House of Commons

Monday 12th January 2015 Commons Chamber

Monday 12 January 2015

The House met at half-past Two o’clock

Prayers

Monday 12th January 2015 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 12th January 2015 Commons Chamber

The Secretary of State was asked—

[Andrew Stephenson (Pendle) (Con)]

1. What steps he is taking to increase the number of cadet units in schools.

[The Minister of State, Ministry of Defence (Anna Soubry)]

We are on track to achieve our target of 100 new combined cadet forces in state schools by September 2015. That will ensure that, whatever their background or school, children will have a great opportunity to enjoy all the benefits of being in the cadets.

[Andrew Stephenson]

I am proud to have 1104 Pendle squadron air cadets in Nelson and Army cadet force units in Briarfield and Barnoldswick in my constituency, but we are yet to have any cadet units in schools. Will my hon. Friend update the House on the funding model for all combined cadet forces?

[Anna Soubry]

We decided that we would look at the current funding so that we could make sure that we were in a position to expand. We consulted people and I am grateful that they responded in the way that they did. We listened to what was said and as a result we will not change the funding model. We are confident about the expansion plan, which I hope will go into my hon. Friend’s constituency. I look forward to discussing that, and how we can assist further, with him. It is a good idea.

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

18. Will the Minister proactively promote youth cadets, particularly in our state schools, for which it is not such a natural course to follow? Will she also talk to her Cabinet Office colleagues responsible for the National Citizen Service as a way of getting more recruits into the uniformed youth services and of recruiting more youth leaders to help run them?

[Anna Soubry]

I absolutely endorse everything my hon. Friend has said. So far, there are 64 new cadet units of which 47 are up and running. I agree with my hon. Friend that this is a wonderful opportunity. It is particularly important that we expand the cadet experience into state schools, because it should not just be the domain of the private sector.

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

Tower Hamlets is the lead borough for police cadets. We also have fire cadets, a sea cadet unit is being set up on the Isle of Dogs, and I am president of the 31 Tower Hamlets air cadet training corps at Mile End. How much support will be given to cadet units that are not associated with schools, but that are based in the community?

[Anna Soubry]

We know that there are more community cadets. They are all equally important and we are determined to do everything we can not just to support them, but, as we have heard from Members on both sides of the House, to encourage more young people to take advantage of the benefits, opportunities and the fantastic experience that the cadets offer.

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

I strongly support the Government’s initiative for 100 new CCFs in schools across the land. It is a great idea, but the Minister mumbled over the question of the funding formula—[Interruption.] I apologise: she most certainly did not mumble. To put it a different way, I am a little unclear as to what she meant about the funding formula. Will she guarantee that she will not do what she originally planned, namely fund the CCFs by charging existing cadets up to £500 a year for membership?

[Mr Speaker]

That was a gracious withdrawal. I have periodically accused the Minister of things, fairly or unfairly, but I have never, ever accused her of mumbling and I cannot imagine ever doing so.

[Anna Soubry]

Some people wish I would mumble a bit more, Mr Speaker. Let me make the situation very clear, in case my hon. Friend the Member for North Wiltshire (Mr Gray) did not hear me, which I find astonishing. There will be no changes. We are determined to support all our cadet units, wherever they are, but we are particularly keen to see growth into the state sector. Everybody should welcome that, especially Government Members because we are the first lot to actually achieve it.

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

The House will know from the previous Question Time that I was in the combined cadet force when I was at Hampton school many years ago, but I understand that I will never be gallant. May I draw the Minister’s attention to the concerns of the recently retired children’s commissioner that people as young as 17 could serve in combat duties on the front line?

[Anna Soubry]

As a comprehensive schoolchild I never had the benefits of the CCF, which is why I am such a keen supporter of the scheme. I did not have the benefit of going to the independent school that perhaps the hon. Gentleman went to.

[Mr Sheerman]

It was a grammar school.

[Anna Soubry]

It was a grammar school. I will move swiftly on to answer his question. [Interruption.] The Hartland was a very good school—I think the hon. Member for North Durham (Mr Jones) and I both went to it. [Interruption.] Oh no, he went to another one. Anyway, the important point is that I do not share the view of the hon. Member for Huddersfield (Mr Sheerman). This is not about children being put on the front line. I am confident that our duty of care and the way in which we train everybody who joins our armed forces are absolutely right. We take our responsibilities very seriously. Nobody under the age of 18 goes on to the front line—we need to make that very clear.

[Crispin Blunt (Reigate) (Con)]

I thank the Minister and the Secretary of State for listening during the consultation. The proposal was very nearly a disaster for the existing CCFs and they rescued it. I thank them very much indeed. Although I understand the desire to have CCFs in state schools, I ask the Minister not to lose focus on the Army cadet force as the policy continues.

[Anna Soubry]

I absolutely will not lose focus. It is worth saying that we listened to all the representations that were made. We also know and understand that we have a duty to live within our means as a nation and to keep within the Defence budget. That is why we always look at such matters with great care. We looked at the matter, we listened and, in this instance, we did not act. The policy will therefore continue and I am confident that it will do so with success.

[Sir Hugh Bayley (York Central) (Lab)]

2. How many UK military personnel are currently serving in Afghanistan.

[The Minister for the Armed Forces (Mr Mark Francois)]

Let me start by passing on our congratulations to the hon. Gentleman on his well-deserved knighthood. Our commitment to the current NATO Resolute Support mission in Afghanistan, the UK element of which is known as Operation Toral, amounts to about 470 UK military personnel. They work in support of the democratically elected Afghan Government, who have just announced their new Cabinet.

[Sir Hugh Bayley]

I thank the Minister for his kind remarks. The benefits that our service personnel, as well as our diplomats and development workers, have brought to Afghanistan at such cost over the past 13 years could be swept away in part or all of that country, as has happened in Iraq, if the new Resolute Support mission to support the Afghan national security forces does not provide the support that is necessary. Can he reassure the House that Resolute Support will be maintained for as long as is necessary to guarantee the gains that have been made over the past decade?

[Mr Francois]

Along with our NATO allies in Resolute Support, we are committed to the long-term security of Afghanistan. On the UK contribution, we continue to lead mentoring at the Afghan national army officer academy and to provide mentors in the Afghan security institutions. We are also taking the lead on the Kabul security force, which is a key enabler for managing and assuring the protection of UK and NATO personnel in Kabul. The hon. Gentleman mentioned sacrifice. We lost 453 personnel who died in the line of duty in Afghanistan. They made a great sacrifice to give the people of Afghanistan a future and we will never forget them.

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

Will the Minister outline for the House what role he sees for the Army Reserve in contributing to Operation Resolute Support?

[Mr Francois]

As a former reservist, I am delighted to do so. Army reservists have served in Iraq and Afghanistan, and they will continue to serve in Operation Toral. I believe that some elements of 3PWRR—a regiment close to the heart of the Under-Secretary of State for Defence, my hon. Friend the Member for Canterbury (Mr Brazier)—will deploy to Afghanistan shortly as part of the security force. Reservists will be an important and integral part of our commitment under Operation Toral.

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

3. What assessment he has made of recent trends in recruitment to the Army Reserve; and if he will make a statement.

[The Parliamentary Under-Secretary of State for Defence (Mr Julian Brazier)]

The trained strength of the Army Reserve at 1 October 2014 was 19,310 and we expect it to exceed our end of year target of 19,900. Enlistments in the first two quarters of the year were 62% above the equivalent period in the previous year and we expect the latest quarter to show a further increase, owing to the removal of delays in the recruitment process, the restoration to units of the key role of mentoring recruits and the new marketing campaign.

[Diana Johnson]

Ministers raised the age limit for Army reservists from 43 to 52 after recruiting, as I understand it, only 20 new reservists—somewhat short of the 30,000 they were aiming for to cover the cutting of 20,000 personnel from the Regular Army. Recently in east Yorkshire, there has been filming for the new “Dad’s Army”, so I wondered whether Ministers thought it might be appropriate for the cast to keep their uniforms on.

[Mr Brazier]

In the latest six months, 2,130 recruits were enlisted into the Army Reserve. I ask the hon. Lady to think very carefully before making jokes about the Army Reserve. Whatever policy differences there are, 30 members of the reserve forces—24 of them from the Territorial Army—have died on operations in Afghanistan and Iraq.

[Chloe Smith (Norwich North) (Con)]

21. Could the Minister also give us a short update on his progress on the cyber-reserves?

[Mr Brazier]

Recruiting for the cyber-reserves is on course in all three services, but I am afraid that I am not allowed to give any details of the planned structure, for obvious security reasons.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

Reservists in the Royal Army Nursing Corps are putting themselves in significant danger as they are called up to serve in Sierra Leone to help combat Ebola. Why is the Ministry of Defence refusing to pay those brave people their operational allowance?

[Mr Brazier]

I share the hon. Gentleman’s admiration of those people, and I was privileged to see them off just before Christmas. I note that the senior nursing officer in the rotation—effectively the commander in the red zone on the current operation—is herself a reservist.

To answer the hon. Gentleman’s question directly, those people are entitled to a number of other allowances, and we are looking at the moment at the issue that he mentions. My right hon. Friend the Minister for the Armed Forces will write to him when it has been determined.

[Mr John Baron (Basildon and Billericay) (Con)]

The latest MOD figures show that the trained strength of the Army Reserve has actually fallen over the past 18 months. Can the Minister inform the House of the extra cost that has been incurred, over and above the original estimates, to encourage recruitment? The MOD’s continued silence on that suggests either embarrassment or ignorance.

[Mr Brazier]

On my hon. and gallant Friend’s first question, by looking back 18 months he is looking back past the bottom of the trough. The past six to nine months have been much more encouraging, and the next quarter is expected to be even better.

My hon. and gallant Friend has asked his second question again and again, and we have explained that, although we acknowledge that there are some extra costs, there is no way that we can separate them from the whole picture. Some of them are one-off costs, and some of them are connected with regular recruiting as well—we have to remind people, post-Afghanistan and so on, that we are recruiting.

[Mr Kevan Jones (North Durham) (Lab)]

The original plan to reform the reserve force stated that a force of 30,000 would be required by 2018. That was pushed back to April 2019, and last week in The Times, well informed sources in the MOD suggested that the date may well be pushed back even further. Can the Minister confirm exactly when the 30,000 strength will actually be met?

[Mr Brazier]

We are still firmly committed to April 2019 as the target date. As I have mentioned, recruiting has increased substantially. If we look at the latest quarter as opposed to the latest six months, we see that it has roughly doubled. Over the past six months it is up 62%, but over the second half of that period it has gone up even faster, and we expect a further continuation of that positive trend. We are firmly committed to April 2019.

[Jeremy Corbyn (Islington North) (Lab)]

4. If he will publish research held by the Government on the global atmospheric consequences of nuclear war.

[The Minister for the Armed Forces (Mr Mark Francois)]

Classified studies conducted by the Ministry of Defence focus on the effects of UK nuclear weapons and the potential impact, including on critical national infrastructure, of a nuclear attack on the United Kingdom.

[Jeremy Corbyn]

Under the 30-year rule, Cabinet papers for 1984 have now been published. They show that the Government at that time refused to undertake any study of the atmospheric effects of a nuclear weapon explosion or nuclear testing. As I understand it, no other study has been undertaken since then. At the conference on the humanitarian effects of nuclear weapons in Vienna, there were some disturbing—no, frightening—reports of what would happen to the world’s climate if any nuclear explosion took place anywhere. Does the Minister not think it is incumbent on the Government to tell the British people exactly what the consequences of a nuclear explosion are, not just for them but for the whole planet?

[Mr Francois]

I think the hon. Gentleman is referring to some declassified Home Office documents, which as Minister of State at the Ministry of Defence I confess I have not read. I believe that nuclear deterrence contributes materially to our national security. If the hon. Gentleman wants to read a really good study on nuclear deterrence, I recommend “On Nuclear Deterrence: The Correspondence of Sir Michael Quinlan”, published by the Royal United Services Institute in 2011. It is a ripping good read about how to keep a country safe and free.

[Dame Joan Ruddock (Lewisham, Deptford) (Lab)]

Does the Minister understand that at a time when we are rightly outraged and mourning the deaths of 17 people at the hands of terrorists, it is a terrible paradox that every hour of every day this nation deploys a nuclear weapons system that will kill directly millions of people, and due to its climate effects could kill up to 2 billion? Does he think it is time to engage with a new Austrian initiative that could ultimately lead to a ban on all nuclear weapons and is, I stress, a multilateral initiative?

[Mr Francois]

I respect the position from which the right hon. Lady approaches this issue, but as I have said, I believe that maintaining continuous at-sea deterrence is the best way to deter nuclear exchanges, rather than lead to them. In fairness, she has been absolutely consistent and long standing in her views about nuclear weapons, which is more than we can say this week for her party leader.

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

I am sure my right hon. Friend agrees that we would all like nuclear weapons not to exist, but sadly they do. Given that, is it not rather strange to hear cries for disarmament on the very day we read that former President Gorbachev has said that the likelihood of a nuclear conflict around Ukraine is much greater than it has been since the end of the cold war?

[Mr Francois]

The Conservative party remains firmly committed to continuous at-sea deterrence to provide the ultimate guarantee of our nation’s security, and as a former Armed Forces Minister, I know my right hon. Friend shares that view. Conservative Members also share that view; what is the view of the leader of the Labour party?

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

A recent report suggested that the long-term climatic effects of nuclear war could include low light levels, sub-freezing temperatures and heavy air pollution that could place the global ecosystem in serious jeopardy. If nuclear weapons had existed since Roman times, statistically all that may have come to pass by now. Does not that show the danger to the planet of the madness that is nuclear weapons?

[Mr Francois]

A nuclear war would be a tremendous danger to the planet. That is why it is better to deter it.

[Graeme Morrice (Livingston) (Lab)]

5. What plans he has to consider delivery of UK defence capability through conventional rather than nuclear weapons as part of the 2015 strategic defence and security review.

[The Secretary of State for Defence (Michael Fallon)]

The next strategic defence and security review is a matter for after the general election. My Department is preparing for the review, but our focus remains the delivery of the 2010 review.

[Graeme Morrice]

In a period of changing security threat, and as the national security strategy noted in 2010, is it not sensible to consider how ending the Trident replacement programme would release resources that could be spent more effectively on other security measures, as well as on a range of other public spending priorities, not least our national health service?

[Michael Fallon]

Successive Governments, Labour and Conservative, have been committed to our continuous at-sea deterrent for more than 45 years, and I hope that the Labour party in Scotland will not waiver from that. It would be extremely dangerous to move to any kind of part-time or lesser deterrent, and the Conservative party will not gamble with Britain’s national security.

[Dr Julian Lewis (New Forest East) (Con)]

My right hon. Friend has just made that commitment to continuous at-sea deterrence and, as I understand, it is the position of both main parties that the successor submarines for Trident should go ahead. Will he therefore guarantee to me that there will be no question of any delay in signing the main-gate contracts if we end up with another hung Parliament and the Liberal Democrats or Scottish nationalists seek to exact that as a price for their participation and support?

[Michael Fallon]

I confirm to my hon. Friend and to the House that the main-gate decision is scheduled for 2016. I will not speculate on the possibility of a hung Parliament, except to note that I know the Liberal Democrats would favour some kind of part-time deterrent, although it is pretty obvious to me that our enemies are not part time.

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

Given that RUSI is predicting that by the early 2020s the replacement of the nuclear deterrent will account for some 35% of the defence procurement budget, and given that this summer, whatever the outcome of the election, Ministers at the Ministry of Defence will be struggling to make limited resources pay for a long list of major procurements, could it possibly make sense to exclude from a comprehensive review the biggest single procurement?

[Michael Fallon]

I am sorry that my hon. Friend, who has some experience of these matters, does not attach the importance to continuing the deterrent that we do. Of course, the costs of the deterrent are spread over a number of years. As I have said, successive Governments in office have, every time they have re-examined the need for the deterrent, committed to continuing it.

[Mr Adam Holloway (Gravesham) (Con)]

6. What progress his Department has made on delivering the defence equipment plan.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

Under this Government, the Ministry of Defence was one of the first Departments to publish a long-term plan: our 10-year equipment plan. The third annual iteration of the equipment plan will be published shortly. I expect it to show that, in the vital area of defence equipment, we have a plan and that we are delivering against it in each domain. New investment committed last year includes: three offshore patrol vessels, four new F-35s, and 589 new Scout armoured vehicles under the largest land equipment contract the British Army has seen for 30 years.

[Mr Holloway]

What changes have been made to the way the plan is being delivered?

[Mr Dunne]

As my hon. Friend will recall, the previous Labour Administration had no plan and compounded one procurement incompetence with another. Consequently, the wrong equipment was often delivered, years late and billions over budget. By contrast, since balancing the defence budget and establishing an equipment plan, where there was chaos now there is competence; where there were cost overruns now there are cost savings; and where equipment deliveries were years late now they are on time, or, in far fewer cases, a few months behind.

[Angus Robertson (Moray) (SNP)]

In recent weeks, maritime patrol aircraft have been seen in the skies above Moray, operating from RAF Lossiemouth and plugging a capability cap, because the RAF has precisely no maritime patrol aircraft. All of our neighbours have them: the Irish air corps, the Royal Danish air force and the Royal Norwegian air force. In the plan the Minister has just mentioned, when can we expect to have maritime patrol aircraft?

[Mr Dunne]

As the hon. Gentleman knows full well, there was a recognised capability gap when maritime aircraft were taken out of service in SDSR 2010. The Government, as with previous Governments, operate in conjunction with our allies around the world. We provide aircraft to Baltic patrol and transport lift aircraft to the French. On occasion, our allies provide us with maritime patrol aircraft.

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

I was glad to hear the Minister’s answer to the question regarding Russian submarines infiltrating our waters.

Why, after the major equipment programme has been let, are his Department and UK Trade & Investment still scurrying around trying to hold the manufacturer to a pre-contract offer of safeguarding or creating 10,000 jobs in the UK? We now know that the Scout programme he mentioned will be built in Spain, Germany and the Netherlands, and that the core jobs in the UK are fewer than 400. That has happened on his watch. Why was the economic case for bringing the work to the UK not done before the contract was finalised? The Secretary of State spent all that time trumpeting what seemed to be a huge success when, in fact, it is not.

[Mr Dunne]

As the hon. Lady may recall, the original proposed contract, which was considered under her Administration, was for more than double the number of vehicles for which we have contracted. Consequently, the number of people potentially employed is significantly lower. However, the contract for the Scout vehicle, at £3.5 billion, is the largest contract that the British Army has received, and involves some 160 companies, predominantly in the UK. It will sustain 1,400 jobs in the UK, and we are currently actively exploring the opportunity for the onshore assembly of vehicles, from 101 to 589.

[Douglas Carswell (Clacton) (UKIP)]

7. What his policy is on the creation of a national defence medal.

[The Minister of State, Ministry of Defence (Anna Soubry)]

There is a long-standing and widely understood military tradition that medals are not awarded as a record of service but in recognition of specific campaigns or operations, acts of gallantry or outstanding service. We set up an independent review into medals and decorations, and its chair, Sir John Holmes, specifically considered this matter and decided against such a medal. That decision received royal approval.

[Douglas Carswell]

MOD tradition and protocol have an important role, but would it not just be the decent thing to recognise our veterans in this way simply because they have served their country? Would it not be wonderful to have cross-party agreement to recognise them, as happens in many other English-speaking countries around the world?

[Anna Soubry]

We absolutely recognise and pay handsome tribute to our veterans. There is no better example of that than the military covenant and all that it stands for. The fact that so many people are signing up to it—businesses, all our local authorities and so on—demonstrates that the understanding of the great sacrifices made by our veterans in their service and by their families has never been higher in the public’s imagination.

[Sir Bob Russell (Colchester) (LD)]

I support the comments of my fellow Essex MP, the hon. Member for Clacton (Douglas Carswell). The last Government quite rightly introduced the national service badge, which has been greatly appreciated. The medal would do no harm, but it would do a lot of good.

[Anna Soubry]

I do not agree with my hon. Friend. Medals are for specific campaigns and acts of gallantry, and rightly so. In this instance, therefore, we will have to disagree.

[Guy Opperman (Hexham) (Con)]

8. What plans he has to visit Albemarle barracks to review handover arrangements.

[The Minister of State, Ministry of Defence (Anna Soubry)]

I fear I might let down my hon. Friend because we have no plans—unfortunately—to visit his barracks, unless he makes me an offer I cannot refuse. However, we all look forward to the moment when 3 Regiment Royal Horse Artillery replaces 39 Regiment Royal Artillery later this year. I know of the great work he does in supporting his barracks, and of course he will welcome 3 Regiment Royal Horse Artillery when it moves in.

[Guy Opperman]

No pressure there! All I can say is that the Minister would be warmly welcomed in Northumberland, where we are transitioning from 39th Royal Artillery and welcoming 3rd Royal Horse Artillery. We are also looking at the base improvements that have happened already and the ongoing case we are making in respect of these troops.

[Anna Soubry]

I pay tribute to the work that my hon. Friend and others have done, and I will look at all our diaries to see whether we can come up; we would like to if we can. I promise I will look at my diary, and at the diaries of other Ministers as well.

[Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)]

9. What assessment he has made of the level of the cyber-security threat to the UK.

[The Minister for the Armed Forces (Mr Mark Francois)]

Maintaining robust cyber-security is a priority for the UK and of particular importance to the MOD. The threat is continually changing in scope and complexity. All public and private sector organisations have a stake in addressing the cyber threat, and the MOD is one element of the national cyber-security programme, which is co-ordinated by the Cabinet Office.

[Luciana Berger]

We know that cyber attacks are often targeted at defence companies themselves. What steps have the Government taken to ensure that security within the UK defence sector is strengthened?

[Mr Francois]

We have taken very specific steps. With the Office of Cyber Security and Information Assurance, the Centre for the Protection of National Infrastructure and GCHQ, we are working closely with industry to ensure it is aware of the changing nature of the threat and has effective counters in place. The defence cyber protection partnership aims to meet the emerging threat specifically to the UK defence supply chain by increasing awareness of cyber risks, sharing threat intelligence and defining risk-driven approaches to applying cyber-security standards. We are already doing it.

[Mr Philip Hollobone (Kettering) (Con)]

To what extent have NATO and our NATO allies prioritised the development of cyber capabilities?

[Mr Francois]

For obvious reasons, NATO takes this threat very seriously. For instance, I believe it has a centre of excellence based in Estonia helping to provide advice to other NATO countries. We in the UK also take the threat very seriously and have invested heavily to counter it.

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

In response to the hon. Member for Norwich North (Chloe Smith), the Minister said that the recruitment for cyber-reserves was on track, but he could not give us precise details because it would breach confidentiality. I have always subscribed to the notion of “trust but verify”. Will he indicate by what means—numbers or some other means—we can ensure that the information is accurate and correct?

[Mr Francois]

I went and verified. I visited the joint forces cyber-group at Imjin barracks in Innsworth in November, and I was able to meet a number of reservists, one of whom was from the Bank of England, who had recently signed up to help provide for the defence of our country. We do not give out publicly the number of people recruited for the cyber-reserves, and I hope the House will realise that there is a logical reason for that. The recruitment is, however, on track, and the quality of the individuals I met at Innsworth were, I have to say, extremely impressive.

[Ian Lucas (Wrexham) (Lab)]

President Obama has openly stressed the importance of establishing rules for the road on cyber-security, but what capacity has the UK developed to respond to a cyber-attack?

[Mr Francois]

I remind the House that the strategic defence and security review announced a £650 million budget for the national cyber-security programme. Moreover, in June 2013, my right hon. Friend the Chancellor of the Exchequer went further by stating that investment in this area will continue to grow in 2015-16 and will include a further £210 million. An announcement by the Ministry of Defence last July showed that we are going even further than that.

[Stuart Andrew (Pudsey) (Con)]

10. What steps he is taking to assist Iraqi forces in countering ISIL.

[Mr David Jones (Clwyd West) (Con)]

12. What steps he is taking to assist Iraqi forces in countering ISIL.

[Richard Graham (Gloucester) (Con)]

14. What steps he is taking to assist Iraqi forces in countering ISIL.

[The Secretary of State for Defence (Michael Fallon)]

We are making a major contribution to the coalition, having deployed sophisticated surveillance, strike and transport aircraft to the region. As of yesterday, we have carried out 99 air strikes in Iraq, second only to the United States. We have also provided training and equipment to Kurdish forces, including infantry, combat first aid, sharpshooting and counter-IED training.

[Stuart Andrew]

Given reports at the weekend that ISIL fighters killed another 24 people in the security forces in northern Iraq, will the Secretary of State provide more details of the equipment that his Department might be supplying to Iraqi forces to help them counter this threat?

[Michael Fallon]

Yes. The National Security Council has asked us to do further work to scope the additional assistance we can offer to the Iraqi military. We plan to gift counter-IED equipment to the Iraqi security forces in the near future, subject to the approval of this House. All our support is part of the developing coalition and Iraqi plan to ensure that Iraqi forces are coherently supported.

[Mr Jones]

To what extent are British personnel in Iraq liaising with the Shi’a militias? Given the recent deaths in Iraq, apparently in action, of the Iranian General Taqavi, what assessment has my right hon. Friend made of the extent of the Iranian influence over those militias?

[Michael Fallon]

Our training has been focused in Kurdistan through the Ministry of Peshmerga, and our other embedded personnel work only with the security forces of the Government of Iraq, not with any of the Shi’a militia. Iranian influence over the Shi’a militia is well known, and Iran can certainly play a positive role in helping to bring about better government in Iraq.

[Richard Graham]

In combating ISIL jihadists, our armed forces might be at greater threat in the UK than in Iraq. After last week’s atrocities, France has, I understand, allocated 10,000 troops for sensitive sites. What steps is my right hon. Friend considering armed forces in the UK should take for their own and our constituents’ safety?

[Michael Fallon]

We take our personnel—both military and civilian—extremely seriously. We have reviewed our protective security measures and the advice to personnel in the light of the recent tragic events in France. My hon. Friend will appreciate that, for obvious reasons, I cannot discuss details of the security arrangements that are in place.

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

Given that the Kurds still face attacks by ISIS forces using sophisticated captured American arms, is the Secretary of State satisfied that our allies have enough heavy weapons, including tanks and helicopters, to counter those attacks?

[Michael Fallon]

We are looking at the gaps in the capability of the Kurdish and Iraqi forces, and if we can help with additional equipment, we are ready to do so, and we have already played a very active part in transporting to those forces equipment that has been gifted or sold from other nations.

[Vernon Coaker (Gedling) (Lab)]

The House stands united with the people of France, and, indeed, with all who support the principles of freedom of speech, tolerance and democracy in the face of the barbarity that the world witnessed last week on the streets of Paris. This morning the Defence Secretary attended high-level meetings in Whitehall to discuss the United Kingdom’s response to those tragic events. Given that one of the terrorists said that he was acting on behalf of ISIL, will the right hon. Gentleman update the House on what further steps the Government are taking to combat this threat in Iraq and beyond?

[Michael Fallon]

I am grateful to the shadow Defence Secretary for, in particular, the tone that he has struck in the light of the tragic events in France. We all have sympathy with those involved.

I think that the hon. Gentleman and I are clear about the fact that if we are to reduce the threat from ISIL in France and the United Kingdom, ISIL must be defeated in both Iraq and Syria. This morning, under the Prime Minister’s direction, we again reviewed our standing preparations for a terrorist attack, including the number and readiness of troops available to assist the police, and we are keeping the security situation under continuous review.

[Vernon Coaker]

I think that the whole House will be grateful to the Defence Secretary for his response. Does he agree that following those recent events the need to tackle the threat is even more urgent, and that we must work ever more closely with our allies in Europe—such as France—and with our partners in the region, including Turkey? Will he update us on the progress that has been made by United Kingdom forces in their crucial work of training Iraqi and peshmerga troops in Iraq to combat the ISIL threat there, and also, importantly, preventing future acts of terrorism here in the United Kingdom?

[Michael Fallon]

We are already co-operating closely with France in particular, and we have reinforced our offer of assistance to France over the last few days. If ISIL is to be defeated and the threat to our own country and other European countries reduced, we will of course depend on the co-operation of the entire international community, but especially on the co-operation of partners in the region. The hon. Gentleman is right to draw attention to the role that Turkey and other regional partners can play.

We have been training Iraqi and Kurdish forces, and are doing so at the moment. Training courses in Kurdistan are being managed and led by British troops, and I hope that they will help the peshmerga, in particular, in their fight against ISIL.

[Rory Stewart (Penrith and The Border) (Con)]

Setting aside the fact that there will be no foreign combat troops on the ground, will the Secretary of State tell us what is the difference between the 2007 strategy in Iraq and the strategy today? In particular, have we a new counter-insurgency doctrine, is there a new Sunni outreach strategy, and have we adopted a new approach to building the capacity of the Iraqi Government and army, or are we fighting the same target with the same strategy and fewer resources?

[Michael Fallon]

I can tell my hon. Friend—who, I know, brings a great deal of experience from Iraq to the House—that the biggest difference between now and 2007 is that we now have a genuinely inclusive Government in Iraq, who represent both Shia and Sunni, and, indeed, Kurdish elements in Iraq. The new Defence Minister, Minister Obeidi, is himself a Sunni. It is important for that Government to concentrate on precisely the kind of Sunni outreach that the hon. Gentleman has mentioned, so that their forces can enjoy the support of the tribes in the Anbar region, where ground must be recaptured from ISIS.

[Andy McDonald (Middlesbrough) (Lab)]

11. What the strategic rationale is for the opening of a UK military base in Bahrain.

[The Secretary of State for Defence (Michael Fallon)]

The Ministry of Defence has had a naval base in Bahrain since the 1950s, providing naval and logistics facilities in support of our operations in the Gulf. The agreement that was signed last month reaffirms the joint determination of the United Kingdom and Bahrain to maintain security and stability in the region.

[Andy McDonald]

How long does the Secretary of State expect the military personnel who have been sent to train the Kurds in Iraq to remain there? Can he give us a time frame?

[Michael Fallon]

Our training effort, our troops and our air contribution to the fight against ISIL will remain in Iraq for as long as is necessary, which may well be a very long time. As for our presence in the Gulf, I hope that the House will welcome the recommitment that we have made to security and stability through the new naval base agreement, which will enable us to deploy larger ships and to provide better facilities for those who are deployed in or are passing through the Gulf.

[Sir Gerald Howarth (Aldershot) (Con)]

I congratulate my right hon. Friend and salute the work carried out by Lieutenant General Sir Simon Mayall in re-establishing an east of Suez policy with our very close and reliable ally the Kingdom of Bahrain. Is this not a good example of the role defence diplomacy can play, and, in that context, may I invite the Secretary of State to reaffirm our commitment to the five power defence agreement in the far east, which reassures our allies and gives Britain an influence in the region?

[Michael Fallon]

My hon. Friend, one of my predecessors as a Minister in the Department, is right to pay proper tribute to Lieutenant General Sir Simon Mayall, who was responsible for negotiating this agreement, which will put our naval presence in the Gulf on a more permanent footing. My hon. Friend is also right to say that we should continue to examine our defence engagement policy in the far east as well as in the middle east.

[Mrs Madeleine Moon (Bridgend) (Lab)]

It has been estimated that a three-day closure of the strait of Hormuz, perhaps by a terrorist attack, could lead to a four-year negative impact on the world economy. Has that influenced our decision to increase our capability in the Gulf?

[Michael Fallon]

Yes, the hon. Lady is absolutely right to draw attention to the economic and strategic importance of the strait of Hormuz. Our mine counter-measure vessels are playing a major part in ensuring that the strait always remains open, and I was privileged to visit two of those vessels and meet their crews. I put on record our appreciation of them for the very difficult and challenging work they do, particularly their divers, in making sure the strait remains open.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

13. What recent investment he has made in (a) cyber-security and (b) unmanned aerial vehicles for the armed forces.

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

In addition to the sums identified by my right hon. Friend the Armed Forces Minister, in July of last year the Prime Minister announced a further investment in equipment for our armed forces, which included £75 million specifically for cyber-defence. The total recent investment in unmanned aerial vehicles for the armed forces in the current year is £233.5 million.

[Sir Oliver Heald]

On unmanned aerial vehicles, will my hon. Friend provide more information about the Watchkeeper tactical remotely piloted air system and when it will be available to our British Army units?

[Mr Dunne]

I am pleased to be able to tell my hon. and learned Friend that the Watchkeeper achieved its first initial operating capability last summer and was deployed with the Royal Artillery to Afghanistan between August and October last year. It immediately demonstrated its excellent, and potentially game-changing, tactical capability over Helmand. We expect Watchkeeper to be at full operating capability in April 2016.

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

As well as investing in unmanned aerial vehicles, is the Department responding to reports that al-Qaeda in the Arabian Peninsula is developing counter-measures designed to diminish the effectiveness of these drones in current operations?

[Mr Dunne]

We are always alert to intelligence reports of evolving threats, from wherever they emerge. We take a very keen interest in the development of unmanned systems across the armed forces and will continue to do so.

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

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

[The Secretary of State for Defence (Michael Fallon)]

Our immediate priorities remain our current operations in Afghanistan and against ISIL and Ebola as well as the commitments reached at the NATO summit and the delivery of Future Force 2020. I want to build up our reserve forces and invest in the equipment that our armed forces need to keep Britain safe.

[Eric Ollerenshaw]

Will my right hon. Friend tell me whether there will be opportunities for reserve units, such as 4th Battalion The Duke of Lancaster’s Regiment, to serve as units in operations and major exercises?

[Michael Fallon]

Reserve service offers exciting opportunities to serve overseas in formed units. For example, a platoon from 3 Princess of Wales’s Royal Regiment will be supporting 1 Royal Anglian in Kabul from February onwards, and 4 Mercian, based in Wolverhampton, recently deployed two platoons to Cyprus. This is exactly what Future Force 2020 was intended to do—making the most of reservists’ skills by integrating them with our regulars.

[Gemma Doyle (West Dunbartonshire) (Lab/Co-op)]

In the recent armed forces covenant report, the three service families federations state:

“We remain disappointed that a sizeable proportion of our people continue to say that they have little or no knowledge of the AF Covenant and the principles that underpin it.”

Three years after Conservative and Lib Dem MPs were initially whipped by the current Armed Forces Minister to vote against enshrining the principles of the armed forces covenant in law, this Government have failed to test their own policies against the covenant, failed to support local authorities to implement it and, we now know, even failed to ensure that forces families know about it. When are they going to get a grip?

[The Minister of State, Ministry of Defence (Anna Soubry)]

May I say how very disappointed I am at such an appallingly negative question that achieves absolutely diddly-squat? With the introduction of the covenant enshrined in law, this Government, more than any other, have ensured that our veterans, serving members of our armed forces and their families get the sort of recognition that they need. It is not disputed that we can do more, especially at local level. That is why, by the end of the day, I shall personally have topped and tailed a letter to every chief executive and every leader of every council in Great Britain. My next task is to write to every clinical commissioning group and hospital trust to ensure that we deliver on the covenant in the NHS as much as we are doing in government, and we now want to do it at local level.

[Mr David Ruffley (Bury St Edmunds) (Con)]

T2. The closure of RAF Mildenhall in Suffolk represents a staggering £0.2 billion loss to the Suffolk economy, including the loss of more than 700 civilian jobs. I know that the Minister for Business and Enterprise, my right hon. Friend the Member for West Suffolk (Matthew Hancock) is chairing the taskforce on trying to continue economic activity in some form at RAF Mildenhall, but will the Minister tell me what steps he will be taking to help fill the massive economic void that will result from this regrettable closure?

[The Parliamentary Under-Secretary of State for Defence (Mr Philip Dunne)]

This is the first opportunity I have had to put on record at the Dispatch Box how pleased the UK is with the decision by the United States air force to base its first two F-35 squadrons at RAF Lakenheath, which is adjacent to Mildenhall. We think that a number of jobs will transfer from Mildenhall to Lakenheath. The base closure at Mildenhall is regrettable, but it will not happen for a number of years. We in the Ministry of Defence will engage with the working group being led by my right hon. Friend the Minister for Business and Enterprise, and we will be looking to see whether there is a future military use for the facility; if not, we will work to find an alternative.

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

T9. According to recent reports in The Times, Ministers are presiding over not only a stalling reserves recruitment programme but a crisis in recruitment to the regular forces. Can any of the Ministers reassure the House that the targets for recruitment to the regular Army forces will be met this year?

[The Parliamentary Under-Secretary of State for Defence (Mr Julian Brazier)]

The hon. Lady is correct to say that, in recruiting year 2013-14, we were running at 66% of the annual regular soldier target. That represents roughly 6,200 soldiers, against a target of 9,300. However, the numbers are increasing and we are looking at a range of measures to increase them further, including a marketing campaign that is to be launched shortly.

[Mr Charles Kennedy (Ross, Skye and Lochaber) (LD)]

T3. Returning to the question of the issuing of a national defence medal, will the Minister join me in paying tribute to my constituent, Mr Martin Halligan, who has done an inestimable and unstinting job on promoting the campaign for the medal nationally? Despite the review that has taken place, will she take on board the feeling expressed by many current and former service personnel that the issuing of such a medal would not undermine previous protocols and conventions or take away from specific acts of courage, leadership and honour, which are rightly recognised at present?

[Anna Soubry]

I certainly pay tribute to the work that has been done by my right hon. Friend’s constituent. I am sure that it is helpful in any event. There has been an independent review, however. Sir John Holmes has made his recommendation, and I am bound by the arguments that he has advanced against what my right hon. Friend is suggesting. I am not actually sure that the veteran community would agree with my right hon. Friend, but I am always willing to listen and if he wants to come and have a chat with me, I would welcome that.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

At this weekend’s Cardiff City game, I saw not only a welcome return to blue, but, intriguingly, that substitutions in the game were being sponsored by the Royal Naval Reserve recruitment programme, no doubt at considerable expense. Will a Minister tell me what the cost of that programme was and how many reserves have been recruited? Given the low levels of reserve recruitment across the UK, what assessment has been made of the efficacy of such expensive advertising programmes?

[Mr Brazier]

I cannot give the hon. Gentleman the exact answer he requests, but I can say that the maritime reserves have been consistently ahead of their recruiting and manning targets from the beginning.

[Stuart Andrew (Pudsey) (Con)]

T4. Will the Minister provide an update on the Future Force 2020 programme?

[The Minister for the Armed Forces (Mr Mark Francois)]

Progress towards the implementation of Future Force 2020 is on track. Taking the Army as an example, the transition towards Army 2020 structures and locations is well under way. For instance, Force Troops Command reached full operational capability in April, and I was there to mark that. In November, I visited the newly formed 1 Artillery Brigade and Headquarters South West in Larkhill, which has taken responsibility for the regional point of contact in the south-west. On Wednesday, I will visit 11 Infantry Brigade in Aldershot before it deploys to Sierra Leone to help to fight Ebola. I am sure the whole House will join us in wishing them God speed and good luck in that task.

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

The Minister said earlier that the Cabinet Office has a role to play in cyber-policy. If that is to be a strong and robust policy, will he tell the House when a ministerial representative from the MOD last met the Home Office, Foreign and Commonwealth Office and Department for Business, Innovation and Skills to discuss the issue? What was the outcome of the meeting?

[Mr Francois]

I can assure the hon. Gentleman that within government we take this issue extremely seriously, and we had meetings with representatives from other Departments and with members of the House of Commons Defence Committee. We are dealing with a diverse and complicated threat, and I have already explained to the House how much we have invested to meet it. We are in no way complacent, nor will we be.

[Guy Opperman (Hexham) (Con)]

T5. Pupils from Corbridge middle school in my constituency are shortly to go to the world war one sites, under the battlefield tours programme. What support is the MOD giving to schools, charities and families whose ancestors were involved as we go forward with future commemorations?

[Anna Soubry]

Of course there are a number of schemes run and encouragements given, not just through the MOD, but through the Department for Culture, Media and Sport, which has been the main Department leading on all this. My hon. Friend makes a good and important point: the commemorations of the first world war continue right up until 2018. Let me just mention that this March we have the commemoration of the battle of Neuve Chapelle, which holds huge significance in both India and Britain. Later in the year, notably in April, we will remember all the events at Gallipoli, and we will be marking Anzac day on 25 April at the Cenotaph.

[Keith Vaz (Leicester East) (Lab)]

At today’s high level meetings was any additional help offered to Yemeni defence forces, who are under sustained attack from extremist groups?

[Michael Fallon]

That has not specifically been discussed, but, obviously, we continue to see what further help we can give to countries in the region which are under pressure from ISIL. The right hon. Gentleman is right to remind the House that this is not simply a challenge to Iraq.

[Richard Fuller (Bedford) (Con)]

T6. Boko Haram slaughter the innocent, sell girls into slavery and impose mediaeval government and fear in wide areas of Nigeria. The local military are seen in many cases as being corrupt and perhaps to have involved themselves in human rights abuses. What role is the MOD carrying out to support Nigeria in tackling Boko Haram?

[Mr Francois]

We unequivocally condemn the awful atrocities committed by Boko Haram in Nigeria. In June 2014, at the London ministerial meeting, the former Foreign Secretary announced that the UK will significantly increase the training and capacity-building assistance we offer to the Nigerian armed forces. We have since expanded our resident training and advisory team, and deployed increased numbers of short-term training teams to help prepare Nigerian troops for deployment against Boko Haram.

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

Last year, the number of Britain’s reservists rose by just 20. Given the millions thrown at the recruitment campaign, how is that a triumph?

[Mr Brazier]

The tri-service numbers of reservists over the past six months were up 400. The fact is that after 15 years of continuous quarter-on-quarter decline, they are now going up again. As I mentioned earlier, in the last quarter announced, recruiting was running at double the rate that it was in the equivalent period last year. [Official Report, 14 January 2015, Vol. 590, c. 7-8MC.]

[Mark Menzies (Fylde) (Con)]

T7. May I put on record my thanks to the Minister for the Armed Forces for his visit to BAE systems in Warton and Salmesbury aerodromes, which are key employers in Lancashire? Will he update the House on defence export prospects for the Hawk trainer aircraft, as its production line has recently opened in my Fylde constituency?

[Mr Dunne]

As my hon. Friend knows, BAE systems is pursuing a number of significant export prospects for the Hawk, with active support from the Ministry of Defence and UK Trade and Investment Defence and Security Organisation. As international air forces modernise their front-line aircraft, we anticipate that there will be significant further interest in the next generation of Hawk aircraft, the Hawk T2, which is already in service to train our Typhoon pilots and will do so for the F-35 pilots in due course.

[Jeremy Corbyn (Islington North) (Lab)]

Next month, the Government will be hosting a meeting of the five declared nuclear weapons states ahead of the non-proliferation treaty review in May. Will the Minister tell the House what he intends to achieve from that meeting, whether there will be an agreed position put and whether the P5 will adhere to the basic principles of the non-proliferation treaty and take steps towards nuclear disarmament?

[Mr Francois]

As the hon. Gentleman knows, we take the nuclear non-proliferation treaty extremely seriously. We uphold that treaty and it is vital that we persuade other nations around the world that may be in breach of that treaty to abide by its conventions as well. The hon. Gentleman and I take a different view on these matters. I spent many years at university debating against the Campaign for Nuclear Disarmament, and I still seem to be doing it now.

[Steve Baker (Wycombe) (Con)]

Will the Government reassure me that they, apparently unlike some parties opposite, will not allow even the distant prospect of coalition negotiations to soften their commitment to continuous-at-sea nuclear deterrence?

[Michael Fallon]

Absolutely. Successive Governments have maintained that commitment to a continuous-at-sea deterrent and this Government are also determined to do so.

[John Woodcock (Barrow and Furness) (Lab/Co-op)]

I am puzzled by the attempts of the Minister for the Armed Forces to goad the Opposition on the issue of the nuclear deterrent. Let us be clear: we are committed to a minimum strategic nuclear deterrent delivered by submarines that are continuously at sea. We continue to support the programme that we started in Government, which his Government have delayed. In what way is that different from his policy?

[Michael Fallon]

What is different is that the Leader of the Opposition, who was challenged on this just a week ago, spoke only about the need for the least-cost deterrent, without repeating—[Interruption.]

[Mr Speaker]

Order. I know that the Secretary of State can generally look after himself, but Members must not seek to shout him down. I always facilitate full exchanges on all these important matters, but the Secretary of State must be heard.

[Michael Fallon]

Thank you, Mr Speaker. This is a very important matter. The Leader of the Opposition did not repeat Labour’s previous commitment to what matters, which is a continuous-at-sea deterrent. What we cannot have is any kind of part-time deterrent, which would rely on our enemies being part-time as well.

[Michael Fabricant (Lichfield) (Con)]

I have the great pleasure of announcing to the House that I have just been made president of the (Mercian) Squadron Air Training Corps in Lichfield, which is one of the biggest Air Training Corps in the midlands. Will my right hon. Friend maintain his commitment to the Air Training Corps?

[Mr Brazier]

I congratulate my hon. Friend on that great distinction. Air cadets offer a huge opportunity to young people from a whole range of different backgrounds. The Ministry of Defence provides, and will continue to provide, support to both the Air Training Corps and the university air squadrons through the provision of high quality flying training and other supporting activities, including access to defence training areas and ranges.

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

May I try to goad the Secretary of State so that he stops trying to bamboozle us all about the real deterrent we need, which is a properly armed, conventional group of 100,000 men and women to defend this country? Is it not about time that he took our mind off reservists and talked about how many men and women we have under arms in this country?

[Michael Fallon]

In stark contrast to the previous Government, our defence budget has been properly managed and has enabled us to keep this country safe. We are determined to support Future Force 2020. The hon. Gentleman’s question might be better directed to the shadow Defence Secretary, who last week told The Times:

“Army 2020 isn’t working and Labour will not take it forward”,

although last year he said that

“we support the rationale behind…Future Force 2020”.

[Mr Speaker]

Last but not least, I call Mr Duncan Hames.

[Duncan Hames (Chippenham) (LD)]

Allied warplanes cross the skies above Syria while Assad’s helicopters drop barrel bombs on the civilian population. How can this apparent indifference help us to prevent the civilian population of Syria from turning to the ISIL militia?

[Michael Fallon]

The Prime Minister has made it clear to the House that ISIL can only be defeated in both Iraq and Syria. We are making a major contribution to the campaign in Iraq, which itself of course allows others to contribute to the campaign against ISIL in Syria. ISIL has to be defeated in both countries.

Nigeria

Monday 12th January 2015 Commons Chamber

15:35

[Sarah Teather (Brent Central) (LD)]

(Urgent Question): To ask the Secretary of State for International Development if she will make a statement on the current situation in Nigeria.

[The Minister of State, Foreign and Commonwealth Office (Mr Hugo Swire)]

The Boko Haram terrorist group continues to wreak havoc across north-east Nigeria. Many colleagues will have seen the press reports over the past week highlighting its latest sickening attacks. Hundreds of people are believed to have been killed in the town of Baga in Borno state last week as Boko Haram continued its bloody insurgency campaign. Suicide bombings in urban areas are also a common feature of Boko Haram’s tactics. This weekend, we saw another heinous example in the Yobe state town of Potiskum.

These attacks are just the latest example of the insurgents’ reign of terror. We believe that more than 4,000 people were killed by the group last year in north-east Nigeria. The United Nations estimates that more than 1.5 million people have been displaced by terrorist activities, and that at least 3 million have been affected by the insurgency.

The abductions of the Chibok schoolgirls on 14 April last year shocked the world and highlighted the mindless cruelty of Boko Haram. The group deliberately targets the weak and vulnerable, causing suffering in communities of different faiths and ethnicities. It is almost certainly the case that attacks by Boko Haram have killed more Muslims than Christians.

The year 2015 is an important one for Nigeria’s future. Presidential and state elections will take place in February. It is crucial that they are free, fair and credible and that all Nigerians are able to exercise their vote without fear and intimidation.

As Minister with responsibility for the Commonwealth, I responded to the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Prime Minister, on behalf of the Government in the last debate in the House on this subject. I am grateful to the hon. Member for Brent Central (Sarah Teather) for asking this timely question, which will allow Members from across the House to give this important issue the attention it surely deserves.

[Sarah Teather]

This weekend saw an inspiring and moving display of international solidarity in the wake of the Paris shootings, but while we were watching the horror unfold in Paris, hundreds or possibly thousands of civilians were slaughtered by Boko Haram in northern Nigeria, with very little international attention. While millions poured on to the streets in Europe in a hopeful, defiant march for peace, thousands of Nigerians fled across the border into Chad in fear of further violence, adding to the tens of thousands who have already fled to Chad, Cameroon and Niger and the 1 million or so people displaced internally.

I visited northern Nigeria with Voluntary Service Overseas in 2008, as recorded in my entry in the Register of Members’ Financial Interests, to see projects working to improve access to and the quality of primary education. Will the Minister tell the House how UK Government-funded programmes for education in northern Nigeria are responding to the escalating security situation and to the mass displacement of people? What are the Government doing to ensure a rapid humanitarian response for refugees, who are mostly fleeing to countries that are already resource-poor and insecure? Looking ahead to the world humanitarian summit next year, are there measures that can be put in place now for the co-ordination of aid and support for local non-governmental organisations? Does the Minister recognise that the international NGOs are already hugely overstretched in the region, responding to multiple conflicts and Ebola?

What are the Government doing to bring pressure to bear on the Nigerian Government to tackle Boko Haram and to prioritise protection of humanitarian workers? What are we doing to encourage the Nigerian Government to stamp out corruption, which is such a breeding ground for loss of confidence in the state? Finally, looking ahead to the Nigerian elections, how will the Minister ensure that we can capitalise diplomatically on the window of opportunity provided by a newly elected Nigerian Government to tackle such issues, however discredited those elections might turn out to be, when we will be in the middle of our own election campaign?

[Mr Swire]

I thank the hon. Lady again for asking this urgent question, which gives us the time to return to these matters. There is a problem in that when something crops up elsewhere in the world, we are easily diverted and we forget the appalling suffering that continues in other parts of the world. I pay tribute to the world leaders who gathered in Paris at the weekend, including my right hon. Friend the Prime Minister, and the “Je suis Charlie” campaign. I know we would all have liked to be there to show our solidarity.

To return to the question of Nigeria and managing the humanitarian crisis, we are working closely with our international partners to react to the large numbers of people who have now been displaced by the conflict in the north-east, an issue that affects not just Nigeria but its close neighbours. The UK’s contribution to the UN’s central emergency response fund and the European Commission’s humanitarian aid and civil protection department programmes in 2014 was £1.7 million and, of course, DFID’s total budget for Nigeria is one of the biggest in the world at some £250 million, which includes funding for the safe schools initiative and promoting women’s and girls’ rights in northern Nigeria. British aid will help 800,000 more children to go to school in Nigeria, including 600,000 girls.

Corruption is worth highlighting, and it is worth remembering as we discuss these matters that Nigeria has the largest economy in Africa. It spends 20% of its national budget on security, so, properly run, Nigeria should be able to do a lot of this work itself. Our money from DFID does not just alleviate poverty, although there is a disparity in the economies of the north and the south, but helps build robust institutions so that Nigeria can take on some of the problems itself.

The hon. Lady refers to the forthcoming election in February. We have concerns about violence during the election and about the feasibility of running a nationwide election when an area the size of Belgium is now under Boko Haram.

[Mr John Spellar (Warley) (Lab)]

I thank the hon. Member for Brent Central (Sarah Teather) for asking this question and you, Mr Speaker, for granting it.

The whole House will be shocked and outraged by reports that up to 2,000 people were killed in northern Nigeria last week following a series of brutal and deadly attacks by Boko Haram extremists. Most recently, we have heard reports of 23 people killed in a bomb attack involving three young girls, one of whom is reported to have been just 10 years old. Eyewitness reports suggest that after one such murderous attack hundreds of their victims’ bodies were left strewn across the town of Baga, including those of children, women and the elderly.

As the Minister highlighted, that follows months of violence across northern Nigeria with killings, mass abductions and attacks on innocent civilians. These attacks and brutality have been rightly condemned around the world, and although many people have rightly praised the moving solidarity seen across Europe this week, there can be no doubt about the need for solidarity across continents in the wake of such appalling attacks. That includes the atrocity in the school in Peshawar; we welcome its reopening today, striking a blow against terrorism everywhere. The world must not simply stand back and tolerate Boko Haram’s brutal campaign of violence.

Here in the UK there is cross-party support for Britain to continue to provide support alongside our allies to the Nigerian authorities in their efforts to tackle Boko Haram. Will the Minister update the House on the level of that support and say whether there have been any additional requests for British advice and expertise from the Nigerian Government? The Minister rightly reminded us of the appalling kidnappings in Chibok, which brought much needed global attention to the security situation in northern Nigeria and the vulnerability of civilians, in particular women and girls, at the hands of Boko Haram.

The recent testimonies collected by Human Rights Watch from victims who escaped or who were released show the appalling extent of the violent and brutal conditions in the Boko Haram camps where women and girls are held. In October the Nigerian authorities announced that they had agreed a ceasefire with Boko Haram, which was supposed to see the schoolgirls safely returned, but this agreement was shattered by the horrific news of the suicide bomber wearing a school uniform who set off a backpack full of explosives in the middle of a school assembly. Can the Minister provide the House with an assessment of the current plight of the girls who have been kidnapped by Boko Haram? What discussions has his Department held with the Nigerian authorities on working together to secure their release?

[Mr Swire]

I stand alongside the shadow Minister in welcoming the reopening of the school in Peshawar. We should all stand together against violence and terrorism around the world. By doing that, we can face it down.

The shadow Minister asked about UK support. I imagine he was referring to the package of support announced on 12 June 2014 by my right hon. Friend the Leader of the House, then the Foreign Secretary, who is in his place now. Since then we have enlarged our programme of capacity-building support for the Nigerian armed forces to provide direct tactical training and advice to the Nigerian forces engaged in this fight against terrorism. With France and the United States we are supporting regional intelligence-sharing arrangements between Nigeria and its neighbours. As I said to the hon. Member for Brent Central (Sarah Teather), a DFID-US aid partnership will draw 1 million more school children into education by 2020, which includes increased support for girls’ education in particular. This is in addition to the £1 million which we committed in May to the UN safe schools initiative, which I alluded to earlier. DFID is providing advice and assistance to Nigeria for a more strategic approach to economic development in the north.

The right hon. Gentleman referred to the brutality of Boko Haram. There is no other word that better describes their actions. They are extraordinarily brutal to their own Muslim brothers, as well as to Christians—indeed, to any one who seems to get in their way. The tales of what they leave behind when they move into these areas are too ghastly to rehearse here this afternoon. They are one of the most brutal organisations known to man.

The issue that caught the attention of this House and of the world was the abduction of the Chibok girls. We are still supporting the Nigerian authorities in trying to establish the girls’ location through the provision of surveillance assets and intelligence expertise. Information generated by these assets has been provided to an intelligence fusion cell in Abuja, where British personnel are working alongside Nigerian, American and French colleagues. We are clearly unable to comment on the results of ongoing intelligence operations, as the House will accept, but while the girls are still missing our resolve and that of the international community to continue the search remain strong. I remind the House that we are dealing with an area the size of Belgium under the control of Boko Haram, and intelligence is difficult, but we are not giving up at this point.

[Sir Tony Baldry (Banbury) (Con)]

What is happening in northern Nigeria with Boko Haram is grotesque and it is important that the House and everyone else should demonstrate that all human life is equally valid and equally sacred. My right hon. Friend made it clear that he is the Minister with responsibility for relations with the Commonwealth, and as the right hon. Member for Warley (Mr Spellar), who spoke for the Opposition, made clear, this is not just about northern Nigeria; it equally applies to the north-west frontier province in Pakistan. What is the potential for the Commonwealth as an institution to show solidarity by ensuring that Commonwealth countries act collectively to support Commonwealth members that are seeking to resist terrorism and fundamentalism?

[Mr Swire]

My right hon. Friend raises an extremely good point. I am the Minister with responsibility for the Commonwealth, although I do not have direct responsibility for Nigeria, and I have been asking officials about this matter this afternoon. I think that there is a role for the Commonwealth. Particularly in Nigeria, more work could be done locally through organisations such as the African Union, but the Nigerian Government have to want other countries to come in and do that. It is worth looking at a pan-Commonwealth approach to dealing with terrorism of this nature, from which few countries currently seem to be immune, and I shall raise it with the secretary-general.

[Mr David Winnick (Walsall North) (Lab)]

The vast demonstrations in Paris and in other French cities against murderous religious fascism were among the most impressive in my lifetime. Is there not genuine concern that the authorities in Nigeria are simply inadequate to deal with this terrible threat? Time and again when the Nigerian President has been under a good deal of international pressure, and rightly so, his response has been such that one can conclude only that the commitment to fight the terrorism and atrocities in that country is not as it should be.

[Mr Swire]

No one living outside the affected areas in Nigeria should believe for one minute that they are immune to the possible terrorist activities of Boko Haram. As I said, there is an election in February, and presumably there are those who wish to campaign in this large chunk of the country in the north. It is a problem for Nigeria. Yes, we certainly wish that its institutions were stronger, but I think that both the Nigerian Government and the international community are absolutely certain that Boko Haram needs to be routed out, and quickly, before it does further damage within the country and to its vulnerable neighbours.

[Mr John Redwood (Wokingham) (Con)]

I agree entirely with what the Minister and the shadow Minister have said. I particularly agree with the Government’s decision not to intervene in Nigeria directly with military force. Will the Minister explain, though, why the west is right to try to use military force in Syria and Iraq, in rather similar situations, but not in Nigeria?

[Mr Swire]

We have deployed assistance to Nigeria and we will continue to do so, particularly on the intelligence side. I repeat that Nigeria is one of the richest countries in Africa and it spends 20% of its own budget on defence expenditure. In the normal course of events, it should be able to handle these things itself, but it cannot, and that is why we are providing assistance to enable it to do so. Drawing any parallel between what is going on in Syria and Iraq is not useful, if I may say so. This is something localised to Nigeria, and we want to prevent it from spreading across other parts of Africa.

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

I draw the House’s attention to the Register of Members’ Financial Interests, where I have registered visits to Nigeria over the years. The Minister will be aware that the situation in Nigeria is a matter of great concern to the British people. It is also of concern to the tens of thousands of our constituents with strong family connections in Nigeria who want to know what the British Government are doing for their friends and family. As he pointed out, Nigeria has the capacity to deal with Boko Haram if it so chose. After all, it has the largest GDP on the continent and spends huge amounts of money on arms and weaponry, and it was very effective in relation to Ebola. Does he agree that people want to know what the British Government are doing to put maximum political pressure on the Nigerian Government to make them aware that people all over the world are watching them and want them to step up to this crisis?

[Mr Swire]

We are more than stepping up to the crisis. I have said that we have one of the biggest bilateral aid budgets to Nigeria in the world—it is approximately £250 million a year—as well as the additional packages I have just announced. For the diaspora here, that is something of which we can be proud. The hon. Lady said that, given the wealth in Nigeria, Nigerians have the capacity to handle these things, but I disagree. I would say that they should have the capacity to deal with them, but the reality is that they do not. That is why a lot of UK support is going towards helping to build the capacity they need, with direct tactical training and advice to the Nigerian forces. I agree that they should have it, but currently I do not believe that they do.

[Martin Horwood (Cheltenham) (LD)]

Does the Minister agree that the answers to violent extremism lie in inclusion and reconciliation, and development and good governance—all of which the Department for International Development will continue to support in Nigeria, even after the cameras have moved on? Does he also agree that effective evaluation of Government-to-Government aid must accompany that work?

[Mr Swire]

The first thing to point out is that no UK aid goes directly to the Government of Nigeria; it goes to other organisations within Nigeria. Yes, we should continue to help build. As I have said, I believe that we have to justify overseas aid because it is a contentious issue and people do not want to see it going to countries that squander it in some way. That is why we do not on the whole give Government-to-Government overseas aid. Given Nigeria’s huge wealth and its huge divisions of wealth, particularly between the north and south, we think there is a role—in the British interest, apart from anything else—to help build capacity and strengthen institutions in that country so that it can handle these issues itself. We will continue to do that, whether the cameras are on us or not.

[Keith Vaz (Leicester East) (Lab)]

I think the whole House appreciates what the Government have done to support the Government of Nigeria. In my view, we have the best counter-terrorism operation in the world. Has the Minister had a specific discussion with the Home Secretary about any counter-terrorism support we can give the Nigerian authorities? They may be very rich, but they lack our expertise.

[Mr Swire]

The best thing we can do is what we have done, which is provide satellite imagery, training, and surveillance and intelligence assistance to the Nigerian authorities. In an earlier search, we deployed Sentinel and Tornado GR4 aircraft with surveillance capabilities. I have not had a discussion with the Home Secretary; these things have been handled to date by the Ministry of Defence, the Department for International Development and the Foreign and Commonwealth Office.

[Bob Stewart (Beckenham) (Con)]

The problem with trying to gain intelligence is that the only way to get really good intelligence is to put troops into the area where it can be gathered. The Nigerian Government already spend 20% of their gross national income on security. Will the Minister consider the possibility of putting on the ground some kind of coalition—under the United Nations and paid for, at least in part, by the Nigerian Government—so that effective troops could go into this area the size of Belgium to get decent intelligence and give some reassurance to the people there?

[Mr Swire]

No British troops will be deployed in that role in Nigeria.

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

I should declare that I chair the all-party group on Nigeria. Although I do not want to play down the evils of Boko Haram, we know that the security forces and the Nigerian police have themselves caused problems while tackling its actions. I know that the Foreign Office has met the Metropolitan police’s Nigerian police forum—there are nearly 900 Nigerian-origin police officers in the Met. Will the Minister update the House on those discussions and on whether there is a role for the Metropolitan police and other police in the UK to help embed human rights policing in Nigeria?

[Mr Swire]

There are human rights issues in not only the police in Nigeria, but in the armed forces there as well, and those very serious concerns have to be balanced against any assistance we provide. That applies to us, France and, of course, the United States. The hon. Lady’s question about any assistance that the Metropolitan police might be able to offer would be best answered by the Home Office, and I shall make sure that my right hon. Friend the Home Secretary answers it fully.

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

As the appalling violence spreads, will the Minister outline what specific measures the UK has taken to help the Nigerian authorities protect civilians in the more isolated and rural areas? Given the targeting of so many women and girls, what steps are being taken to share our technical expertise in preventing and prosecuting sexual violence in conflict?

[Mr Swire]

I will not rehearse again all the assistance that we have given to Nigeria, particularly since June. It is extraordinarily difficult to have a conversation at the moment about the prevention of sexual violence in conflict, to which my hon. Friend alludes. We could have it with the Nigerian military. However, given that across great swathes of the country vast numbers of girls are being abducted, made to convert from their religion and married off, it is a bit premature to start talking about the prevention of sexual violence. This is an endemic problem right across the struggle between the Nigerian authorities and Boko Haram.

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

It is a sobering thought that the deaths of so many hundreds and thousands of Nigerians last week warranted so little attention in this country. My right hon. Friend the Member for Warley (Mr Spellar) spoke of the need for solidarity across continents. In the discussions that will undoubtedly happen in the wake of yesterday’s moving show of solidarity across the channel, will the Minister see how the UK and France can work together to provide security assistance—particularly at the porous border between Nigeria and Niger, which enables Boko Haram to melt back after its atrocious crimes?

[Mr Swire]

There have been a number of ministerial meetings around the world to look at the security situation in Nigeria and the UK will attend the next follow-up meeting on 20 January in Niamey, the capital of Niger. Co-ordinating the regional approach to Boko Haram’s violent campaign is vital, as the hon. Lady suggested. The terrorists do not respect national borders. The recent attacks on Cameroon have also been extremely bloody. The House should be in no doubt that this will be a long and difficult task, but we are totally committed to standing by Nigeria in its fight against terrorism.

[Jeremy Lefroy (Stafford) (Con)]

As the hon. Member for Hackney North and Stoke Newington (Ms Abbott) said, the Nigerian state showed a strong response to Ebola, yet its response to terrorism in the north has been extraordinarily weak, with soldiers reportedly not even having bullets for their weapons. How does the Minister of State account for that enormous discrepancy in competence?

[Mr Swire]

We would like to have seen a more robust attitude from the army and the military to what is going on in the northern states. However, it is an extraordinarily complicated question and it is extraordinarily difficult to find out what is going on. We read lots of stories about people changing sides and equipment being seized. The Nigerian army certainly needs better training to combat the incredibly violent terrorist organisation that is Boko Haram. It needs more assistance and training, but, as I have said, that cannot be done overnight.

[Jeremy Corbyn (Islington North) (Lab)]

The House owes a debt of thanks to the hon. Member for Brent Central (Sarah Teather) for ensuring that this question was asked today. Millions turned out across Europe yesterday, particularly in France, because of the atrocious killings in Paris; millions more need to turn out all over the world over the deaths of innocent people in Nigeria. Does the Minister not think that it is important for all Governments—and all Parliaments, for that matter—to send the message that a human life lost because of such atrocities is equally awful in France, Nigeria or anywhere else, and that every human life is a human life that should not be taken?

[Mr Swire]

Hear, hear to that! We estimate that in 2014, at least 4,000 people were killed in Boko Haram attacks. The insurgency is growing and it is a growing humanitarian issue. The UN estimates that more than 1.5 million people have been displaced and at least 3 million affected by the insurgency.

The hon. Gentleman will have noted the recent words of the Catholic Archbishop of Jos in Nigeria, who claimed that the west is not doing enough to support Nigeria in tackling Boko Haram and drew an unfavourable comparison with the international community’s response to the Paris terrorist attacks. I think that the United Kingdom is showing the way through leadership, financial assistance and training. Perhaps other countries should look at themselves and see what more they can do to join in with the attack on terrorists.

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

Members of the Nigerian armed forces have complained that one reason why they cannot defeat Boko Haram militarily is that money destined for equipment has been siphoned off by senior officials. To go back to a question that my hon. Friend the Member for Brent Central (Sarah Teather) asked, what specific action is my right hon. Friend the Minister taking to tackle corruption in Nigeria?

[Mr Swire]

There are allegations of equipment going missing and money not reaching the right place, and unfortunately I believe that all those allegations are founded on truth. That is why we have training teams in Nigeria—to try to build better institutional capacity for a better, more accountable and more transparent military, so that such things do not go on happening.

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

It has been reported that the French have an initiative whereby they are trying to create a multinational taskforce comprising Nigeria, Niger, Cameroon and Chad, but so far none of those countries has been prepared to provide the troops required. Is the United Kingdom supporting the French Government in that initiative, which must surely be the way forward?

[Mr Swire]

I think I said earlier that the solution should be regional. Some of those countries, such as Niger and Cameroon, are on the borders of Nigeria and are already affected. However, we cannot offer help if the country we are offering it to does not want it, so we have to hear more from the Nigerian Government about how the international community can assist, particularly locally. Hopefully, a force such as the hon. Lady suggests can come from that.

[Mr Philip Hollobone (Kettering) (Con)]

No one can have a sensible discussion about Nigeria unless they consider its exponential population growth. In 1950 there were 33 million Nigerians, and there are now 175 million. The UN’s central estimate for 2100 is that there will be 730 million. One in five Africans is Nigerian, and half the population is under the age of 14. Against the background of that huge demographic instability, is the Minister satisfied that the Foreign Office understands the potential catastrophe for Africa of a successful Islamic insurgency in that country?

[Mr Swire]

We are extremely concerned about the problem spreading—I have already said that—but let me look at the glass as being half-full, rather than half-empty as my hon. Friend sees it. Nigeria is the richest economy in Africa, and it has huge talent—we have only to look at the Nigerian diaspora in this country to recognise that. It is rich in resources, so there are huge opportunities for it. However, it has endemic problems, such as a disparity of wealth, including a north-south geographical disparity, that is far too great.

I believe that if an incoming Nigerian Government of whatever persuasion in February are determined to invite in the international community in a more open way to help rebuild a modern Nigeria, they can become a shining beacon on the African continent of what such a country can achieve.

[Richard Fuller (Bedford) (Con)]

I fear that many people listening to this exchange, perhaps including the 1 million or more British citizens of Nigerian origin, will see the Minister’s response as inadequate: first, because he has framed the problem as being smaller than they perceive it to be; secondly, because his response that we are at the behest of the Nigerian Government, rather than actively pushing them for change, is too weak; and thirdly, because he has not outlined one measure that will give the thousands of people who are running for their lives right now any hope for any change in the near future.

With the greatest respect to those who took part, our response to Boko Haram needs more than a hashtag and a photo opportunity. It needs an active response from the British Government, who believe in the freedom of the individual wherever they are in the world. May I ask the Minister to reflect on that and perhaps come back to the House with a more substantive response?

[Mr Swire]

I simply do not recognise any of that. My hon. Friend talks about photo opportunities and Boko Haram, but there have not been any that I am aware of. We have one of the biggest bilateral aid budgets at £250 million, and we are doing a lot on education and safety in schools in Nigeria. However, Nigeria is a rich country and it needs to be taught to do those things itself. I believe that the UK is at the forefront of trying to assist Nigeria, but we cannot impose assistance if it is not asked for. There is something called sovereignty, which may have escaped my hon. Friend’s notice, and the Nigerian Government are perhaps, as I have said, too slow to ask the international community for help. The United Kingdom should be proud of its record at the forefront of attempts to right some horrible wrongs going on in that country.

Stamp Duty Land Tax Bill

Monday 12th January 2015 Commons Chamber

Considered in Committee

[Mrs Linda Riordan in the Chair]

Clause 1

Change in method of calculating tax on residential property transactions

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mrs Linda Riordan)]

With this it will be convenient to discuss schedule 1.

16:11

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

It is a great pleasure to serve under your Chairmanship, Mrs Riordan, and to debate the Bill.

Clause 1 amends section 55 of the Finance Act 2003 to change the basis of calculation for stamp duty land tax on residential property transactions, and provide a new table of rates and thresholds that apply to those transactions. It also introduces the schedule that makes the consequential changes to SDLT, and to the method of calculating the amount of tax due when certain reliefs are claimed. As right hon. and hon. Members will be aware, the measure came into force through a resolution under the Provisional Collection of Taxes Act 1968 for transactions whose effective date—usually the date on which the purchase contract is completed—is on or after 4 December 2014.

Let me briefly remind the House why we have introduced this important and comprehensive reform to SDLT on residential property. In essence, the stamp duty system on residential property as it previously stood was flawed and widely criticised, and it created an enormous hike in taxes at certain thresholds. Someone paying £250,000 for a house would pay £2,500 in stamp duty, but if they paid £250,001, they would pay £7,500—three times as much. Inevitably that created peaks in transactions at those thresholds and dead zones above them, and that big distortion affected a significant number of properties. We have got rid of the inefficient and distorted old system and replaced it with a fairer new system that cuts SDLT for 98% of those who pay it. No buyer of a property under £937,500 will pay more SDLT than they would have done before 4 December. We have provided a calculator on the HMRC website so that people can work out how much tax they will pay, and I am happy to confirm that to date it has been used more than 1.25 million times.

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

As the Minister points out, this change will result in savings for the vast majority of people purchasing a home. What assessment has he made of the impact on house price inflation as a result of the changes?

[Mr Gauke]

There may be a slight impact on house prices, but we must put that in context. Many factors determine house prices, and on the evidence before us our view is that the changes will not have a significant impact on the overall level of house prices. They are likely to have a bigger impact on removing some of those dead zones and distortions in the housing market, which is beneficial in creating a more efficient and effective housing market.

The reform has been welcomed by right hon. and hon. Members in all parts of the House and by outside bodies, including the Council of Mortgage Lenders, the Institute of Directors and the Institute for Fiscal Studies. Jonathan Isaby, from the TaxPayers Alliance, called it:

“an early Christmas present for young people looking to get on the housing ladder.”

[Mr John Redwood (Wokingham) (Con)]

Will the Minister comment on the impact on revenue? He may collect more revenue where rates have been cut, but lose revenue at the top end.

[Mr Gauke]

That is not our assessment. My right hon. Friend is an eloquent and distinguished advocate of the argument that it is possible to raise more revenue by reducing rates, and he has over many years demonstrated cases where that would apply. I do not believe that we will quite see that dynamic effect to that extent in this case. I think more revenue, and certainly a greater proportion of it, will be raised from properties above £2 million. Undoubtedly, we will see a few more transactions, which will mean additional revenue that would otherwise not come in. On balance, we will see a reduction overall in revenue across the SDLT regime, but we believe that that is none the less the right thing to do to ensure that we deliver a reform that benefits the vast majority of people who pay SDLT.

Under the rules as they applied on 3 December, the amount of tax payable was a percentage of the chargeable consideration—the purchase price—for the acquisition of the property. Different scales of percentages, table A and table B, applied respectively to transactions consisting wholly of residential property and to transactions that consisted of, or included, non-residential property. The clause substitutes a new table A, setting out the new tax rates and bands that apply to a transaction consisting wholly of residential property. It also amends the calculation rules for those transactions, so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts of each band.

[Mrs Anne Main (St Albans) (Con)]

I stress again how welcome the change has been for residents in St Albans, particularly at the lower end of the market where there have been big savings. Has consideration been given to expanding the scheme to commercial properties, and not just keeping it to wholly or partly residential properties?

[Mr Gauke]

All these matters are kept under review. My hon. Friend has been a consistent and doughty campaigner for reform in this area. If we had exactly the same system in place for commercial property, with the same thresholds and so on, we would be imposing a much greater burden on commercial property transactions, because by their nature they tend to be of a more substantial size. There is a higher level of consideration in place than for most residential property transactions. The argument for reform for residential property was particularly strong, which is why we took these steps. Consideration of whether there is a strong and persuasive case for reform for commercial property is perhaps a matter for another day.

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

I join my hon. Friend the Member for St Albans (Mrs Main) in welcoming the provisions, which will provide a great deal of assistance to the housing market.

The Minister knows that for some time I have been pursuing stamp duty land tax for all those affected by the notorious HS2 infrastructure project. Is the Minister willing, while he is looking into this matter, to review those provisions? The SDLT relief applies to only a very narrow number of properties. To keep the property market operating normally, it should be possible to extend it to properties up and down the line that are being so adversely affected by the project.

[Mr Gauke]

I am grateful for that observation from my right hon. Friend and constituency neighbour. I know well how the issue of SDLT in general must be relevant to many of her constituents. On the specific point about HS2, the Government remain to be persuaded that SDLT is necessarily the right measure for addressing the concerns that she identifies and on which she provides an articulate voice in defence of her constituents and others affected by the project. We remain to be convinced, but I know that she will continue to make her argument, and we will continue to look at it carefully. As I said, however, we are not yet convinced that reform of SDLT, or an exemption or relief, would necessarily provide the right support for those with properties affected by HS2.

Clause 1 substitutes a new table A setting out the new tax rates and bands applying to a transaction consisting wholly of residential property and amends the calculation rules for these transactions so that each rate of tax applies only to that part of the consideration that falls within the relevant band. The total tax due is then the sum of the amounts for each band. The new calculation rules extend to linked transactions—those that form part of a scheme arrangement or a series of transactions between the same buyer and seller. In this case, SDLT applies to the aggregate consideration for all the linked transactions.

The new rules do not apply to transactions to which table B in section 55 of the 2003 Act applies—transactions or linked transactions consisting wholly of non-residential or a mixture of residential and non-residential property. The clause introduces the schedule, which makes consequential amendments to SDLT legislation to take account of the reform. The main changes are to the method of calculating the tax due under certain SDLT reliefs. The first relief is for statutory leasehold enfranchisement, where leaseholders of flats club together to buy the freehold of their block. This relief formerly operated by setting the rate of SDLT according to the amount paid for the freehold, divided by the number of qualifying flats. Under the new arrangements, first we divide the amount paid for the freehold by the number of qualifying flats and calculate the amount of tax due on that sum. We then multiply that amount of tax by the number of qualifying flats in order to arrive at the total tax due.

Secondly, a similar change is made to relief for purchasers of multiple crofts from a landlord by a crofting community body under the crofting community right to buy scheme. This relief only applies in Scotland so will only be relevant until 1 April 2015, when SDLT in Scotland is replaced by the devolved land and buildings transaction tax.

Finally, a similar change is made to multiple dwellings relief, which applies to purchasers of more than one dwelling in either a single transaction or linked transactions. This relief was previously subject to a minimum rate of 1%. Under the new rules, the amount will be equivalent to 1% of the chargeable consideration given for the dwellings, which in practice gives the same result.

Right hon. and hon. Members raised several important points on Second Reading. I would like to take this opportunity to explain in a little more detail the Government’s position on some of those issues. First, it has been asked why we have chosen not to apply the new rules to non-residential—commercial and agricultural —property as well as to residential property. That point was raised just now by my hon. Friend the Member for St Albans (Mrs Main). As I said, the market for non-residential property is very different from the market for residential property. For example, non-residential properties have a higher value on average and many are held on market rent leases granted for a small or no premium. At this time, the Government do not feel it appropriate to make changes to non-residential SDLT, although all taxes are kept under review as part of the policy making process. Any change to non-residential SDLT would have to be considered very carefully.

Some concern has been expressed about the possibility of purchasers avoiding SDLT by designating the property as either residential or non-residential in order to obtain a more favourable result. What constitutes residential property is set out in the legislation. Property can be either residential or non-residential, which is a matter of fact. There is no option, as it is has been suggested there is, to flip property between one and the other. I can reassure the Committee on that.

