of plant sciences at the university of Oxford said in his submission to that inquiry:

“The lack of core funding is forcing Kew to abandon its traditional roles and research and instead head in the direction of research to which it is not suited. Much will be lost if this process continues.”

Today’s announcement does not deal with that fundamental point.

Environmental science should be a priority of the Government’s, but it could not be further down their list of priorities. Just look at the Environmental Audit Committee’s report published in September; it has an environmental traffic light scorecard that has no green on it. Would you expect a Government with an environmental scorecard coloured red, red, red and amber to understand the value of Kew? Of course not. Labour is committed to halting and reversing the decline of our natural environment, and we are clear that Kew has an important role to play in meeting that ambitious goal.

15:39

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

It is a pleasure to serve under your chairmanship today, Sir Alan. I, too, congratulate the hon. Member for Richmond Park (Zac Goldsmith) on securing the debate and all hon. Members on their contributions made both today and at other times when the future of the Royal Botanic Gardens, Kew has been discussed. I also congratulate Kew on its approach to refreshing how it delivers its science in the 21st century.

As lead Government sponsor for Kew, the funding that the Department for Environment, Food and Rural Affairs provides helps to support the institution as an international, collections-based, centre of expertise in plant and fungal identification, taxonomy, conservation, sustainable use and related research. It helps to support Kew in its role as a UNESCO world heritage site and supports Wakehurst Place, which is managed by Kew and is home to the millennium seed bank. The funding also supports Kew in its roles as the world’s most famous botanic garden, an important visitor attraction, which has been highlighted by hon. Members from London, and a provider of science-based education to the public.

Kew was founded over 255 years ago. The Government and Kew’s shared challenge is to ensure that its structure is resilient and fit for purpose to meet the challenges of the 21st century. Its new science strategy is vital. Kew is recognised throughout the world for its unrivalled assets and expertise, and we want further to enhance that reputation. Kew is not simply another academic institution; it maintains a world-renowned collection, which enables it to be unique in the science that it can provide. This debate and the Science and Technology Committee’s hearing tomorrow on the future of the Royal Botanic Gardens, Kew will help to inform the final details of a new science strategy for Kew.

We have been able to offer relative protection to Kew in terms of total Government funding. Average funding has been more than £27.4 million a year over the past five years. Between 2007 and 2010—the last comprehensive spending review period—the average was less than £27 million. Others have already mentioned it, but I am pleased to confirm an extra £2.3 million unrestricted resource funding for 2015-16, which the Government secured through the recent autumn statement and which was announced today by my right hon. Friend the Deputy Prime Minister.

[Zac Goldsmith]

I thank the Minister for giving way so early in his speech. I want to echo the point made by the hon. Member for Hayes and Harlington about the need for a full, open stakeholder meeting. The grant that the Minister alludes to is a one-off, a reprieve, a delay and nothing more than that, so there is a need for such a discussion. I ask him to address that point directly. If he could facilitate that meeting, I am sure that we would all appreciate it.

[Dan Rogerson]

I thank the hon. Gentleman for his intervention. I will return to that point and some of the long-term issues later.

The funding announced by the Deputy Prime Minister today maintains Kew’s resource funding at 2013-14 levels right through to April 2016, which is in recognition of the need to embed the restructuring in order to deliver a sustainable future for Kew and the globally recognised science work that it provides. The funding is in addition to the announcement made by the Deputy Prime Minister in September that unrestricted resource funding for RBG Kew will be maintained until April 2015 at 2013-14 levels. Kew was provided with an additional £1.5 million to honour that.

We fully support Kew’s efforts not only to balance the budget, but to increase commercial and other sources of funding. That approach not only reduces reliance on Government funding, but potentially opens up additional and new opportunities. In support of that, I can confirm that we have extended to Kew more of the freedoms that are available to certain museums and galleries, to which my right hon. Friend the Member for Banbury (Sir Tony Baldry) referred. In particular, that will mean that Kew can bid for preferential Government loans to pursue projects that will enhance its ability to grow self-generated income. Kew has been asking for that and I am pleased that the Deputy Prime Minister confirmed that today.

Kew is already a valued partner in delivering DEFRA’s strategic evidence priorities. It has unique assets and globally respected expertise and is a top performing scientific institute that helps to deliver DEFRA’s science objectives. I welcome Kew’s approach to refresh how it delivers that science in the 21st century. In turn, that will help to deliver what people want of Kew and what the Government need. I support Kew’s restructuring as it will enable the right skills to be in place to secure long-term success, to maintain a world-class facility and to be able to respond to future challenges. Kew’s scientists directly support DEFRA’s work in several ways. For example, they contribute to international biodiversity, to tackling climate change globally and to a resilient, sustainable and growing food and farming industry. They help with the bio-security system and our ability to respond to plant, pest or disease outbreaks and contribute towards halting the loss of biodiversity in England by 2020.

Kew has a dedicated, committed and professional work force, but it needs the right skills to deliver a new scientific vision and to respond to future global challenges. It cannot afford not to change. It may be easy to think that it is all about reducing costs, but the restructuring is about securing long-term stability for the institution and creating and maintaining a world-class facility for future generations. That will enable it to make a unique contribution to meeting the 21st century’s great social and environmental challenges, to which the hon. Member for Richmond Park referred in his opening remarks.

Restructuring will also ensure succession planning by introducing new career and development opportunities for staff, so that future generations have the capability to continue its science legacy. Kew cannot afford not to change if it is to continue to be the world-class organisation that we all want it to be. The restructuring clearly impacts on individuals in different ways. It is too early to tell what that means for every person working at Kew, but Richard Deverell and his team are offering every support to the people affected by the transition.

[Zac Goldsmith]

I worry that the Minister is approaching the end of his speech, so I want to make a point before he finishes. Some of Kew’s key work, as the Minister and other Members have identified, clearly crosses over into the realms of the Department for International Development. Has the Minister’s Department approached DFID at any point to ask whether what would represent an almost immeasurably small pinprick in its budget could be diverted to support specific work at Kew that relates to poverty alleviation, building resilience into the global food economy and dealing with climate change?

[Dan Rogerson]

Part of Kew’s restructuring involves making it better able to look at other opportunities, some of which may come from other sources of public funding. We want to make it ready to take advantage of that.

[Zac Goldsmith]

Will the Minister give way?

[Dan Rogerson]

May I make a little progress? I want to refer to the points made by other hon. Members and, indeed, those made by the hon. Gentleman.

Turning to heritage, it is an important Government priority to meet our obligations as a state party to the world heritage convention. We are working with Kew to ensure that it is using resources effectively and looking for innovative ways to maintain and secure a long-term effective use of the assets that it manages. We will continue to involve our colleagues in the Department for Culture, Media and Sport in those discussions. We have invested considerable capital funding in recent years to help Kew reduce operational costs and increase self-generating income, including support to the temperate house restoration project, where we underwrote £10 million, which is a UNESCO management priority.

On the issues raised by hon. and right hon. Members the debate, I have sought to set out that the coalition Government have had to deal with public spending challenges to reduce the deficit. The hon. Member for Aldershot (Sir Gerald Howarth) was at pains to point out his ideological leanings. Mine might be slightly different, but we can agree that we need to tackle the problem facing the country in order to deliver growth and guarantee future investment in public services. Although DEFRA has faced a budget reduction, as have all Departments, Kew has done slightly better than DEFRA more generally. My right hon. Friend the Member for Banbury was concerned that non-departmental public bodies are at the end of the queue. That is a bad pun, but it is not the situation with Kew.

[John McDonnell]

The point that we were trying to make is that Kew has missed out on other opportunities. Even though it plays a role as a heritage centre, it comes under the Department for Environment, Food and Rural Affairs and so it did not gain additional money from the Department for Culture, Media and Sport that others, museums in particular, received. Even though it plays a key education role, it did not gain the protection of the education budget. It was the same with regard to the Department for International Development. As Kew is funded directly by DEFRA, it has missed out on all those other funding opportunities over the past 15 to 17 years.

[Dan Rogerson]

I understand the hon. Gentleman’s point, his commitment to the institution and his desire to look at every opportunity to secure its work and underpin it for the future. The triennial review offers an opportunity to look at the position of the institution and where it sits in the Government structure. He has referred to that chance, and that is the proper time, rather than asking the question separately today.

Hon. Members have raised issues to do with science and the crucial work that is done. The hon. Member for Richmond Park talked about the need for succession planning, to which I referred a little, and Kew is looking at the courses and other work it does as academic provision to ensure that it is bringing through the next generation of expertise for the future. That is an important part of its work.

Hon. Members from all parties have been campaigning to keep Kew at the forefront of debate in the House and outside it among people at large. I have been on the receiving end of that, too, not only from the hon. Member for Richmond Park, but from Opposition Members. I have heard from Liberal Democrats in Richmond and elsewhere. Today, we had the announcement of my right hon. Friend the Deputy Prime Minister. So there has been pressure from throughout the country to ensure that we are doing the absolute best to protect Kew and all that it does.

As for the prospect of a further meeting, I will take that to my noble Friend Lord de Mauley, who is the responsible Minister. Given the Science and Technology Committee inquiry that is to begin tomorrow and the opportunities of the triennial review and the next comprehensive spending review, we will have to decide when the right point for such a meeting will be, but I will certainly take the proposal back to my noble Friend for his consideration. He is always happy to hear from Members of this House, as well as Members of another place, on the subject.

I also want to refute some of the little barbs sent in my direction by the hon. Member for Penistone and Stocksbridge (Angela Smith), who spoke for the Opposition. The Government have invested in science. As Forestry Minister, I know that the appointment of a chief plant health officer, the work on forestry research and so on are crucial, which is why we will continue to fund such things and take science forward.

The hon. Lady also made some points about funding generally. We heard from her party leader a few days ago about the fact that all parties will need to tackle issues such as how much Government will be able to invest in public services, how much expenditure will have to come from taxation and how much will have to be borrowed in the future. Those are difficult questions for all of us to answer.

[Angela Smith]

The Minister is being generous with his time, but I wish to remind him that I asked questions about today’s announcement. We would like the answers to the questions, rather than responses to the points made.

[Dan Rogerson]

I was merely responding to the hon. Lady’s assertion that, somehow, all would have been well and rosy for every area of public spending had a Labour Government been in office. I suspect that that would not have been the case.

The hon. Lady wanted to know whether the money announced today was new money. It is—it is not money coming from elsewhere in DEFRA’s budget. The funding is unrestricted and has no conditions attached to it, so Kew will be able to use it across the range of its responsibilities. All that money will be available in 2015-16. I hope that that reassures her and answers her questions.

I am grateful for the opportunity to place on the record the Government’s commitment to the Royal Botanic Gardens, Kew. I thank hon. Members of all parties for their commitment and support. I hope that the announcement today by my right hon. Friend the Deputy Prime Minister demonstrates that the money is available to help the transition that the institution is having to make over the coming years towards the long-term future that we all wish to see.

[John McDonnell]

May I ask the Minister when we can look forward to the next instalment?

[Dan Rogerson]

The budgetary position has now been set out for the next 18 months, as the hon. Gentleman said, and the triennial review will then give us the opportunity to look at the future of Kew and where it sits in the Government apparatus. I thank him and all hon. Members for their contribution to the debate. I thank you, Sir Alan, for the opportunity to speak.

[Sir Alan Meale (in the Chair)]

We have a short time remaining, Mr Goldsmith, if you would like to say something.

15:55

[Zac Goldsmith]

I appreciate the unexpected perk, having spoken when I initiated the debate.

I do not know whether it is appropriate to ask the Minister to intervene, but I would welcome a clearer answer to my question on DFID funding, which is crucial. A lot of work that Kew does falls within the remit of DFID. If his Department has not yet approached DFID, will it now commit to doing so? DFID does some wonderful things, but no one would argue against the fact that huge chunks of money presided over by DFID are not as well spent as they might be. Kew would present a great opportunity to spend that money well.

I acknowledge the answer given to the hon. Member for Hayes and Harlington about the stakeholder meeting. When are we likely to hear back from the Minister about that meeting? There is not a lot of time between now and the election, and the meeting should happen before it. Although I am grateful for today’s bung, my concern is that it is a political device to kick the issue beyond the general election. As Members and campaigners, we are aware that if we are to have long-term stability for Kew, it will need to be secured this side of the election, because negotiating afterwards will be much harder.

[Dan Rogerson]

On the hon. Gentleman’s specific points, I will have to confirm with my noble Friend Lord de Mauley whether any such approach to or discussions with other Departments such as DFID have happened. The institution is going through a process and has been exploring with our officials in DEFRA the best path for getting to its future, but if we can help it to have conversations with other Departments, I am sure that that is possible and very much part of the bottom-up process of Kew deciding what would be appropriate. We would facilitate a conversation, rather than seek to push another Department to make a budget available unless it fits its core priorities. I will take the suggestion of a meeting back to my noble Friend.

On the hon. Gentleman’s political points, all the political parties are setting out our stalls for future funding. There are challenges. He and other hon. Members will look at what all the parties are saying about future funding of public services and will make up their own mind. With regard to the funding for Kew, however, the money is in place for 2015-16.

[Zac Goldsmith]

I put on record my thanks to the hon. Member for Hayes and Harlington, in particular, for campaigning so hard, which is appreciated by my constituents and by the staff and friends of Kew. It has not gone unnoticed. Personally, I am grateful to him for having pushed the issue so high up the agenda. We would not be having the debate or have seen the press release about the extra funding this morning had it not been for his leadership. I am also grateful for all the speeches.

[Sir Gerald Howarth]

Before my hon. Friend finishes, may I say how strongly I support his message to the Minister that he should be talking to DFID? The Department for International Development is simply awash with cash. It has had a bung of an extra £5 billion in the past four years. So much of the work that Kew does is overseas, helping developing countries, so I am sure that my hon. Friend and I can make a compelling case to the Minister to go and nick some of that cash off DFID.

[Zac Goldsmith]

With that, let us commit here and now as hon. Members and Back Benchers to visit the Secretary of State for International Development to make that case. My hon. Friend is absolutely right.

I thank you, Sir Alan, for presiding over the important debate. I hope that it is the beginning, not the end, of something positive.