Finally, it has been suggested that the highest rate of tax payable under the new rules might reduce the disincentive to envelope residential property provided by the 15% higher rate SDLT charge, which applies to purchasers of residential property by a company or other non-natural person. The highest marginal rate of SDLT for the purchase of residential properties above £1.5 million is now 12%. However, SDLT is charged at 15% on the whole value for residential properties bought through corporate envelopes for more than £500,000. We are not proposing to make any changes to the 15% higher rate charge. However, in the autumn statement, we announced that the annual charges of the annual tax on envelope dwellings—ATED—would increase by 50% above inflation for the chargeable period 1 April 2015 to 31 March 2016 in order further to discourage the use of enveloping. The Government keep all taxes under review where individuals continue to hold property within corporate wrappers. They should be prepared to pay their fair share of tax.

These reforms to SDLT will remove the previous economic distortions in the system, benefiting the housing market and improving the fairness and efficiency of the tax system. They will give another boost to people looking to fulfil their aspirations of owning the place they live in and will make a real tangible and positive difference to the lives of people up and down the country.

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

It is a pleasure to serve under your chairmanship, Mrs Riordan.

I thank the Minister for his introduction to clause 1 and schedule 1. Let me confirm from the outset that we support these measures, as we did in the previous two debates on the Bill. We will do so again today. As I say, we have already had a couple of debates and it is a small Bill, so many of the issues have been debated thoroughly before. I am grateful to the Minister for dealing with some of the questions that arose on Second Reading. I have just a couple of points on which I would like to press him, and I will be grateful to hear his response in his summing up.

First, can the Minister provide us with an update on HMRC’s handling of the queries that arose when these measures were announced? Can he confirm the number of queries that HMRC had to deal with, clarify the nature of the queries that the public or their advisers raised and confirm whether all outstanding queries have been dealt with?

Secondly, let me press the Minister a little further on the revenue. I put some points to him on Second Reading about the expectations of revenue, but that matter has not been fully covered by the responses we have received. The Minister knows that these measures are expected to cost £395 million in 2014-15, rising to £760 million in 2015-16. Research by Lonres and Dataloft has found that more homes changed hands on the day of the autumn statement than on any other day in the past decade, so one in six of all homes sold in London’s most expensive areas in the last three months of the year changed hands on 3 December. The research by Lonres and Dataloft estimates that, as a result, buyers saved £9.4 million in taxes. Is that in the order of the behavioural change that was expected, as modelled by the Treasury in its costings? I am sure the Minister will repeat that they have been independently certified by the Office for Budget Responsibility.

I should like to know whether the number of transactions and the cost in Exchequer revenue after the announcement of the measures in the autumn statement are along the lines that the Government were expecting. As the Minister knows, the Office for Budget Responsibility, which applies a rating system to the “certainty” of costings, has said that it considers the costings to be medium to high risk. How confident is he about the numbers, and about the extent of the behavioural change that is expected?

16:30

[Alok Sharma (Reading West) (Con)]

I am delighted that the hon. Lady and her party welcome measures that are intended to help people who aspire to own their homes. How does she think this policy contrasts with a policy of an annual property tax which may force some people out of their homes if they have to pay it?

[Shabana Mahmood]

I think that the Bill shows that the Government have accepted that properties with a very high value are under-taxed. The hon. Gentleman alluded to our proposals for a mansion tax, which would help to pay for our NHS commitments. Our measures will not force anyone out of their homes, because, as we have pointed out, a deferment option will be available to basic-rate payers. I am afraid that that was a bit of party political scaremongering on the hon. Gentleman’s part.

[Alok Sharma]

The hon. Lady mentioned the mansion tax. My constituents fear that the threshold might start at, say, £2 million, and then drop very quickly to levels applying to properties that ordinary hard-working taxpayers are aspiring to own. The Labour party has done that in the past. Will the hon. Lady tell us what would be the threshold for her so-called mansion tax?

[Shabana Mahmood]

I am delighted that the hon. Gentleman has given me an opportunity to tell his constituents that their fears are entirely misplaced. Anyone who publishes literature suggesting that the threshold will lower is doing nothing more than scaremongering. As we have made clear, the number of high-value properties will not increase, because the indexation of the threshold will be in line with the average rise in value for the highest-value properties. That means that the number of properties caught by the tax is not expected to increase. I am, as I say, delighted that the hon. Gentleman has given me an opportunity to reassure people who are currently living in properties that are below the £2 million threshold that they will not be caught by our proposed mansion tax.

The Minister explained that the changes in the Bill would not apply to commercial property, and I am grateful for his clarification of the Government’s thinking. However, I should like to press him a little further on a couple of matters. First, one of the reasons why the Government were so keen to proceed with stamp duty changes applying to residential property was their anxiety about labour mobility. Has any thought been given to the impact on business mobility of maintaining the slab structure for commercial property transactions?

Secondly, changes will come into effect later this year in Scotland, where stamp duty is now a devolved matter. The Scottish Government will introduce a land and buildings transaction tax, which will apply to both residential and commercial properties. Have the Minister and the Treasury considered whether there is a risk that England might be disadvantaged, particularly in relation to business mobility? Does the Minister agree that the differential in the treatment of commercial property in Scotland and England is not ideal, and is the Treasury taking account of that aspect of the changes?

Finally, I want to raise a point that has been highlighted by the Chartered Institute of Taxation. It noted the different treatment given to definitions of residential dwellings, and observed that clause 1(3) inserts new subsection 1B:

“If the relevant land consists entirely of residential property and the transaction is not one of a number of linked transactions, the amount of tax chargeable is”,

and so on. The CIOT notes that various amendments to the tax system, including the introduction of the annual tax on enveloped dwellings, or ATED, have led to subtly different definitions of “residential” property for the purposes of SDLT. In schedule 29A to the Finance Act 2004 there is different treatment for investment-regulated pensions and potentially for capital gains tax, capital gains tax-related ATED, business investment relief for non-domiciliaries, capital allowances and VAT.

The Minister and I have had a number of debates when discussing other Bills about the different treatment given to particular phrases in employment law as against taxation law. There seems to be a nuanced difference in the way residential dwellings will be identified in these different elements of different taxes. I am concerned that inconsistencies are creeping in, which lead to complexity and create more work for lawyers. They will welcome that, of course, but ordinary taxpayers will not. It would be helpful if the Minister could give us his comments on those differences in definitions and say whether the Government are considering clarifying that.

[Ian Swales (Redcar) (LD)]

I will keep my remarks brief. I have spoken in each previous debate and do not have a great deal to add. My party very much supports these measures and, as I have said in previous debates, dealing with the slab system that we had and the consequent cliff edges and removing the incentives for strange behaviour and sub-optimal activity has to be the right thing to do.

I have only one point to add, which partly follows on from the remarks of the right hon. Member for Wokingham (Mr Redwood) and the assessments of the Office for Budget Responsibility. I would have thought that the taxation of a fixed asset transfer like this, with the certainty that that implies, would mean this is a very low risk method of changing a tax system, but if the OBR regards it as medium to high risk, and if the right hon. Gentleman is suggesting there may be more complex effects that I have not understood, I would like the Minister to clarify whether I am missing something. I would have thought this was a very straightforward way of raising taxes in a highly certain manner—and certainty is, of course, one of the hallmarks of a good tax system.

I will not detain the Committee any longer. Our party supports these measures. They affect 98% of the population favourably, and, broadly speaking, the other 2% are millionaires, and therefore those with the broadest shoulders. I am pleased that through this Bill this Government have found yet another way to help deliver a small amount of redistribution, with the pain felt by those with the broadest shoulders. The support for it is universal in my constituency, as I think everybody will be a winner. Overall, these measures will lead to a more liquid housing market and therefore a stronger economy, and they also make the system fairer.

[Mr Redwood]

First, may I remind the Committee that, as listed in the register of Members’ interests, I provide advice to an industrial company and an investment company?

The Minister has produced what is on the whole an excellent scheme. I support most of it and was one of those, along with my hon. Friend the Member for St Albans (Mrs Main), who was lobbying hard to get this major reform through. I congratulate the Minister and the Chancellor on dealing with the problems that the slab system created. The peaks and the dead areas were damaging to the property market and made it difficult for some people to buy or sell properties in certain price ranges. The system probably distorted pricing as well, to the benefit of some people and the detriment of others. It is therefore good that we have smoothed it out and introduced a more sensible progression up to £937,000, where most of the transactions lie. The new arrangements will represent a fairer, lower-cost system for practically all transactions, which is wholly admirable.

I want to tease out a little more information about the rather pessimistic forecasts of how much revenue will be lost up to the end of this decade. It is clear from the figures that cutting the higher rate of income tax has produced considerable extra revenue, as it was bound to do, given that the previous rate deterred people or meant that they did not come here at all. It is also clear from the figures that the much higher rate of capital gains tax has been very damaging to revenues, which are still miles below where they were prior to the crash. This is a difficult one to call, and I am not saying to the Minister that the proposals would either damage or increase revenues. I am merely suggesting that the Treasury’s forecasts for that lengthy time period could prove to be inaccurate, and that it would be nice to unpack those forecasts in order to understand what the Treasury thinks is going on.

The problem with trying to forecast the revenues at this juncture is that, on the one hand, we have seen a slowing of the mortgage market in recent months through regulatory intervention, and we would therefore expect fewer transactions because the regulators and the banks are now being much tougher about mortgages. On the other hand, however, we have Government intervention trying to mitigate that effect through the very successful and helpful Help to Buy scheme, which I believe to be necessary. It is certainly helping people in my area to buy their own home. However, the net result of these arrangements seems to be a dampening of transactions, and we must bear that in mind when trying to judge the impact of those policies and to assess the impact of the stamp duty change. All things being equal, we should expect to see an increase in the volume of transactions under the £937,000 level because buying such homes will be a bit cheaper, and in certain price bands we will see activity occurring that would not have occurred at all because of the slab effect.

[Mrs Main]

Does my right hon. Friend share the optimism that I feel, having talked to small businesses in my community, that there could be a knock-on effect from people having a bit more money to carry out home improvements? Those businesses have suffered in recent years because people have not been investing in their own homes.

[Mr Redwood]

Yes, indeed there could.

This is difficult to predict, because all these things need to be modelled. The level of the reduction in some cases is quite large, and it will be difficult to make up for all that lost revenue through increased transactions. That is why it would be interesting to probe the Treasury a little more on its forecasts. I expect it thinks that there will be quite a big revenue gain where the rate has gone up, but that effect might not prove to be as strong as it hopes, because there will definitely be a disincentive effect at the top end following the introduction of the very top rate for the privileged few who can afford those types of properties. Those people are often in the fortunate position of owning more than one property, and of being able to decide whether they wish to buy property in this country or elsewhere. There will be some kind of disincentive effect, and we need to look at relative taxes and relative prices in relation to London and other centres.

It would therefore help if we knew a little more about the Treasury’s numbers at this stage of the debate, so that when we review this policy in a year or two, we can see what was right and what was wrong. For example, does the Treasury think that there will be extra revenue from the higher rate? That has clearly not been the case in relation to the two big taxes that I have mentioned. Does it envisage a loss of revenue despite the effect on transactions at the lower level? It would be good to have more detail, so that we can have some benchmarks as we try to assess the financial impact of the policy.

[Mr Gauke]

I thank all right hon. and hon. Members for their contributions to this short debate on clause 1, and I shall attempt to address as many as possible of their questions. The hon. Member for Birmingham, Ladywood (Shabana Mahmood) raised a number of points about the impact of the changes. First, let me deal with her question about HMRC’s handling of inquiries. I do not have all the detailed numbers available, but, as I mentioned earlier, about 1.25 million hits have been made on the HMRC calculator, which is a substantial number. There have been relatively few queries made over the telephone or in writing. In practice the great majority of those can be dealt with by HMRC’s stamp tax helpline or by reference to ongoing guidance. More complex queries are escalated to HMRC’s technical specialists. As I say, I cannot give the numbers but I do know that the view within HMRC is that this process has gone smoothly, including in respect of the helpline provided on the day of the autumn statement, when, as has been pointed out, a number of transactions were accelerated in order to benefit from the transitional regime. All that has gone smoothly and I am not aware of any particular difficulties in that area.

16:45

Let me now deal with the definitional issues the hon. Lady raised. Ideally we would have a single definition for all tax purposes, and this is not an issue specific to what we have before us today—it is a wider point. Different areas of the tax system have different purposes. The same definition will not necessarily serve all purposes adequately, and so some differences are probably inevitable. However, we do keep all aspects of the tax system under review and we will consider simplifying definitions where that is desirable and practical. I am not aware of any particular difficulties in this context, but it is always worth having another look at this point over time to see whether problems emerge.

On the point about non-residential property, it is worth pointing out that if we were to have exactly the same regime applied there, approximately 40% of tax-paying non-residential transactions would pay more. That would not be terribly attractive for businesses. If we examine the costings of such a move on a purely static basis—I shall return to costings points in a moment—by which I mean there is no behavioural change, we find that a switch to an identical system for commercial property would be a substantial revenue raiser. It would raise about £3.6 billion, but that represents a substantial increase in the burden of SDLT on business and we do not believe it would be advisable. That is one reason why we have not gone down that route. So, inevitably, different regimes will apply for residential and non-residential property.

The hon. Lady asked whether the continuation of a slab structure for non-residential property could result in damage to business mobility. I make the point, of course, that the Government keep all taxes under review. Businesses incur costs from all manner of sources, of which SDLT is just one. The rates of SDLT in England and the land and buildings transaction tax in Scotland will differ owing to the natural consequences of devolution. It is unlikely that many businesses will move from England to Scotland, or vice versa, just because of changes in the SDLT or LBTT regimes.

My right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Redcar (Ian Swales) raised the issue of costings, with my right hon. Friend rightly making the point that he was a strong advocate of reform in this area. We have to understand that a number of factors are involved in a change in SDLT in these circumstances. There may be changes in the number of transactions that occur depending on what is done with the rates. There may be changes in the value of the properties. To what extent will those changes be capitalised? There are also the changes in the amount paid per transaction. To make an assessment of how much will be raised or forgone as a consequence of these changes, it is necessary for the Treasury and HMRC and then the Office for Budget Responsibility to assess the behavioural changes.

To answer the point raised by my hon. Friend the Member for Redcar, the challenge for the OBR and the reason why it has rated this as a medium to high risk is that there will always be a degree of uncertainty over the behavioural response. Will people be much more inclined to move property as a consequence of these changes? A number of assumptions are made. We believe that the costings are robust, sensible and essential.

The overall impact will be additional revenue being raised at the top end—those transactions above £937,000 where a higher rate would apply. Even accepting that there may be an impact on the number of transactions and on property prices, the changes in the amount of stamp duty paid per transaction will mean that the overall effect will be to bring in revenue. But the reverse process applies for the vast majority of transactions where there is a reduction in rates. We may see more transactions and prices increasing slightly, which means that a slightly higher amount of SDLT will be paid. But the overall effect will be less revenue from those areas.

[Ian Swales]

I thank the Minister for giving way and for his very helpful clarification. It is worth putting it on the record that the opportunities for avoidance of this particular tax, such as time shifting, charging different expenses and reclassifying income or capital gains, are simply not there against a fixed asset of this nature. Although I accept his clarification around those behavioural effects, it is worth saying that the public will not have any opportunities to avoid this tax in the way that they might avoid other taxes.

[Mr Gauke]

My hon. Friend brings me to an important point, which is that, over the course of this Parliament, the Government have been determined to address stamp duty land tax avoidance. It was a problem in the tax system. One certainly heard both anecdotally, and in the concerns of HMRC, of transactions being made to envelope properties and so on, which is why in 2012 we announced the introduction of the annual tax on envelope dwellings. It is why, over the course of this Parliament, we have taken a number of actions to deal with that avoidance. Had we not done so, it would have been difficult to make the reforms that we have in front of us today in an affordable way, as we would not effectively have been able to raise additional revenue from the top end of the housing market to counteract the reductions in revenue that will occur in the rest of the market.

Increasing rates would not have led to much, if anything, by way of additional revenue, because we would have found that it would have increased avoidance activity and we would not have got in the money that we would otherwise have done. As a consequence, the costs would have been unaffordable.

[Mr Redwood]

Are there not two obvious ways in which certain groups of people in the higher value properties decide not to pay this tax? The first is people who are in a two to three-bedroom flat or a small house in a very expensive part of the UK, normally London, may decide that they do not want to swap properties or downsize or upsize because it is too expensive. The other is that the very rich people at the top end coming in from abroad may decide that this is the straw that breaks the camel’s back on the transaction. Some people might welcome that but it could still be a behavioural impact of this particular provision.

[Mr Gauke]

My right hon. Friend is right to say that there will be behavioural responses. Some people might be dissuaded from entering into a transaction and decide to remain in the same place as a consequence of a higher level of duty. There may also be an impact on the attractiveness of the UK as a place in which to locate, but as he is well aware, that is but one factor among very many. I can think of greater threats to the attractiveness of the UK. I should not get drawn into what those threats may be, but they certainly exist. I am tempted to turn to the Opposition’s mansion tax, but I dare say you would haul me into line, Mrs Riordan, so let me not be drawn into what others might say. There is much I want to say, but it would probably not be in order.

I hope that my remarks are helpful to the Committee, and that the clause will stand part of the Bill.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.



Clause 2

Citation, commencement and transitional provision etc

Question proposed, That the clause stand part of the Bill.

[Mr Gauke]

The clause provides for the new method of calculating SDLT introduced by the Bill to apply to transactions where the effective date is on or after 4 December 2014. It introduces transitional provisions that apply in cases where contracts were exchanged before 4 December, but the contract was completed on or after that date. Under the rules, a purchaser may elect that the new rules do not apply. The election is made in a land transaction return, and must comply with any requirements specified by the Commissioners for Revenue and Customs.

I should clarify a remark made by my hon. Friend the Exchequer Secretary on Second Reading in response to a question asked by my right hon. Friend the Member for East Yorkshire (Sir Greg Knight). The requirements are set out in the HMRC guidance published on 3 December, and simply serve to explain how the taxpayer should make an election; they do not restrict the application of the legislation in any way.

An election for the transitional provisions to apply is made simply by self-assessing the relevant amount of tax due in the return, or by amending the return, which may be done within 13 months of the effective date of the transaction. The transitional provisions are designed to protect purchasers who, before the changes were announced, entered into a binding contract in the expectation that the old rules would apply. In practice, more than 98% of purchasers will benefit from, or at least be no worse off under, the new rules. The transitional rules will ensure that those who exchanged contracts before 4 December are not disadvantaged as a result of the changes introduced by the Bill.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Schedule agreed to.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

17:00

[Mr Gauke]

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

Let me start by thanking all right hon. and hon. Members who have contributed to the scrutiny of the Bill and who have done so in a constructive and positive manner. There has been considerable consensus and agreement on its contents and I welcome the support received from right hon. and hon. Members on both sides of the House.

The Bill makes important and comprehensive reforms to stamp duty land tax on residential property. The move from a slab to a slice system will cut SDLT for 98% of people who pay the tax—99% in Scotland, Wales and Northern Ireland, and 91% in London. It will reduce distortions in the housing market and will be of particular benefit to first-time buyers and those making the first few moves up the housing ladder. It will ensure that nobody paying up to £937,500 for their home will pay any more SDLT than they would have done under the rules as they applied on 3 December last year.

The aspiration to own the place one lives in has been the driver of Britain’s prosperity for centuries. SDLT is an important source of Government revenue, raising £6.5 billion in 2013-14 to pay for the essential services Government provide and support, but as a tax it must be imposed fairly and reasonably, and to put it quite simply, it has not been until now. These reforms will boost people’s aspirations and, critically, ensure that SDLT is paid in a fair and applicable manner that minimises avoidance. They are part of a much wider suite of Government measures designed to get Britain building the homes it needs. Almost 217,000 affordable homes have been delivered since April 2010 and between 2011 and 2015 some £19.5 billion of public and private investment is going into affordable homes, putting us on track for the highest rate of affordable house building for at least two decades. A family buying a Help to Buy property at the average cost of £185,000 will be £650 better off as a result of the reforms—a significant sum, especially at a time when cash is most likely to be tight.

I welcome the efficient and effective debate we have had so far so. The measures will make a tangible and positive difference to the lives of people up and down the country, which has been recognised and welcomed by Members on both sides of the House. I hope that Members will see fit to read this Bill a third time and to pass it.

17:02

[Shabana Mahmood]

I thank the Minister and echo his thanks to Members from both sides of the House for the efficient debates we have had on the Bill, which, as he noted, has had support from across the House. He is right that the slab structure of SDLT was very unpopular. It was subject to regular criticism, and Ministers and shadow Ministers have long been lobbied for change. The Institute for Fiscal Studies described it as

“one of the worst designed and most damaging of all taxes”,

so it is good to see some change, especially given the huge increase in house prices that led to the burden of stamp duty rising significantly.

I am grateful to the Minister for answering the questions I put to him, particularly those on dealing with the differential treatment of commercial and residential property. Sometimes the way in which the Minister says, “We keep all taxes under review,” hints that some change might be in the offing or that no change will happen at all on his watch. I could not work out which applied today, so at the very least I am sure he has made his officials very happy.

I welcome the measure. Notwithstanding the figures on house building that the Minister gave at the tail-end of his speech, I place on record our continuing concern that the Government have not done enough to deal with the biggest housing crisis for a generation. We need a much more active approach to housing supply, rather than dealing with demand-side issues, but those are debates for another day. The changes to stamp duty are welcome and we are happy to support them.

17:05

[Mr Redwood]

I, too, support the Bill because it is a move in the right direction. I strongly welcome the decision to get rid of the slab structure, against which I and others have lobbied strenuously for some time, and it is good that the Government have listened.

However, given that many of us believe in the virtues of home ownership, it is a pity that we still need a tax on home ownership at all. I welcome the fact that it is now lower, but I do not welcome the fact that we still seem to need a tax on home ownership. It is a great pity when we have to tax good aspirations in our community. Many of my constituents are now fortunate enough to own their own home, but there is a new generation who wish to do so, and this is still a high tax on them which they have to find a way of financing.

I hope that in future Budgets, as the long-term economic plan produces its magic and as we get rid of the deficit, we can return to this tax. The rates are still very high and it is a tax on one of the most essential things that families need. They need shelter; they need housing. The preferred type of housing for most people in our country is to own their own home, and this is still quite a large tax on home ownership. I know that the Minister and his colleagues are working away to ease the burden wherever they can in the straitened financial times we live in, and I know that they have a number of schemes to promote home ownership.

I urge my hon. Friend to do everything he can to promote home ownership because owning that first home makes such a difference to people’s lives. It gives them something to be proud of and it means that they can look forward to an old age not facing a rent bill, when they have at last repaid the mortgage and can truly call their home their own. It is very galling for them if a big chunk of the mortgage is paying Government taxes, so I welcome this small step to make home ownership a bit more affordable.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Consumer Rights Bill (Programme) (No. 3)

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

That the following provisions shall apply to the Consumer Rights Bill for the purpose of supplementing the Order of 28 January 2014 in the last Session of Parliament (Consumer Rights Bill (Programme)), as varied by the Order of 13 May 2014 in that Session (Consumer Rights Bill (Programme) (No. 2)):

Consideration of Lords Amendments

(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.

(2) The Lords Amendments shall be considered in the following order: Nos. 12, 1 to 11 and 13 to 78.

Subsequent stages

(3) Any further Message from the Lords may be considered forthwith without any Question being put.

(4) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Jo Swinson.)

Question agreed to.

Consumer Rights Bill

Monday 12th January 2015 Commons Chamber

Consideration of Lords amendments

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I must draw the House’s attention to the fact that financial privilege is involved in Lords amendments 24, 38, 39 and 77. If the House agrees to any of these amendments, I shall ensure that an appropriate entry is made in the Journal.

New Clause

Secondary Ticketing Platforms

17:08

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I beg to move amendment (a) to Lords amendment 12.

[Madam Deputy Speaker]

With this it will be convenient to consider the Government motion to disagree with the Lords amendment.

[Mrs Hodgson]

Amendment (a) was tabled by the hon. Member for Hove (Mike Weatherley) and me. It gives me great pleasure to speak in support of the new clause as inserted in the other place; it follows on from new clauses 18 to 21, which I, the hon. Member for Hove and others tried to add to the Bill on Report. Those new clauses were based on the report produced by the all-party group on ticket abuse after our inquiry into the secondary market and what needs to change within it.

It is worth pointing out that all these interventions—the all-party group’s report, the new clauses in the Commons and, latterly, the new clause passed in the other place—have been completely cross-party. I would like to place on the record my thanks not only to Opposition Members, but to other hon. Members—in particular the right hon. Member for Bath (Mr Foster) and the hon. Members for Hove, for Selby and Ainsty (Nigel Adams), for North West Leicestershire (Andrew Bridgen) and for North East Cambridgeshire (Stephen Barclay). They have been big supporters in the all-party group and in working on the Bill during its passage through the House.

In the other place, the push was very ably led by former sports Minister Lord Moynihan and by Baroness Heyhoe Flint, both Conservative Members, as well as by Lord Clement-Jones, the Minister’s party colleague, who has been one of Parliament’s foremost campaigners for our live music sector. It was also strongly supported by my noble Friend Lord Stevenson and by many others from all parties and none, including Baroness Grey-Thompson. It is safe to say that the Minister’s counterpart in the Lords had a pretty rough time in those debates. If the Government had any doubt in their mind that they were on the wrong side of the argument when they rejected these amendments in the Commons last summer, their defeat in the Lords should have confirmed that for them.

[Philip Davies (Shipley) (Con)]

Will the hon. Lady give way?

[Mrs Hodgson]

I certainly will not give way to the hon. Gentleman at this stage. I am sure that he plans to speak, and we have debated this so often that I cannot think that there is anything he would add to the argument today that I have not heard already. He will get his chance and I will listen to him then.

[Philip Davies]

This is supposed to be a debate.

[Mrs Hodgson]

The hon. Gentleman can debate when his time comes.

The concession that the Minister offered in this place—tweaking the guidance to a set of regulations to make it clear that secondary ticketing platforms should abide by them—has proved completely ineffective. Those regulations have been in place for more than six months, and the secondary websites have completely ignored them. It is time for real action, and that is what proposed new clause 33 would provide.

What we are asking for is not exactly radical. Any consumer in any market would expect to know who they were buying from, exactly what they were buying and whether a product came with a risk that they would not be able or allowed to enjoy it.

[Mr John Redwood (Wokingham) (Con)]

Will the hon. Lady give way?

[Mrs Hodgson]

Not at the moment.

What we are asking for would not put secondary ticketing platforms out of business; if anything, it would increase consumer confidence in them. What we are asking for would not drive legitimate resale underground, but it might drive some illegitimate resale underground. Why would the Government and this House want to take decisions that benefited illegitimate enterprise? If that part of touting is driven underground, then it will be nowhere near as successful as it is now, given that it is able to hide behind the legitimate veneer of platforms that are supposed to be about fans selling unusable tickets to fellow fans. What we are asking for would not leave consumers who bought a ticket they can no longer use out of pocket if the event organiser does not allow refunds; there are sometimes very good reasons for many of them not doing so.

[Mr Redwood]

rose—

[Mrs Hodgson]

Let me make this extra clear, because that might clear up some of the points that Members are trying to make—if not, I will let them intervene. We have tabled a small amendment to the clause that the Government could easily adopt today to allay their own fears. This is simply about transparency—that is all. Who could argue against creating a more transparent marketplace other than those who benefit from the murkiness and muddiness that we have at the moment?

[Mr Redwood]

I want to clarify the hon. Lady’s point about the event organiser’s right to cancel tickets. Under her amendment, in which conditions could the event organiser cancel a ticket if it had been resold?

[Mrs Hodgson]

If the ticket clearly states that it is not for resale—that it is non-transferable—then that is part of the terms and conditions that it was sold under. In the new model that we are hoping to create, with a new level of transparency, there would be less need for that.

The reason event holders put it on their tickets is to try to do something about the murkiness and market failure that we see at the moment with the resale of tickets on the secondary market. Under our proposal, that need would not be there because there would be full transparency and people would be able to see who was reselling the tickets. There would be fewer abuses of the system so there would be less need to put “Not for resale” on tickets, because genuine fans would be able to resell to other genuine fans tickets for events they could no longer attend.

[Mike Weatherley (Hove) (Con)]

Does the hon. Lady agree with me and the Secretary of State for Culture, Media and Sport, who has said that, when a person wants to sell something, terms and conditions should be respected?

[Mrs Hodgson]

I agree that people should abide by terms and conditions. The fact that the lack of transparency allows platforms to resell against terms and conditions is certainly not in the interest of consumers.

If the Minister does not want to take my word or that of Members in the other place on why we need transparency, perhaps she will listen to those who are actually involved in our crucial cultural and live sector. As she may know, more than 85 prominent organisations and individuals signed a letter to The Independent on Sunday yesterday calling on her and the Government to adopt the proposal. Those signatories included UK Music, the voice of the live and recorded industry; the Sport and Recreation Alliance, the voice of sporting governing bodies in the UK; the Rugby Football Union; the Lawn Tennis Association; and the England and Wales Cricket Board. They have all gone to great lengths over the years to try to ensure that tickets reach the hands of grass-roots fans.

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

May I congratulate the hon. Lady on the diligent way in which she has approached the issue and her determination to get justice for music fans, which is what we are talking about? UK Music’s music tourism forum found that live music generates £2.2 billion. Surely we have a right to expect that live music fans are protected and not ripped off.

[Mrs Hodgson]

I agree with the hon. Gentleman and thank him for that valuable contribution. He is not only a creator of music—he remains one to this day—but a huge supporter of the music industry.

Other signatories to the letter included probably the world’s most pre-eminent promoter, Harvey Goldsmith CBE; the operators of west end and regional theatres; a host of individual music managers who look after some the country’s leading performers, including Iron Maiden, Muse, Arctic Monkeys and even One Direction; and most other industry umbrella bodies, which represent countless businesses contributing to the vitality of our creative sector, such as the Association of Independent Festivals and the Event Services Association.

All those bodies, and more, joined together to call on the Government to make one simple change. Would the Government rather listen to that collective call from the live event sector: the people whose hard work, talents and investment create the demand that the touts exploit? Alternatively, would they rather listen to the four companies that have been lobbying so intensely—I have with me reams of letters they have been sending out lately—against opening themselves and their relationships with big-time touts up to scrutiny?

[Nick Smith (Blaenau Gwent) (Lab)]

May I also praise my hon. Friend’s leadership? She has done a cracking job raising this important point. Does she agree that we need to get at the touts? Those internet spivs are ripping off fans across the country, rigging the market and preventing real fans from going to gigs by exploiting them through the hugely overpriced tickets that they have harvested.

[Mrs Hodgson]

My hon. Friend makes an excellent point. If the Minister does not want to listen to him, me, Members from both Houses or the creative industry, she should at the very least listen to the police.

The “Ticket Crime: Problem Profile” report by Operation Podium has, of course, been quoted in this place before—several times by me, in fact—but it bears repeating. This was, after all, the unit that was set up to tackle organised crime affecting the Olympic games, and it spent about seven years looking at the workings of the ticket market. In particular, it looked at the major ticket touts—the very people my hon. Friend the Member for Blaenau Gwent (Nick Smith) spoke about—because of the links that many of them have to serious and organised crime and money laundering, and because it was likely that the same people would try to tout Olympic tickets.

After spending so much time looking at the ecosystem that exists behind the veneer of legitimacy provided by the secondary platforms, the Metropolitan police’s Operation Podium unit produced a final report on ticket crime in February 2013. It found that:

“Due to the surreptitious way that large numbers of ‘primary’ tickets are diverted straight onto secondary ticket websites, members of the public have little choice but to try to source tickets on the secondary ticket market.”

It concluded that:

“The lack of legislation outlawing the unauthorised resale of tickets and the absence of regulation of the primary and secondary ticket market encourages unscrupulous practices, a lack of transparency and fraud.”

It made the following recommendations:

“Consideration must be given to introducing legislation to govern the unauthorised sale of event tickets. The lack of legislation in this area enables fraud and places the public at risk of economic crime.

The primary and secondary ticket market require regulation to ensure transparency, allowing consumers to understand who they are buying from and affording them better protection from ticket crime.”

Will the Government listen to the police, who have nothing to gain either way, or to those who have gained and continue to gain from the lack of the regulation that the police say is needed?

One public agency that might have something to gain from the change is Her Majesty’s Revenue and Customs. One effect of the new clause proposed in Lords amendment 12 is that it would be possible to see which individuals were reselling tickets as a commercial enterprise, and therefore who should be paying tax on the sales made through the websites.

At the moment, when somebody buys a ticket on such platforms, they are led to believe that they are buying from another fan, and the only VAT that they see on the final statement is the VAT on the service charge levied by the platform. If they are, in fact, buying from a third party business—or even from the event organiser, or, as in some cases, the performers themselves—VAT should be paid on the ticket price, as well as, obviously, on its profits as a company. That point was raised last weekend with the Secretary of State for Culture, Media and Sport in an e-mail from a live music agent that I was copied into. They made the point that PRS for Music, which collects royalties to distribute to artists and music publishers, is also being deprived of its lawful entitlement.

I wrote to HMRC following the “Dispatches” documentary, “The Great Ticket Scandal”, in 2012; I have also referred to that in the House countless times. That programme clearly showed how tickets were being bought up and resold in huge quantities—indeed, channelled directly but surreptitiously to the secondary market by promoters and managers. The response that I received from HMRC was that no investigation could be made unless there were specific questions about specific individuals or businesses. Of course, we did not have those then and we do not have them now, precisely because we cannot see which individuals or businesses are selling the tickets and in what quantities. If that transparency is brought into the market through the proposed new clause, perhaps the Treasury’s coffers will see a much bigger slice of a market that is estimated to be worth between £1 billion and £1.5 billion a year—that is the secondary market alone and does not include the primary market.

The same principle could be applied to the problem of botnets, which GET ME IN! has been saying is the biggest problem and should be the focus of any legislation. There is certainly a case for keeping the law on the misuse of computers under review. The hon. Member for Hove and I have met the Under-Secretary of State for the Home Department, the hon. Member for Staffordshire Moorlands (Karen Bradley), who has responsibility for organised crime, to discuss this matter.

It is welcome that primary ticketing companies, such as GET ME IN!’s parent company Ticketmaster, invest in their own software to try to stop people scooping up large quantities of tickets automatically. However, let us be clear that touts use botnets only because they know that they can shift all the tickets they manage to buy from the primary market through the secondary market with the benefit of complete anonymity, with no questions asked by the platforms about how they got them. The secondary platforms are best placed to detect ticket crime at the moment, but they do nothing, because that is to their benefit. If we make the market transparent, it will be clear for everyone to see who has an abnormally large number of tickets, and I bet that the use of botnets would drop off sharply as a result.

This entire debate boils down to a simple divide: it is about whose side we are on as legislators. Are we here to pass laws to protect and enhance the rights of ordinary consumers, or are we here to block laws that might make individuals and companies more open and accountable to those consumers? It is about whose interests we are here to serve. Are we here to serve those who elect us, or are we here to be spin doctors for those exploiting them and apologists for those who know full well that they are lucky to be getting away with what they are doing? It is about whose opinions we value most highly. Do we listen to our constituents, the police and those in the live events sector, who all tell us that there is a problem and a gap in the law that needs to be closed, or do we listen to the few who benefit from that gap in the law? I know whose side I would rather be on, whose interests I am here to serve and whose opinions I value most.

Nobody operating honestly in the secondary market has anything to fear from transparency, and no consumer will be left out of pocket. If anything, the secondary platforms should be embracing the opportunity to build confidence in their sector and limit their exposure to criminal activity. I hope that Members of all parties will think on those points when they go through the Division Lobby later tonight; I am minded that the amendment will have to be pressed to a Division. Let us finally do the right thing and put fans first.

[Philip Davies]

It is always a pleasure to follow the hon. Member for Washington and Sunderland West (Mrs Hodgson). Her arguments have not got any better in all the years we have been going around the houses on this matter, but I admire her for persistence in flogging this particular dead horse.

There have been a number of reports on secondary ticketing, and the hon. Lady said that the Government have listened to no one apart from certain companies. Perhaps they have listened to the Select Committee on Culture, Media and Sport, on which I serve, which looked into the issue and came up with a report that was unanimous, including among Opposition Members, showing that the market was legitimate and worked in the best interests of consumers. When a former Labour Minister, the right hon. Member for Barking (Margaret Hodge), came to give evidence to the Committee, she made it abundantly clear that she believed that as well, so I will be interested to see how she votes on the amendment. When the Office of Fair Trading looked into the matter, it reached the same conclusion. I am afraid that when the hon. Member for Washington and Sunderland West says that only a few big companies say that the market works in the best interests of consumers, she knows full well that she is talking absolute cobblers.

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

Can my hon. Friend throw some light on when that Culture, Media and Sport Committee investigation took place? I have a sneaky feeling that it might have been six, seven or eight years ago, and the market has moved on a bit since then.

[Philip Davies]

It was during the last Parliament that the Committee and the Office of Fair Trading produced their reports and the right hon. Member for Barking made her recommendations. Of course time has moved on, but principles do not, and I will come on to the basic principle of the matter. I do not blame the hon. Member for Washington and Sunderland West for making the point that she does—after all, she is a socialist, so of course she wants to stop the free market and does not believe in it. If I was a socialist, I would not believe in the free market either. I would want to interfere in every single nook and cranny of how the free market operates. That is what the hon. Member for Walthamstow (Stella Creasy), who is on the Opposition Front Bench, wants to do, because she is a socialist as well and that is what socialists do. What astonishes me is that anybody who can call themselves a Conservative in any shape or form would want to interfere in the free market in this ridiculous way. [Interruption.] If my hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) wants to intervene, I am happy for him to do so.

[Stephen Barclay (North East Cambridgeshire) (Con)]

Let us take the Rugby Football Union, for example. Tickets are sold at a discount to promote the game of rugby, so it is not the operation of the free market as my hon. Friend and I would traditionally refer to it. Tickets are sold to promote the game and are resold in breach of the terms and conditions. It is Government policy to ask the RFU to take enforcement action, but it cannot do that without transparency about which tickets are being resold.

17:30

[Philip Davies]

I fear that by using the RFU as an example my hon. Friend is rather leading with his chin. The RFU makes very few, if any, tickets available to genuine fans for rugby internationals. The tickets go all round the houses to rugby clubs and so on, but a genuine fan who wants to go and watch rugby finds it difficult to get their hands on one. The secondary market is one of the prime reasons why—[Interruption.] I will not give way again. My hon. Friend has made his point—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Just because we are talking about rugby does not mean we have to behave as if we are on a rugby field.

[Philip Davies]

Thank you, Madam Deputy Speaker. For a genuine fan who does not belong to a rugby union club but wants to watch a rugby international, the secondary ticketing market is one of the best ways of indulging their interest.

The hon. Member for Washington and Sunderland West and my hon. Friend the Member for Hove (Mike Weatherley) found that every report on the secondary ticketing market went against them, so they decided in the all-party group on ticket abuse to produce their own report, because they knew that it could come to a conclusion with which they agreed. It was a sort of desperate measure—no one else would agree with them, so they produced their own report. As I understand it, in their report they argued against capping prices, yet the amendment is in effect a price cap. The amendment states that tickets can be resold, as long as they are not resold above their face value, and that is a price cap—[Interruption.] Of course it is. If someone can resell a ticket but that resale is limited to its price value, there is a price cap on that ticket. We have the extraordinary situation where the hon. Lady and my hon. Friend have come up with their own report, and now they have tabled an amendment that argues against that report. They argued against price caps, but the amendment would introduce one.

There are many arguments against a price cap. First, we do not have price caps on other things. If I buy a ticket to an event, as far as I am concerned that is my ticket and if I want to sell it on to somebody else—for whatever price I can command—that should be my choice. Similarly, if I buy a house and want to sell it on at a later date to somebody at a much higher price, and someone is prepared to pay that price, why should the Government interfere in that legitimate transaction between a willing seller and a willing buyer?

People say that the market in tickets does not work properly because there is a dearth of supply and a lot of demand, and it is the same with houses. There are currently few houses for sale and a lot of people want to buy one, and the price of houses has rocketed as a consequence. Exactly the same arguments apply to housing as to tickets, yet who argues that we should have a price cap on houses and that someone cannot sell their house for more than they paid for it? It would be ridiculous for anybody to argue that, but it is exactly the same principle.

[Pete Wishart]

Will the hon. Gentleman give way?

[Philip Davies]

In a moment, if the hon. Gentleman calms himself down. The only difference is that people think it is populist to say that we should have a cap on tickets, and they know that it would be grotesquely unpopular to say we should have a cap on house prices.

[Pete Wishart]

To take the hon. Gentleman’s analogy to its logical conclusion, it would be like someone coming to a street, buying all the houses in that street, and selling them back at an inflated price. Would he be happy with that?

[Philip Davies]

As far as I understand, that is exactly what the son of John Prescott, the former Deputy Prime Minister, did in Hull. As I recall, he bought a whole street of houses in Hull for a ridiculously low price and sold them on at a higher price afterwards. That is what happens. I know the hon. Gentleman is a socialist too, so I would not expect him to believe in the free market. However, Members on the Conservative Benches are supposed at least to consider themselves believers in the free market. If they agree with the Lords, and in particular with the hon. Lady’s amendment, I do not really see how they can justify that.

[Ian Swales (Redcar) (LD)]

As usual, the hon. Gentleman is making an entertaining speech. One thing that has moved on since the date of some of the reports he mentions is IT. A constituent of mine told me last night that he tried to get a ticket for a Mark Knopfler concert in Newcastle. Even though he logged on to the website from the first second, he simply could not get a ticket. He ended up seeing one on the secondary market that he could not afford. He then found some tickets on the primary market that were being sold physically at half the price. Does he agree that IT is part of the problem?

[Philip Davies]

I am not saying that IT is part of the problem or part of the solution. IT is part of the real world. That is what we deal with and IT can benefit people. For example, people can put bids on things on eBay and then go to bed. This is what happens with technology: people make the best use of it.

Event promoters have many of the solutions in their own hands. Selling all their tickets in five minutes flat creates a secondary market. If promoters are so bothered about the secondary market and ticket touting for a popular event, it may be more sensible for them to start selling tickets in dribs and drabs. There would then still be tickets available to genuine people right up to the day of the event. They do not do that, of course. For cash-flow reasons, they want to get all the money in on day one. It is no good them saying that they want to get all the money in on day one—there is no doubt that the people buying up the tickets to sell on are helping them to get all the money in on day one and therefore helping their cash flow—and then complaining about the very same people they have sold the tickets to in the first place. They are creating the problem they are complaining about and I am afraid I have absolutely no sympathy with them. If they are serious about tackling this problem, the solutions are in their own hands: they should sell tickets in dribs and drabs so that people can go on the day and buy a ticket at face value. That would, at a stroke, make a massive difference to the secondary market.

There are lots of things that people sell that are at a premium. I have mentioned them in the past and I do not want to go through a long list again, but we have seen it with Christmas toys. People have a bun fight to try to get a particular toy at Christmas, buying up as many as they can. Five minutes later, the toys are on eBay at an inflated price. Are the Government going to start stopping people buying up any precious and valuable commodity that has a limited supply? Of course not; that would be nonsense. So why are tickets any different?

[Mr David Nuttall (Bury North) (Con)]

Does my hon. Friend agree that there is another problem, which is that there is nothing to stop a seller wanting to sell a ticket in combination with another item? It would be impossible to know which item was being inflated.

[Philip Davies]

My hon. Friend makes a very good point, which drives a coach and horses through the hon. Lady’s amendment. People could sell a ticket to an event along with a scarf or a hat and say that they are charging x amount for the hat and the face value for the price of the ticket. That would get around the hon. Lady’s amendment quite easily and make the whole thing complete nonsense.

[Mr Redwood]

There is a more serious problem than the one my hon. Friend has just described. I do not think people will be selling houses or hats with tickets, but there are hospitality packages. Companies that offer hospitality with an event normally have to pre-buy tickets so that they can get the person into the ground before they can provide the hospitality. There is a cross-pricing issue.

[Philip Davies]

My right hon. Friend is absolutely right. The point is that people could easily get round the law by selling other things with the ticket to ensure they do not breach the terms of the amendment. They could charge different amounts for the various things being sold as a package. It would be complete nonsense.

As I mentioned, the OFT decided that the current regime worked in the consumer’s best interest. [Interruption.] My hon. Friend the Member for North East Cambridgeshire (Stephen Barclay) keeps chuntering from the sidelines. If he wants to make a speech, I am sure that you, Mr Deputy Speaker, will look on him favourably.

[Stephen Barclay]

My hon. Friend will not take my intervention.

[Philip Davies]

I have already taken an intervention from my hon. Friend. It was not a very good one, if I remember rightly.

Not only did the OFT make it clear that the current regime worked in the best interests of the customer, but we have practical arguments from the US showing that the kind of price cap the hon. Lady wants to introduce does not work. In fact, when America introduced the price cap, it led to higher prices on both the primary and secondary markets. A study by the university of California found that by focusing on penalties for those who engage in prohibited transactions, anti-ticket scalping —as they call it—regulations seemed to lead to higher prices in the resale market. If a seller is taking more of a risk, they will want to command a higher price—that is what happens with the free market, supply and demand and the rest of it. I am surprised my hon. Friend the Member for North East Cambridgeshire is not aware of that. The university of Texas found that such regulation increased prices not only in the secondary market, but in the primary market. The hon. Member for Washington and Sunderland West says she wants to stand up for consumers, but by rejecting the amendment, we will do just that.

If I buy a ticket to the opening day of the test match at Lords and walk into the pub and say, “I’ve got a ticket for the opening day of the test match at Lords”, and a chap comes up to me and says, “You know what? It’s my lifetime’s ambition to go to the opening day of the test match at Lords. It’s the one thing I’ve wanted to do all my life. I will give you £500 for that ticket”, and if I decide to sell him the ticket at that price, who loses out? I do not lose out—because I am happy to sell it at that price; the other person does not lose out—they have left absolutely delighted at having paid a price they are happy to pay to fulfil their lifetime’s dream; and Lords has not lost out—because it has already sold the ticket and the England and Wales Cricket Board has got the income it was hoping for when it put the ticket up for sale. Nobody loses out. Why on earth should the Government intervene to make that transaction illegal? It would be absolute nonsense if the Government were to make that transaction illegal.

[Gordon Birtwistle (Burnley) (LD)]

I agree with the hon. Gentleman. When he buys that ticket, he becomes the owner of that ticket, and it becomes his to do with as he wishes. He can sell it for £500 or give it away to the gentleman whose lifetime’s ambition it is to go to Lords. It is his ticket to do with as he pleases. It is called living in a free society.

[Philip Davies]

The hon. Gentleman has hit the nail on the head, although he is obviously much more generous than me, because he said he would give the ticket away—but of course he is from Lancashire and I am from Yorkshire, where we are a bit more careful about these matters. In Yorkshire, the idea of giving away a valuable commodity brings us out in a rash—we would at least want to get a good deal—but I take his point. Whether he wants to give it away or sell it, it should be no business of the Government to tell him he cannot.

The law would quickly become an ass. Does anybody really think that in the utopia the hon. Lady seems to think would result, if somebody could not sell their ticket for £500, they would sell it at cost price or less on eBay? Of course they would not. If anybody thinks that would happen, they need to get out more, to be perfectly honest. That person would be out on the streets, outside the event, touting the ticket to whomever they could find—all the spivs and Arthur Daley types, with their hats and their Mackintoshes and the rest of it. The idea that they would be selling at cost price or less is for the birds. It is an absolute load of nonsense, to be perfectly honest. Anybody who thinks that all sales would go at cost price or less is living in cloud cuckoo land.

17:45

[Nigel Adams]

I do not know whether my hon. Friend has looked online recently to try to buy a ticket for the first day of the Ashes, but I think he would find that £500 would not buy one. I believe that £545 is the going price. I have some sympathy with what my hon. Friend says about the amendment placing a cap on what tickets could be sold for—at face value, for example. Surely, however, transparency is crucial so people know that they will not get stitched up by buying a ticket that is behind a pillar, reserved for children or whatever. I know he is a great Conservative, so he should believe in transparency.

[Philip Davies]

The point is this. Places such as viagogo guarantee the tickets. If someone enters into a transaction on a viagogo site and anything untoward or amiss takes place, viagogo will stand behind the transaction and ensure that no consumer loses out. When it comes to selling something that is fraudulent or counterfeit or selling a ticket that does not exist, there are already laws in place to stop that. We cannot create another law to make something that is already illegal more illegal. If the ticket exists and is genuine, I could not care less who is selling it, as long as it guarantees me my place in the grounds to watch the game I want to watch. I do not care who the original owner was, particularly when the secondary market exists and respectable companies such as viagogo are there, guaranteeing to the buyer that nothing untoward will happen.

[Jenny Chapman (Darlington) (Lab)]

Will the hon. Gentleman give way?

[Philip Davies]

I am going to press on because others want to speak.

If we stop this legitimate market, all the protections that the secondary market has introduced into it will disappear. What will happen is that it will not be possible to go to a legitimate company such as viagogo to buy a ticket and have it guaranteed that nothing can go wrong; rather, everyone will be competing outside with the Arthur Daley types with the mackintosh jackets and trilby hats trying to buy a ticket. Then people are taking their lives into their hands, as some of those tickets might not be what they seem.

If we want to protect the interest of consumers, it is essential to allow the legitimate secondary ticketing market to flourish. An event that I want to go to might come along, but I am not sure whether I can go to it because of my work commitments. All the tickets are sold out. I then find out that I am free to go to the event. Here the secondary market is the only one that allows me the opportunity to go to it. It will ask for a certain price, and if I do not want to pay it, I will not have to pay it. Nobody is fleecing anyone, because I will not pay the price if I do not want to. At least I would have had the opportunity to choose in a way that would not arise if no secondary market was available. That is why the secondary market works in the best interests of consumers. It also means that if someone has a ticket but cannot go, they can get rid of it. Some events do not even accept refunds when a ticket is bought, so it is possible to be left with a ticket and not be able to get shot of it.

The secondary market is good and a price cap does not work. Anybody who believes in the free market could not possibly agree with the amendment to the Lords amendment. I hope that common sense will prevail. I have no doubt that the hon. Member for Washington and Sunderland West will keep trying to peddle her socialist ideal outcome, with the Government interfering in every single market going just because she thinks certain things are too expensive. When she starts arguing that house prices should be capped because there are too few of them and too many people want to buy them, I will at that point have a little more respect for her. In the meantime, this is just pure political opportunism, which she thinks is populist but it is not in the best interests of anybody.

[Nic Dakin (Scunthorpe) (Lab)]

It is always entertaining to follow the hon. Member for Shipley (Philip Davies), who puts his case firmly and securely before the House, but I am rather more taken with the arguments of my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson), so I shall speak in favour of amendment (a), tabled by her and the hon. Member for Hove (Mike Weatherley).

I approach this issue merely from the perspective of the constituents who got in touch with me after Paul Weller tickets went on sale at Scunthorpe’s magnificent Baths Hall. There have has been some fantastic programming at the Baths Hall in recent years, featuring a rich variety of events. Great comedians such as Jimmy Carr, Paul Merton and Alan Davies have appeared there, as have the Moscow City Ballet and the Royal Philharmonic orchestra. We in Scunthorpe are very proud of the Baths Hall, and when someone like Paul Weller is due to appear locally, many of my constituents want to go along and enjoy the act.

The tickets for the Paul Weller event sold out pretty quickly, at £38 each. Within hours of their ceasing to be available at that price on the Baths Hall site, a large number popped up for sale at significantly higher prices on secondary ticket sites.

[Mr Nuttall]

Does the hon. Gentleman not agree that when Paul Weller or his management team first put those tickets on the market, they must have known that the tickets were underpriced and that a great many people would be prepared to pay a much higher price?

[Nic Dakin]

Other Members know far more about this than I do, but I suspect that promoters want to promote events to their real fans at fair prices, and that that is their motivation.

[Mr Nuttall]

rose—

[Philip Davies]

rose—

[Nic Dakin]

I will take further interventions later. Let me first describe my constituents’ experiences in relation to the Paul Weller concert, which is to take place on 17 March 2015. Some arrived early to join the queue at the Baths Hall ticket office, while others applied by telephone and via the website, but many failed to obtain tickets. Shortly afterwards, tickets cropped up on secondary sites. Today I looked into where I could buy a ticket for the event, and how much it would cost me. I discovered that it would cost me £102 to obtain one through a secondary site. According to my maths, that is a mark-up of £64 for someone in the system. It would be better to allow more of my constituents to have access to the tickets locally, or to put money into the local community via the venue, or to give more to the performers.

[Mrs Hodgson]

What that example demonstrates—Conservative Members refuse to see this for some reason—is complete market failure. A Select Committee and the Office of Fair Trading looked into the matter, but what Conservative Members fail to mention is that they did so 10 years ago, and because they did not act then, the market is now skewed to the extent that my hon. Friend has described. Is that not exactly why, 10 years later, we need to do something, and would not the amendment solve the problem that he has highlighted?

[Nic Dakin]

With the benefit of her knowledge of this matter, my hon. Friend has made her point extremely well. As she says, what we are seeing is market failure, and it is interesting to note that the main evidence base that was drawn on by the hon. Member for Shipley is many years old.

[Mr Nuttall]

rose—

[Philip Davies]

rose—

[Nic Dakin]

I must move on, as other Members want to speak.

Points made by Members on both sides of the House have reinforced what was said by my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson). We should be focusing on market failure, and the need to make the market operate well in the interests of performers, venues and consumers. I did not expect to speak in this debate, but I am doing so because constituents have knocked on my door and said that they consider the present system to be unfair and not in their interests, and I tend to agree with them. However, it is not only my constituents and me—and other Members—who take that view. In a letter that it sent to Members, UK Music says:

“UK Music's position is that we would prefer there was no secondary ticketing market as it is often understood as it does a disservice to our customers. Profiteering undermines the enterprise, endeavours and investment of those whose livelihoods depend on the future sustainability of the music industry.”

We should focus on customers and on those whose livelihoods depend on the music industry, and the same applies to sporting and other events.

I agreed with my hon. Friend the Member for Washington and Sunderland West when she said, in simple terms, that at the heart of the debate, the amendment and consideration of the Lords amendment was the question of whose side we were on. Are we on the side of consumers, or are we on the side of ticket touts? That is the choice before the House, and I hope that we bear it in mind later when we vote.

[Mike Weatherley]

While the speech by my hon. Friend the Member for Shipley (Philip Davies) was thoroughly entertaining, the “facts” in it were totally wrong. I hope that both he and my hon. Friend the Member for Bury North (Mr Nuttall) will listen to my speech, because it will address many of the points that they made.

I thank the hon. Member for Washington and Sunderland West (Mrs Hodgson) for her contributions, which were very good. I shall try not to duplicate the points that she made, and to make additional points. I also thank the Minister for telephoning me earlier today to talk about the issue. I appreciate that. It was the right approach to the debate, unlike some of the references to trilby hats and so forth that we have heard from other speakers. Let us debate this in a serious manner, because it is a serious matter.

Live events, whether they consist of sport, music or theatre, are essential not only to the British economy, but to British society. Each year our creative industries generate more than £36 billion, and employ 1.5 million people. If they are to continue to be so successful, we need to ensure that performers and fans are given a fair deal through a transparent ticket market. Otherwise, inflated prices will mean that fans continue to pay more for tickets, and performers will lose revenue.

[Philip Davies]

How?

[Mike Weatherley]

I will explain that to my hon. Friend in a moment, and I shall be happy to take interventions later.

Society has moved on from the time when there were a few cheeky-chappie touts outside venues selling tickets at marked-up prices. There are some who would reasonably argue that the small scale “street” touts provided a reasonable free-market service. The new issue with which the ticketing industry is dealing is the use of computer programmes, known as botnets, which buy up tens of thousands of tickets only seconds after they have gone on sale, so genuine fans are unable to purchase them at source. That is happening on an industrial scale, and the tickets are then sold on the secondary market. Some botnets in themselves are illegal because they have been used through hacked computers. They are immensely useful to touts, who are able to conceal their identity while purchasing large volumes of tickets with minimal questions asked. Botnets allow touts to seize control of the market, thereby increasing ticket prices.

Part of the reluctance of some to consider allowing the proposed measures to be implemented is based on the mistaken premise that those who are buying and reselling are in some way “classic entrepreneurs”. If that were the case, I would be on their side. I am a Conservative because of Sir Keith Joseph and his principles of the free market. In this instance, however, the free-market scenario has been broken owing to severe supply shortage and unequal purchasing ability. [Interruption.] If my hon. Friend the Member for Shipley wishes to intervene to tell me the five principles of the free market and explain why they apply to secondary ticketing, I shall be glad to debate the point. However, the free market has clearly collapsed because the principles of the free market do not apply in this instance.

There is another important dimension, which was raised by my hon. Friend the Member for Shipley. A ticket is not a commodity like a car; it is a licence to view, owned by the artist. The performances are not a commodity, but a licence to experience. There is the principle of allowing artists to remain in control of their performances. Let me give an example. A football club could sell all its family and juvenile ticket allocations for much more, but it recognises the importance of building a fan base. If all under-16 tickets were bought by “classic entrepreneurs” and sold to adults, tourists or the highest bidder, football clubs would not be developing their long- term fan base. The football clubs know that making a short-term price profit is not in their long-term interests, and it is surely right for the provider of the entertainment to be able to make a commercial decision not to sell at top dollar but to invest in the future fan base. It is the same for live bands and many other events. What the free market does do, which I support, is allow football clubs, bands and theatres to choose how much to charge for their event.

18:00

Let me expand on why inflated ticket prices are bad for all of us. Some say the artists have got what they wanted for a show, so they should not be concerned as they have got their full profit from the ticket sales.

[Philip Davies]

indicated assent.

[Mr Nuttall]

indicated assent.

[Mike Weatherley]

My hon. Friends are nodding away, which is great, but that is a mistaken point of view. On taking money away from the artists and putting it in the pockets of these “classic entrepreneurs” and others in the entertainment industry, let us just say—[Interruption.] Let me explain to my hon. Friend the Member for Bury North, who is shouting from a sedentary position—

[Mr Nuttall]

May I ask a question on an intervention? My hon. Friend has said they are taking money away, but how can that be as the vendor has received full price for the ticket? They have not lost a penny.

[Mike Weatherley]

That is a very good intervention as I have the answer in the very next sentence of my speech.

Let us say that my hon. Friend has decided that he has £200 to spend on his entertainment budget for the year and he would like to go to four concerts at £50 a throw. If he has to pay his entire annual budget on buying just one ticket, he is going to go to only one concert, not four concerts. My hon. Friend the Member for Shipley mentioned the cricket. If someone has paid £500 to go to the cricket game, he will not be buying the T-shirts, the food and all the other things the promoters and artists rely on. Almost more money is paid for merchandise than for tickets. Promoters and artists want people to buy things at the concerts, not for that to be taken away. [Interruption.] If my hon. Friend will not listen, there is no point in his coming to the debate.

The bands will make it clear that it is not just the ticket price for the gig that gets them the money that allows them to tour; it is also merchandising and other things. If my hon. Friend the Member for Bury North has spent his whole annual budget getting to one gig, he is not going to buy the T-shirt and the other things. That is how bands lose out. It is not possible to argue with the economics of that; it is entirely right.

[Nigel Adams]

I want to reiterate that point. Most bands nowadays have to sell merchandise to survive because very few people are paying full price, as they once used to, for the music itself. They therefore rely on selling merchandise on the evening; otherwise, they are not able to survive and produce the fantastic music that British bands do.

[Mike Weatherley]

Absolutely, and there is no doubt that merchandising plays a significant part in allowing bands to continue touring.

[Pete Wishart]

The hon. Gentleman is making a very powerful point, which I recognise from my experience of touring with a band. It is uneconomic to go out with two trucks and all the equipment to play in front of fans. Bands rely on their merchandise and on being able to sell other products to enable them to continue to work and make the fantastic records they do, and ensure that people of any age group can watch them play live. Distortion caused by these appalling ticket prices threatens the industry.

[Mike Weatherley]

I thank the hon. Gentleman, and I would like to thank him for his contributions over the years; we have had good debates in this Chamber.

It is probably true that my hon. Friends the Members for Bury North and for Shipley have unlimited budgets, but most people have a finite budget and they have to make decisions on how to spend their money. If they spend it all on ticketing, they will not spend it on other things.

As has been mentioned, different methods have been tried to control secondary ticketing and to protect purchasers, such as named ticketing. It has been proved, however, that this will not work for every event. It works in some situations, but not others. The industry would like to take other steps to control these abuses but it cannot do so. It has been argued by the ticketing organisations that the measures already in place are enough. If that was the case, why are we still seeing cases where fans or performers are not protected from exploitation and revenue loss?

These amendments do not restrict the buying and resale of tickets. All they ask is that the process is transparent so that buyers have information such as where the seat is, who the seller is, and what the original price of the ticket was, and whether the resale of the ticket is against the terms and conditions of the original purchase. It does not expose the seller to data protection problems. Only those sellers whose job is related to the live entertainment sector will need to provide employment details. This means that an informed decision can be made whether or not to buy a ticket. Similarly, it would mean that in cases where tickets were resold by industry insiders for a profit, it was out in the open.

Creating such transparency means that it will be easier to prevent and detect ticket fraud, expose and reduce insider dealing of tickets, and assist event-holders in protecting their customers from the worst excesses of ticket touting. It will also assist the artists in ensuring that they are able to deliver tickets to the intended market at the intended price. In my view, these amendments provide the right balance to avoid full legislation criminalising the activity by implementing sensible, reasonable information requests. To quote Steve Parker, managing editor of Audience and Live UK:

“The proposed amendment to the Consumer Rights Bill simply requires transparency and the restoration of fairness to the market. It is not a threat, restriction or burden to anyone operating honestly in this sector—it is a threat to those that seek to secretly manipulate the market for their own greedy ends.”

Only the operators who want to hide this information could possibly object to a request for the system to be transparent. The proposed measures have been formally supported by a wide range of stakeholders from the live event sector, promoters including Harvey Goldsmith, the Lawn Tennis Association, the National Theatre, the Musicians Union, the England and Wales Cricket Board, UK Music, the premier music booking agencies, managers of major British bands like One Direction, Iron Maiden, Arctic Monkeys, Muse, Radiohead and Mumford and Sons, and over 50 more in a letter issued over the weekend. These amendments are only opposed by those profiteering from the confusion and technological shortcomings of event ticketing.

[Philip Davies]

The list of those that support this which my hon. Friend rattled off were, from what I could tell, all big businesses in the entertainment world, but has he looked at opinion polls which show that when people are asked, “If you have a ticket, should you be able to sell it on to somebody else at a price you determine yourself?”, an overwhelming majority say yes? The idea that only a few people are against this flies in the face of all the opinion poll evidence.

[Mike Weatherley]

I am so glad my hon. Friend intervened because I would like to quote back to him some things he said in the previous debate we had on the Consumer Rights Bill, on Report on 13 May 2014:

“I think that one of the fundamental rights of the consumer is to know what they are purchasing.”

That is what this measure proposes. [Interruption.] If I may continue, he went on to say that

“legislation requiring labelling is essential for consumers to exercise their right to make an informed decision.”—[Official Report, 13 May 2014; Vol. 580, c. 672-73.]

My goodness, he could be giving this speech for me, Mr Deputy Speaker!

On mobile phone internet usage coverage, which is important, my hon. Friend said on 16 June 2014:

“The lack of transparency and clarity that has persisted in the market has allowed consumers to be deceived.”

That is amazing; it could apply to the area under discussion now. He went on to say:

“It seems like the voluntary ways of ensuring greater transparency...have failed.”—[Official Report, 16 June 2014; Vol. 582, c. 896.]

He said that about mobile phones, but why should it not apply to this debate?

[Philip Davies]

Will my hon. Friend give way?

[Mike Weatherley]

I have one more quote, but I will give way.

[Philip Davies]

I am sorry to urinate on my hon. Friend’s bonfire, but the point is that if I buy a ticket for the Lords test match, I know what I have got. There is no transparency issue; it is a ticket for the test match at Lords. The quotes he is giving on halal meat and all the rest of it are completely different from a ticket to a Lords test match, where it is perfectly clear what I have bought.

[Mike Weatherley]

rose—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We should be more gracious to each other. I am frightened that we might undermine that, and that this whole debate is going to descend, which I do not want.

[Mike Weatherley]

Thank you, Mr Deputy Speaker. I was just trying to point out that we ask for transparency in almost every other aspect of our society, and we should be asking for it on tickets. We are only asking for the name, the seat location and so on to be given. I think I have made that point crystal clear.

It should also be noted that the police are generally supportive of the suggested changes to the secondary ticketing markets. Ticketing legislation was recommended in the final report from Operation Podium, the Metropolitan police unit set up to monitor crime around the Olympic games. The police said the Government should intervene in the ticketing market because, among other things, certain aspects of it are funding criminal activity. We cannot argue against that; the police are saying it.

There is one more thing: many ticketing companies argue that should a ticket be invalid, counterfeit or fraudulent, a full refund will be given. We heard that earlier. That is very laudable, but it does not address the full problem. Refunding the price of a ticket will not make up for the travel expenses and accommodation costs of going to the concert, show or event; nor will it make up for the time spent acquiring the ticket.

Refunds look like a fair deal on paper, but even though the buyer will get their money back, the process actually sets up losses across the board. The seller of the ticket does not make any money, the company loses money by having to pay a refund and the buyer does not get the satisfaction of going to the event. The buyer is deprived of the experience that he or she worked hard for and spent money to secure. With the proposed transparent system, that would not be the case.

There is another quirk to the existing system that affects not only the artists but the taxpayer. Some venues, such as the National Theatre and the Donmar Warehouse, are subsidised by the state in order to ensure that opportunities to see productions are available to the widest possible audience. When ticket prices are vastly inflated—as in one case, from £20 to more than £2,000 for a Shakespeare production at the Donmar Warehouse—not only are potential purchasers priced out of the market but the Government’s programme of subsidising the arts is undermined and money that could be ploughed back into new productions is lost. Why would we, as taxpayers, want to subsidise theatre to make it more available to people while at the same time allowing others to make £2,000 on a ticket? That is absolutely bonkers.

The Secretary of State for Culture, Media and Sport has told me that he supports the right of ticket providers to have terms and conditions and for those terms and conditions to be respected, and that any buyer should be aware of and adhere to them. Others who have spoken today have said that there should be terms and conditions, and that they should be respected, just as any other contractual arrangement is respected. That is how purchasing works. If I go on a train, I buy a ticket that is not transferrable. That applies in many other areas of society, too, so it seems bizarre that it does not apply to ticketing. These measures would enable those terms and conditions to be respected, and the Secretary of State should therefore fully support the amendment. I find it bizarre that he does not.

What we are asking for would give artists and venues the opportunity to regain control of ticket pricing and of the terms and conditions that they put on tickets. This would ensure that genuine fans had access to the events they wanted to attend. It would also hinder the ability of those using new methods of mass ticket-buying to artificially inflate the market in such a way as to creative negative impacts on the UK’s creative and sporting industries. If a band, artist or promoter wants to sell tickets at an inflated price, they are absolutely at liberty to use the secondary market to do so, but our proposals would mean that they would need to print on the ticket the fact that they had done so. I see nothing wrong with that. If we can make a small step in supporting the artists and fans, as we can with these amendments, we will have taken a very large step forward.

[John Robertson (Glasgow North West) (Lab)]

It is a pleasure to follow my fellow co-chair of the all-party parliamentary group on music, the hon. Member for Hove (Mike Weatherley), and it will be difficult to follow such an excellent speech. I agree with every point he made. I shall make my contribution a little more personal.

I got involved in ticket touting—in the sense of complaining about it, not actually doing it—many years ago. I became an MP 14 years ago and about a year later, Take That got back together. My three daughters were desperate to get tickets to see them, but I am sad to say that they did not, although they have seen the band since. After a lot of shouting and ear-bashing and being told that I should do something about the problem because I was an MP, I looked into the situation and found it to be nearly as bad as it is today. Things were not so technically advanced back then, but they were certainly shaping up that way.

[Mrs Hodgson]

It was tickets for the Take That reunion tour that garnered my interest in this topic. I want to place on the record my gratitude to my hon. Friend for the leadership that he showed on this issue before anyone else in the House did. Others have picked up the reins now that he has led the way in getting us to where we are today.

[John Robertson]

I think my hon. Friend might be over-egging the pudding a bit, but I am always grateful when people recognise that someone has done something, particularly in this place.

18:16

I am very keen on music; at the moment, I am really keen on a band called Foo Fighters. I was trying to get tickets to see them at Wembley and I went on to what I thought was the Ticketmaster website. I cannot remember the exact price of the tickets—about £60, I think. I was quite happy to pay that to see a band that I really wanted to see. Suddenly, however, I got kicked on to another website, where the ticket prices started at £90-odd. Only when I looked into the matter did I notice that this website was run by Ticketmaster.

I was a touch upset that—probably because I had said that I accepted the cookies, or whatever—I was pushed on to a website owned by the company from which I was going to buy a ticket for £68 and informed that a ticket for the same concert would now cost me £90-odd. It was really difficult to get back to the first website. For me, as for most Members of Parliament, time was of the essence and I needed to move on. I still have not bought the ticket, but I will try again. I found it incredible that, without doing anything, I ended up on a secondary ticketing site on which the ticket prices started at £90-odd. That was the price per ticket if I was buying two; a single ticket was more than £100.

[Kerry McCarthy (Bristol East) (Lab)]

I had exactly the same experience, albeit not with Foo Fighters. I was trying to get tickets for the Jesus and Mary Chain recently, and there seemed to be a lot of sites advertising the tickets as being available. Those sites lure us in, but eventually we get transferred to other sites. By that time, we have wasted a huge amount of time and end up buying the more expensive tickets. Sometimes we try to hunt for the original tickets, but I suspect that that offer no longer exists by that stage.

[John Robertson]

My hon. Friend is absolutely right.

This is not a free market; it is what I call a con market. I believe in a fair market. I believe that people should be treated fairly and given a chance to buy something at the advertised price. If 100,000 people want to go to a concert and they get to the tickets before I do, that is fine, as long as there are really 100,000 people. I do not expect the machines that the hon. Member for Hove mentioned to buy up all those tickets in a matter of seconds so that I cannot get one. That is not a free market, and it is certainly not a fair one.

The previous Labour Government, with whom I had lots of arguments, could not quite see this my way. I hope that the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for East Dunbartonshire (Jo Swinson), will listen to these points, because she now has a chance to do something that my Government never did—put the situation right. Things are getting worse and as technology becomes more advanced, people use it for the wrong ends. They used it to prevent my kids from getting those Take That tickets all those years ago—my kids are still looking for those tickets, even though they are parents themselves now—and they are preventing me from getting the tickets I want.

We just want to be treated fairly. I do not mind paying the going rate of £68 or whatever, but I do mind someone buying up 100,000 tickets at £68 each and then selling them for £100 each. That is not right, and it should be against the law—it is taking ticket touting to an extreme. I am not talking about the happy chappie who sells tickets for a game of football before the match, although that used to upset me as well. We cannot allow people to do this on a large scale.

We can allow someone who has bought a ticket to pass it on to a family member or a friend, and I do not have a problem with them making a profit on it, provided it is not too much. However, I do have a problem with the guy with £500 getting ripped off by the hon. Member for Shipley (Philip Davies) with his Lord’s ticket. Why anybody would want to pay that kind of money to watch a game of cricket I do not know! Having said that, if someone really wanted to see the event, I can understand them paying it, but I do not understand why some people should be able to corner the market and then resell tickets to others at a vast profit. That undermines our music industry. At the end of the day, the issue comes back to the people who are trying to give us a service and the benefit of their life’s work.

[Nigel Adams]

Let me take the hon. Gentleman back to the discussions about the ticket from Lord’s. I am torn on this issue: I am sympathetic to the amendments, but I am also sympathetic to some of the remarks made by my hon. Friend the Member for Shipley. If someone is prepared to, and can afford to, pay £500 a ticket to go to the test match, that is their choice. However, that individual should be able to find out and know where that ticket is located—where in the ground they are going to be sat—and whether or not it is legitimate. That is where the transparency angle of these amendments is correct.

[John Robertson]

Therein lies a problem, because sometimes the tickets being sold are not even proper tickets—someone might just have made a very good copy. The person with the £500 would be taking that chance. I do not believe that is right—that is probably why the hon. Gentleman is sat on the other side of the Chamber and I am sat here. If the ticket says £25, £60 or £100—whatever the figure is—I expect to pay that. I do not have a problem if I have to pay a wee bit extra, but I would not be paying £500 or £1,000. The worst case I ever heard of was when two tickets for Wimbledon finals day, which were for disabled people, were being sold on eBay for £2,000 each, and the buyer had to buy the pair. That is not right, and I am talking about only a couple of tickets.

[Jenny Chapman]

Would my hon. Friend like to say something about venues? I understand that millions of pounds are being taken out of the music industry, in particular. I support small venues in my constituency. They really do struggle. I do not mind paying top dollar for a ticket for a band I want to see, but I want to know that that money goes to the person who bought the ticket at a fair price, the venue or the artist.

[John Robertson]

My hon. Friend makes a good point. I like to think that the small venues are for new bands—people who are up and coming and do not have a great following. I have bought a ticket to see AC/DC at Hampden Park, which I had no problem doing because it holds 50,000 people. That was easy, but there is a genuine problem in respect of the small venues. We have a new venue in Glasgow called the Hydro, which holds 13,000 people. I have been there and it is fantastic, but even there, depending on who is coming, the ticket touts are out selling the tickets.

[Pete Wishart]

The hon. Gentleman is making a fine speech and covering a range of new issues. One thing we have not thought about is that because the Government have failed to do anything about this, it has been left to the big festivals such as Glastonbury and T in the Park to try to put in place some sort of inventive, creative measure to protect their own audience. Why should it be left up to large festivals to deal with the problem? Surely it is the Government’s responsibility to protect fans.

[John Robertson]

The hon. Gentleman is right about that. I have met various promoters for T in the Park and they have done their level best to try to stop the touts, but even they admit that they cannot do it completely. If we make this illegal, that puts a different front on it. If we tell everybody it is illegal to do something and someone does it, they know it is illegal. If we do not tell them it is illegal, they will continue to do it. As we have already said, they will continue to use all the new technologies that are coming online and they will rip people off. There will be people who are so desperate to buy a ticket to see somebody that they will pay these prices, and as long as somebody is willing to pay them, the problem will continue and prices will keep increasing.

[Mr Redwood]

The hon. Gentleman is right that some things should be illegal, but I can reassure him that where someone creates an artificial ticket and it is not a proper ticket, that is either fraud or theft. We have already made that an illegal situation.

[John Robertson]

I appreciate what the right hon. Gentleman is saying, but what is the difference between that person making a forgery and other people having a machine that can buy up 100,000 tickets for a venue? Is that not illegal? Is it not outrageous? Would you not want to do something about it? I am not talking about you, Mr Speaker; I am talking about the right hon. Gentleman.

I feel very strongly about this issue, as you can probably tell, Mr Speaker. Sometimes it is difficult to put things into words, but as politicians and Members of Parliament we should be putting our constituents first, not big business. We should not be hindering big business, but we should not be putting it before our constituents. Some in the Chamber tonight would rather put big business before their constituents.

[Mr Nuttall]

It is a pleasure to follow the hon. Member for Glasgow North West (John Robertson). He makes his points passionately, but I disagree with them all. I am unashamedly on the side of the free market on this one. The whole problem with the Lords amendment is that it simply strikes at the heart of the free market—no more, no less. This is not really an issue about consumer protection, although it is dressed up as that—it is about the free market. If this measure were passed, it is likely to have the consequence—I accept this might be unintended —of providing less protection for the consumer.

[Philip Davies]

The hon. Member for Glasgow North West seemed to suggest that my hon. Friend and I were arguing on the side of big business and that he was arguing in favour of the consumer, but does my hon. Friend agree that the hon. Gentleman is actually arguing in favour of the big music business? Does anyone think Harvey Goldsmith is not big business? I do not know whether the hon. Gentleman would take that as an insult or a compliment, but arguing on the side of those big music businesses is not arguing in favour of the small consumer, is it?

[Mr Nuttall]

No, it is not. Let us be clear that a lot of these organisations are quite capable of looking after themselves and, if they put their minds to it, of achieving the aims they say they want to achieve. That applies whether we are talking about the Harvey Goldsmiths of this world, the Rugby Football Union or the England and Wales Cricket Board. These organisations put forward their arguments about wanting to help the grass roots of sport and so on, but if they really wanted to do that, they could do so in many ways without going down the road of trying to interfere in the free market.

Let us be clear about how much personal information will have to be placed on the internet for everyone to see under the regulations that have been passed by the other place. The seller has to provide details of

“(a) the face value of the ticket;

(b) any age or other restrictions on the user of the ticket;

(c) the designated location of the ticket including the stand, the block, the row and the seat number of the ticket, where applicable; and

(d) the ticket booking identification or reference number.”

That information could easily be used by criminals and those who are less scrupulous in order to ring up the vendor of the ticket and arrange for the ticket to be sent to an alternative address. It could also be used to set up an alternative listing, as so much information is being provided.

[Clive Efford (Eltham) (Lab)]

The information that the hon. Gentleman has just read out would surely be available at the point of sale, so if anyone wanted to use it in the way he is suggesting, they would merely need to go on the website originally offering the tickets or ring up the venue in order to get it. It is at the point of resale in the secondary ticketing market that we are asking for that same information to be made available. What can be wrong with that?

18:29

[Mr Nuttall]

The difference is the name of the vendor, the booking reference and all that, which are not there on the original sale. At the heart of the argument is the fact that, by placing all this extra regulation on the secondary market and making it more difficult to sell tickets, fewer people will choose to sell their ticket through what will eventually become a regulated market. That will result in people, or spivs as my hon. Friend the Member for Shipley (Philip Davies) called them, choosing to sell their tickets on the unregulated market—or the black market as it is known outside this place. That is likely to happen, and the result will be less, not more, consumer protection.

It was mentioned a moment or so ago in the context of the Paul Weller concert that someone was being asked to pay £101 for a ticket that had a face value of £38 and that somehow the “real” fans were being denied access to the concert. But no one has been able to explain why someone who is prepared to pay £100 for the right to attend and listen to a concert is any less of a real fan than someone who is prepared to pay £38. It just does not make any sense. Surely if a person is prepared to pay £100, they are equally likely to be a real fan as someone who is paying £38.

The hon. Member for Glasgow North West, who is leaving his place, talked about someone making false tickets in their bedroom or their office. That is already a criminal offence; it is fraud. We cannot make it any more of a criminal offence by passing more legislation. Those matters are already covered by criminal law, and the amendment before us will do nothing whatever to sort out criminal behaviour—those who set out deliberately to con and defraud members of the public. We have plenty of laws to deal with those people. The market is working well. To all those who say that they are standing up for the consumer, let me say that I am not inundated with lots of e-mails on this matter. I get hundreds of thousands of e-mails a year complaining about all sorts of things, but I do not get many from people saying, “Oh, I tried to get a ticket for this concert and I could not get it because they were all bought up.”

[Philip Davies]

My hon. Friend is making an excellent speech, but he seems to be slightly behind the current argument. The proponents of the Lords amendment and the amendment to it are no longer arguing that this is in the best interests of the consumer; they appear to have abandoned that idea. They are now saying that the measure is absolutely crucial to pop groups such as One Direction as they can sell expensively priced merchandise to their supporters. They will not be able to do that under the status quo. Will my hon. Friend keep up with the argument? This is not about consumer rights but about big groups such as One Direction selling overpriced merchandise to their supporters. I am not sure why that is necessarily in the best interests of consumers.

[Mr Nuttall]

I am grateful to my hon. Friend for his intervention. When those arguments were put forward by my hon. Friend the Member for Hove (Mike Weatherley) earlier, we were taken into a whole new area. We are now arguing that the tickets themselves may have been underpriced to allow people to pay over the odds for the merchandise. That seems to be the argument, does it not?

[Philip Davies]

That is absolutely right.

[Mr Nuttall]

So we have to sell the tickets cheap so that people can be conned into paying over the odds for the T-shirts and the CDs. That is the reality.

The other argument is that this is all about transparency; that a person needs to be able to see that they are in a certain row, seat and place in the stadium. Well, people are not stupid. They know that if they buy a ticket without that detailed information, there is a risk that they might end up sitting behind a pillar and have a restricted view. People do not need any further legislation to help them make up their minds about the risks involved in buying tickets. They know that if they buy on the secondary market, there might be risks, but there will be much greater risks if they go underground. Under the current market, we have operators who run professional businesses, which have been going for a number of years without any problems. Everybody uses them every day of the week. Okay, so a person might pay more than the face value of the ticket, but that is the operation of the free market. I come back to the central point: such operators would not even exist if the vendors sold the tickets at a higher price in the first place. They know when they sell those tickets on day one that they will be swept up and sold at a higher price. In most cases, they turn a blind eye to it because all they are interested in is selling the tickets, getting the money in the bank, and forgetting about the problem.

[Mrs Hodgson]

That is utter rubbish and so not true. People involved in cricket, rugby, tennis and music have written to the Minister and made this case. It is not the case that they are not bothered as long as they are sold out. They set the price for a variety of reasons, including making it affordable for the genuine fan. It is so disingenuous of the hon. Gentleman to say that the clubs do not care as long as the tickets are sold out.

[Mr Nuttall]

Interestingly, I was happy to give way to the hon. Lady, but she did not give way when I wanted to intervene, but we will leave that aside. If the large organisations that run these sporting bodies put half a mind to it, there would be many ways in which they could ensure—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. All Members are doing is holding up the debate.

[Mr Nuttall]

If those organisations want to ensure that the tickets are being used by the clubs, that is for them to deal with. We have seen what happened with the Rugby Football Union. The tickets are sent to the clubs, supposedly for use by the grass roots, and they are then sold on by the clubs. The tickets get leaked out into the open market. We cannot interfere with the free market; that is a fact of life. No matter how we dress it up or what legislation we introduce, tickets will find a way to be sold at the market price—what somebody is prepared to pay for it.

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

My experience of the RFU at Twickenham is that rugby tickets are given out on allocation and request to local clubs—the grass roots of rugby—at a certain price. Were those to be sold on the black market at a higher price and the RFU were to discover it, that club would then get no allocation of tickets for several years. That was a reasonable protection that was placed on the sport.

[Mr Nuttall]

I am grateful to my hon. Friend for making that point. He has just described one way in which these sporting bodies can control the allocation of tickets. I am sure that there are many other ways. Much has been said about the use of botnets and modern technology to scoop up tickets.

I have heard nothing about how big businesses, which run these venues, have tried to use technology to deal with the problem—if they think it is a problem. I put it to the Chamber that they do not think it is a problem, as they are getting the money that they expected to get. They do not see it as a problem and the consumers do not see it as a problem. The reason why I have not been inundated with complaints is that people are, by and large, happy with the system. They know that tickets for popular events will probably be sold at a price that is greater than that for which they were originally sold. If people are lucky enough to get a ticket in the first allocation, that is exactly how they regard themselves—lucky. They know that they have got a valuable commodity, in just the same way as someone who acquires any other article that goes up in value thinks themselves lucky. Someone may buy something for a fiver at a car boot sale on a Sunday morning, and find out a few months or years later, when they take it on “Antiques Roadshow”, that it is worth 10, 100 or 1,000 times more than they paid. That is how the free market works.

It does not matter how much we try to legislate or to cap ticket prices, the fact is that ultimately the free market will out: tickets will change hands, whether through an organised website or on the black market outside stadiums and venues, for whatever someone else is prepared to pay for them.

[Clive Efford]

I pay tribute to my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) for her campaign on secondary ticketing and the need to protect consumers, and to the hon. Member for Hove (Mike Weatherley) for his consistency on this issue and, as someone who comes from the entertainment industry, for his very well-informed speech.

I must also pay tribute to Statler and Waldorf at the back of the Government Benches—if it was not unparliamentary, I would suggest that the hon. Members for Shipley (Philip Davies) and for Bury North (Mr Nuttall) were a couple of muppets. My question for them is: what kind of market would object to consumers being fully informed about a commodity at the time of purchase? Even if we applied the principles of the free market, we would not want to restrict information to consumers when they buy products.

The hon. Member for Shipley used the example of selling houses, but we would not sell someone a house without letting them look around it or without giving them all its specifications. Similarly, we would not sell someone a car saying, “We’ll only let you look at its left side,” or “We won’t let you look inside”; we have to give people all the information. There cannot be any objection to ensuring that consumers are fully informed.

The hon. Member for North West Leicestershire (Andrew Bridgen) intervened to ask about the resale of rugby tickets. He said that if tickets allocated within the rugby family were offered for resale on the secondary market, the rugby club found doing so would be banned from receiving any future allocation. The RFU went to court to obtain the information it needed in order to regulate the sale of tickets in exactly that way. I therefore agree that such rules should apply, but rugby needs such information to make its own regulations stick. In seemingly agreeing with his colleague, the hon. Member for Bury North, the hon. Member for North West Leicestershire is actually agreeing with us.

The Olympics restricted the resale of tickets, which had to go back through the arrangements set up by London Organising Committee of the Olympic Games and Paralympic Games and be resold by Ticketmaster at face value. In the early stages, people complained about the fact that there were a lot of empty seats, but such tickets had to be recycled to ensure there was an atmosphere in the stadium. The process of making sure that the tickets went to family members or genuine fans successfully and memorably created a unique atmosphere within the Olympic stadium. That is remembered, particularly by the athletes who performed there, because we made sure that such tickets were made available at face value to genuine fans.

The RFU wanted to do exactly the same with its tickets for this year’s rugby world cup, but even before the tickets were made available, they could be bought for several thousands of pounds on secondary ticketing websites. The cheapest child’s ticket is £7 and the most expensive ticket is £700, but I saw—I will not name the website, because there are lots of them and it is wrong to single out one of them—five tickets on sale for £8,000 each, with a £3,000 handling charge.

18:45

I asked the secondary ticketing company how it could sell tickets for £8,000, given that they were not yet available and that the ballot for them had not even happened. It could not really answer the question, but in my opinion someone in the rugby family who was going to get the tickets had put them up for resale. That underlines why people need information at the point of resale. The company told me, “Look, we provide a service. We stop those dodgy guys hanging around outside stadiums selling tickets in their camel hair coats. They look at the cut of your shoes to determine how much they reckon they can charge you for a ticket.” I asked what the £3,000 handling charge was for, and it said, “If you can pay £8,000 for a ticket, we think you can afford a £3,000 handling charge.” That is the equivalent of looking at someone’s shoes: the company looks at the amount on someone’s credit card and says, “You can pay £8,000, so you can bung us £3,000 for handling the tickets.” That is a complete and utter disgrace.

The point is that sports in particular, like the entertainment industry, want to ensure that tickets are available to core fans and that, within reason, no one is excluded on the grounds of price. Someone can be a genuine fan and not be able to afford £500 for test match tickets—they would be lucky to get a test match ticket for £500 on the secondary market—so it is vital for sports to make their matches accessible to fans and families to build their next generation of supporters.

The hon. Members for Shipley and for Bury North are apparently arguing that people should be priced out of going to matches. The sports of rugby, cricket and tennis wrote to the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Maidstone and The Weald (Mrs Grant), to express their concern that if the practice continued, they would be forced to put up their prices. They say that they charge reasonable prices for tickets to make them accessible to all fans who support their sports, but that if money continues to be made on the secondary ticketing market, they might as well make that money by selling tickets at top prices and then put it into their sports. However, they are genuinely concerned about what that might mean for the future of their sports, because they will not be able to build a fan base among the whole community of those who want to support them and to go to matches, and their sport may dwindle as a result.

When the people who run sports set ticket prices, they have the future of their sport at heart. We cannot just say that the secondary ticketing market offers some sort of guarantee if there is something wrong with the ticket. For someone who has paid to go to a major international at a venue across the country, such arrangements will not pay back the cost of their travel or of staying overnight at a hotel, and they will certainly not get the experience that has been paid for in buying the ticket. People must have the information they need to make an informed decision about whether such tickets should be on sale in the first place, and whether they will actually get what they are promised when the ticket is offered for sale. We have heard the arguments against that and for letting the free market reign, but the market absolutely is not free.

[Andrew Bridgen]

I want to take the hon. Gentleman back to his point about the website selling tickets for £8,000 with a £3,000 handling charge. Did it actually sell any tickets at that price, and if so, is he concerned or sorry for the people who decided to pay £11,000 for a ticket of their own free will and does he believe that they need to be protected?

[Clive Efford]

If they can afford £8,000 for a ticket, I do not think they need my sympathy. The point is that we put pressure on people such as the organisers of the rugby world cup to make tickets affordable through a progressive ticketing policy so that people who genuinely love the sport but might not have the funds to pay that price for the ticket can go to the games.

[Andrew Bridgen]

rose—

[Clive Efford]

I am answering the hon. Gentleman’s point and he can come back to me on it in a minute, although I am going to shut up quite soon.

Some of the people purchasing these tickets are clearly involved in criminal gangs, as shown in the report on Operation Podium from the Metropolitan police. That report was given to the Government and they were warned that it was not just a question of people making a few bob on the secondary ticketing market. The people who set up these botnets to swamp the market when tickets are first offered for sale are often involved in criminal gangs associated with drugs and firearms. The Metropolitan police have raised serious concerns about this and we ignore them at our peril. What kind of free market wants to perpetuate such activity? I am interested in that.

[Mr Redwood]

We have heard a lot about the £500 tickets to go to a particular day of the Lord’s test against Australia, but as a cricket lover who wants more people to be able to go to test matches does the hon. Gentleman agree that an awful lot of tickets are on offer from the original vendor at very sensible prices for Headingley, Durham, Old Trafford and so on and that people could go to those?

[Clive Efford]

I am delighted that those tickets are on sale at very sensible prices, which is why I am in the Chamber to support the ECB, the RFU, the FA and others in asking for the sensible ticketing policies they apply to be protected. All they are asking is to have the information available when a ticket is offered for resale so that they can see whether that ticket is being sold according to the original terms and conditions for the sale. We should not be allowing organised gangs to exploit the consumer by hoovering up these tickets and forcing people to pay much higher prices on the secondary ticketing market.

[Andrew Bridgen]

To return to the question of the RFU, it is well known by the local grass-roots rugby clubs that these tickets are on allocation and should not be resold at a higher value. All it needs to say on the ticket is, “If this ticket is resold at a higher value, ring this number.” Everyone will then know that the club will not get an allocation for three or five years.

[Clive Efford]

The point is that the governing body of the sport wants that information so that it can police it. It went to court to try to get the information, so we should be saying that it is not unreasonable for the information available at the original time of purchase of the tickets to be made available when the tickets are being resold—

[Andrew Bridgen]

rose—

[Clive Efford]

I am not going to give way again, because I want to end my remarks.

I have one question for the Minister before I sit down. She wrote on 8 January to the Trading Standards Institute and to the Society of Chief Officers of Trading Standards in Scotland. Our argument is clearly getting through, because she has raised concerns about consumer protection and has asked for the organisations’ advice. When she responds, will she say whether she has had that advice? We have been debating the issue for a very long time and for the Minister to be writing on 8 January to find out this information is a little like shutting the stable door after the horse has bolted, but we still have time, because the Bill will obviously go back to the Lords where there will be an opportunity for common sense to prevail with the Government, even if they will not concede the point tonight. I hope that the Minister can tell us how she got on with her letter.

[Ben Gummer (Ipswich) (Con)]

I came late to this debate and picked up on some interesting arguments being put by Members on both sides of the House. At first glance, my one concern about the amendments is that they do not seem to address some of the valid points about robots that have been raised by Members on both sides. I am sure that the Minister will want to address that point when she answers the debate.

One point that has not been raised about the nature of the free market and how it operates for secondary ticketing is that there is not an absolute property right to a ticket when it is sold, because it is not like any other good. The hon. Member for Eltham (Clive Efford) mentioned second-hand cars, which someone might buy and then sell at a later date, but of course the ticket is merely a promise to provide a service or a piece of entertainment in a given period of time, and therefore the original vendor must retain some sort of property right. If the original vendor wishes to sell a ticket to someone at one price, perhaps because they are a certain age, come from a particular area or belong to a particular club, that vendor might still have some property rights that enable them to enforce the terms of that sale. I am sure that the Minister will want to address that issue as it pertains to the secondary market, because those people who sell tickets should be able to have some control at some point, if they wish, over who they sell those tickets to.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

It has been a year since we started to scrutinise the Bill, time during which much has changed, not least the Minister leading on it. As she can tell from today’s debate, she missed many treats during our debates, although I am not sure whether a repeat performance of the arguments made by the hon. Members for Bury North (Mr Nuttall) and for Shipley (Philip Davies) was what she intended to generate.

It has been a long journey and I pay tribute to all those Members who have sought to scrutinise and improve the legislation. Many debates have taken place to meet the test we set, as this is a once-in-a-lifetime opportunity to create a nation that is on top of its rights and can play a full and active part in the market in both the public and private sectors. Labour certainly recognises that helping people to make the most of their money is vital in a country that is drowning in personal debt—£1.43 trillion of it. Little wonder that StepChange Debt Charity says that six out of 10 people in this country believe that politicians must do more in the next five years to help them stay out of financial difficulty. Making sure that they do not get ripped off should therefore be absolutely paramount in the work we do and in this Bill.

I pay tribute to the hon. Member for Hove (Mike Weatherley) and my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) for tabling the amendment and for their perseverance on ticket touting, which is a clear example of people being ripped off. I also want to pay tribute to the hon. Members for Bury North and for Shipley for their persistence in making their arguments and possibly making Friedrich Hayek spin in his grave through their interpretation of a free market. Let me deal with their arguments, because I think we will have to come back to them otherwise.

Few other markets would be characterised as free in which a limited number of sellers hoard a product, buying it up in bulk using underhand methods and then colluding to sell at hyped prices. Just because this is happening on the internet does not make it any different. One of the golden rules of the free market is that people should deal with each other honestly and require honesty in return, and that is clearly not what is happening in this industry. It is clearly not a free market. I am also delighted that both hon. Gentlemen outed themselves as fans of St Trinian’s, because that can be the only explanation of why they believe that this is about spivs in pork-pie hats looking at the types of shoes people are wearing rather than a billion-pound ticket-touting industry that is damaging the pockets of fans of sport and music.

One reason we support the amendment tabled by the all-party group on ticket abuse and reject the Government’s call to reject the cross-party call from the Lords to address this issue is that we do not agree with the Secretary of State for Culture, Media and Sport that this is classic entrepreneurship, precisely because we know that it is not an open market. We know that botnets are hoovering up tickets the second they go on sale. Fans simply do not stand a chance.

Some estimates put the figure at 60% of tickets being taken up in this way. One expert looking at the sporting industry in the past year has identified around 30% of tickets being bought up in this way, so fans cannot click fast enough to beat the botnets. The Secretary of State challenged my hon. Friend the Member for Washington and Sunderland West and said:

“The interests that the hon. Lady is representing are probably those of the chattering middle classes and champagne socialists”—

I noted that the hon. Member for Shipley called me a socialist earlier; I have amended my Twitter biography accordingly, with his praise—

“who have no interest in helping the common working man earn a decent living by acting as a middleman in the sale of a proper service.”—[Official Report, 21 January 2011; Vol. 521, c. 1187.]

This is no Flash Harry and this is no decent living.

19:00

As my hon. Friend the Member for Eltham (Clive Efford) pointed out, ticket touting is connected to serious organised crime in this country, making around £40 million a year. The Metropolitan police said:

“The lack of legislation outlawing the unauthorised resale of tickets and the absence of regulation of the primary and secondary ticket market”

encourages this situation. Before the Deputy Speaker calls me to order and says that this is a debate not about the Serious Crime Bill but about consumer rights, let us look at the damage caused to consumers.

The hon. Member for Shipley quoted the Office of Fair Trading report, which is more than 10 years old. He was rather selective in what he quoted—perhaps we should say the primary marketing rather than secondary marketing of this report—so let us look again at the report. It did indeed say that

“secondary agents can provide a useful function”

for consumers, but it also

“found evidence of a number of secondary agents who deliberately mis-sell or defraud consumers”

and do not follow the golden rule of the free market.

That is why it is not uncommon to see tickets with a face value of £70 being sold for up to £1,200 on sites such as StubHub. All 20,000 tickets for Monty Python’s reunion performance—I am sure the hon. Member for Shipley would love to have gone and seen the Knights Who Say “Ni!”, as he says it so often himself—sold out in three quarters of a minute, only to reappear on the secondary market at more than 15 times their face value. Tickets for the reunion gig of the Stone Roses at Heaton Park, something that many of us had only dreamed of for many years, were advertised at more than £1,000 only minutes after they had sold out. Their original face value was £55.

For the avoidance of doubt, nobody is saying that there should not be a secondary ticket market. All of us have experienced the frustration of buying tickets, only to find at the last minute that we could not go. I freely admit that the first time I ever pleaded with the Whips to have the night off was when I had bought tickets for the Wedding Present at KOKO and feared that I would not be able to go and see them. I was not able to go and see the Wonder Stuff because of a last-minute change to sitting hours in this place. We all recognise that a secondary ticket market is necessary in such circumstances, because it is difficult for fans to get a refund at short notice. That does not mean that we should give the commercial touts a free ride, especially when they distort the prices.

It takes a lot for us in the House to say that Russell Brand’s management is getting something right, but they were among the signatories to the letter that we saw this weekend from event organisers and people across the political spectrum and across the industry, saying that we needed to take on the issue and introduce transparency. [Interruption]. The hon. Member for Shipley says from a sedentary position that we are talking about more money for Russell Brand. We on the Opposition Benches are absolutely not committed to that. What we are committed to is people not paying over the odds to see Russell Brand, were they that way inclined—[Interruption.] That seems to have the unanimous support of the House.

The proposals before us are a sensible way of addressing the problem. The amendment may look long, but its purpose is simple—to let fans who are buying from a secondary site know what they are buying, such as whether the ticket includes a hospitality package or not. Let us look at the egregious information that the hon. Members for Shipley and for Bury North think we should not have: the name and address of the seller of the ticket, the location of the ticket being sold, so that they are not sold a ticket for a seat behind a pillar, the face value of the seat, and the terms and conditions.

We have been trying to make progress on this issue for a number of months. We tabled amendments similar to the Lords amendment. The Government did not support these amendments because they argued that the scale of the problem was only 10% of the market and that it was a matter for trading standards or the Advertising Standards Authority. They also said that the information in the amendment should already be available to consumers and that it was part of the consumer contracts regulations—the replacement for the distance selling regulations.

That is why I was surprised to see the letter that appeared in my inbox today at 4.30 from the Minister, saying that she had written to trading standards, asking them to look into the issue. It was her colleague, the right hon. Member for Cardiff Central (Jenny Willott), who first raised the point on 13 February last year. It seems a curious timing to say that there might be an answer in existing legislation. I was also interested to see the letters that the Minister put forward from the companies, offering to uphold the existing regulations, as though it was a great concession to do what the law currently requires. They have said before that they would do so. One suggestion was that specifying the face value on the ticket would be the way forward. Fans buying from secondary sites would then know by how much they were being ripped off—what a wonderful concession to make in this market!

If the Government are committed to transparency and if they say that consumers should already have the information as a result of the distance selling regulations, I do not understand why they oppose a cross-party proposal for transparency in pricing. I hope they will at least support the proposal from the all-party group to enhance that protection and to ensure that there is a secondary ticket sales market by making sure that it is not possible to cancel a ticket just because it is offered for resale at face value. We know that the amendment will improve the legislation. Tackling ticket touting has been discussed for a year. We are in the year of the rugby world cup. Fans cannot wait any longer for the Government to see what is in their interest, make progress on this issue and ensure a freer market with informed consumers, not consumer capture, which I am sure Friedrich Hayek would have been concerned about.

It comes down to this: is the Minister on the side of organisations such as the England and Wales Cricket Board, UK Music and—dare I say—Mumford & Sons? Or is she on the side of Waldorf and Statler and the hon. Members for Shipley and for Bury North? I know which way my constituents would like the Minister to vote. I hope that others across the House who recognise that it is time to tackle the problem of ticket touting will vote with us.

[Jo Swinson]

I am delighted to speak on the Bill for the first time—a Bill whose development and gestation took far longer than my pregnancy. Although the hon. Member for Walthamstow (Stella Creasy) says that I missed many a treat, she does not know that I did watch Second Reading on BBC Parliament during my maternity leave, although I had to use the pause function occasionally. It seemed to have a fairly soporific effect on my son. Perhaps that is a tip for all new parents—the delights of BBC Parliament.

The debate often seems polarised, with on the one hand the advocacy of very prescriptive primary legislation to deal with the issues, and on the other, the speeches of my hon. Friends the Members for Shipley (Philip Davies) and for Bury North (Mr Nuttall), who argue that the free market is working perfectly and no intervention is required. I recognise that there are issues and difficulties. We have to find the best way forward to deal with those so that the interests of consumers are well looked after.

A careful balancing act is needed. We want to make sure that as many people as possible can access events, whatever their means. We want sports and entertainment in the UK to flourish. We have some of the best events and tournaments in the world, which bring in large numbers of international visitors and businesses. We also, of course, want to protect consumers and allow the ticket resale market to work as well as it can.

There has been an encouraging trend in recent years towards safer and more tailored online ticket marketplaces and away from the touts outside venues. These websites can offer much more consumer protection than was available before, often in excess of what the law requires. The sites have processes in place to try to prevent, discourage and punish fraud. Although no market is perfect, we know how much time, money and emotion fans invest in attending events, so we want fans, as consumers, to be able to operate safely in this market.

There are already protections in place for consumers. The consumer contracts regulations came into force just six months ago to ensure that consumers are fully informed before they buy from a trader. At the time, the Government announced guidance specifically on internet ticket sales to accompany those regulations, which build on existing law such as the Consumer Protection from Unfair Trading Regulations 2008, which protect consumers from being misled by practices such as claiming that a seat is on the front row when it patently is not.

The regulations complement the Fraud Act 2006 and the Computer Misuse Act 1998, which list a range of offences available to law enforcement to tackle the fraudulent sale of tickets and the criminal harvesting of tickets from online ticket sales. Botnets and hacking into sites have been mentioned, but these proposals would not only cover cases of hacking. Botnets could also be illegal if, for example, they were being used to gain unauthorised access to a website that clearly states that it deals with real individuals.

We are absolutely committed to ensuring that the law is properly enforced. We have a powerful economic crime command within the National Crime Agency to drive forward this work. We have invested about £86 million to build law enforcement capabilities to respond to cyber-crime, including online fraud. We have strengthened the reporting and intelligence arrangements for fraud. Action Fraud is now the single national reporting centre for fraud and financially motivated cyber-crime. Since 1 April last year, responsibility for Action Fraud rests with the City of London police, bringing it closer to the National Fraud Intelligence Bureau.

The City of London police are also working with the organisation behind the rugby world cup to exclude participants in the ticketing lottery who have links with previous reports of fraud. In October last year, the police reported that they had foiled “hundreds” of fraudulent attempts to gain tickets via the official ballot. The Competition and Markets Authority and trading standards bodies lead consumer law enforcement in this area. Through their hard work, trading standards officers have successfully enforced consumer law—for example, right here in Westminster in reducing the number of consumers being caught out by bogus theatre tickets.

My right hon. Friend the Member for Cardiff Central (Jenny Willott) and Baroness Neville-Rolfe have previously set out the Government’s position. We do not think that there are no problems in this market, but we have to find the best way to tackle them.

In that context, I will set out the difficulties involved in Lords amendment 12. Although it purports to add further transparency requirements to protect consumers, it could have the opposite effect. It would mean that all sellers, whether as a business or as one friend selling to another, would have to provide detailed information about themselves and the ticket they were selling, including the seat number and the booking reference number. That would enable the event organisers to cancel tickets put up for resale, as is intended by the amendment. That would mean that a fan with a spare ticket, perhaps because their friend is ill, could not resell it without risking having all their tickets cancelled. Someone who had bought a resold ticket could arrive at the venue only to be refused entry on that basis. That does not seem very fair or proportionate.

[Stella Creasy]

Will the Minister clarify two things? First, does she think that the amendment applies to individual-to-individual sales? It is actually aimed at the marketplace that secondary ticket sites create. Secondly, if she is worried about resales and tickets being cancelled, will she accept the amendment proposed by the all-party group, which would specifically deal with that to ensure that it does not happen?

[Jo Swinson]

I recognise the attempts made in that amendment, although they do not address all the difficulties that I have outlined. Many people who are unable to attend an event at short notice will find that they have another friend who is happy to go along to it with them, but others will not, so they will use online marketplaces, in which case these issues will apply.

One of the main difficulties with the Lords amendment is that it would require sellers to provide their name. That should raise concerns, because it would include private individuals who could be young people or vulnerable consumers. Perhaps a 14-year-old One Direction fan who is unable to attend the concert she has bought tickets for will want to resell them, and in doing so would have to provide her name online. This is a concern not about ticket sales but about things such as identity theft and the difficulties involved when private individuals have to place their names online. There were over 100,000 reports of ID fraud in 2013, and we do not want to support proposals that could—albeit inadvertently —push that number higher.

[Mr Redwood]

When I asked the hon. Member for Washington and Sunderland West (Mrs Hodgson) in what circumstances a ticket could be cancelled—a crucial point, because there might be legitimate circumstances but also circumstances where it would be unreasonable—I did not feel that I got a sensible answer. The Minister is right to be worried about that lack of precision.

[Jo Swinson]

I thank the right hon. Gentleman for making that point.

[Mrs Hodgson]

This proposal is in no way about making 14-year-olds vulnerable online if they want to sell their ticket. On eBay, people who buy and sell have an identity: we know who we are buying from in the sense of whether they have sold one of something or 1,000 of something. All sorts of mechanisms could be in place to keep the person who is selling on the ticket safe. The Minister is wrong to suggest that this is about allowing event organisers to cancel tickets—that is not the intention at all. It is about transparency. Very few event organisers put “Not for resale” or “Non-transferable” on their tickets. The reason why some do is to try to protect the tickets, but they would not need to if we had this transparency.

19:15

[Jo Swinson]

I thank the hon. Lady for her intervention. I appreciate that her intention might not be to force people to use their names, but unfortunately that is what the Lords amendment says. Many organisations would wish to cancel tickets if they knew exactly which tickets were being resold, and that would not be in consumers’ interests.

The amendment could result in the cancelling of tickets and potential ID theft, which would have the common impact of incentivising the movement of sales to other, less secure websites, perhaps overseas, or to the street touts of whom people already have experience. Having more safety in online marketplaces that behave more responsibly has to be better than pushing things on to foreign, unregulated websites or insecure websites. We want to make sure that consumers are protected. The touts we see outside venues do not offer that protection—not even close to it.

[Nick Smith]

The Minister says that the amendment is too prescriptive. Does she not recognise that the internet spivs who use these botnets are rigging the market and putting up prices for consumers? What is she going to do about these internet spivs who are harvesting tickets against the interests of consumers?

[Jo Swinson]

I will come to enforcement, because I accept that there are issues that need to be looked at, but I want to complete my explanation of the difficulties with amendment 12.

There is a real risk that introducing these additional, more stringent information requirements would go beyond the provisions set out in the consumer rights directive, which EU law does not allow us to do. Compliance with EU law might be further harmed in relation to the technical standards and regulations directive. To comply with that directive, the amendment would have to be notified to the Commission at least three months before the Bill was due to finish its passage through Parliament, meaning that it remained in draft form during that standstill period. We have clearly run out of time for such steps to be taken now. The consequence, which I know the proposers of the amendment would not want, is that amendment 12 could end up being unenforceable if it were passed in its current form.

[Stella Creasy]

It is interesting that the Minister raises the EU directive, which talks about the importance of providing the characteristics of an item that is being sold. If the characteristics of a ticket are not to say where the event is, what time it is, and which seat it is, what does she think would be included under the directive?

[Jo Swinson]

Much of this information already has to be provided under the consumer contracts regulations, and that is absolutely fine. However, amendment 12 goes beyond that—for example, in requiring individuals to give their name. I do not think that people would wish to run the risk that it ended up being unenforceable, but unfortunately that is the legal situation.

The amendment tabled by the hon. Member for Washington and Sunderland West (Mrs Hodgson) talks about stating the face value on the ticket. I understand what she is getting at, but this is not a particularly helpful concept to use in legislation because the face value is not clearly defined. A ticket does not necessarily have just one value—there may be delivery and administration charges, and the seller might not know which of those needed to be included in the face value. If the fan selling the ticket got that wrong, the ticket could end up being cancelled without their knowledge. The value stated on the ticket might not be what the fan paid because of the fan club or early-purchase discounts that have been discussed. People would not want consumers to lose money when they cannot attend an event, and the face value would not always cover what the consumer had actually paid.

There is a more substantive issue of principle. Is it right for Government to tell consumers that they cannot sell items that they have bought second-hand at above the price that they paid for them? If I buy a book for £4.99 and then a very popular film is made of it and a friend offers me £10 for the book, why should the Government get involved and say that it cannot be sold on?

Perhaps unintentionally, the amendment suggests that it is acceptable for an event organiser to cancel tickets that have been sold for above face value. Many hon. Members have addressed the issue of terms and conditions, and some have said that organisations should be able to cancel such tickets, but that would not necessarily always be a fair term. Under the Unfair Terms in Consumer Contracts Regulations 1999, it would be up to a court to decide on a case-by-case basis, but it may not always be a fair term.

There are problems in the market—as is the case in any market—which is why we have listened and are taking action. We agree on many of the issues relating to consumer information, including consumers not knowing where to go to get redress when they have a problem with a resold ticket. Consumers sometimes raise concerns with event organisers when they should approach the online marketplace where they bought the tickets. Of course, that can be inconvenient and frustrating for both the organiser and the fans.

There is also a problem with bulk selling and the people who have been referred to as bedroom touts. Like the organisers, I am not comfortable that there are people who buy tickets as if they were real fans, but with the sole intention of reselling for a profit. I am, therefore, pleased to announce various actions that we have taken. We have been working closely with the secondary ticket marketplaces and continue to have constructive discussions with them and the event organisers.

The online ticket marketplaces have made a range of commitments, as outlined in the letters that have been placed in the Library of the House and are available from the Vote Office in the Lobby. They have committed to providing further information and transparency, to make sure that consumers have appropriate information. The commitment covers much of the information that Lords amendment 12 would require, but it will not breach EU rules, result in unintended consequences for privacy and fraud, or give event organisers the opportunity to cancel tickets put up for resale.

Secondly, the marketplaces have confirmed their commitment to consumer protection. When consumers have a problem with a ticket they have bought on an online marketplace, they should have access to redress. The marketplaces have set out the guarantees they provide to users and how they work to protect consumers. Thirdly, the marketplaces have committed to ensuring that consumers know where to go to get redress by providing the information prominently on their websites. Alongside those common commitments, they have committed to a range of different improvements specific to their individual sites. They are all welcome commitments.

In addition to the action taken by industry at a practical level, we want to ensure that the Government address the issues with an evidence-based approach. The Department for Culture, Media and Sport has today launched an independent review of the effectiveness of the current law—and, indeed, what can be done to improve it. The review will survey enforcement of the current consumer law as it applies to online marketplaces as facilitators of transactions in tickets, and it will assess the challenges of enforcement of that law. We invite the review to suggest how that enforcement could be improved. That will include looking at how to tackle bulk selling, which has been raised by many Members today, and how to effectively enforce the law against traders impersonating consumers in order to evade consumer law.

I have written to trading standards to gather evidence on what more can be done to enforce consumer law as it applies to buyers and sellers of tickets. That will complement the DCMS review. To respond to the hon. Member for Eltham (Clive Efford), I have not yet received a response from trading standards, but I will, of course, keep the House informed.

Given the ongoing commitments to tackle the genuine issues, I urge the House to reject Lords amendment 12 and the amendment to it, and to welcome the package of measures that I have announced.

[Mrs Hodgson]

We have had a wide-ranging debate. If we were to apply the law of averages to the question of which side of the argument the coin would fall, I think it would fall on the side of the Opposition and the hon. Member for Hove (Mike Weatherley) who tabled amendment (a). The debate has been strongly in favour of transparency, apart from the contributions of two hon. Gentleman in the back row—the hon. Members for Shipley (Philip Davies) and for Bury North (Mr Nuttall) —who have been the only Members to put up any argument against that, albeit unconvincingly.

I have listened to what the Minister has had to say and I have seen the lobbying from the four secondary marketing companies. They have obviously spent a fortune on lobbying and I am sad to say that I heard a lot of their arguments in the Minister’s speech. From their point of view, all the money they have spent on lobbying has worked, but the House is not convinced.

There is demonstrable market failure. When the House, the Select Committee and the then Minister looked at the issue 10 years ago, they said we would need to see such failure before requiring legislation. We have now demonstrated that that market failure exists. I know that the Minister has written, very late in the day, to trading standards. I wrote to trading standards years ago and the response I received was that there was no evidence. Transparency would provide the evidence of what is happening.

The four letters from the secondary marketing companies say, at long last, that they will abide by the regulations that the Minister’s colleague, the right hon. Member for Cardiff Central (Jenny Willott), announced last year, but they have already had more than six months to abide by those regulations. I wrote to them to point out that the regulations are now on the statute book, but they have carried on regardless. I have no faith that they will do anything different. That is why we need to legislate. There is cross-party support for that and I hope that Members on both sides of the House will support us in the Lobby. I know that when the Bill goes back to the House of Lords our proposal will have cross-party support, ably led by Lord Moynihan, Lord Clement-Jones and Baroness Grey-Thompson, as well as our own Lord Stevenson. I will push the amendment to the vote.

Question put.

19:26

Division 127

Ayes: 204

---

Labour: 189
Scottish National Party: 6
Conservative: 3
Plaid Cymru: 2
Independent: 2
Democratic Unionist Party: 1
Social Democratic & Labour Party: 1

Noes: 289

---

Conservative: 244
Liberal Democrat: 42
UK Independence Party: 2

Motion made, and Question put, That this House disagrees with Lords amendment 12.—(Jo Swinson.)

19:39

Division 128

Ayes: 290

---

Conservative: 244
Liberal Democrat: 42
UK Independence Party: 2
Independent: 1

Noes: 203

---

Labour: 187
Scottish National Party: 6
Conservative: 5
Plaid Cymru: 2
Democratic Unionist Party: 1
Social Democratic & Labour Party: 1
Independent: 1

Lords amendment 12 disagreed to.

Clause 3

Contracts covered by this Chapter

[Jo Swinson]

I beg to move, That this House agrees with Lords amendment 1.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

With this we may take Lords amendments 2 to 11 and 13 to 78.

[Jo Swinson]

I am delighted that we are bringing the Bill back to the House in such good shape. There was a good debate in the other place and a number of amendments build on and improve the Bill. We listened to concerns in both Houses about consumers being out of pocket if they have to pay to return rejected goods, and as a result we agree that it is sensible to make it clear in the Bill that the trader bears responsibility for the reasonable costs of returning goods that have been rejected by the consumer. That provides clarity and sets a sensible balance between the parties, without causing significant burden to business.

The Bill has always contained a provision that if a consumer exercises the final right to reject, the trader may reduce the refund to take account of the use that the consumer has had of the goods, unless the goods are rejected in the first six months, in which case the general rule is that no deduction may be applied. That is intended to balance the interests of consumers and traders, and for that reason the Bill provides a limited exception to the general six-month rule. However, we understand the concern that that exception could be interpreted too broadly, and in response we have narrowed the exception to address specifically the impact on the motor industry.

The particular nature of motor vehicles may affect the balance between traders’ and consumers’ interests because cars are high-cost items that lose value quickly. They are also complex, so it is more likely that a car will develop two faults in the first six months than, for example, a piece of furniture. The option to make a deduction for use in the first six months is therefore particularly significant for traders in motor vehicles.

The amendments include a power to increase the scope of the exception if appropriate in future. We think that is important, as it is not possible to predict the goods and technologies that may develop. We are conscious of the need to reflect the dynamic nature of digital content. Many forms of digital content are not static products and change over time with updates to software and apps. The Bill provides that the digital content must meet the quality rights—satisfactory quality, being fit for a particular purpose and as described—following an update. We listened to concerns raised in the other place that as originally drafted the requirement could prevent traders from improving digital content or offering flexible products. That outcome would not be good for consumers, so we have clarified that the requirement does not prevent traders from adding new features or enhancing existing features, as long as the original description is still met.

We have amended the provision on digital content that causes damage to a consumer’s device or other digital content. That will allow traders to exclude or restrict their liability under the Bill for damage to the consumer’s device or other digital content, to the extent that it would be fair under the unfair terms provisions in part 2 of the Bill. That provision will apply even to free digital content, specifically when it causes damage and the consumer can show that the trader failed to use reasonable care and skill to prevent the damage occurring. We have clarified the maximum fining penalty that the regulator of premium rate services can impose on non-compliant and rogue operators, and we are making clear that where appropriate and proportionate, the regulator can impose the maximum fine for each contravention of the code. That maximum is £250,000, so in the event of a company making two serious contraventions of the code, the regulator could impose a fine of up to £500,000 if that was considered appropriate and proportionate.

We are determined to tackle the minority of rogue letting agents who offer poor service, and in Committee we added provisions to ensure transparency of letting agent fees, to give consumers the information they want while supporting good letting agents. It is important that that requirement comes into effect as soon as possible to ensure that tenants have certainty over the payments that they make, and for that reason we are putting the enforcement details in the Bill. We are also applying the duty on letting agents to publicise fees in Wales as well as England. That was requested by the Welsh Government and has the added advantage of minimising any cross-border enforcement problems.

Existing legislation requires landlords and letting agents acting on their behalf to protect the tenant’s security deposit. That is the most significant money likely to be held by an agent, but they might hold other money on their client’s behalf, which is why the Government already encourage agents to join client money protection schemes. Public awareness of that is not as high as we would like, so we are also requiring agents to state whether they are a member of a client money protection scheme.

From 1 October last year all letting agents and property managers must belong to one of our three approved redress schemes that provide tenants with an effective way to address complaints. We will now require letting agents to publicise which redress scheme they have joined. Those changes will level the playing field for agents by raising awareness of what best practice looks like, put downward pressure on fees, and provide consumers with the information they need without introducing significant new costs to the sector.

As set out in our 2011 White Paper on higher education, we are providing all higher education students who receive public support with access to external dispute resolution. That reflects the fact that increasingly, new and different providers are offering higher education, not just the traditional university sector, yet only a handful of alternative providers—seven in total—have so far voluntarily joined the Office of the Independent Adjudicator’s complaints handling scheme. We are making it mandatory for alternative providers whose courses are designated for student support to join.

I convey my grateful thanks to the Delegated Powers and Regulatory Reform Committee. It published the outcome of its scrutiny on 11 July 2014, and I was delighted to accept its recommendations that the exercise of certain powers in the Bill be subject to the affirmative resolution procedure, as reflected in the amendments. We also addressed concerns that current provisions for the appointment of the Competition Appeal Tribunal—or CAT—effectively exclude judges from the Scottish Court of Session or the Northern Ireland High Court. We have now ensured that Lord Chief Justices of England, Wales and Northern Ireland, and the Lord President of the Court of Session, may nominate any suitably qualified individual who is already a judge sitting in a relevant court to be deployed as a CAT chair.

We have improved provision for private actions in competition law. First, we are allowing the Competition and Markets Authority—the CMA—to approve an outline of a voluntary redress scheme, and for the business to create a full scheme afterwards. That is part of a wider Government initiative to promote alternative dispute resolution, and it allows responsible businesses who wish to make redress to those they have wronged an avenue to do so. The amendment allows the CMA to impose conditions necessary to set up a full scheme. If those conditions are not complied with when the full scheme is set up, the CMA can withdraw approval or consider a revised scheme.

We are enabling provision to be made for claimants to incur costs if they apply to have the representative to the action removed but lose the application. That is in line with the wider “loser pays” principle that exists in domestic law, and should deter vexatious applications. The Government recognise that during collective proceedings, not all damages are claimed. Therefore the Bill makes provision that the CAT may award unclaimed damages from opt-out collective action proceedings to a prescribed charity—currently the Access to Justice Foundation. Although the body to receive unclaimed damages may be changed, we are ensuring that it must always be a charity.

The Bill consolidates and simplifies important provisions on investigatory powers of consumer law enforcers, and the Government greatly value the vital work that enforcers such as trading standards do in protecting consumers and legitimate businesses. We now require enforcers to give two days’ written notice for routine inspections, and we have set out clear exemptions to that. We are firmly underlining that provision by putting it beyond doubt that notice need be given only for routine inspections, which is when there is no reason to doubt that the business in question is operating properly without any significant breaches of legislation. We have committed to review the practical effect of the notice requirement within two years of the commencement of the Bill. As a result, we are confident that the powers and safeguards strike the right balance between protecting civil liberties, reducing business burdens, and ensuring effective enforcement, and I invite the House to agree with the amendments.

[Stella Creasy]

In the short time available let me say that I think we are looking at a form of alternative dispute resolution this evening, so let me first flag up the positive in terms of the customer service feedback we would like to give to the Government on these Lords amendments: we will be supporting all the Lords amendments. In particular, there are three that are worthy of consideration, following the rule about the six in 10 Britons who believe that politicians should do more in the coming years to help them stay out of financial difficulty.

20:00

On Lords amendment 24, regarding nuisance calls, I pay tribute to the long-standing campaigning work of my right hon. Friend the Member for Doncaster Central (Ms Winterton). It is perhaps apposite, as we come towards election time, for the House to make progress on tackling nuisance calls. I know that many constituents will be concerned about them. We therefore welcome the Lords amendment 24. It follows some of the rulings we were trying to make on tackling the problems caused by nuisance calls. Automated calls and texts make life a misery for many, with 71% of landline consumers saying they have received a live marketing call and 63% a recorded marketing message. The Opposition tabled amendments in his House to strengthen issues around consent to receive calls for marketing purposes. We therefore welcome the fact that the Government have accepted the Lords amendments on making caller line identification mandatory for marketing calls. Marketing calls must now show the number from which the call is coming, which will allow consumers to screen and block the calls they do not want to take. That follows what has happened in Germany and France. We look forward to working with the Government on this issue. There is more to do on nuisance calls, but we welcome the amendment and the Government’s agreement to it.

On Lords amendment 77, as a London MP, I disagree with the Minister completely when she says that it is a small minority of letting agents who are causing problems. In my community alone, stories come to me daily about the problems with letting agent fees and the rip-off charges that consumers face. The impact they have on my local community and on the bank balances of my constituents is heartbreaking. I am not alone in seeing those challenges. Studies from organisations such as Shelter show that some tenants are being charged as much £700 before they even set foot in a property, and that charge can often happen on an annual basis.

We welcome that the Government, under pressure from the Opposition to do something about regulating the private rented sector, introduced proposals on Report. However, they still fall short of what we need to do. In particular, we need to learn the lessons from the hon. Lady’s constituency and from Scotland on the impact of banning fees for tenants. We need to recognise that there is a simple conflict of interest: is the letting agent acting for the tenant or the landlord when it charges both of them for the price of a credit check? An agent cannot act for both parties in the same sale. We have put forward proposals to outlaw this form of conflict of interest. I am disappointed that the Government still oppose those measures and I hope we will make progress in tackling the private rented sector. Nevertheless, it is welcome that the Government have recognised that transparency of fees is a start towards the process of recognising just how much people in the private rented sector are being ripped off by agents, and that this is not a fair market as a result.

On private colleges and their access to alternative dispute resolution, Lords amendment 50 reflects perhaps the biggest Pandora’s box that the Bill has opened: the rights of consumers in the public sector. In debating the Bill, the previous Minister, the right hon. Member for Cardiff Central (Jenny Willott), admitted that the law would apply to all contracts covered in the public and private sector where there are agreements in which

“there is a promise to do something in return for a valuable benefit known as consideration.”––[Official Report, Consumer Rights Public Bill Committee, 6 March 2014; c. 517.]

She highlighted that that would be in terms of paying tuition fees, personal care budgets and possibly a number of other areas. We believe it would proffer a whole range of contracts within the public sector. The Minister at the time was confused about whether students would become consumers. I hope that we have now clarified that matter. Certainly, the Government’s acceptance of the amendments on extending the rights to alternative dispute resolution to those who are students of private colleges is welcome, in that it recognises that students paying tuition fees are consumers. However, it is unclear whether the Government have given any meaningful thought to what extending the consumer rights framework to the public sector will mean. We are deeply concerned as a result. We welcome the Government’s adoption of our amendments—I pay tribute to the work done by Baroness Hayter on extending access to the Office of the Independent Adjudicator for Higher Education—but I put on record that we are deeply concerned about this proposed legislation as it moves forward. We hope that the Government will think again, because this is a once-in-a-lifetime opportunity. In our lifetimes, there has not been any other consumer legislation in this way.

On ending conflicts of interest both online and offline, we hope the Minister, in the time she has left in the Department—who knows what will happen after May?—will look again at whether we can do more to protect consumers who are being ripped off.

The Bill has singularly failed to do anything about the personal debt crisis now facing our country. It could have done so much to tackle the rip-off charges we have seen in the consumer credit industry. There are already 9 million people who are over-indebted. That is before any rise in interest rates, which may well happen this year. The Government refuse to do anything to end logbook loans or the scandal of making people in debt pay for the privilege of being assisted out of it, or the mis-selling of debt management. The Government have done little either on alternative dispute resolution. The Government’s proposals would do little to provide a proper system. I draw the attention of the Minister to the comments from the new retail ombudsman, which show the frustration within the industry on these issues. We have put forward proposals to license ombudsmen to finally give real teeth and meaning to the concept of ombudsman. I hope the Minister will look again at this issue. She was away when the issue was first raised, but I hope she will look again at how we can implement the European legislation.

I hope the Minister will also look at public service complaints. It is right that we give people in the public sector clear rights, but those rights need to be enforced. The lack of advice and information in the public sector, the growing evidence that numbers of people in the public sector, particularly vulnerable people, do not complain because of fear of reprisal, and the uniquely different relationship we have to the public sector as both producers and consumers all call for a far more rigorous process than the Bill has allowed for looking at the impact that will have. We may now see students calling to lecturers to say that they did not receive a lecture in a reasonable time frame at a reasonable standard. They will have the right to complain, but it will be those, I would wager, in the law department who will use these rights—they will not be equally distributed.

The Minister may laugh, but what if this happens with personal care budgets? Some vulnerable people may be able to complain, but others will not. There is a risk that, in introducing the Bill without looking at how we ensure that everybody and not just those with sharp elbows can use this legislation, we will increase inequality. The Opposition are keen to see consumer rights extended, but we do not want to do so at the risk of creating some who are more able than others to access their rights. We are therefore not looking for a repeat performance. We believe that when the public adjudicate—they are the ombudsmen after all—they will decide that the failure to act on these very real issues and the opportunities missed mean that the Bill is a faulty product and that nothing less than a complete replacement in May 2015 will do.

[Jo Swinson]

I thank the hon. Lady for her comments. She had some well-crafted lines and I disagree with her final remarks, but she raises an important point about information for consumers whether in the public or private sector. My view is clear: passing the Bill to enshrine those rights is not in itself sufficient. It is vital that people know how to use these rights in a practical way. That is why the Department has been working with consumer information bodies such as Citizens Advice and Which?, and retailers and other groups, to try to ensure that there will be sound, straightforward and easy to understand information that will be readily available to consumers, whether at the point of sale or where they have a problem, through a variety of different methods, and whether online or through more traditional means. Consumer confidence, which will underline the improvements in the economy, is crucial and will ensure that this landmark legislation, which the hon. Lady rightly highlights as a once-in-a-generation opportunity, will truly deliver much more confident consumers who are able to enforce their rights. That will help to ensure that the economy benefits and is much stronger.

20:00

Three hours having elapsed since the commencement of proceedings on consideration of Lords amendments, the debate was interrupted (Programme Order, this day).

The Deputy Speaker put forthwith the Question already proposed from the Chair (Standing Order No. 83F), That this House agrees with Lords amendment 1.

Question agreed to.

Lords amendment 1 accordingly agreed to.

The Deputy Speaker then put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83F).

Lords amendments 2 to 11 and 13 to 78 agreed to, with Commons financial privileges waived in respect of Lords amendments 24, 38, 39 and 77.

Motion made, and Question put forthwith (Standing Order No. 83H), That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendment;

That Stephen Doughty, Matthew Hancock, Toby Perkins, Mel Stride, and Ian Swales be members of the Committee;

That Matthew Hancock be the Chair of the Committee;

That three be the quorum of the Committee;

That the Committee do withdraw immediately.—(Mel Stride.)

Question agreed to.

Committee to withdraw immediately; reason to be reported and communicated to the Lords.

Consumer Rights Bill (Carry-Over Extension)

Monday 12th January 2015 Commons Chamber

20:10

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

I beg to move,

That the period on the expiry of which proceedings on the Consumer Rights Bill shall lapse in pursuance of paragraph (13) of Standing Order No. 80A shall be extended by 67 days until 30 March 2015.

We have this afternoon and early evening considered the amendments made to the Bill in the other place, and the result of our deliberations now needs to be considered there. We are mindful of the fact that the Bill was introduced in this House on 23 January 2014. As set out in Standing Order No. 80A, as a carry-over Bill, it will fall if it does not receive Royal Assent within 12 months of its First Reading, and that date is now approaching.

Given the strong support for the important measures contained in the Bill, it is only right for us to safeguard against this. The Bill is the biggest overhaul of consumer rights for a generation. It sets out a simple, modern framework of consumer rights that will promote growth through confident consumers driving innovation and more competitive markets. I therefore trust that hon. Members will support me by agreeing to the motion.

20:11

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I simply rise to agree that this is an important Bill, and we are looking forward to progress being made and the Government finally agreeing with us in the Lords on ticket touting. We look forward to its return to this House for us to approve it.

[Mr John Spellar (Warley) (Lab)]

rose—

[Madam Deputy Speaker (Dame Dawn Primarolo)]

I call—[Hon. Members: “John Spellar”.] Oh, yes. I call John Spellar.

20:12

[Mr Spellar]

Thank you, Madam Deputy Speaker. Those days we spent in Washington together were clearly—

[Madam Deputy Speaker]

Order. Mr Spellar, this is not the time to tell secrets. My apologies for temporarily not calling you correctly to speak.

[Mr Spellar]

I understand, Madam Deputy Speaker. It is an age-related thing.

I congratulate the Minister on moving the extension right up to the end of her period in Parliament. We wish her well in her future career. As she and the Opposition spokesperson said, this is an important Bill, in which case one wonders why the Government have taken so long to bring it to fruition on the statute book. What is their problem? It is not as though we are burdened with business. Week after week, the Government are filling time in this Parliament—not just since we came back after the Christmas holiday, but certainly since we came back in September. What have the Government been doing and why are they taking so long to pass the Bill? This Parliament has rightly now been described as a zombie Parliament.

[Mr Kevan Jones (North Durham) (Lab)]

Does my right hon. Friend agree that since the introduction of fixed five-year Parliaments, there is no excuse for not knowing when the general election will be, meaning that the proper programming of Bills should be a piece of cake for the Government?

[Mr Spellar]

My hon. Friend is exactly right; it should be a piece of cake for any properly run Administration. We realise that there are substantial internal tensions in the Government. That is why several private Members’ Bills are held up in the proceedings, and why other important issues, such as one dear to his heart in his role as deputy defence spokesman for the Opposition—the failure to advance the programme on the renewal of the Trident submarine programme—are also held up. On those matters, we understand, although we do not agree, with the delay. The hon. Member for Wellingborough (Mr Bone) has several times drawn to the attention of the House and the Prime Minister some of the internal contradictions of the coalition. We understand those problems.

What are the problems with the Bill before us? There might be differences between the Government and the Opposition, as we saw with the Government’s disgraceful support for the ticket touts against the interests of supporters and fans of sport, music and the arts, but there are no internal differences to hold up the progress of the Bill. That brings us to the underlying point: the Government’s programme is in a bit of mess. We have to consider this point, because it is important for the constitutional arrangements of the House. Although there are strong differences of opinion within the Chamber, things really fall down when we have a Government who cannot handle their own business, do not know what they are doing and—equally important, although for some this is a more trivial issue—do not understand the dynamic of Parliament, not just in this House but in the relationship between the two Houses. We are seeing many examples of that.

It might be that the Minister can give us some clues as to where the problem lies. Who is in charge of Government business? Who should be steering the Bill through Parliament, and why have they failed so singularly to do so inside a year—a very long time? Normally, when there is good will in the House—as the Minister rightly said, the Bill has broad approval and is important—Bills can progress at a reasonable pace. Have there been unreasonable obstacles from the Opposition or within the coalition? Or is it that the Government are asleep on the job?

Many Members, including Back-Bench Government Members, have raised concerns about that issue. It is clear that the Prime Minister and the crew at No. 10 are not in charge of Government business. We have seen in the newspapers and heard personally many complaints from Members about his “chillaxed” approach, and we remember the comments about the fish rotting from the head down. He makes a virtue of his “chillaxed” approach to policy and, in particular, to administration and organisation—those dull details that actually ensure that government and Parliament run properly.

[Mr Peter Bone (Wellingborough) (Con)]

The right hon. Gentleman is making an interesting speech. It seems to me that he is arguing for a business of the House committee, which I would of course support him in.

[Mr Spellar]

Most certainly not. I am arguing for an effective Government, but the hon. Gentleman makes an interesting observation, because he is really saying that the driver behind his business of the House committee is the failure of his own Government. He has to consider whether that is a failure arising from the particular circumstances and structure of this unholy coalition, or whether it is down to the deficiencies of the individuals concerned. I think it is probably both, but even within this alliance, which I know he is deeply unhappy with and would like to see ended—it was Government Members who voted for the five-year fixed-term parliaments, which has ossified this Parliament—if there were people there who had some grip on the situation, matters would be improved. Either way, it is clear that the Prime Minister and his fairly undistinguished staff at No. 10 have not got a grip on the situation. Within the House, of course, under all Governments, including much better run Governments, the Leader of the House and the Chief Whip have played key roles, so let us deal with them in turn, starting with the Leader of the House.

I say without any sense of irony that the right hon. Member for Richmond (Yorks) (Mr Hague) was a very good Foreign Secretary. I did not always agree with all his policy, but he was an effective Foreign Secretary who advanced a number of important and noble causes. I pay tribute to him for the redirection and reorientation of the Foreign Office towards using our embassies more to ensure that they sold British goods and services and represented British interests. I am pleased to say, too—I pay tribute again—that he made sure that embassy staff drove British-made cars.

The Leader of the House is also an entertaining speaker. On a day when he is not bored, he is an extremely effective speaker and very fine writer, too. I suspect he will use those talents in the future, and I think it will be a loss both to this House and to the Conservative party when he stands down voluntarily—unlike the Minister, who will be standing down involuntarily—at the next general election.

However, notwithstanding all those qualities, I do not believe that organisation and boring detail are top of the right hon. Gentleman’s agenda, so I do not think that the Leader of the House—in this as in a number of other facets of this zombie Parliament—has got a grip on the pace of the programme of the Government’s legislation.

The Chief Whip is in a slightly different position, along with the deputy Chief Whip, although I see a lack of organisation in what they do. We have seen many examples of them rushing around during votes when they clearly do not have a clue what is going on. They have not been speaking truth unto power, either, when it comes to what can or cannot be done within this House, so they bear some degree of responsibility for what has happened.

We are having to spend some time this evening examining these issues not just because of one Bill. Rather, it is because of a systemic problem in the Government that is, frankly, not helping Parliament, not helping proper debate, not helping the progress of legislation and not helping the bringing forward of measures to deal with the problems facing this country. Thus, I am pleased to say, we now have a useful opportunity to examine all that, and I hope that my hon. Friend the Member for North Durham will be able to deal with it in more detail in his contribution.

20:23

[Mr Kevan Jones (North Durham) (Lab)]

It is a privilege to follow my right hon. Friend the Member for Warley (Mr Spellar). I agree with him that this is an important Bill, although, as my hon. Friend the Member for Walthamstow (Stella Creasy) stated, much should have been in it that is not in it, so it has been a missed opportunity. I give credit to my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) and others who have argued for greater transparency over ticket touts. I cannot for the life of me think why the Government think there are votes to be gained from ticket touts rather than from the mass of the public who buy tickets. My hon. Friend helpfully highlighted cases where people had clearly been ripped off or misled under the present situation.

The motion before us relates to paragraph (13) of Standing Order 80A, which states:

“Proceedings on a bill ordered to be carried over to the next Session of Parliament shall lapse on the expiry of the period of twelve months from the date of its first reading in this House and the bill shall be laid aside unless the House shall order, in pursuance of a motion under paragraph (14), that proceedings on the bill be extended for a specified period.”

This Bill had its First Reading on 21 January 2004, as the Minister mentioned—[Interruption.] I meant 2014.

Very little legislation has gone through Parliament over the past year. Another habit of this Government is trying to push things through the House very quickly, with limited days allotted for the scrutiny of legislation, which means that the other place has more time to examine a Bill at leisure. I have a fundamental objection to that, because this House is the supreme body for framing and scrutinising legislation and for tabling amendments. The rush to get everything through this House as quickly as possible has left us with what has been described in many newspapers as a “zombie Session”. The programme for next week and subsequent weeks shows that very few votes on legislation are going to be provided for. We are waiting on their lordships’ House to return legislation that has speedily been channelled through this House.

I do not believe it right that an amendment such as the one debated today to deal with ticket touts should have been agreed in the other place. It should have been agreed here. The Government should have taken more time to consider it in detail and to ensure that hon. Members understood the implications of what they had done. We have seen legislation—badly drafted legislation—rushed through this House time and again during this Parliament; it has then gone to the other place and been filleted like a fish.

[Mr Spellar]

My hon. Friend draws attention to a further aspect that causes difficulty. In the initial enthusiasm of the coalition, a number of ill thought through constitutional changes were brought through—changing the date of the Queen’s Speech and the five-year Parliament, for example. However, no consideration was given to the natural rhythm of legislation in this Parliament, either on a sessional or a whole-Parliament basis. In both cases, the coalition has run into considerable difficulties in respect of running through legislation in this place and of the inter-relationship between this place and the other place.

[Mr Jones]

I agree with my right hon. Friend. After passing the Fixed-term Parliaments Act 2011 for five-year Parliaments, it should have been easier for the Government to programme their business motions through this House. At the time of the last general election, the Prime Minister talked freely about reducing the cost of politics, but since then he has absolutely stuffed the other place with new peers and peeresses. He is obviously trying to ensure that the Conservatives maintain their in-built advantage in the other place.

It is clear that the whipping system in the other place is not working very well, which is laughable. Either Members who have just been ennobled are not turning up or other Members are rebellious, because they are clearly not voting along Government lines on every issue. The amendment on ticket-touting, for example, was tabled by a Conservative peer.

A five-year Parliament ought to ensure that programmes are completed, but motions such as this mean that Bills are stuck in the other place and we must wait for them to come back. That applies to some important Bills, such as the Armed Forces (Service Complaints and Financial Assistance) Bill, which would create an armed forces ombudsman and must be keenly awaited by members of our armed forces. It has been argued that there has not been enough time during the current legislative Session, but we should bear in mind the number of Opposition days and Thursdays devoted to business tabled by the Backbench Business Committee. I mean no disrespect to any of those debates, but space could have been made for debates on important Bills.

Moreover, during the current Parliament an unprecedented number of Committee stages have been dealt with on the Floor of the House rather than in Committee Rooms upstairs. That has used up days that could have been devoted to more lengthy consideration of Bills.

[Mr Bone]

The hon. Gentleman is making one of his interesting speeches, but surely he is not suggesting that Committee stages of constitutional measures that have been dealt with on the Floor of the House should have been dealt with upstairs.

[Mr Jones]

No, I am not. I cannot think of an example at the moment, but a number of Committee stages that would previously have been dealt with upstairs have been dealt with on the Floor of the House. That leads us to ask whether the Government are simply trying to fill up time on the Floor of the House—and I think that that is exactly what they have been doing.

As I said at the beginning of my speech, this is an important Bill, and it will clearly be given a great deal more scrutiny and attention in the other place than it will be given here. Given the current logjam in the other place, we shall have a very thin February and March as we wait for Bills to return to us. There is also the broader issue of the reputation of the House of Commons. I do not think that headlines about, for instance, zombie Parliaments or MPs coming to the House on only two days a week do our reputation any good. We cannot expect the public to understand the minutiae of parliamentary timetabling, especially given the incompetent way in which the Government are handling it.

[Mr Spellar]

My hon. Friend may recall press reports about a memorandum sent by the Government Chief Whip to his Members of Parliament, indicating that they were unlikely to be needed on Thursdays and, possibly, Mondays, and therefore, effectively, they had to be here on only two days a week. In fact, this level of inactivity was being “programmed in” by the Chief Whip, partly because of failure to run the business, but also for party political purposes.

[Mr Jones]

That is an interesting point. I do remember seeing press reports about the letter sent to Conservative Back Benchers. If I thought that the Chief Whip and the Leader of the House were well organised enough, I would say that there was obviously a plot, but I do not think that there was. I think that they have found themselves with time on their hands, and Conservative Back Benchers have been told not to come here on Mondays or Thursdays.

[Mr Bone]

May I state categorically that I have never received such a letter from the Chief Whip?

[Mr Spellar]

He does not include the hon. Gentleman.

[Mr Bone]

He would prefer me to stay away much more often.

[Mr Jones]

That does not surprise me, given the hon. Gentleman’s record. I should not have thought that he was one of those whom the Chief Whip would hold close to his bosom in terms of communication. I imagine that if there was room for only one more person in a lifeboat, the Chief Whip would not get into it if the hon. Gentleman was there.

The point is that we have ended up with a slack programme, and the progress of Bills, including this Bill, depends on how sedately or otherwise the other place deals with them. Certain important Bills, such as this and the Armed Forces (Service Complaints and Financial Assistance) Bill, could be delayed until the wash-up, and could then fall. As was pointed out by my hon. Friend the Member for Walthamstow, provisions in this Bill that are actually welcome could end up being dealt with in the usual meat-grinder sessions at the end when it is decided what can and cannot be agreed. I do not think that that would be satisfactory from the point of view of those who have worked hard to ensure that the Bill is passed, or when it comes to ensuring that it is scrutinised in a proper and just fashion. I note that there are other carry-over motions on the Order Paper, and I suspect there will be others, because it is within the Government’s remit to introduce them. As I said, under paragraph (13) of the Standing Order that has been invoked, paragraph (14) comes into effect, which states:

“A motion may be made by a Minister of the Crown to extend for a specified period proceedings on a Bill which would otherwise lapse under paragraph (13), and any such motion

(a) may contain provisions amending or supplementing a programme order in respect of the Bill;

(b) may be proceeded with, though opposed, after the moment of interruption”.

I agree with my right hon. Friend the Member for Warley (Mr Spellar) that this is not about the Government having a procedural or a timetabling Committee of the House for Bills. A competent Government should be able to put forward a legislative programme for a Session that ensures not only that they get their Bills through, but that it is done in a timely fashion and the Bills get proper scrutiny in this place. Clearly, now that they have discovered paragraph (13), it is going to be used far more to extend consideration of Bills.

The time period goes up to 30 March and it will be interesting to see what timetable there will be and whether or not, and when, we will get this Bill back from the other place. On the transparency issue around ticket touting, for example, Lord Moynihan was clear on the radio this morning that he would listen to what this House said, but there is a good chance that the Bill will be voted on again in the other place and come back to us.

The issue is whether the Conservative Whips Office in the House of Lords can get all these new peers whom the Prime Minister has added out of their sleepy slumber and ensure that they attend and vote in support of the Government. Their record so far is not very good. There is even a question as to whether they can be relied on to vote the right way, because there are Cross Benchers and Conservative peers who support the cause of greater transparency for the consumer which my hon. Friend the Member for Washington and Sunderland West (Mrs Hodgson) has championed for many years. If the Bill comes back, we will get into a ping-pong session, and given that we are now getting a logjam of Bills, what real in-depth discussion will we have of any amendments that are brought back?

That brings us back to my central point about the role of this House as opposed to that of the other place. I could be unfair on the Government and think that all along, with the coalition in place, their plan and the Prime Minister’s plan was to rush everything through this House as quickly as possible, so that it gets to the other place where, because he has appointed so many new Conservative peers, he now has an in-built majority to steamroller through whatever he wants.

We have seen some examples of that. The coalition love-days of the rose garden at No. 10 in 2010 have now clearly gone sour. The coalition was described then as a shotgun marriage, and it has clearly not lasted the course. I know of occasions when internal tensions in the coalition have led to legislation being dropped—the latest example being the issues around surveillance on the internet, where there appears to be a clear divide between the position of the Liberal Democrats and that of the Conservative part of the coalition. It is important that we get legislation through in time, and we cannot second-guess the internal politics of the coalition. Let us remember the rights of this House. There has been a lot of talk about broken politics, and the—

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. The hon. Gentleman is now drifting a long way from the subject before us. We are not discussing the internal politics of the coalition; we are concentrating on the proposal for the carry-over extension of the Bill, and the hon. Gentleman needs to return to that.

[Mr Jones]

As always, Madam Deputy Speaker, I shall heed your advice. The important point, however, is that a very strange dynamic has been created during this Parliament. Bills have been announced and put forward, and the first was the Bill relating to the Boundary Commission, which subsequently fell apart. That also happened to a House of Lords Bill. I use those as an example—

[Madam Deputy Speaker]

Order. Mr Jones, it is fascinating to hear your explanation of why you should continue to make the points that I have asked you not to make, but I am now directing you to return to the subject before us. Members might be entertained by your contribution, but it is my job to keep you in order. You are currently out of order, so please return to the subject.

[Mr Jones]

I am quite aware of that, and I apologise for digressing into areas that are beyond the scope of the Bill.

The central point is that this Government have not been able to programme their Bills properly during this Parliament. Depending on where this Bill gets to in the stack of Bills in the other place, it could end up in the wash-up. If Lord Moynihan presses these matters to a vote again, as he said on the radio this morning that he would, we shall have ping-pong and this Bill and others could end up either being filleted or in a ping-pong session. That could result in important legislation not being put forward. The use of this Standing Order shows that the Government have failed in one of their basic tasks—that of timetabling their legislation in this House. It is an indictment of the incompetent and arrogant way in which they have acted.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Does not this show precisely the reverse? Does not it show the ambition and forthrightness of the Government in having such a busy programme, even at the end of five years, that they need an extra 67 days? That dynamism is something of which the Government should be proud.

[Mr Jones]

I am glad I have woken the hon. Gentleman from his slumbers. In fact, the opposite is the case. The Government have had a year in which to get the Bill through, yet they have had to argue for an extension to finish the process for this and other legislation. They cannot hide behind the argument that there has not been enough time to consider the Bill; there has been plenty of time. This Government have an inbuilt practice of trying to get Bills through the House as quickly as possible, which is why they have ended up with a logjam in the other place. That is not good for this House, because the Bills do not receive proper scrutiny. This House should be the place in which amendments are tabled and discussed.

During this Parliament, we have seen some very badly drafted Bills. They have not only needed amendment in the other place but come back to this House, at which point the Government themselves have had to table reams and reams of amendments. That is about bad drafting of legislation. It says exactly the opposite to what the hon. Gentleman suggests, in that if the Government cannot get it through in a year, that shows either incompetence or, as I said, a strategy whereby they were trying to push everything to the other place so that when they have their in-built majority there they can bang it through as quickly as possible.

That does this House, or how the public see it, no favours. They do not understand the effectiveness of the other place and how it changes Bills. This House should be where amendments are introduced and things are changed. Without that, all we are doing is rubber-stamping the Government’s legislation—that should not be the position. Members should propose amendments and argue against badly drafted legislation and against things they feel strongly about, as on occasion have the hon. Members for Wellingborough (Mr Bone) and for North East Somerset (Jacob Rees-Mogg).

I think that we will be seeing more of these carry-over motions, which is an indictment of how this Government have been managing legislation. The Procedure Committee needs to look at this practice in order to ensure in future that this House is the body that not only drafts legislation, but ensures that it receives proper scrutiny.

Question put and agreed to.

Business without Debate

Monday 12th January 2015 Commons Chamber

Delegated Legislation (Committees)

Ordered,

That the Motions in the name of Sir Tony Baldry relating to the Care of Churches and Ecclesiastical Jurisdiction (Amendment) Measure, the Ecclesiastical Property Measure and the Church of England (Pensions) (Amendment) Measure shall be treated as if they related to instruments subject to the provisions of Standing Order No. 118 (Delegated Legislation Committees) in respect of which notice has been given that the instruments be approved.—(Mr Wallace.)

Delegated Legislation

Monday 12th January 2015 Commons Chamber

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

Criminal Law

That the draft Youth Justice Board for England and Wales (Amendment of Functions) Order 2014, which was laid before this House on 27 November, be approved.—(Mr Wallace.)

Question agreed to.

Business of the House

Monday 12th January 2015 Commons Chamber

Ordered,

That at the sitting on Tuesday 13 January–

(1) notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), debate on the Motion in the name of the Chancellor of the Exchequer relating to the Charter for Budget Responsibility may continue for up to three hours, after which the Speaker shall put the Question, if it has not already been disposed of; and Standing Order No. 41A (Deferred divisions) shall not apply; and

(2) Standing Order No. 41A (Deferred divisions) shall not apply to the Motion in the name of Secretary Patrick McLoughlin relating to the National Policy Statement for National Networks.—(Mr Wallace.)

Corby Fire Services

Monday 12th January 2015 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Mr Wallace.)

20:47

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

I am very pleased to have this opportunity today to lead a special debate on the future of fire services in Corby and east Northamptonshire. My constituents are extremely concerned about plans drawn up by the current administration at Northamptonshire county council to scrap one of Corby’s two fire engines and cut the firefighter team at the station, which serves Corby and much of east Northamptonshire. The county council is planning reductions in the Northamptonshire fire and rescue service operating budget of £1.6 million over three years—that is equivalent to a cut of 7.5% in the current operating budget. That is additional to cuts in excess of £1 million already implemented under this Government, which resulted in a loss of 31 posts. The strategy for delivering these cuts is simple: cut at Corby; cut an engine; and cut the crew

The council has been running a consultation, which closes today, in which it is not considering cuts to services in any other part of the county—the impact is all on Corby. A one-option consultation is not a consultation at all; it is a public relations exercise. The council’s plans will take out a standard fire appliance, and the associated crew, from Corby and replace this with a new Cobra intervention vehicle crewed by only two firefighters. I have discussed this with Martyn Emberson, head of the fire and rescue service in the county, who has confirmed that these changes would not add any new capability to Corby—Cobra-based technology can already be deployed from the Corby station, as I have seen for myself; would significantly deplete manning levels at the station; and would result in a degradation of the response service locally. The key concern about these changes is that if firefighters arrive on the scene of a major fire, they may face a delay of up to 20 minutes before they can enter the building.

The strength of public opinion against the plans is huge. Thousands of people have signed an online petition organised by local firefighters. Over the past few weeks, more than 200 people have responded to my appeal for input into tonight’s speech. I want the Minister to hear from my constituents in their own words. I hope that she will listen to them and agree to meet me, local firefighters and the county council to see whether we can find an alternative to these current plans.

I appreciate that money is tight for local councils, but the county council has not explored other options. Firefighters tell me that there are other ways of making savings, but the county council is not interested in exploring them.

I want to start by saying that my constituents really appreciate the excellent work of the firefighters who cover Corby and east Northamptonshire. Graham Scotney says:

“Our firefighters do an amazing job from the front line, fire fighting and accident rescue through to fire prevention and education.”

Terry Lester says firefighters

“attend many emergency situations such as road traffic accidents, plane crashes, train crashes, building or scaffolding collapse, all aspects of flooding, chemical spills, releasing people trapped in machinery and rescuing animals.”

Lyn Simnett says simply:

“We must protect them as they protect us.”

Of the county council’s proposals, Anne Brown tells me that they are “bloomin’ terrible”. “Disgusting,” say Bryan Robson, Janet Keeney, Liz McCormick, Dave Holt and Robert Nelson. “Uncannily stupid,” says Ian Murrie. Paul Cross calls the plans “insane”. Kenny Keys, Albin Wallace and Lisa Chong say the plans are a “disgrace”. Tim Wadley feels that the proposed cuts are “putting lives at risk”, a view that is shared by Robert Anderson.

David Laws says the proposal is “ludicrous”. As a Corby resident for more than 60 years, he told me that he objects

“strongly to this ridiculous idea”.

Julie Kelly says fire cover is not a “nice to have” but a resource that is there to save lives. “This is just stupidity”, says Michael Gray. Jean Addison and John Ashman both say that the council’s proposals are “short-sighted”. Christine Larkman says it is

“repulsive to put money before lives.”

Mark Lonnie says:

“Less sometimes really does mean less and that is exactly what’s being offered.”

Ian Foreman is “very troubled” by the plans. Tim Hawkes says that the plans are “incompetent and inept”.

“Ridiculous”, say Tom Cardwell and George Jenkins. Damian Roche agreed, saying:

“It is a ridiculous cut to make that endangers the lives of the residents of Corby and surrounding villages.”

Chris Godbold questions whether the idea has been thought through. I agree with Kim Denham when she says that there has been a “lack of sound judgment”. Shayna Denson said:

“This is crazy. The service should be expanded, not cut.”

“Idiotic”, says Valerie Walker. Keith Jenkinson said:

“It shows a lack of civic responsibility.”

Paul Grey, Niell McAllister and Samantha Timms say the idea is “ludicrous”. Ronald Aston calls it, “scandalous”. Ann Huntington says:

“It's iniquitous, terrible and a travesty.”

It makes no sense, says Robert Burridge. “Terrible”, says Jayne Gardiner. “A crazy idea”, agrees Sally Barlow.

Many commented that the cuts come at a time when Corby is the fastest-growing town in the UK with the highest birth rate in England. Helen Moore mentioned the new development at Priors Hall. Paul Young highlighted the growth of the Oakley Vale area.

Many of my constituents believe that rather than looking to cut Corby’s fire service, we should be talking about how we meet the needs of an expanding population.

Those points are re-enforced by John Walker, Elizabeth Mullen, Madeline Whiteman, Joseph Burlington, Geraldine Oliff, Tony Killem, Kelly Farrar, Irene Hamilton, Jane Parsell, Kirsty Lane, Gail Corby, Anita Few, Ian Duncan and others who contacted me. The others who expressed a view included: Trevor Haynes, James Campbell, Anita Hambly, Simon Neves, Melissa Roberts, Margaret Browning, Linda Bingham, Ann Kieran, Stan Gemmell, Barry Tempest, Sue Clews, David Smith and Wendy Finn. All of them took the time to share their views. Andrew Tyre says that, if anything, we need possibly more cover, not less.