Barnett Formula

Tuesday 16th December 2014 Westminster Hall

16:01

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

It is a pleasure to serve under your chairmanship, Sir Alan. I am grateful to have this opportunity to discuss the future of the Barnett formula in a little more depth than recent debates have allowed.

My reason for calling for the debate was neither to call for the abolition of Barnett, nor to say that it must stay unchanged for ever more. My motivation was born out of frustration at some of the ill-informed comments made about it. In advance of the draft legislation on further devolution to Scotland, which is due before Burns night next year, I want to put on the record an explanation of what the Barnett formula is and, perhaps more importantly, what it is not. I also put on the record that I absolutely support extra fiscal powers for the Scottish Parliament. That is good for the democratic accountability of Holyrood.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Gentleman mentioned the Barnett formula and, before he goes too far, I want to highlight its operation. About a fortnight ago, the Treasury gave out money because roads and health in England had a shout for that. Therefore, from that followed Barnett consequentials to Northern Ireland, Wales and Scotland.

However, I notice that, if there is a need in Scotland, Wales or Northern Ireland for money for health or transport, the Treasury does not dip its hands in its pockets in the same way with Barnett consequentials running in the other direction. Barnett consequentials follow on from need in England. It is surely a governance problem when the Treasury responds only to health and transport needs in England and then we get consequentials. Should not the Treasury give money and have consequentials running in the other direction when need arises?

[Sir Alan Meale (in the Chair)]

Order. May I point out to Members that we have only a short time for the debate? If interventions are to be made, can they be questions to the speaker at that time rather than statements? Hopefully everyone will have an opportunity to speak.

[Iain Stewart]

I am grateful for the hon. Gentleman’s intervention. If he bides his time a little, he will see that I will touch on some of those issues later on in my speech.

[Karen Lumley (Redditch) (Con)]

Does my hon. Friend agree, though, that the majority of people in my constituency would think that the Barnett formula is unfair?

[Iain Stewart]

There certainly is that perception. Part of my motivation for securing the debate was to address such issues so that we can have a more informed debate on the fiscal relationship principally between Scotland and England. I am conscious that Members from Wales and Northern Ireland are in the Chamber as well. My comments will be principally about Scotland and England, but the arguments also apply to the rest of the United Kingdom. As I said, there is much ill-informed comment and misunderstanding about what the Barnett formula is and does and that is why I wanted to have this debate.

As well as being misunderstood, the Barnett formula is much maligned. Contradictory simultaneous comments are made that it both penalises Scotland and is too generous to Scotland, but both of those cannot be right. I am reminded of a comment that Lord Foulkes made when he was a Scotland Office Minister about a decade ago:

“If the SNP think that Barnett is too mean and the English Tories think that it is too generous, most sensible people would think that it is just about right”.

For many years, reform of the Barnett formula has been parked in the “too difficult” box.

[Jim Shannon (Strangford) (DUP)]

In Northern Ireland’s case the Barnett formula is just right. It recognises the need to keep the balance of wealth, because in Northern Ireland our wages are lower and the products we buy in shops are more expensive. At the same time, if the current talks work out—I hope that they do—and corporation tax is devolved to Northern Ireland, that could be a poisoned chalice. However, Northern Ireland has already been able to set its air passenger duty for long-haul flights with the permission of the British Government.

[Iain Stewart]

As I said earlier, the purpose of the debate is not to say whether Barnett is right or wrong or whether it needs to be changed or not; it is just to help inform a more considered debate about the issues.

[Glyn Davies (Montgomeryshire) (Con)]

Will my hon. Friend give way?

[Iain Stewart]

Certainly. I will complete my tour around the United Kingdom.

[Glyn Davies]

I feel that Wales should have a contribution to this international debate. My hon. Friend is addressing the issue of clarity. In Wales, the lack of clarity in the Barnett deficit is leading the Welsh Government to resist financial accountability. Does he agree that it is vital that we find out what the Barnett deficit is? A whole range of figures have been bandied about. Most of them are untrue, but they are being used to prevent the financial accountability in Wales that we all want to see.

[Iain Stewart]

My hon. Friend makes an excellent point. There is a lot of darkness and cloud about these matters, and if we are to have a sensible debate about the fiscal balance between the component parts of the UK, we need that greater clarity.

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

I think that Lancashire needs a say. In the debate that is coming on English votes and so on, does my hon. Friend agree that we need to be honest with the English people? There is a cost to being the biggest part of the Union and there is a cost to the Union. Whether we agree about Barnett or not, England will have to pay more than the rest of the component parts of the United Kingdom.

[Iain Stewart]

My hon. Friend as ever makes a good point. At the conclusion of my speech I will say a little more on that.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Iain Stewart]

Once more and then I must make some progress.

[Mr MacNeil]

While the hon. Member for Lancaster and Fleetwood (Eric Ollerenshaw) may be correct that England pays more, it pays more only because it is larger; it does not pay more per capita. Unfortunately, that has been Scotland’s preserve: it has paid more tax per capita into the UK each and every year for the past 33 years.

[Iain Stewart]

Again, I shall address those very points in a few moments. I want to shed some light on the issue. Critics of Barnett usually start by quoting Treasury figures that say that public spending per capita in Scotland is £1,600 greater than in England as a consequence of the Barnett formula. For once I may be in agreement with the hon. Gentleman, because that is not correct. The Barnett formula is only one part of the complex fiscal relationship between the different parts of the United Kingdom.

The Barnett formula applies only to certain parts of public spending. Currently, about 40% of public spending in Scotland is not covered by it because that spending is not determined by the Scottish Parliament. That proportion will reduce in time as further taxes are devolved, but that point is important. Nor does Barnett determine the size of the Scottish block grant as a whole. That has built up incrementally over the years and the Barnett formula determines only the annual changes.

In simple terms, Scotland gets a population share of a departmental budget change in England where the equivalent is determined by Holyrood. Each year, the changes for each spending programme are totalled up and an overall adjustment to the previous year’s block grant is made. It is then up to the Scottish Parliament to decide how it spends that grant; it is not hypothecated. If Scotland gets £100 million more for health services because of the change in England, it is not obliged to spend that on health. That partly explains why some public services and other matters in Scotland are different from south of the border.

It is important to note that when the formula was introduced in the late 1970s it was designed as a convergence formula to narrow public spending per capita between Scotland and England. In advance of the devolution legislation proposed by the Wilson and Callaghan Governments, the Treasury carried out a needs-based review to determine the extent to which public spending per capita in Scotland would need to be higher to provide a comparable level of public services to those in England. It was found that because of factors such as Scotland’s proportionally greater landmass, rural population, council housing stock and poor health indicators, spending needed to be 16% per capita higher than in England. It was actually 22% higher, so Barnett was introduced gradually to narrow the gap and avoid the annual round of what was described as table-thumping over agreements between the different spending Departments.

It would seem that convergence has not happened, and it is important to understand why. First, in the initial years of operation, the population share was never adjusted, and that was at a time when Scotland’s population relative to England was falling. For a decade or so, a bias was therefore built in to the formula in Scotland’s favour. In the 1990s, the population share was adjusted, but it helped to sustain the higher levels. Secondly, and more significantly, were the number of deals done outside the Barnett formula. Whatever calculation Barnett produced, there was always pressure, under Governments of all parties, for extra funding arrangements. In his autobiography, the noble Lord Lang notes that when he was Scottish Secretary, between 1990 and 1992, Barnett should have reduced the Scottish Office block grant by £17 million, but, as a result of separate deals agreed with the Treasury, it was increased by £340 million.