Corby’s firefighters had a busy time over Christmas, with a large fire in the town’s shopping centre, along with a number of other serious incidents. Fortunately there were no fatalities, but my constituents are worried that cuts to the service will put at risk the safety of the public and the firefighters. Bernadette O'Keefe says:

“People's lives will be put at risk.”

Vicky Sidwell says:

“No amount of money saved would be worth risking people’s lives for.”

Helga Ramsay told me that

“the prospect of the time taken to reach a fire being extended is unacceptable.”

David Hamilton says:

“They waffle about it not endangering lives and the service being maintained... I don’t understand how this can be the case”,

and he is right to be sceptical. Debbie Graham thinks that this will put “people’s lives at risk”.

Mel Munton, the manager of one of Hanover’s sheltered schemes in Corby, said:

“It concerns me very much that because of this decision if ever a major fire emergency happened here at Swan Gardens many of my residents could be put in danger, serious danger, many being wheelchair bound or with poor mobility could lose their lives. The twenty minute wait for another fire tender to arrive could be disastrous”.

Michael May says the plans put “costs before essential services”. Paul Balmer says:

“If we saved money but lost ONE life then we would have saved nothing”.

John Holton says that the reason for maintaining cover is simple—“it saves lives”.

Lives will be particularly at risk when there is a large incident because, as Bob Scott points out, there will be fewer firefighters, or when two or more incidents require a fire service response at the same time. Susan Bird asks what will happen when two fires occur at once, and Jeff May asks:

“What happens if the fire service is called to two incidents in Corby at the same time?”

Paul Garvie stresses that a

“fire can take hold and kill in minutes so every second counts”,

and that that “cannot be allowed”.

Danny McAvoy highlights that the plans will leave Corby with only two firefighters to deal with some incidents. Mark Browning raises concerns about the ability of firefighters to respond should more than one fire break out in the town. Sonia Barker says:

“I think it is ridiculous cutting the fire services to just one engine. If there was a very major fire and only one to go out to the call you would have to get more from around the county and that will be losing time and make things even harder”.

This is happening at a time when many of the retained fire engines in nearby towns are frequently not running or not available. Corby’s two engines provide resilience for the whole of north Northamptonshire. Taking that away will put lives and firefighters at risk not only in my constituency, but in neighbouring areas.

The Corby fire service covers many villages surrounding the town. My constituents in rural areas are rightly concerned about the plans. Jacqueline Kay highlights the fact that residents in her village, Gretton, “have not been asked” about how the plans will affect them. Lloyd Caddock asks

“how long will it take to get to villages for serious fires”?

John Melhuish points out that lots of rural areas depend on the Corby fire service, as do areas right across from the border of Lincolnshire and to the border of Cambridgeshire.

Skip Sortland is worried that

“if they can get rid of a second engine in Corby they can then reduce the fire services in others parts of the county just as easy”.

The truth is that they are not even considering what options there are in the rest of the county; this one-option consultation is all focused on Corby.

Darren Whitaker believes the cuts

“will clearly affect the level of protection that Corby and its surrounding villages require and deserve”.

Peter McDonald says:

“Bearing in mind that Corby station provides cover for a vast amount of rural communities in the North East of the county it is not only the people of Corby whose lives are being jeopardised. It’s a disgrace to hoodwink the general public by saying they are replacing an appliance with new high tech fire-fighting equipment”.

Alison Tootle says that this is a

“real problem for Corby and the surrounding villages”,

and she is right.

Many people have commented to me on the impact the plans will have on Corby’s business community. Marian Anderson says:

“A cut in fire service personnel will undermine the attractiveness of Corby as a destination for business and put lives at risk”.

Dave Fox, a resident of east Northamptonshire, highlights the fact that Corby is a highly “commercially productive” sector of the county. Indeed, Corby has been identified as the manufacturing capital of the country, which has to be weighed as a factor in assessing fire risk.

Janice Harper points out that if

“crews are unable to take swift action there is a cost to businesses and in consequence to the community. If businesses are unable to continue it means loss of jobs and damages the local economy”.

William Renwick, who told me that he was responsible for finalising a report about risk in fire services in Northamptonshire in 1985, says that removing

“one pump and replacing it with a questionable vehicle will place the industry and commerce of Corby at risk”.

Robert Thorogood, a business owner in the area, says that

“Corby and district represent a large part of our business infrastructure”,

and that the size of the population and the number of businesses demand its having both pumps.

Robert Leacroft says:

“As the number of industrial units in the area increases the chance of fires involving chemicals, plastics etc. increases and these need to be tackled as fast as possible so reducing the number of engines available is a very backwards step”.

There have been fires in many of our factories in the area. Les Vargerson makes the point:

“It is not just Fires. Corby is surrounded by Arterial Roads where the Fire Brigade is always in attendance due to the number of…accidents. They cannot be in two places at any time with just one unit.”

Tony Banks believes that the proposals show that the Government want to return Britain to the ’30s, with the decimation of public services. Kevin Morrisey asks whether savings could be made elsewhere by the council, which is a good question. Eleanor McEwan sees a different motive. She says that it is

“typical Tory councillors targeting a Labour…town”.

Paul Dickson believes the proposals are

“indicative of the County Council’s treatment of Corby in general. How can they even think this is remotely workable? They are now playing with the lives of Corby residents”.

Ann-Marie Leonard says that this is

“another demonstration of the blind stupidity of the rapidly failing”

Northampton county council. Julie Halliday says:

“I think for a council to even consider this just as a money saving measure shows a lack of care and imagination which the Corby people will fight all the way”.

Tracy Bruce says:

“Reducing a life or death service to a growing population is the politics of the incompetent”.

David Rafferty said that

“this is another Tory action showing that they care more about profit than the ordinary people”.

Lorraine Shaw says:

“As usual with Northants County Council they are targeting Corby residents and have a complete disregard for life and safety”.

Rob Maguire points out that Northamptonshire county council’s own website presents figures for last year

“indicating that Corby Fire Station has the second highest area coverage and incident attended”

whereas Richard Sharman reinforces the point that

“Corby has had two fire crews for the last 50 years”.

Lucille Giola works in a local pharmacy and has spoken to lots of her customers about the plans. She says that she has

“not heard one person agree with the proposals”.

Roger Kinsey asked a good question, which was whether

“a correct procedural risk assessment survey”

has been conducted

“and past statistics…taken into account”.

I very much doubt it and I have seen no evidence of such.

Kelly Tallan shared her experience with me:

“Having had family and friends involved in house fires in Corby, sadly with fatal consequences, I cannot believe this is even being discussed. Any delays to enter a burning building can and will have dangerous results, not only for the people inside but also the firefighters. This town is growing rapidly and we can’t have our emergency services reduced, please please rethink.”

Ian Chapman says:

“The figures being used for the argument to reduce the number of fire engines are already old and with the year on year population increase this data is completely unreliable and there should at the very least be a stay of execution whilst new data is gathered and this time include a factoring for the future growth of Corby.”

I appreciate that the Minister will be unable to respond to all the points from my constituents, but I hope she has taken on board what they think. I am sure that she was in contact with the county council before today, as that is the usual way of preparing for such debates, and I look forward to hearing from her. I hope that she has challenged the council on why it is considering only one option, and I very much hope she has not bought into the spin it is peddling about the proposals.

Before I finish, I want to share three final comments from Corby firefighters. They have insights and experience that we should listen to, but sadly they do not feel valued by the Government, who have failed to find a resolution to their ongoing pensions dispute—a resolution that has been found in other parts of the UK, but not by this Government. The Minister has a chance to show the firefighters that on this issue she is listening and respects their view.

Lois Smith said:

“As a serving firefighter in the town for some twenty plus years, I can tell you that we have rescued numerous people by the skin of their teeth over the years. Downgrading a full appliance that carries four personnel to a smaller appliance with two personnel will ultimately lead to the new appliance turning up to an incident one day and the two person crew not being able to rapidly deploy to the incident and immediately rescue people.”

He continues:

“In the skin of the teeth cases the outcome would have been very different if we just had this new proposed appliance there at the time”

rather than a proper fire engine.

Gary Mitchell says:

“The proposal to reduce the number of fire fighters (2nd Pump) at Corby Fire Station is shocking. I have had to listen to the County councillors responsible for these cuts trying to explain that the Cobra fire fighting system and a robot can some how take the place of operational fighters, this rhetoric is completely misleading and dangerous to both the public and fire fighters alike. We have had Cobra fire fighting equipment on Corby appliances for 5 years! Expert Firefighters save people’s lives from fire and road traffic collisions”,

not robots. Rob Martin says that the plan

“to replace a properly equipped fire appliance with the proposed van is like replacing a properly equipped ambulance with a first aid box”.

In summary, I believe that there are very important reasons for maintaining the current level of capability at the station. The first is the risk profile of Corby and the surrounding area. Corby still has a range of businesses within its local economy that present particular risks arising from the nature of the processes and materials used. Historically, the industry and commerce in Corby are the reason the risk was rated higher traditionally and Corby always had two engines.

The second reason is the recognition that Corby is growing. This is planned to continue, with the population reaching 100,000 by the end of the next decade. Even accepting the progress made in preventing domestic fires, a town of this size needs to be serviced properly by the fire and rescue service because extra demands will be placed on the service by a growing population. Thirdly, the station supports a very large geographical area beyond the town of Corby, stretching across all the villages up to the county’s borders with Leicestershire, Lincolnshire and Cambridgeshire. There are well-documented difficulties with, for example, the fire station at Oundle, which is rarely able to get its retained crew to be available to be on the run with the fire engine. Maintaining the Corby station’s capability is critical to providing north-eastern Northamptonshire with the assurance that a responsive and adequately crewed service is available to meet fire and rescue needs in this part of my constituency.

I recognise that councils, including Northamptonshire county council, have faced very significant cuts. When this Government were elected, they told us that their cuts would not have an impact on front-line services. We all know that is not true. We have seen the cuts in social care, Sure Start and road maintenance. People have put up with it partly because they were told it was needed to eliminate the deficit, but now they know the truth—the deficit is still there and the debt has gone up because the Government caused our economy to grind to a standstill for four years. The Government have dug a bigger hole and now they are planning cuts that are deeper and ever more dangerous. Taking away Corby’s second engine would become a symbol of this and it would have tragic consequences.

I heard that the Tory parliamentary candidate in Corby is trying to dissociate himself from the fire cuts. He has called on Corby borough council to pick up the tab using the new homes bonus, a cheeky move that conveniently overlooks the fact that Northamptonshire county council receives far more in new homes bonus. More important than that, it has the statutory responsibility to provide a fire service. We do not want a sticking plaster. This is about the security of revenue funding year on year in future years for the second fire engine that we need in Corby to be provided by the county council, with its statutory responsibility.

If the Tories ever want to get anywhere in Corby, they should show local people some respect and stop trying to treat them like fools. People in Corby know where these cuts are coming from, they know exactly who is responsible, and if Tory councillors over at county hall force these fire cuts through, the damaging and potentially fatal consequences will be on their hands. I hope the Minister will do the right thing and use her influence to tell the county council to think again, because there has to be a better way.

21:07

[Mr Peter Bone (Wellingborough) (Con)]

I congratulate the hon. Member for Corby (Andy Sawford) on securing this important debate, to which the excellent Minister with responsibility for fire, resilience and emergencies will respond.

As the hon. Gentleman said, east Northamptonshire relies a lot on the fire service in Corby and we share that fire service. There is a consultation going on so the House should not think that the proposed cuts will definitely happen. Listening to the hon. Gentleman’s speech, the House might have got the impression that Corby would go down from two pumps to one pump if the consultation suggestion were implemented. That is not the case. The consultation suggests that the second pump at Corby is replaced by a Cobra two-man intervention vehicle, so there would still be two pumps there.

I declare an interest. Ever since I was elected in 2005 I have shared a close interest in the fire service in north Northamptonshire, one of the reasons being that when I was fighting to be elected for the first time, the Labour-controlled county council was proposing to close a fire station in my constituency. We fought hard against that and after the general election, when I was elected, we managed to save the fire station. Never under the Conservative-controlled county council has a fire station in Northamptonshire been closed.

I pay my tribute to the men and women in our fire service in Northamptonshire. I also pay tribute to the people who run the fire service in Northamptonshire. They are leading the world with new technology. The Cobra intervention vehicle is new technology. What it does in certain circumstances is a quicker method of saving lives. It will also prevent flashbacks that kill firefighters. There is a significant role for the intervention vehicle. To the Government’s credit, that has been funded entirely by central Government; there has been no cost to the taxpayer in Northamptonshire. I agree entirely with the hon. Gentleman that thousands of new homes are being built in Corby and across east Northamptonshire, and the number of businesses is expanding rapidly. In fact, only today I was with the Transport Secretary at Chowns Mill in my constituency, where we looked at the new roundabout improvements and road improvements that stretch between my constituency and Corby. They are being put in place because of the expansion in the number of houses and businesses. We have also had the Government’s announcement of the Rushden Lakes development—a huge retail and leisure park that will of course result in more fire risk.

The hon. Gentleman was right to read out what his constituents are saying. Since I was first elected, I have run a so-called listening campaign. That is being copied by Tom Pursglove, the excellent Conservative councillor in Corby whom the hon. Gentleman mentioned. The idea of a listening campaign is to go out and listen to what people are saying, as the hon. Gentleman has done, reflect on it, and then campaign on it. People in Corby and east Northamptonshire clearly want more fire cover for our area; I think he said that one of the people he mentioned said so.

That is why earlier this year Tom Pursglove and I launched our More Fire Cover campaign. Everybody in Corby has had a card from Tom about that and I have distributed leaflets in my constituency. We are arguing for more fire cover, not less. I have met the chief fire officer and the firefighters of green watch in my constituency. I have seen the Cobra intervention vehicle in operation and heard the firefighters praise it, but I do not see why it should be a substitute for one of the pumps at Corby. It should be an additional vehicle that can cover Corby and east Northamptonshire. As the hon. Gentleman said, there was recently a very large fire locally, and of course the two pumps from Corby got there quickly, but would it not have been better if we had had three pumps?

The More Fire Cover campaign that Tom and I have launched is getting widespread support. The hon. Gentleman mentioned the local firemen’s petition at Corby fire station. Tom has been to meet the firefighters there and signed the petition. In political terms, there is no difference between the hon. Gentleman and me in that we want things to improve, but he is wrong because just two pumps are not enough—we need three. The question is how we pay for that. The capital cost of the intervention vehicle has already been paid by the Government, so there is no cost to local taxpayers for that—there are only the running costs.

We need this extra vehicle because of all the new homes and businesses that have been built and created in east Northamptonshire and Corby, so the logic is that the funding should be connected with that expansion. That is exactly what the Government provide through the new homes bonus. This year, Corby borough council will get £2.6 million to spend on infrastructure measures that support the local community. I cannot think of anything more important than fire cover, and only a fraction of that £2.6 million would be spent in providing, in effect, the cost of an additional two firemen.

I am surprised that the hon. Gentleman pooh-poohed that idea. I think it was because Corby borough council has massively overspent, by £13 million, on a project involving offices and a library complex. In the past 18 months, it has also spent, bizarrely, a third of a million pounds on temporary staff. We hear about the campaign for no zero-hours contracts, but it is all a bit topsy-turvy at the council. If it put its house in order, part of the £2.6 million could be spent on supporting the two extra firefighters we would need to operate the Cobra intervention vehicle as an additional pump. It would be based at Corby—I am quite happy with that—but serve the whole of east Northamptonshire.

After this debate, I would like the hon. Gentleman to join me and Tom Pursglove in supporting a bipartisan approach to more fire cover in our area.

[Andy Sawford]

The hon. Gentleman proposes that the new homes bonus be used to provide resilience across the area. His claim to participate in this debate is that Corby’s fire station serves some of his own constituents and provides resilience in the north of the county. He will certainly accept that it serves my constituents in Oundle, Irthlingborough and Thrapston. Is he recommending to the leader of East Northamptonshire district council that it should make a proportionate contribution, and has he made a similar recommendation to Kettering and Wellingborough councils? What contribution does he expect Northamptonshire county council to make, because it would, of course, be entirely wrong for Corby to fund his proposal to meet the needs of his constituents?

[Mr Bone]

I am very grateful to the hon. Gentleman for his intervention. Perhaps he is moving towards my and Tom’s listening campaign. The reason we need this extra resource is the expansion in the number of houses and businesses, mainly in Corby. I think the hon. Gentleman would accept that, without that expansion, we would not be so worried about getting more fire cover.

However, because the issue is being driven by expansion in the borough of Corby, it is right that it should be the borough of Corby that contributes. I say that because the new homes bonus is linked to the number of houses being built. If all those houses were being built in east Northamptonshire, I would argue that east Northamptonshire should contribute, but they are not being built there; as the hon. Gentleman rightly says, they are being built in Corby.

[Andy Sawford]

The trouble with the hon. Gentleman’s contribution is that he is purporting to speak about his own area when in actual fact he would much rather talk about Corby, which his constituents find perplexing. He would be welcome to stand for Corby in the future—we would send him packing in the same way as we did the last candidate with whom he trooped around my constituency. We will do the same to the next one. If the hon. Gentleman knew anything about my area, he would know that a significant amount of the expansion is in east Northamptonshire district, not Corby.

[Mr Bone]

We are just going to have to disagree on that point.

[Andy Sawford]

It is a factual point.

[Mr Bone]

All I will say—I do not think the hon. Gentleman will query this—is that a £2.6 million new homes bonus is being given to Corby this year. The great thing about the new homes bonus is that it will increase every year. I think that Northamptonshire county council realises that a new fire station will be needed somewhere in east Northamptonshire in the future, but it is illogical to reduce the fire cover for Corby and east Northamptonshire at this moment in time.

Other ways of saving money are being considered, and this is where I disagree with the hon. Gentleman. For example, the police are moving into Rushden fire station, which the Conservatives fought so hard to keep and Labour wanted to close. It will be a shared facility, which clearly will save money both for the fire service and for the police. It is a little unfair, therefore, to suggest that the fire and rescue service is not looking at other options.

[Andy Sawford]

Will the hon. Gentleman give way?

[Mr Bone]

I am always delighted to give way to the hon. Gentleman.

[Andy Sawford]

I would be stunned if the hon. Gentleman could find in the county council’s medium-term financial plan—it needs to make a saving of £1.6 million over three years, with a 7.5% reduction each year—a saving in his area that is anything other than the cut to the number of Corby’s fire engines. I cannot find such a saving.

[Mr Bone]

I just gave the specific example of Rushden fire station housing the police. We need to consider doing much more of that sort of thing and look at the whole estate. Coming back to tonight’s topic, the puzzling thing is why the hon. Gentleman, who is usually quite happy to support the expansion of services, does not support the proposal to use just a little of Corby borough council’s new homes bonus money for this purpose.

[Andy Sawford]

Will the hon. Gentleman give way?

[Mr Bone]

I will in a moment, but it might help the hon. Gentleman if I finish this point. The reason he does not support the proposal, of course, is that if we have a Labour Government after the next general election, they will abolish the new homes bonus, so Corby will immediately be £2.6 million worse off.

[Andy Sawford]

The new homes bonus is simply a partial replacement for the grant to Corby borough council and other local authorities that has been cut. It is only right that we once again link the resources that local authorities have with need by returning the funds back into grant. That is our proposal. Corby will not lose out from that because it has substantial need.

The hon. Gentleman has inferred that I am opposed to the expansion of Corby fire station. He presents all sorts of Aunt Sallies and tries to distract people in my constituency and treat them like fools. They can see that what is really on the table is the proposal to cut one of the two engines. I am fighting to stop that. He is trying to get my constituents to look away, to distract them and to pretend that that is not happening, but before we know it, that cut will have been implemented. I have at no time opposed the expansion of the service. I would be happy to see it expanded, but right now I am fighting the battle in hand with the Tory county council that he supports, which wants to cut my fire engine.

[Mr Bone]

It can hardly be suggested that I support the proposal from the county council. I am doing exactly the opposite. Neither can it be suggested that Tom Pursglove is somehow supporting the Tory line, when he has signed the petition for the firefighters and is running a campaign for more fire cover in Corby. I just do not see the logic in the hon. Gentleman’s argument.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

Order. We started with an Adjournment debate about the Corby fire service, which was allocated to the hon. Member for Corby (Andy Sawford). We are moving very wide of the mark. We are referring to people who are not Members of this House and to all sorts of propositions, whereas the Adjournment debate should be addressed to the Minister so that she can give the answer. Mr Sawford and Mr Bone, perhaps we could move back to the central proposition and allow the Minister to answer. You may, by all means, intervene on the Minister for clarity, but I do not think that we are making much progress.

[Mr Bone]

May I apologise unreservedly, Madam Deputy Speaker? I should not have taken the bait from the intervention of the hon. Member for Corby. Of course, he brought up Tom Pursglove in his opening remarks, so I thought I ought to set the record straight.

Perhaps I may end my speech, before we listen to the excellent fire Minister, on a point of consensus. I would love the hon. Gentleman to stand up and support my campaign for more fire cover.

[Madam Deputy Speaker]

Order. Mr Bone, that really is enough. The convention of the House is that this is an Adjournment debate that Mr Sawford is addressing to the Minister. You are perfectly entitled to take part, Mr Bone, but this is not an inquisition of Mr Sawford. I would therefore like you to allow the Minister to respond to the important points that have been made. I think that you had concluded.

[Mr Bone]

Not quite.

[Madam Deputy Speaker]

Okay, but can we not have this ping-pong across the Chamber and instead return to the conventions of an Adjournment debate?

[Mr Bone]

I am very grateful that we have a lot more time than we normally have for Adjournment debates because of the collapse of the other business.

Finally, may I say to the Minister that I appreciate all the efforts the Department is making to find solutions to problems, including what she did with the firefighters’ pension scheme? I thought that that was Parliament at its best. Perhaps we can work towards a unified approach to solve what is a really important problem in my constituency and the surrounding areas. On that note—I hope it is one of harmony—I will conclude.

21:24

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

I congratulate the hon. Member for Corby (Andy Sawford) on securing this important debate, not least because it affords me the opportunity to congratulate Northamptonshire fire and rescue authority on its tremendous success in keeping its local community safe. Since the start of this Parliament, there has been a 34% reduction in all fire incidents in Northamptonshire, and no fire fatalities at all were reported last year. That is good news for people in the hon. Gentleman’s constituency, and everyone involved in those achievements deserves praise.

However, we cannot afford to be complacent. Fire and rescue authorities must continue to put prevention and protection first in all that they do. We have made a clear commitment to ensuring the ongoing effectiveness of front-line fire and rescue services, despite the need to tackle the deficit inherited from the previous Administration.

It is clear that Northamptonshire fire and rescue service shares that commitment. Its recently published community protection plan reviews the strong progress that it has made towards delivering its strategic targets and objectives, as set out in its 2013 to 2017 integrated risk management plan. It has set out clearly how it has successfully delivered on those original plans, which were to collaborate with other blue light responders and develop the potential for an integrated emergency service across the county, in order to provide better local services. As my hon. Friend the Member for Wellingborough (Mr Bone) pointed out, it is a world leader in that work: to keep the public safe through partnerships with other agencies; to continue to work to reduce the cost of false alarms, which has fallen by more than 50% since 2008; and to ensure the ongoing safety of its firefighters through the provision of enhanced training facilities and methods, and the adoption of new capabilities, technology and equipment.

Although there have been reductions in funding over recent years, fire and rescue authorities have been given some important protection across the spending review period. Funding reductions have been back-loaded to give fire authorities more time to make sensible and considered savings without their having an impact on the quality of services offered to communities. As Northamptonshire is a county fire authority, its budget allocation is a matter for Northamptonshire county council. Overall, the county’s spending power was reduced by only 1.6% in this financial year, and the provisional settlement for the next financial year will see its spending power increase. In addition, the county has received £488,000 of funding for the forthcoming financial year for specialist equipment to improve resilience for flooding and other emergencies.

We are supporting fire and rescue authorities to transform the delivery of services by promoting greater efficiency, either independently or in collaboration with other emergency service partners. As I announced in October, 37 fire and rescue authorities have been awarded a proportion of the £75 million fire transformation fund for next year, and Northamptonshire is one of those authorities.

The county council has been proactive in planning its spending over the current round, setting out its proposals in a new community protection plan. That document has been subject to full consultation with the local community.

[Andy Sawford]

The Minister is talking about additional funds. Does she understand why my constituents and I will be perplexed when she suggests that the Government have given Northamptonshire county council and the fire service additional funds, since the chief fire officer and the county council’s cabinet member for finance have come to me to say that they are cutting the engine because they do not have any money and have to make cuts? To me, those two things do not add up. Will the Minister explain?

[Penny Mordaunt]

I would be very happy to clarify things for the hon. Gentleman, because some of the things that he said in his speech do not add up. I am happy to address the points that his constituents have made, but I also want to set out the facts, because it is incredibly important that whatever decisions people take—I am not taking them—the public are aware of the facts. We do not want to scaremonger and make people concerned about things that will not come to pass. All Members realise how important fire and rescue services are to our communities, so we need to ensure that we deal with the facts of the case.

The county council’s consultation closed today, and I hope that the hon. Gentleman has put in a submission and made his views known. Part of Northamptonshire’s proposed strategy is to move towards a new firefighting system called Cobra.

[Andy Sawford]

Cobra is incredibly important, but before the Minister turns to that will she clarify whether she is saying that Northamptonshire county council will have more or fewer resources for fire services as a result of the funds and changes she has outlined?

[Penny Mordaunt]

For the forthcoming financial year the authority’s spending power will increase, and I have mentioned the fund of almost half a million pounds that has been provided for resilience and flooding. The only action I can take, and the only part within my remit as Minister—quite rightly, these are devolved issues—is the fire transformation funding that has funded the vehicles I am about to describe. I am not minded to withdraw that funding. It is close to £2.3 million, and I would rather Corby have that money. If the hon. Gentleman wishes to argue to the contrary—I am sure he will not.

[Andy Sawford]

Will the Minister give way?

[Penny Mordaunt]

I will make some progress and then I will be happy to take an intervention.

Cobra is a new technology that utilises high-pressure water and can be used in conjunction with an abrasive compound to cut through materials releasing high-pressure water droplets into a fire compartment—I do not know whether the hon. Gentleman has seen that in action, but I understand that Corby already has two of those appliances. Northamptonshire fire authority is a proactive user of that technology, which it believes will enable it to develop and deliver a new strategic approach to firefighting. The authority already uses those vehicles. It currently has two, and it wants to increase those to seven. The vehicles have been used in rural areas, covering places where retained duty staff availability is insufficient to allow early intervention at incidents, as the hon. Gentleman mentioned, and they will move around as necessary.

We fully support a forward-looking strategic approach, and have awarded Northamptonshire £2.3 million, of which £1.5 million is for the purchase of five new Cobra-enabled vehicles. That award was the result of a rigorous, fair and consistent evaluation process, and the bid was assessed against a range of criteria set out in published guidance to meet the fund’s transformation objectives. It was in competition with other fire authorities and the authority was awarded that money because we had confidence in the bid and the difference it would make to the hon. Gentleman’s community.

[Andy Sawford]

Will the hon. Lady give way?

[Penny Mordaunt]

I will make some progress. The authority is clear that the new Cobra vehicles will enhance—not compromise, as was suggested—the flexibility of response within Corby and the north of the county. It will maintain the current two-appliance capability, and although it will facilitate a reduction in whole-time staff, those reductions will be met only through natural wastage rather than any redundancies. I can conclude only that the hon. Gentleman does not support the benefits that Cobra will bring and would like me to withdraw the fire transformation fund funding, but I can see no reason to do so.

[Andy Sawford]

Will the Minister give way?

[Penny Mordaunt]

I will make a little more progress.

[Andy Sawford]

That is quite a big claim.

[Penny Mordaunt]

I will make some progress. Operational matters such as the introduction of the deployment of fire appliances and crews are best assessed and planned at local level. It is not for the Government to interfere with the judgments of fire and rescue authorities, or to micro-manage the services provided from central Government. We expect and trust chief fire officers and elected Members to listen to their communities and make the right operational decisions for them. That local voice is critical, which is why I support fire and rescue authorities and oppose Labour’s plans to abolish them and move everything to the centre.

Whether or not the hon. Gentleman thinks that that is the right approach, it is clear that the proposal is not to reduce cover but is about seeking a quicker response in rural areas where there are problems such as those he mentioned. It should be made clear to his constituents that this issue does not warrant scaremongering.

[Andy Sawford]

It is very simple. May I just explain to the Minister the maths of this? There are currently two Cobra facilities at Corby. They sit on two proper pumps. Four firefighters man those pumps. We are talking about going down to one proper pump with four firefighters and a van with this equipment on the back of it. That is not—the chief fire officer readily acknowledges this—an enhancement of what is available at Corby. It may be that in some other areas of the county there will be some additional service from the seven vehicles—in other areas. In Corby, however, in my area there is a clear reduction in the service. To suggest otherwise—well, the public will not believe it for a moment and they do not believe the county council.

[Penny Mordaunt]

The point I am making is that it is not as the hon. Gentleman set out in his speech. There are operational reasons why this has been put forward as a proposal. However, I readily admit that local people may disagree with that. There is a consultation which closed today and clearly Corby is an expanding town. This is not just about what the fire service has to deal with today; this is about planning for, and making provision for, the future.

In those circumstances I can see why Corby might want more from its local fire services. I am very aware of the More Fire Cover campaign, which, although it is content with using new technology and the Cobra vehicles and welcomes that new technology, wishes to retain the second traditional appliance for Corby. The campaign, led by Councillor Pursglove, has put forward a way that that could be funded without the need to increase council tax. I give credit to all residents in Corby and Northamptonshire who have made their views known.

[Andy Sawford]

On a point of order, Madam Deputy Speaker. May I seek your advice? This is an Adjournment debate. The Minister is now talking to proposals I am not familiar with. They were not part of my speech and are not part of the county council’s proposals. They are not really the matter in hand. I just wonder whether it is in order for the Minister to continue in that way.

[Madam Deputy Speaker (Dame Dawn Primarolo)]

The Minister is responsible for what she says at the Dispatch Box. The normal procedure is to answer the hon. Member, and the points raised by other hon. Members who have participated in the debate, and I am sure the Minister will bear that in mind.

[Penny Mordaunt]

Thank you, Madam Deputy Speaker.

Local leaders will make better decisions with the benefit of the ideas and input from the residents of Corby and the wider area. The idea of using the new homes bonus to fund the cost of a third appliance may not have been considered before, but it is encouraging to see sensible, pragmatic ideas being proposed. There may be other options, but the two we have been discussing today are an improvement on the status quo.

In conclusion, I will not, as the hon. Gentleman might have wanted me to, withdraw the funding for Cobra vehicles. I am very glad that he has put the record straight on that. The service asked for that funding. We were impressed with the project and the new technology, and I think that Corby will be better off for that £2.3 million. I suggest to the hon. Gentleman that if he agrees with the objectives of the More Fire Cover campaign, he might review his opposition to the new homes bonus and support it as a way of providing extra funding, from whichever authority it comes out. I also encourage him, if he values the local voice, as his innovative crowdsourcing debate seems to imply, to hold in high regard fire and rescue authorities and that local accountability that really does put local people in charge and in the driving seat for such local decisions. He might wish to reconsider his wish to centralise fire and rescue authorities. The consultation closed today, and it is not for me to decide what should happen.

[Andy Sawford]

On a point of order, Madam Deputy Speaker. I appeal for your advice. There have been repeated claims about my position on a range of matters. For example, it has been suggested that I would not support the expansion of Corby fire service—of course I would; and that I do not welcome additional funds for Corby fire service—of course I do. These claims have been made time and again. It might be orderly—this is where I seek your advice, Madam Deputy Speaker—but it certainly does not seem to be very parliamentary.

[Madam Deputy Speaker]

As I have said, the Minister is responsible for her own words at the Dispatch Box, and the hon. Gentleman has had the opportunity to correct the record. I remind the Minister that when she is standing at the Dispatch Box, she is answering for her responsibilities as a Minister. Any other observations we can hear at another time.

[Penny Mordaunt]

This is an incredibly important matter, as the start of the debate clearly outlined. There are serious concerns in Corby about some of the messages put out about the consultation, and it is important to set the record straight. There are many people with many different perspectives in the community putting forward solutions and ideas about how they can best protect their community. It is important to put that on the record and to state that there is no complacency either from the professional firefighting staff or the elected members of the authority, who take their duties seriously and by all accounts have a good track record on protecting their communities, as the statistics bear out.

There are clear choices and different visions emerging. It is a choice between protecting the local voice through fire and rescue authorities, and abolishing them and centralising decisions; between councillors who think it is important in an expanding town that fire stations be protected, and those who want to close them; between proposals to improve services and perhaps have a third appliance on the run, and the status quo; between using the new homes bonus, and not having that funding option; and above all else, between careful, thoughtful local leadership, coming up with solutions to these serious matters, and scaremongering and an abdication of responsibility. I trust the people of Corby to decide which vision for their future is best for them.

Question put and agreed to.

21:42

House adjourned.

Ministerial Correction

Monday 12th January 2015 Ministerial Corrections

Monday 12 January 2015

Cancer Drugs Fund

Monday 12th January 2015 Ministerial Corrections

The following is an extract from Questions to the Secretary of State for Health on 25 November 2014.

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

6. How many patients have received treatment through the cancer drugs fund since the inception of that fund.

[The Secretary of State for Health (Mr Jeremy Hunt)]

More than 60,000 patients in England have received treatment through the cancer drugs fund since its inception in October 2010. They and their relatives will be very concerned at the suggestion made by the shadow Health Secretary last month that a Labour Government could abolish the fund.

[David T. C. Davies]

I congratulate the Secretary of State on that very high figure. Is he aware that some of those people who are being treated have had to sell up their homes and move here from Wales, where they are routinely denied life-prolonging cancer drugs by the Labour-run Welsh Assembly Administration. What does that teach us about the respective differences between the health services in England and Wales?

[Mr Hunt]

I thank my hon. Friend for raising that point. The last Labour Government did leave us with one of the lowest cancer survival rates in western Europe, which is one of the reasons why we introduced the CDF. Unfortunately, the current Labour Government in Wales are continuing with those policies, which is why 6,500 Welsh cancer patients were admitted for treatment in English hospitals last year.

[Official Report, 25 November 2014, Vol. 588, c. 732.]

Letter of correction from Mr Hunt:

An error has been identified in the response I gave to my hon. Friend the Member for Monmouth (David T. C. Davies) during Questions to the Secretary of State for Health.

The correct response should have been:

[Mr Hunt]

I thank my hon. Friend for raising that point. The last Labour Government did leave us with one of the lowest cancer survival rates in western Europe, which is one of the reasons why we introduced the CDF. Unfortunately, the current Labour Government in Wales are continuing with those policies, which is why last year there were 6,500 admissions to English hospitals for cancer treatment where the patient was from Wales.

Petition

Monday 12th January 2015 Petitions

Monday 12 January 2015

Immigration checks in the UK

Monday 12th January 2015 Petitions

The Petition of residents of the UK,

Declares that the Petitioners believe that current immigration checks in the UK are not tough enough; further that the Petitioners believe that the checks should mean that if an individual has no job, no money and a criminal record, they should be denied entry to the UK; and further that a Petition in the Rutherglen and Hamilton West Constituency on this matter has received over 800 signatures.

The Petitioners therefore request that the House of Commons urges the Government to enforce stringent checks on immigration to stop criminals from entering the UK and breaking laws.

And the Petitioners remain, etc.—[Presented by Tom Greatrex, Official Report, 10 November 2014; Vol. 587, c. 1272.]

[P001397]

Observations from the Secretary of State for the Home Department:

The Government have detailed arrangements in place to identify people of concern who are attempting to enter the UK. All passengers are checked against police, security and immigration watchlists upon arrival and, where the Government are aware of individuals who pose a risk, Border Force officers can—and do—refuse them entry.

The Government operate a framework of mandatory bans on non European Economic Area (EEA) foreign criminals entering the UK, where the Government are aware of their offending.

For those sentenced to up to 12 months imprisonment it is mandatory to refuse any application for entry to the UK made for five years from the end of sentence, for those sentenced to between 12 months and four years imprisonment it is mandatory to refuse any application for entry to the UK made for 10 years from the end of the sentence and for those sentenced to four or more years imprisonment any application to enter the UK is a permanent mandatory refusal.

In addition to decisions being made on the basis of convictions, a non EEA foreign national is also liable to be refused entry on discretionary grounds due to their character, conduct and associations.

All non EEA nationals who are applying to come and stay in the UK for six months or longer are required to disclose any criminal convictions. Where someone has failed to disclose a criminal conviction and the conviction is subsequently discovered, action can be taken to curtail their immigration status because of the deception.

The Government are working with a number of countries to improve the exchange of information about offenders and has signed information sharing agreements with Albania, Australia, Canada, Ghana, Jamaica, New Zealand and the United States.

Where the Government receive information that a European economic area national presents a genuine threat to society, the Government are able to take action to prevent entry to the UK. A criminal conviction, depending on the circumstances, may be enough evidence to show that an EEA national is a present and genuine threat to society.

The onus for flagging such individuals lies with the authorities in their home country and the Government are leading the way in Europe on improving the exchange of information in cases involving dangerous criminals. The Government are one of the biggest users of the European criminal record information system (ECRIS) and is finalising preparations to connect to the second generation Schengen information system (SIS II) which will allow us to identify individuals wanted by other European law enforcement agencies at our borders, including those subject to a European arrest warrant (EAW).

Written Statement

Monday 12th January 2015 Written Statements

Monday 12 January 2015

Pension Guidance Service

Monday 12th January 2015 Written Statements

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

At Budget 2014, the Government announced a fundamental change to how people can access their pension savings. From April 2015, everyone with defined contribution pension savings, who is aged 55 and over, will be entitled to access their defined contribution pension savings as they wish, subject to their marginal rate of income tax.

In order to help consumers make confident and informed decisions on how they use their pension savings, everyone approaching such a decision will be entitled to free, fair and impartial guidance.

In response to the “Freedom and Choice in Pensions” consultation on the changes, a team was established within HM Treasury to lead the creation of this guidance service. The Government also committed to publish a progress update on the service design and implementation strategy.

The progress update, “Delivering Pensions Guidance: January 2015 Update”, is available on the gov.uk website at:

http://www.gov.uk/government/publications/delivering-pensions-guidance-january-2015-update.

It includes:

an announcement of the brand name and logo of the new guidance service;

details of how interested potential users can register their interest in early access to the

service and be part of piloting activities;

an explanation of the service design, and how this will be delivered; and

the estimated cost of the service in FY 15/16 of £35 million, to be raised through an FCA levy.

Costs will be confirmed in March 2015.

[HCWS182]

Grand Committee

Monday 12th January 2015 Grand Committee

Monday, 12 January 2015.

Small Business, Enterprise and Employment Bill

Monday 12th January 2015 Grand Committee

Committee (2nd Day)

15:30

Relevant documents: 11th and 13th Reports from the Delegated Powers Committee

[The Deputy Chairman of Committees (Lord Colwyn) (Con)]

My Lords, should there be a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 15: Target for streamlined company registration

Amendment 33A had been withdrawn from the Marshalled List.

Amendment 33B

Moved by

[Lord Mendelsohn]

33B: Clause 15, page 17, line 18, at end insert—
“( ) For the purposes of this section and section 16, a system for streamlined company registration is a system which ensures that company incorporation and tax registration is approved on the same occasion.”

[Lord Mendelsohn (Lab)]

My Lords, the purpose of Clause 15 is to set a timetable to streamline the process for companies to incorporate and register for corporation tax, VAT and PAYE online without having to provide the same information repeatedly. The aim is for this to be done “by electronic means”, as defined in Section 1168(4) of the Companies Act 2006—that is, to be able to be,

“sent … and received … by means of electronic equipment for the processing … or storage of data, and … entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means”.

Our amendment, somewhat modestly, adds a target that is desirable and deliverable. Our amendment sets the goal of ensuring that this system should be delivered to make it possible not only to enter all the data required for all the tax and registration requirements at the same time but to ensure that approval for company incorporation and tax registration is provided at the same time. We are pleased to support this clause, as it meets the objectives of reducing burdens on business and encouraging the adoption of new technology and the delivery of more public services digitally.

As an element of policy to support small businesses, the proposed measure is useful, although I doubt that it will be transformational. However, I think that the measure is to be commended because of what, in a sense, it stands for: first, that where we can make it better to establish, grow or develop small businesses, the Government should help—the Government can do more to simplify regimes, even efficient ones, and we think that this is a sensible step; secondly, that the Government must do what they can to act in a way that serves all types of businesses. As a big organisation, government struggles both to have the right horizon and to be sufficiently adaptable to meet the needs of small businesses.

This amendment puts a large stake in the ground. I am sure that the Minister could tell us how many officials in her department, prior to the introduction and design of this Bill, dealt with small businesses versus the number who dealt with, say, the automotive industry. I do not wish to diminish support for the automotive industry, but I am sure that the disparity in numbers says something about the extent to which the department is sufficiently able to appreciate the nature of the main drivers of employment and growth in the private sector economy and how to get the right feel for, and approach towards, legislation and regulation.

We share the ambition to make Britain the best place in the world to start and grow a business. When Labour left office in 2010, Britain was ranked by the World Bank as the easiest place in Europe in which to set up a business. In fact, it was ranked the fourth easiest place to do so in the entire world. I say that not to make any partisan point but to stress that we are all committed to progress on support for small businesses. So it just has to be right that, rather than inputting the same data several times to incorporate and register for taxes, a new company should be able to provide the information just once, digitally, to incorporate with Companies House and to register with Her Majesty’s Revenue & Customs for corporation tax, VAT and PAYE.

The Government’s case is that Clause 15 uses a statutory target to demonstrate, in the strongest possible terms, the commitment to improve the current system and to ensure that it is given the highest priority across government to deliver a solution as quickly as is reasonably possible. I am bound to say that, although we support and understand that, it is rather disappointing that this is not just done but needs legislative support.

I would be grateful if the Minister could reassure us by providing some details on the planned delivery of this measure. For example, given that this is a technology project and given the Government’s record on the delivery of IT projects, it would be useful to know which department will lead the project management and delivery of the work. Will there be a joint procurement and management team? What has been the engagement and market testing with the business community? What expertise is being assembled or commissioned to help with its design?

Also, does this commitment only extend to the development of tools for computer-based formats, or is it pioneering and embracing mobile and tablet devices? Could we get some idea of what we can expect from the reporting procedures between now and 2017? What progress should we expect by, say, March 2016, and what steps will businesses see between now and then? I am sure that, as with any similar project, there are already ideas of what the milestones will be. After all, how could the 2017 date itself be established without them?

While I know that the Minister’s colleague in another place was reluctant to be drawn on details, I wonder whether the few months between his comments and our deliberations have allowed more details to be forthcoming. The Minister in another place said:

“I want us to be able to deliver a complicated IT project. Government IT projects are difficult enough to deliver on time without having to hit a description written in Hansard of what we now expect to happen”.—[Official Report, Commons, Small Business, Enterprise and Employment Bill Committee, 23/10/14; col. 231.]

I need hardly remind the Minister of the useful advice of Dr Martin Read, with whom she served in the Government’s Efficiency and Reform Group. Martin Read, an outstanding IT leader and businessman, had previously looked at IT procurement and delivery in government and given some excellent advice, which I hope the Government will follow in the delivery of this project. However, to indicate that they are entering into a project without any sense of desired outcomes, costings, budgets and timings—and especially contracting and project management—would suggest that they did not really heed his advice. It is pretty hard to believe that this is a blank piece of paper and I would be grateful if the Minister would provide us with the courtesy of just some morsels of information.

Finally, in relation to the duty to report, I would be grateful if the Minister would clarify how, when, and hopefully what, it will cover. Crucially, will it cover problems in delivery and will it be possible for it to restate timetables, both positive and, potentially, negative? Interestingly, this measure does not provide enabling powers to facilitate the delivery of the targets and the Government have said that, if they identify the need for such powers, this will be dealt with through another legislative vehicle. I would be grateful if the Minister would set out the Government’s thinking on this and if he would illuminate for us where they might anticipate that such powers may or may not be needed in the future. I beg to move.

[Lord Popat (Con)]

My Lords, I thank the noble Lord, Lord Mendelsohn, for this very important amendment. I understand his desire to bring speed and avoid duplication of any kind, but I will just go through the reasoning on why this would quite often be difficult. The streamlined company registration is designed to save businesses time, money and effort when registering their details for company incorporation and tax registration. This means that businesses will not need to provide the same information on multiple occasions to incorporate a company with Companies House and to register for VAT, corporation tax and PAYE with HMRC.

Amendment 33B would require company incorporation and tax registration to be approved on the same occasion. There would be some difficulties in doing this, but I am pleased to assure the noble Lord that we would face a whole number of issues in incorporating his amendments. The amendment could be interpreted in two ways: that the incorporation and tax registration are approved at the point when the application is made or that the business would have to wait until the completion of both incorporation and tax registration to receive confirmation.

To deal with the first point, incorporation and tax registration cannot be delivered at the point that the noble Lord, Lord Mendelsohn, mentioned, when the application is made. First, there are processes that need to happen sequentially before all obligations have been met. Incorporation for a company at Companies House is the start of the process before a company can register for corporation tax, PAYE or VAT. Secondly, assurance checks need to be made to prevent fraud. HMRC and Companies House have strong existing processes to counter fraud, which will continue to apply under the new system. HMRC is currently unable to process these assurance checks in real time because they require analysis of intelligence and cross-checks with other HMRC systems. These processes are not automated. However, security aspects will be considered throughout the implementation of this project. HMRC will continue to use expert knowledge and organisational learning to fraud-proof its processes and systems through continuous improvements to system controls and checks.

To deal with the second point, although a single response could be given to customers to inform them of the completion of incorporation and tax registration, this would have to be done at the end, rather than at each stage of the process, which we think would result in a poor customer experience. We believe that keeping customers informed on the progress of their registration and supplying information as it becomes available will enable companies to begin doing business while the process is still in train—for example, by opening a bank account as soon as incorporation is complete. That will also help to generally enhance the customer experience.

The noble Lord, Lord Mendelsohn, mentioned the history of failing to deliver extensive IT programmes and asked how this will be different. The Government have made significant improvements to the way in which IT projects are managed and delivered. This project will be developed using a build, test and deploy approach, which avoids costly errors and the pursuit of inappropriate solutions. That approach is widely used and was successfully used in the development of GOV.UK and new transactional services which have delivered significant improvements for citizens and businesses. That is a major project that is currently taking place.

The other question raised by the noble Lord, Lord Mendelsohn, was what progress would be made by the time of the first report in 2016. It is premature to say exactly how much progress we will have made by the time of the first report to the House. The immediate next step is to begin detailed engagement with a wider range of businesses and stakeholders to refine the delivery options. That will include new businesses and those thinking of starting a business, as well as professional and representative bodies. As a minimum, by 2016 we expect to have developed a working prototype designed and tested with a set of core businesses with a programme of wider engagement which will give us the feedback required to develop the final product. At all times, the focus will remain on ensuring that the end solution will meet users’ needs in the most cost-effective way.

The first thing that people who want to set up their own business from home or from any commercial premises need to do is to register their company. That must be as instant as possible so that they can start trading and open a bank account. They cannot possibly at the same time register for VAT, PAYE and corporation tax. I am talking from my business experience on that—these things take time. The good news is that we are streamlining the process by including information so that future registration for VAT, PAYE and corporation tax becomes much easier. In many ways, it will be faster than it would otherwise be.

I hope that the noble Lord has found my explanation reassuring and, on that basis, I request him to withdraw his amendment.

[Lord Mendelsohn]

My Lords, I thank the Minister for his reply. It may not have appeared so, but I am somewhat excited about this measure. It is not just the notion of IT programmes which interests and excites me—they do not—but as someone who has declared an interest as an owner, investor and someone who works in small businesses, I may well get to use this system. I am enthusiastic in that regard. It is not my concern about the speed or, in a sense, the relative level of difficulties. I am more than aware of the difficulties that will be faced—especially by HMRC, with its current system. However, what is important to understand about this measure is the opportunities that it provides and the ambition that it demonstrates.

15:45

It is important not to underestimate this rather simple and rudimentary task, even though there is a degree of complexity on the establishment of businesses and the registration of documents. If we can get Companies House, HMRC and—who knows?—even others working together, there are some tremendous opportunities ahead which government, as a market-maker and enabler, can deliver if we can get these sorts of things right. It is important to see it in that context: we are highly supportive of the ambition and would like to drive in more than is presently on the table. Those sorts of things are what set the right level of ambition, give us a sense of confidence and amplify the message of the Bill itself—that we are doing more for small businesses. We may well return to this, not just because of my excitement but because the opportunity here is quite strong. However, I beg leave to withdraw my amendment at this stage.

Amendment 33B withdrawn.

Clause 15 agreed.

Clause 16 agreed.

Clause 17: Review of regulators’ complaints and appeals procedures

Amendment 33C

Moved by

[Lord Stevenson of Balmacara]

33C: Clause 17, page 18, line 13, at end insert—
“( ) A person cannot be appointed by a Minister of the Crown under subsection (1) if the person is a current or immediately past board member of the regulator.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Bill creates a duty on the relevant Minister of the Crown to appoint a person for each non-economic regulator. As the person is variously described it is a bit confusing, both in the Bill and in the notes, as to exactly what they will be called. It might be worth having a further discussion about this at some point, but for the purposes of this amendment my eye was drawn to the phrase in the notes “Small Business Appeals Champion”.

An additional point to make here is that it is quite refreshing to read of a Government who are prepared to go hammer and tongs into adding new regulations to an area. I am not one who is necessarily against regulation in principle, as good regulation drives a lot of good things, but this has quite a set of layers of regulation in it. Given that we are also considering the Deregulation Bill, and indeed have been faced with a number of attempts to try to reduce regulation, we ought to be quite clear what we are doing here. Although I make a trivial point about the name, it is also important.

The aim is to ensure that there are clear and effective procedures and processes in place, so that businesses—again, it seems to be defined as “businesses”—can challenge regulatory decisions, should they feel that they have been treated unfairly. I put on record that we support this approach. We are aware of the previous history of this: in the publication Small Business, Great Ambition it was said that businesses were not always confident that there was a clear pathway to challenge decisions by a regulator. It is good that the Government have recognised this and want to come forward with proposals. It is also interesting that, in the evidence for that, it is clear that two issues are in play here. Businesses did not know how to challenge decisions—I imagine that is more at the smaller end of the market—but they also found that it was either too expensive or too time-consuming, or both, which again rings true to anybody with experience in this area.

In the consultation issued by the Government prior to the preparation of the Bill, Small Business Appeals Champion and Non-Economic Regulators—it perhaps gave away its content in its title—the Government explained that,

“given the range of different statutory arrangements … the Government will need to give individual consideration to the application of the policy to each regulator before the policy is implemented”.

That is a large amount of work given the number of regulators that have been revealed as a result of our work on the Deregulation Bill, for which a parallel but different set of regulations is of course being imposed. Can the Minister update us on how they are doing on this? It will be quite an extensive trawl through a number of regulators that were set up over the years. It is important that we have some sense of how we are getting on and whether any lessons can be learnt from that experience.

Cutting to the chase, a small business appeals champion—or whatever name we agree on—will be appointed to every non-economic regulator. These will be quite important people, particularly for small businesses, because they will be concerned about, and seek redress, when regulators introduce new regulations that might be against the best interests of their businesses. I worry that the Bill is not very sharp about the regulatory powers and responsibilities. Will they be sufficient? Will they be adequate to achieve what they set out to do? Will it be more than just a talking shop?

Individual appointments to the regulator will be by a Minister of the Crown. The Bill states that they will either be statutory office-holders within the regulator or be appointed by the Minister of the Crown in respect of the regulator’s functions—presumably as additional personnel. I am concerned about this. The power of a small business appeals champion will lie in their ability to challenge the regulatory functions that they are appointed to review. Perhaps the Minister will explain this when she responds, but it does not seem to me that a person who is already employed by the regulator is in a very strong position to criticise the regulator’s activities. Could she talk us through this? Are they not meant to be independent? It would be very unusual to have someone in a position of reviewing or providing reports to external bodies about a particular body if they are employed by that body. It might be better if they are board members and maybe they should be appointed in a particular capacity to each board, but the range envisaged in the Bill seems to be too large for this to be appropriate.

To take further examples, what happens if a reviewer has to comment to the Minister on the way that the regulatory duties are discharged by his or her boss? Is there not a problem there? The employee will have a duty of care that might be breached if they are expected to make recommendations in public that will end up being considered in Parliament. Noble Lords begin to see where I am going. This is almost like a whistleblower. Parliament has considered this topic and will return to it later in this Bill, but real concerns have been expressed about how we treat whistleblowers. Their effectiveness is entirely related to whether they can make their comments without being subsequently sorted out by the powers that be in their organisation.

Similar points came up on whether an employee in a regulator would have sufficient knowledge and expertise to do the job envisaged by the Bill. It seems to me that someone who reviews the work of a regulator would need to be at the board level. Although there will be no doubt excellent people further down the chain, I doubt whether they would have the experience or expertise, or be senior enough, to take a view.

There is also an intention in the clause that one reviewer would be appointed to each national, non-economic regulator in some cases but to groups of regulators in others. For instance, some regulators, groups of industries or groups of functions will work in roughly the same area; the suggestion is that one regulator could cover them all. Is there a list of the regulators that would likely be grouped together? If there is not, could we get that in play? That is quite important. For instance, we could consider one regulator for energy, but we could also think that there would need to be different expertise relating to gas or to water, as opposed to some of the other utilities. There is also the asymmetry of expertise and experience that I have already mentioned. For instance, if a reviewer was employed by one regulator but was expected to review and critique a cognate regulator—or even a very different one—one would worry about whether they had the expertise, or whether they would be able to criticise a sister organisation operating in the same field.

I am afraid that I have asked a lot of questions. I should have made clear that this is merely a probing amendment. We support the general approach, but we would be grateful to have a bit more detail so that the Committee could better appraise whether this is a good move. I beg to move.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)]

My Lords, I thank the noble Lord for his amendment relating to the appointment of small business champions—my snappier, if less accurate, title for them. I agree that sometimes we need to regulate, especially, as in this case, to make regulation better.

The Government have brought forward these clauses because we want to ensure that regulators’ appeals and complaints processes are accessible and fair, and work for business. We want to make sure that, if a business wants to challenge a poor regulatory decision, there is a clear and easy-to-understand process to make a complaint or appeal to that regulator. I agree with many of the noble Lord’s comments.

How are we progressing with identifying regulation? The consultation closed last Friday. It is on the government website. We will make final regulations with our proposals for listing regulators once the Bill is approved. Our proposed list was set out in the consultation. What regulators will be grouped together? We have not decided on that, but we will certainly look at it once the list of regulators is finalised in the light of the comment that the noble Lord made.

Turning to the amendment before us, the Government intend that the small business appeals champion policy should apply to a diverse range of national regulators, with equally diverse circumstances. For example, there are large regulators, some with statutory governance arrangements, complex stakeholder groups and thousands of staff, such as the Health and Safety Executive, the Care Quality Commission and the Environment Agency. However, there are also tiny regulators with few staff, where there is no board and the legal responsibility for regulating lies with the Secretary of State, such as the Employment Agency Standards Inspectorate, the Animals in Science Regulation Unit or the Senior Traffic Commissioner. There is something in between as well, such as the Office for Nuclear Regulation or the Charity Commission. We have designed this policy so that it has the flexibility to work across this varied array. A key part of that flexibility is around appointments.

I agree with the noble Lord that in some cases it may not be appropriate to appoint a board member as a champion. For instance, if the board is involved in the appeals process, it would create a conflict of interest. However, in other cases, it could be a positive advantage to appoint a board member as the champion. A non-executive director might be uniquely well placed to combine an understanding of the needs of regulated businesses and an intimate knowledge of the way the regulator works. There is not an unlimited supply of people of talent and objectivity who are prepared to take on public roles of this kind and familiarity can be a distinct advantage, especially in very technical areas.

The Government do not agree that the appointment should be limited to exclude regulators’ board members. We have deliberately placed responsibility for appointing champions with the relevant Minister, supported by his or her departmental officials, and not with the regulator, to ensure that someone of appropriate independence and stature is chosen. We should trust Ministers to be responsible for ensuring that an appropriate appointment is made, and not constrain them as the amendment proposes. In carrying out the recruitment process, the Minister and the Government will, of course, ensure adherence to any relevant guidelines such as the Code of Practice for Ministerial Appointments to Public Bodies. I hope that the noble Lord will be reassured by what I have said and agree to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I thank the Minister for her very clear exposition. I agree that we should focus on small business champions—I will try to do that, although it gets a bit complicated later on. Who is involved and what sort of bodies are likely to be grouped together are obviously a work in progress and I hope to get information on that as we go forward as it shapes the way in which we respond to this issue. We may wish to return to that at a later stage.

I understand the point the Minister makes about the need to have expertise and a sufficient number of high-calibre people doing this important work. It will help small businesses and, as I said, we support it. However, I think that the conflict-of-interest point has resonance. Her examples do not necessarily reassure me that, simply because the appointment comes from outside and is made by somebody who is not themselves the regulator, that will provide the degree of independence, authority, expertise and single-mindedness of purpose that will be required if this is to be effective. However, for the purposes of this debate in Committee, I beg leave to withdraw the amendment.

Amendment 33C withdrawn.

Amendment 33D

Moved by

[Lord Stevenson of Balmacara]

33D: Clause 17, page 18, line 20, leave out “and”

16:00

[Lord Stevenson of Balmacara]

In some sense this group of amendments is the continuation of the earlier debate, but it now focuses on the reports that may come from whatever system is set up for these small business appeals champions—although here they are sometimes called the “Independent Complaints Commissioner”. I am not sure where that fits into it; perhaps there is another whole area of bureaucracy that I have not yet managed to uncover.

The Bill is very helpful in setting out the duties and functions of the review process. The overall objective is to encourage the regulator to improve and to simplify the appeals and complaints processes that businesses should follow if they wish to challenge or appeal a regulatory decision. The requirements are quite onerous: annually, each reviewer—obviously we still do not know how many there will be—has to review the effectiveness of the relevant regulator’s procedures and prepare a report about his or her findings, which may include an assessment about whether those are accessible and fair, as well as recommendations for improvement. Those recommendations can go either to the Minister of the Crown—which might be relevant and appropriate, given that that most of the time that person will be making the appointment, and that would certainly have to be the case, presumably, if legislation was to follow—or they can go to the regulator themselves if it is just a simple matter of a change of procedures. It would be helpful if the Minister could give us a bit more detail on that.

On the narrower question of whether a report has to go to the Minister of the Crown simply because it involves changes in the law, this does not give quite enough depth or sketch in some of the things that will come. The reviewer may not be in a position to give a formal recommendation that there has to be a change in the law—they may say, simply, “This is something which I’ve picked up, which I think is important for small businesses, and I refer it to the Minister for appropriate action”. The appropriate action may well not necessarily be legal; it may be some form of instruction to the regulator, or that some regulatory bodies need to work closer together, or some other things. I am not trying to be difficult—the way it is expressed is just a bit narrow. If the Minister can perhaps find the words to explain that in a more rounded context, that might be helpful as we go forward.

I am moving Amendment 33D, but in this group we also have Amendments 33E, 33F and 33L. The point raised in Amendment 33E, which is minor but important, is the suggestion that the review should also reflect on any discriminatory practices that exist. We are aware—more anecdotally than evidence based, although it is still important—that there are concerns about some issues to do with diversity in other areas, which are in the law and legally applied to individuals, but we are talking about small businesses, for which there may therefore be concerns. This might be a good point to try to think harder about making sure that the way this is framed also includes the question about discrimination and wider issues to do with that area of work.

Amendment 33F suggests that there may be issues where an individual company may feel that the regulations that have been imposed are not only against them but mean that they are being discriminated against. Therefore, again, it would be helpful if consideration was given, perhaps in the regulations, to making a broader pass through this, including recommendations for mitigating steps that might be taken, if an assessment by a reviewer concludes that discrimination has taken place.

On Amendment 33L, Clause 20 places a duty on the independent complaints commissioner or small business champion to produce an annual report on his investigations under the scheme as regards the FSA regulators, which are specifically carved out in one part of the Bill—although, obviously, that is because they already carry out many of the functions that the reviewer in the Bill would carry out. However, for completeness, and to make sure that there is no gap between them, might it not be sensible just to include within the Bill a very clear inclusion paragraph that would make sure that they also have to look at unfair and discriminatory practices under the scheme? I beg to move.

[Lord Deben (Con)]

My Lords, I rise to warn the Committee—and I hope that the Minister will accept this warning—of the danger of the enactment of good-heartedness for the sake of it. There is a phrase in the amendment that symbolises that. The amendment that we are discussing with the first one contains the expression,

“protecting individuals from unfair treatment and promoting a fair and more equal society”.

I am all in favour of a fair and more equal society, but I cannot think of anything that is more likely to make people feel that all this stuff is yet again a whole collection of persiflage rather than the serious matter we are talking about. This is not about small businesses; it is not what small businesses are about. It is a perfectly reasonable statement but not something that we should be putting into the Bill. I am surprised that it is in the amendment.

That enables me to say what I really wanted to say, which is that I think this is a good and necessary Bill. However, we have to remember that we also have a commitment to reducing red tape and reducing the appearance of red tape. I want to make a point about the appearance of red tape. Very often people think that something is restrictive or difficult because there is an awful lot of it. I have always believed that we ought to have a law saying that we cannot introduce any new laws unless we take away at least the same number of lines from the present laws, so as not to make people feel that they are overwhelmed by what is before them.

This seemed to me to be a reasonable moment, before the Minister rises, to say to the noble Lord opposite that there is a responsibility in setting down amendments so as not to give the impression that we are prepared to load people with a whole lot of things that may be politically correct, nice things to say, or something that might be added to a speech, but which, frankly, make people feel that the Government are constantly after them with all sorts of nebulous thoughts and ideas to which we can all sign up, but which ought to be left to people to decide for themselves as to their purpose. They should not be written down in this way.

[Baroness Neville-Rolfe]

I thank noble Lords for the amendments and for the opportunity to debate the role of the champion and how it helps business.

We know that small businesses suffer disproportionately from regulatory burdens and find appeals systems, in particular, hard to understand. I thank my noble friend Lord Deben for his intervention, which I could not have put better myself. The point about reducing red tape and the appearance of red tape particularly applies to appeals, when people need to understand where they can go and to have proper processes at a regulator if and when things go wrong. I feel that very strongly.

Looking at the amendments in turn, Amendments 33D and 33E relate to the champion’s assessment of the regulators’ appeal processes and procedures. We certainly do not want the champions to ignore the core role and function of a regulator when making an assessment of the regulator’s complaints and appeals. However, we will make it clear in guidance that the champions should consider this in their assessment of appeals processes. Clearly, those processes need to be shaped by the sort of cases at stake. Cases considered by the Pensions Regulator will be very different from those before the Environment Agency or the Security Industry Authority. There are a number of factors that champions will need to consider in reviewing appeals processes. As well as the protections that the regulator has been established to secure, these will include the types of cases being considered, the profiles of the businesses which are applying and the typical timescale. We aim to identify the relevant considerations in guidance. Putting only one of them in the Bill would give it undue weight. I hope that the noble Lord will accept that, and feel able to withdraw the amendment.

Amendments 33F and 33L relate to reporting—both by the champion and the independent complaints commissioner—on discrimination against a business that has challenged a regulator. Of course, the independent complaints commissioner is the equivalent of the champion for financial services regulation. It has a different name and different framework to fit in with the regulations that establish these bodies and the statutes relating to them, as I think the noble Lord acknowledged.

The Government fully agree that such discrimination is unacceptable. We do not want to deter complaints. However, Amendment 33F requires that the champions should provide an assessment of individual cases and provide redress on those cases if they find that discrimination has occurred. While understanding the objective, we do not want to create a separate route of appeal, which is what the amendment seems to do. It also conflicts with Clause 17(5), which explicitly prevents champions making any recommendation in relation to individual cases. By giving the champion vires over individual cases, Amendment 33F would negate that.

None the less, this whole issue is certainly one to which the champions should be alive. I am happy to commit that our guidance to champions under Clause 19 will require them to consider any examples of discrimination against those who challenge regulators’ decisions, and to make recommendations where they find it. That is an important horizontal issue for them to look at. The Government therefore oppose this amendment, although we support the sentiment behind it.

Amendment 33L makes similar, though less extensive, requirements in respect of the financial regulators’ independent complaints commissioner. The amendment requires an assessment of any unfair and discriminatory practices in the commissioner’s annual report. The clause already requires the report to include information concerning general trends emerging from investigations, which can and should include the issues of unfair and discriminatory behaviour where there has been a complaint. We believe that does enough and do not want to create a new industry of challenge and confusion.

I hope that the noble Lord has been reassured by my response and by what we plan in terms of guidance and will agree to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her comments. I am sorry that the noble Lord, Lord Deben, took exception to the content of my remarks. It was clearly a probing amendment in an attempt to dig out some of the issues. I am sure that he is as guilty of that as I am in his previous lives, and I have no worry at all about standing here, and will continue to do it. However, the noble Lord might want to bear in mind the fact that the Minister said that the guidance coming forward will indeed cover all the points that I raised in the amendments—probably better than I would have done. I am certainly confident that the points I made will be picked up and taken forward. In that sense, I am delighted to withdraw the amendment.

Amendment 33D withdrawn.

Amendments 33E and 33F not moved.

Amendment 33G

Moved by

[Lord Mendelsohn]

33G: Clause 17, page 18, line 32, at end insert—
“( ) An assessment under subsection (4)(a) need only consider small businesses as defined in section 33(2) and micro businesses as defined in subsection (3) of that section.”

[Lord Mendelsohn]

In moving Amendment 33G, I will also speak to Amendments 33K, 33N, 33S and 33T.

While we are very supportive of this measure, we have an underlying concern about how it is drafted and how it relates to the central driving and important common objective of supporting small businesses. Our contention about the drafting of some of the Bill is that it does not appear to be sufficiently designed to deal with the particular and unique contours of the very many different businesses that comprise the category of small business. Our amendment seeks to try to probe the Government to be more forthcoming about what they are trying to achieve in the clauses. In the current drafting, “business” has a wide definition.

The Bill proposes that a Minister of the Crown can appoint a reviewer in respect of certain regulatory functions. This reviewer must release a report, including an assessment of the extent to which the relevant regulator’s procedures, particularly handling and resolving complaints and appeals made by businesses to the regulator, are accessible and fair to businesses. Does this mean all businesses? As this is the small business Bill, is that not rather inappropriate?

16:15

Our Amendment 33G limits the application of this to small and micro-businesses as a means of probing the Government about the wording they have used. The Secretary of State has a duty to publish a business impact target and must, in particular, have regard to the need to minimise any disproportionate impact of regulation on activities carried out by “smaller scale businesses”. Again, in 33N we are probing the use of what we see as vague terminology.

With regard to Amendments 33S and 33T, Clause 25 proposes the creation of an independent body to verify assessments and reports on a range of matters, from listing and capturing regulatory provisions to providing assessments and economic impacts on the business activities of each of the qualifying regulatory provisions—these include, in the terms, those carried out by “smaller scale businesses”. I would be grateful if the Minister would outline in more detail how this body will operate and how they see its size, scale, governance, recruitment, both lay and professional, budget and the like. Most importantly, it does not seem clear whether it is to protect small businesses from harm, if you like, caused wittingly or unwittingly by Government and their agencies or whether it is to promote the interests of small businesses. If it is the latter, then I am sure the Minister will carefully consider our amendments. If it is not the latter, we would be grateful for more details about how it works and fulfils both tasks concurrently and in relation to all businesses. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Mendelsohn, for his explanation of these amendments, which I hope I have understood, as I know that they are largely probing in nature. First, I turn to Amendment 33G, which would have the effect of limiting the champion to consider only appeals and complaints by small and micro-businesses. I suspect this is not his intention. It is true that larger businesses generally find it easier to navigate regulators’ appeals systems. That is why we call this policy the small business appeals champions or the small business champion—because the main benefits will fall on small and micro-businesses.

However, large businesses have problems with appeals, too, and fixing those problems can be beneficial in a broader way: smaller businesses having similar issues or facing similar burdens can benefit. It would be a mistake to exclude the experience of larger business entirely from the work of the champions. One can imagine a champion telling a business, “I’m sorry, but because you’ve got 51 staff, I can’t take any notice of the evidence of your problems within the regulators’ appeals system”. Clearly, that is not what we want. What we want is somebody of good quality who will come in and take a critical look at this important area.

Amendment 33K proposes that the guidance for the small business appeals champion should be laid before Parliament. I can tell the noble Lord that it is actually the Government’s intention to show the guidance to Parliament and I am content to consider his amendment further.

Amendments 33N and 33T seek to replace the term “smaller scale businesses” in the business impact target provisions with a cross-reference to the definitions of small and micro-businesses in Clauses 33 and 34. I understand the logic behind these amendments and recognise that use of a specific cross-reference might at first sight provide for a certain legislative coherence. However, I do not believe that the amendment is necessary for the provisions in this part of the Bill to achieve their intended effect. The Government’s view is that, in the specific context of the content of the annual reports required under the business impact target provisions in Clauses 23 and 24, and the expertise of the independent verification body that will assess estimates of economic impact under the target provisions under Clause 25, the term “smaller scale business” is sufficiently clear.

The context for the use of the term “smaller scale business” here is very different from the purposes of the definitions which have been provided in Clauses 33 and 34. Those later definitions are being created to facilitate exemptions from regulations. To achieve that, the definitions need to be precise and workable at a detailed technical level. In contrast in this clause, we believe that the term “smaller scale businesses” is sufficiently clear for its own purposes.

The Government’s view is that in practice the term “smaller scale business” will be interpreted in accordance with the EU definition, which we discussed last week, and is therefore consistent also with the definitions provided for in Clauses 33 and 34. The EU SME definition is, of course, widely used on an administrative basis in the UK for a variety of purposes, including statistics, grants, and other policy contexts.

Moreover, the use of a broader descriptive term, rather than something more technical, clearly has advantages in terms of enabling a wide range of relevant issues to be included in the report without raising questions as to whether such issues are within the powers provided for in this clause. This ensures that the reporting can operate flexibly. Similar arguments apply in relation to the expertise of the independent verification body, which we will no doubt come on to discuss.

In addition, there are some legal issues with the operation of this amendment. The definitions in Clauses 33 and 34 are not complete and will require secondary regulations to make them function. While the headcount is defined on the face of the Bill, there are important financial definition criteria which have to be established under delegated powers. Such regulations will not be in place by the time that the target clauses are commenced and in operation—a technical point but I thought one worth making.

Amendment 33S would require the independent verification body to have expertise in the assessment of the impacts of regulation on small and medium-sized businesses, but not larger businesses. That is a narrowing of the current requirement set out in subsection (6) of Clause 25, which requires the independent verification body to have relevant expertise in assessing the economic impact of new regulation on all businesses, including smaller ones. The Government consider it vital that the verification body should have the expertise required appropriately to assess the economic impact of regulation across the full range of business. That is clearly particularly important for regulations that concern activities typically undertaken by large businesses—for example, large-scale manufacturing, or businesses with certain types of pension scheme. The findings of our current version of the independent verification body—the RPC—bring a great deal of light to regulatory proposals and often cause us to pause and ask whether something is good or bad regulation. We are trying to bring that good system on to the statute book in a way that attracts top-quality people to this body. We think that the wording in the Bill is right.

I thank the noble Lord for his probing amendments. There are good practical reasons why we have drafted the clauses in the way that we have. I hope that he has found my responses helpful, including my clarification on the amendment relating to Parliament, and will be willing to withdraw his amendment.

[Lord Mendelsohn]

I thank the Minister and am very grateful for her response. While small businesses will be the disproportionate beneficiaries, and although some of these issues affect companies of different sizes, there is the potential for small businesses to be squeezed out in certain circumstances. I accept that the drafting is elegant, and certainly has a lot more legal validity than our amendments probably have. However, it is important to consider how the measure will operate in practice. I cannot help feeling that we may return to these issues time and time again as the relevant balance is difficult to achieve.

We are very encouraged by the Minister’s response on Amendment 33N. We will certainly take careful note of what she said and consider how the measure will operate. We are very grateful to her for her constructive response but will want to consider whether we are sufficiently reassured that the measure will disproportionately benefit small businesses—the Bill is about disproportionate benefit to small businesses—or whether we have lingering concerns that small businesses will again lose out—not completely, they will be beneficiaries—to other companies. In those circumstances, and given the Minister’s very helpful comments, I beg leave to withdraw the amendment.

Amendment 33G withdrawn.

Amendment 33H

Moved by

[Baroness Thornton]

33H: Clause 17, page 19, line 14, at end insert—
“( ) The following regulators are excluded from the provisions outlined in this section—
(a) the Equality and Human Rights Commission;(b) relevant regulators in—(i) the Department of Health;(ii) the Department for Transport;(iii) the Department for Work and Pensions;(iv) the Department for Business, Innovation and Skills;(v) the Department for Culture, Media and Sport;(vi) the Department for Communities and Local Government.”

[Baroness Thornton (Lab)]

My Lords, it is a great pleasure to be in the Grand Committee today to support my noble friends and to speak to the three amendments in this group.

Amendment 33H would exclude the EHRC and relevant regulators in departments. In the discussions on the Deregulation Bill, we expressed concern about the regulatory provisions in this Bill. Clause 18 sets out the process for specifying regulatory functions and bringing them within the reviewer’s remit. It provides that the Secretary of State may, by making regulations, specify regulatory functions to which the duty set out in Clause 17, “Review of regulators’ complaints and appeals procedures”, applies. Amendment 33J would limit it to regulators that the Deregulation Act requires to have regard to growth. In Clause 21, the Secretary of State has a duty to publish the business impact target. Amendment 33M would ensure that, at the same time, the Secretary of State must publish a list of regulatory bodies that the Deregulation Act requires to have regard to growth.

We are asking the Government to assure us that there has been a legislative read-across. The Minister will be aware that the status of the Equality and Human Rights Commission was discussed in the course of the Deregulation Bill, and we expect to return to that on Report. As noble Lords will know, the EHRC enjoys an “A” status as a national human rights institution. I am dealing with these amendments because I am the shadow equalities spokesperson—I dealt with this issue all the way through the consideration of the Deregulation Bill and hope to continue to do so. We need to be clear that it is not appropriate to apply these regulations to the EHRC. We need to be assured that the Government recognise this and have taken steps to ensure that it does not happen. We sought to put it in the Deregulation Bill. I am sure that the Minister will be completely up to speed with this and that she and her colleagues will have discussed how best to deal with it as regards this Bill.

This is important because “A” status is awarded by the United Nations International Coordinating Committee of National Human Rights Institutions, which reviews the EHRC’s compliance with the United Nations’ Paris principles, which require the EHRC to be an independent body. We think that the Government have decided to exclude the commission from the list of non-economic regulators subject to the growth duty provisions in the Deregulation Bill, but, as I say, I seek further clarity on that. That is important because we have to avoid the reality, or the perception, of interfering with the commission’s ability to perform its regulatory functions independently. If that was jeopardised, it would, in turn, jeopardise its “A” status. As it is our human rights body, having an “A” status is of great importance to the UK’s international standing and reputation. It enables the UK to influence the protection of fundamental rights globally and it gives us a voice at the Human Rights Council. Any downgrading of the commission’s status would have a significant negative impact on the UK’s global influence.

Have the Government decided to exclude the EHRC from the list of regulators covered by Clauses 17 to 19? That question is at the heart of these amendments and that is the clarification we seek. I beg to move.

16:29

[Viscount Eccles (Con)]

My Lords, there is one amendment to Clause 21 in this group. If the Committee will allow me, I will raise a rather general point about Clause 21. This impact report is a very big exercise, which is made quite complicated because it is selective; that is to say, it is supposed to concentrate only on regulations that have been introduced and withdrawn during the period. I am not looking for an answer on the general approach today, but perhaps my noble friend will be kind enough to write to the Committee about this clause.

This business impact target will be very expensive to carry out. I would particularly like to know how many people, over what period of time, will be engaged upon writing this annual report. Quite apart from that, its conclusions will be disputed, which will give rise to a lot more toing and froing. I wonder what will be achieved and what will be done as a result of this report that would not be done on a case-by-case basis anyway. That is to say, circumstances would arise as regards a particular regulation or the withdrawal of it, which would cause people to think that something must be done. Indeed, we have been discussing quite a complicated and comprehensive system for being able to raise such problems and deal with them. Therefore, before the next stage I would be most grateful to understand in more detail than I do what the real benefit is of Clause 21.

[Lord Deben]

My Lords, having been critical of what I am afraid I referred to as persiflage in an earlier amendment, I draw my noble friend’s attention to the importance of this set of amendments. They are not here, as I understand it, to lay extra burdens on anybody or to make generalised statements about good will and family life. In fact, they are designed very purposely to ask the Government to be very clear about this issue.

I say to my noble friend that it is important for the Government to be very clear about this position, because there are a number of other areas in which the Government have not been clear and where we are now in some difficulty. Of course I would not be out of order were I to speak to the question of caste at any length, but there is no doubt that there are a series of issues where lack of clarity has led people to be concerned as to where the Government stand. I am not concerned about that, because I am quite sure that the Government stand in the right place—you could not expect me to sit on this side of the Room if I did not think that. However, there are those who are not entirely sure, and this would be a good opportunity to give them the assurance that they need, not only for the high-minded view that the noble Baroness, Lady Thornton, put forward and which she is perfectly right to raise, on the standing within the international community, but also for a rather boring local reason. That is that one of the problems of red tape, as I said, is the perception of it, and one of the other problems is the misunderstanding, and not knowing where it is.

I do not like the term “deregulation” much, as it presupposes that the answer in all questions is not to have regulation, while in my view we have to try to look for good regulation. That is what Governments of all parties mean, when they are sensible, whatever they say outside. One of the ways we can have good regulation is, first of all, to have clear regulation—people know where they are. That is why I am so keen on not having too much of it, not because I do not want regulation, but simply because the more you have of it, the less people are clear and the less they know what they should be doing. In this particular case, clarity seems crucially important.

Although this is clearly a probing amendment that is meant to try to make sure that the Government say what they think and, if it is necessary to put that in the Bill or change one of the clauses in such a way as to make that explanation certain, I am sure that the Government will find a way to do that. I wanted to emphasise that this seems to be a totally different kind of discussion from the one that I rather light-heartedly drew attention to earlier on—I apologise to the noble Lord, Lord Stevenson, if he felt that I had been unfair about what he said. However, on this occasion it is important that there should be absolute clarity.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Baroness for her amendments relating to the scope of the champion policy and the links to the growth duty and indeed, for making an appearance in the Committee to talk about the EHRC in particular.

If the noble Baroness will bear with me, I shall take the amendments in turn. Perhaps I should start by commenting on the question from my noble friend Lord Eccles about the purpose of the business impact target. Clause 21, to which he refers, establishes a framework for transparent regulatory reporting. This framework builds on, it is fair to say, the world-leading success of the Government’s one-in, one-out and one-in, two-out approaches to regulatory management, which have saved business a lot of money—£2.2 billion a year.

The Government have significantly improved the regulatory environment for business, but the job is not done. Many businesses in this country, as we have heard in the Committee, believe that complying with regulations is still the single greatest challenge to running their business. There remains an ongoing need for future Governments to ensure that the regulatory system is as streamlined and efficient as possible and, as my noble friend Lord Deben said, really clear.

Clause 21 is designed to achieve that objective. It places a duty on the Secretary of State to publish and lay before Parliament a business impact target within 12 months of the commencement of a new Parliament. The setting of deregulatory targets is already well established. The previous Administration set a reduction target for administrative burdens; this Government have pioneered other systems. Examples demonstrate the value of such an approach and the Bill’s proposals are in a sense a natural progression of the established practice, which is important.

Amendments 33H and 33J would, in different ways, restrict the list of regulators to which the small business appeals champion provisions can apply. The Bill already provides that the list of regulators covered by appeals champions should be set out in regulations. As I have already said, these will be subject to an affirmative resolution. We have already issued a consultation document—I repeat that for the benefit of the noble Baroness, Lady Thornton—and that consultation paper is on the government website. The consultation ended last Friday, but we are happy, of course, to take account of representations received in debates in the House alongside the consultation. We will publish a summary of the consultation and the Government’s response in due course. Our response will become the basis of the regulations that we lay before Parliament and which will bring regulators into scope.

The one area where the clauses mention specific regulators is in respect of the financial services regulators. That is because these regulators already have an extensive statutory framework for engaging with business stakeholders and we feel that creating a champion would risk creating confusion and duplication.

On Amendment 33H, if one accepts the general thrust of this policy on the need for someone to make sure that regulators’ appeals processes are business friendly, why would one not want it to apply, for example, to care homes that felt unfairly treated and wanted to challenge rulings by the Care Quality Commission? What about businesses challenging the Insolvency Service?

Moreover, the amendment also proposes to exclude the Equality and Human Rights Commission. I can reassure the noble Baroness that it is already the Government’s position that the EHRC should not be in scope. Consequently, it was not included in the consultation to which I referred or in the list of regulators to be covered. The Government recognise the possibility that applying the growth duty to the EHRC might have inadvertently triggered a review of the “A” status of the EHRC. They have therefore decided not to do so. The Business Secretary has written to the EHRC to confirm this decision. We have no desire to threaten the status of the EHRC, and will take all necessary action to ensure that we do not. I hope that that clarity also reassures my noble friend Lord Deben.

Nevertheless, we do not think it would be appropriate to start excluding certain regulators within the Bill. The Bill, as drafted, rightly leaves this for secondary legislation. This is because regulators may change over time and it is important that there is flexibility to amend the list accordingly.

[Lord Deben]

My noble friend said earlier on that this would not apply to the financial regulators. Some of us think that this Government have the most amazing ability to think in two different ways: they deregulate on everything else but overregulate in the financial areas. I declare an interest, which is in my entry in the register of interests. I do not quite understand why, if these things are so good for all the other areas, they are no good in the financial service area. My noble friend said that she thought it might be duplicative, but I cannot think of any rights that people have under the present regulations which parallel this. There are small businesses involved—again, I declare my interest—so I do not quite understand her answer to that, although I must thank her very much for her clear answer on the equalities organisation.

[Baroness Neville-Rolfe]

I thank my noble friend for his intervention because it gives me the opportunity to explain that Clause 20 introduces equivalent provisions for financial services. It is because of the plethora of existing legislation on financial services that we have to do it in a slightly different way in that area. I am sure that we will come on to scrutinise that clause in due course. Even for the financial regulators, I understand that the exclusion is not in the Bill. We are simply trying to achieve exactly the same effect but have had to do it in a different way.

[Baroness Thornton]

Rereading this, I wonder whether I could ask the Minister a question about Clause 21(4), which says that:

“The Secretary of State must lay each thing published”.

I was responsible for taking a Bill through the House which used “thing” in it. We spent a great deal of time defining what “thing” meant. That was in the medical world and we came to the conclusion that, in that context, “thing” was the word that had to be used. However, I am not sure whether “thing” needs to be used here when we are talking about publications. The Minister may not need to answer what I ask now, but perhaps she would like to think about it.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Baroness for bringing her experience of other areas, with a certain levity, while raising a good point. I will certainly take it away and look into why the drafting was done as it was by parliamentary counsel.

Amendment 33J relates to the duty on regulators to have regard to growth. That duty will of course be created by the Deregulation Bill, which we have also been considering in this House, and which includes similar provisions to this Bill giving the Secretary of State power to make regulations establishing which regulators should be covered by it. Like the small business champions, the growth duty is part of the Government’s better enforcement programme to improve regulatory enforcement. The champion will seek to improve scrutiny and governance on the appeals and complaints processes of a regulator and has no vires over individual regulatory decisions. The growth duty seeks to ensure that regulators have regard to growth when they take regulatory action.

The two policies will apply to many of the same regulators, but there will be a few differences at the margins. I agree that there may be regulators for which the growth duty is not appropriate, but I do not believe that this would automatically mean that a champion would not be of benefit, for all the reasons we have been discussing. For instance, the Pensions Regulator will not be subject to the growth duty because it already has an equivalent duty under its own statute. But we see no reason why it should not have an appeals champion, and have proposed as much in our recent consultation paper.

16:44

The issues here need to be considered on a case-by-case basis, not under a blanket rule, or the primary legislation will become cumbersome and unwieldy. Parliament will be able to consider which regulators should be in or out of scope when it sees the list which the Secretary of State will propose under Clause 18. That is the time to make those decisions.

Amendment 33M relates to reporting on the list of regulatory bodies subject to the growth duty.

[Baroness Thornton]

My Lords, I apologise for intervening, but the noble Baroness will be aware that, if this is done under statutory instruments, there is no power to amend them, which is why it is very important to get things right in Bills.

[Baroness Neville-Rolfe]

We are serious about the terms of our consultation. I have explained why I think that we are right to do it the way that we are. The list is available, and I will ensure that the noble Baroness has a copy of it, but I think that the material point for her is the undertaking I have already made standing here in Parliament about the EHRC, where I think that we are in agreement.

On Amendment 33M, the business impact target and the growth target are two very different policies. The growth duty applies to regulators and the target to the Government. The target relates to regulatory legislation, whereas the growth duty is about influencing the behaviour of regulators on the ground. Having a report on the coverage of one policy included in a publication about the details of another risks confusion rather than adding to transparency. The growth duty is covered in the Deregulation Bill, and we should not confuse matters by adding it to this Bill as well. We already have full transparency about the list of regulatory bodies to which the growth duty will apply. The Deregulation Bill provides for that list to be prescribed in regulations, which are subject to affirmative resolution. Anyone wanting to understand the coverage can and will look at that list. Duplicating it as part of an unrelated publication does not seem to be the right thing to do.

I have received important advice on the subject of the meaning of “thing” in the Bill. It refers to several different things—thus the use of the phrase—including the business impact target, the interim target, the methodology and the scope of the target. I suppose that that was the best wording that they could come up with for that purpose.

I hope that I have answered the noble Lord’s questions and the wider questions raised by my noble friend Lord Eccles. If I have not, I am sure that we could discuss those points further. We do not believe that the amendments are necessary. I hope that some reassurance will have been taken from my response and that, in the circumstances, the noble Baroness will agree to withdraw the amendment.

[Baroness Thornton]

I thank the Minister for that comprehensive answer. I thank the noble Lord, Lord Deben, for referring to me as high minded and for his support. I do not take that as any reflection on my noble friends and their efforts in this regard. I am very grateful to the Minister for that reassurance. I know that the noble Baroness, Lady O’Neill, has received her letter and is very grateful for it. It is not that we will stop keeping a weather eye on these issues, but this one looks like it will be okay.

My noble friends will probably be returning to Amendment 33M, because there are issues about having the Deregulation Bill and this Bill, with business impact targets and the growth targets. I think that further clarification will be sought, but that is not my job right now, so I beg leave to withdraw the amendment.

Amendment 33H withdrawn.

Clause 17 agreed.

Clause 18: Power to specify regulatory functions

Amendment 33J not moved.

Clause 18 agreed.

Clause 19: Guidance by the Secretary of State

Amendment 33K not moved.

Clause 19 agreed.

Clause 20: Independent Complaints Commissioner: reporting duty

Amendment 33L not moved.

Clause 20 agreed.

Clause 21: Duty on Secretary of State to publish business impact target etc

Amendments 33M and 33N not moved.

Clause 21 agreed.

Clause 22: Sections 21 and 23 to 25: “qualifying regulatory provisions” etc

Amendment 33P

Moved by

[Lord Stevenson of Balmacara]

33P: Clause 22, page 21, line 42, leave out subsection (2)

[Lord Stevenson of Balmacara]

My Lords, to be clear, this is a probing amendment, which could be called the “lowest minded” of my amendments today, because I simply cannot make sense of Clause 22. I will be grateful for any guidance that the Minister can give.

First, Clause 22 defines statutory, regulatory and qualifying regulatory provisions. I am surprised that these need to be defined again in this Bill; in no sense do I accuse the Government of being otiose as regards wanting to repeat legislation, but perhaps the Minister can explain why that is necessary. These seem to be bog-standard—I am sorry; I am sure that that is not a parliamentary term—or very obviously standard phrases that are used commonly within legislative processes and they should not need redefining. If there is a story behind that, I would like to know it. The only point that comes out is that the issues that seem to be defined are that the Secretary of State has discretion to make whatever regulation he or she may wish to at an appropriate time. That seems very close to a Henry VIII power and I would like clarification that that is not the case. I beg to move.

[Viscount Eccles]

My Lords, what the noble Lord, Lord Stevenson, said reinforces my view that the question of impact has not been carefully thought through. Perhaps the most difficult thing in the previous clause is the question of the methodology. You could have any number of economics professors lined up across the equator and they would all completely disagree about the methodology for an economic impact assessment on this subject. If in addition you have a way of cherry-picking by regulation the regulators that you wish to be included in the impact statement, the thing becomes quite byzantine.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for tabling this probing amendment. To answer his question I will explain the purpose of the clause. The Government have significantly improved the regulatory environment for business, as I have already explained. There has also been some encouraging progress at an EU level. This December’s EU Competitiveness Council conclusions on better regulation were extremely positive, calling for the first time for EU burden reduction targets. Therefore, the issue now goes wider than the UK. Building on those achievements, the Government are legislating to lay the framework for transparent regulatory reporting.

On Amendment 33P, I acknowledge that the framing of the business impact target sets a wide scope for future Administrations to determine for themselves what will count for the purposes of the target; that is, what is a “qualifying regulatory provision”. We consider it prudent to allow sufficient flexibility for future Administrations to determine the precise scope of the target, depending on their priorities and circumstances. We believe that this approach should attract support on all sides, not least at this stage of the Parliament.

Potentially a wide range of regulations could be in scope, meaning that some adjustment may be necessary to avoid perverse outcomes or other adverse impacts. For example, it may not be sensible to include certain measures—such as those related to national security or civil emergencies—within the target, because they could not be anticipated at the start of, say, the five-year parliamentary term. In addition, a future Government may wish to exclude measures that have negligible impacts on business, such as simple consolidations of existing regulations. Including all such measures in the target could be disproportionate and would represent a poor use of taxpayers’ resources without delivering obvious benefits to business.

The fundamental point is that the choices that a future Administration make regarding the scope of a business impact target will be transparent and will be for the Government of the day to defend. It is not appropriate for this Government or for Parliament unduly to restrict that choice. I hope that that is not byzantine but sensible and that on reflection noble Lords will feel that it is a reasonable rationale.

My noble friend raised the important issue of methodology and I agree with him that you can have as many methods as you have economics professors. However, it is an important principle that we need transparency around methodology and, of course, methodology is an important component of the good work that a body such as the RPC does. It is entirely appropriate that the Government of the day are able to look at the methodology options in a transparent way, to make appropriate decisions and to put them before Parliament. I hope that the noble Lord will be willing to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I prefaced what I said by saying that it was a very low-minded question. I hoped that I would get an answer to my concern, which was that I did not understand why we had to regulate in the Bill for stuff that I thought was taken as read more generally. Perhaps that was too detailed or too low a question to be answered on the Floor of the House. Perhaps the Minister might write to me about it. I do not think that it is a major issue.

The major issue is the one raised by the noble Viscount, Lord Eccles, which is increasing my sense of concern—“panic” might be too strong a word—arising from some of the ways in which Clause 21, in particular, is described. It is not just the slightly odd use of the word “things”. This is a complicated set of calculations with a new quango being set up to look at it, with all the other things that go with that. I think that we will come back to it, as I have an amendment later that deals with the way in which this might be amended. At this stage, I will certainly withdraw the amendment, although I think that we will need to come back to some of the points raised.

Amendment 33P withdrawn.

Clause 22 agreed.

Clause 23: Duty on Secretary of State to publish reports

Amendment 33Q

Moved by

[Lord Stevenson of Balmacara]

33Q: Clause 23, page 23, line 30, leave out from “businesses” to “which”, in line 31

[Lord Stevenson of Balmacara]

My Lords, in speaking to Amendment 33Q and the others in the group, I think that this is probably again at the low end of the scale. I am again grasping for some sort of assurance from the Minister about where most of this bites. This set of amendments is about the relationship between the work that is going to be undertaken in relation to business impact activity and voluntary or community bodies. The question also arises: what are business activities? In the good old days, voluntary or community bodies and charities did not do business. That was fairly straightforward. They were there for social and other provisions.

However, as we get to a more complex and richer—and I admit in some ways better—set of arrangements under which the work of the state is delivered, whether through public bodies directly or through those commissioned to do it, then obviously we have a much more complicated set of bodies and organisations involved. As is listed in the Bill, they range from charities through to community interest companies, trade unions, voluntary bodies and various other groups. They are all involved in delivering public value of some kind, but not all of them are going to be classified as business activities. The choice of the definition, which takes a rather theoretical point of view that a body is not undertaking business activity if it is in some way controlled by a public body, seems to me very tight.

The purpose of this group of amendments is to try to flesh this out and to get the Minister in her response to explain why she has approached the matter in this way, to understand the limitations on that and to give us a better understanding of how small businesses can operate within this environment. I am sure that all Members of the Committee and the wider community are aware of charities and others who have taken corporate forms that would make them very similar to small businesses. They may, indeed, be small businesses in terms of the definition. They may not be profit seeking, but that in itself is not now a consideration. They may not be profit distributing, but they may still have activities. While it might be comfortable to think of trade unions as being truly business activities—because they probably are a contribution to the national business activity—it does not necessarily imply that they are easy to understand in the same scope as, say, a small business trying to undertake work regulated in the energy area that is suffering from decisions that are going to cause it difficulty in trying to formulate a business plan to operate its activities and make a profit, which is what it will be there to do. So I am confused. I would be grateful, when the Minister responds to these amendments, if she could set out in a bit more detail where this bites.

17:00

The purpose of the amendments relates to the fact that we are thinking about an independent verification body, which will be set up as a separate quango to operate and relate to this whole area of work. It will be a duty of the Secretary of State. It is obviously important to have a body that will verify the estimates of economic impact on all measures in scope and the classification of the regulatory provisions as qualifying regulatory provisions, which are all specified in the Bill. In some senses this is the codification and placing on statute of the existing Regulatory Policy Committee. I understand that, but we are short of detail, unless it is in regulations that I have not yet seen. Will these appointments be gazetted in the normal way, through the Civil Service Commission, or through some other body? Are they public appointments in that sense? Will they be paid? If so, what salary are we talking about? How will the chair be chosen? Will that be from within the body or by the Secretary of State? I would again be grateful to have more focus on this.

We are still talking about small businesses, but across a very broad canvas. We are not necessarily talking about those defined as small businesses, because we are talking about smaller businesses, which, in some cases, seem to be quite big businesses. Indeed, they may even be international businesses. What expertise will be required in appointing and staffing the group? Might they be people who have served on the RPC or who are likely to be part of it? I obviously do not want names, but it would be helpful to have some sense of people’s backgrounds.

Three things seem still to be elusive. Where do we find the best definition of what constitutes “business activities” for the bodies concerned? Where does the Bill relate to the activities that they are doing? To limit people simply based on ownership structure seems to be a rather uncertain leg on which one would build a set of regulations. How will the necessary expertise and knowledge of the quango be properly found and how will it be assessed and organised through the systems that will be set up? I beg to move.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord, Lord Stevenson, for his questions and for allowing us to debate these important provisions. I will start by answering the question about coverage and refer him to Clause 27(2)(b), where he will see that businesses activities are defined as including activities,

“by a voluntary or community body”.

The definition is broad and includes the voluntary sector. I can understand why that is.

[Lord Stevenson of Balmacara]

That is, of course, true and I have read that. Clause 27(2) specifies that, but Clause 27(3) says that they do not count as business activities if they are controlled by a public body, or are,

“acting on behalf of a public authority in carrying out the activities”.

We are back on a rather circuitous argument.

[Baroness Neville-Rolfe]

The noble Lord has anticipated me. Voluntary shops presumably would be covered, but I will come on to talk about why there is a carve-out for public services, which is a slightly different point; I think that it is in the noble Lord’s last amendment.

Perhaps I should also, before I answer on individual amendments, talk a little about the verification body. It could of course be the RPC, which already exists, but the Bill allows flexibility for the Government of the day to decide on the precise body that they want, the people who are on that committee and the mechanics of how they are remunerated. At the moment, they get paid a daily rate, which seems fine to me. The Secretary of State will be under a duty to appoint a person, people or a body to perform the verification function. The body or persons must, in the view of the Secretary of State, be independent of UK Ministers and have expertise in economic and cost-benefit appraisal and the impact of regulation on business—including, significantly and importantly, smaller businesses. They will obviously also be subject to the usual public appointments rules.

Returning to the amendments, I think that there is a strong consensus on the importance of minimising regulatory burdens on voluntary and community bodies. Those bodies range from Cancer Research UK at the upper end to local community football clubs or parent-teacher associations. They are affected by many of the regulatory burdens affecting businesses, including reporting requirements. That is why the economic impact of regulations affecting the activity of those bodies is explicitly included in the scope of our target and it is why they are included in other regulatory reform proposals in the Bill. Moreover, as noble Lords will be aware, the Government have made a number of changes that have made it easier to set up and run charities and social enterprises. For example, we have provided greater legal clarity about volunteer liability and supported proposals to make criminal record checks simpler and less onerous.

However, the Government are not convinced of the need for the two amendments tabled today. The vast majority of voluntary and community bodies are small and will therefore already be covered by the existing reporting requirement set out in Clause 23(4). As well as being fewer in number, larger charities can call on greater resources and are able to mitigate the impact of regulatory burdens more easily than smaller charities. The amendment would therefore have the unintended consequence of weakening the focus of the reporting requirement on mitigating disproportionate burdens and undermine its intended impact. It also means that the benefits of the amendment in extending the reporting requirement to community and voluntary bodies in general would be limited.

Amendments 33U and 33N relate to the expertise of the independent verification body. I understand that there is a desire to deliver a clear specification of expertise—that is, regarding small business, community and voluntary bodies, as well as businesses in general. However, the Government’s view is that the clause already provides sufficiently for that outcome. Clause 25(6) requires that the independent verification body must have expertise in assessing the likely impact of regulation on business activities, including activities carried on by smaller-scale businesses or voluntary or community bodies. The Government consider it most important that the verification body has substantive expertise in assessing the economic impact of regulation on voluntary and community bodies, not just on commercial business. That is reflected in the membership of the existing Regulatory Policy Committee. However, securing that outcome does not require a change to the Bill.

Finally, I turn to Amendment 33X and the question asked by the noble Lord, Lord Stevenson, about the carve-out for public sector bodies. The Government’s primary focus in the Bill is reducing regulatory burdens on business and the third sector. Subsection (3) therefore excludes from the definition of qualifying activities those carried out by public sector bodies or that are related specifically to the delivering of a public service. Public sector regulatory burdens are of course important, but they are clearly beyond the scope of a business impact target. Including them within the target system would lose the clarity of focus on business—small business in particular—so essential to the growth agenda.

This carve-out also avoids unintentionally capturing regulations concerning requirements of public sector delivery—for example, schools, prisons and NHS services. We feel that it would be perverse to capture within the target the impacts associated with regulations relating purely to the provision of public services in that way. Doing so would lead to significant changes in reported impacts arising purely from changes in public sector delivery arrangements. For example, where service delivery was transferred from the public to the private sector, or the other way round, the effect would be an increase/decrease in the reported burden on business.

I hope that that explains the rationale for the provisions and why it is important that they are retained. I hope that the noble Lord will have found that reassuring and will be willing to withdraw the amendment.

[Lord Stevenson of Balmacara]

Not quite. I do not think that it is reassuring. I am getting more and more like the noble Viscount, Lord Eccles, as we go through the day. Is the Minister really saying that every PTA in the country will have to be in scope to this quango? I may be thought bonkers, but this is getting beyond a joke. We are talking about a Government so dedicated to deregulation that they will require my Little Missenden parish council school to get together in a way to ensure that it has proper regulatory functions in place and understands the process of regulatory procedures to the point at which it can appeal and go to see a small business champion, who will, of course, be far too busy dealing with big business problems. I understand, I think, that the regulatory structures need to be reformed a little, but one only has to read pages 26 and 27 to become completely hysterical about what we are saying. We have talked about things already, but the wording here does not strike one as being a wonderfully clear and concise expression of the new regulatory burden.

[Baroness Neville-Rolfe]

We are building on existing good practice, which I have explained. If small bodies such as the ones that the noble Lord described are affected by a new regulation, it seems right that the impact should be considered in the assessment by the independent body—the sort of compliance assessments that we rely on to look at the impact of regulation. It could, of course, be de minimis. That would be perfectly possible in the circumstances described by the noble Lord, but to exclude them does not seem to be right. This is in relation to the impact target; we are particularly focused on that at the moment.

[Lord Stevenson of Balmacara]

I appreciate what the Minister is saying, but I do not see a de minimis provision here. Perhaps the noble Baroness can take that away to look at. It is similar to what the noble Viscount, Lord Eccles, was saying. It looks like a many-headed Hydra and I do not think that that is what was meant. I think that it is meant to be a much simpler cut-through to try to find a balance between ensuring that those who are adversely affected by regulatory practice have a mechanism recognising that they are so affected and having a way of resolving it without suddenly putting the aegis of the country on a war-time footing alert that they are going to be attacked by the bureaucrats who will be coming to get them. I extend to make my point.

[Baroness Neville-Rolfe]

My Lords, given the concern that has been raised and given that, as the noble Lord, Lord Stevenson, says, our intentions are certainly to cut red tape rather than the reverse, I shall be happy to discuss this before Report if that would be helpful.

[Viscount Eccles]

My Lords, I have found myself in support of the noble Lord, Lord Stevenson, on other occasions. It is quite a new and strange experience to find him in some support of me. My conclusion is that if Clauses 21 to 27 were quietly to disappear, the world would be a better place.

17:15

[Lord Curry of Kirkharle (CB)]

My Lords, I think that my interests in this are understood by most in the Room, in that I chair the Better Regulation Executive. I simply want to help by providing a little clarity here. What we are in fact trying to capture in this regulation—I say “we”, because the Better Regulation Executive has had some input into its drafting—is to ensure that what works very well at the moment is set in place in statute for the future and that the impact of regulations on the business community is understood. While this looks complex on paper as drafted, in practice it is largely what is happening now. It is not creating some bureaucratic monster that is having difficulty interrogating every small community business. However, it is important that the impact of legislation as proposed by departments on small and medium-sized businesses is understood. The expertise within the body is essential to this effect, but the quality of the impact assessment is the role of the statutory body. The business department must carry out the impact assessment and, in doing so, take into account the impact of legislation on SMEs. The independent body must then verify whether the impact assessment has been as robust as it should be.

[Lord Stevenson of Balmacara]

My Lords, that is helpful and a conversation around some of these issues might be revealing. While what the noble Lord, Lord Curry, has said is probably a statement of where we are, I say to him only that we are forgetting that a new and proper quango has to be established. That is not the current situation. A number of reviews, reports et cetera are also built into the legislation. Again, those may be the status quo, but they are not currently given statutory provision. It is about balancing the additional statutory provision against the benefits that may or may not flow and, in a third dimension, against the extent to which this now appears to apply to people who probably carried on their daily lives without any previous understanding that they were in danger of being taken on by the people from Whitehall, who know best. However, we have said enough on this and I beg leave to withdraw my amendment.

Amendment 33Q withdrawn.

Amendment 33R not moved.

Clause 23 agreed.

Clause 24 agreed.

Clause 25: Appointment of body to verify assessments and lists in reports

Amendments 33S to 33V not moved.

Clause 25 agreed.

Clause 26: Amending the business impact target etc

Amendment 33W not moved.

Clause 26 agreed.

Clause 27: Sections 21 to 25 etc: interpretation

Amendment 33X not moved.

Clause 27 agreed.

Clause 28: Duty to review regulatory provisions in secondary legislation

Amendment 33Y not moved.

Clause 28 agreed.

Clause 29 agreed.

Clause 30: Section 28(2)(a): “provision for review”

Amendment 33Z not moved.

Clause 30 agreed.

Clause 31 agreed.

Clause 32: Sections 28 to 31 etc: supplementary

Amendment 33BA not moved.

Clause 32 agreed.

Clause 33: Definitions of small and micro business

Amendment 33BC

Moved by

[Lord Mendelsohn]

33BC: Clause 33, page 29, line 12, after the second “business””, insert ““medium-sized business”, “large business” or “super corporate””

[Lord Mendelsohn]

My Lords, in moving Amendment 33BC, I will speak also to Amendments 33BD and 33 BG. The amendments together would create a total of five definitions in UK law based on the measure of employee headcount. We are trying to introduce the definition of a micro-business, meaning a business with one to nine employees, a small business, meaning a business with 10 to 49 employees, a medium-sized business, meaning a business with 50 to 249 employees, a large business, meaning a business with a headcount of 250 to 1,000, and a super corporate, meaning those with in excess of 1,000 employees.

We very much support the thrust of the clause, and it is excellent to have a proper definition to work with. Our amendment seeks to establish a richer and, in our view, better way to define the different type of businesses. The basic argument for it is pretty compelling. We understand the need to make regulations and legislation as effective an operation as possible. Defining in law what is meant by the terms “small business” and “micro business” will make it possible for future Governments of any colour to exempt enterprises of that nature from new regulatory obligations. In addition, it can help to target particular elements of policy and support to the required businesses.

The definitions are based on the European Commission’s recommendation, which defines micro, small and medium-sized businesses by employees, turnover and balance sheet total—definitions which are already widely in use on an administrative basis. There are arguments to be had about the relative merits of headcount versus turnover and how to blend those numbers. It is widely acknowledged that it will not be straightforward to embrace everything cleanly with those definitions. It ends up as a complex Venn diagram landscape of connected definitions.

Nevertheless, there is a great attraction to making it as simple but sophisticated as possible. We believe that this five-group classification achieves that. It is of course accepted that the definitions are always imperfect, and that turnover is a factor in the size of a business. Nevertheless, there are good reasons to take a broader view than the Bill currently does.

The great merit of the Bill is its defined and single purpose: to focus on small businesses. Our challenge is that it does not go far enough, but we accept—to paraphrase—that a journey of a thousand miles starts with a single step. We believe that we should not stop to congratulate ourselves on starting the journey but remain focused on the future.

Here, we have a chance to do something with our amendment. Other places which have for a long time had very focused small business policy and even agencies are today looking at how they use definitions better to deal with the problems that we are debating now. The Bill represents a chance for us to address matters of the future.

Governments and policymakers in general have always had difficulty in improving the efficiency of markets in which small businesses operate. It is easy to use measures to deal with monopolies, oligopolies and so on, but in the markets in which small businesses operate it is very different. The Government’s role in relation to small businesses is naturally to consider how to establish political and economic stability, how government spending can trigger markets, setting interest rates in different places, forms of regulation, but also—and decisively—the role of market catalyst. Among the measures and levers that the Government have, it is important to recognise the diverse needs, aspirations and potential of businesses.

Small businesses are a key source of jobs in any economy. There are those start-ups which will have the ambition to become global players and will recruit in great numbers, but most small companies are small and will stay that way. Tax credits for hiring new workers are of great importance to a company on the threshold of a decision on whether to increase by one more employee or a small number. For aggressive start-ups with great confidence and belief in the future, the high-growth culture will make them more concerned about visas, immigration and the condition of education.

It is not just about growth. There are also great distinctions between companies relating to their ages and their relative requirements based on how long they have been in business and the challenges that they have had. Providing policy incentives, encouragement and exhortation can be done better if the type of business can be defined better. That is even now a strong debate in places such as the United States, with the Small Business Administration, and in other places where they have had long-standing agencies to target small businesses. Today, they are looking at further definitions to ensure that their measures can be as targeted and effective as possible.

In our view, this welcome area of the Bill would be strongly enhanced by richer and fuller definition. Even if the relevant measures are not introduced at this stage, there is no doubt that such definitions would help us to design much better policy in the future. In this context, I would be grateful if the Minister could reassure us that the Government have considered the Bill’s drafting not just in terms of 2015 but with regard to the future, and can assure us that the policy measures can be appropriately constructed to target different subsections of the small business community. I beg to move.

[Baroness Neville-Rolfe]

My Lords, I am grateful to the noble Lord for taking us back to the question of definitions in the Bill, which we have already discussed, and for setting out in a wide-ranging speech some of the logic behind his position. I shall read that with great interest when I have a little bit more time to reflect. I would like to go through the amendments that the noble Lord has tabled, which I think are to some extent probing in nature, and explain why we have done things the way that we have.

First, I turn to Amendments 33BC and 33BD. The Government are establishing definitions which will be broadly consistent with the European Commission’s, as I have said before. These definitions are widely used in the UK, and so by following the approach taken by the Commission, we will keep life simple for businesses. We are establishing statutory definitions of small and micro-businesses for a specific purpose, which is to help mitigate disproportionate burdens on smaller businesses, including community and voluntary bodies, by facilitating exemptions or other more proportionate treatment in new secondary legislation. We need to define small and micro-businesses clearly in order to exempt them from regulations where appropriate.

This policy intention explains why these definitions are different from those we have heard in previous provisions of this Bill. These definitions need to be precise enough for businesses to know whether they are covered by certain regulations or not. The rationale for the definitions is clear. It costs a small business 10 times more per employee, on average, to comply with regulations than it costs a large business—that is an interesting statistic to add to the noble Lord’s list. In contrast, medium-sized and larger businesses do not suffer from the same level of disproportionate burdens. For instance, those businesses are more likely to have access to specialist regulatory expertise. It would surely, therefore, be unfair to exempt larger businesses from certain regulations without also exempting smaller businesses. There is, therefore, no need to include larger businesses in these definitions.

The Government are committed to reducing regulatory burdens on all businesses, including medium-sized and large businesses, but the specific purpose of these proposals is to mitigate the disproportionate burdens that are most acute. I hope that the Committee can agree that, based on our policy intention, extending the definitions to include medium-sized and larger businesses is not required, and, indeed, could undermine the strong focus on mitigating burdens where they are most severe.

Turning to the detail of the definitions, I welcome the noble Lord’s support for the use of headcount. However, as he said, financial criteria can be an important adjunct to staff headcount in order to reflect the true scale of a business, and therefore the extent to which it suffers from burdens. If a business has the resources of larger businesses, those resources will mean that it is unlikely to suffer from the same disproportionate burdens, even if its headcount is relatively low. For example, such a business would be able to buy in specialist expertise to assist with compliance. For these reasons, in my view it would not be right for them to be treated as a small or micro-business for the purposes of this definition.

As regards Amendment 33BG, which I regard as probing as the noble Lord did not explore it, this Government believe that it is appropriate for the small and micro-business regulations to be subject to the negative procedure. The regulations will make detailed, highly technical provisions, which may require periodic minor changes. For example, the financial thresholds could need to be updated in line with EU definitions. I welcome the fact that the Delegated Powers and Regulatory Reform Committee accepted the Government’s judgment on this issue. I know that the House has great confidence in the views of that committee.

I am grateful for the debate on these provisions, and for the support that we have heard for the Government’s intentions in relation to small and micro-businesses. I hope that the noble Lord will withdraw his amendment.

17:30

[Lord Cope of Berkeley (Con)]

My Lords, I want to reinforce some of what my noble friend the Minister has just said with regard to these definitions and whether they should include any financial criteria as well as the headcount. It is very important that they do, and I was disappointed to see that this amendment left out the financial provisions. If the Committee looked through the list of businesses that we were looking at the other day, while considering the amendment of my noble friend Lord Flight, your Lordships would see that some very large businesses with huge turnovers—or, for that matter, huge balance sheet totals—nevertheless have very few people working for them. They have very few employees and are not small businesses by any normal criteria. It is important to include financial criteria within these definitions.

[Lord Mendelsohn]

I thank the Minister for her reply. The noble Lord, Lord Cope, made an important point about the size of businesses and the financial criteria when evaluating the different areas to look at. One has to take note of the huge imbalance that there is in the volume of businesses with very small numbers of employees and characteristics. You could distort that by the introduction of certain financial measures but, as I said, it is not that we believe that there is an absence of financial figures. If you are looking at where you can target policy, that is so but we want to illustrate a point within this—that there is a common interest in the promotion of small businesses and in trying to create measures to do that.

Considering the deregulatory issues about burdens and other sorts of things is one side of it—my noble friend Lord Stevenson outlined some of our concerns in relation to them—but this Bill is not just about removing burdens of regulation. It has to be about being able to promote small businesses, and people who are engaged in the activity of developing them, by easing their burdens and making their commercial activities much stronger and more successful. In that context, when we talk about regulatory burdens, every single poll of small businesses here, in keeping with those in other places, will demonstrate strongly that those issues are dwarfed in significance for them by the problems of payments—access to credit, cash flow and other sorts of things.

Within that context, we are also looking at the challenges which small businesses have in relation to competing in markets dominated by larger companies. On the issues that they have about access to markets, turnover thresholds and employment and other sorts of things, we are keen to think about how you can use these measures to try to design policy, support and other sorts of levers for the future. With a sense that the Minister will reflect carefully on that side of the coin, I beg leave to withdraw our amendment.

Amendment 33BC withdrawn.

Amendment 33BD not moved.

Amendment 33BE

Moved by

[Lord Mendelsohn]

33BE: Clause 33, page 29, line 28, at end insert—
“( ) Those who represent businesses with 10 to 49 employees and are purchasing goods or services for use within their commercial activities will be considered consumers with all the rights acquired by the Consumer Rights Act 2015”

[Lord Mendelsohn]

My Lords, in moving Amendment 33BE I will also speak to Amendment 33BF. For veteran observers of BIS matters, this debate will be quite familiar. These issues were raised during the course of the Consumer Rights Bill and the Government’s approach steered us towards considering this matter under the rubric of this Bill. This debate cuts to the heart of the level of commitment behind creating a framework that truly supports the backbone of our private sector in this country, and whether government are really willing to appreciate and tackle the market dynamics that favour bigger businesses over smaller businesses, as other countries have done successfully in stimulating small business. Indeed, small businesses are already treated as consumers in many parts of the European Union and many of the regulatory areas in our own country.

I will briefly set out the context and drivers behind the amendments. The argument is pretty straightforward. Small businesses, especially micro-businesses, have very little bargaining power because they are not making large-scale purchases. These companies do not have any more time or specialist knowledge than individual consumers. They do not have specialist procurement functions, procedures or external support, or even in-house accounting and legal expertise. We believe in extending protections to micro-businesses in the sale of goods and services.

My noble friend Lady Hayter meticulously spelled out these issues when she said that,

“we might expect a small hairdresser to know what they are doing when they are purchasing shampoo or hair-dryers, but they are not in any stronger position than any other individual consumer when they are getting a window cleaner in or buying a type of floor cleaner or purchasing electricity. Similarly, a small café that happens to offer wi-fi to its customers may be as vulnerable as the rest of us to poor service or being fobbed off by a wi-fi supplier. Similarly, small landlords may let out perhaps only one or two properties but some of those landlords will be classed as business and will not be able to enforce their rights when they are dealing with utility suppliers, or indeed the Post Office or anyone else, that they may deal with as a business”.—[Official Report, 13/10/14; col. GC 2.]

The Government have had some historical objections to such measures. First, they argued that small and micro-businesses are already protected under the Sale of Goods Act and the Supply of Goods and Services Act. That is why they directed us to this Bill, as opposed to the Consumer Rights Bill. That was reasonable and I agree with the point that these protections exist and are essential. However, they are not enough. The core problem for small businesses is that, in general, the level of protection afforded to business customers is significantly lower, reflecting a view that businesses ought to be in a position to look after themselves. A culture of caveat emptor, or buyer beware, is typically considered sufficient protection for business customers, other than in extreme circumstances. Moreover, very small-scale businesses are excluded from a range of commercial opportunities and proportionately penalised and treated as cash cows by a range of suppliers.

Secondly, the Government objected that it is an unnecessary and unusual intervention, but the truth is that it already exists. A number of regulators already treat micro-businesses as consumers. The Legal Services Ombudsman and the Financial Ombudsman Service both treat micro-businesses as consumers for their complaint handling. Ofcom extends consumer protection to micro-businesses and requires providers to apply an alternative dispute resolution scheme for dealing with unresolved complaints from domestic and small business customers. The Communications Act 2003 specifies that small businesses should be classified with domestic customers, as long as they do not employ more than 10 people or trade in the telecom sector. The Federation of Small Businesses has reminded us that small businesses also count as consumers in breaches of competition law; the FSB can act as a super-complainant in such cases. Small businesses will also be covered under Clause 80 as regards redress under competition law, where the opt-out provisions will cover small businesses; the Federation of Small Businesses can be party to that. What we are asking is therefore not that unusual. In fact, it is usual for this provision to be made to ensure the proper functioning of markets.

Thirdly, an objection has been made that business does not support it—even that the Federation of Small Businesses does not support it. This is both true and untrue. It is true that some big businesses do not want it. The Government have previously quoted consultations from the CBI. I can only say that, in my experience, some are good and some are bad: some react positively to deliver as if small businesses were protected as consumers, and others—this is really the main part of my experience—use the difference to provide inferior and costly service to the smallest commercial entities.

What is true is that the Federation of Small Businesses wants this measure. I know that this has been a matter of contention before, so I checked before speaking today. I think that last time there was a misreading of a report whose purpose was to inform the federation’s recommendations as being the recommendations themselves. When it comes to negotiating business contracts, the Federation of Small Businesses has identified four areas that add up to real detriment for those businesses. It talks about a “lack of expertise” in purchasing policy, high opportunity costs of time spent making purchasing decisions, low benefits, and little bargaining power. The Federation of Small Businesses firmly supports this recommendation.

Finally, the argument is made that there is no evidence that the measure helps, and that it could be bad in terms of how small businesses are treated by big businesses. I am bound to say that, while I am fairly new at this, it has not gone unnoticed that this has not seemed to stop government before. Indeed, I would even go so far as to say that some of the consultations on the Bill may well confirm the thrust of this argument, and the way in which the evidence is gathered can be quite narrow and sometimes give the appearance that our final evidential base is unlikely not to have unintended consequences as a result.

In my view, the argument about whether the Government can measure the impact of treating small or micro-businesses as consumers seems to be a minor objection. It is very easy to model an answer and I am sure that the department’s officials have grasped that or have used the time between this and the previous debate to get this right. I hear the argument about changing the legal framework for 4.7 million businesses without a full and complete understanding of the impact, but that is a rather false construct. I strongly reject the argument that we should avoid doing this because larger businesses will act with retributive force, or that they should be allowed to maintain a power imbalance because they do not like meeting proper business standards. I think that we also had that debate within the context of payments and access to finance. I also reject the argument that there is any meaningful and real business opposition. Would they suggest it? No. Do they really have any meaningful objections? I believe that they do not.

I hope that the Minister will be the bearer of some good news on this. There were some very encouraging statements in the other place and by Ministers on these matters. In fact, the Government’s response to the report by the Federation of Small Businesses into the consumer issues facing smaller firms and sole traders was also encouraging. I hope that the Minister has come here today with some additional measures strengthening the rights of these businesses, or even perhaps with the remarkable news that she will support our amendments. If my optimism is to be dashed, I hope that the Minister could place on the record—given all that has gone before—a reasonable exposition of the work the department has done to review the evidence in this area and create an evidence base, and say whether the Government categorically rule out amending the law in the future. If they do not do so, why not support the power to ensure that this can be done quickly and efficiently now?

If there is still a chink of light, given that this distinction is already made in statute law, regulator policy and other EU jurisdictions, would the Government be amenable to discussing how the Bill could clarify what is already a clear fragmentation in law and a mixed message to small businesses? I beg to move.

[Lord Deben]

My Lords, I ask my noble friend to take very seriously the issues which are raised here. I look at it in a rather different way from the noble Lord, Lord Mendelsohn—that is, from the point of view of a small business itself. As my declaration of interest shows, I chair a number of small businesses. I have been recategorising them while reading through the amendments, so I also chair a medium-sized business. On the basis of this discussion, I am hoping that it will become a large business. I look forward to that. I do quite a bit of mentoring of people starting businesses. It is very hard for them to start a business. However, we know that innovation comes more from small businesses than anywhere else and that the bigger a business becomes, the less innovation there is. It is a crucial part of improving employment and the economy. We have to recognise that.

How do people start small businesses? Very often, they do not start it as a small business but as a person or customer. You begin something and realise that you have a kind of business, and then you try to make it into a business. It is a much more haphazard operation than those who have never started a business sometimes think. I hope that the civil servants present will not mind my saying it but one of the problems with all this is that nobody who writes this stuff has ever run a business or understands how a business is run. Having done the job as a Minister, I recognise that I was pretty unusual because I came from the business community. Most Ministers had not done that. We have here a Minister who is very well equipped, because she has played a major part in what can only be called a megabusiness, in the circumstances.

17:45

I want to look at it from the psychology of a person who is running a small business. He or she sees themselves as a customer of other people. They soon discover that one problem with being a customer of other people is the same as we all have as customers: they are bigger than you, so it is difficult to deal with them and you therefore need protection. That is why we have consumer protection laws—I see that one is going through the other place at this very moment. I find it hard to understand why it is not automatic that small businesses should be treated as customers to a point at which they are genuinely in the same league as the people from whom they normally purchase. There are arguments against that, such as saying that you are buying from other small businesses in the same position, but that happens with customers, too. This is not a difficulty to overcome.

Why is that important? We must recognise that the big difference between a small business and a big business is that in the small business, every individual working there does about five different jobs, if not 10. Often, when a new job comes along, you have nobody who has any idea of how to do it, so you scrabble about and try to do it yourself and then find someone who might do it rather better. That is how it works, whereas the big business has somebody to do each thing. As long as you are small enough not to have somebody to do each thing, you need the protection that any individual has when dealing with bigger firms as a consumer.

My noble friend may wonder why I bothered to spend time talking about that. There is a much more fundamental reason that I now want to express. I believe that we are losing the battle for the free enterprise system. I do not mean that in a party-political way. I mean the system which we all share of having a free society where people create wealth because they start things and find ways to satisfy people’s needs. We are losing that because so often the spokesmen for the free enterprise system are not actually speaking for free enterprise; they are speaking for oligopolies and monopolies. I have just been reading Naomi Klein’s book. It is pretty concerted nonsense most of the way through, because what she thinks of as free enterprise is actually the Koch brothers or the great oligopolies. We have allowed her to think like that because we have not presented properly what a free enterprise system within a free society is. To do that, we have to be a society where we discriminate against monopoly and bigness in favour of smallness and innovation.

That is why what the noble Lord, Lord Mendelsohn, has been talking about is crucial. That is the thought behind the whole Bill and why, in general, it has support on every side. I worry that we have not grasped this nettle hard enough to recognise what a tough world it is. If you are a small business, who are you dealing with? It is the oligopoly of the energy companies. It is no good kidding ourselves: this is not the same as dealing with the garage down the road but a different concept. You are dealing with the monopoly of many of the state services. I am concerned that we are not clever enough to talk about the problems of the National Health Service, for example, in the same way as we talk about the problems of monopolies generally. In a sense, it does not matter who runs them: monopolies have effects on the consumer which are unacceptable. We cannot talk about that because we have got ourselves into all sorts of silos. Therefore let us start where we can talk, which is to say that smallness and innovation present certain difficulties, which are manifest, and the biggest of those difficulties is: how do you deal with things that are much bigger than yourself, over which you have no control?

I do not know whether my noble friend has ever tried, as a normal consumer, to get something out of, for example, her electricity supplier. I can tell noble Lords that the time you spend on the end of the telephone, trying to find the person to have the conversation with, is not just a statistic as provided by Which? but a horrible fact of life. The only parallel is trying to do the same in the National Health Service: being told by your local doctor, for example, that although he has the closed shop of a pharmacy, and although the prescription was written by him and his dispenser has only to take the bottle from the shelf and give it to you, that it will take three days before you can have that prescription, because that is what he does. Why? Because he is the monopoly provider, and he knows that. That is no criticism of our National Health Service but a criticism of a system that means that people are in a position to say to people who, even when they are small, are smaller than they are.

I feel very strongly that this is not just a probing amendment. It is not just a reminder of how important the small business is and how it needs the kind of protection which we give to individual consumers. It is one of the elements which reach much further than that, because it is just a tiny example of what is deeply wrong with the society that we have created. Unfortunately, we characterise it as if it is an argument about capitalism. It is not; it is an argument about how individuals can cope with bigness, and how bigness can be made to be able properly to provide the services that individuals want.

I take this as a very serious amendment, not of course to be accepted because it has no doubt been written in the wrong way, and there will be this, that and the other reason not to accept it—I was a Minister for a long time, so I know exactly what can be said. However, I hope that my noble friend will recognise that this is a very important element and not something put forward because the Opposition want to find something wrong with the Bill. It seems that they want to improve it. This is not a contrary amendment. If it is not the answer, perhaps my noble friend will be able to provide us with an answer, because I am sure we will all be very happy to have it.

[Baroness Neville-Rolfe]

My Lords, I thank the noble Lord for his amendments on treating businesses as consumers. Like my noble friend Lord Deben, I have worked in small business—in fact I ran a small garden centre business, and represented 6 million small businesses in Brussels for some time. No one is more determined to try to think about the effect of legislation on small businesses and how to get that right and incentivise innovation, which my noble friend Lord Deben referred to. However, we should not entirely condemn our great companies, which deal in everything from electronics to aerospace and food. They do innovate, and many of them lead very substantial export efforts around the world. Like my noble friend Lord Deben, however, I worry about the free enterprise culture. In fact, I have been trying to get one of my four sons to create a small business, so far without success.

As a Back-Bencher last year, I learnt a lot about the difficulties of dealing with utility providers. That informed us on the Consumer Rights Bill, which we debated in this Room for many weeks—and I am delighted that the noble Baroness, Lady Hayter, has joined us after so many constructive discussions on that Bill.

I agree that we must support small and micro-businesses and put in place the conditions for them to prosper. That is why the Bill is so important and why this Government are doing all that they can to support these businesses. None the less, I remain concerned about the scope of the amendments. They are wide-ranging and not consulted on. Small business might be keen on them until they discover the unintended consequences for their own businesses. That may be wrong, but we just do not know. For example, the small printer gets more reassurance when he buys his ink, but he suddenly has to give full refunds to his small-business and micro-business customers for 30 days because of a fault that might previously have been subject to a more agreeable negotiation—if he had cash flow problems, for example.

We also need to remind ourselves that businesses, including small and micro-businesses, are not unprotected at the moment, as the noble Lord, Lord Mendelsohn, said. Provisions under the Sale of Goods Act and the Supply of Goods and Services Act apply to them now and will continue to apply. Under the unfair terms legislation, a business may limit its liability to another business if that is reasonable in the circumstances when they make an agreement. The existing regime gives appropriate protection, which is important, while allowing businesses to enter into flexible transactions, a point that I shall return to.

Small and micro-businesses make up 99% of all businesses in the UK—a total of 5.2 million businesses. Of those, 5 million are micro-businesses, which in aggregate employ 8.3 million people and have a turnover of £655 billion. That is an extraordinary and very good thing, but it means that a lot of businesses—a lot of value added—would suddenly face a change in operating rules under either of these amendments, even if those amendments are well meant. It also means that there is an incredible range of small businesses across all sectors of the economy, many being very specialist in their sectors and skilled negotiators in transactions. They are able to judge exactly what their interests are.

Businesses think about value for money and do not always require the detailed protection that we give to consumers. We give consumers general protections because they almost always face the same information asymmetries when they buy goods and services—that is, the range of goods and services that consumers are likely to purchase is so wide that they are unlikely to have detailed knowledge of them. The same is not true for small businesses. It is in the interest of these businesses to reduce this information asymmetry. The same incentives simply do not apply to consumers. In addition, consumers are less able to assess the cost and implications of their purchase decisions, whereas efficient businesses, by their nature, assess this information and make these decisions more effectively. The Government are of course keen to encourage businesses to become more efficient and to see a healthy and competitive market.

All businesses also need to enjoy the freedom to contract for goods and services on an individual basis. The current legislative framework allows for that already. The amendment would, at a stroke, reduce that freedom for 99% of all businesses—in the case of the second amendment, 96% of all businesses. The default obligations under the Consumer Rights Bill would apply, whether it suited a business or not. This could place a restriction on business negotiations.

Consider risk and reward—a defining concept of enterprising activity. This proposal could have a chilling effect by removing all risk in business transactions. Superficially, that sounds attractive for small one-off purchases, but what about the bulk deals, the order of specialist items or the removal of old stock? How would this encourage suppliers to take risks with cash flow? A supplier faced with the possibility of having to give a full refund to all its small business customers for 30 days, without scope to negotiate reasonably about any liability, would need to be extra cautious about its financing. Is that the right culture?

I of course recognise that the intent behind the amendment is to protect small or micro-businesses where they might not know more than a consumer when buying goods and services unrelated to their core commercial activity—I remember that in Committee we talked about kettles as well as hairdressers. But how do we make the distinction? What is core for one business may not be for another. The Consumer Rights Bill does not have a legal definition of a consumer good or service that we could rely on.

A further point is the difficulty for a seller in deciding the difference between the small or micro-business to whom the Act would apply and larger businesses to which it would not. That would certainly complicate implementation and I am passionate about having a good and simple implementation plan for the Consumer Rights Bill so that sellers abide by the new rules and consumers know where they stand.

17:59

The noble Lord rightly raised the question of the Federation of Small Businesses. The Government consulted on the subject of these amendments in 2012, and when the previous Administration was in power, they consulted in 2008. Stakeholders were clear that they preferred the simplicity of a Bill that dealt with consumers alone. The CBI and the BRC recognised that there were difficulties in treating small businesses as consumers when they gave evidence to the Commons Committee on the Consumer Rights Bill in February 2014.

I know what was said about the FSB and that its views may have come on since it responded to the 2012 consultation, but it did helpfully commission research on the issue. Its report, published in January last year, recognised the complexity and that there could be potential difficulties. It concluded that Government should carefully consider the point when drafting consumer protection legislation and that it was important for the sector regulators to look to protect small businesses. Ofcom was mentioned. We recognise and welcome protections in sector-specific regimes but, as I outlined, we have concerns with applying more general protections in this way.

I have some sympathy with noble Lords in their quest but, as I said when we debated the issue in the Consumer Rights Bill, we risk giving with one hand and taking with the other. The amendment has not been properly tested and could potentially undermine what we are trying to achieve in helping small and micro-businesses, which has to be the focus of the Bill. I hope the noble Lord will understand that this is not a sensible addition and agree to withdraw his amendment.

[Lord Mendelsohn]

I thank the noble Lord, Lord Deben, for his powerful speech in Committee. I strongly agree with his central thrust about the operation of markets and what we have to do. There is a clear importance to the vibrancy and general benefit of very strong consumer-driven markets, and where we can get the asymmetries out of markets. That is something to be looked at in the general context of the Bill.

The noble Lord’s speech reminded me of research I read in relation to the Bill from the Brookings Institution, which talks about America, the custodian of great enterprise and small businesses. A piece of research indicated that although there were a number of innovative, high-tech businesses, there was an attrition of the traditional entrepreneurial culture of mom and pop businesses in America, and the measures they were going to have to introduce to try and deal with the problem. It strikes me that the problem we have with parts of the Bill is that, while it is hugely welcome and to the Government’s credit to have put it through and to be saying something specific about small businesses, the scope of ambition is a bit too narrow.

We have a huge challenge to encourage such businesses and this is a great opportunity to do so. Even in circumstances where it may not be possible—the drafting might be problematic, there may be synchronicities in policy, or all sorts of things—it is still important to maintain the sense of ambition, so that we can put into place now strategic anchors or even some of the exhortations or ambitions we have for small businesses in the future.

It is in that context that, while being hugely encouraged by the excellent speech of the noble Lord, Lord Deben, I was a tad disappointed by the Minister’s response. It contained a lot of things that I believe are, bluntly, utterly bogus. I just do not buy the notion that the western economy is going to collapse because micro-businesses are going to be given this protection. I do not buy the impact story. It does not ring true to anyone in business and I cannot believe it was presented. It is just not right. It is not right to believe that we can accept that the chilling impact of these things is going to be the principal reason why businesses are going to suddenly not transact. We know, even from our discussions, that within the context of late payments it does not have the same impact. If the Government accept what we are suggesting on the definition of micro-business and on late payments, we will have sufficient velocity in the markets for the cash flows to be less distorting and more encouraging.

I was also disappointed that there did not seem to be any real change or progress, or much work done, between the Consumer Rights Bill and the current position, even to the point of talking about the context of the FSB’s research on regulators, which concerns some of the other measures we talked about on previous amendments—the consultations related to the Consumer Rights Bill and other things. It did not look at the context of trying to use these measures to encourage and trigger small businesses.

We say very clearly that this is not about big businesses being bad. I do not believe that big businesses are bad; they are very important for this country for all sorts of productive things. However, we have to try to ensure that we push the fundamental context of small businesses: the market dynamics, the enterprise and the entrepreneurialism in which they exist.

On the statistics that the Minister gave us about the number of small businesses and the number of people who they employ, I have to say: do the maths. Most of these people are consumers, who, when they try to buy something for themselves rather than in the context of their businesses, have an easier time or more rights. I do not think that that is sensible.

I must ask the Minister to reconsider, to rethink some of the points made by the noble Lord, Lord Deben, and some other things about what we can do to achieve greater outcomes for small businesses. We also ask her—at least for my benefit—to spend some time scrutinising some of the work that has taken place since the Consumer Rights Bill until now to try to get some sense that we have properly assessed this and done some work as to whether or not they should reject this amendment. On the basis that I know that she will do that, I beg leave to withdraw the amendment.

Amendment 33BE withdrawn.

Amendments 33BF and 33BG not moved.

Clause 33 agreed.

Clause 34 agreed.

Clause 35: Exclusion of home businesses from Part 2 of the Landlord and Tenant Act 1954

Amendment 33BH

Moved by

[Baroness Hayter of Kentish Town]

33BH: Clause 35, page 32, line 27, at end insert—
“( ) In considering what is reasonable for the purposes of subsection (4), the court shall have regard to all relevant factors including but not limited to the following—
(a) the nature and location of the premises;(b) the nature of the business and the extent to which the activities of the business are comparable to activities carried on at home which are not business activities;(c) whether the business requires any structural change to the premises comprised in the tenancy;(d) the number and frequency of visitors likely to come to the premises in connection with the business;(e) the number and frequency of deliveries and collections of goods likely to occur at the premises in connection with the business;(f) the amount of any noise or other environmental impact likely to arise from the business;(g) the likely effect of the business on the parking of vehicles in the vicinity of the premises; and(h) the proportion of the property used for the business.( ) Where a dwelling-house is let under a tenancy to which subsection (2) applies the landlord and tenant may agree in writing under the terms of the tenancy or in any other document signed by them—
(a) that a particular business, or(b) that a particular description of business, if carried on in the premises, shall be a home business for the purposes of this Part of this Act.( ) Any such agreement shall be binding upon the parties.”

[Baroness Hayter of Kentish Town (Lab)]

My Lords, Amendment 33BH stands in my name and that of my noble friend Lord Stevenson. It deals with the issue of so-called home businesses that take place in rented or leased homes.

At present, landlords who let residential property to tenants who also use their homes for business run the risk of their tenants claiming security of tenure as business tenants under Part II of the Landlord and Tenant Act 1954. To protect themselves from this, landlords usually prohibit any use of the residence for business in the tenancy agreement. However, should the landlord in some way acquiesce to such businesses, the tenant gets security under the 1954 Act, notwithstanding the wording of the agreement. That is why the Government have included Clause 35 in the Bill, which will allow that, where a home business is carried on by a tenant, it should not qualify for security of tenure under the 1954 Act. Landlords could thus accept some working at home by tenants without risking losing control of their property—the tenants having only normal residential security of tenure. Secondly, where a tenant carries on a home business in breach of any prohibition against business use and the landlord gets to know about it—and thus at the moment is seen effectively to acquiesce to it—the Bill as drafted would not give the tenant statutory rights.

The clause seems sensible but my first question is: why is the measure in the Bill? Although we support its intention, we are unaware of any problems, debate or any evidence that led to its inclusion. Helpful though Clause 36 may be, will the Minister outline a little more of the background? We doubt whether it will have much impact, but that is no reason for us to oppose its inclusion. We welcome what it could do but we have questions about the wording, hence the amendment.

The most obvious, indeed crucial question is: what is a home business? The definition in the Bill, which has been described by my noble and learned friends as hopelessly wide, states:

“A home business is a business of a kind which might reasonably be carried on at home”.

I kid you not. That is what the Bill says.

That is fraught with uncertainty. Whether a tenant’s business is one which can reasonably be carried on at home will depend on a great number of variables. Indeed, there is an almost infinite range of businesses which householders carry on at home at present. Probably all of us over the weekend were doing a bit of office work at home. I am excluding civil servants from that; I would hope they had a good weekend off. We have catering, music teachers, tutors, web design, computer programming, craft work, repairing and restoring anything from machinery and vehicles to furniture, books, TVs or musical instruments, hairdressing, jewellery-making, secretarial services, fine art or even Barbara Hepworth’s wonderful sculptures, journalism, charity work, medical, counselling, physical fitness training, accountancy, legal advice, or, to return to the Consumer Rights Bill, dress-making. I know that the Minister understands my particular interest in that.

Whether all of those can reasonably be carried on at home depends on the home. What can be done in the back yard of a remote cottage is rather different from what can reasonably be carried out in a flat on the third floor. So, to assist the courts, and to provide some certainty for landlords and tenants alike, the test of “reasonableness” needs fleshing out. Presumably it must be reasonable from the point of view of the premises—something which is sufficiently close to activities which householders might carry out on their own account, such as sewing, studying, reading, writing, cooking, handicrafts, gardening, DIY, and so on may not seriously impact on the fabric, condition or layout of the premises. Nevertheless, there could be environmental considerations.

Is it reasonable to receive deliveries, customers, clients, patients or students, or to carry out noisy activities when you live in close quarters with your neighbours? Will the business generate an excessive amount of traffic on the roads, creating congestion or parking problems? That will be particularly the case where the Bill will now deny statutory rights to businesses in which the landlord has acquiesced, since there will not be an earlier agreement between the landlord and the tenant over whether what the tenant is doing at home is indeed a home business, given that there is no independent definition of that.

It is for that reason that the first part of our amendment seeks to suggest the factors that the court should take into account—and therefore factors that the landlord and tenant need to be aware of when the court is deciding what can reasonably be described as a home business. The second part would specifically allow a landlord and a tenant to contract out of the Landlord and Tenant Act 1954, probably providing that they notify the court, as has been possible since the 1970s under some other circumstances.

The success of this probably desirable measure will depend on how any definition is received in the real world, and whether there is sufficient clarity or guidelines to enable both parties—the landlord and the tenant—to know where the statutory rights will fall. The amendment attempts to identify a way forward to provide the clarity needed for the measure to have effect that I assume the Government desire. I beg to move.

18:14

[Baroness Neville-Rolfe]

My Lords, I welcome the noble Baroness, Lady Hayter, back to the Dispatch Box on the Bill. I start by answering her question about why we are doing this. Clause 35 will help support the further growth of home businesses by removing the current incentive for landlords to bar tenants operating a business from their home. As we have heard already, there are nearly 5 million small and medium-sized businesses in the UK. Of those, 2.9 million are home businesses. Home businesses are of growing importance to the economy, with an increase of half a million since 2010. The Government want the home business sector to continue to flourish. That is why we are committed to do what we can to overcome obstacles, and Clause 35 is a key part of that work. Landlord and tenant bodies agree that that is a sensible step, so why not use this opportunity to act now to help the enterprise culture and the small businesses that we all agree are so important?

For those who rent their home, things can be particularly complicated. Landlords can be wary of letting them run a home business. Indeed, residential tenancy agreements will often include a prohibition on business use. Section 23 of the Landlord and Tenant Act 1954 provides that where there is a business use for a property, a business tenancy exists. Because business tenancies enjoy greater security of tenure, private residential landlords are keen to avoid them, as they fear that it may be more difficult to get their property back at the end of a lease. That is what Clause 35 will address by amending Part 2 of the 1954 Act.

I add that the opportunities created by the digital world, bringing ever more innovations into the marketplace, make that provision even more important. This change could help to encourage the enterprise culture. I think that it is a sensible move and would assist the graphic examples that the noble Baroness, Lady Hayter, gave, although I think it will take a little longer to get the younger generation sewing again. However, perhaps craft skills are coming through and there is certainly an element there.

I thank the noble Baroness for tabling the amendment, but we are concerned that the effect would be to cause confusion. It would not prohibit the types of business activity listed, but it would create uncertainty as to whether certain types of business carried on in a home would make the home subject to the business tenancy provisions of the Landlord and Tenant Act. As I said, currently, Section 23 provides that where there is a business use for property, a business tenancy exists. Because business tenancies enjoy a greater security of tenure, residential landlords are often keen to avoid them.

Clause 35 is aimed to remove that disincentive on landlords when they are considering allowing a home business from their property. Under our proposal, landlords would continue to have a veto. The landlord continues to have a right to impose conditions—which I think is important, because it can relate to matters such as noise, which can be a big issue—or prohibit a home business outright if that seems appropriate to the property in question. However, we believe that the amendment could have perverse consequences, create bureaucracy, disincentivise landlords from being willing to consider a home business and encourage them to set unnecessary conditions.

Let us take an example. Suppose that a tenant were to ask the landlord for permission to operate a home business. The amendment would encourage the landlord to check whether the proposed business fell foul of the factors listed. The landlord might have to judge what constitutes a reasonable number of clients calling at the property, the impact of deliveries, and so on. In the face of that increased burden, landlords might become risk averse and say no. We also have concerns about providing for a binding agreement between landlord and tenant on whether a particular business or description of business carried on in the business should be a home business. That could have a detrimental impact on business tenants—that is, those in premises where business is the predominant use—if they were to lose the rights secured for them by the Landlord and Tenant Act. The security afforded by business tenancies means that tenants can invest in their businesses, building up good will, buying equipment and stock, without fear that they will have to leave the premises before the end of the tenancy.

Amendment 33BH would allow people to define for themselves, by agreement between the landlord and tenant, what a home business tenancy was. Some landlords might seek to use this to exclude business tenants from having the security of tenure provided by the 1954 Act. There is already provision for the exclusion of security of tenure in business tenancies by agreement, and with tested procedures involving notices and declarations by the parties. I believe it would be undesirable for this clause to provide an alternative route for landlords to avoid security of tenure. The tenancy agreement can state in terms that the tenancy is a home business tenancy, as set out in the clause, and the tenancy agreement is legally binding, provided that the tenancy is a home business tenancy within the meaning of the 1954 Act.

I know that the noble Baroness was probing to some extent, and I hope that she has found my explanation of this background useful. I think that this is a concrete and important change, which I commend to the House.

[Baroness Hayter of Kentish Town]

My Lords, it was not meant as a probing amendment at all. It was tabled because the very senior advice that I have taken from the top planning chambers in the country says that this is not going to work unless people know what it means; it will end up in court and that is where the definition of a home business will have to be decided. When someone claims, as a residential tenant, “Well, I’m sorry, I’ve been running my business as a speechwriter for the House of Lords at home and am therefore a business, not a home business”, that will have to go to court. The landlord is going to say, “No, it’s a home business because you live there as well”, but the tenant will say, “No, the major thing is that it’s a business”. The advice is absolutely that the courts will need guidance as to what is a home business.

A landlord would be sensible to claim that an enormous business was a home business, just because the person running it also happened to live in the place, because of course that would deny them the right of security as a business. So the landlord will be saying, “This is a home business”, while the person running the business will be saying, “No, this is a normal business and I happen to live here”. I mentioned Barbara Hepworth. Anyone who has been to her house will know that there is a bedroom there, but 80% of the house is her sculpture gallery. Of course, she owned that house. Still, if a house has one room that is a bedsit and nine rooms that are a business, is that a home business?

[Baroness Neville-Rolfe]

The noble Baroness is rightly concerned about this question ending up in court with lots of legal proceedings, which we all agree is what one wants to avoid in good regulation. To some extent, we have thought about that. We have taken a power in the Bill that allows us to further specify the definition if that proves to be the case, so she is right and I am wrong.

[Baroness Hayter of Kentish Town]

That is why we thought it should go in the Bill rather than waiting for regulations. I think that we share the desire that this should work, but it will work only if landlords and tenants can have confidence. As I say, just because a person running a business from a rented place happens to live there, I assume it is not the intention that they should therefore lose the security that they get under the 1954 Act. This will also open up to quite big businesses, and I wonder what thought has been given to the planning issues that arise from this. Local government certainly needs to think about how big a business would be before there were planning implications.

The Minister said that there were 2.9 million home businesses; she did not of course say how many of those were in rented accommodation as opposed to owner-occupied. Maybe she would be able to write to me about the figures—or she may be getting them at this moment—for how many of those 2.9 million are in rented accommodation. I worry that this is so vague that it will not give certainty and there will have to be test cases in court. Without some guidance from Parliament about what we had in mind for what is probably a welcome and well intentioned measure, the fear is that there will not be enough certainty. We know that landlords are pretty risk averse, for understandable reasons. There will be so much uncertainty that the measure will not be implemented.

[Baroness Neville-Rolfe]

I do not have the figure that the noble Baroness would like, so I shall write to her. However, the powers apply only to tenants with a residential tenancy, so there is no risk that someone with an existing business tenancy could lose security. That is an important clarification. It does not affect existing planning requirements either, but I note the point she made. The planning requirements continue to apply. They are complicated, but it does not do anything about planning.

[Baroness Hayter of Kentish Town]

Existing businesses that will lose the right to secure tenure are those where the landlord has acquiesced because he has known about a business being taken on. Until this Bill becomes an Act, those businesses have security, and they will lose that, not necessarily wrongly, but it is not quite correct that all businesses will retain the rights they have. This is something we may come back to. We will certainly take further advice. People who are very active in this field certainly have concerns, and the Minister may also need to check a little more widely on that. For the moment, I beg leave to withdraw the amendment.

Amendment 33BH withdrawn.

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

Before calling Amendment 34, I must advise the Grand Committee that if it is agreed to I will not be able to call Amendments 34A or 34B due to pre-emption.

Amendment 34

Moved by

[Lord Popat]

34: Clause 35, page 32, line 36, leave out from “instrument” to end of line 42 and insert “,
(d) may not be made unless—(i) in the case of regulations made by the Secretary of State, a draft of the statutory instrument containing the regulations has been laid before Parliament and approved by a resolution of each House of Parliament,(ii) in the case of regulations made by the Welsh Ministers, a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of, the National Assembly for Wales.”

[Lord Popat]

My Lords, amendments to Clause 35 will help to clarify the definition of home businesses to be captured by amendments to the Landlord and Tenant Act 1954, subject to the affirmative procedure and, additionally for Wales, a resolution of the National Assembly for Wales.

As my noble friend Lady Neville-Rolfe mentioned, there are around 4.9 million small and medium-sized businesses in the UK. Of those, 2.9 million are home businesses. Home businesses are of growing importance to the economy with an increase of 500,000 home businesses since 2010. There can be obstacles to those wanting to run a business from home, but this Government want the sector to continue to flourish. That is why we are committed to do what we can to remove them.

For those who rent their home, things can be particularly complicated. Many tenants state that landlords can be wary of letting them run a home business. Indeed, residential tenancy agreements will often include a prohibition on business use. One of the reasons landlords do this is that the current legislation encourages them to do so. Section 23 of the Landlord and Tenant Act 1954 provides that where there is a business use of a property a business tenancy exists. Since business tenancies enjoy greater security of tenure, residential landlords are keen to avoid them as they fear it will be more difficult to get their property back at the end of a lease.

It is this area that Clause 35 seeks to address by amending Part 2 of the 1954 Act to exclude home businesses from its provisions. First, we are inserting a new subsection into the 1954 Act. This deals with the instance where a landlord initially includes a prohibition on business use but subsequently agrees to home business use, defined as business of a kind which might reasonably be carried on at home. Secondly, Clause 35 adds a new Section 43ZA to provide that where a dwelling is let as a home and the tenancy allows a home business use from the outset, or does so subject to the consent of the landlord, a business tenancy is not created.

18:30

Amendment 34 establishes a basic definition of a home business in new Section 43ZA(4) to ensure that only businesses that could reasonably be carried out in a home benefit from the exemption from Part 2 of the 1954 Act. The regulation-making power at subsection 43A(6) allows cases of what is and is not a home business to be prescribed. I believe, however, that the main provision is sufficiently clear that the use of this power may not be needed.

I should also make clear that these provisions will not interfere with existing tenancies. Subsection 35(5) provides that the provisions apply only to tenancies entered into after the coming into force of the provisions. Subject to the National Assembly for Wales’s agreement to a legislative consent Motion, these provisions will apply to both England and Wales. These provisions will provide certainty for both residential landlords and tenants. By doing so, we will make landlords more amenable to home business use.

I believe that removing the existing obstacle that stands in the way of tenants in the rented sector being able to enjoy the benefits associated with running a home business is difficult to argue against. I see no reason why people who rent should be prevented from having benefits, such as lower overheads, or from being able to balance their work and family responsibilities more flexibly.

I hope noble Lords can see that these amendments are a sensible updating of the law to reflect how we increasingly use our homes. The related government amendments to Clauses 152, 153 and 157 are purely technical and ensure that amendments to Clause 35 and after also apply to Wales. On that basis, I hope noble Lords will support these amendments. I look forward to hearing the noble Baroness speak to the amendments tabled in her name.

Amendment 34 agreed.

Amendments 34A and 34B not moved.

Clause 35, as amended, agreed.

Amendment 35

Moved by

[Baroness Neville-Rolfe]

35: After Clause 35, insert the following new Clause—
“Section 35: supplementary and consequential provision
(1) In section 41 of the Landlord and Tenant Act 1954 (trusts), after subsection (2) insert—
“(3) Where a tenancy is held on trust, section 43ZA(2) has effect as if—
(a) paragraph (b) were omitted, and(b) the condition in paragraph (c)(i) were a condition that the terms of the tenancy require at least one individual who is a trustee or a beneficiary under the trust to occupy the dwelling-house as a home (whether or not as that individual’s only or principal home).”(2) A dwelling-house which is let under a home business tenancy is to be regarded as being “let as a separate dwelling” for the purposes of—
(a) section 1 of the Rent Act 1977 (protected tenancies),(b) section 79 of the Housing Act 1985 (secure tenancies),(c) section 1 of the Housing Act 1988 (assured tenancies), and(d) any other England and Wales enactment relating to protected, secure or assured tenancies.(3) Subsections (1) and (2) do not apply to the tenancies mentioned in section 35(5).
(4) Subsections (2) and (3) do not limit the circumstances in which a dwelling-house which is let under a home business tenancy is to be regarded as “let as a separate dwellling”.
(5) In this section—
“enactment” includes provision made—(a) under an Act, or(b) by or under a Measure or Act of the National Assembly for Wales,“England and Wales enactment” means any enactment so far as it forms part of the law of England and Wales,
“home business tenancy” has the same meaning as in section 43ZA of the Landlord and Tenant Act 1954.”

Amendment 35 agreed.

Amendment 35A

Moved by

[Lord Cromwell]

35A: After Clause 35, insert the following new Clause—
“Exclusion of home businesses from non-domestic rate liability
Where a residential property is used for one or more home businesses by the owner or by a tenant, that property shall not be or become subject to a non-domestic rate.”

[Lord Cromwell (CB)]

My Lords, I apologise most sincerely that events conspired so that I was unable to attend earlier discussions of the Bill, but I hope that the Committee will nevertheless allow me to speak to the amendment standing in my name. I raised the matter with the Minister in a meeting with Cross-Bench Peers before Christmas.

I should declare an interest as a trustee of a trust which in a small way lets out residential property. In another part of my life I am involved in working with entrepreneurs, some of whom invest in and let out property. I have also run a small business and an international chamber of commerce for several years. Enough about me.

As others have said, there is much to be welcomed in the Bill. One aspect of that is the removal of the risk to a landlord letting out residential property that a business run from such a property will give rise to a business tenancy under the 1954 Act. I certainly assure the Committee that this is a very real problem for landlords letting out property. In that, I have absolutely no doubt. I share the concerns expressed by the noble Baroness, Lady Hayter, about the definitional aspects but I am sure that many of us have had the experience of trying to write page after page of legal definition and ending up by replacing it with the word “reasonable”. I suspect that tenancy documentation will evolve to cope with this issue.

However, there is a second leg to this issue: the fear which landlords have that allowing a residential home to be used for a business will end up getting them entangled in the rating system, particularly if that business does well, grows and prospers, which presumably we would all welcome. That concern among landlords relates not just to the period when a tenant is in occupation but when they leave; the landlord fears finding themselves with a property that is unlet but subject to business rates. The effect of that is simply to make landlords reluctant to let out property with home businesses, to put clauses in agreements which prevent it and to avoid colluding with tenants who nevertheless try to start up such a business.

I am sure that many of your Lordships will be aware that small businesses can apply for relief from rates. However, almost everyone seems to be in agreement that the rating system is not simple; indeed, it is complex. Perhaps as an indicator of this, I notice that there are a number of businesses which, as a chargeable service, offer to assist small businesses in navigating through the rating system. I would hate to put them out of business but, as an indicator of the complexity that small businesses face, the market speaks for itself.

Moreover, I believe that among landlords there is a perception that it is dangerous to allow someone to run a business, no matter what reliefs there may be available, within their residential premises. The noble Lord, Lord Deben, touched earlier on the point that perception of regulation is every bit as important as its actuality. This amendment seeks to achieve simplicity and clarity by making it clear in straightforward terms that allowing a home business to operate will not bring the property within the rating system. It is my proposal that combining clarification on the tenancy issue and the rating issue would be the two sides of the bridge that get us across this river of landlords’ resistance to letting out residential properties to people who wish to run businesses within them. I beg to move.

[Lord Stoneham of Droxford (LD)]

My Lords, I was tempted to intervene in the last debate that we had on the amendment of the noble Baroness, Lady Hayter, because this is quite an interesting issue. I am not going to be able to support fully the noble Lord, Lord Cromwell, but I am pleased to come in on this debate. I have often voted for him in parliamentary by-elections because his was a name that I knew. I also thought that the genes were probably more in favour of change and reform than conservation.