[Mr MacNeil]

Will the hon. Gentleman give way?

[Iain Stewart]

I hope that the hon. Gentleman will forgive me, but I must make some progress.

The simple point is that if Barnett were to be ended tomorrow, the issue of comparative spending would not go away. There has not been a needs-based review since the 1970s, in which time many economic, social and demographic changes have taken place, so we do not actually know what the current position is. There are also difficulties in defining exactly what territorial spending is. One example is the building of High Speed 2, a project of which both phases will be entirely within England. One could therefore argue that spending on it should accrue only to England, but there is a benefit to Scotland and Wales—

[Mr MacNeil]

And France.

[Iain Stewart]

I am not quite sure whether the hon. Gentleman’s geography is correct. High Speed 2 will go from London to Birmingham and the north of England.

[Mr MacNeil]

The hon. Gentleman has conceded, as he is right to do, that High Speed 2 will be built in England, and says that it will also bring benefits to Scotland. If there are benefits to Scotland in the north, surely there will also be benefits at the other end, in the south—namely, to France. The benefits will be not only within but outwith the United Kingdom. High Speed 2 is not running in Scotland, but the hon. Gentleman argues that it will benefit Scotland; if it is going to benefit Scotland, it will benefit France in the same way.

[Iain Stewart]

Given the fact that there is currently no straight link between High Speed 2 and High Speed 1, that is a slightly tangential point. I have simply given High Speed 2 as an example of how difficult it is to assign exactly public spending on a territorial basis; I could cite many other examples.

It is worth while to look not only at public spending relationships between Scotland and England and Wales and England, but within each nation and the regions of each nation. There is currently a process of further devolution in England, which is producing more demands for tax and spending powers in the cities and regions. The north of England says quite regularly, “We’re being hard done to because of the Barnett formula.” London says that it pays far more than it receives in public spending—[Interruption.] I am not saying whether that is right or wrong, merely that such comments are made. I have funding issues in Milton Keynes in my constituency: with a rapidly growing population, sometimes the funding formulae do not keep up with the population need. There are also tensions between urban and rural spending—the issue is not only between the component countries of the United Kingdom.

We must start to open up a wider debate about the allocation of public spending right across the UK, bearing in mind the fact that we have a finite pot of money. We must also look at the tax receipts side of the ledger, which is also controversial. We have never definitively established the comparative amount of taxes raised north and south of the border, or, indeed, within England, because we have never had to assign taxes territorially. Many studies have been conducted, but they have been based on controversial assumptions.

It is difficult to assign tax revenues on a territorial basis because we have long had a unitary system. For example, my father was employed by the Civil Aviation Authority. He was based at Prestwick but spent one week in every two working at head office in London. He commuted between the two, so his time was spent equally between Scotland and England, and, to throw another spanner into the works, his tax office was in Cardiff. It would not be impossible to unpick all that, but it would be difficult, for corporation taxes as well as personal taxes. Nevertheless, it is something that we will have to do if more tax powers are devolved to Holyrood. We must also look at the disaggregation of national insurance and pension receipts and liabilities.

Simple calls for the retention or abolition of Barnett are very wide of the mark. If we are going to dismantle what has been a unitary fiscal system, there are many aspects to consider. Without updated figures on the current costs of providing public spending in each nation of the UK and within each region of each nation, we are working in the dark. I gently suggest to my hon. Friend the Minister that the Treasury looks at providing those figures.

My final point echoes the excellent one made by my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw). We must look at this matter in the context of the cohesion of the United Kingdom. The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) has left the Chamber, but his party, the SNP, lost the referendum. We must make the Union work better and we need a sense of fairness; as my hon. Friend the Member for Redditch (Karen Lumley) said, every part of the Union must be treated fairly.

A few years ago, I began to do research for a book, and I looked at what is done in places such as Canada, Germany, Spain and the United States with regard to different tax-raising and spending powers in the component parts. Whatever the system, everyone still argued about spending levels and transfers from more to less affluent areas. That will never end—it is part and parcel of political debate—but the important thing is that we have a sense of fairness. I hope that today’s debate has helped to shed some light on matters that are often simplified and on a debate that is often inflamed, and that I have made a useful contribution to a much longer debate that we must have about public spending in the UK.

16:18

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

It is a great pleasure to serve under your chairmanship this afternoon, Sir Alan. I congratulate my hon. Friend the Member for Milton Keynes South (Iain Stewart) on securing this debate and setting out his case in a characteristically thoughtful and analytical way. He brings great knowledge and expertise to the matter. I also thank other hon. Members for their contributions to this short debate, the timing of which is very appropriate. Given the momentous referendum in Scotland not that long ago and the Smith commission’s subsequent report, this subject has never been more topical. Furthermore, hon. Members will have seen that the Government have published a Command Paper today looking at the options for devolution in England. The paper acknowledges that the treatment of tax and spending decisions that impact on funding to the devolved Administrations will need to be considered in any solution.

Since its introduction over three decades ago, the Barnett formula has proved to be a durable and robust method of calculating changes to the block grants for the devolved Administrations, providing population-based shares of comparable UK Departments’ changes in spending. The leaders of the three main UK parties have confirmed that the Barnett formula will continue, and the House of Lords report in 2009, as we heard, recognised advantages such as simplicity, stability and the absence of ring-fencing. However, we also recognise the concerns expressed about the formula and we welcome all views on its continued implementation.

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

The vow has been made to the people of Scotland that the Barnett formula will be preserved and that Barnett funding will be preserved at its current level. Does the Minister not agree with my analysis, therefore, that a new benchmark has been set for what we would term fair funding? Whereas before the argument was for some sort of needs-based formula, the argument is now about making sure that the people of Wales, for instance, are not disadvantaged compared with the people of Scotland in terms of public funding per head.

[Mr Gauke]

Let me turn to the issue of fairness for all parts of the United Kingdom, including for Wales—I assure the hon. Gentleman that I will get to that eventually. As my hon. Friend the Member for Milton Keynes South has mentioned, there is a perception, particularly in parts of England, that Scotland is overfunded because it offers generous policies on university tuition fees, for example. However, I must emphasise that devolved Administrations do not receive any additional funding for those policies. They accommodate them within existing budgets by prioritising those policies over others—for example, by not protecting school spending during this Parliament, as we have in England.

One of the purposes of devolution is to allow the devolved Administrations to make different policy choices. That was set out in 1997 in the statement of principles, which states:

“The key to these arrangements is Block budgets which the devolved administrations… will be free to deploy…in response to local priorities.”

In contrast, commentators in Scotland, Wales and Northern Ireland tend to be concerned about the Barnett squeeze convergence property of the Barnett formula, whereby the percentage changes in devolved Administration spending are lower than in England. However, the Barnett formula itself does not change the budgets of the devolved Administrations disproportionately to England’s: an extra pound per head in England means an extra pound per head in the rest of the UK. The so-called Barnett squeeze reflects the higher levels of spending per head in Scotland, Wales and Northern Ireland that have existed over many years, before and since devolution in the 1990s.

I know that some hon. Members consider Wales to be relatively underfunded as its spending has converged towards the level in England. In fact, spending per head there is 11% above England’s and has more than doubled in cash terms since devolution. Wales also benefits from large EU structural fund spending, having been awarded £1.9 billion from 2007 to 2013 and a similar amount for 2014 to 2020.

However, we recognise that there are concerns about relative levels of funding for Wales; that is why we have established a bilateral process to consider that in advance of each spending review. The most recent assessment, before the 2013 spending round, determined that convergence was not forecast to occur through to 2015-16 and that the existing level of Welsh funding was within the range suggested by the Holtham commission. The Government have now further agreed with the Welsh Government to review that process in the light of the tax and borrowing powers contained in the Wales Bill.

[Glyn Davies]

The Minister may have just answered the question I was going to ask, but perhaps he might reassure me on the uncertainty about the size of what I call the Barnett deficit in Wales. Everybody thinks it has decreased substantially over the last few years as a result of the change in public spending levels. Are we moving to a position where we will know precisely what that Barnett deficit is, because it is very important for the discussions that we are having about the powers over income tax that the Welsh Government should be taking on?

[Mr Gauke]

My hon. Friend raises an important point. I know that he has been very active in ensuring that the Welsh Government take advantage of the powers that may be available to them, and I know there is an issue of funding there. I hope that I did address his point by saying that the Government have agreed with the Welsh Government to review the process in the light of the tax and borrowing powers in the Wales Bill. I hope that process will satisfy him by shedding light on the issue that he raised.

I turn to the issue of the needs-based formula. I have heard it said that the Barnett formula does not take sufficient account of needs. The most basic issue here is that no one has been able to say how we would agree a needs-based assessment that would suit every part of the United Kingdom. However, far from being a static formula, the Barnett formula is regularly updated to take account of changes in population and levels of devolved responsibility.

The budgets of the devolved Administrations cover a very wide range of devolved spending programmes. It is, of course, for the devolved Administrations to decide how to allocate their overall budget to individual programmes, reflecting their own policies and their own assessment of the needs of each country. The Barnett formula allows them the freedom to do that.

However, we believe that financial accountability can be improved in Scotland, Wales and Northern Ireland as the devolution settlements evolve. The Government’s record on that speaks for itself. Both the Scotland Act 2012 and the Wales Bill currently in Parliament will devolve new tax and borrowing powers. We have also committed to implementing Lord Smith’s heads of agreement in full. As we devolve further powers, Scotland and Wales will be responsible for raising far more of their funding, so their block grants will become less important. The impact of the Barnett formula on overall levels of funding will decline.

Finally, in highlighting today’s debate in The Daily Telegraph, my hon. Friend the Member for Milton Keynes South set out that the debate would be better informed if we had

“detailed and incontestable territorial public accounts”,

which is a point he made earlier. The Government do not disagree, but this is a complex matter. The Office for National Statistics is considering the development of sub-national accounts as part of its implementation of the European system of accounts, and it is also undertaking work on the comparability of official statistics across the United Kingdom.

It is right that a formula that has set out devolved spending for over a third of a century is continually kept under review to make it fit for the needs of the current day. The three main party leaders have stated that the Barnett formula will continue, and that is therefore what will happen. However, we continue to listen to the strong views on the formula from all parts of the United Kingdom, which have been represented in this debate this afternoon. In that spirit, I thank everyone for their contributions today. I particularly thank my hon. Friend the Member for Milton Keynes South, who has brought to this debate careful, thorough and thoughtful analysis. He has succeeded in shedding some light on an important issue and has highlighted some matters that can often be lost in this important debate.

[Sir Alan Meale (in the Chair)]

Mr Stewart, would you like to add anything? We have a short period of time left.

[Iain Stewart]

I was not planning to, Sir Alan, but may I thank the Minister and other Members for their contributions? The debate has been helpful. I am particularly interested by the work of the Office for National Statistics on the development of sub-national accounts. I think that will help to inform the debate, but I am sure that this is not the last word on the subject.

National Minimum Wage

Tuesday 16th December 2014 Westminster Hall

16:30

[Sir Alan Meale (in the Chair)]

Before the start of the final debate, I point out that the vote that we had earlier added 11 minutes to the time scale. Because that time can be carried over to the next debate, hon. Members can finish at 5.11 pm, if there is not another vote in the meantime. You have a little extra time to play with, Mr Jarvis, if you want to take it; you can stick to your time scale if you so wish.

[Dan Jarvis (Barnsley Central) (Lab)]

Thank you, Sir Alan. It is a pleasure to serve under your chairmanship. I begin by thanking Mr Speaker for granting this debate. It should really have taken place a fortnight ago, on Friday 28 November, the date for the Second Reading of my private Member’s Bill—the Low Pay Commission (National Minimum Wage) Bill. That is a Bill to make work pay: to strengthen the national minimum wage, to give greater powers to the Low Pay Commission and to tackle the scourge of low wages, which blights the lives of too many people across Britain today. Regrettably, we did not have an opportunity to debate my Bill. Two hon. Members, both of whom are known throughout the House as long-standing campaigners to undermine the minimum wage—I believe that one of them even voted against it in 1997—spoke for more than two hours to sabotage the earlier debate on a Bill to tackle revenge evictions, blocking my Bill as a result. Given that we were deprived of a debate that day and given that this issue means so much to so many across our country, I have called this debate to say now what I would have said then and to give the House the opportunity to debate the important matter of low pay.

Choosing the subject of my Bill was a difficult decision. I had no shortage of helpful suggestions, but ultimately it was the story of one woman that made up my mind. I wanted to make a difference to people such as Catherine. Catherine is a cleaner and housekeeper in my constituency. She juggles six different jobs, working in six different locations across Barnsley. She works more than 50 hours a week on the minimum wage. Like many people, Catherine struggles to make ends meet. Her pay packet does not stretch as far as it used to, especially as the real-terms value of the minimum wage has declined since 2010. When I asked her how that had affected her life, she said that she had had to cut down on what she described as “luxuries”. Soon I realised that she meant that she could not afford essentials such as clothes. “I just work to exist,” she said, “I can’t afford nice stuff. I just work to keep my head above water.”

Catherine does not have time to take notice of polls or political pundits, but what happens in our politics, what goes on in this place and the Governments we choose to serve us here will shape her life more than most. It is easy now to take it for granted that Catherine earns a national minimum wage at all. Before 1997, many workers like her were expected to work for as little as £1 or £2 an hour. In its first months of existence, the Low Pay Commission found appalling cases of factory employees earning only £1.22 an hour, care home workers taking home just £1.66 an hour and even a chip shop worker from Birmingham forced to make do with 80p an hour.