[Lord Cromwell]

I have to disillusion the noble Lord but I am very grateful for his support. I must disabuse him of that—I have no genetic link to others of that famous name. My family is older but my instinct to chop off the heads of the overmighty may have been inherited by mistake.

[Lord Stoneham of Droxford]

I do not take away from my comments because that is exactly how I was behaving in those elections.

The amendment cannot be supported as it stands, although it has good liberal tendencies. It is a very difficult area, as the noble Baroness, Lady Hayter, said. It is difficult to get a balance here between defining by restriction what we can do and opening it up; the general tenor of the Bill is to try to open up the issue to encourage home businesses. The one thing that this amendment does not make absolutely clear is that the tenant or owner must occupy this property, so any tenant or somebody who owns it would have that overriding right, and the planning law does not accept that. Therefore in that sense the amendment cannot be accepted. This is the issue—whether we define the planning restrictions on home businesses in the legislation; the Minister has already told us about the danger.

With great respect to the noble Baroness, Lady Hayter, as regards some of the definitions she has used, she accused the definition of “home business” of being vague, but the fact that you have to take account of the location of a property does not tell you whether you can allow a home business. That will be a matter of judgment, therefore quite vague, whereas the intention of the legislation is to open this up and to encourage home businesses, obviously within the planning restraints that are currently there: you have to occupy the property, you cannot fundamentally change the home for the business, you cannot have people coming to buy from the premises, and you cannot employ people. We know that there is already great flexibility in where we are and that people do those things, but obviously, if they overstep the mark, there is the danger that if their neighbours think that their community life in their residential area is disturbed, they will object and have the grounds for doing so. Therefore this is an area of great interest. I would be in favour of where we are in the Bill, where we do not define it in the legislation, although we may come back to it through regulations. Clearly we cannot accept the amendment because it does not make it absolutely clear, which it has to, that the premises have to be occupied by the owner or the tenant.

[The Earl of Lytton (CB)]

My Lords, the noble Lord, Lord Cromwell, raises an interesting point. Before I go any further, I declare an interest as a practising chartered surveyor. Rating is one of the things I get involved with; I am a landlord of holiday and private rented accommodation as well as business accommodation, so I get a bit of everything here.

The chief difficulty is one of fact and degree about when things move from being “residential property” as a term of art to something quantifiably different. The problem is that they are different tests for different purposes. For instance, there may be a test under regulations that come out as a result of the Bill. A different test may be applied by the Valuation Office Agency to determine what is and what is not a business. When I think in terms of holiday lettings, for instance, I am aware that if a residential property is available to let as a holiday unit for more than 120 days in the year, I think, it is deemed to be a business use. I am not suggesting that there is an issue between holiday letting and home businesses in this instance, but that exemplifies the point about the fact and degree transition.

The empty rates issue would be a live one were it to kick in, because the amount levied under empty rates is typically considerably more than the amount that would be levied under a council tax assessment. I have raised this matter before in the House, and used as an example a property of my own, a 1,000 square foot property let as offices to a business tenant under a conventional contracted-out commercial lease. The rating assessment, off the top of my head, was £12,000 rateable value, and something over £5,500 was payable annually by that small business in business rates.

Fifty yards up the road I occupy a large residential property in band H, but I pay nowhere near £5,500 or so in council tax. My bins are emptied for me within that charge, which, of course, is not the case for the business rate payer. The issue comes about because of the way in which business rates are levied. As I have said before, business rates are disproportionate when compared with residential rates given the services provided and the nature of the accommodation in question. Assessments made on property value, services or any other measure you might choose do not support that differential. There is potential to change this situation through a change of definition and results from a non-domestic assessment, bearing in mind the tests that may be used by the Valuation Office Agency, which is charged with optimising the revenue obtained from those rates. This issue needs to be clarified.

18:46

I do not for one moment ask the Minister to answer all those points but this issue needs to be clarified because all these various organs, whether they be concerned with planning or valuing non-domestic properties for rating purposes, need to be streamlined and they all need to sing from the same hymn sheet. This simply will not happen if people have doubts about this issue and are fearful about what is happening elsewhere in unstated regulatory practice.

[Lord Deben]

My Lords, we should be very grateful to the noble Lord, Lord Cromwell, for raising this question. It is only part of the question, if I may put it that way, because there is a real issue which the previous speaker was absolutely right to raise. We have to think this through and I am not sure that it has been thought through. What is the nature of a property which was rented originally, or, indeed, owned originally, as a house, and then a business is started within it under the terms of the Bill? I put it like that because it was pretty clear in the past what you had to do: you were running a business, so you had to report it to somebody and somebody told you whether you could or could not run a business in those circumstances. That is, bluntly, more or less what happened.

We also know that a very large number of people run businesses, do not report them to anybody and nobody cares too much. As long as they do not make too much noise or other nuisance, everybody is perfectly happy. However, that is an unacceptable position because some people manage to run a business in those circumstances but others do not and that is not right. We want to encourage people to start a business in these circumstances because it is the natural way to do so. We do not want interfering local authority personnel to arrive and say, “You can’t do that in your garage. You have got to move to our extremely nice and very expensive industrial estate”.

Two tax elements are involved here. I do not think that the noble Lord, Lord Cromwell, mentioned the other one. I am very interested to know what happens about VAT. If a house is said to be a business premises as a result of this measure, there is also the question of whether, if you sell it on, you retain your right to sell on your principal residence, because it could be your principal residence as well as your business. How would that interact with selling a business premises where you have received rent? Then there is another question about how you have structured the business and which part of it is used as a business. The Committee can see immediately that there is a series of complications here. I dare to say to my noble friend that I am not quite sure that people have actually thought this through.

I want to do precisely what the Bill is intended to do, which is to say that you cannot prevent people running a business from their own homes. That is not an acceptable way for either a landlord or local authorities to operate. I know some areas where local authorities have operated absolutely appallingly in what they insisted on. They made it very difficult for people. This is not just in small circumstances. There was a really bad example in my constituency when I was a Member of Parliament in which a local authority said that it was unacceptable for a marquee to be put up in a very large house with a very large amount of ground around it because it was being used as an exemplar of marquees. They could have a marquee if they wanted one for a party—as long as they did not have too many parties—but to have a marquee as an exemplar of marquees, because the business was for marquee renting, was unacceptable without planning permission, which the local authority would not give.

People get themselves into terrible situations. We need to be quite sure where we are going with this particular change. However, I think that the amendment in the name of the noble Lord, Lord Cromwell, is not acceptable for all the reasons that have been given: it is not complete enough and it opens the gates to misuse of the Bill, which none of us wants. We have to ensure that the person lives in the house; that is obvious. This is one of those really difficult situations because it is like the question of the elephant: you can describe what you mean by this, but to write it down in a satisfactory way is quite difficult. Clearly, if a house is largely used for a business and a flat is effectively attached to it then that is different from the house being used as a house in which some of the rooms are used for the business. Some of the rooms may sometimes be used by the business. All those things make it extremely difficult.

I do not want my noble friend to think that the only answer to this is not to do it; that would be a great disappointment and I am sure that she will not think that. We want to do it, but I am not sure that this little bit has been as thought through as it will have to be. The noble Lord, Lord Cromwell, has rightly brought it to our attention and I hope that my noble friend will accept that we need to know more about this before we can be entirely happy with it.

[Baroness Neville-Rolfe]

My Lords, I welcome the noble Lord, Lord Cromwell, to the Committee and thank him for joining our discussion, and for putting us right on the history of the Cromwell family. More seriously, he has brought his practical experience of enterprise and of the subject. I thank him for his support for the Bill, and I think he supports Clause 35 as well. This has been a good debate. It is excellent when Back-Benchers raise these sorts of concerns with amendments of this kind.

For completeness, I should add the wider action that we have taken on business rates. In the 2014 Autumn Statement, the Chancellor announced further help for business rates, bringing the total support for 2015-16 to £1.4 billion. That included some very significant measures targeted specifically at smaller businesses, such as the doubling of small business rate relief for a further year and the £1,500 discount for smaller shops, pubs and restaurants. We have also, of course, given councils powers to grant discounts entirely as they see fit. When they do so, we automatically meet 50% of the costs. Those powers can be used to support small businesses to encourage growth.

It was also good to have the support of my noble friend Lord Stoneham. As usual, he made perceptive points about the drafting and rightly drew attention to the requirement for owner-occupation.

It is always good to have the noble Earl, Lord Lytton, joining the debate, in view of his knowledge of the subject. I note what he says about empty property rates and the services provided to business rate payers. Of course, the current system on empty property rates was introduced by the last Labour Government. We recognise that the empty property rate can be burdensome, especially at times of economic difficulty, but the need to balance changes to the system owing to fiscal consolidation has meant that we have left things as they are.

I turn to the amendment and the issue at hand. The purpose of the proposal is to exclude home-based businesses from paying business rates altogether. I agree that this is an important issue, and we have to provide sensible and clear rules on home working so that they support growth and businesses know where they stand. However, we believe that the amendment is unnecessary, as we hope that we have indeed already achieved the desired outcome through some sensible and clear rules. We have ensured that, in the majority of circumstances, home-based businesses will not attract business rates—the noble Baroness will be glad to hear that. We provided that clarity through guidance published by the Valuation Office Agency last summer. The guidance clearly sets out the circumstances in which the Government do not expect businesses to pay business rates. That guidance is available on the GOV.UK website.

As a result, in the majority of circumstances home-based businesses will not attract business rates, but there are some exceptions in the interests of fairness. For example, a dentist’s surgery on the ground floor of a domestic house continues to attract business rates. Indeed, that example serves to illustrate why we favoured guidance over legislating on this matter in this Bill. Guidance allows sensible decisions to be made reflecting the circumstances on the ground in each case. Attempting to legislate to cover all situations could, I fear, increase uncertainty over home working and allow some substantial businesses to avoid business rates. I hope that noble Lords agree that is not what we wish to achieve, and that clear guidance is the best approach in this situation.

My noble friend Lord Deben raised questions about tax, so I shall comment on VAT in particular. A home-based business, as I am sure he will know, should remain liable for VAT in the same way as other businesses, subject to the same thresholds.

[Lord Deben]

I was referring not to that issue, but to the issue of clearing up the connection between business rates and home businesses. Unless we do that, there could be circumstances in which the home became liable to business rates and then it could be seen as a business property. I want to make sure that, if such a business was sold, the owner could maintain the right to sell his own property without VAT—

[Lord Cope of Berkeley]

And capital gains tax.

[Lord Deben]

Yes, the capital gains tax element becomes very serious in that regard. I know that my noble friend will tell me that, happily, it is all here, but I am just not sure that everybody will understand that. I want to make sure that the guidance makes it clear that people are protected.

[Baroness Neville-Rolfe]

I understand what my noble friend says. He is talking about untoward effects, which we are not in the business of creating if we can possibly avoid it. The sensible thing would be for me to take away that point on VAT and capital gains tax. I am always rather careful about saying things about capital gains tax, as it is a complex subject. So we will write on that issue and copy the letter to anyone else who is interested in that point.

I finish on another positive point by reminding noble Lords that, in his Autumn Statement, the Chancellor announced that the Government would conduct a review of the future structure of business rates. The review will report before the Budget in 2016, and the Government will publish its terms of reference. I would encourage interested parties, including noble Lords with expertise in this area, to engage with this review, because it is an important opportunity.

I hope that the noble Lord has found my explanation somewhat reassuring and, on this basis, will withdraw his amendment.

19:00

[Lord Cromwell]

I am very grateful to the noble Baroness for her comments and to the range of speakers for the breadth of topics that we appear to have covered somewhat inadvertently this evening.

On occupancy, changing one word in the amendment, from “used” to “occupied”, would deal with that, but I think that the issue runs wider than that. Equally, if the property became classified as business premises, as the noble Lord, Lord Deben, is concerned, if it were excluded from rates, that would merely strengthen the case for it not to be so classified. However, I do not dismiss the suggestion that this is a complex area. Opening up any new area of opportunity will always keep tax lawyers busy trying to find ways to work that to their clients’ advantage.

On the question of perception, I am grateful for the reference to the government website. I have a couple of extracts here, and I notice the language:

“You don’t usually have to pay business rates for home-based businesses … You may need to pay business rates as well as Council Tax”.

One category is entitled, “You’re a small business but don’t qualify for relief”. Flippancy aside, I register that it is a question of perception. For landlords trying to work through that, it is much easier just to say no.

In the hope that that will get further consideration, I am happy to withdraw my amendment.

Amendment 35A withdrawn.

Clause 36: CMA to publish recommendations on proposals for Westminster legislation

Amendment 35B

Moved by

[Baroness Hayter of Kentish Town]

35B: Clause 36, page 33, line 31, leave out “in particular” and insert “in consultation with consumer advocacy groups”

[Baroness Hayter of Kentish Town]

My Lords, the amendment is in my name and that of my noble friend Lord Stevenson. I shall speak also to Amendment 35C in this group. Clause 36 empowers the Competition and Markets Authority to make and publish recommendations about the impact of any proposed legislation on competition. That is clearly to be welcomed. The CMA, after all, exists to promote competition in the interests of consumers and therefore, should laws be proposed that could be detrimental to consumers, we should know about it in advance.

Indeed, the Government recognise that regulation, procurement and other activities can affect markets and therefore envisage the CMA playing a key role in challenging the Government where they are creating barriers to competition. However, there is one problem with the clause. That arises from our failure, when the CMA was created, to persuade the Government to establish a CMA consumer panel analogous to those for the Legal Services Board, Ofcom and the Financial Conduct Authority, or some such similar mechanism, to ensure that real insight from consumer advocates and from the consumer perspective was built into the CMA’s judgment on such matters.

It is a matter of regret that we failed in that, given that the CMA’s primary duty under Section 25(3) of the Enterprise and Regulatory Reform Act 2013, which set it up, is to,

“seek to promote competition … for the benefit of consumers”.

It therefore seems essential that the voice of consumers be embedded in the CMA’s view as to whether draft legislation will be to the benefit or detriment of consumers with regard to competition.

Hence, Amendment 35B requires the CMA to undertake its consideration of draft legislation in consultation with consumer advocacy groups. Amendment 35C takes the Government’s new clause one stage further by requiring the CMA to undertake a similar exercise not simply when legislation is proposed but to carry out an annual health check on the state of competition and consumer protection in key markets, including by listening to consumers, consumer advocates and small businesses.

Without consumers at the heart of the Government’s drive to increase competition and tackle the cost of living crisis, any plans or measures are likely to be ineffective. Big business and special interests can always get the ear of Ministers, civil servants and regulators, and big businesses can and do—as we heard earlier from the noble Lord, Lord Deben—take advantage of market weaknesses.

We see this in the failure to pass on reductions in fuel prices and in the banks’ failure to work in clients’ interests. We see it in the bus market, where bus fares have risen by 25%—five times faster than wages. Big bus companies have cut crucial routes that people rely on to maximise their own profits. Indeed, the failure in competition within the bus market costs the taxpayer £305 million a year. We see it in myriad other markets where the consumer is unable to shop around—the monopolies and oligopolies, referred to by the noble Lord, Lord Deben, in the earlier group. Indeed, if ever there was a failing market, it is where energy companies have not passed on reductions in wholesale costs to consumers. We have to have a mechanism for action to force such companies to cut their prices when wholesale costs fall, or where phone calls simply cannot get through to the right person, again as described earlier by the noble Lord, Lord Deben. We have to have a mechanism for an annual review of vital markets to identify those where consumers are being taken for a ride.

For years consumers and their representatives knew that energy price cuts were not being passed on to users, but there seemed to be no mechanism for making the Government take action. Labour wants consumer groups, such as Which? and Citizens Advice, to work with the CMA and sector regulators to draw up an annual competition audit or health check of Britain’s economy, which will lead to a programme of action for regulators and the Government. We need this analysis to identify broken markets, so that Ministers and departments can respond accordingly.

Amendment 35C would ensure that the consumers are at the table when priorities for action are decided. Consumers and their advocates should not have to shout from outside. They should be given a direct say in how to tackle abuses or concentrations of power which undermine competition. Without this amendment, decisions as to whether markets are working in the interests of the public will be taken solely by regulators. These sadly have failed to protect small businesses in the banking sector when the mis-selling of interest rate swaps undermined some 40,000 small businesses. They failed retail clients when banks were selling PPI and endowment mortgages. Regulators have failed to ensure that users got a fair deal from the big six energy firms.

In all of those cases, consumers and their representatives were well aware of the serious problems with markets not working competitively, but they were denied a proper hearing. So our approach is to embed the consumer interest into decision-making, so that decisions about priorities for improving competition are taken in the public interest, in the interest of consumers and in the interests of small businesses, and with policymakers having to confront problems rather than leaving them to drag on. The proposed annual competition health check, led jointly by consumers and the competition authorities, would ensure that regulators and politicians act where markets are not working in the public interest. Crucially, it will include consumer organisations and small business representatives, rather than just being done by the CMA. I beg to move.

[Lord Deben]

I did not intend to speak on this but the noble Baroness has referred to me so often. I had better explain to her that I think that this is nonsense. It is nonsense from beginning to end because it misunderstands how business works and what the Government should do. The last thing we want is the establishment of a collection of people who professionalise the representation of consumers. Any of us who have ever had to deal with the double standards which some of them put forward about their own businesses and the way that they are never quite sure whether they are representing the consumer or some business operation which they have, which is part of the way in which they support themselves, recognise that this is not sensible. What is sensible is to have a proper organisation whose job is to ensure proper competition.

The Government ought to be concerned about having proper competition. I would be strongly opposed to the idea that the only people concerned with proper competition are the consumers. Government and the competition authorities should both be committed to ensuring competition. Decent companies, of course, can be very much in favour of competition until they see that there is an advantage if they are monopolistic. I do not blame them for that: it seems to me perfectly simple that everybody would like to have a nice, comfortable life in which they do not have to compete with anyone else. You therefore need a balance in society where you constantly refresh the market; you constantly make the market work. However, the idea that you do that by way of consumer representatives misses the point; we have to make government do it. That is what the Government are there for; it is not what Which? is there for. Which? is there precisely to be outside the system and to shout. Government is supposed to run the system so that there is proper competition. I do not want government to be excused from that.

Therefore, I do not agree with these amendments. I hope that the Minister will recommit the Government to ensuring proper competition. They should ensure, too, that the Competition Commission has the powers, the resources and the intent to achieve the best level of competition possible. We should also begin to have a bit more of the philosophical background to this, which is essential if we are to win the battle. If we cannot have competition as we ought to have it, frankly, the argument for the free society is difficult to maintain. If that is important, let us make it the purpose of government and the Competition Commission, and not say that it has to be run on a sort of old-fashioned, tripartite basis, which is to allow the Government to get off the hook. They should be on that hook firmly for promoting competition.

[Lord Whitty (Lab)]

My Lords, I apologise to the Committee for having joined your Lordships so late that you seemed to have made good progress without my help and I shall try to focus on this amendment. I do so partly because I was going mildly to support my noble friend but also because the noble Lord, Lord Deben, has provoked me to say how much I disagree with what he has just said, including going into the wider philosophical and ideological areas right at the end, because a free society requires representation of people’s views as well as mechanisms, legislation and regulations and so on.

At various stages, the Government have recognised that consumer organisations of one sort or another are important in ensuring that competition is delivered. I am very happy to see that this clause gives the CMA the ability to comment on draft legislation, which is absolutely right, but, in doing so, it has to pay attention to its prime objective, which is not to create competition full stop but to create competition in the interests of consumers. Since in various contexts successive Governments have recognised that there needs to be some focus on that consumer input, it is important that we have some requirement on the CMA at least to consult such organisations when it is making an assessment of future legislation.

For example, many of us, including the noble Lord, Lord Deben, sat through lengthy proceedings on the previous Energy Bill, which sets up a whole new system of energy regulation and government interventions, with state and consumer subsidy of various bits of the energy system. It does not look entirely like a free market; I think that the noble Lord, Lord Lawson, at one point referred to it as Gosplan. It is not quite that, but it is a whole range of things to ensure delivery and availability of energy ultimately in the interests of the consumer, but it will change the nature of our whole energy system.

19:15

After that, the Government and Ofgem decided to refer the structure of the energy market to the CMA. Logically, it should be the other way around. Many years ago we should have had—of course the sector regulator rather resisted it—a CMA inquiry into the energy supply system, and we should have based the legislation on that. But we are where we are. However, it is very important that a big piece of legislation such as the Energy Bill is subject to the test of whether it will affect the way in which energy is supplied to consumers, including business consumers.

Looking to the future, we have a quasi-statutory requirement: Citizens Advice acts as the representative of energy consumers. The powers—I declare my past interest as the chair of Consumer Focus—have passed to it, specifically in relation to the energy sector, which is an oligopolistic sector where it is very difficult to ensure that competition operates.

That is not the only example. My noble friend has referred to the financial sector. Seven years after the financial collapse and the “too big to fail” discussions, one organisation still supplies virtually a third of the total mortgage market. We do not have effective competition within the retail financial services sector. In the transport sector, there is a franchising system for the railways which has been shown to be less than totally adequate in recent years. There is a statutory body, Passenger Focus. If there were legislation to change the way in which the franchising system operates, we would expect the Government to take into account the views of that organisation. If the CMA is, rightly, to be given a pole position in commenting on future legislation, and if there was railways legislation in that context, then we would expect it to consult Passenger Focus.

We have just passed a Water Act which has marginally extended competition in the business supply sector. In that area the Consumer Council for Water, another statutory body supported by the Government, had some doubts as to whether it would operate effectively. That would need to be reflected. The water industry is, par excellence, a so-called natural monopoly on which we are trying to impose some unnatural competition. I am in favour of that, but the way it operates and affects individual consumers and small businesses needs to be brought into the equation.

The CMA’s role is to look at new legislative proposals—sectoral or general—and ask whether they enhance competition for the benefit of consumers. These organisations, which in many ways the Government support and in other ways finance, or require industry to finance, are the repositories of a fair amount of wisdom—not total wisdom by any means—and expertise. It is important, therefore, that, if we, rightly, impose on the CMA a requirement to comment on proposed legislation, it does so after consulting and taking into account the views of such organisations.

With regard to my noble friend’s second amendment, it would be healthy to have from the CMA an overall assessment of the level of competition in our economy, taking into account in its report the views of consumer groups. It may be slightly too frequent to address the total economy once a year, nevertheless the CMA should be required to do that, and there is a role for the consumer organisations in that too. However, my noble friend’s first amendment is essential if we are to give the CMA this responsibility, which I believe we should.

[Lord Deben]

There is a fundamental difference between saying that the CMA should consult with a range of bodies, which is what the noble Lord says, and the way in which the noble Baroness presented it, which suggested that it was a kind of duo or tripartite, or some sort of system where they do all this together as part of the same thing. There is a difference between saying that the CMA has a responsibility, which it carries out by, of course, taking into account the views of all these people, and saying, on the other hand, that it is a kind of function where they are part of the actual operation. Doing that second—and that is the point I was trying to make—removes the fundamental responsibility of both Government and the CMA to do this job properly.

[Lord Whitty]

My Lords, we have limited time as we are in Committee so I will only take a moment. It is certainly true that, at the end of the day, this report will be the CMA’s report and all it says is “in consultation” with these bodies. My noble friend and I both argued that the internal proceedings of the CMA should reflect a different structure of relationship with consumer bodies. That is now past. However, we are now saying—as I understand my noble friend’s amendment—that the CMA has a responsibility for producing this report, but it should do so clearly and explicitly and in the Bill, in consultation with the bodies that represent consumers and which the Government have recognised as so doing.

[Baroness Wheatcroft]

My Lords, I apologise for not being here at the beginning of proceedings, but I have to intervene on this. Consumer groups are extremely effective in making their views known. They lobby us very effectively and they certainly lobby the CMA. While it is right that the CMA should listen to them, I do not think that there needs to be any formalisation of that relationship when it is looking at legislation. On the second issue, the idea of an annual report on the state of competition in the economy, I agree with the noble Lord, Lord Whitty, that this would be a massive undertaking for the CMA to have to complete every year. In fact, it is very hard to see how it would be able to undertake its main role if it had to produce that report on an annual basis. It also seems to me that because consumer groups now have the right to bring a super-complaint, there is a degree of duplication anyhow in the amendment. If consumer groups feel very strongly, they can make their super-complaint. Therefore, I take issue with the amendment.

[Baroness Neville-Rolfe]

My Lords, Clause 36 is important and I thank the noble Baroness for providing us with an opportunity to debate it. In our various dealings on other legislation, we have agreed on the importance of competition to consumers and the role that consumers play in making competition a reality. The Government are very keen on competition and I am not going to try at this late hour to engage in the philosophical debate between my noble friend Lord Deben and the noble Lord, Lord Whitty, both of whom have great experience of regulation, regulators and competition. Indeed, I learned from the noble Lord, Lord Whitty, during the passage of the Water Bill, when I was on the Back Benches. I am clear, however, that the Government want to ensure that the powers are in place to effect proper competition. I hope this clause will be a significant contribution to that, empowering the CMA formally for the first time to make recommendations on legislation.

Amendment 35B relates to consulting consumer groups. The CMA is the independent, expert competition body. It is the body best placed to assess the likely impacts on competition of legislative proposals. In considering proposals from Government, it will take into account their impact on consumers. This is a key value and it is enshrined in the CMA’s primary duty as set out in the Enterprise and Regulatory Reform Act 2013. This states that,

“the CMA must seek to promote competition, both within and outside the United Kingdom, for the benefit of consumers”.

Consumer advocacy groups have a valuable and vital role to play in scrutinising proposals brought to Parliament. That will continue and they can make their views on proposals known as and when they see fit. As the noble Baroness, Lady Wheatcroft, rightly said, they often do that in many different ways. The CMA works closely with consumer advocacy groups, including Which? and the Citizens Advice service. CAB is also an active member of the Consumer Protection Partnership, although, sadly, Which? chose not to join it. The CPP brings together publicly funded enforcement, advocacy and advice organisations to share, compare and interpret intelligence to identify trends in the causes of consumer detriment. Regular scheduled meetings of this group and its sub-group are held throughout the year, and it plays an important role.

The CMA’s main responsibility is to ensure that competition and markets work well for consumers. That is one of the main reasons we value competition: it leads to better deals for consumers by encouraging innovation, new products, new ways of doing things and more competitive prices. In its annual plan for 2014 the CMA made a commitment to put consumers at the heart of everything it does. It is embedding this approach in its thinking and processes across the organisation, as well as establishing a programme to reach out to consumers and to a wide range of consumer organisations. An example of the success of that approach is the low income consumers project, where the CMA engaged actively with the CPP and other organisations that have a role in protecting consumers to review how problem debt affects consumers’ decisions and choices regarding the goods and services they purchase. There is also a practical timing point in response to this amendment. Requiring the CMA to consult others before making use of its new power would inevitably delay the timeliness of its recommendations, which might in turn diminish its influence and impact on new legislation.

Amendment 35C relates to an annual competition health check in collaboration with consumer advocacy groups and representatives of small business. Well functioning markets work for consumers, business and the economy, and for small business. The aim of the CMA is to make markets function in that way and to promote competition. In understanding markets and establishing priorities, it is of course important that the CMA takes into account the views of interested parties, including consumer advocacy groups and small business. However, effective mechanisms are already in place to achieve that. The intelligence gathered by the CMA through its engagement helps to inform its annual business plan. On 26 November it published its draft annual plan for consultation, and its strategic assessment was published the following day. The draft version of that plan sets out plans and priorities for the coming year. The consultation gave interested parties, including small business, the opportunity to provide views and comments on the proposed priorities. The consultation period closes on 23 January and a final version of the plan will be published in March.

The CMA has limited resources, and it is important that it is focused in the most effective way. New and effective mechanisms are already in place to enable it to gather intelligence, including vital consumer intelligence. The introduction of a new duty to produce an annual competition health check would divert resources away from tackling problems in markets that have already been identified, which at present, of course, include banking and energy. In view of the comments that the noble Baroness made, I am sure that she welcomes that. The CMA inquiry is a very important moment for the energy market. The independent and authoritative analysis that the CMA will bring will start rebuilding trust. The investigation is looking at many very important issues: barriers to entry, the impact of vertical integration, market power in generation, and weak incentives for companies to compete in retail markets, including of course any lack of consumer engagement.

To conclude, therefore, we are doing enough, and the provisions in the Bill should be welcome, although I suspect that we may not agree this evening. I am very grateful for the support of my noble friends Lord Deben and Lady Wheatcroft, and other noble Lords, on this important amendment. In the circumstances, I hope that the noble Baroness will agree to withdraw her amendment.

19:30

[Baroness Hayter of Kentish Town]

I thank the Minister but her suspicions, as ever, are completely accurate. We do not agree.

We are getting close to the time to finish, but I have two things to say. The problem with the CMA or for any of us who are legislators, in government, or whatever, is that the impact of malfunctioning markets falls most heavily on consumers. They are the ones who get ripped off when markets do not work. Not to have embedded in discussions in both identifying those problems and in looking at solutions the very people who feel the whack of it seems to be a mistake in legitimacy terms.

[Baroness Neville-Rolfe]

I agree that consumers are absolutely central to this. I have said it on many occasions, but I believe that we have a reinvigorated CMA. The processes for engagement with everybody, including small businesses and consumer groups, which are the subject of the second amendment, are very strong. It would be a mistake, as others have said, to put yet more requirements and red tape into this area because I fear that that would have an adverse effect on the ability of the CMA to tackle and use its competition powers to look at these very important markets in the way in which it is looking at energy.

[Baroness Hayter of Kentish Town]

The Minister might well say that. However, the Which? manifesto—I gather there is a general election in the offing—is that the CMA and all sector regulators should carry out routine, cross-examining analysis on the state of consumer competition. That may sound familiar to those who have been reading the amendment. The Minister may be very confident that consumer representatives feel that everything is tickety-boo—sorry, Hansard—but that is not how the consumer organisations themselves see it, and they have called for this. That is an important element. They still feel that they are shouting from the outside.

I take very much the comments made by the noble Baroness, Lady Wheatcroft, on what the problem is, as someone who has both run a lobbying organisation and an embedded consumer body within a regulator. The difference in the impact that one could make is enormous. Shouting from the outside one tends to do late. Indeed, I think the Minister gave it away when she said that consultation could delay something. The suggestion I hear from that is that we will have our report and then we will consult on it. That is not what we are trying to do.

[Baroness Neville-Rolfe]

There are systems within the CMA set-up, including the CPP, which allows it to consult on things. Who knows what the exact facts are, but that is how the system is designed. It is to try and give pre-eminence to competition which is done in a way that is envied by other member states I visit. They are very concerned both about competition and consumers.

[Baroness Hayter of Kentish Town]

The Minister thinks that we are not very far away. She is saying “Do it in consultation” and I am saying that, too. I tabled an amendment about consultation and the noble Baroness is saying that we are doing it in consultation but does not want this amendment because she does not want to do it in consultation. That is not quite an accurate portrayal of what we are saying but it sounds as if we are closer than maybe the Minister wants to admit. Having a review of how something will affect the competition and asking the CMA that is meant to do this only for consumers and not do it in consultation would be strange. Therefore, adding the words,

“in consultation with consumer advocacy groups”,

seems easy. That was the first amendment.

On the second amendment, the idea is to make sure that all the time somebody is asking, “Are there failures in the market?”. The difference between us is that it sounds as if everything is going well, yet our experience is that consumers are not always getting a good deal from parts of the market. The system that is set up is not good enough. We have been in government. My noble friend was actually in No. 10 but he obviously was not doing enough at the time. My other noble friend was a Minister, so it clearly goes back a long way. The idea is that we should have a driving mechanism, which is what the second amendment is about. The first amendment is important and one to which we should return. The idea of excluding those who are most affected by the lack of competition cannot be right, but for the moment I beg leave to withdraw the amendment.

Amendment 35B withdrawn.

Amendment 35C not moved.

Clause 36 agreed.

Clause 37 agreed.

Committee adjourned at 7.35 pm.

House of Lords

Monday 12th January 2015 Lords Chamber

Monday, 12 January 2015.

14:30

Prayers—read by the Lord Bishop of Lichfield.

Introduction: Baroness Wolf of Dulwich

Monday 12th January 2015 Lords Chamber

14:38

Alison Margaret Wolf, CBE, having been created Baroness Wolf of Dulwich, of Dulwich in the London Borough of Southwark, was introduced and took the oath, supported by Lord Sutherland of Houndwood and Lord Rees of Ludlow, and signed an undertaking to abide by the Code of Conduct.

Roads: Young Drivers

Monday 12th January 2015 Lords Chamber

Question

14:43

Asked by

[Lord Jordan]

To ask Her Majesty’s Government whether they have any plans to produce a Green Paper to address the incidence of vehicle accidents involving young drivers.

[The Minister of State, Department for Transport (Baroness Kramer) (LD)]

My Lords, Britain has some of the safest roads in the world. However, young drivers are disproportionately involved in collisions. There is a difficult balance to strike between promoting young drivers’ safety and their freedom to access work and education. We will not rule out further measures, but at present we are focusing our efforts on technological solutions. We recently commissioned research into how telematics can reduce accident rates among young drivers and the findings will help to shape future road safety policy.

[Lord Jordan (Lab)]

I thank the Minister for that reply. Young drivers account for about 20% of all road deaths, yet they represent only 7% of all fully licensed drivers and have less mileage than older drivers. Measures have been tried for many years, and all have failed. It is now time for this issue to be grasped. I believe the time has come for an all-party commitment, before the next election, to a Green Paper on young drivers that is prepared to see more radical solutions than we have seen so far. This will not only harness those who want to support this but will certainly give some relief to all the parents in Britain who are terrified of the statistics I have quoted. Is the Minister prepared to be part of an all-party commitment to a new Green Paper?

[Baroness Kramer]

My Lords, the Government are not ruling out any programme that safeguards young drivers, but at the moment we are focusing our efforts on technological solutions, such as the telematics I described. We think they offer great potential and will help to get the right balance between safety and the freedom to use a car, which is so important to many young people.

[Baroness Gardner of Parkes (Con)]

Will the Minister consider looking at the Australian system, which is very much tougher on young drivers? Until a certain period has passed, you have to have a nil alcohol level, but the real secret is enforcement. Will she look at that policy?

[Baroness Kramer]

Obviously it is important to look around the world, and we do. I agree that enforcement is important, and that is one of the very important areas for telematics, which provide a running judgment on the way in which a car is being driven at any moment.

[Lord Wills (Lab)]

My Lords, the Minister will be aware that of the serious accidents caused by young drivers, the great proportion of those accidents, and fatalities, are caused by young men drivers, not by young women drivers. This is as much a cultural problem as anything else. What are the Government doing specifically to tackle that aspect of the problem?

[Baroness Kramer]

We have extensive programmes on issues around drink driving, and I am sure your Lordships are aware of those campaigns. We have a very good safety record in this country, frankly, but we can never be complacent about that. As I say, the focus of the work is now on what we can do with telematics, which now enable us to tackle this problem in a much more targeted way. Research is under way so that we will be able to do that effectively.

[Lord Bradshaw (LD)]

My Lords, I concentrated on road safety for many years when I was a member of the Thames Valley Police Authority. The injuries which young men suffer—often at night, usually driving too fast, usually driving in wet conditions—are horrendous, and they are horrendously expensive. I wonder whether, instead of a Green Paper, the Minister would consider some legislation to make things like provisional licences a reality rather than something which people refer to every few years and then forget about.

[Baroness Kramer]

My Lords, it is crucial that we use research and research-based evidence to design effective programmes. As noble Lords will know, there are many different examples around the world, but under its current system, which we are obviously seeking to improve, the UK actually scores very well on international measures.

[Lord Howarth of Newport (Lab)]

My Lords, will the noble Baroness be kind enough to explain, for the benefit of elderly drivers who may not know, what telematics are?

[Baroness Kramer]

My Lords, that, I am sure, his Lordship does know. It is basically a gizmo—if I may use such language—that is in the car, which constantly communicates the driving performance to the insurance company, so erratic driving and speeding are picked up on a live basis.

[Earl Attlee (Con)]

My Lords, is it therefore correct that the Government have wimped out on introducing graduated licences, and why do we allow motor manufacturers to build motor cars that can far exceed the prevailing speed limit?

[Baroness Kramer]

My Lords, as I say, we have not ruled anything out, but we think telematics are a useful direction to pursue because they let us target problem driving, so that many other youngsters who are driving well still have the scope to reach various education and social events. As for the question of general speed limits in cars, I have never addressed that, but I will try to find the noble Lord an answer and write to him.

[Lord Davies of Oldham (Lab)]

My Lords, is this the only Government who perceive a Green Paper as green grass into which they can kick difficult areas? In March last year the Minister made a commitment to produce this Green Paper. Subsequently it was quite clear that we would not see it before Christmas. We know the nature of the grass leading up to the next general election. This Government have no intention at all of tackling this significant road safety issue, and they stand condemned on that fact.

[Baroness Kramer]

My Lords, the review of telematics will be a two-phase study, and we should see the first phase in April. That will lay out what further work needs to be done. At the moment we do not have the evidence base or the research that we need to make sure that we are coming up with the most appropriate solution.

[Baroness Walmsley (LD)]

My Lords, could I ask for a little more clarification about telematics? Does this mean that this gizmo has to be put in the car of every young driver for a period after they pass their test? Could my noble friend the Minister explain a little further?

[Baroness Kramer]

At the moment, Members of your Lordships' House may themselves have driving insurance that has telematics attached. Anyone going on to one of the websites and looking at various insurance premiums will see that discounts are available for most companies if there is an agreement to use the telematics system. It is still obviously fairly early on in its life. That is why we need to have research, because we want to understand whether there is a good relationship between this ongoing monitoring of what is happening in the car and the actual accidents about which we are all concerned.

[Lord Dubs (Lab)]

The Minister has not mentioned young motorcyclists. Are they not the group that is particularly in danger of accidents?

[Baroness Kramer]

The noble Lord is right that young motorcyclists are also disproportionately engaged in accidents. I am frankly not clear on the insurance and telematics potential for motorcycles, and I will have to write to him on that.

Battle of Waterloo: 200th Anniversary

Monday 12th January 2015 Lords Chamber

Question

14:51

Asked by

[Lord Forsyth of Drumlean]

To ask Her Majesty’s Government what plans they have to mark the 200th anniversary of the Battle of Waterloo.

[Lord Gardiner of Kimble (Con)]

My Lords, the Government are working with Waterloo 200, a charitable trust, to commemorate the 200th anniversary of the battle. Many activities are planned across the United Kingdom and in Belgium. The Government announced, in June 2013, £1 million of funding to ensure that the famous farmhouse at Hougoumont is restored by 18 June. Activities to commemorate this anniversary and others have benefited from heritage lottery funding.

[Lord Forsyth of Drumlean (Con)]

My Lords, I am grateful to my noble friend, and delighted to hear that. However, in commemorating a famous victory over Napoleon by the Iron Duke and his European allies, does my noble friend agree that we must never forget the sacrifices made by the peoples of these islands over the past 200 years in defence of peace, prosperity, democracy and freedom in Europe? In this week of all weeks, we must stand together as a United Kingdom with our allies in defending this precious legacy.

[Lord Gardiner of Kimble]

My Lords, I entirely agree with the sentiments that my noble friend expresses. Indeed, Waterloo secured peace in Europe for nearly 50 years. Men and women from all parts of the United Kingdom have made the ultimate sacrifice in the cause of freedom over the past 200 years. We rightly commemorate them; we are as united now as we have been before in the cause of freedom and tolerance.

[Lord Anderson of Swansea (Lab)]

My Lords, for Blücher should we not read Merkel, and recognise that one suitable way of commemorating this is to recognise that we have a national interest in keeping in close touch with our German allies and partners?

[Lord Gardiner of Kimble]

My Lords, it is undoubtedly the case that we should be in touch and work with all our partners on current affairs, but it is of interest in relation to Waterloo that a number of Länder are commemorating the Battle of Waterloo. The noble Lord mentioned Germany. Hanover, Brunswick, Berlin, Hamburg and Wiesbaden are all commemorating the battle.

[Earl Cathcart (Con)]

My Lords, I am fortunate to have in my family archives some original maps of the battlefield used by various members of my family who fought at Waterloo. One was aide-de-camp to Wellington and another had three horses shot from under him during the battle. Happily, both survived and went on to become generals like their father, grandfather and great-grandfather. So, naturally I welcome the Government’s donation to help the restoration of Hougoumont. However, can I ask about the overall cost of that project and the overall funding? Presumably, individuals have donated. Have any other countries made donations? Presumably not the French.

[Lord Gardiner of Kimble]

My Lords, as well as the United Kingdom Government’s funding, the Government of Wallonia—part of Belgium—have contributed €900,000; there are also Belgian sponsors and UK sponsors of €1 million and £2 million respectively. The Hougoumont site is hugely important, as is known: it was the battle within the battle.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, this House has within its walls a remarkable commemoration of the Battle of Waterloo in the shape of the Daniel Maclise fresco in the Royal Gallery. It commemorates not only the triumph of Waterloo but also its great tragedy. Will the Minister give the House an up-to-date account of where we are with the restoration of that fresco and its partner?

[Lord Gardiner of Kimble]

My Lords, I spoke to the curator this morning, rightly anticipating this question. This is a very intricate and complex matter and the University of Cologne is considering all the points that come out of its research. After that careful consideration —because obviously we do not want to do anything at all that could further damage the paintings—this will come before the Works of Art Committee. The options before it will then be considered, and then all of us will hear more.

[Baroness Bonham-Carter of Yarnbury (LD)]

My Lords, picking up on the artistic aspect, does the Minister agree that one of the most effective commemorations of the First World War was “Blood Swept Lands”—the ceramic poppies at the Tower of London? That was a very strong and evocative example of the power of artistic endeavour in bringing people together. I agree with my noble friend Lord Forsyth that Waterloo 200 should similarly emphasise not the triumph but the tragedy of conflict—tragedy that we experienced so starkly last week.

[Lord Gardiner of Kimble]

My Lords, I think that that is why we have all, rightly, used the word “commemoration” and never “celebration”; it precisely encapsulates what we all feel about the sacrifice of these dreadful battles. However, we are grateful that we prevailed.

[Lord West of Spithead (Lab)]

My Lords, I understand that, as part of these celebrations, one of the events will be a re-creation of the dispatch from Brussels to London. It is a very good educational tool. HMS “Peruvian”, which took the dispatch from Ostend, was becalmed off Ostend and the captain and four sailors then rowed 18 miles to Broadstairs. Does the Minister not think that if we are going to re-create that, we need to start training some captains in the Royal Navy now to achieve it?

[Lord Gardiner of Kimble]

My Lords, the dispatch and delivery of this great news, and the peace that unfolded in Europe, were hugely important; and, indeed —as the noble Lord will confirm—the Battle of Trafalgar ensured that there was peace at sea for a very long time.

[Lord Spicer (Con)]

My Lords, on the morning of the Battle of Waterloo the Duke wrote: “I have no time to write a short letter so I will write a long one”. He was probably referring to a divorce case in which he was unfortunately one of the cited parties. Is it not the case that, had the journalistic practices that prevail today applied in that time, he might never have been supreme commander and we might have lost?

[Lord Gardiner of Kimble]

My Lords, we can all be extremely grateful for the Duke of Wellington’s courage and bravery.

Alcohol: Addiction

Monday 12th January 2015 Lords Chamber

Question

14:58

Asked by

[Lord Avebury]

To ask Her Majesty’s Government what are Public Health England’s plans for combatting alcohol addiction.

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, Public Health England recognises that the harmful use of alcohol is a major health risk. The harm from alcohol is preventable; alcohol is one of seven key priorities that PHE is focusing on. It is implementing a programme to support national and local government, the NHS and partners to implement evidence-based policies and interventions. Included in this work is the reduction of alcohol addiction.

[Lord Avebury (LD)]

Considering that three years ago, there were 1.1 million alcohol addicts in England and that abuse of alcohol was costing the nation £21 billion—and probably much more than that today—how can the Minister reconcile the fact that we spend only one-tenth as much on treating alcohol addiction as we do on patients suffering from drug addiction? Why is it taking until 2016 to update the guidance on access to mutual aid fellowships such as Alcoholics Anonymous, when the ACMD has shown that there are effective ways of combatting the addiction?

[Earl Howe]

My Lords, my noble friend was kind enough to give me advance warning of those questions. I have to say to him that we do not recognise the figures he quotes; nor do we think that the comparison he makes is like for like. In 2007, an estimated 1.6 million people had some degree of alcohol dependence, including those with a slight dependence. Of those, some 250,000 were believed to be moderately or severely dependent. The specialist treatment centre system continues to work well for many people. Many of the trends in terms of treatment are positive. As regards supportive relationships, I fully agree with what he said; they are a vital element in helping individuals build their own recovery. In October 2013, Public Health England produced a strategic action plan for supporting the treatment sector to strengthen its links with mutual aid organisations to ensure that everyone in treatment can benefit from that support.

[Lord Hunt of Kings Heath (Lab)]

My Lords, how many meetings have been held between Ministers and representatives of the alcohol industry since the last election? Why are the Government delaying the publication of the Chief Medical Officer’s review of safe drinking levels until after the election? Are the two connected?

[Earl Howe]

No, my Lords, they are not. The Government have regular dialogue with the industry, but the industry does not formulate policy and never will do. There has been a delay on the new guidelines; the consultation on them had been planned for December last year but will not now happen until shortly after the general election. That is simply due to problems with Public Health England commissioning expert advice on guideline methodologies, which took longer than intended. The academic body that PHE wanted to do the work decided that it did not have the capacity to do so. A tender exercise was therefore necessary and the work is being carried out by a team from Sheffield University.

[Baroness Howarth of Breckland (CB)]

My Lords, the Minister is well aware of the effect of alcohol on unborn children. What are the Government doing for young mothers who are either addicted to drink or unaware of the difficulties that alcohol creates for their children in terms of education both through the health service and the education system?

[Earl Howe]

My Lords, the Royal College of GPs has a special focus at the moment on giving advice to GPs. We are also dramatically increasing the number of health visitors, who are, of course, highly instrumental in influencing the behaviours of mothers-to-be and young mothers.

[Lord McColl of Dulwich (Con)]

My Lords, does the Minister accept that although alcohol was until recently the commonest cause of liver disease, the commonest cause is now the obesity epidemic, which is killing millions of people? Some 13 million people in this country are suffering from obesity—far more than are suffering from alcohol problems.

[Earl Howe]

My noble friend is absolutely right. More than 90% of liver disease is due to three main, preventable and treatable risk factors—alcohol, hepatitis B and C, and obesity. Alcohol accounts for 37% of liver disease deaths, but obesity is indeed a major factor in this.

[Lord Brooke of Alverthorpe (Lab)]

Will the Minister explain to the House why, when his Government came to power, they tore up the draft strategy on liver disease that had been prepared by the previous Government? What are they going to do to put one in place and, given the complaints we have heard, make sure that the growth in the number of deaths is reversed?

[Earl Howe]

My Lords, Public Health England has a programme of work to ensure that all the bases are covered. It is producing a report for government that will be published later this year. Over the next 18 months, there will be a longer programme of work on such things as a framework for liver disease, setting out the evidence base for the introduction of a minimum unit price for alcohol and using alcohol as the trail-blazer for a new whole-system approach that establishes what works and is clear on the return on investment, to enable government to take action based on evidence.

[Baroness Hollins (CB)]

My Lords, the Board of Science at the BMA, which I chair, believes that the availability of cheap alcohol, such as white cider, is one of the main causes of the rise in addiction. We believe that the sale of cheap alcohol needs to be tackled through the introduction of a minimum unit price and that prevention really is better—and cheaper—than cure. What does the Minister think about that?

[Earl Howe]

Minimum unit pricing remains under consideration while additional evidence becomes available. We are not taking it forward at the moment. We need to give careful consideration to any possible unintended consequences of minimum unit pricing, such as the potential impact on the cost of living, the economic impact of the policy and increases in illicit alcohol sales. It is, and has only ever been, part of the Government’s alcohol strategy—although, as I mentioned a moment ago, Public Health England will be assembling the evidence base for the introduction of a minimum unit price for alcohol to advise the next Government.

[Lord Garel-Jones (Con)]

Does the Minister agree with me that alcohol is properly defined as a habit-forming, hallucinatory drug, and is it not about time that Governments began to treat the use and abuse of this particular drug with the same seriousness as they do the abuse of other drugs?

[Earl Howe]

My noble friend makes a very good point. Alcohol in moderation is something that we can all enjoy, but people who binge drink or drink drive cause problems for accident and emergency departments. They are the people we have to bear down upon. I believe that we do now have effective systems of regulation and enforcement, which are proving their worth.

Village Life

Monday 12th January 2015 Lords Chamber

Question

15:06

Asked by

[Lord Roberts of Llandudno]

To ask Her Majesty’s Government what steps they are taking to safeguard village life.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con)]

My Lords, this Government are safeguarding village life. We have already given community rights to give power to communities, enabling them to shape their place and protect their local assets. We have also delivered over 7,500 affordable homes in the smallest rural communities. The £20 million community branch fund is supporting Post Office community branches, enabling them to further enhance their sustainability and viability, and the Rural Development Programme for England has invested over £400 million to grow the rural economy.

[Lord Roberts of Llandudno (LD)]

I thank the Minister for that reply, but I am sure he will agree that villages of, say, 1,000 or fewer residents are not just to be suburbs of larger towns, but places where people can live and earn their living. Can the Minister tell me what plans the Government have to encourage the liveliness and buoyancy of villages? Could we ask every community and parish council to draw up a plan so that they know what their present status is, what their problems are, and what their proposals are for the future?

[Lord Ahmad of Wimbledon]

I agree with my noble friend; he makes a very good point about the importance of village life. As I have already alluded to, the Government are investing a great deal in this respect. Let me draw the attention of the House to the Rural Community Buildings Loan Fund that the Government are supporting, which is a £700,000 Defra fund that is managed by ACRE and encourages communities to raise funds. Of course, the Government have also pushed and worked with the Post Office to ensure that post offices are retained at a local level and we are working alongside banks to ensure that communities in the most remote parts can access financial services. Indeed, I believe that RBS has just started a mobile scheme that goes out to about 90 rural towns that are hard to reach, which is quite innovative and certainly is supported by the Government.

[Lord Clark of Windermere (Lab)]

Is the Minister aware that in many villages in national parks the fact that more than 50% of the houses are now used as holiday lets means, for example, that GP practices are having to close in places like Coniston and Hawkshead in the Lake District because there are insufficient permanent residents? What plans does the Minister have to consider the proposals from local authorities that they should have some say on the designation of holiday lets?

[Lord Ahmad of Wimbledon]

The Government have already outlined their commitment to the localism agenda. I have talked previously from the Dispatch Box about local enterprise partnerships. These are prevalent not just in towns but in villages and within the rural economy. Currently five pilot rural growth networks have been established in Warwickshire, the north-east, Swindon in Wiltshire, the heart of the south-west and Cumbria. These are all working with the local authorities and local lets to encourage local growth. The noble Lord’s point about holiday lets is well made. However, we are working with local authorities to ensure the vibrancy of local economies and local housing.

[The Lord Bishop of Rochester]

My Lords, reference has been made at various points to housing. The Minister will be well aware of the importance for the sustainability and vitality of rural communities of a good mix of housing, housing tenure and so forth. Does he agree that community land trusts are a valuable and perhaps essential way of ensuring a continuing and permanent supply of affordable housing in rural communities? If so, what commitment have the Government made to increasing the number of such trusts?

[Lord Ahmad of Wimbledon]

The right reverend Prelate makes a valid point. We work with local authorities to ensure that we identify trusts which can take forward development of the local economy. The community right to build was part of our localism agenda and we are encouraging that. However, I fully acknowledge that there is a lack of affordable housing in villages, which has a knock-on effect on sustainability. We are currently looking to deliver more than 73,000 affordable homes that have been provided for in rural local authorities in England since April 2010.

[Lord Deben (Con)]

When my noble friend talks to local authorities, will he talk to them seriously about their partiality in these matters? Many of them will deal only with what they call larger villages—central villages that are convenient for them—rather than with small villages. I, for example, am told that I do live not in a village but in a scattered settlement. It has always been a village but it is now a scattered settlement. The reason is that the local authority does not want to treat us as it treats others because that would be inconvenient for its bureaucracy. Will the Minister please have a word about this partiality?

[Lord Ahmad of Wimbledon]

I of course recognise my noble friend’s concern, including his reference to a scattered development. I will certainly look into that. In Arun in the county of Sussex the country’s first three community right to build orders were successfully passed in Ferring, Arun district, in December last year.

[Lord McKenzie of Luton (Lab)]

My Lords, the Minister has acknowledged the lack of affordable homes in rural areas. In particular, is there not a lack of smaller homes? In these circumstances, does not the bedroom tax have an especially pernicious effect on rural areas, and is not the only solution to get rid of this wretched tax?

[Lord Ahmad of Wimbledon]

The important point is how many homes are being built. I am sure the noble Lord recognises that we currently have a record number of housing starts and, indeed, housing builds, and that is what we need to encourage. I have already alluded to some of the initiatives that we are taking. I believe my noble friend Lord Freud has previously highlighted that, where difficulties with the bedroom tax are identified, the Government have made available funds to help people in that situation.

Health and Social Care (Safety and Quality) Bill

Monday 12th January 2015 Lords Chamber

First Reading

15:13

The Bill was brought from the Commons, read a first time and ordered to be printed.

Self-build and Custom Housebuilding Bill

Monday 12th January 2015 Lords Chamber

First Reading

15:14

The Bill was brought from the Commons, read a first time and ordered to be printed.

Recall of MPs Bill

Monday 12th January 2015 Lords Chamber

Order of Consideration Motion

15:14

Moved by

[Lord Wallace of Saltaire]

That it be an instruction to the Committee of the Whole House to which the Recall of MPs Bill has been committed that they consider the Bill in the following order:

Clauses 1 to 6, Schedule 1, Clauses 7 to 10, Schedule 2, Clauses 11 to 16, Schedules 3 to 5, Clauses 17 to 20, Schedule 6, Clauses 21 to 25.

Motion agreed.

Pension Schemes Bill

Monday 12th January 2015 Lords Chamber

Committee (2nd Day)

15:15

Clause 47: Pensions guidance

Amendment 29

Moved by

[Lord Newby]

29: Clause 47, page 20, line 8, after “members” insert “, and survivors of pension scheme members,”

[Lord Newby (LD)]

My Lords, the Government intend that all those who stand to benefit directly from the new pensions flexibilities provided by the Taxation of Pensions Act 2014 should have access to pensions guidance, which will help to empower them to make informed decisions about their pension savings.

The amendments to Clause 47 and Schedule 3 are technical amendments to ensure that this is the case. The amendments in this group adjust the definition of pensions guidance in new Sections 333A and 137FB of the Financial Services and Markets Act 2000, to extend pensions guidance to survivors of members who have benefits to which the flexibilities will apply, rather than just to members of pension schemes. This is needed because in some circumstances pension schemes may provide benefits to survivors of members of the scheme other than insurance-based products or cash lump sums—that is, flexible benefits—without their becoming members of the scheme. I beg to move.

[Lord McAvoy (Lab)]

My Lords, a large number of government amendments have been tabled for today’s business. The impression given is of last-minute thoughts responding to last-minute contributions and suggestions. If the Government had been doing their groundwork properly, they would not have had to respond to such issues by moving the amendments.

I thank the Minister for doing his best to explain the amendment. I think he has said that these are minor and technical amendments, but can he confirm that that is so and that they do not substantively change the effect of the Bill? Quite frankly, we know what the Government are saying in these amendments. I do not think there has been time to study them very well, so we will reflect on what the Minister has said and consider it very carefully ahead of Report.

[Lord Newby]

My Lords, I can absolutely confirm that these are minor and technical amendments.

Amendment 29 agreed.

Clause 47, as amended, agreed.

Amendment 30

Moved by

[Lord Bradley]

30: After Clause 47, insert the following new Clause—
“Guidance guarantee: annual review
The Secretary of State must each year produce a report on the effectiveness of the guidance under Schedule 3, and that guidance must include—(a) the number of people who have taken up the guidance;(b) the number of people eligible to take up the guidance who did not do so;(c) the effectiveness of the guidance in preventing instances of consumer detriment through the purchasing of inappropriate products.”

[Lord Bradley (Lab)]

My Lords, I beg to move Amendment 30. At the start of our deliberations, it is worth reminding the Committee that at Second Reading we took two pension Bills together: the Pension Schemes Bill and the then Taxation of Pensions Bill. We did so because it was recognised that the two Bills were interrelated and that the issues to be scrutinised and debated were inextricably linked between them. While there was no debate in this House on the Taxation of Pensions Bill, as it was a money Bill, it would be impossible not to refer to these interrelationships in our deliberations today on such matters as pension guarantee, guidance guarantee, product development and the financial and economic consequences of the Bills.

Furthermore, we will continue the theme that we developed on day 1 in Committee: since so much of the Pension Schemes Bill relies on regulation—to date such regulations have not seen the light of day—we will continue to press the Government for far more information on the regulations, to try to make as much sense as possible of how the proposals in the Bill, and the Bills, will be implemented.

Similarly, we have highlighted the speed at which this legislation is being brought to the statute book, which further hinders scrutiny not only inside Parliament but by key stakeholders. These include those who will be responsible for delivering the crucial guidance guarantee—particularly Citizens Advice and the Pensions Advisory Service—and the pensions industry and its representative bodies, who will need to respond to the effects of the policy changes, some of which come into force in barely three months’ time.

As we have made clear throughout our deliberations, the overriding objective is broadly to support the freedoms and flexibilities in the Bill and to ensure that the public have all the information they need and the guidance they seek to ensure their interests are protected, and that they receive the best outcomes for their retirement without the fear of the scandal, for example, of mis-selling, which the public encountered some years ago.

One example of what I am alluding to emerged only today with the revelation from the Government that only 45% of new pensioners will be entitled to the full new flat-rate state pension in the first five years of the system. That is 2 million people who will not get the full amount. Certainty of the amount of the new pension will be critical in the decisions people may make about how they plan their retirement income or draw down cash immediately after April. I know that the Minister will want to clarify the situation when he responds.

It is in that spirit that I move Amendment 30. At the heart of the amendment is our wish to ensure that the Bill works in the way that it is intended, and that the guidance will be both taken up and prove effective in helping people to choose the right products to fund their retirement or to make the right decisions about lump sums or other retirement income. We believe that guidance is needed but we are concerned that this House has, to date, been provided with too little information about what guidance will be offered. Additionally, will the quality of this guidance ensure that people make the right decisions for themselves and their families, now and in their later years?

I welcome the fact that more information about the guidance has been produced today and I thank the Minister for providing the Committee with it. In particular, we now have the title of the service, ‘Pension Wise’, and the branding, “Your Money. Your Choice”. However, I stress that at this point we are talking about guidance and not advice. We have made this point on a number of occasions during our deliberations and it is important to keep in mind the distinction between guidance and advice on which people rely.

I know it is intended that the guidance should be comprehensive—that has been elaborated on today in the announcement from the Treasury—which, to some extent, is reassuring. The assumption is part-based on the discussions in the Public Bill Committee in the House of Commons, especially the interchange between the Minister for Pensions, Steve Webb, and the shadow Minister, Gregg McClymont. The Minister said in the other place:

“Guidance will discuss the pros and cons of different financial products and services”.—[Official Report, Commons, Pension Schemes Bill Committee, 4/11/14; col. 283.]

He quoted the Financial Conduct Authority, saying that,

“guidance will need to be tailored, providing consumers with sufficient personalised information, so that they can understand their options and make confident, informed decisions about their retirement options”.

The FCA also thinks guidance should include information on tax matters. This is clearly an important consideration. The Minister responsible in the other place went on to say that a guidance session has to be person-specific and that he was consulting for opinions, attitudes and expectations on what is needed in good guidance.

I realise that the Treasury is taking this matter forward and leads on this. Again, I further welcome the information that has been provided in the guidance guarantee today. We have to ensure that we can digest the contents of that information that I received at lunchtime today, so that we can further consider the matters within it. That may lead to further consideration of the detail on Report.

It is reassuring to know that the Minister envisages guidance sessions to be comprehensive, but it raises the question of how much it will cost and how those costs will be met. The National Association of Pension Funds estimates the cost of advice for people seeking an annuity under the current system to be £681 million—I mean £681 per session. It does not go quite as far as millions; we might get to that at some later stage. That is hardly a simple assessment but it is not such a comprehensive session, in many ways, as the far-reaching guidance envisaged by Steve Webb, the Minister, and the Financial Conduct Authority.

At £681 per session, it will cost £480 million to provide those 600,000 people retiring in 2015-16 with guidance. But how many people will, in practice, seek guidance? It is safe to assume that some will not choose to take it up, perhaps because their pension pot is too small—maybe less than £10,000, although it could be argued that this group is the very one that will need the best advice. Others will pay an independent financial adviser. The Legal & General group helpfully undertook a trial of free advice to some 9,000 people. It reports that only 2.5% took up the offer. This would cost £154,000 at £681 per session. The Chartered Insurance Institute estimates a 90% take-up. This would cost £368 million. Which do the Government think most likely to be correct? Have the Government risk-assessed this? If so, can this information be available to the Committee? I note that the Treasury has today estimated a cost of the service at £35 million for 2015-16. I would therefore be grateful if the Minister would tell the Committee how this amount has been calculated.

The Minister also told the Public Bill Committee, on 4 November in the other place, that guidance providers will not be subject to FCA regulation. Instead, the FCA must put in place standards that designated providers must work within. Designated providers must be chosen and approved by the Treasury and the list will be available to the public. The FCA will have a duty to monitor compliance and the Treasury will take responsibility for ensuring that the FCA framework is sound enough. Is that sufficient? Monitoring may be comprehensive but fall short of regulation. Perhaps the Minister can assure us on how this compliance will work. As the Minister may imagine, at the heart of my concern is a strong desire to avoid another mis-selling scandal, which would put the guarantee for savers at risk, with savers therefore failing to get the retirement income they need and deserve.

The current designated partners, the Pensions Advisory Service and Citizens Advice, are very credible providers of advice and guidance generally. I am sure that Citizens Advice will ensure that all 380 independent bureaux, which will deliver that advice, have all the necessary public liability insurance in place to protect them from claims arising from the guidance tipping into advice and then being acted on. But is it right not to regulate this market? Will others seek to enter the market with far less credible track records than these two esteemed bodies? For example, will people selling products be able to offer guidance via the designated lists in the future? Furthermore, could the Minister explain what redress people will have in practice? With 600,000 people entitled to free advice, it is inconceivable that something will not go wrong. The fact that it is guidance, not advice, could prove to be an inadequate veil to hide behind. The Minister in the other place seemed to think that few people would seek redress. However, I remain concerned, and the implications could be huge.

15:30

I turn to the specifics of our amendment on an annual review of the guidance guarantee. In spite of what has been provided today and throughout the deliberations at all the stages of the Bill, we are being asked to pass legislation here when we still have little real information on which to base full support for it. I hope the Minister can provide a great deal more detail to the Committee today, based on the information that has been provided. If necessary, as I said earlier, we can come back at a later stage for further deliberation.

I conclude with some points that I have gleaned from scrutinising the debates and evidence given in both Houses. First, the guidance is intended to be comprehensive and we welcome that. But we note the views of Rachael Badger of Citizens Advice, who told the Committee on the then Taxation of Pensions Bill last year:

“Guidance sessions will be tailored to people’s circumstances. They will cover things such as tax benefits, possible social care needs, savings and debt; there will also be signposting to regulated advice if that is appropriate”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 11/11/14; col. 23.]

Will the Government confirm in their response today that all those matters will be properly covered?

Secondly, I recognise that guidance will also be available online and by telephone through the Pensions Advisory Service, but will the Minister give details of the proposed 45-minute sessions that we received details of in the information today and of how the cost of the £35 million that I have already alluded to has been calculated for 2015-16? Thirdly, will the Minister allay the fears identified by, among others, the Financial Services Consumer Panel? In the evidence session on the then Taxation of Pensions Bill, it said:

“We are very worried about the face-to-face guidance delivery. It is a huge challenge for CAB to get ready for April”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 11/11/14; col. 12.]

The training and capacity of Citizens Advice and, of course, the Pensions Advisory Service must be in place. Can the Minister confirm that it will be—for the number of people who will be seeking that advice—perhaps before, but immediately after, the April implementation date? Fourthly, I repeat our concern that the delivery partners will not be regulated but merely monitored.

The central argument, as we know, is that we are being asked to have faith that the Government have fully appreciated all the implications of the legislation, in spite of the speed of implementation and the fact that so much relies on regulation and not primary legislation. We are being asked to take too much on trust. Not unreasonably, this amendment seeks to reassure us that the legislation will work in the way intended. It is right to ensure the quality of the guidance and that adequate funding will be available so that people can have access to the guidance that they need. Specifically, we are asking for a review to include, first, how many people are accessing the guidance that they need. Given that the estimates vary between 2.5% and 90%, this is crucial. Given that many people have limited knowledge about pensions, we need to monitor this to ensure that people know of the guidance that is available to them and where to get it, and that the service is promoted. Secondly, the review should look at why people do not take up guidance. Given that we all agree that it is necessary to offer guidance to help people make informed choices about pension pots and financial planning for their retirement, we need to be sure that they have considered guidance, and if they have elected not to take it up, it would be useful to know why. Thirdly, we need to assess the quality of that guidance and whether it is preventing people from purchasing the most appropriate products. We need to be assured that, as the guidance rolls out, the first users of the service are not seen just as guinea pigs but are used to inform and change guidance that is then appropriate because of the consequences of the information provided by those first people using it.

I am sure that we all recognise the need to provide people with guidance to make our pensions products safe for future pensioners. Given the lack of detail in the Bill, I am sure the Minister will want to support this amendment so that we can have a regular review of the workings of the Bill, and in particular how the pension guidance guarantee works in practice for the benefit of the people who use it. I beg to move.

[Lord Freeman (Con)]

My Lords, I find myself in sympathy with the spirit of the amendment but, I am afraid to say, the detail is somewhat defective. The spirit must be right because the more information that can be available and collected accurately, the better, so that the schemes in the Bill can be improved or amended in due course.

I draw the attention of my noble friend the Minister to the comments of the chartered institute and Royal London; first, on eligibility; secondly, on take-up; and, thirdly, on effectiveness. It is not really possible within a short period of time—that is, on an annual basis—to measure accurately the results of this legislation under those three categories. I look forward to what the Minister has to say, whether in response to this amendment or in due course on Report. I very much associate myself—and, I know, some of my colleagues—with the spirit of the amendment but I think the devil is in the detail.

[Lord Newby]

My Lords, I am grateful to the noble Lord, Lord Bradley, for the way in which he moved the amendment, and for setting out some of the broader issues that are covered by a number of groups. I hope the Committee will forgive me if I, too, take my introductory remarks slightly wider than the amendment itself, because I think they are both relevant to this amendment and spill across a number of groups.

First, I draw noble Lords’ attention to the publication today, which the noble Lord, Lord Bradley, referred to, of an update from the Treasury on the implementation of the pensions guidance service. It announced that the brand for the service will be Pension Wise, with the tagline, “Your money, your choice”. This branding will be used by all delivery partners and is designed to be easily recognisable. The HM Government logo will be used to support the Pension Wise brand where appropriate, to underline the credibility of the service. In answer to one of the points made by the noble Lord, Lord Bradley, potential scammers and fraudsters should be aware that the Bill introduces a new criminal offence which means that anyone passing themselves off as Pension Wise could face prosecution. I can reassure the noble Lord at this point about the way in which the guidance providers will themselves be regulated, and on the basis for the compliance.

The standards for designated guidance providers are in fact a Financial Conduct Authority instrument, so it is a legal document which it is exercising, I am sure the noble Lord will be pleased to know, under Section 333H, Standards for Giving of Pensions Guidance by Designated Guidance Providers, of the Financial Services and Markets Act 2000. It is therefore very much a statutory underpinning of all the guidance which guidance providers will have to follow. This is a detailed document to which I will refer later. Also from today, following the publication of the document, individuals have the opportunity to register their interest in early access to the service as part of the piloting activities. The publication also sets out details of how consumers can access and use the guidance, with further information on the progress and costs of implementation. I am sure that noble Lords will find this information useful.

I can assure the House that the Government are committed, in looking at the specific amendment, to a full programme of monitoring and evaluation which will look at the uptake of the guidance as well as how it is achieving its objective of informing consumer decision-making at the point of retirement. I share the noble Lord’s focus on ensuring that we maximise take-up of the guidance, and that is why the Treasury is legislating, through this Bill, to place a duty on the FCA to require pension providers to signpost people to the guidance as they approach retirement.

Last year, the FCA consulted on its proposals for delivering against this duty, and in November published a very detailed policy statement with its near final rules. Following Royal Assent, these rules will require pension providers not only to signpost individuals to the guidance service in wake-up packs issued four to six months ahead of an individual’s nominated retirement date, but to recommend to their customers that they seek guidance or advice whenever a consumer wishes to access their pension fund. That is one of the reasons the Government are announcing the Pension Wise brand now, so that the industry can get ready for these new requirements and start bringing the service to their customers’ attention as soon as possible.

I will clarify a statement I made to the House at Second Reading in response, I think, to the noble Lord, Lord McKenzie, on the issue of requirements in the round and progress towards the standardisation of the pension statements that providers will send to their customers approaching retirement. While it is not yet a formal requirement, the Government are clear that progress must be made by industry more quickly. The FCA has clarified in its near final rules that will underpin the guidance service that information about a customer’s pension pot must include, at a minimum, the current value of the pension pot, along with information on guarantees and other relevant special features. Building on this, the Treasury is working with the industry to standardise how the key information is presented. We have made it absolutely clear that the Government consider this to be a key priority. A wide range of respondents to our consultation last year on the pension freedoms made a convincing case that it is necessary to help consumers understand and engage with decisions on what to do with their pension savings. The Government welcome the recent commitment from industry trade bodies to support the development of standardised materials by the Treasury and to encourage their members to use them in communications with their customers as soon as possible.

The Government welcome the FCA’s commitment to consider making such standardisation a mandatory requirement in the wide review of its rules that will take place in the first half of this year. If the trials show that such standardisation helps consumers, I imagine that will be a very strong case for the regulator to require it. We must recognise, however, that not all individuals will seek to take up the guidance offer. It is their choice to do so. They may have other sources of help and advice, such as an independent financial adviser or advice services provided by their employer. We must ensure that consumers know that the guidance service is available and how it can help them, and encourage consumers to use the guidance as far as possible. We must, however, respect the fact that there will be consumers who will be content and equipped, for a variety of reasons, to make decisions without taking guidance. The FCA has introduced a number of safeguards to ensure that consumers are encouraged to seek guidance or, if they do not, are provided with the necessary information to support decision-making.

In summary, it is made clear that firms should not do anything to dissuade customers from getting the guidance. It has reaffirmed the expectation that firms will encourage consumers to shop around on the open market. It has introduced a new requirement that when communicating with customers about accessing their pension funds, firms are required to ask whether they have taken guidance or relevant financial advice and, if not, to encourage them to do so. It has introduced a new requirement on firms to recommend that consumers should seek guidance or advice rather than simply signposting to it. It has also confirmed that firms will be required to give a description of the tax implications of the option selected by a consumer.

15:45

Similarly, we must accept that some people may make decisions which may not result in the best outcome for them or may not seem to an outside observer to be “rational”, even after taking advice. That is their choice and their responsibility, and their decisions will be influenced by a range of factors unique to them, but it is worth noting that the FCA has clarified that where a firm is concerned that an individual is making a decision which does not seem consistent with their circumstances, it can check this with the consumer without it being regarded as regulated financial advice.

For too long, individuals’ ability to make choices about how they use their pension in retirement has been constrained by the majority of people being forced down a single route. It is therefore hardly surprising that this has resulted in a lack of engagement in the decision-making process, consumer inertia and a market that was not working in people’s interests. What the Government are working towards now, as they introduce much welcomed freedom and choice, is genuine consumer engagement with the decision-making process. Guidance will be key to that, and the Government will closely monitor and evaluate the effectiveness of the service in supporting consumer decision-making. However, requiring a box to be ticked to confirm guidance has been received or mandating guidance goes against the grain of consumer choice and consumer responsibility.

I apologise for setting out the background in such detail, but I hope that noble Lords will forgive me. Perhaps I may turn to one or two of the specific questions asked by the noble Lord, Lord Bradley. He asked about estimates for take-up of the guidance and how we had reached the figure of £35 million. As he pointed out, the estimates for the take-up of the guidance have been very wide, ranging from 2.5% to 92%—they could not be wider. In fixing a figure of £35 million, we have made our best estimate of the resources needed to deliver the advice in the first instance. It reflects the fact that demand is necessarily difficult to predict in the first year and we accept that the figure may need to be amended in the light of experience. In the document that we have published today, we have explained that if further funding is necessary to meet the demand, the Treasury will meet that cost in the short term. The guidance is funded on a levy. The levy has been set at £35 million this year. If we find that we have to spend £40 million or whatever, the Government will meet that cost in the short term to ensure that we meet the demand and reclaim it from subsequent years’ levies. There is no great science in getting the right figure at this stage. There is no figure for take-up around which there is consensus, but we think that we have reached a sensible starting figure.

On whether we think that training is in place, obviously a big programme is needed to achieve this, but we are confident that the training we are doing is adequate. Citizens’ Advice has a very good track record of giving advice to people in a whole range of circumstances, and this is just another. All CAB and TPAS staff delivering the guidance will receive training with a view to meeting the rigorous FCA standards. They will be required to demonstrate that they have the necessary pensions knowledge and the ability to deliver a quality guidance service before they talk to the public. There will also be a programme of continuous specialised improvement that maintains and develops their technical and professional skills.

The noble Lord also referred to the story on the BBC this morning about the new state pension. We think that the story gets it completely wrong by seeming to pass off as a new feature of state pensions the need to reflect that millions of people have been contracted out into private pension schemes since SERPS started in 1978. When the new state pension starts on 6 April 2016, we will assess people’s national insurance record, we will value their contribution and record under the new rules and the existing rules, and the higher value will be the starting amount in the new state pension. We will make a deduction if someone has been contracted out of the additional state pension. We do this for people claiming their state pension now.

This is because contributions were made to a private pension and people have either paid national insurance contributions at a lower rate, or some of the national insurance contributions they paid were used to contribute to their private pension. If we were to ignore these contracted-out pensions, whether in the old scheme or the new, people would be paid twice for the same national insurance contributions, and that would be unfair on all of today’s pensioners and on people who have never been contracted out. The fact is that when we value people’s contributions in 2016 they will get at least what they would have got for their national insurance contributions under the current system. Many will get more, with women, carers, low earners and the self-employed set to benefit the most. Under the new state pension, people will need to have only 10 qualifying years to be entitled to a state pension. From 2016, contracting out will be withdrawn and people will all pay the same percentage rate of national insurance for the same state pension.

That is some way from the specific amendment we are discussing. Returning to it, I hope that I was able, in the early part of my remarks, to convince the noble Lord that we are taking the question of monitoring and evaluation seriously and that he will feel able to withdraw the amendment.

[Lord McKenzie of Luton (Lab)]

My Lords, can the Minister help me on two points which arise from the Pension Wise document we got just this morning? Page 7, which recites progress to date, says that,

“until the service reaches maturity, overall responsibility for service design and implementation will remain within the Treasury”.

Will the Minister expand on that and say at what stage he believes the service will reach maturity?

Page 17 says:

“Telephone and face to face guidance sessions will initially be designed as a single session per consumer, though this will be kept under review”.

Will the Minister say something more about the components of that review? What will be taken into account in determining whether that single session for consumers is adequate?

[Lord Newby]

It is difficult to give a precise answer to the noble Lord’s first question, about maturity. The Treasury is, for good or ill, going to keep its mitts on this process until we are very satisfied that it is working well and is seen to be in a stable and successful state.

As for the single session, noble Lords will be aware that people will be able to access the service either online, on the phone or in person. The hope is that by giving people all the financial information that they require, by encouraging them, in the case of pension providers, and by explaining to people, before they turn up to their session, the kind of information that we are looking for, it will be possible to give adequate guidance in one session. We accept that that will not be enough for some people; they will have forgotten something or a thought will occur to them once they have left. We hope that of those cases, which we hope will be a small minority, a majority will be able to get an adequate response to a specific query by going to the website.

We accept, however, that for some people that will not be the case, and that in a minority of cases some people will need to go back, either to make a subsequent phone call or to have a subsequent meeting. However, we are working very hard to minimise that necessity—because, obviously, getting things right first time will be in everyone’s interest.

[Lord German (LD)]

My Lords, perhaps I could follow the point that my noble friend and the noble Lord opposite have just raised in respect of the same document. Box 2.A on FCA standards requires the people delivering the service to have a range of skills, which are numbered i to viii. I shall refer to a report last week in a newspaper that prints on pink paper, in which it was trying to seek from Citizens Advice and the Pensions Advisory Service the qualities of the people that they would employ. The report in the Financial Times that I am quoting from says:

“Citizens Advice said details of where the”,

agents and case workers,

“would be deployed throughout its … bureaux … were still being finalised. However, it conceded that consumers could be required to make a further appointment if their questions could not be answered during their … guidance sessions”.

That raises two separate issues: one is the quality and skills of the people who are delivering the guidance service, and the other is whether Citizens Advice is on side with the idea of delivering it in one go. The comment seems to suggest that its people may not have answers to the questions that are being raised by those people seeking guidance in their first interview. I wonder whether the range of flexibility on the two is at all appropriate.

[Lord Newby]

My Lords, we are keen to make sure that by the time people have been through the guidance process, they are able to make the best decisions for themselves. As I say, we hope that that will be possible in the vast bulk of cases first time around.

I think that what will happen in giving guidance in this area, as happens elsewhere, is that there will be a number of very special cases, but the vast bulk of people will have the same issues as others. The CAB, which after all has to give advice on the whole benefits system, which if anything is even more complicated than the pensions system, has a proven track record of developing the skills of people, and is very good at this—while this is, of course, what the Pensions Advisory Service does.

So we are confident that there are going to be well qualified people. We are building flexibility into the system—partly by having three ways of accessing it and partly, as I say, by, in exceptional circumstances or in a minority of circumstances, allowing people to go back—and we hope we are going to make sure that at the end of the day people will all have the degree of guidance that they need, relevant to their needs, to enable them to make well informed decisions.

[Lord Bradley]

I thank the Minister for his comprehensive reply, particularly when he said that the Treasury would be keeping its mitts all over the service. I assume that that was meant to be reassuring.

I note that he said that he thought the BBC had got the story wrong today about flat-rate pensions, and I listened with great care to his explanation, which we will need to reflect on very carefully. It is vital that people are clear about what their pension income will be when they are making plans about their whole-pot retirement income. I hope that when I read his response, it will be clear that that information will be available to people well in advance of them taking advice from the CAB, the Pensions Advisory Service or whatever source they may choose, so that they can rely on the figures provided to them by the Pension Service.

16:00

The report out today identifies a sum of £35 million. I accept that it is impossible to be very accurate about proposed take-up, but it is still not clear to me where in the range between 2.5% and 92% the £35 million is placed. I welcome the assurance that wherever it is placed, no one will be denied access to pension advice through lack of resources for those providing it.

The Minister said that the training will be “adequate”. We are seeking an absolute assurance that it will be of the highest quality. I recognise that Citizens Advice deals with very many complex issues. It will often have specialists in its offices who deal with particular aspects and services. Depending on the volume of uptake of pension guidance, we want to ensure that everyone within Citizens Advice who is expected to provide guidance is of the highest quality—not just of adequate quality—and understands all the implications of what the Minister rightly admitted is a very complex landscape to which we are moving.

There are still a number of issues to be considered. As I said in my opening remarks, we need to reflect further on the information that has been provided by the Treasury today. With the proviso that we may continue this debate at a later stage, I beg leave to withdraw the amendment.

Amendment 30 withdrawn.

Amendment 30A

Moved by

[Lord Bradley]

30A: After Clause 47, insert the following new Clause—
“Pensions flexibility: impact on government revenues
(1) The Chancellor of the Exchequer shall, within a period of 2 years from 6 April 2015, publish and lay before both Houses of Parliament a review of the impact of pension flexibility on government revenue, with particular reference to opportunities for tax and national insurance contributions avoidance.
(2) The information published under subsection (1) should include an assessment of the impact on—
(a) the use of salary sacrifice arrangements;(b) income tax receipts; and(c) national insurance contributions.”

[Lord Bradley]

My Lords, the two amendments in this group are intended to ensure that the effects of the pension flexibilities on the public finances and savers are adequately monitored by the Government. Their purpose is to ensure the publication and proper analysis of the information and that it is placed in the public domain to ensure transparency.

I shall speak first to Amendment 30B, which requires the Treasury to produce a review of the effects of the pension flexibilities 18 months after they are introduced. This reflects the question we need to consider around the guidance guarantee and wider issues of pensions flexibility. We support the introduction of pension freedoms and flexibilities, but we want to ensure that they are done in the right way and that consumers are adequately protected. However, the pace at which the reforms are being brought forward leaves open considerable concern about the effects of the rollout. On Report in the other place, the Minister said:

“The Bill was originally much shorter and obtaining the approval of, originally, the Government to bring it forward took place before the Budget … as we are in the final Session of a Parliament, everything has been on an accelerated timetable”.—[Official Report, Commons, 25/11/14; col. 804.]

The pace at which the wider pension flexibilities provided for in this Bill and in the Taxation of Pensions Act are being brought forward have also led to concerns among a number of other interested parties about whether the Government have fully bottomed out the policy and whether the rollout will go exactly as they are planning. A recent report in the Financial Times said that a lack of detail about the reforms has left the industry concerned that they were at risk of failure. The chairman of the National Association of Pension Funds said:

“There are 4.2 million savers over the age of 55 who from next April will have the right to ‘choose’ how they take their retirement savings”.

He also said that,

“this lack of detail—this lack of clarity—is severely limiting our opportunity to get things right for our members … and it’s increasing the risk of failure”.

I point this out by way of background to show that, come April, there will still be a lot of work to do in reviewing the effects of the changes. The details of this amendment enable the Government to do just that. Conveniently, they will be along the lines of the test that we have already set out for these reforms: they should be fair; there should be decent products for low and middle-income savers; and the reforms should not result in extra pressures on the public finances.

The ongoing position of annuities is one such matter that needs to be considered. For some people, annuities will remain an attractive product because of the security they provide. The Treasury have recognised that this is the case. Therefore, if the market for annuities were to suffer some major change, and perhaps products that were good value in the first place were no longer then available, that would be something for this House to consider carefully. This is why the amendment requires a review to consider that matter.

Noble Lords will also be able to see that a review would be required to conduct an analysis of the cumulative effect on the revenues of the Treasury. Our other amendment on this point is focussed on the potential effects of salary sacrifice arrangements. It is also important to consider the possible costs in what the state may end up having to provide. I am not aware of any Treasury analysis of this. The Minister may well want to correct me on this and I am happy for him to do so.

Further, we still do not know how this will interact with changes to social care. In its written evidence to the Committee on the Taxation of Pensions Bill, the Association of British Insurers expressed concern that,

“a continued focus on early access at the age of 55 means that there may be barely enough in the pension pots of some savers to cover their near-term retirement income needs, let alone enough left to stretch to care costs in older age”.

We have also seen a recent report in which it is anticipated that pension withdrawals of this nature are set to rise by £6 billion above what the Government currently estimate. The charity Age UK warned last week that significant numbers of people could run out of cash in later life by withdrawing funds under the new plans unless tougher safeguards are in place.

We do not believe that the Government have conducted sufficient analysis of the potential impact on the social care landscape. We also believe that there has been a disproportionate focus on the new freedom to access pensions early, and to take money out, which was not previously possible, as I have just alluded to. That is why we are calling on the Government to publish a review setting out the distributional impact by income decile of the reforms in the Bill. It is also unclear what effect having access to flexi-access pensions will have on means-testing for social care. I am not sure that the Government have the answer to this yet, but I would be grateful if the Minister could tell us what effect an amount of money that exceeds the means test level in a flexi-access draw-down account would have on the individual’s liability. As I have already pointed out, that money may be expected to last until death, as an annuity would have, but it may be accessible in a way that capital sitting in a bank is. Will that meet the means-test criteria or not?

Just a few months from the changes coming into effect, there are clearly still a number of unanswered questions. That is why our amendment also covers a proper behavioural analysis of consumers in the light of the new freedoms and flexibility. At this point, may I also ask the Minister a question about access to funds? Is the report in the Sunday Times correct that the Minister in the other place is considering whether someone who has already taken an annuity may be able to buy themselves out of that so that they can be included in the new flexibilities and freedoms?

The other amendment in this group requires the Secretary of State to produce a report on the revenue impact of the changes contained in the Bill and the Taxation of Pensions Act. Taken together, there is the potential for the Government to lose a great deal of revenue. As a result, we want to probe the impact that this is likely to have on the figures that the Government have presented in the Budget and in subsequent reanalysis. The main issue at the core of this is so-called salary sacrifice, a potential tax effect first highlighted by John Greenwood in the Telegraph, whereby someone over 55 pays a large part of their salary into their pension pot to avoid paying national insurance and income tax. The Budget freedoms would then make it possible for them to flexibly access their money through their pension fund, saving them and their employer a potentially large amount of national insurance. Some 25% of what they access will be tax-free and the rest will be charged at their marginal rate of income tax. This does not appear to have been the Government’s intention, and steps have been taken to try to prevent this. An annual contribution allowance of £10,000 a year for anyone who is accessing pension benefit restricts the possible tax leakage but does not prevent it. The reduced £10,000 limit is activated only after the pension has been flexibly accessed for the first time. As explained by the Association of Accounting Technicians:

“In the first year, before the £40,000 allowance is lost, individuals over the age of 55 will still have the scope to save … NI on the full £40,000, provided they have the necessary earnings, less their existing pension contributions. Where an individual flushes (passes) an extra £30,000 through pension rather than drawing salary they will achieve a saving of £3,600 in employee NI, more than £1,500 in income tax and, also, £4,140 in employer NI (13.8%) in the first year. A total loss to the public purse of £9,240. The ‘Freedom and choice in pensions’ rules mean this money can be withdrawn immediately if an individual is over 55. This fact means that there will not be clear distinction between salary and pension for this age group”.

Questions remain for the Minister to answer over, first, whether that possibility was adequately taken into account before the change was announced and, secondly, whether the revisions made since then are sufficient. For instance, the Government’s revised figures that take into account the changes made since the Budget forecast a loss of £35 million in the first year, and then £25 million for years after that. However, if we are to assume that the annual allowance reduces the potential for tax leakage, why do the revisions forecast a loss? The only conclusion I can draw is that the initial figures did not take into account the potential for salary sacrifice. Can the Minister confirm that this is the case?

It may be the Government’s intention to introduce a more stringent allowance, in which case the £10,000 annual allowance was in fact a relaxation of the rules. However, that would appear to conflict with the Government’s statement that salary sacrifice was not intended to be part of the reforms. If the intent was an annual allowance of zero once the pension has been accessed, what analysis did the Government conduct that persuaded them to change it to £10,000, and can they provide it to Members of this House before Report? It is therefore an issue that needs to be kept under active review, and the Government should report to Parliament on the effect of this matter.

As I have said, the purpose of our two amendments is to create clarity and transparency. As my honourable friend Cathy Jamieson said in the other House:

“It is fair and sensible for us to ask that the new clause is included in the Bill because it would ensure that the Government did not simply monitor quietly in the background, waiting for something to go wrong, but proactively looked at all these areas and then brought further information to Parliament so that we could consider how best to do things in the future and remedy any unintended consequences or loopholes”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 20/11/14; col. 123.]

That is the purpose behind our review, and I hope that the Government will accept the amendment. I beg to move.

16:14

[Lord Hutton of Furness (Lab)]

My Lords, there has been a great deal of rhetoric surrounding this Bill. Some of the claims for the Bill may be far-fetched, but in one respect they probably are not. Many people have claimed that the reforms in the Bill constitute the biggest shake-up of our pension system for 100 years. If that is true, it is incumbent on the Government to have a clear plan—rather as my noble friend has indicated—for keeping Parliament abreast of the impact of those changes and reporting appropriately on it. None of us knows at the beginning of the extraordinary journey on which we are embarking what will happen and what will be the consequences of giving pension savers these significant new freedoms and flexibilities. It is quite likely that these are responsible people. They have been saving in workplace schemes, in some cases, for decades. Perhaps they are not going to blow their pension pots in a reckless spending spree at the end of their working lives. I tend to agree with that, but we simply do not know. Whereas giving choices is a great policy and one that I can support, it competes with another policy that has similar standing: that is, we must ensure that people approach and enter retirement with enough income to meet their lifestyle requirements.

As has been said by many others in the course of this debate and in another place, these two policies are, to some extent, competing with each other through the Bill. My noble friend’s amendment is really seeking to do one important thing, which is to ensure that there is a proper appreciation of the risks inherent in this approach to the new legislation and a willingness to keep Parliament informed of them. If we get this wrong, not only are we going to impoverish future generations of retirees, but there is, as we know, some risk that the costs of that will fall back on to the shoulders of taxpayers. Either of those two outcomes would be a terrible result of these new freedoms and flexibilities which, in principle, I strongly support.

I hope that the Minister will be able to respond positively to my noble friend’s amendment. I suspect he will say that there is something wrong with the drafting of the amendment. We have all been there before and we know how this process unfolds. If he is not prepared to accept the amendment I hope that he will at least give the House some indication of what reporting the Government are planning to embark on so that future legislators will be able to look back at the detail of this legislation and conclude at some point whether it is working or not. If it is not working, we will have to change it. If it is working, we will all celebrate one of the great reforms of the Government. However, it is clear at the moment that there is no indication, either in the Bill or elsewhere, of what plans Ministers have to keep Parliament abreast of the impact of these changes, given their significance and importance. It is necessary that we hear from the Minister today what the Government’s plans might be.

[Lord McKenzie of Luton]

I will speak in favour of my noble friend’s amendment and address two points. The first is the point my noble friend raised about tax leakage and the risks of salary sacrifice arrangements. I draw the Minister’s attention to Clause 54, which looks at the issue of independent advice and provides, not unreasonably, that that will not be a taxable benefit. However, it precludes it from that exemption if it is the subject of a relevant salary sacrifice arrangement, which is defined in the Bill. Rather than rely on a reduction in the annual allowance as, seemingly, the protection against salary sacrifice arrangements and tax leakage, why not simply adopt the same formulation that is adopted in Clause 54 by precluding salary sacrifice arrangements being available on appropriate definitions?

My second point is to try to get a better handle on the Government’s assessment of behavioural change in the early years as a result of these flexibilities. We can do no better than to focus on the tax projections in the Red Book for March 2014 and the Green Book for the Autumn Statement because those must have been underpinned by some detailed calculations. I am not sure that we have seen that detail to date. I hope that the Minister will follow up in writing if he is not able to deal with all the detail today. How many cases of individuals taking lump sums or other drawdown arrangements rather than annuities are included in those estimates? That must have been the basis on which they were adduced. What is the additional aggregate taxable income expected each year until 2020? How many individuals are estimated to pay tax at higher rates as a result than they would under normal annuitisation? We probed this matter on Report in the Commons but did not get a reply. It would be helpful to have that detail as it would give us an understanding of the Government’s assessment of behavioural change and the number of people who will take more of their pension pots under these flexibilities than would if the annuity arrangements only had been available.

[Lord Newby]

My Lords, the two amendments in this group would require the Government to publish two reviews of the impact of pensions flexibility. I start by completely agreeing with the noble Lord, Lord Hutton, that these changes are welcome freedoms and flexibilities but, like all freedoms, they bring some risks that I hope, in a variety of ways, we shall be effective at mitigating.

Noble Lords will not be desperately surprised to hear that I do not believe that these amendments are necessary. First, when considering new Clause 1 and the parts of new Clause 2 which relate to Exchequer revenues, it is important to note that in the Autumn Statement the Government published estimates of the Exchequer impact of the policy as a whole. These costings, which were certified by the independent Office for Budget Responsibility, cover all the changes made to the policy since the Budget as a result of consultation. The total impact of these decisions was set out in table 2.1 of the Autumn Statement document.

To ensure that the Government were being sufficiently transparent, the Financial Secretary to the Treasury wrote to members of the former Taxation of Pensions Bill Committee setting out these costings. I will now outline them for the benefit of the Committee. Further detail on how these costs were calculated is set out in the policy costings document published alongside the Autumn Statement. However, in the letter sent by the Financial Secretary to the Treasury to the members of the former Taxation of Pensions Bill Committee, it was also explained that the costings published as part of the Autumn Statement were based on the same central assumptions that underpinned the costings published at the Budget. Since the Budget, the Government have explored in more detail two aspects of the policy that affect this costing, which takes us to a point made by the noble Lord, Lord Bradley, about the increased cost of salary sacrifice and the increased cost of welfare as a result of the reforms. The Government have produced costings for these, which have been scrutinised by the OBR. In line with standard practice, these are accounted for as changes to the forecast and are not therefore outlined in table 2.1 of the Autumn Statement document.

Given the concern that noble Lords have expressed, it may be helpful if I detail what those figures are. The revisions to the forecast to account for salary sacrifice, which take account of further discussions and considerations since the Budget, are £35 million in 2015-16, £30 million in 2016-17, and £25 million in each of the following three years. When the forecast was revised to account for the increased cost of welfare, the figures rose from £15 million in 2016-17 to £25 million in 2018-19 and 2019-20. The Government have therefore already published the information that these two new clauses are seeking on the Exchequer impacts of various aspects of flexibility, all of which have been certified by the independent OBR. The Government are committed to keeping the policy under review through the monitoring of information collected on tax returns and tax records. Additionally, HMRC regularly publishes data on tax receipts, which will reflect any impacts on the Exchequer. Any such impacts will be reflected in forecasts at future fiscal events and the Government of course keep tax policy under continuous review. Therefore, there is no need, in the Government’s view, for further reviews of the Exchequer impacts of the policy as the Government have already committed to keep these under review through the usual processes.

[Lord Bradley]

I am grateful to the Minister and thank him for his explanation of the figures. I want to be absolutely clear that my example of a person who transfers his salary into his pension pot and saves national insurance in the way that I have described has been fully taken into account in these figures.

[Lord Newby]

My Lords, I believe absolutely that they have. If I am wrong in that, obviously I will write to the noble Lord; but that is the purpose of having initially produced the figures on salary sacrifice and subsequently revised them.

I turn to the other elements of the amendments. Amendment 30B also seeks to require that the Government review the distributional impact of pensions flexibility, no less than 18 months after the Bill takes effect. As set out during debate of the Taxation of Pensions Act, pensions flexibility does not have a direct consequential impact on household incomes. Distributional effects will be driven by the choices that individuals make about how and when to take their pensions. In addition, household income is not necessarily a reliable measure of pension wealth, particularly in the years immediately prior to retirement. It is possible that the impacts of this policy could be misrepresented if we were to review them only against the distribution of household income.

Additionally, Amendment 30B would require the Government to publish behavioural analysis. The costing of tax policies often involves an assessment of the behavioural impact of the measure and, in some cases, the capacity for additional tax planning and avoidance behaviour. These assumptions and methodologies are, of course, certified by the independent OBR. However, as a matter of policy, the Treasury considers that making these detailed behavioural assumptions public can have the potential to affect the behaviour they relate to, and as such can be potentially detrimental to policy-making. The policy costing note published alongside the Autumn Statement explains how the costings have been calculated. This is in line with the principles outlined in the government document Tax Policy Making: A New Approach, which was published alongside the June Budget in 2010.

Amendment 30B would also require the Government to review any impact that pensions flexibility might have on the volume of annuity purchases. Data on the sales of annuities will continue to be available through other channels, such as the data published by trade bodies such as the ABI and publications by individual firms. Therefore we do not think that there is going to be any lack of this information being publicly available, so there is no need for a requirement in the Bill to achieve that.

[Baroness Hollis of Heigham (Lab)]

My Lords, is the Minister saying that the information will be available to departments but that the Government do not wish to publish it because of the behavioural implications it may have, or is he saying that it is too soon to gather that information and therefore they will not actually do so? The problem with the second position is that this change is such that it is almost impossible to change policy direction once it is embedded because of the nature of the policy changes, which to my mind are extravagantly at risk. As a result, the Minister is denying Parliament the opportunity to make the modifications before that degree of risk is permanently embedded in public policy.

[Lord Newby]

My Lords, I was saying that the Government have made an assessment of behavioural changes and they have produced figures which take those changes into account. Therefore, there has been a full assessment of the behavioural changes as best as can be done in advance of the change coming into effect. As I said, it is Treasury policy not to publish those assumptions but that work has been done. In terms of the cost to the Exchequer of this policy change, the figures were published at the time of the Budget and were subsequently revised, as I set out, at the time of the Autumn Statement.

16:30

[Lord Hutton of Furness]

My Lords, presumably that information will be subject to freedom of information requests.

[Lord Newby]

That, my Lords, is an extremely interesting question to which I do not know the answer.

[Baroness Hollis of Heigham]

In that case, my Lords, the Minister is saying that we are being given the assumptions that go into the forecasts but we are not going to be given the information to see whether those forecasts are accurate.

[Lord Newby]

I am saying that in a whole raft of areas, no doubt under successive Governments, the Treasury has made behavioural assumptions. When I used to work in Customs and Excise, that was certainly the case when asking what would happen if the duty on whisky was put up. A whole raft of behavioural assumptions is made in policy-making and I do not think that it has been the policy to make those behavioural assumptions public. What obviously has been, and will remain, policy is to set out the impact of those behavioural changes. The noble Baroness shakes her head. Perhaps when she was a Minister behavioural assumptions were made available. My understanding is that that has not been the policy but I will go back to the Treasury and check.

[Lord McKenzie of Luton]

I wonder whether the Minister can help me. It seems to me that there is potentially a difference with behavioural change which is incidental to the fundamental policy issue. However, here we are talking about a system where the change and the data underlying the tax issues are absolutely fundamental—it is what the whole policy change is about. Just to be clear on that, the Budget Red Book for 2014 refers to extra tax in 2015-16 of £320 million, £600 million the year after, £910 million the year after that and £1.2 billion the year after that. I think we understand that work has been done on those figures and that the Office for Budget Responsibility has accepted them as realistic. However, as I understand it, the Government are not going to tell us the basis on which those figures have been derived. They are not going to give us the opportunity to make any judgment as to whether, ultimately, we support the policy.

[Lord Newby]

My Lords, I was simply saying that my understanding is that it is a long-standing convention regarding the behavioural assumptions that go into producing those figures. The only other thing I would say is that today we have seen another, very different, estimate of the costs. There is a very considerable degree of uncertainty about the figures at the moment but the Government made their best estimate at the time of the Budget and they amended it in the light of further consideration at the time of the Autumn Statement. They will obviously keep the situation under review as we see what people do rather than speculate about how the policy will work.

The noble Lord, Lord Bradley, asked about the effects of the new policy and flexible access on eligibility for means-tested benefits—in particular, social care. The policy aim is to ensure that the decisions people make in choosing between taking their pension as income and keeping more of their pension as capital and drawing it out periodically do not significantly impact on how they are assessed for social care support and how their means are assessed for social security purposes. New statutory guidance and regulations under the Care Act were published on 23 October. They include details on the changing rules for care and support.

In respect of social security, we announced a change in the rule for people above pension credit qualifying age who claim means-tested benefits. The notional income amount applied to pension pots which have not been used to purchase an annuity will be reduced from 150% to 100% of the income from an equivalent annuity, or to the actual income taken if that is higher, in line with the rules for care and support.

The noble Lord, Lord Bradley, asked about unwinding annuities already bought. This is not government policy. It was a suggestion of my colleague Steve Webb, the Pensions Minister, in the context of future Liberal Democrat party policy. It was not a statement of government policy.

I am sure that there are other specific issues raised by noble Lords in this debate to which I have not given a full answer. I will read it again.

[Lord McKenzie of Luton]

I promise not to delay the Committee any longer. However, I would just refer to the point about why the Government have not taken the opportunity to specifically deny the benefit of the flexibilities when there are salary sacrifice arrangements. They have done it in another small part of the Bill, so it is technically achievable. Why have they eschewed that—to allow at least some element of salary sacrifice arrangements to have the tax benefits that they are designed to?

[Lord Newby]

My Lords, one thing I have not responded adequately to—and I am not sure whether what I am going to say will adequately answer the noble Lord’s point, but I will write to him if I do not—is about salary sacrifice and the question about the £10,000 allowance, which the noble Lord, Lord Bradley, and others, referred to.

The £10,000 allowance is, we think, a sensible middle way to allow the majority of people the flexibility to withdraw or contribute to their pension as they choose from age 55, while also ensuring that individuals do not use the new flexibility to avoid paying tax on their current earnings. However, there are clearly circumstances in which it will be in an individual’s best interests to gain access to part of the pension pot early—at 55 or 56—while by the time they are 60 their circumstances have changed and they can then start contributing again to a pension. We did not want to deny that entirely. Equally, as noble Lords have said, we did not want individuals recycling money out of pension pots just in order to avoid tax. It is therefore a pragmatic compromise figure which we think strikes the right balance.

[Lord Bradley]

I again thank the Minister for his detailed response. In relation to buying out annuities, the Minister is right—the article in the Sunday Times did state that Steve Webb was a Liberal Democrat. However, it also stated that he was the Pensions Minister. I am sure that this is part of the tensions of coalition as we head towards the general election.

I am grateful for the support for this amendment from the noble Lords, Lord Hutton and Lord McKenzie, both of whom are experts in this field and bring great value to our deliberations. I am grateful to the Minister for clarifying some of the points regarding social care, although again I suspect that there may be further devil in the detail that we may debate further this afternoon.

The Minister’s response made the most compelling case for why we need the review brought back to Parliament with all the information gathered in a coherent and digestible way. In his response to our amendment he identified various sources of information in various departments, and it would take great expertise to beaver away and gather all that information into a form that enables enlightened and informed debate, not only in this House but in Parliament generally, and—in terms of transparency—for the public to understand fully the implications of these amendments.

We need to look carefully at the way in which information is gathered, disseminated and presented to Parliament. This amendment was a very good start for the revolution that is likely to take place in pension provision and how freedoms and flexibilities are used by the public. For today, however, I beg leave to withdraw the amendment.

Amendment 30A withdrawn.

Amendment 30B not moved.

House resumed.

Nigeria

Monday 12th January 2015 Lords Chamber

Statement

16:40

[The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend Hugo Swire to an Urgent Question in another place on Nigeria. The Statement is as follows:

“The Boko Haram terrorist group continues to wreak havoc across north-east Nigeria. Many colleagues will have seen the press reports over the last week highlighting their latest sickening attacks. Hundreds of people are believed to have been killed in the town of Baga in Borno state last week as Boko Haram continued their bloody insurgency campaign. Suicide bombings in urban areas are also a common feature of Boko Haram’s tactics. This weekend we saw another heinous example in the Yobe state town of Potiskum.

These attacks are just the latest example of the insurgents’ reign of terror. We believe that last year more than 4,000 people were killed by the group in north-east Nigeria. The United Nations estimates that more than 1.5 million people have been displaced by terrorist activities and at least 3 million have been affected by the insurgency.

The abductions of the Chibok schoolgirls on 14 April last year shocked the world and highlighted the mindless cruelty of Boko Haram. The group deliberately targets the weak and vulnerable, causing suffering in communities of different faiths and ethnicities. It is almost certainly the case that attacks by Boko Haram have killed more Muslims than Christians.

2015 is an important year for Nigeria’s future. Presidential and state elections will take place in February. It is crucial that these are free, fair and credible and that all Nigerians are able to exercise their vote without fear and intimidation. As Minister for the Commonwealth, I responded to the right honourable Member for Kirkcaldy and Cowdenbeath, the former Prime Minister, on behalf of the Government in the last debate in this House on this subject. I am grateful to the honourable Member for Brent Central for asking this timely Question. It will allow Members from across the House to give this important issue the attention it deserves”.

My Lords, that concludes the Statement.

16:43

[Baroness Morgan of Ely (Lab)]

My Lords, despite the shocking events in Paris last week it is essential that the world does not lose sight of the terrorist attacks happening elsewhere in the world, most notably in Nigeria. We were horrified by reports that up to 2,000 people were killed in northern Nigeria last week following a series of deadly and brutal attacks carried out by Boko Haram extremists. Terrorism is unacceptable wherever it takes place.

As the Minister has highlighted, this follows months of violence across northern Nigeria, with killings, mass abductions and attacks against innocent civilians. These attacks and this brutality have been condemned around the world. While many people have rightly praised the moving solidarity across Europe in recent days, there can be no doubt about the need for solidarity across continents in the wake of these appalling attacks. The world must not simply stand back and tolerate Boko Haram’s brutal campaign of violence.

I emphasise that here in the UK there is cross-party support for Britain to continue to provide support, alongside our allies, to the Nigerian authorities in their efforts to tackle Boko Haram. I ask the Minister to update the House on the level of that support and to confirm whether there have been any additional requests for British advice and expertise from the Nigerian Government. Is the Minister confident, in the light of the violence, that fair presidential and state elections can take place in February? Can they be fair?

The Minister referred to the appalling kidnappings in Chibok which brought much needed global attention to the security situation in northern Nigeria and the vulnerability of civilians—in particular women and girls—at the hands of Boko Haram extremists. Let us not forget the meaning of Boko Haram: “Western education is forbidden”. The recent testimonies collected by Human Rights Watch from victims who were able to escape show the appalling extent of the violent and brutal conditions in the Boko Haram camps where women and girls are still being held. Can the Minister provide the House with an assessment of the current plight of the girls who have been kidnapped by Boko Haram, and what discussions her department has held with the Nigerian authorities on working to secure their release?

Stabilising Nigeria is essential as its population is expected to surpass that of the United States by 2050. According to UN projections, it could be the world’s third most populous nation by the end of this century, and Boko Haram risks becoming a regional threat to peace and stability. Can the Minister update the House on what discussions the Foreign and Commonwealth Office is initiating with regional and international partners to co-ordinate international action on this issue?

16:46

[Baroness Anelay of St Johns]

My Lords, I am grateful to hear the noble Baroness repeat the support of the Opposition on this matter for resolving what is a horrific situation where we have an insurgency that does not differentiate between good and evil; beheading people seems to be of no account, regardless of who they are. We have read horrific descriptions of what has been happening over the past week. I know that the noble Baroness gave a particular figure. I would say that the figure for those who have been butchered over the past week is not actually confirmed, but clearly there have been significant massacres across northern Nigeria. The area affected, of course, is about the size of Belgium—it is a vast area.

The noble Baroness asked several questions in particular about the activity of the UK. She asked several questions, so perhaps I can be fairly brief in answering each one. We have continued to give our commitment to United Kingdom aid. We work through the UN Central Emergency Response Fund and the European Commission’s Humanitarian Aid and Civil Protection department. DfID has provided £1 million to support the Red Cross to provide humanitarian assistance in the north-east of Nigeria—the particular area to which the noble Baroness referred. In addition, we are working through existing education programmes to ensure that schools are safer in the eight other areas of northern Nigeria. The noble Baroness asked what we are doing in particular for children and rightly reminded us of what Boko Haram originally meant. It has gone a long way from that. This is a group of people who want power and they will kill anybody in their way—regardless of who they are.

Since 2011, 60% of DfID’s budget has been spent in the north of Nigeria, and a major focus of that work has been with regard to women and girls. Particularly, we have worked on education projects throughout the area. I am happy to talk to the noble Baroness about the detail of that later, but I am conscious of the nature of an Urgent Question. She rightly asked, of course, about the Chibok girls and the situation there. I again remind the House that as a Government we are concerned with more than those Chibok girls, serious as it was that they were seized. We have heard stories of seizures and kidnappings across the period since then as well—of boys as well as girls. We have continued our talks with the Nigerian authorities in order to be of as much help as we can, particularly in the provision of surveillance assets and intelligence expertise.

The noble Baroness asked about the position with regard to elections. Clearly, a security situation where people feel afraid to go out and vote is the last one you want when something as important as a presidential election is approaching. We are doing all we can to work with the Nigerian army to provide technical assistance, expertise and training. We are also working through DfID as hard as we can to provide some hope and expectation that there may be some way of elections going ahead that are free and fair, and open to all.

16:50

[Lord Hussain (LD)]

My Lords, the activities of Boko Haram are barbaric and brutal, as we know. Would the Minister not agree with me that it is just as brutal as the Taliban, which attacked children in Pakistan in recent weeks? More than 140 children were killed by the Taliban, and its activities are, no doubt, just as bad as those of al-Qaeda and Daesh in different parts of the world. Would the Minister tell the House what Her Majesty’s Government are doing to help Pakistan to protect its schoolchildren from such brutal attacks by the Taliban in future?

[Baroness Anelay of St Johns]

My Lords, it is the custom that, in answering a Question, we are confined to the particular country under consideration. I can say to my noble friend that, of course, terrorism is wrong per se. He will know our absolute commitment to ensuring that it is rooted out in whichever country it may be.

[Lord Harries of Pentregarth (CB)]

Boko Haram has been creating havoc in north-eastern Nigeria for years now, yet Nigeria is a hugely wealthy country with a large army. Can the Minister shed any light as to why the Government in Nigeria seem so helpless in dealing with this situation? In an earlier reply, she mentioned the help the British Government were giving in terms of aid and intelligence. Could she say a little more about what help we might be able to give the Nigerian Government in terms of military strategy, so that they can deal with this much more forcibly than they are at the moment?

[Baroness Anelay of St Johns]

I entirely agree with the noble and right reverend Lord’s assessment of the situation. The economy of Nigeria is the largest in Africa currently, and if it were not so beset by corruption and by difficulties in administration—if I can put it that way—Nigeria would have a thriving economy. It clearly does not. It spends 20% of its budget on security, yet the security forces have great difficulty in facing and containing Boko Haram. We have ensured that there is technical assistance and advice; indeed, we have ongoing projects with the army to ensure that it can build up resilience over the coming years to try to defeat Boko Haram and that, having done that, Nigeria has an army capable of preventing a recurrence.

[Lord Tebbit (Con)]

Would my noble friend not agree that what we are seeing is largely a continuation of the civil wars of the early 1980s in Nigeria, when the Hausas, who are mainly Muslim, were in conflict with the mainly Christian and pagan Igbos and Rivers people? This is now exacerbated both by the corruption of the Nigerian Government and the new spirit of the vicious Islamic group Boko Haram. Is there any help which we can sensibly offer to Nigeria, other than military help, to help its incompetent army defeat Boko Haram? Are we in any position to offer military help?

[Baroness Anelay of St Johns]

My Lords, we have made it clear that we are not going to become militarily involved in Nigeria with our own troops, but we have done everything reasonable to provide advice and assistance to the army there. We have ongoing projects to provide it with expertise and training. My noble friend referred in particular to the history of the area. However, Boko Haram is something new, not just in the utter viciousness with which it behaves but in the way that it is Muslim against Muslim—not Sunni against Shia but members of the same group against each other. These people have no thought about what one’s religion is. If you are in their way and they want your land, they will kill you.

Pension Schemes Bill

Monday 12th January 2015 Lords Chamber

Committee (2nd Day) (Continued)

16:55

Schedule 3: Pensions guidance

Amendments 31 to 33

Moved by

[Lord Bourne of Aberystwyth]

31: Schedule 3, page 65, line 2, after “scheme” insert “, or a survivor of a member of a pension scheme,”

32: Schedule 3, page 65, line 3, at end insert “or survivor”

33: Schedule 3, page 65, line 9, at end insert—
““survivor” has the meaning given by section 74 of the Pension Schemes Act 2014.”

Amendments 31 to 33 agreed.

Amendment 34

Moved by

[Baroness Greengross]

34: Schedule 3, page 65, line 17, at end insert—
“( ) The Treasury must publish an annual report on outcomes being experienced by people with flexible benefits.”

[Baroness Greengross (CB)]

My Lords, I will take all the amendments in my name together. At Second Reading, I welcomed the overall intention of the Bill, which includes the creation of a new type of pension scheme—a collective benefits scheme. Potentially, such schemes could provide individuals with a greater degree of certainty over the level of pension benefit they might receive. As they enter retirement, it could help them make better choices and informed decisions, but the accompanying new freedoms and choices for people also hold many greater risks. To understand these risks, people have to be very much better informed. If they are unable to manage their money effectively over what in this day and age can be a 40-year retirement, and if they are poorly advised or sold poor-value products, the impact on pensioner poverty more widely could be significant.

We have a narrow window of opportunity to ensure that these reforms work as intended because currently many people at the point of retirement still have the security of defined benefit pensions. Even so, the Pensions Policy Institute, of which I am privileged to be the president, has highlighted that 41% of people who are now aged between 50 and the state pension age—2.3 million people—have no DB savings and so are heavily reliant on DC savings to support their retirement.

On day one of Committee, the noble Lord, Lord Bradley, proposed a new clause on decumulation aimed at protecting savers who default into an annuity with the same savings provider. This was by providing safeguards for people who do not take advantage of the new flexibilities because, for them, an annuity remains the best product. It guarantees them a set income for the rest of their life. In his response to the noble Lord, Lord Bradley, the Minister reminded us that the recent FCA thematic review of annuities and the findings from its market study concluded that competition in the annuity market does not work effectively and consumers are not getting the most out of their hard-earned savings. These reports provided further evidence for the need for a route map through the annuity process for consumers, and the amendment moved by the noble Lord, Lord Bradley, would have established an independent annuity brokerage service to resolve this by providing scheme members with an assisted pathway through the annuity process, ensuring access to most annuity providers and minimising the cost. His amendment was withdrawn but perhaps we need to discuss this further because some sort of alternative navigation support across this fault line between guidance and advice must be necessary. Plainly, this is in the remit of the FCA, but the FCA itself has made it very clear that the supervision of guidance does not lie with it but with the Treasury, so there is something of a stalemate there.

16:59

Last week’s debate also touched on the proposed role of the Pensions Regulator, as many of the annuities offered are bought by members of occupational pension schemes, using their defined contribution savings. These are provided by the FCA-regulated contract-based pension schemes. The Government, however, will define the exact role they see the Pensions Regulator playing in this busy landscape. I shall later come to how we might mitigate savers’ risks by having a second line of defence across all retirement income products.

In their earlier Amendment 30 to Clause 47, the noble Lords, Lord Bradley and Lord McAvoy, sought to mandate the Secretary of State each year to produce a report on the effectiveness of the guidance under Schedule 3, which would include the number of people who have taken up the guidance, the number of those eligible to take up the guidance who did not do so, and the effectiveness of the guidance in preventing instances of consumer detriment through the purchase of inappropriate products. My Amendment 34 similarly seeks to ensure regular monitoring and reporting on the outcomes of these reforms for everyone affected, whether or not they access the guidance. In particular, this reporting should include outcomes such as the number of people cashing in their pension pots in their entirety and the number taking out draw-down or purchasing an annuity, all broken down by pension pot size. The guidance guarantee should be regularly reviewed to ensure that suitable information is there to make sure that people can make the important decisions that really suit their own needs.

On Amendment 35, as I mentioned earlier, another pressing challenge that will have an impact from next April on those approaching retirement is the advice and information envelope, which will underpin the decision-making process here. This and my remaining amendments relate to the proposals for and the regulation of official guidance for people approaching retirement.

Schedule 3 to the Bill places a duty on the FCA to create and regulate the advice and information part of the “freedom and choice” pension reforms in the shape of the guidance guarantee, which is a crucial part of these reforms. The noble Lord, Lord Newby, alluded to this in his response to the previous amendment, but my worry is that individuals are not aware of the existence of this guidance, and not obliged to seek it or to follow it if they find it. Many people will remain seriously ill informed, and, as we heard on day one, they may make the wrong decisions. We mentioned the Sunday Times article on this.

In particular, Amendment 35 seeks to ensure that the guidance service provided under the new rules takes into account all potential sources of income in retirement, especially given that defined contribution pension savings make up a significantly smaller amount of an average saver’s total retirement income than housing wealth. Indeed, some estimates put the housing wealth of older people in the UK at £1.4 trillion.

On Report in the other place, the Minister gave assurances that the FCA’s principle-based standards will require delivery partners to take into account various sources of income, including housing wealth, in the provision of guidance. I have reviewed, however, the near-final rules and standards recently published by the FCA in the annexe to its policy statement on retirement reforms and the guidance guarantee. I thank the Minister for very kindly making those available to us. I believe that these rules will need to be stronger if they are really to better reflect the Government’s avowed intentions.

I welcome the fact that Part 1 of the standards—Standard 20—stipulates explicitly what the guidance must contain, including requesting information about the consumer’s financial situation—for example, whether the person is a home owner or renter—and personal circumstances that are relevant to their retirement options. However, there is no explicit reference to levels of housing wealth. While we can all sympathise with the Government’s reluctance to overpromise on what these relatively limited guidance conversations can be stretched to achieve, the guidance session should act as a prompt for people to consider their options for retirement funding. It would be remiss if this did not include a full picture of people’s financial health.

This amendment would ensure that the individuals providing the guidance service under the new rules were required to ask questions about other assets, including housing wealth specifically. I recognise that the guidance guarantee cannot and should not seek to replace regulated advice, but, as I have said, it should act as a prompt for consumers to consider their full range of options.

Guidance also needs to cover interactions with lending. Research from Prudential found that one in six people planning to retire in 2014 will have debts. The main sources of debts are credit cards followed by overdrafts and bank loans, but they might also include mortgages. Age UK has found that while the proportion of older people with debt had fallen between 2002 and 2010, the average size of the debt had increased. Currently, lenders are unwilling to lend to older people and, in particular, to extend mortgage terms so that they are repayable after retirement. This could mean that more consumers have to repay debts when they reach state pension age. Many of those with a need to repay a mortgage post-retirement will have an interest-only mortgage. I received this information from Age UK and a lot of what I am reading now came from its very full briefings to me.

FCA modelling predicts that just under half of interest-only mortgage holders whose loans mature before 2020 will have a shortfall between their mortgage and their expected repayment vehicle. In the near term, there is a peak of mortgages maturing in 2017 or 2018, many of which were sold as endowment mortgages in the early 1990s. Some of these shortfalls could be significant. The FCA estimates that a third of those with a shortfall will have a shortfall greater than £50,000. It would be a missed opportunity if people were not encouraged to consider those wider assets.

In response to my question at Second Reading regarding the impact of any drawn down money on any subsequent means test for local authority care fees funding eligibility, the Government have said that money held in draw-down funds will be treated as providing notional income and will be treated consistently with annuity income; that is, it will be included in any such means test. I hope that more detail will be available shortly when the Department of Health publishes the draft regulations for care charging under the Care Act 2014, particularly if any such draw-down, despite having been spent, is retrospectively included under the intentional deprivation of assets rules. It is vital that the guidance guarantee makes the full implications here crystal clear.

On Amendment 37, consumers, and therefore guidance, should also take account of the position regarding state pensions. Using your private pension to take up options such as deferring state pension or buying extra state pension could provide much more income than buying an annuity, unless it would affect means-tested benefits. For example, deferring a pension may provide a higher income when it is finally vested, so the individual’s current and future income, assets and liabilities need to be taken into account. Lenders will have to be much clearer on how they will treat small pension pots, and this clarity should be a key part of best-practice guidelines that balance the interests of borrowers and of lenders.

Amendment 37 seeks to ensure that the guidance guarantee and financial advisers take state pensions and benefits into account when offering advice and support to people. For an individual retiring, using their private pension to take up options such as deferring a state pension or buying extra pension could provide much more income than buying an annuity, unless it would affect means-tested benefits.

I turn to Amendments 39 and 40 together. Shopping around for income draw-down is likely to prove complex for many consumers. The Government really should consider introducing a cap on the level of charges for some products. However, it is not just about charges. Investment strategies will need to reflect the new flexibilities and cash held within a pension fund may actually lose money. For example, a money market fund held in a stakeholder pension has actually declined by 2% over the past five years. Both Government and regulators should ensure that scheme governance is strong and effective for the accumulation, saving and de-accumulation or income phases. These amendments seek to do that.

The range and impact of poor value products could increase with the increasing complexity of products on offer after the reforms come into effect. As we heard on day one, further examples can be seen in the recent findings from the FCA following its review of the retirement income market which showed that many consumers in the past have missed out on a higher level of payments from their annuity. In some cases this was because consumers had not been told about better value policies they could have taken out. In addition, a report from Which? and the Pensions Policy Institute believes that income draw-down will become the norm, rather than the exception. However, the research found that none of the alternative products to conventional annuities is currently suitable for the mass market, due to the costs and investment risks involved. It is crucial that this type of situation does not continue when consumers are presented with a far wider array of products when these reforms come into effect next April.

Building on the quality-standard idea, I believe that guidance alone will not be enough to ensure that everyone gets a good deal. The market has not served people with small to average-sized pension pots well in the past. Guidance should help many retirees make better decisions. I feel that the FCA needs to secure greater protection for individuals during the decision-making process, by including devices such as cooling-off periods and defaults. The problem is that, while the latter lie in the province of the FCA’s supervision, the guidance does not, so coherent co-ordination may prove difficult, especially as the FCA avows that it is not part of its consumer protection remit to do this.

The Pension Schemes Bill Committee in the other place heard evidence from a range of expert witnesses, including Dr Ros Altmann, the Government’s business champion for older workers, and representatives from the Financial Services Consumer Panel. They all called for the requirement of a second line of defence to underpin the guidance guarantee to be imposed on pension providers by the FCA. A second line of defence regulation would require pension providers to check crucial factors at the point when consumers accessed their DC pension savings. Specifically, they would have to draw the customer’s attention to a range of known risks which could have a negative impact on people’s finances on retirement, including outliving assets, running out of money, not providing benefits for a spouse on death or missing out on additional income resulting from a medical condition or lifestyle factors. It would also require pension providers to offer a cooling-off period for people who ask to take out all their money in one go.

17:15

As the consumer moves post-guidance into what the noble Baroness, Lady Drake, in last week’s debate called,

“the purchase or decision activity which flows from that guidance”,—[Official Report, 7/1/15; col. 366.]

it is a pity that the FCA seems to have ignored these calls for a second line of defence requirement and has decided that it will simply rely on its supervisory role, which merely ensures that pension providers are required to signpost customers to the guidance service and to encourage them to use that service. That is not the complete solution, in my view. At a meeting on 17 December, the Work and Pensions Select Committee pressed the FCA forcefully on the absence of a regulatory backstop or a second line of defence for consumers, who will first come into contact with the reforms in April. However, no clear answers were forthcoming on this point, which is very concerning, given the growing calls from Age UK, the ABI and others for the FCA to include such a regulation. While I understand that the guidance is not intended to address the specific situation of every consumer—that is the purpose of advice—no one wants the costs of shopping around to mean the imposition of unnecessary additional costs on either some schemes or members. I still think that I am on the side of the Select Committee, which at this point of the proceedings wondered why, rather than emphasising the demarcation issues here, the FCA,

“would not introduce a conduct rule around the second line of defence. Why not?”.

Instead of providers,

“asking customers whether they have taken the guidance and then asking them again, require them to ask those specific few questions about tax, about health—those questions that are needed to make sure the person has made an informed decision”.

This is such a high-stakes decision, with lasting consequences for individuals and their families, that I think some additional measures are necessary. Indeed, similar measures already apply in the case of many routine and far less significant purchases that people make. Will the Minister assure us that both the Treasury and the FCA will be made to work more closely together to ensure that a seamless information and guidance process comes into existence, for the benefit of all consumers? I beg to move.

[Lord Best (CB)]

My Lords, my name is down in support of these amendments from the noble Baroness, Lady Greengross. I declare an unremunerated role as a member of the Equity Release Council’s advisory board, and I speak particularly as chair of the All-Party Parliamentary Group on Housing and Care for Older People. I shall concentrate on the interrelationship of advice about pensions and advice about the use of capital assets to fund one’s retirement.

I strongly support the case made by the noble Baroness that the advice provided by Citizens Advice and the Pensions Advisory Service, under the guidance guarantee introduced by the Bill, should ensure that an individual’s assets, particularly their housing wealth, are taken into account properly. The resources in an individual’s pension pot—their defined contribution pension savings—account on average for around £20,000, which represents only some 4% of their total wealth, compared with over £270,000, 55% of their wealth, which is held in the equity of their home after deducting any outstanding mortgages. Four per cent of wealth in their pension savings and 55% in their property—talk about the elephant in the room. It seems essential that in these important advice sessions attention is drawn, where relevant, to the individual’s wealth bound up in their property, which of course can be turned into cash, either by downsizing to a cheaper home or through an equity release product.

When thinking about buying annuities or choosing other investments, it is extremely important to consider holistically one’s wealth as a whole. The DWP Minister in the other place Steve Webb has agreed that advisers, under the proposed arrangements as spelt out in the near-final version of his department’s rules for giving guidance, should ask whether the consumer is an owner-occupier or a tenant and should ask, perhaps a bit vaguely, about personal circumstances. However, the rules for this interview do not include any explicit reference to housing wealth.

Amendment 35 would make clear that the guaranteed guidance from Citizens Advice and the Pensions Advisory Service should include prompting individuals to look carefully at their housing assets. Without the guidance pre-empting the professional advice of an independent financial adviser, this should be the moment when the interplay of housing and pensions gets aired. Those fulfilling the guidance guarantee should help consumers ask the right questions of an independent financial adviser.

The All-Party Parliamentary Group on Housing and Care for Older People, supported by the think tank Demos, published a report at the end of last year on affordable downsizing. It called for new measures to assist those in their extended middle age who want to move from family housing to a tailor-made apartment or bungalow. Such moves, as well as preventing and pre-empting problems in later life, have very positive financial effects with savings in fuel bills, maintenance costs, garden upkeep and the rest. We also noted the complexities involved in the financial aspects of trading down or equity release. We called for a “help to move” package comprising access to equity loans for movers, as for young people through the Help to Buy scheme, plus concessions on stamp duty, which were partly answered by the Government’s reforms of that tax, and, very importantly, guaranteed guidance on the financial arrangements, piggybacking on the pensions guidance featured in this Bill. These amendments would use the guidance guarantee that covers people’s defined pension contributions to draw attention to bigger questions relating to other assets, particularly housing wealth. They would make the guidance sessions much more meaningful in a country where 14 times more of our wealth in older age is tied up in our properties than in our pension savings. I support the amendments.

[Lord German (LD)]

My Lords, I rise to support the remarks of the noble Lord, Lord Best. In doing so, I declare my interest as an unremunerated member of the advisory committee for the Equity Release Council. I am, I hope, still in extended middle age, which is a new term that I fully endorse.

Housing wealth, along with other assets, means that the guidance is crucial given the disparity between the amount that people tend to have in a DC pot and their housing wealth, which on average is more than 10 times as much. That is a considerable amount of money or resource which people will need to take into account. The FCA standards, which were helpfully published this morning by the Treasury, state that:

“In terms of content, the standards require that the guidance session must … request information about the consumer’s financial and personal circumstances that is relevant to their retirement options”.

That requires the adviser who is going to take people through the guidance session to ask them for information about their housing wealth, but it is not explicit in the standards, and while we know that they are nearly finalised, there is time for the Treasury to make them more transparent about what is required. Because of the relationship between the two amounts of money, the instruction ought to be clarified, perhaps not in the document but in the training so that it is always an issue which people take on board. Will the Minister indicate whether the sentence in the FCA standards set out in the document produced this morning by the Treasury implies that housing wealth, savings and investments will be taken into account? Will he consider making it more explicit in the information that is provided to the consumer and to those providing the guidance?

[Baroness Hollis of Heigham]

My Lords, I would like to ask the Minister a question which is triggered by the important issues raised by the noble Baroness, Lady Greengross, and the noble Lord, Lord Best. However, I want to look at it from the other way round, which is the situation of someone who is 55, is on housing benefit, and has £20,000 locked away in a small pension pot. At the moment, if you have capital of more than £16,000 and you are pre-retirement, that is an absolute block to any further income-related benefits. Different rules apply when you come to retirement. The assumption throughout is that you can access your pension only at the point of retirement, when different rules apply. What will happen now? Can the Minister help us on this? The rules are that if you have capital that you could get at if you applied for it, you are treated as having that capital. While it was tucked away in a pension and not accessible until you reached 60 or 65, you could not have access to it and so it did not affect your entitlement. But in future you will be able to access your capital in such a way that, under the Housing Benefit Regulations 2006, Regulation 49(2), because you can access your capital, you are treated as though you have that capital, which would therefore automatically cut you off at £16,000—you have £20,000 in your pot —from any access to housing benefit. Can the Minister clarify how this will work in the future?

[Lord Newby]

My Lords, I am grateful to the noble Baroness, Lady Greengross, for giving me the chance via the debate on these amendments to address a number of important issues in respect of the guidance service. I turn first to Amendment 34. This seeks to require an annual report on consumer outcomes. As I said in the earlier debate, in terms of the overall policy of greater flexibility, the Government are committed to keeping the policy under continual review, including through the monitoring of information collected on tax returns and tax records. This was confirmed in the debates in the other place late last year on the Taxation of Pensions Bill, which it then was.

How the market evolves to respond to consumer needs is where the regulators come in, in particular the Financial Conduct Authority. As I mentioned earlier in addressing the amendments tabled by the noble Lords, Lord Bradley and Lord McAvoy, the FCA has a strategic objective to ensure that the markets function well and a specific operational objective to ensure that consumers of financial services are appropriately protected. The FCA has recently published the provisional findings of its Retirement Income Market Study. In this report, the FCA committed to monitor the retirement income market, and if consumers appear not to be getting the support or products they need or if competition is failing to drive good value, it will make whatever intervention is appropriate. The noble Baroness will, I hope, be reassured by the specific commitment of the FCA to monitor consumer outcomes,

“we will monitor the market to track developments to assess whether these risks arise and if so, the impact on consumer outcomes”.

I am also grateful for the related amendment from the noble Baroness which seeks to expand the new duty of the FCA to protect consumers using guidance through its role in setting and monitoring standards for the provision of pensions guidance by designated guidance providers. The noble Baroness raised again the question asked earlier about the supervision of guidance and the respective roles of the FCA and the Treasury. To be clear, the FCA has the responsibility for supervising designated guidance providers’ compliance with the standards which it has set. While the Treasury itself is not a designated guidance provider, it has committed in the update published today that it will fully comply with the FCA standards as far as that is appropriate, because the Treasury is responsible for the online channel.

More generally in respect of the FCA and its powers, the noble Baroness will know, I am sure, that the Financial Services Act 2012 gave the FCA wide-ranging product intervention powers. For the first time it is equipped to ensure that new retirement income products are designed and sold in a way that does not cause detriment to consumers. As for assessing the consumer outcomes resulting from the guidance service specifically, with which Clause 3 is concerned, I can assure the noble Baroness, as I have already the noble Lords, Lord McAvoy and Lord Bradley, that the Government are committed to a full programme of monitoring and evaluation of the guidance service, which will encompass the delivery partners’ provision to ensure that the service is operating effectively and successfully in supporting people in their retirement decision-making.

17:30

I turn now to other aspects of the noble Baroness’s amendments. I can reassure her that the guidance service will ensure that consumers consider relevant issues related to pension decisions such as state pensions, debts and other assets, wealth and income. The Government are committed to ensuring that individuals are equipped and empowered to make informed decisions about how to use their pension savings which take account of their wider circumstances. But the Government believe that it is right that the content of the guidance session is set out in FCA standards rather than in legislation. This will enable the content of the session to be more freely adapted to consumer needs in response to the ongoing consumer research that we are undertaking as we prepare to launch the service.

The FCA standards make certain specific requirements on the guidance content with regard to collecting relevant information. They were consulted on last year and the near-final version of the guidance standards was published in November. The standards include a number of requirements on the content of the session itself, which I hope will allay the noble Baroness’s fears. Perhaps I may set them out. They state that the guidance must request all relevant information from the consumer about their pension entitlement; request relevant information about the consumer’s financial and personal circumstances that would inform the discussion; discuss the relevant options and the key facts and consequences for each option and, based on the information provided by the consumer, set out other issues for the consumer to consider. Ahead of the guidance session, consumers will be encouraged to gather such information as would be useful for the session. The FCA has been clear as to what information it would consider to be relevant under these standards and which it would expect the guidance service to ask for. In terms of financial information, this would include information about pension pots and benefits, or those of their spouse. By any view, that would include any potential state pension that the individual was going to get, although I am willing to go back to the FCA to make it absolutely clear that that is its understanding. I am sure that it is, and it may be that the wording could be tweaked.

Other things that fall under this heading are current and future sources of income; entitlement to state benefits, current and future; and whether they are a homeowner or renting. This gets to the point that a number of noble Lords have made about the importance of housing wealth, with which the Government obviously completely agree, and whether this statement on whether someone is a homeowner or renting should be expanded to include a reference to housing wealth as opposed to simply referring to housing status. One cannot imagine in the guidance session the discussion going, “Do you own a house or are you renting?” and someone saying, “I own a house”, with the response being, “Well, that’s jolly nice—now, next question”. The purpose of knowing what the housing status is to get some sense of housing wealth, but perhaps we should be more explicit, and I shall take it back. I agree completely with what the noble Lord, Lord Best, and my noble friend Lord German said about the relevance of housing wealth, because it overshadows all the other assets that most people have. As the noble Lord, Lord Best, knows, I am very supportive of many of the recommendations in his report on affordable downsizing. Having answered a Question on the subject in your Lordships’ House, I know that this issue raises many and various passions on both sides of the debate.

I should add that the standards already refer explicitly to debt provision. The noble Baroness said that it was important to take account of debts as well as assets. The standard already has that phrase in it, so I think that it covers the matter. The personal circumstances that would also have to be taken into account get us back to the question of the broader context of the guidance session. Those would include a discussion of dependants, state of health, and potential long-term needs. So I hope that I have been able to reassure the noble Baroness on these points.

The guidance aims to help people to prepare ahead of their session and identify the relevant information that they will need. The FCA has clarified in its rules for pension providers what information should be provided to consumers approaching retirement, and the Government are working with the FCA, the Pensions Regulator, industry and other stakeholders to consider how individuals can quickly and simply access information on their pension pots in an easily useable format. The guidance will also inform people that they can request a state pension statement from DWP to get an estimate of their state pension position. The FCA standards are designed with the aim of ensuring that the service delivers helpful guidance for consumers in considering their retirement options. Ensuring that consumers consider factors which are pertinent to their retirement decision, as relevant to them, is an important part of what the standards capture.

I hope that I have been able to reassure the noble Baroness, Lady Hollis, on most of her amendments. We are coming on to the second line of defence before long, so I shall deal with that once rather than twice. On the specific question raised by the noble Baroness about whether the £20,000 pension pot would be taken into account, as I said in response to an earlier amendment, the broad principle is that eligibility for benefits should not be significantly altered by this change. However, I will write to her to clarify that.

[Baroness Hollis of Heigham]

The point is that housing benefit is the one benefit that continues in its current form both before and after retirement. Nearly all other benefits change at the point of retirement. Therefore, the issue does not arise. For example, there is no assumption that there is a capital cut-off if you are on pension credit, merely an assumed tariff income. What you are doing now is introducing some of the potential privileges associated with protecting pensions to a pre-pension age. If you do that, that is fine, but if you do not, it means that housing benefit will be wiped out for someone who has capital that they can access, even if they choose not to do so. As the current rules stand, they would have to be treated as if they had accessed that capital, and then housing benefit would be wiped out for someone at the age of 55 in the way it would not be wiped out if that person was 65.

[Lord Newby]

My understanding is that that is not the intention, but I shall write to the noble Baroness to clarify that point.

[Baroness Greengross]

My Lords, I thank the Minister for his very comprehensive reply. I also thank the noble Lords, Lord Best and Lord German, and the noble Baroness, Lady Hollis, who joined in the discussion.

I thought that the Minister’s response was very helpful and inclusive of most of the issues I have raised. He took on board the idea of a prompt, or several prompts, and I think that the wider issues of including other sources of wealth and income were taken. There may be other issues that I have forgotten, but there is time to look at those. I thank the Minister very sincerely for trying to meet all the requirements that I mentioned and for clarifying the role of the FCA and the Treasury, talking about a full programme of monitoring, and looking at the relevant issues that need to be considered in more depth and the rules about guidance that are going to go back to the FCA. The Minister has addressed most of the issues that I raised and I will look between now and the next stage to see whether there are any others that he forgot. In the mean time, I beg leave to withdraw the amendment.

Amendment 34 withdrawn.

Amendment 35 not moved.

Amendment 36

Moved by

[Lord Bradley]

36: Schedule 3, page 66, line 10, at end insert—
“( ) must be sufficient to ensure that the body is capable of carrying out its functions under section 333C(1).”

[Lord Bradley]

My Lords, I will be brief because we covered a significant amount of the areas to which this amendment relates earlier in our deliberations. I would like to probe the Government just a little further on the arrangements with the citizens advice bureaux. Specifically, I am seeking assurance that the CABs are capable of delivering the guidance, that they have sufficient start-up costs and that they will be properly funded to deliver face-to-face guidance through the proposed levy. I do not make any apology for repeating arguments that we have already made earlier in our deliberations, because, again, all we are trying to do with this amendment is to give a belt-and-braces assurance to the public that the guidance guarantee for face-to-face interviews will be delivered.

Let me say at the outset that I am not questioning the CABs and the wonderful work that they do, but pensions advice and guidance is not currently one of the services that they routinely provide. CABs work with 2.1 million people a year and they offer advice in England through 338 independent centres. Impressive though that number is, next year we know that around 600,000 additional people will reach retirement age and may seek—and under this Bill be entitled to— guidance. This high number carries on for a number of years because of the post-war baby boom. This is some scaling-up for the CABs and they will need to achieve this in order to deliver the high-quality guidance.

Relevant to this guidance, CABs offer financial and debt advice; over the past 10 years or so, they have been developing interesting financial capability programmes. It is good work and this experience might be particularly relevant to people who are being encouraged to draw down their pension pots at 55—for example, to settle debt. Pension advice to people retiring with pots of £20,000 to £30,000 probably takes the CABs into new areas and a largely new client base. We should remember that the enactment date is less than three months away and we have not had any sight of the regulations, while the FCA is developing a standard framework within which guidance will be offered—some of which we have had further information about today. There is still more information to come: information that, again, the CABs will rely on. Clearly, it is not the intention to set up CABs or any other provider to fail. If CABs are to deliver a service from April 2015, they perhaps should have had their guidance and information framework well in place before now. CABs produce high-quality information that underpins their advice work, and they know how long it takes to develop such information. Although the issue is not caught by my amendment, the Minister could perhaps assure the House that high-quality guidance will be delivered to 300,000 people whom we anticipate will retire and need guidance before September 2015.

The CABs’ excellent work is a lifeline for some of the poorest people in our society, often the most vulnerable people at vulnerable times in their lives, such as during divorce or separation. This is why—and despite often swingeing cuts—local authorities continue to fund local bureaux, albeit now often at a lower level of service. I am worried that the time of local bureaux will be diverted from their core work, and their service users will have nowhere else to go, particularly—to compound the problem—because legal aid is now hardly available for this group of people. Frankly, local authorities should not, in future, find themselves in a position where they will be picking up the tab for a poorly funded pensions advice service delivered through the citizens advice bureaux. The Minister has given us some assurances on this point, but I seek that further assurance again today. Can we also be assured that the core grant that citizens advice bureaux currently have for their services will not be deflected at all by the money available for this specific service—that there is no overlap between the services in terms of funding streams?

Finally, we know that CABs will be funded by the Treasury for the first two years, and after that through a levy on the industry. Again, I seek an assurance that, with this levy, it will not be necessary for CABs to move money between their funding streams to support their current wide range of services in order to deliver the essential pensions guidance that is coming forward. We know that these are complex matters for people who will be seeking CABs’ advice. We want to ensure the highest quality of that service, but we also want to make sure that the other range of activities that are essential in local communities are not undermined by the emphasis on the new service. I beg to move.

17:45

[Lord Newby]

My Lords, the noble Lord, Lord Bradley, sought a number of assurances about the funding of the guidance and the knock-on effects that this will have on CABs. The Treasury is committed to the provision of high-quality guidance from the start. It has the power in line 12 of page 65, in proposed new Section 333B:

“The Treasury must take such steps as they consider appropriate to ensure that people have access to pensions guidance”.

Given that when we say “pensions guidance” we mean high-quality pensions guidance, that means that there is a legal requirement on the Treasury to will the means as well as the ends.

In terms of the scale of the challenge ahead, we estimate that approximately 300 guidance providers are going to be required, including the CABs, the telephone appointments and the website, and we are actively recruiting them. The funding that the CABs are getting is the subject of continuous discussions between the Treasury and the CABs. I gather that, for the moment at least, the CABs feel that that they are getting the resources they need to do the job that they have been asked to do without any deflection of their core grant and without there being any requirement to fund this from other sources of income that they receive. That is very much the Treasury’s intention behind the whole approach to the scheme.

There has been start-up funding, which the CABs and the other guidance providers have been receiving. The £20 million development fund was announced in the Budget, of which a £10 million advance was approved by Parliament last July to cover preparatory work, most of which is taking the form of grants to the delivery partners. As I said earlier this afternoon, we estimate that there will be a cost of £35 million in the next financial year, and the Treasury is committed to increasing the amount that is made available if the demand for the service warrants it. I hope that, with those assurances, the noble Lord will feel able to withdraw his amendment.

[Lord Bradley]

I am grateful to the Minister for his response. I certainly would have liked to be a fly on the wall in the negotiations between the CABs and the Treasury to see where they were both coming from as their starting point, let alone where they ended up. I am grateful for the assurances that the Minister has given regarding other funding streams for the CABs and the funding for this service. Clearly, none of us wants to get into a situation where the CABs have to prop up the service by use of their invaluable volunteers, who do excellent work within citizens advice bureaux but obviously would not have the expertise, knowledge or training to undertake this work. It is therefore crucial that the activities are separated in that way. However, with those assurances from the Minister, I beg leave to withdraw the amendment.

Amendment 36 withdrawn.

Amendment 37 not moved.

Amendment 38 had been withdrawn from the Marshalled List.

Amendments 39 and 40 not moved.

Amendment 40A

Moved by

[Lord Bradley]

40A: Schedule 3, page 71, line 40, at end insert—
“( ) The FCA must secure an appropriate degree of protection for consumers whether they have used pensions guidance or otherwise throughout the decision-making and purchasing process, including safeguards to actively inform consumers of key risks and benefits.”

[Lord Bradley]

My Lords, this amendment is on the specific issue of second line of defence. We have had some debate on this matter, including the excellent contribution from the noble Baroness, Lady Greengross, on her amendments. However, this amendment places a specific requirement on pension providers to make an active intervention to ensure that they help savers when accessing their DC pension pots to ensure that they get the advice or guidance they need, check that the products are appropriate for them, and have taken into account the tax implications, their partners, lifespan and other matters relevant to planning for their retirement. As we have heard, this has been called the second line of defence.

The need for it has been identified by the Financial Conduct Authority, which released two long-awaited reports—its thematic review of annuity sales practices and Retirement Income Market Study: Interim Report. The reports show continued failure in defined contribution pension providers’ treatment of existing customers, even after three separate investigations between 2006 and 2014. It is time for the FCA to take action before the “freedom and choice” reforms go live in April this year. The findings of the reports make unhappy reading. Perhaps my noble friends will not be surprised by this because we have been there before. It is worth summarising the key findings, which make the case for our amendment.

The thematic review updates the analysis in the FCA’s February 2014 report. Its key findings are, first, that, 60% of retirees,

“were not switching providers when they bought an annuity, despite the fact that around 80% of these consumers could get a higher income on the open market”.

Secondly, an estimated 91% of people with medical conditions could get a higher income on the open market through an enhanced annuity. Thirdly,

“firms’ sales practices are contributing to consumers not shopping around and switching … and missing out on a potentially higher income in retirement as a result”.

Lastly, the study found non-adherence by pension providers to the ABI code of practice. The FCA concludes that its findings clearly highlight that firms need to make improvements in relation to how consumers are informed about shopping around for enhanced annuities.

The key findings of the interim Retirement Income Market Study are that,

“competition in the retirement income market is not working well for consumers … many consumers are missing out on a higher income by not shopping around for an annuity, and some do not purchase the best annuity for their circumstances”.

The FCA economic analysis shows that,

“for people with average-sized pension pots, the right annuity purchased on the open market offers good value for money relative to alternative drawdown strategies”.

It also found that:

“Consumers’ tendency to buy from their existing pension provider weakens”,

competition. The FCA’s consumer research confirms that,

“pension savers display well-known biases, such as a tendency to under-estimate longevity, inflation and investment risk”,

which make them vulnerable to being sold products that do not best meet their best interests. This research also finds that the choices that savers make are highly sensitive to “framing”, and how options are presented will affect decisions they make. The introduction of greater choice and potentially more complex products will,

“reduce consumers’ confidence and appetite to shop around”,

and thus weaken the competitive pressure on providers to offer good value in this market.

What should be the remedies and next steps? The FCA is continuing to monitor the market and is expected to publish a final market study report in the first quarter of this year. It is also seeking views on five proposals it hopes to take forward in 2015. These are to: first, require providers to show how their quotes compare relative to other providers on the open market, including quote comparison; secondly, develop plain-English pensions guidance services and tools to support consumers’ decision-making; and thirdly, develop an alternative to the current pre-retirement “wake-up” packs sent by pension providers to their customers in the run-up to their stated retirement date. They are,

“too long, difficult to navigate and full of jargon”.

Next, the FCA proposes in the longer term, to develop a “Pensions Dashboard” to,

“enable consumers to view all of their lifetime … savings … (including the state pension entitlement) in one place”.

Finally, the FCA proposes to,

“continue to monitor the market as it evolves using a combination of consumer research, market data and”,

ongoing regulatory supervision. This will need to monitor for the likelihood of “pensions liberation” and other scams targeting consumers at retirement.

We have in this Chamber on too many occasions examined how the FCA and other bodies are attempting to drag this financial sector kicking and screaming to act in the best interests of its savers rather than those of their shareholders. The two FCA reports are a further damning indictment of the industry. The FCA proposals, in my view and that of my noble friend Lord McAvoy, help to support the amendment but in themselves are not enough.

In Committee in the Commons, expert witnesses including Dr Ros Altmann, consumer advocates from Age UK and the Financial Services Consumer Panel, and ABI representatives all called for the FCA to introduce a second line of defence, as did other reputable bodies such as Just Retirement. We are persuaded that this is the right course of action. Our amendment will require pension providers to actively ask savers seeking to access their pension savings whether they have considered the most important risks. This could typically include whether their decisions will mean they increase their income tax, outlive assets or run out of money, miss out on guaranteed annuity rates from the existing company, provide benefits for a spouse or other persons on death, miss out on additional income resulting from medical conditions or lifestyle factors, protect savings and income from inflation, purchase an uncompetitive product, or pay an exit charge that could be avoided. All these are crucial matters that need to be properly regulated, and they are part of the amendment for our second line of defence. The FCA could incorporate this through the introduction of a conduct regulation or by issuing FCA conduct guidance for providers to specify their responsibility for actively raising the risks that I have just outlined.

If we do not take this opportunity to act on the evidence contained in these two FCA reports and require changes to be made, we will further undermine consumer confidence in the pensions financial sector and the principles upon which this series of pension reforms are based will be undermined. We will not encourage people to save for their old age; we will not achieve fairness across generations; and it will lead to increased cost to the taxpayer. For all these reasons I commend this amendment to the House.

18:00

[Baroness Drake (Lab)]

My Lords, this amendment sets out a duty on the Financial Conduct Authority to protect savers accessing their pension savings during the actual decision-making and purchasing process, as distinct from a duty to protect savers receiving guidance from designated guidance providers. In particular, the amendment sets out that the FCA should require pension providers to take active, not just passive, steps to check that people are made aware of the factors that will impact their decision.

I will begin by highlighting the problem that drives this amendment. Steve Webb, the Pensions Minister, commented at the end of the Public Bill Committee sessions:

“To be clear, if we thought everything was fine in the world of retirement income choices the FCA would not be doing a thematic review of annuity sales practices or a retirement income market study … those studies are being undertaken because we are aware that there have been problems in this market. We are prepared to introduce further measures, if that is what the studies suggest”.—[Official Report, Commons, Pensions Schemes Bill Committee, 4/11/14; col. 309.]

I believe that that is exactly what those two studies suggest. Since the Bill arrived in this House the FCA has in fact delivered its two reports: the thematic review of annuity sales practices and the interim report on the retirement income market study. Perhaps I may capture the essence of what it reported.

The review found that annuity sales practices were contributing to consumers not shopping around, buying the wrong type of annuity or missing out on a potentially higher income. The consumers’ tendency to buy from their existing pension provider weakens competition. The FCA identified the non-adherence by providers to the ABI’s own retirement choices code. In fact, the ABI urged the FCA to replace its code with regulation because it recognises that with the new freedoms more needs to be done.

As to the FCA retirement income market study, that was initially focused on how to get competition working more effectively for consumers; but following the Budget the emphasis was shifted towards looking at how market conditions might evolve from the advent of the reforms in April 2015. Its interim report suggests that consumers will be poorly placed to drive effective competition; that the retirement income market is not working well; and that the introduction of greater choice and potentially more complex products will reduce consumer confidence and weaken the competitive pressures on providers to offer good value.

Even after repeated analysis of these issues by the Treasury, the FSA, the FCA and others over a period of six years, and just three months away from the introduction of major reforms to the UK pensions framework in April 2015, too many consumers are still being failed by their providers. As my noble friend commented, the FCA research confirmed the well known biases that savers reveal that make them so vulnerable to being sold products that do not best meet their needs, and that the choices consumers make are strongly influenced by how options are presented to them. Martin Wheatley, the FCA CEO, said in a recent interview—published just this weekend—that the timescale to deliver the new freedoms and design suitable products was challenging; providers have been struggling to complete proper due diligence testing on their products.

Turning to the savers, the new freedoms bring with them an even greater onus on individuals to make an active decision about what to do with their pension pot. It is very important, therefore, that consumers are well placed to make decisions that are in their interests. We know the challenges to achieving this: provider behaviour; product design and complexity; savers’ behavioural biases; and financial capability. The noble Baroness, Lady Greengross, is president of the International Longevity Centre, whose new report on making the system fit for purpose reveals the extent of the limited knowledge of savers about relevant products and services, despite the new freedoms being just three months away.

The guidance guarantee is a key policy measure for helping people to navigate the complex retirement options arena from April 2015. I know that there are people working very hard to make its delivery a success. I certainly want it to be successful, as it will provide a very important service to savers. In support of that guaranteed guidance the FCA has confirmed that it will expect providers to check whether a customer has used the guidance service and encourage them to do so if not. It has also recommended that the pensions guidance service incorporates tools to support consumer decision-making. This provides a first line of defence against consumer detriment. The provision of guidance is extremely important, but what the customer does with the guidance also matters. The success of guidance can be achieved only by the whole industry working together. Some people will choose not to take the guidance even if encouraged by their provider.

The Government are very dependent on market behaviour to ensure the success of the new freedoms. Beyond guidance, the saver has to move into the process of making a decision and selecting or purchasing a retirement income route. It is what happens at that stage—the exchange between the consumer and the provider—that is causing so much anxiety.

This amendment is directed at that exchange between the provider and the consumer and puts a duty on the FCA to secure an appropriate degree of protection for the consumer at that stage. That is what is popularly referred to as the second line of defence, to mitigate the risk that savers make detrimental and irreversible choices. After the pension provider has asked the customer whether they have accessed guidance, it should be required to make active interventions, not just the current passive and paper-based disclosures. The FCA reports show that these are clearly failing savers, particularly where they buy a product from their existing provider through inertia, rather than making an active choice. The FCA should require pension providers to take active steps to make people aware of factors passively referred to in the literature and key facts documentation, by asking key questions of the consumer to highlight such matters as the potential impact of health, income tax, dependants, longevity, investment risk and income needs through retirement. That will highlight factors whose impact can lead to poor choices if overlooked.

The FCA analysis, as my noble friend said, revealed that the take-up of enhanced annuities because of health factors by those who remained with their existing pension provider was just 5%, while for those who shopped around the take-up was 50%. That is strong evidence that consumers need an active prompt to consider factors that have a bearing on their incomes in retirement. It is all the more important because decisions on pension savings can be irreversible. This Bill and the Taxation of Pensions Act create unprecedented options for retirees, so the passive approach is no longer sufficient.

The FCA is expected to publish its final market study report in early 2015. It is consulting on certain proposals, as my noble friend detailed, and it will continue to monitor the market. However, this is a reactive approach, waiting to see what problems emerge, and the amendment is underpinned by the belief that prevention is preferable to later cure. With around 400,000 consumers expected to access the new pension freedoms in 2015, yet another review may be required without the additional protections proposed in the amendment, to discover why thousands of pension savers did not make good decisions or get good value for money.

The amendment would introduce a general duty on the FCA and allow protections in time for April 2015, but it would not prevent the Government setting such other further requirements as they considered appropriate in the light of how the retirement market evolved. As the noble Baroness, Lady Greengross, stated when moving her amendment, consumer advocates, industry groups, providers and members of the Work and Pensions Committee have all expressed concerns that, without a second line of defence, mis-selling and poor decisions remain a key risk.

[Lord McKenzie of Luton (Lab)]

My Lords, I support the amendment and have added my name to it. As we have heard, it is about placing a duty on the FCA to set regulations for pension providers to deliver adequate protection for consumers—the second line of defence. However, having heard the contributions of my noble friends Lord Bradley and Lady Drake, I find myself with nothing further to say. I could go through some partial repetition but I think that, in the circumstances, I will desist.

[Lord Newby]

My Lords, I thank all noble Lords who have spoken on this amendment, and perhaps particularly the noble Lord, Lord McKenzie of Luton.

The amendment relates to the FCA’s duty to secure an appropriate degree of protection for consumers making a decision about their retirement income, with or without guidance. It is important to recognise that, as noble Lords have said and as was mentioned in a previous debate today, not all individuals will seek to take up the guidance offer, and that is their choice. I agree with noble Lords that, whether a consumer has taken guidance or not, they should be assured of their protection in the financial services market and be furnished with the right information to make an informed choice. I completely accept the point made by noble Lords —and as demonstrated in the FCA’s market studies—that in the past this has often not been the case.