It took a Labour Government to end that scandal. Their efforts were led by Sir Ian McCartney, the former Minister of State at the Department of Trade and Industry, who piloted the Bill that became the National Minimum Wage Act 1998 through the House, and by my right hon. Friend the Member for Derby South (Margaret Beckett), the former Secretary of State. The national minimum wage was one of Labour’s greatest achievements, but its path to becoming law included a record sitting in the House of 26 and a half hours as Members, mainly from the Conservative party, sat through the night, opposing the Bill line by line, to stand in the way of working people getting a decent wage for a hard day’s work. Today, their fears have failed to materialise. They were on the wrong side of history then, and the scourge of low pay explains why the Government’s plan to balance the nation’s books is failing now. A generation on from the national minimum wage becoming law, the low pay challenge for our country has changed. The national minimum wage did help to root out exploitation and extreme examples of poverty pay, but today we have huge numbers of people across Britain who do a hard day’s work and are still living on the breadline.

Catherine, whose story I shared earlier, is just one of more than 5 million people across Britain who are stuck on low pay. The number is up from 3.4 million in 2009 and is at an all-time record. Women and young people are being hit hardest. One third of all working women and nearly two fifths of 16 to 30-year-old employees do not earn a decent wage. Nearly two thirds of children living in poverty now live in families with someone in work. If we look at the proportion of our work force that is low paid, we see that Britain is towards the bottom of the pile, coming 25th out of 30 OECD countries.

Moreover, the real-terms value of the minimum wage is losing ground. The Low Pay Commission has acknowledged that its relative value has dropped significantly since 2004, and job creation in the lowest-paid sectors has exploded at double the rate of the rest of the economy since 2010. That partly explains why the Government now spend more on tax credits and social security for families in work than they do for the unemployed. It is why the Government have been forced to spend an extra £900 million on tax credits to top up low wages, and it is part of the reason why Ministers have had to spend £1.4 billion more than planned on housing benefit for people who cannot afford a roof over their head.

John Maynard Keynes famously once said:

“When the facts change, I change my mind.”

My central argument today is that as the challenge has changed, our approach to tackling low pay needs to evolve with it. Many of our country’s leading business voices have already called for the minimum wage to increase faster than it has done in the recent past. They include Sir Ian Cheshire, chief executive of Kingfisher, and Steve Marshall, executive chairman of Balfour Beatty. Professor Sir George Bain, the first chair of the Low Pay Commission, has described the organisation as a “child of its time” and has called for an ambitious target to bring the minimum wage closer to average earnings. We need the Government to put that into action.

Labour’s plan to tackle low pay—a plan mirrored in my Bill—preserves everything that has helped to make the Low Pay Commission such a success. I am referring to decision making based on strong research; a balance between the need for wage growth and concerns about the impact on employment; and a partnership approach between the employers who create the jobs and the employees who work the shifts. Let me run through the key points.

First, we need to give a mandate to the Secretary of State to set a target for the national minimum wage to increase over a Parliament at a rate higher than that for median earnings. I did not include a specific target in the Bill. Different people will have their own views on that. We as the Opposition have already expressed our ambition for a minimum wage closer to 58% of median earnings. The important point is that the act of setting a target alone would deliver a more ambitious approach to tackling low pay and a greater focus on what progress we are making. A clear long-term target such as that would give firms certainty and time to adapt their business models to boost productivity and support higher wages. It would also bring us closer to other countries such as Australia and European economies such as Belgium and Germany, where all the evidence shows that it is possible to support a higher minimum wage without any negative impact on employment.

The Low Pay Commission would keep its leadership role in delivering on the target and would set out a plan for how it could be achieved; and flexibility could be retained in the system. We know that the success of the minimum wage has been built on an approach that works hand in hand with industry and takes into account the state of our economy, so in the event of significant economic shocks, the Low Pay Commission could be required to present compelling evidence to the Government and to Parliament, setting out why it is not possible to meet the target during the proposed time frame. The Low Pay Commission could then make further recommendations to get progress towards the target back on track.

[Steve Rotheram (Liverpool, Walton) (Lab)]

I am grateful to my hon. Friend for bringing this vital issue to the attention of the House. The rate of the national minimum wage is important, especially to those who receive it. Does he agree that it is a shocking indictment of the Government that unscrupulous employers who are paying less than the national minimum wage are getting away with it because such a small number have been prosecuted?

[Dan Jarvis]

My hon. Friend makes an important point, and the figures bear out what he has said. I would be interested to hear what the Minister has to say on that point, but I agree that the tiny number of rogue employers who have been prosecuted for paying people less than the national minimum wage is a disgrace. That reflects poorly on the Government’s record.

I believe that the proposal I have just outlined regarding the Low Pay Commission is straightforward and reasonable, and that it is the right thing to do. I would be grateful if the Minister would respond directly to that point.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on securing this important debate. The problem is not simply the minimum wage; many workers have had their hours reduced just to stay in employment. Some workers have not had a wage increase in three years. Some people do not even have the minimum wage let alone a living wage. Does he feel as well that the Government need to address the issue of the living wage so that people can survive?

[Dan Jarvis]

That is a helpful and constructive contribution. If the hon. Gentleman will bear with me, I will talk about the living wage later in my speech. It would be useful to hear what plans the Minister has. The hon. Gentleman makes an important point that we currently have record numbers of people in this country who are underemployed. Record numbers of people want to work full time but cannot get full-time work, so they are stuck in part-time employment and struggling to meet their costs. That is a good point, and I look forward to the Minister responding to it.

[Liz McInnes (Heywood and Middleton) (Lab)]

In his deliberations, has my hon. Friend given any thought to the practice of many employers of paying the extremely low minimum rate for apprenticeships? Some employers set up bogus apprenticeships that last for only a few months so that they can get away with paying the absolutely paltry rate for apprentices, which I believe is less than £3 an hour. Has he looked at that aspect of the minimum wage and at the age-related minimum wage for under-18s?

[Dan Jarvis]

Completely by coincidence, my hon. Friend has made a timely contribution that neatly introduces the point that I was about to make. If we want to win the fight against poverty wages, the remit of the Low Pay Commission must be expanded. It should not be simply a national minimum wage commission that sets the level of wages; I believe that it should lead our national effort to tackle the problem of low pay. We need to give new powers to the Low Pay Commission to investigate the causes and consequences of low pay in different areas of our economy.

We know that some sectors have particular, systemic problems of low wages. More than half of cleaners, 48% of hospitality workers and more than 40% of hairdressers are paid less than £7 an hour. At the same time, other sectors—the banking sector, for instance—could pay a higher minimum wage. I would be grateful if the Minister could tell us today whether the Government would consider giving new powers to the Low Pay Commission to bring together task forces to tackle such issues. Those task forces could include all the key stakeholders and recommend a strategy to the Secretary of State on the best way forward.

[Jim Shannon]

To that list of bodies that the hon. Gentleman referred to, would he add the catering industry? Many workers in the catering industry receive a wage that they cannot live on, which is below the minimum.

[Dan Jarvis]

I absolutely would. There are number of different sectors of the economy to which that could be applied.

[Alex Cunningham (Stockton North) (Lab)]

rose—

[Dan Jarvis]

I know that my hon. Friend has a specific concern about care workers, and I am happy to give way to him.

[Alex Cunningham]

I am sure that my hon. Friend will agree that no matter at what level the minimum wage is set, it must be complied with. Would he be surprised to learn that although the Government claimed to include a minimum wage requirement in their social care commitment, such a requirement was not included? Following my intervention, the Minister who is responding to the debate added a paragraph to the commitment. Does my hon. Friend agree that a paragraph on a piece of paper is one thing, but we need much more robust action by Government to ensure that no one in the care industry or anywhere else is short-changed by unscrupulous employers?

[Dan Jarvis]

I absolutely agree with that point, and I am grateful for the work that my hon. Friend has done in that area. Robust action by the Government is required to ensure that no one in the care industry is short-changed by unscrupulous employers.

I conclude by putting on record the fact that if there is a Labour Government after 7 May next year, we will set a national goal of halving the number of people on low pay over the next 10 years. We will introduce a target for a minimum wage of at least £8 by 2020. We will use tax incentives to encourage more firms to pay a living wage, and we will make a world of difference to working people such as Catherine in my constituency. When I asked her what difference a higher wage would make to her life, she could not quite imagine it. She said:

“I could cut down my hours, couldn’t I? I would have some time to do other things.”

That is the important difference that I am arguing for today.

I would like to end with the words spoken in this place by my right hon. Friend the. Member for Derby South during the debate on the introduction of the national minimum wage 17 years ago. These words were true of the case for introducing the national minimum wage then, and they are true of the case for strengthening it now:

“That policy is right, it is fair, it is just and it is sensible. It is a clear example of how a Labour Government can and will make a real difference to the lives of people across Britain, contributing to fairness and prosperity for the many, not the few. I commend the Bill to the House.”—[Official Report, 16 December 1997; Vol. 303, c. 173.]

16:47

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson)]

It is a great pleasure to serve under your chairmanship, Sir Alan. I congratulate the hon. Member for Barnsley Central (Dan Jarvis) on securing the debate, particularly after his less happy experience on Friday 28 November. I appreciate his frustration about Fridays. I have a vivid memory, from fairly early in my time as an MP, of spending an annoying Friday supporting a Bill promoted by the hon. Member for Edinburgh North and Leith (Mark Lazarowicz) on climate change and having the same experience of a couple of Members talking it out. The hon. Member for Barnsley Central mentioned the excellent Bill promoted by my hon. Friend the Member for Brent Central (Sarah Teather), which would have helped very vulnerable people, and I still hope that we will be able to find a way to take action on those issues. Of course, the opportunity to debate the Bill promoted by the hon. Gentleman was also a casualty of that experience. The procedure for dealing with private Members’ Bills on Fridays is something that I would be keen to see changed.

The hon. Gentleman started by talking about his constituent, Catherine. That is absolutely appropriate, because in discussions about the minimum wage it is easy to get caught up in the numbers of pounds and pence per hour. That is, of course, important, but it is also vital that we remember the individuals at the end of each payslip, who are working on a low wage that represents a minimum or floor.

The hon. Gentleman was right to set out the history of the minimum wage. He highlighted the difficulties that existed before 1997, and the fact that some factory workers earned £1.22 an hour. In 1996, I was 16, and in my first job in McDonald’s, I was paid £2.70 an hour. One of my good friends from school worked in a greengrocer on Saturdays, and she earned £1.90 an hour for lugging around sacks of potatoes.

The introduction of the national minimum wage was absolutely necessary, and the hon. Gentleman is right that it is an historic achievement that should be celebrated. Neither of us was in the House at the time, but my Liberal Democrat colleagues supported the national minimum wage. There perhaps was not agreement from everyone in the House, but the positive thing is that times have moved on and there is now wide acceptance of the national minimum wage’s importance. The Government are strong in our belief and commitment that the national minimum wage is a vital part of the employment protections and basic minimum standards in the labour market. Many business organisations are also strong supporters of the national minimum wage. Recent reports by organisations such as the CBI talk about the importance of supporting household budgets from a wider economic perspective.

The minimum wage level is always likely to be the subject of much discussion and interest, and we clearly need to find the right rate that helps as many low-paid workers as possible, but we must ensure that we do not damage employment prospects by setting the level too high. This year the Government accepted an above-inflation rise in the national minimum wage. In October, workers saw the biggest cash increase in their pay packets since 2008, which helps more than 1 million workers on the national minimum wage and means that anyone working full time on the national minimum wage gets an extra £355 a year in their pay packet. Of course, those workers are also helped by the increase in the tax threshold, which has taken more than 3 million low-paid individuals out of paying income tax and helped ensure that people’s money goes further because they keep more of what they earn.

[John McDonnell (Hayes and Harlington) (Lab)]

I apologise to my hon. Friend the Member for Barnsley Central (Dan Jarvis) for being late. I was in the main Chamber. We seem to miss out young people in these debates. I am not sure whether he referred to the figures: for an 18 to 20-year-old the national minimum wage is £5.31; for a 16 to 17-year-old it is £3.79; and for apprentices it is £2.73. That must be a disgrace.

[Jo Swinson]

The hon. Gentleman addresses both the youth rates and the apprentice rate, and the hon. Member for Heywood and Middleton (Liz McInnes) also raised that issue. I share those concerns, particularly on the apprentice rate. We want to encourage people to take up apprenticeships, and under this Government there has been a great increase in their number. Two million apprenticeships have started since the general election, but both hon. Members are right that £2.73 an hour is a very low rate. It is worth bearing in mind that the average pay for apprentices is upwards of £6 an hour and that most employers of apprentices pay well above the minimum rate, but there is also a concerning level of non-compliance with the apprentice minimum wage. Of course, there never used to be an apprentice minimum wage at all—it was introduced by the Government because apprentices were previously not covered by the national minimum wage. Although that was a step forward, there is still a real issue here.

Earlier this year, my right hon. Friend the Business Secretary stated that he is minded to seek a significant increase in the apprentice rate. He suggested that it might be combined with the £3.79 rate for 16 and 17-year-olds, which would provide a boost of more than £1 an hour. We have asked the Low Pay Commission to consider that carefully, and we look forward to hearing its views on the proposal as part of its overall report in February 2015.

The hon. Member for Heywood and Middleton mentioned bogus apprenticeships, under which people were taken on but not given the training that should go alongside an apprenticeship. The reason for the lower apprentice rate is because employers rightly have to support the development and upskilling of apprentices with training and qualifications. Where that is not happening, national minimum wage law is being broken, even if the apprentice rate is being paid. I encourage anyone who is concerned that they are not being paid the right amount to contact the pay and work rights helpline on 0800 917 2368. I will never tire of saying that number because I want people who are not properly paid the national minimum wage to get in touch and make a complaint. Her Majesty’s Revenue and Customs will investigate every complaint, and we have increased the resources available for enforcement. I am determined that people who do not properly pay the national minimum wage are brought to book and that those who have been underpaid are given the arrears that they are due. That would discourage employers who might be tempted not to pay properly.

The hon. Member for Liverpool, Walton (Steve Rotheram) mentioned prosecutions. I understand his point, but prosecution is not the only way to address non-compliance. The number of prosecutions is not high. We are talking single figures every year since 2007, and there are sometimes no prosecutions in a given year, but the number of prosecutions was in single figures when his party was in government, too. The reason for that is pretty compelling: the most important thing is that people who have not been paid the national minimum wage get the arrears that they are due. If they go through the civil process through which HMRC takes employers, people will get their arrears paid and a penalty will be paid to HMRC—there is effectively a fine for the employer—which delivers a better result for the employee. Of course, prosecution is appropriate in the most extreme circumstances where employers have been wilfully and continually not paying the national minimum wage, but given the costs of bringing a prosecution and the interest of ensuring that people get their arrears, the civil process is the right way to go about it.

[Steve Rotheram]

The Minister is absolutely right about trying to get the best deal for the person who has been short-changed. There is no argument about that, but the message needs to be sent out to unscrupulous employers who continue to underpay that they will be prosecuted. That is the only way that we will stop them, not by good will, nor by appealing to their better nature, but by saying, “If you continue to underpay your employees, we will prosecute.”

[Jo Swinson]

We may have a difference of opinion. I agree that there should be very tough consequences for employers who do not get it right. We have ensured that the fines are in place, increased the maximum penalty to £20,000 per worker—that is currently going through Parliament in the Small Business, Enterprise and Employment Bill—and introduced a naming and shaming scheme that is far more comprehensive than the previous scheme, the criteria of which were almost impossible to meet. We now regularly list employers that have not properly paid the national minimum wage, and we name them publicly so that in their local area people can be aware that those companies are not paying the national minimum wage, which affects the reputation of those businesses.

In response to the hon. Gentleman’s plea for more prosecutions, I would say that, in the cases that are named, in most circumstances the underpayment is not necessarily a malicious act by the employer. That does not make it right, and it does not make it okay, but very often someone has put the wrong digits into a computer program so somebody is not been paid the right pence per hour. There may be mistakes on the accommodation offset allowances or mistakes on the apprentice rate. Of course, if we increased the apprentice rate to the lower age rate, we would simplify the system and make it easier for employers to get it right. That is not an excuse, as employers have a responsibility to get it right, but I would not necessarily contend that those circumstances should also result in a criminal prosecution. Our tough penalty regime, increased fines and the reputational consequence of naming and shaming are the right way to address underpayment. We are increasing the resources available to HMRC to address this issue.

[Jim Shannon]

There might be an individual working for a firm who is getting less than the minimum wage. They might be concerned but there is a fear factor in pursuing the issue. That goes back to what the hon. Member for Liverpool, Walton (Steve Rotheram) said in his intervention. Is that part of the reason why we have a low prosecution rate? People fear losing their job for making a complaint. Would it be better for complaints to be tied to the company, not the individual?

[Jo Swinson]

I hope I can provide a lot of reassurance on those points. The hon. Gentleman is right that there is a fear factor, which is why it is important for people to recognise that they can make complaints in confidence. It will not necessarily be clear which member of staff has made a complaint. The HMRC investigator will not just go along to a company and say, “Can you show me the records for this particular member of staff?” The investigator can ask to see the records for all members of staff. That has two benefits. The first is confidentiality, but secondly, of course, if one member of staff is not being paid the minimum wage properly, it is possible—indeed, likely—that other members of staff are also not being paid properly.

To put the issue in context, the hon. Member for Strangford (Jim Shannon) suggested that the reason why there are not as many prosecutions as he might like is that people are not coming forward. Actually, since HMRC began enforcement back in 1999, more than 229,000 workers have received arrears worth more than £54 million. In the last year alone, £4.6 million in arrears was delivered to 22,600 workers, a significant 17% increase in the number of workers helped compared with 2009-10. The amount of arrears per case is also rising. HMRC is learning how to ensure that it does not just look at one person in the business; now it routinely looks much more widely at lots of workers within the same business. That is important to ensure that enforcement works.

We are the fastest-growing G7 economy at the moment, and that strong growth is reflected in our employment statistics, with more people in employment than ever before. That is good news, but hon. Members have raised issues about the type of employment and whether it is just insecure part-time employment. It is worth recognising that our figures from the Office for National Statistics show that full-time work made up three-quarters of the growth in employment since the election and 85% over the last year. The growth in the labour market is significantly of full-time work, but of course there are issues around the insecurity of work, which the Government are taking steps to address. We understand those issues too.

We will return to this matter, rightly, many times in this House. I pay tribute to the Members present today, who in their different elements have been campaigning on the issue. The hon. Member for Stockton North (Alex Cunningham) is particularly assiduous in the care sector, where HMRC has done a significant investigation and is seeking to follow up. That is an area where HMRC found a lot of non-compliance. We need to stay on the case of industries where there are greater problems, because lack of compliance is much less widespread in other industries.

[Dan Jarvis]

I am slightly concerned that the Minister might not address the fundamental issue that I raised in my speech, which is that the low pay challenge for the country has changed. Record numbers of people in low-paid work are struggling to make ends meet. I would be grateful if she critiqued the model that I proposed; I am thinking specifically of the five-year target and more powers for the Low Pay Commission. Will she respond on those two points?

[Jo Swinson]

Certainly; I am happy to. I understand where the hon. Gentleman and his Opposition colleagues are coming from when they call for a five-year target, but there are significant problems with that approach. Announcing an ambitious-sounding minimum wage level would not necessarily take into account future economic conditions, which could be a problem in two ways. If the economy did not perform as strongly as expected, job cuts could be the consequence of an ambitious target. Equally, if the economy did much better than anticipated, we might find that the target ended up holding back wage growth. We need to get the balance right.

My right hon. Friend the Business Secretary has said clearly that it would be helpful for the Low Pay Commission to be able to provide more forward guidance, so that it is no longer the case that once a year, business suddenly learns what the next rates will be without any idea of how things will go forward. It is worth bearing in mind what the Low Pay Commission has said about the period that we are entering now and whether we should be expecting further rises above inflation in the national minimum wage. That will be of great comfort to the many people who, like the constituent of the hon. Member for Barnsley Central, work for the national minimum wage.

On the taskforce suggestion that the hon. Gentleman made, a sectoral approach can be helpful, but there is a danger of distracting the Low Pay Commission from setting the basic rate of minimum wage. It is already considering the impact of the national minimum wage on pay, employment and competitiveness in the low-paying sectors, and it sets that out in its annual report. Members of the commission go out personally to visit lots of different organisations and employers across the UK in a range of sectors. In its recommendations, the commission manages to reflect back what it has considered after examining all the evidence.

However, there is an issue with the Government and others encouraging higher pay. The national minimum wage is not just what people are paid. It is just that: a minimum, a floor. It is right that we should set a basic level. Some employers will not be able to afford to pay more than the minimum wage. If somebody wants to come to any of our constituencies and set up a business, and they cannot afford to pay more than the minimum wage but they will provide jobs, we would probably welcome that. However, there are many businesses that probably can afford to pay more than the national minimum wage and currently choose not to. That is where we would like to encourage behavioural change.

I am heartened to see many employers making a virtue of the fact that they are living wage employers, for example, or making commitments about pay levels. We should encourage employers to compete with each other on such issues—with falling unemployment, that will be more possible in the months and years to come—because we should not just accept a situation in which it is expected that someone on the national minimum wage will stay there. We want basic jobs to be created with that wage floor, but we also want people to be able to progress from a national minimum wage job through the ranks. As their skills and the length of time with their employer increase, their wage should also. We will continue to encourage employers to pay more than the minimum wage where they can.

I know that hon. Members here will continue to campaign on the issue, and I thank everybody for such a constructive debate. I am, thankfully, not talked out.

Question put and agreed to.

17:06

Sitting adjourned.