First, the FCA is a relatively new body with new powers. I assure noble Lords that it has a duty to ensure that the retirement income market is working for consumers. That is captured under its statutory objectives, including its objective to secure an appropriate degree of protection for consumers in this market, which already extends across retail financial services markets. The FCA has specifically committed to closely monitor how the retirement income market develops and to take action where appropriate. It has broad powers to take action if there is evidence of mis-selling of products that are clearly inappropriate for consumers. It also has product intervention powers, which allow it to ban features of products or require products to be sold with certain protections or restrictions in place.

It is also important that consumers have the right fundamental information that they need to inform their choices, whether they take guidance or not. For those who choose not to take up the offer of guidance—the amendment is about people who choose not to take up the guidance; the issues raised here will be covered in the guidance sessions—the FCA’s rules, which it recently consulted on, in respect of these pension changes will require firms to provide a description of the possible tax implications when people apply to access their pension fund. The FCA has also made it clear that firms can question a customer’s decision where they feel it is inconsistent with their circumstances without fear of overstepping the boundary into regulated advice.

As noble Lords have pointed out, the FCA has committed to reviewing all its rules in the first half of this year. I assure noble Lords that it is considering what additional consumer protections should be put in place to support people making choices about their pension savings and the implications of those different choices. This is not simply a reactive approach; the FCA is doing this in the light of the work that it has already done and in the light of its extensive understanding of the market.

This debate highlighted an important issue of FCA protection. I hope that I have been able to assure noble Lords that not only does the FCA already have a duty to secure an appropriate degree of protection for consumers, regardless of whether they have used the Pension Wise service, but it has the appropriate powers to fulfil this duty without this amendment. Its attention is suitably focused on the development and treatment of consumers in the retirement income market. I hope that the noble Lord will therefore see fit to withdraw his amendment.

18:15

[Lord Bradley]

First, I thank my noble friends Lady Drake and Lord McKenzie for their excellent contributions, which are welcomed on both sides of the Committee. There is a strong feeling that it is very important that the second line of defence, as put forward in our amendment, is part of the Bill.

While I am grateful to the Minister for his comments, I feel that there is a degree of complacency in his response. We obviously recognise that the FCA is a new body and that its work is unfolding. However, there is a rather greater degree of urgency about the matters that we have placed before the Committee in the light of the fact that these new provisions for freedom and flexibility come into force in just a few weeks’ time. We do not want to be in the position where there is not complete confidence in the market and where all the relevant matters have not been taken into account with guidance and, through our amendment, a second line of defence to give absolute certainty to the public that the market which they will be moving into is operating in their best interests.

We need to reflect very carefully on what the Minister has said and on the fact that the public seek those assurances and want that second line of defence in legislation to underpin that confidence. For now, I beg leave to withdraw the amendment, although we may well return to this matter at a later stage.

Amendment 40A withdrawn.

Amendments 41 to 44

Moved by

[Lord Bourne of Aberystwyth]

41: Schedule 3, page 74, leave out line 35 and insert “, and survivors of members of the scheme, with subsisting rights in respect of any flexible benefits.”

42: Schedule 3, page 74, line 44, leave out “with a right or entitlement to flexible benefits” and insert “, and survivors of members of pension schemes, with subsisting rights in respect of any flexible benefits.”

43: Schedule 3, page 75, line 10, at end insert—
““subsisting rights” has the meaning given by section 74 of the Pension Schemes Act 2014;“survivor” has the meaning given by section 74 of the Pension Schemes Act 2014.”

44: Schedule 3, page 78, line 1, leave out “with a right or entitlement to flexible benefits” and insert “, and survivors of members of the scheme, with subsisting rights in respect of any flexible benefits”

Amendments 41 to 44 agreed.

Schedule 3, as amended, agreed.

Clause 48: Independent advice in respect of conversions and transfers: Great Britain

Amendment 44A

Moved by

[Lord Bradley]

44A: Clause 48, page 20, line 16, leave out “appropriate independent advice” and insert “independent advice from an appropriate person”.

[Lord Bradley]

In moving this amendment to Clause 48, I will soon be moving back to government Amendments 45 and—

[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

Perhaps I may interpolate. The groupings list is slightly in the wrong order. I have been following the correct order as it appears in the Marshalled List.

[Lord Bradley]

I am grateful for that clarification as, I am sure, is the whole Committee. In moving Amendment 44A I shall speak also to Amendments 47 and 48.

At this Committee stage, we have tabled amendments on all the recommendations of the Delegated Powers Committee. The Government will either accept the recommendations of that committee or put on record why they do not believe that the delegated power in question requires the affirmative procedure. That is what our amendments in this group do. The Delegated Powers Committee recommended that the power in Clause 48(3) be subject to the affirmative procedure as the power contained in it is, to quote from the report, “very significant”, not only in the context of Clause 48 but for the purpose of Chapter 2 of Part 4 as a whole. That is a very fair summary. The power enables the Secretary of State to provide for exceptions from the need to seek independent advice, which is central to ensuring that someone in a defined benefits scheme, for instance, is adequately informed of the risks and rewards of transferring out in order to access their pensions.

The power in Clause 48(7) is equally fundamental, giving as it does the Secretary of State the power to define what counts as “appropriate independent advice”. Our amendment is designed to probe exactly what would be meant by “appropriate independent advice”. Will the scheme trustees or managers be required to assess the appropriateness of the advice received—that in the circumstances of the particular scheme member the recommendation is the right one and transferring out will not harm their chances of having a good requirement income? The alternative is that the scheme trustees or managers will have to check that the advice received by the scheme member comes from someone appropriate who is regulated by the FCA. Our amendment gives the Government the chance to clarify that point. The difference in responsibility and cost is obviously significant.

I acknowledge that the Minister has already been kind enough to write to me, for which I am grateful, and the Government’s response to the Delegated Powers Committee has made it clear that the definition of “appropriate independent advice” will be through a regulation that is subject to the affirmative procedure, although as a consequence not directly part of the primary legislation in this Bill. None the less, it would be very helpful if the Minister could put on record the likely content of the regulation and give as many details as he is able to about it so that it addresses the issues I have raised in the amendments.

Can the Minister also give the Committee an update on the likely timing of that regulation? The response to the Delegated Powers Committee on 6 January says that it is likely to be “in the new year”. Given that it also says that it has to be in place by April, we are safe to assume that the new year does not mean January 2016. However, it would be helpful if the Minister could say when that regulation is likely to be laid so that there can be proper scrutiny of it. I beg to move.

[Baroness Drake]

My Lords, I had not intended to speak on this amendment but I should like to support my noble friend in his probing. As a pension trustee, I deal with these requests for transfers for a cash equivalent value from DB to DC schemes. I think I dealt with two this morning. As someone with a fiduciary duty—when I see the scale of what can be transferred—they keep me awake at night. What I had to sign off this morning made me think that I should take the opportunity to reinforce my noble friend’s concern.

I am sure that demand for these transfers is already rising in anticipation of the new freedoms that will flow from April 2015. I am concerned. We have already seen problems such as pensions liberation. We can talk about the FCA and the regulated industry, but what unregulated charlatans and scoundrels are waiting in the wings to encourage people to transfer their funds and access their freedoms? As someone who has been a trustee for about 27 years—dreadful I know—I have seen the personal pensions problem, the cash accounts transfer values and the pension liberation scams. I have watched these things from the perspective of a trustee. I have a real fear that this is a car crash waiting to happen unless it is properly regulated.

Two adjectives go with advice: “independent” and “appropriate”. Independence is easy to define, in a way, because it has a regulatory definition. What is really important is what is appropriate. As a trustee I would want to know what the Government think is the appropriateness of the advice people have received when they make applications to the schemes of which I am a trustee for such a transfer.

I read the response to my noble friend Lord Bradley on the Delegated Powers and Regulatory Reform Committee’s report and my reading of that letter is that the Government are on the case. That would be great, and if they are I want to say positive things and encourage the Minister to deal with this robustly, because it is a car crash waiting to happen. It is not just a matter of the big defined benefit pots. If you are on quite a modest income and are lucky enough to have a DB scheme, then even if your pension is going to be about £4,000 a year that will translate into a really big pot of cash—a pot of cash such as you may not have seen before—leaving you quite vulnerable. I can see from the letter to my noble friend Lord Bradley that the Government are on the case. I urge them to stay on the case.

[Lord Newby]

My Lords, these amendments give expression to the recommendations of the Delegated Powers and Regulatory Reform Committee concerning Clause 48. Amendments 47 and 48 make the regulations under subsections (3) and (7) subject to the affirmative procedure. Amendment 44A narrows the power taken in Clause 48(7) in such a way that regulations could not be made setting out the nature of appropriate advice but would instead focus on the characteristics of an appropriate person. As the noble Baroness has just pointed out, my colleague Steve Webb, the Minister for Pensions, wrote to the noble Baroness, Lady Thomas, chair of the Delegated Powers and Regulatory Reform Committee, acknowledging the committee’s concerns, providing a commitment to address them as far as we can and explaining why we were unable to accept the committee’s exact recommendations. The letter details alternative ways in which we will be able to address the concerns of the committee and the House. As Amendments 47 and 48 implement the committee’s recommendations, the government response is along similar lines to the letter, which can be found in the Library.

18:30

Regulations under subsection (7) of Clause 48 of the Pension Schemes Bill will set out the definition of “appropriate independent advice” that underpins the advice safeguard. We recognise the concerns about the lack of the definition of appropriate independent advice in the Bill. In the response document to the consultation on freedom and choice in pensions, we set out that appropriate independent advice would be delivered by an adviser who is authorised by the FCA. In response to the concerns expressed by the Delegated Powers and Regulatory Reform Committee and in Amendment 48, we are now looking into bringing forward an amendment to Clause 48 on Report to provide more detail about the meaning of appropriate independent advice in the Bill.

Our intention is to define appropriate independent advice in regulations by reference to activity regulated by the Financial Conduct Authority. To facilitate this, the Treasury intends to legislate to add a new activity to the FCA’s regulated activity order. This will be done by means of a statutory instrument amending the Financial Services and Markets Act (Regulated Activities) Order 2000. We do not think it is appropriate to refer to subordinate legislation which has yet to be made in the Pension Schemes Bill but this statutory instrument, which we intend to lay later this month, will be subject to the affirmative procedure.

In order to ensure that the definition in the Bill fits with any definition in the regulated activity order, we will still need to leave at least some of the detail of the definition in Clause 48 to regulations. We think it is appropriate that such regulations be subject to negative procedure, especially if the parameters of the definition can be expanded upon in the Bill. We do not think, however, that it would be appropriate for these amendments to require the regulations to become subject to the affirmative procedure as this would mean they would not be in place by April this year, when the flexibilities come into force. Schemes would then find themselves subject to a requirement that was legally uncertain and there would be no effective advice safeguard in place to protect members or survivors.

Subsection (3) of Clause 48 provides for regulations to be made which set out exceptions to the appropriate independent advice safeguard. We set out in the consultation response document on freedom and choice in pensions, published in July last year, that we intended to exempt those with pensions wealth below £30,000 from having to obtain advice if they wished to transfer safeguarded benefits. This remains our only intended use of the exemption. However, once the new flexibilities come into force, it may prove necessary to create an exemption for other special circumstances.

The exemption threshold of £30,000 and below will need to be adjusted and up-rated over time and therefore we feel the affirmative procedure would not be suitable. However, in response to the concerns raised by the Delegated Powers and Regulatory Reform Committee report, we are looking into bringing forward an amendment on Report to subsection (3) to ensure that exemptions to the advice safeguard, other than for members with small amounts of safeguarded benefits, would be subject to the affirmative procedure. This would ensure that the House had the opportunity to scrutinise any other exemptions that are required to the appropriate advice safeguard.

We understand that Amendment 44A proceeds from nervousness in the industry that under this new safeguard trustees or managers might have to examine the advice that has been provided to their members, as opposed to simply checking that the advice has been received. I can assure the House that it is not our intention that trustees or managers should have to evaluate the content of the advice or check its quality.

We recognise the concerns about the lack of detail in the Bill with regard to the definition of appropriate independent advice. I have already mentioned that we are now looking into bringing forward an amendment to Clause 48 on Report to provide more detail about the meaning of appropriate independent advice in the Bill. The approach suggested in Amendment 44A is useful to us in our considerations about the amendments we are considering to clarify the nature of the advice. We will therefore consider Amendment 44A but regret that we are not in a position to accept it at this stage of the Bill in its current form.

The concerns expressed by Amendments 44A, 47 and 48 and by the Delegated Powers and Regulatory Reform Committee are understandable. However, I hope noble Lords are reassured that I have been able to offer enough to address them and that Members appreciate that it is not in the interests of the consumer or the industry for the tax flexibilities to come into force without a meaningful, clear and effective advice safeguard coming into force alongside them. We will therefore be considering this further and, as such, I ask the noble Lord not to press the amendments given the planned forthcoming government amendments.

[Lord Bradley]

I am grateful to the Minister for that detailed and rapid response to the amendments. It will require careful reading to ensure that we fully appreciate all the issues that he has laid out to the Committee. The key element I should be pleased about is that Amendment 44A will be reflected upon by the Government as they devise their own amendments to be brought back on Report, which I understand is currently scheduled to be within a couple of weeks or so. There is some urgency that there is that clarification. However, with that assurance and in the light of being able to look at that within the context of the other matters raised in the amendments, I beg leave to withdraw the amendment.

Amendment 44A withdrawn.

Amendment 45

Moved by

[Lord Newby]

45: Clause 48, page 20, line 20, after “acquiring” insert “a right or entitlement to”

[Lord Newby]

My Lords, at Second Reading my noble friend Lord Bourne explained that there was a need to define flexible benefits due to differences between pensions and tax legislation regarding money purchase benefits. The definition of flexible benefits contains three elements. These are: money purchase benefits; cash balance benefits; and a third category of benefit which is not money purchase or cash balance but is calculated by reference to an amount available for the provision of benefits. The most common form of benefit offered in this category relates to a pension with the option of a guaranteed annuity rate. It is to this third category that the amendments are primarily aimed.

Amendments 46 and 50 ensure that a scheme must check that a member has received appropriate independent advice before paying an uncrystallised funds pension lump sum from arrangements in the third category of flexible benefit, which includes guaranteed annuity rate pensions. Benefits within this third category offer a level of security of income akin to defined benefit arrangements. Guaranteed annuity rates were typically issued in the late 1980s and 1990s, their distinguishing feature being an enticement to customers promising that when they came to take these pensions, if they bought their annuity with the provider with which they had accumulated the pension, they would get an annuity rate specified at the point of purchase.

Due to the decline in annuity rates, the pensions these guaranteed annuity rate arrangements provide by means of annuities are especially generous. Therefore in the Bill they are given the same safeguarded treatment as a defined benefit pension. An individual should, in each case, understand what it is they are giving up before taking advantage of the new flexibilities. The Bill already requires a scheme to check that advice has been received before an individual transfers their rights from such an arrangement, or where a member converts their benefit into a draw-down arrangement.

Amendment 46 extends this protection to the circumstance where a member or survivor takes an uncrystallised funds pension lump sum. Clause 48 does not currently require this because taking such a lump sum does not constitute a transfer or a conversion. I must emphasise that these amendments only require that advice be taken before taking an uncrystallised lump sum in return for safeguarded benefits. It does not require that advice be taken on uncrystallised lump sums in any other circumstances.

Amendment 46 amends Clause 48, providing that this has effect for Great Britain. Amendment 50 amends Clause 51, making parallel provision for Northern Ireland. Amendment 103 defines uncrystallised funds pension lump sum by reference to the Finance Act 2004.

I recognise that these amendments are challenging to explain and understand but the effect is to make a small change that ensures that those with valuable benefits such as guaranteed annuity rates will be properly informed before deciding to give up those benefits. I therefore beg to move.

[Lord McAvoy (Lab)]

My Lords, I thank the Minister for his explanation of the amendments. “Challenging”is is one of the words that he used. I would like to challenge the thrust of what the Government are saying about these amendments. Although, strictly speaking, he has not used the words “technical amendments”, nevertheless they are in that category. I would like to probe a wee bit further and ask how the amendments came about. What advice was taken, what discussions took place and what organisations were in touch with Ministers to press this change? It could be argued—slightly tendentiously, but it could be argued—that this changes the Bill quite a bit. When did the Government decide to bring out this amendment whereby people with a guaranteed annuity rate pension would have to take advice? It has been a constant theme—not only previously but today in particular—that a number of amendments seem to be afterthoughts or a result of lobbying. It is a good thing in that these are very important issues and people are entitled to try to influence government. However, I would like to probe a wee bit further and ask what process was entered into that ended up with this amendment.

[Lord Newby]

My Lords, I agree with the noble Lord that the amendments are very technical at one level. However, they are not technical amendments; they are proper substantive amendments. They broaden the scope of the type of pension where people will be required to take advice. I will happily write to him if I can provide him with more details. I think that it simply became apparent to officials during the Bill’s passage that this was a potential—relatively small—market involving a type of pension lump sum that had not been covered in the way that had always been intended for this sort of thing. As we find with most Bills as they go through the House, the Government introduce amendments because they become apparent to officials as they do more work and to parliamentary counsel as it does more work. If there was anything more specific that led to these amendments, I will definitely write to him.

Amendment 45 agreed.

Amendment 46

Moved by

[Lord Bourne of Aberystwyth]

46: Clause 48, page 20, line 21, at end insert—
“( ) paying a lump sum that would be an uncrystallised funds pension lump sum in respect of any of the benefits.”

Amendment 46 agreed.

Amendments 47 and 48 not moved.

Clause 48, as amended, agreed.

Clauses 49 and 50 agreed.

Clause 51: Independent advice in respect of conversions and transfers: Northern Ireland

Amendments 49 and 50

Moved by

[Lord Bourne of Aberystwyth]

49: Clause 51, page 22, line 10, after “acquiring” insert “a right or entitlement to”

50: Clause 51, page 22, line 11, at end insert—
“( ) paying a lump sum that would be an uncrystallised funds pension lump sum in respect of any of the benefits.”

Amendments 49 and 50 agreed.

Clause 51, as amended, agreed.

Clauses 52 to 54 agreed.

18:45

Clause 55: Sums or assets that may be designated as available for drawdown: Great Britain

Amendment 51

Moved by

[Lord Bourne of Aberystwyth]

51: Clause 55, page 25, line 1, after “pension” insert “, nominees’ drawdown pension or successors’ drawdown pension”

[Lord Bourne of Aberystwyth (Con)]

My Lords, I now turn to a further group of amendments which make minor changes to the clauses dealing with draw-down of pension benefits.

The first set of amendments follows amendments made in Committee in the other place to what is now the Taxation of Pensions Act. The Taxation of Pensions Act will allow for payment of death benefits to nominees and successors of members in relation to money purchase arrangements. The Act makes provision for a nominees’ draw-down pension and a successors’ draw-down pension. These amendments make the changes to this Bill to reflect the introduction of these new types of draw-down pension. They amend Clauses 55 and 56 so that these types of pension are treated in the same way as a dependants’ draw-down pension. They also insert definitions of a nominees’ draw-down pension and a successors’ draw-down pension into Clause 74. Amendments to Clauses 60 and 61 do the same for Northern Ireland. The second set of amendments makes small changes to Clauses 72 to 74, which deal with the definition of terms used in Part 4 of the Bill. As I said, these amendments make minor changes. I hope that noble Lords will agree, and I commend these amendments to the House. I beg to move.

[Lord McAvoy]

My Lords, I thank the noble Lord for his succinct exposition of the amendments. These are more in line with the phrase “minor and technical”. Nevertheless, I still make the point that there has been a barrage of amendments. We will study these carefully and, if necessary, do something on Report. I just make the point that we will be scrutinising them carefully.

Amendment 51 agreed.

Clause 55, as amended, agreed.

Clause 56: Provision about conversion of certain benefits for drawdown: Great Britain

Amendments 52 and 53

Moved by

[Lord Bourne of Aberystwyth]

52: Clause 56, page 25, line 17, leave out “or”

53: Clause 56, page 25, line 17, at end insert “, nominees’ drawdown pension or successors’ drawdown pension”

Amendments 52 and 53 agreed.

Clause 56, as amended, agreed.

Clauses 57 to 59 agreed.

Amendment 54

Moved by

[Lord Bourne of Aberystwyth]

54: After Clause 59, insert the following new Clause—
“Sections 55 to 57: consequential amendments
“(1) In section 101AI of the Pension Schemes Act 1993 (early leavers: cash transfer sums and contribution refunds - further provisions), in subsection (8)—
(a) in paragraph (a), after sub-paragraph (ix) insert—“(x) section 55 of the Pension Schemes Act 2014;“(xi) regulations made under section 56 or 57 of the Pension Schemes Act 2014;”;(b) in paragraph (b), after sub-paragraph (vii) insert—“(viii) section 55(3) of the Pension Schemes Act 2014;“(ix) regulations made under section 56(4) or 57(4) of the Pension Schemes Act 2014.”(2) In section 67A of the Pensions Act 1995 (the subsisting rights provisions: interpretation), in subsection (9)—
(a) in paragraph (a), after sub-paragraph (viii) (inserted by section 45of this Act) insert—“(ix) section 55 of the Pension Schemes Act 2014;(x) regulations made under section 56 or 57 of the Pension Schemes Act 2014;”;(b) in paragraph (b), after sub-paragraph (vi) (inserted by section 45 of this Act) insert—“(vii) section 55(3) of the Pension Schemes Act 2014;(viii) regulations made under section 56(4) or 57(4) of the Pension Schemes Act 2014.”(3) In section 318 of the Pensions Act 2004 (interpretation), in subsection (3)—
(a) in paragraph (a), after sub-paragraph (viii) (inserted by Schedule 2to this Act) insert—“(ix) section 55 of the Pension Schemes Act 2014;(x) regulations made under section 56 or 57 of the Pension Schemes Act 2014;”;(b) in paragraph (b), after sub-paragraph (vi) (inserted by Schedule 2 to this Act) insert—“(vii) section 55(3) of the Pension Schemes Act 2014;(viii) regulations made under section 56(4) or 57(4) of the Pension Schemes Act 2014.””

[Lord Bourne of Aberystwyth]

My Lords, this group of amendments makes a number of small consequential amendments, all designed to ensure that the transfer provisions work as intended. The amendments are somewhat technical and I hope your Lordships will bear with me while I set out in a little more detail what they do.

Amendments 54, 63 and 64 are consequential on Clauses 55 to 57, which make provision in relation to drawdown. Clause 55 contains a provision that overrides scheme rules to the extent that there is any conflict. Clauses 56 and 57 also contain provisions allowing regulations made under them to override scheme rules to the extent that there is a conflict. The amendments make provision to insert a reference to Clauses 55 to 57 into the list of relevant legislative provisions for the purposes of the scheme rules definition in Sections 100B and 101AI of the Pension Schemes Act 1993—in relation to transfer—Section 67A of the Pensions Act 1995—in relation to members’ subsisting rights—and for the purposes of the Pensions Act 2004. Amendments 62, 67, 71 and 73 further ensure that the definitions of scheme rules in the 1993 and 2004 Acts also apply for personal pension schemes, taking account of any provisions that override these rules. These provisions are needed to ensure that the new overrides are taken into account in the existing legislation and so that it is clear what is meant by scheme rules where a provision has been overridden. Amendments 58, 63, 64, 77, 82 and 86 make provision for corresponding changes to Northern Ireland legislation.

I now turn to Amendments 59, 70 and 72. These make amendments to Schedule 4 to update existing cross-references to the transfer rights contained in the Judicial Pensions Act 1981, the Judicial Pensions and Retirement Act 1993, the Pensions Act 1995 and the Scottish Parliamentary Pensions Act 2009, so that they point to Chapters 1 and 2 of new Part 4ZA of the Pensions Schemes Act 1993. This will ensure that transfer provisions continue to operate as intended in conjunction with this Bill in relation to these pension schemes. This schedule also introduces identical provisions for Northern Ireland legislation in Amendments 76 and 87.

Amendments 60, 61, 68, 69, 75, 76, 78, 79, 83 and 84 amend Schedule 4 to make a number of minor and consequential changes to various sections of the Pensions Schemes Act 1993 and its Northern Ireland equivalent to ensure that the precise wording of the these sections operates as intended, now that a member’s statutory right to transfer will apply at benefit category level.

Finally in this group, Amendments 65 and 66 make small drafting amendments to new Section 100C of the Pension Schemes Act 1993 to put the meaning of “normal pension age” beyond doubt, with corresponding amendments for the Northern Ireland equivalent through Amendments 80 and 81. The amendments make minor and technical changes to the Bill which are important to ensuring that the legislation operates correctly. I beg to move.

[Lord McAvoy]

My Lords, I make the point about minor and technical amendments again. We will study them carefully, although with less suspicion than those in other categories. However, I will just say that Amendment 54 takes up a full page on the Marshalled List of amendments. Again, it reinforces the image of things being hurried or missed out when an amendment of that length has to be moved. Having said that, we accept it as a minor and technical amendment.

Amendment 54 agreed.

Amendment 54A

Moved by

[Lord Bradley]

54A: After Clause 59, insert the following new Clause—
“Drawdown funds: cap on charges
The Secretary of State may make regulations imposing a cap on the charges that may be imposed on members of flexi-access drawdown funds.”

[Lord Bradley]

My Lords, having listened to the Government’s amendments, I am tempted to say that this one is minor and technical and hope it will slip through on the back of that. However, it is not. On the first day in Committee, our first amendment on decumulation was an attempt to ensure that the Government did not lose focus on ensuring that all pension savers obtain a good deal when they look to turn their pension pot into a retirement income. In that instance, we wanted to protect savers from being defaulted into an annuity without a recommendation from an independent broker.

This amendment asks the Government not to lose sight of progress that has been made in getting a better deal for pension savers, despite the sweeping changes enabling freedom of flexibility in accessing pensions that will come into force this April. The cap that has been introduced on charges for work-based pension schemes of 0.75% a year has no equivalent in draw-down products, but from April a great many more savers—perhaps an estimated 320,000—will be using these products to get a retirement income. They should be protected from unfair charges. I repeat: they should be protected from unfair charges. It is welcome that NEST, the National Employment Savings Trust, has launched a consultation on draw-down products and how to ensure that middle and low-income earners have suitable and good-value products available to them. As the consultation rightly says:

“The solutions we as an industry develop over the next few years could determine the lives of millions of people in old age. We absolutely cannot afford to fail consumers … Leaving their retirements to chance is not an option”.

We have been clear throughout that welcoming the Budget freedoms is predicated on good solutions being available for savers in those income brackets, which we hope will happen. A good first step would be to remove the possibility of savers being open to what may be termed rip-off charges. This should apply in the decumulation stage as well as the accumulation stage, because a rip-off charge is a rip-off charge, wherever a consumer finds themselves at the end of it.

What is the evidence that this may happen in the decumulation stage for draw-down products? We already know that charges can be varied and opaque. The report from Which?, The Future of Retirement Income, points out:

“Even for a simple fund structure from a low-cost provider, the annual management charge might be 1% plus an administration fee of £250 per annum, which would cover the cost of income payments and income level reviews, for example. A more common total cost is about 2% p.a. which is similar to that for an investment-backed annuity. Worryingly, we came across cases where the charges for a SIPP package and advice were 4%-4.5%”.

Our amendment would give the Secretary of State the power to address this. The report goes on to point out that the costs are not always clear to the consumer:

“There are also hidden costs, including bid-offer spreads, the cost of sub-funds within the main fund, platform charges etc. Where an actively managed fund is selected, there is a risk that high turnover (churning) would add significantly to the total cost due to the transaction costs involved”.

Remember, this is about a product that is likely to become a great deal more widespread from April. The report therefore recommends that the Government should consider the introduction of a charge cap on the DC decumulation market at the same time as this is made a requirement for auto-enrolment DC schemes.

No one can be quite sure how the market will develop after April, but if the Government do not want to put this in place now, accepting our amendment would give them the power to take action to prevent consumer detriment in a new market in an area that has not always served savers as well as it should. This seems to me to be a sensible step that will protect consumers and ensure that they are not subject to rip-off charges. In that spirit, I hope that the Government will accept this amendment.

[Baroness Drake]

My Lords, from April 2015, when people reach the age of 55, they will be able to access their defined contribution pension savings as they wish. That will essentially leave them with four choices: full withdrawal of cash, taxed at their marginal rate, less a 25% tax-free lump sum; some kind of income draw-down product, drawing down cash while leaving the remainder invested; taking uncrystallised funds pension lump sums; an annuity purchase; or any combination of the four.

We do not know how the market will evolve in light of the new unprecedented options for pension savers in terms of the retirement products that will be available and what their charges will be. However, we do know that the FCA thinks, first, that the new freedoms could weaken the competitive pressure on providers to offer good value, because people display even more inertia in the face of complexity; and, secondly, that providers have been struggling to complete proper due diligence testing on new products because of the tight timetable. We do not have clarity as to the Government’s thinking on the charges, quality standards and transparency requirements for retirement income products going forward.

19:00

There is a significant risk that some individuals will be overtaxed because, in the face of complexity, people will get security from putting their savings in the bank. As the Strategic Society Centre suggests, instead of trying to understand the complexities of various retirement income products, people may choose to put their money into easy-access savings accounts which do not commit them to any course of action. Individuals can take 20% of their DC pot as tax-free cash and the rest at the marginal rate of tax, but an International Longevity Centre survey suggests that people do not understand the term “marginal tax rate”, and that this could result in them facing a significant tax bill, generating less income for their retirement. This may boost government tax revenues but it will also result in individuals having less to live on in their retirement. I fear that those with modest savings pots will be more vulnerable to being overtaxed than the confident, wealthier saver who can afford ongoing advice—a fear shared in a recent report by the Pensions Policy Institute and, indeed, by the FCA.

An article in today’s FT refers to Channel 4’s “Dispatches” programme and to research by industry analysts that estimates that about £6 billion of cash—three times the government estimate of £2 billion—will be taken out of pension pots following the introduction of the new freedoms. The CEO of the FCA, Martin Wheatley, said in an article last weekend:

“The beauty of an annuity is at least you make a decision. Faced with complexity … we prevaricate or put it off. And then we rely on very simple stimulus, so if someone says you can have £1,000 in the bank tomorrow if you make a decision, people are going to make snap judgements”.

He added:

“The worry is not those with the largest pots, but those with a £20,000 pot when the cost of providing advice may be excessive relative to the pot size”.

In the face of that risk, the availability of well regulated, low-cost, low-risk ways of accessing pension savings efficiently on an income draw-down basis or through uncrystallised funds pension lump sums and reforms to the annuity market become even more important, particularly for lower and moderate earners.

The Government have set a 0.75% charge cap for auto-enrolment default investment funds but there is no cap for retirement income products. The cost of income draw-down and the charges will come under intense scrutiny and fierce debate. The FCA market review has revealed that charges in these products can be high. Yet retail income draw-down products will not be scrutinised by the independent governance committees that have been put in place within the pensions industry. These products are not risk-free; savings remain invested. As these products become more of a mass market, I expect future savers to react to investment falls, charges and spending cash far too quickly.

The FCA’s head of investment, David Geale, speaking to the Public Bill Committee, has already highlighted the risk of draw-down under the present range of products for those with pension pots worth less than £50,000. He added that,

“there is no reason why over time flexible access products need to be poor value for money or to represent a high element of risk”.

But he acknowledged that,

“we will see how the market develops”.—[Official Report, Commons, Taxation of Pensions Bill Committee, 11/11/14; col. 10.]

If the evolving market starts to offer non-advised income draw-down products, particularly for those with smaller pots, the need for controls over charges becomes even greater. A key emerging issue is whether after April 2015 there will be income draw-down products suitable for modest-income pension savers. Because of the potential risks and costs to the consumer, the Government should take the initiative by embracing a power within the Bill to impose a cap on the fees and charges in a core of flexi-access draw-down products that could be readily available to ordinary pension savers.

Uncrystallised funds pension lump sums—a catchy little title for a measure that will allow people to keep drawing lump sums from uncrystallised pension funds, with 25% of each sum tax-free and the remainder being taxed at their marginal rate, without having to crystallise the whole pension pot—are intended to form the basis of the Government’s pension bank account concept. It is a good concept but who will provide them? Employers may be reluctant to provide the facility through their company schemes. On the contrary, they seem increasingly inclined to ask ex-employees and pensioners to move their savings out of the company scheme. Therefore, it is likely to be industry providers that provide such a product. But what will their fees be for looking after people’s money and what will they charge every time someone takes money out of their pot? The amendment allows the Government to take the initiative to set a cap on the fees and charges that can be imposed by those providing access to uncrystallised funds pension lump sums—it is quite hard to say—so preventing poor value.

The pension freedoms in the 2014 Budget still require a properly functioning annuities market and we will inevitably return, I believe, to a political recognition that it is in the national interest to have one. The ILC report has a section headed:

“The catastrophic costs of taking money out of the pension and putting it into a savings account”,

which concludes that if individuals tried to use their ISA to give them a comparable retirement income to an annuity, many would run out of money long before they died. Will the market promote a more flexible portfolio of annuities, such as deferred or fixed-term annuities? A lack of annuity contract standardisation has rendered price comparison websites ineffective and unfair sales practices have deprived pensioners of significant income. The open market option has not worked—perhaps it is time to look at more radical options.

There is not time to meet all the challenges associated with the new freedoms in pensions before April 2015—this is work in progress for some time to come. But it is the right time to recognise that the Government should be given the powers to regulate and control the charges and the quality standards of these products. The pension freedoms announced in the Budget trust savers to make the right choices, but those right choices will not occur solely as a function of trust in the consumer; they require good behaviour by the providers. The Government have enshrined in statute the power to set quality standards and control charges in the market during the accumulation stage. This amendment would give the Government the ability to exercise such controls also on retirement products during the decumulation phase.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord Bradley, for moving the amendment and the noble Baroness, Lady Drake, for her contribution.

The Government take the issue of charges on pension products very seriously and are committed to taking action where there is evidence of consumer detriment. The Government’s announcement of a charge cap on default funds in pension schemes used for automatic enrolment—which, subject to the approval of noble Lords, will come into effect in April—amply demonstrates that commitment to act. However, I am pleased to be able to reassure noble Lords that this amendment is not necessary. There already exist regulation-making powers which allow the Government to cap charges on the new flexi-access draw-down funds. The Government took broad powers under the Pensions Act 2014 to limit or ban charges borne by members of any pension scheme. These powers would allow us to cap charges on draw-down funds offered by a pension scheme, including any new flexi-access draw-down funds, if this proves necessary to protect consumers.

Similarly, the Financial Services and Markets Act 2012 gave the Financial Conduct Authority wide-ranging product intervention powers. Under these powers, the Financial Conduct Authority also has the ability to cap charges on draw-down products, including flexi-access draw-down funds where these are offered by insurance companies. These existing powers cover all the institutions which could offer such draw-down arrangements.

I also reassure noble Lords that the Government and regulators are, as has been indicated, monitoring the development of new retirement income products, including the next generation of draw-down products, very closely indeed. In the publication of provisional findings from its retirement income market study, the Financial Conduct Authority has specifically committed to monitor how the retirement income market develops and to take action where appropriate if it sees sources of consumer detriment arising or if competition is not working properly in the market. In addition, again as mentioned earlier, the Financial Conduct Authority has also committed to undertake a full review of its rules in relation to the retirement income market which will commence in the first half of this year.

Therefore, while the Government share the concerns that have been expressed about member-borne charges, we believe that this amendment is not required. I therefore hope that the noble Lord will withdraw this amendment.

[Lord Bradley]

I thank the Minister for his response and the noble Baroness, Lady Drake, for her very important contribution to this debate. I am pleased that the Government recognise that this is an issue and that the purpose of this amendment is entirely to protect the consumer in this matter. I hear the Government’s assurance that the powers to act already exist. What we all want to ensure is that the Government do actually act if it does turn out to be the case that excessive charges above what would be a reasonable capped level of such charges actually come into existence as new products come on to the market.

If the Government are right that this amendment is not necessary, the test will be that they actually act in the interests of consumers in a timely way to ensure that they do not suffer the rip-offs that they have in the past in other circumstances. With those assurances, I beg leave to withdraw the amendment.

Amendment 54A withdrawn.

Clause 60: Sums or assets that may be designated as available for drawdown: Northern Ireland

Amendment 55

Moved by

[Lord Bourne of Aberystwyth]

55: Clause 60, page 27, line 18, after “pension” insert “, nominees’ drawdown pension or successors’ drawdown pension”

Amendment 55 agreed.

Clause 60, as amended, agreed.

Clause 61: Provision about conversion of certain benefits for drawdown: Northern Ireland

Amendment 56 and 57

Moved by

[Lord Bourne of Aberystwyth]

56: Clause 61, page 27, line 36, leave out “or”

57: Clause 61, page 27, line 36, at end insert “, nominees’ drawdown pension or successors’ drawdown pension”

Amendments 56 and 57 agreed.

Clause 61, as amended, agreed.

Clauses 62 to 64 agreed.

Amendment 58

Moved by

[Lord Bourne of Aberystwyth]

58: After Clause 64, insert the following new Clause—
“Sections 60 to 62: consequential amendments
“(1) In section 97AI of the Pension Schemes (Northern Ireland) Act 1993 (early leavers: cash transfer sums and contribution refunds - further provisions), in subsection (7)—
(a) in paragraph (a), after sub-paragraph (vii) insert—“(viii) section 60 of the Pension Schemes Act 2014;(ix) regulations made under section 61 or 62 of the Pension Schemes Act 2014;”;(b) in paragraph (b), after sub-paragraph (v) insert—“(vi) section 60(3) of the Pension Schemes Act 2014;(vii) regulations made under section 61(4) or 62(4) of the Pension Schemes Act 2014.”(2) In Article 67A of the Pensions (Northern Ireland) Order 1995 (S.I. 1995/3213 (N.I. 22)) (the subsisting rights provisions: interpretation), in paragraph (9)—
(a) in sub-paragraph (a), after head (vii) insert—“(viii) section 60 of the Pension Schemes Act 2014;(ix) regulations made under section 61 or 62 of the Pension Schemes Act 2014;”;(b) in sub-paragraph (b), after head (v) insert—“(vi) section 60(3) of the Pension Schemes Act 2014;(vii) regulations made under section 61(4) or 62(4) of the Pension Schemes Act 2014.”(3) In Article 2 of the Pensions (Northern Ireland) Order 2005 (S.I. 2005/255 (N.I. 1)) (interpretation), in paragraph (4)—
(a) in sub-paragraph (a), after head (vii) insert—“(viii) section 60 of the Pension Schemes Act 2014;(ix) regulations made under section 61 or 62 of the Pension Schemes Act 2014;”;(b) in sub-paragraph (b), after head (v) insert—“(vi) section 60(3) of the Pension Schemes Act 2014;(vii) regulations made under section 61(4) or 62(4) of the Pension Schemes Act 2014.””

Amendment 58 agreed.

Clause 65 agreed.

Schedule 4: Rights to transfer benefits

Amendments 59 to 86

Moved by

[Lord Bourne of Aberystwyth]

59: Schedule 4, page 78, line 17, at end insert—
“Judicial Pensions Act 1981 (c. 20)A1 In Schedule 1A to the Judicial Pensions Act 1981 (transfer of accrued benefits), in paragraph 3, for “Chapter IV of Part IV of the Pension Schemes Act 1993” substitute “Chapter 1 of Part 4ZA of the Pension Schemes Act 1993”.
Judicial Pensions and Retirement Act 1993 (c. 8)B1 In Schedule 2 to the Judicial Pensions and Retirement Act 1993 (transfer of accrued benefits), in paragraph 3, for “Chapter IV of Part IV of the Pension Schemes Act 1993” substitute “Chapter 1 of Part 4ZA of the Pension Schemes Act 1993”.”

60: Schedule 4, page 78, line 31, at end insert—
“2A In section 24F (transfers out of GMP-converted schemes), in subsection (3), omit “guaranteed”.”

61: Schedule 4, page 81, line 30, at end insert—
“( ) In subsection (2), in paragraphs (a) and (b), for each “accrued rights” substitute “transferrable rights”.”

62: Schedule 4, page 83, line 14, leave out “an occupational” and insert “a”

63: Schedule 4, page 83, line 45, at end insert—
“(xi) section 55 of the Pension Schemes Act 2014;(xii) regulations made under section 56 or 57 of the Pension Schemes Act 2014;”

64: Schedule 4, page 84, line 13, at end insert—
“(ix) section 55(3) of the Pension Schemes Act 2014;(x) regulations made under section 56(4) or 57(4) of the Pension Schemes Act 2014.”

65: Schedule 4, page 84, line 23, leave out “a case” and insert “any other case”

66: Schedule 4, page 84, line 29, leave out “any other case” and insert “a case not falling within paragraph (a) or (b)”

67: Schedule 4, page 85, line 10, leave out “an occupational” and insert “a”

68: Schedule 4, page 87, line 25, at end insert—
“15A In section 101M (effect of transfer on trustees’ duties), for the words from “pension credit benefit” to the end of the section substitute “benefits to which the transfer notice relates”.”

69: Schedule 4, page 87, line 43, at end insert—
“( ) In that subsection, omit the definition of “pension credit benefit”.”

70: Schedule 4, page 88, line 35, at end insert—
“27A In section 124 (interpretation of Part 1), in subsection (1), in paragraph (b) of the definition of “transfer credits”, for “Chapter 5 of Part 4 of the Pension Schemes Act 1993 (early leavers)” substitute “Chapter 2 of Part 4ZA of the Pension Schemes Act 1993 (transfers and contribution refunds)”.”

71: Schedule 4, page 89, line 30, leave out “In section 318 (interpretation),” and insert—
“(1) Section 318 (interpretation) is amended as follows.
“(2) In subsection (2), for “an occupational pension scheme” substitute “a pension scheme”.
(3) ”

72: Schedule 4, page 89, line 42, at end insert—
“Scottish Parliamentary Pensions Act 2009 (asp 1)37A (1) Schedule 1 to the Scottish Parliamentary Pensions Act 2009 (Scottish Parliamentary Pension Scheme) is amended as follows.
(2) In paragraph 75, in Condition 6, for “section 93A(2)” substitute “section 93A(4)”.
(3) In paragraph 91(2)(g), for “Chapter 4 of Part 4” substitute “Chapter 1 of Part 4ZA”.”

73: Schedule 4, page 90, line 11, leave out “, in relation to an occupational pension scheme,”

74: Schedule 4, page 90, line 21, at end insert—
“Judicial Pensions Act 1981 (c. 20)40A In Schedule 1A to the Judicial Pensions Act 1981 (transfer of accrued benefits), in paragraph 3, for “Chapter IV of Part IV of the Pension Schemes (Northern Ireland) Act 1993” substitute “Chapter 1 of Part 4ZA of the Pension Schemes (Northern Ireland) Act 1993”.
Judicial Pensions and Retirement Act 1993 (c. 8)40B In Schedule 2 to the Judicial Pensions and Retirement Act 1993 (transfer of accrued benefits), in paragraph 3, for “Chapter IV of Part IV of the Pension Schemes (Northern Ireland) Act 1993” substitute “Chapter 1 of Part 4ZA of the Pension Schemes (Northern Ireland) Act 1993”.”

75: Schedule 4, page 90, line 35, at end insert—
“42A In section 20F (transfers out of GMP-converted schemes), in subsection (3), omit “guaranteed”.”

76: Schedule 4, page 93, line 30, at end insert—
“( ) In subsection (2), in paragraphs (a) and (b), for each “accrued rights” substitute “transferrable rights”.”

77: Schedule 4, page 95, line 15, leave out “an occupational” and insert “a”

78: Schedule 4, page 95, line 40, at end insert—
“(viii) section 60 of the Pension Schemes Act 2014;(ix) regulations made under section 61 or 62 of the Pension Schemes Act 2014;”

79: Schedule 4, page 96, line 4, at end insert—
“(vi) section 60(3) of the Pension Schemes Act 2014;(vii) regulations made under section 61(4) or 62(4) of the Pension Schemes Act 2014.”

80: Schedule 4, page 96, line 14, leave out “a case” and insert “any other case”

81: Schedule 4, page 96, line 20, leave out “any other case” and insert “a case not falling within paragraph (a) or (b)”

82: Schedule 4, page 96, line 48, leave out “an occupational” and insert “a”

83: Schedule 4, page 99, line 12, at end insert—
“55A In section 97M (effect of transfer on trustees’ duties), for the words from “pension credit benefit” to the end of the section substitute “benefits to which the transfer notice relates”.”

84: Schedule 4, page 99, line 30, at end insert—
“( ) In that subsection, omit the definition of “pension credit benefit”.”

85: Schedule 4, page 100, line 22, at end insert—
“67A In Article 121 (interpretation of Part 2), in paragraph (1), in paragraph (b) of the definition of “transfer credits”, for “Chapter 5 of Part IV of the Pension Schemes Act (early leavers)” substitute “Chapter 2 of Part 4ZA of the Pension Schemes Act (transfers and contribution refunds)”.”

86: Schedule 4, page 100, line 25, leave out “In Article 2 (interpretation),” and insert—
“(1) Article 2 (interpretation) is amended as follows.
“(2) In paragraph (3), for “an occupational pension scheme” substitute “a pension scheme”.
(3) ”

Amendments 59 to 86 agreed.

Schedule 4, as amended, agreed.

19:15

Clause 66: Restriction on transfers out of public service defined benefits schemes: Great Britain

Amendment 87

Moved by

[Lord Newby]

87: Clause 66, page 30, line 46, leave out “subsection” and insert “subsections (2) and”

[Lord Newby]

My Lords, the purpose of Amendments 87, 88 and 89, which amend Clause 66, is to improve the drafting of technical aspects of this clause, which introduces restrictions on transfers out of unfunded defined benefit public service pension schemes to schemes from which it is possible to acquire a rise or entitlement to flexi-benefits. Amendment 87 ensures that the definition of unfunded public service defined benefit schemes applies where it is needed. Amendment 88 enables the Treasury to make regulations relating to public service pension schemes which can currently be made only by the Secretary of State. Amendment 89 ensures that certain regulations already in force will apply until new regulations are made under certain of the new powers provided for in this clause.

Turning to the amendments in respect of Clause 67, as a reminder, I say that the purpose of this clause is to introduce a new safeguard for funded defined benefit public service pension schemes which gives Ministers a power to designate a scheme or part of a scheme, and in that way require the reduction of cash-equivalent transfer values in respect of transfers from that scheme to another scheme in which the member will be acquiring flexible benefits.

Amendments 90, 91 and 92 clarify the schemes covered in Scotland by the new safeguard for funded defined benefit public service pension schemes, which is introduced in Clause 67. They ensure that only schemes which are public service pension schemes within the meaning of Section 1 of the Pension Schemes Act 1993 fall within the power introduced by this clause.

Amendment 93 improves the drafting of Clause 67. Rather than speaking of “acquiring” flexible benefits, the clause will refer to acquiring a “right or entitlement to” flexible benefits, which is more accurate. Amendments 94, 95 and 96 amend Clause 69 to make provision for Northern Ireland parallel to that made for Great Britain by amendments described above. Similarly, Amendment 97 amends Clause 70 to make provision for Northern Ireland parallel to that made for Great Britain by the amendments described above. I beg to move.

[Lord McAvoy]

My Lords, I thank the Minister for his exposition. He sold me when he mentioned Scotland, so I think we accept that these amendments are genuinely minor and technical, although, to coin a phrase, we will reserve our position in case we discover something. I hope my noble friend Lord McKenzie of Luton can resist the temptation to jump up and shout, “Me too!”.

Amendment 87 agreed.

Amendments 88 and 89

Moved by

[Lord Bourne of Aberystwyth]

88: Clause 66, page 31, line 5, leave out subsection (4) and insert—
“( ) After section 95(5) insert—
“(5A) Except in such circumstances as may be prescribed in regulations made by the Secretary of State or the Treasury, subsection (2A) is to be construed as if paragraph (d) were omitted.””

89: Clause 66, page 31, line 17, leave out subsection (9) and insert—
“( ) Until the coming into force of the first regulations made under a provision of the Pension Schemes Act 1993 specified in the first column of the table, regulations made under the provision of that Act specified in the corresponding entry in the second column apply (with any necessary modifications) for the purposes of the provision specified in the first column—

New provision of Act	Existing provision of Act
Section 95(2A)(a)(iii)	Section 95(2)(a)(ii)
Section 95(2A)(b)(iii)	Section 95(2)(b)(ii)
Section 95(2A)(c)	Section 95(2)(c)
Section 95(2A)(d)	Section 95(2)(d)
Section 95(5A)	Section 95(5)(a).”

Amendments 88 and 89 agreed.

Clause 66, as amended, agreed.

Clause 67: Reduction of cash equivalents: funded public service defined benefits schemes: Great Britain

Amendments 90 to 93

Moved by

[Lord Bourne of Aberystwyth]

90: Clause 67, page 34, leave out lines 1 to 12

91: Clause 67, page 34, line 13, leave out “, or paragraph 3(4)(b) of Schedule 2 to,”

92: Clause 67, page 35, line 14, leave out “to (d)”

93: Clause 67, page 35, line 25, after “acquiring” insert “a right or entitlement to”

Amendments 90 to 93 agreed.

Clause 67, as amended, agreed.

Clause 68 agreed.

Clause 69: Restriction on transfers out of public service defined benefits schemes: Northern Ireland

Amendments 94 to 96

Moved by

[Lord Bourne of Aberystwyth]

94: Clause 69, page 37, line 31, leave out “subsection” and insert “subsections (2) and”

95: Clause 69, page 37, line 38, leave out subsection (4) and insert—
“( ) After section 91(5) insert—
“(5A) Except in such circumstances as may be prescribed in regulations made by the Department or the Department of Finance and Personnel, subsection (2A) is to be construed as if paragraph (d) were omitted.””

96: Clause 69, page 38, line 1, leave out subsection (9) and insert—
“( ) Until the coming into force of the first regulations made under a provision of the Pension Schemes (Northern Ireland) Act 1993 specified in the first column of the table, regulations made under the provision of that Act specified in the corresponding entry in the second column apply (with any necessary modifications) for the purposes of the provision specified in the first column—

New provision of Act	Existing provision of Act
Section 91(2A)(a)(iii)	Section 91(2)(a)(ii)
Section 91(2A)(b)(iii)	Section 91(2)(b)(ii)
Section 91(2A)(c)	Section 91(2)(c)
Section 91(2A)(d)	Section 91(2)(d)
Section 91(5A)	Section 91(5)(a).”

Amendments 94 to 96 agreed.

Clause 69, as amended, agreed.

Clause 70: Reduction of cash equivalents: funded public service defined benefits schemes: Northern Ireland

Amendment 97

Moved by

[Lord Bourne of Aberystwyth]

97: Clause 70, page 40, line 1, at end insert “a right or entitlement to”

Amendment 97 agreed.

Clause 70, as amended, agreed.

Clause 71 agreed.

Clause 72: Meaning of “flexible benefit”

Amendment 98

Moved by

[Lord Bourne of Aberystwyth]

98: Clause 72, page 40, line 35, after “scheme” insert “or a survivor of a member”

Amendment 98 agreed.

Clause 72, as amended, agreed.

Clause 73: Meaning of “cash balance benefit”

Amendment 99

Moved by

[Lord Bourne of Aberystwyth]

99: Clause 73, page 41, line 2, after “scheme” insert “or a survivor of a member”

Amendment 99 agreed.

Clause 73, as amended, agreed.

Clause 74: Interpretation of Part 4

Amendments 100 to 103

Moved by

[Lord Bourne of Aberystwyth]

100: Clause 74, page 41, line 34, at end insert—
““nominees’ drawdown pension”, in relation to a survivor, has the meaning given by paragraph 27B of Schedule 28 to the Finance Act 2004;”

101: Clause 74, page 42, line 5, at end insert—
““successors’ drawdown pension”, in relation to a survivor, has the meaning given by paragraph 27G of Schedule 28 to the Finance Act 2004;”

102: Clause 74, page 42, line 6, leave out “an occupational” and insert “a”

103: Clause 74, page 42, line 13, at end insert—
““uncrystallised funds pension lump sum” has the meaning given by paragraph 4A of Schedule 29 to the Finance Act 2004;”

Amendments 100 to 103 agreed.

Clause 74, as amended, agreed.

Clauses 75 and 76 agreed.

Schedule 5 agreed.

Clauses 77 to 79 agreed.

Amendment 104

Moved by

[Lord Balfe]

104: After Clause 79, insert the following new Clause—
“Pension Protection Fund: compensation cap underpin (service-related)
(1) Schedule 7 to the Pensions Act 2004 (pension compensation provisions) is amended as follows.
(2) In paragraph 26 (compensation cap), after sub-paragraph (9) insert—
“(9A) This paragraph is subject to paragraph 26B.”
(3) After paragraph 26A insert—
“26B (1) The relevant compensation payable to a person must in every case equal the lower of the amounts specified in sub-paragraphs (2) and (3).
(2) The amount specified in this sub-paragraph is the sum of—
(a) 50% of the annual value of the benefits to which he is entitled under the admissible rules; and(b) 2% of that amount for each whole year of the person’s pensionable service, subject to a maximum of 40% of that amount.(3) The amount specified in this sub-paragraph is two times the standard amount.
(4) Expressions used in this paragraph have the same meaning as in paragraphs 26 and 26A.””

[Lord Balfe (Con)]

My Lords, I welcome the opportunity of being able to speak to this proposed extra clause at the end of the Bill. I will say straightaway that it is motivated by friends in BALPA, the union for pilots, but it also affects a number of other higher-paid workers who are caught by what many of us would regard as an anomaly in pensions legislation.

The aim of the amendment is to ask for a review of the part of the Pensions Act that covers the limitation on funds that can be paid out to people whose pensions go into the Pension Protection Fund. In particular, I refer to pilots who used to work for Monarch Airlines—which has gone into the Pension Protection Fund—many of them with many years of service, but because of the cap that was put on payments out, they are limited as to the amount of pension which they can now draw. That cap was put into place for very good reason: to stop moral hazard; to stop directors who were members of their company pension fund abusing the fund knowing that they could basically transfer their liabilities for their own pensions to the Pension Protection Fund. However, the people who I am speaking about, such as the pilots of Monarch Airlines, are inadvertently caught. They had no say whatever in the way in which the company was run. They were workers for the company; they were higher-paid workers and were paid the sort of wages which you only get in the other House down the corridor—of course, if the House of Commons ever went into the Pension Protection Fund, many MPs’ pensions would be limited as well, but no one would say that they are the directors of a company. They are the MPs of the people and look after many things, but they would be caught.

So the amendment is a measure to deal mainly with higher-paid workers, but workers who have none the less put in. We are very fond in this country of bashing anyone who makes anything that exceeds the higher-rate tax threshold, but there are many people who go to university, who work hard in our economy and who exceed the higher-rate tax threshold—they earn more than £40,000 or sometimes even more than that, and they do earn it. I have never been a subscriber to the view that we have to pay megabucks to everybody, but I have always been a subscriber to the view that a decently trained professional worker who is putting their efforts into the benefit of the country deserves a decent wage. These pilots are highly skilled people and deserve a decent wage, as do people at the Atomic Energy Authority and British Midland Airways who are caught. In this particular instance, of some 67 pilots, around 13 will lose more than half the pension that they have paid for. Part of the weakness in the Pension Protection Fund is that your levy is not based on how many workers are covered; it is based on the liabilities of your fund. If someone earns too much to get the full pension, you are still paying, as I understand it, a levy into the pension fund which is commensurate with the liabilities of the fund, not of the individuals.

I am asking the Minister to look at the PPF cap and how it works. We are proposing two ways of dealing with it: either reviewing the cap on the basis of years of service over 20 years, as the current planned change would do little to help many of those in the pension scheme who are affected by the cap; or reducing the service-related or age-related underpin into the PPF. We are basically looking for a way of relieving those workers. It would be a comparatively cheap operation, largely because many people who earn a lot of money are in the PPF. It is estimated that the measure would cost something in the order of £12 million in all over all the years that the extra pensions would have to be paid, so it is not a huge amount of money.

I am therefore asking the Minister to have a look at this matter. Clearly, the categories of people that I am speaking about are not the decision-makers and they should not be caught by moral hazard. They are well worthy of a review of the contributions that they have made and the way in which the PPF works. I have not made enough speeches in this House to know whether it is conventional to thank my colleagues opposite, the noble Lords, Lord Monks and Lord McKenzie, for their help in meeting the union that I have mentioned. I think that we are talking on a cross-party basis in asking for this matter to be seriously looked at by the Government. I beg to move.

19:30

[Lord Monks (Lab)]

My Lords, I declare an interest as the president of BALPA. I congratulate the noble Lord, Lord Balfe, on the first pro-trade union speech from that side of the Chamber that I have heard since I came into the House—it was a pleasure to hear.

[Lord Balfe]

Did the noble Lord not hear my other speech?

[Lord Monks]

I am sorry, I did not, but this one made for a nice change and I commend that example to the rest of your Lordships on those Benches and hope to hear more remarks of that kind.

The noble Lord, Lord Balfe, has admirably covered the BALPA case. Monarch Airlines is the current case, and BMI was the previous one. We are beginning to struggle as these airlines in trouble pass their pensions obligations over to the Pension Protection Fund. There are other similarly paid workers in the same category. I hope that the message of this amendment is that though this cap is essential—I understand that very well, as the noble Lord, Lord Balfe, does—in order to stop exploitation of the fund, which after all is contributed to by well run pension schemes around the country, it is very important that we take those obligations seriously.

The cost to the fund is not enormous; it is quite modest. I hope therefore that the Government will consider the idea of a review of the arrangements around the cap and that we can get extra justice for some people who are hard working, who do responsible jobs, who are not fat cats and who deserve rather better than they have had recently from the fund. I am very happy to support the amendment in the name of the noble Lord, Lord Balfe.

[Baroness Warwick of Undercliffe]

My Lords, I want to make a brief comment on this amendment since I am a non-executive director of the Pension Protection Fund. I declare that interest and hope that I can offer some thoughts that may be helpful to the Committee. The PPF was set up by the Pensions Act 2004 to be a lifeboat for members of defined benefit pension schemes whose sponsoring employer has become insolvent, leaving the scheme in deficit. The PPF saves thousands of members from potential penury who otherwise would have received only a small fraction of the pension promised to them in their employer’s scheme. The benefits it pays to insolvent scheme members are paid for, in large part, by a compulsory levy on other DB schemes with solvent employers, which of course is a cost on the employer.

When the PPF was set up, it was always recognised that there was a fine balance between on the one hand protecting those who had saved and who, through no fault of their own, were now the casualties of their employer’s insolvency, and on the other, not unduly penalising schemes which had made prudent assumptions or decisions, or employers whose businesses remain solvent, providing jobs and funding for their pension schemes. One way in which this was reflected was the benefit cap: the maximum benefits normally paid for someone who is not above the normal retirement age and drawing pension, are 90% of what the pension was worth, subject to a cap.

The cap at age 65 is currently £36,401 per year, which equates to just over £32,500 when the 90% level is applied. The earlier a person retired, the lower the annual cap is set, to compensate for the longer time the person will be receiving payments. So the full expectations of high earners who have built up a number of years in their schemes would not be met. The average annual compensation in payment per member in the PPF is just over £3,500 per annum, so the average PPF member has clearly received less than the amounts which would have been earned by high earners such as those who would be affected by this amendment.

The important point to note is that the PPF board has no role or responsibility in setting the financial limits in the fund. That is the responsibility of Governments. However, back in 2004 there was a general political consensus, which I believe still holds, that there was a need to balance the interests of members against the cost to those who fund the PPF—the levy payers, who ultimately are the employers and members of other pension schemes.

There is obviously a debate to be had about appropriate levels of compensation. I have every sympathy with those who have been made a pension promise that their scheme can no longer afford. However, that is a matter for the Government and I do not want to comment on it, except to say that the PPF board has an obligation to keep the fund’s finances on a sure footing in changing economic conditions. It has a particular responsibility to balance its liabilities within a reasonable framework of constraints so that it does not impose an undue burden on the pension schemes and businesses which pay its levy. The PPF also has to be sustainable over the very long term, and the level of protection given to pension scheme members has to be such as to make that possible. The PPF has faced some significant calls on its resources as a result of big household names going bust. At November 2014, the net deficit of the 6,000 PPF eligible schemes is £221 billion. PPF provides a protective wrap for these liabilities in the event of insolvency. The amount of levy that would need to be raised to cover all members’ benefits in these schemes would be much higher.

To add a final note of caution, requiring solvent employers with DB schemes to pay more levy for higher levels of compensation will not come without problems.

[Lord Balfe]

Is it true that the PPF currently has a surplus of £2.43 billion, out of which we are asking that this modest payment be made?

[Baroness Warwick of Undercliffe]

I do not think I should enter into a conversation about that and I do not think it is really relevant to this argument.

[Lord McKenzie of Luton]

My Lords, I thank the noble Lord, Lord Balfe, for giving us an opportunity to air this issue this evening and for organising a meeting with the Minister. I thank the Minister and his officials for participating in that meeting. No one can be comfortable with the position of employees in this situation, who approach retirement with a likely pension significantly below the expectation which is derived from an employer promise which can no longer be met. This is not diminished by the fact that, while the pension expectations would be well above average levels, they are commensurate with remuneration levels which reflect the skill of pilots and the responsible jobs they undertake. As we have heard, some 67 Monarch pilots will lose, in aggregate, some £900,000 a year in lost pension because of the operation of the PPF cap and other pilots are in a similar position.

We should acknowledge that the Pension Protection Fund introduced by the previous Government, but on a cross-party basis, protects millions of people throughout the UK, as we have heard, who belong to defined benefit pension schemes. According to the Purple Book, which monitors the risk of DB schemes, there are some 6,057 mostly private sector DB schemes covering more than 11 million scheme members with more than £1 trillion of assets. In broad terms, as we have heard, the fund takes over the responsibility of pension obligations in the event of employer insolvency, but it does not seek to replicate, in every respect, the employer promise. There is, in particular, a cap on levels of payment for those below normal retirement age when the scheme enters the PPF. This is a source of the problem we are discussing tonight.

We know that the PPF is a highly professional organisation dealing with a complex market situation with great skill. On recent data, some 745 schemes have been transferred, covering 217,000 members. Compensation paid to date amounts to £1.53 billion, but the average yearly payout is, as we have heard, some £3,500 only. Tens of thousands of people now receive compensation from the fund and hundreds of thousands will in the future, potentially making the difference between retirement in poverty and retirement in a degree of comfort. This may not be the occasion to discuss how the PPF will operate in shared risk schemes, but that is doubtless a matter we will return to at some stage.

The thrust of the amendment in the name of the noble Lord, Lord Balfe, is generally to improve the position of those whose compensation is limited by the cap. The position of those with significant pensionable service with one employer has already been improved under the Pensions Act 2014, but this does not cover pilots, who tend not to have pensionable service substantially in excess of 20 years. Of course, the origin of the cap was to address issues of moral hazard, as we have heard, but also to be some restraint on the overall costs of the arrangements—it is not just a moral hazard issue. It is accepted that the moral hazard is not present in the case of pilots and the amendments would not lead to 100% compensation. However, the amendments would not apply just to Monarch; we simply do not know who might be entering the scheme at some future date and therefore the costs associated with that. As an aside, I ask the Minister: if the levels of compensation were raised, what if anything would that mean for the arrangements entered into with Monarch that allow for continued trading? Would that arrangement have to be recast?

The bottom line is that amending the rules in the way suggested would lead to higher payouts from the PPF. That raises the question, as my noble friend Lady Warwick has made clear, of where the funding is going to come from. The answer, of course, is the levy, which ultimately feeds back to individual schemes and sponsoring employers. Although the amounts related to pilots may be relatively small in the context of the overall PPF scheme, we simply do not know how many more might be affected and what the overall costs would be. As I have just said, there was an attempt in the 2014 Act to ameliorate the effects of the cap for individuals whose pension entitlement was derived mainly from one source for at least 20 years, although this does not particularly help the matter in hand unless there were to be some recasting of the spread in coverage to affect it in a different way. However, presumably this would involve losers as well as gainers.

It seems that any improvement in the lot of the pilots who might find themselves in a similar position, now and in the future, would involve more resources for the PPF. So, while having great sympathy for those whose legitimate pension expectations have been significantly impaired, I do not think we have been presented with a compelling argument to make the specific changes that the amendments suggest. However, the Government may take the opportunity to reflect on and review how the cap is generally affecting entitlements, bearing in mind the need to ensure the sustainability of the PPF in the current, and future, DB environment.

[Lord Bourne of Aberystwyth]

My Lords, I thank my noble friend Lord Balfe for so eloquently moving this amendment, and other noble Lords who have participated in this debate—the noble Lords, Lord Monks and Lord McKenzie, and the noble Baroness, Lady Warwick. I found the meeting very useful, and I assure the noble Lord, Lord Monks, that, as a former trade union member, I was certainly taking everything very seriously when he put forward the points that he made.

The amendment relates to the position of certain members of pension schemes that have entered the Pension Protection Fund. I am sure that we all have a great deal of sympathy with the situation that these people find themselves in. This amendment, which offers two alternative methods of changing the cap, very helpfully allows me to talk to the Committee briefly about the level of the PPF compensation cap. I understand that my noble friend’s principle is that he would like an increase in that cap to provide higher compensation to those who had accrued a relatively large pension, but who, because they had relatively short service in their scheme, will not be affected by the long-service cap amendments. I will therefore deal initially with that principle rather than concentrating on the actual effect of this amendment.

I start by making a small but perhaps important point: the loss of these pensions is not a consequence of the PPF cap. The fact is that the schemes were underfunded and could not meet the costs of the accrued pensions. Those pensions have already been lost. What we are discussing is the level of compensation that should be paid to the affected people.

The Pension Protection Fund does not replace lost benefits in full. That is not an uncommon approach; for example, deposits in banks are covered up to a limit of £85,000. The PPF pays compensation at the full rate of the pension in payment at the insolvency date to anyone over their normal pension age. Pilots as a group, with their relatively low pension age of 55, benefit from this, as more of them are likely to be over that threshold than if the scheme had a more usual pension age of 60 or 65. It is those below their normal pension age who have their compensation set at broadly 90% of the pension accrued at the insolvency date. Further, it is this group—those below their scheme’s normal pension age—who are affected by the compensation cap.

The current cap produces what many would think was rather a generous entitlement of £32,761 per year at the age of 65. The cap is of course reset for anyone who chooses to take their compensation at an age lower than 65, to reflect the longer period of payment. So a person with an unusual pension age of 55, such as pilots, would have a cap of £26,571 precisely. Noble Lords might also wish to be reminded that the Pensions Act 2014 contains provision for a long-service increase to the cap, which has been referred to during the debate, of 3% for each year of service above 20 years, although I accept this may not be relevant for many pilots because of the lower retirement age.

19:44

Understandably, those affected by the cap compare the amount of compensation to what they expected to get from their pension scheme. However, that is not a valid comparison, at least in terms of how the scheme operates. As I have said, their pensions have already been lost, and if the scheme could have paid them more than the amount of compensation then it would not have entered the Pension Protection Fund in the first place. In answer to the point made by the noble Lord, Lord McKenzie, we would have to revisit the Monarch situation; although there is no intention of moving this cap, if we did then it would affect the Monarch arrangements.

The question before us is whether compensation of £26,500 a year, or just over, for life from age 55 is acceptable. To put this figure into context, it is almost double the average occupational pension in the UK. In an ideal world, I am sure that we would all like the compensation paid by the PPF to be higher, although, if such an increase were possible, some would probably prefer it to be targeted at lower earners. I certainly do not want to clobber those people with a high salary who earn it, but I wish to act fairly here, as do the Government.

The noble Lord has referred to an additional cost of £12 million. I have to say that I do not recognise that sum; the letter he wrote and the discussion we had refer to a cost of £70 million and the Government thought that that was on the low side, so I am not sure where the £12 million comes from. Regardless of the actual cost, however, any increase to the compensation cost must be paid for, so how could it be funded? To begin with, the compensation paid to others could be reduced, but I am sure that noble Lords are not advocating that approach. Another option is to increase the PPF’s income. Compensation is funded by a combination of the schemes’ remaining assets, investment return and a levy on ongoing schemes. If the money had to be found through an increase in the levy, the costs are borne by those schemes that are still backed by solvent employers. Some 78% of schemes eligible for the PPF were in deficit at the end of November 2014, and their aggregate deficit was £221 billion. Noble Lords may wish to consider whether this is the right time to be increasing their costs.

Lastly, we could expect the PPF to absorb this extra liability. It is true that it currently running a surplus, and this is something the PPF can be proud of. I am very grateful to the noble Baroness, Lady Warwick, for her insights into its remit and work. Given that the number of schemes eligible to pay the PPF levy is declining, the PPF has taken the decision to aim to be self-supporting by 2030 so that it can continue to pay compensation, which could be necessary into the 22nd century. There are significant risks to this goal in terms of future levels of insolvency and scheme deficits. In view of this, the current surplus has, if I may put it in these terms, already been committed to help to safeguard the future.

The Pension Protection Fund currently pays compensation to about 150,000 people and protects around 11 million scheme workers. We should be very cautious before we place any extra burden on the fund. The argument for so doing must be very strong and, respectfully, I do not think that it has been made out in this case. While I sympathise with those who have lost their pensions, as do the Government, they will still get a significant amount of compensation. I do not think that the position of people with capped compensation is so unfair as to justify putting an extra burden on to the PPF. I therefore urge my noble friend Lord Balfe to withdraw the amendment.

[Lord Balfe]

I thank the Minister for that reply, and I am glad that we have aired this problem. It often seems to me that we as a society are very good at concentrating on fat cats, who are seen as being unworthy, and thin cats, who are seen as being extraordinarily worthy, but we forget all the people in the middle—the people who work extremely hard, often for good salaries, to keep this country going. They do not live in Monaco, and they do not live on benefits either. There is a shortage of support for what I would call “the middle middle class”, which is reflected in both parties. We see here that classic private sector pension schemes are in the PPF and public sector pension schemes are underwritten. No one is going to take my pension away from me. HMG are not going to go bust and go into the PPF. The European Union is not going to go bust and go into the PPF. As Britain will find out if it tries to withdraw, it will get a rather large bill. However, I appreciate what the Minister and my colleagues said, and I beg leave to withdraw the amendment.

Amendment 104 withdrawn.

Amendment 105 not moved.

Clause 80: Power to make consequential amendments

Amendment 106

Moved by

[Lord Bourne of Aberystwyth]

106: Clause 80, page 45, line 4, leave out “The Secretary of State or the Treasury” and insert “The appropriate national authority”

[Lord Bourne of Aberystwyth]

My Lords, Clause 80 provides a power to enable the Secretary of State or the Treasury to make consequential changes needed to any primary or secondary legislation, whenever made. Clause 81 makes provision for the regulation-making powers that have been set out in the Bill and the procedure for exercising those powers.

The amendments to Clauses 80 and 81 are technical and enable the regulation-making powers contained in the two clauses to be extended to the Department for Social Development in Northern Ireland in relation to Northern Ireland legislation. This will allow the Secretary of State for the Department for Social Development in Northern Ireland, who is responsible for social security benefits and pensions in Northern Ireland, to make consequential amendments to provisions in Northern Ireland legislation, where appropriate. In line with the provisions for Great Britain, including Scotland, where the powers are used to amend primary legislation, they are subject to confirmatory procedure, which is equivalent to the affirmative resolution procedure in this House. These changes and other provisions in the Bill allow the Northern Ireland authorities to maintain parity with pensions legislation in Great Britain. Clause 84 sets out when the different parts of the Bill will come into force.

The Government have given a commitment that from April 2015 people will be able to access their pension savings flexibly. These amendments ensure that the regulation-making powers in Part 4 come into force on Royal Assent so that the relevant regulations can come into effect on 6 April 2015 in line with the commitment given. The amendments also ensure that amendments made to include reference to the Bill in the definition of pensions legislation in the Pensions Act 2004 come into force from 6 April 2015. I beg to move.

[Lord McAvoy]

My Lords, I thank the Minister for his exposition. Somebody must have told him about my Irish grandparents. That is the other side of my Celtic tradition. We accept that these are minor and technical amendments and have no objections to them, with the usual proviso.

Amendment 106 agreed.

Amendments 107 and 108

Moved by

[Lord Bourne of Aberystwyth]

107: Clause 80, page 45, line 7, after “any” insert “primary or subordinate”

108: Clause 80, page 45, line 8, leave out subsection (3) and insert—
“(3) In this section—
“appropriate national authority” means—
(a) in relation to provision which could be made by an Act of the Northern Ireland Assembly without the consent of the Secretary of State (see sections 6 to 8 of the Northern Ireland Act 1998), the Department for Social Development in Northern Ireland, and(b) in relation to any other provision, the Secretary of State or the Treasury;“primary legislation” means—
(a) an Act;(b) Northern Ireland legislation;“subordinate legislation” means—
(a) subordinate legislation as defined by section 21(1) of the Interpretation Act 1978;(b) an instrument made under Northern Ireland legislation.”

Amendments 107 and 108 agreed.

Clause 80, as amended, agreed.

Clause 81: Regulations

Amendments 109 to 111

Moved by

[Lord Bourne of Aberystwyth]

109: Clause 81, page 45, line 15, leave out subsection (2)

110: Clause 81, page 45, line 20, leave out “an Act” and insert “primary legislation”

111: Clause 81, page 45, line 27, leave out subsections (6) to (8)

Amendments 109 to 111 agreed.

Clause 81, as amended, agreed.

Amendments 112 and 113

Moved by

[Lord Bourne of Aberystwyth]

112: After Clause 81, insert the following new Clause—
“Regulations: Northern Ireland
“(1) A power of the Department for Social Development in Northern Ireland to make regulations under this Act is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).
(2) Where regulations made by the Department for Social Development in Northern Ireland under section 80 amend, repeal, revoke or otherwise modify a provision of primary legislation (whether alone or with other provision), the regulations—
(a) must be laid before the Northern Ireland Assembly after being made;(b) take effect on such date as may be specified in the regulations but (without prejudice to the validity of anything done under them or to the making of new regulations) cease to have effect on the expiry of a period of 6 months from that date unless at some time before the expiry of that period the regulations are approved by a resolution of the Northern Ireland Assembly.“(3) Any other regulations made by the Department for Social Development in Northern Ireland under this Act are subject to negative resolution within the meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).
(4) Subsection (3) does not apply to regulations containing provision under section 84(6) only.”

113: After Clause 81, insert the following new Clause—
“Regulations: supplementary
(1) A power to make regulations under this Act may be used—
(a) to make different provision for different purposes;(b) in relation to all or only some of the purposes for which it may be used.(2) Regulations under this Act may include incidental, supplementary, consequential, transitional, transitory or saving provision.”

Amendments 112 and 113 agreed.

Clauses 82 and 83 agreed.

Clause 84: Commencement

Amendments 114 to 116

Moved by

[Lord Bourne of Aberystwyth]

114: Clause 84, page 46, line 29, leave out paragraphs (b) to (e) and insert—
“( ) any other provision of Part 4 so far as is necessary for enabling the exercise on or after the day on which this Act is passed of any power to make provision by regulations;”

115: Clause 84, page 46, line 38, leave out paragraphs (a) to (c) and insert—
“( ) paragraphs 24, 30, 33 and 36 of Schedule 2 (and section 46 so far as relating to those provisions);“( ) Part 4, so far as not already in force.”

116: Clause 84, page 47, line 3, at end insert “other than paragraphs 24, 30, 33 and 36 of Schedule 2 (and section 46 so far as relating to those provisions)”

Amendments 114 to 116 agreed.

Clause 84, as amended, agreed.

Clause 85 agreed.

House resumed.

Bill reported with amendments.

Elderly People: Powers of Attorney and Living Wills

Monday 12th January 2015 Lords Chamber

Question for Short Debate

19:56

Asked by

[Baroness Bakewell]

To ask Her Majesty’s Government what steps they are taking to encourage elderly people, including those with early-stage dementia, to prepare living wills and powers of attorney in anticipation of serious illness or degenerative disease.

[Baroness Bakewell (Lab)]

My Lords, I am particularly grateful for the chance to debate dementia at this time both because it is timely—the national dementia strategy came to an end last year—and because there seems to be considerable movement on both the medical and the social care fronts in the approach to dementia sufferers and their carers. I know this because last December I wrote and presented a documentary for BBC Radio 4 about the subject called, “Suppose I Lose It”, and I learnt a great deal in preparing that programme.

The dilemma at the heart of the debate as I proposed it is exemplified by the response it got. It was first referred to the Ministry of Justice as being a legal matter —just so; the lasting power of attorney is a legal document—but at my request it was rerouted to the Department of Health as primarily a medical matter. I am grateful for this, and I am particularly delighted that the noble Earl, Lord Howe, will be replying for the Government. However, in the wider world there is a risk that the matter of advanced directives and LPAs might fall between the two stools: the legal and the medical.

Let me address the medical dimension first. There is a brief and to the point leaflet available at my local surgery, entitled Worried About Your Memory? The Alzheimer’s Society report tells us that dementia is the most feared condition among the over-50s. They are both fearful of knowing and ignorant of what might happen. This leaflet refers them to the Alzheimer’s Society, Britain’s leading dementia charity. It goes on:

“The earlier you seek help, the sooner you can get information, advice and support”.

There is a desperate need to know more and do more. Earlier diagnosis is the key that unlocks a whole raft of advice and behaviours that can help delay the progress of dementia and assist people to live well with it.

In my Radio 4 programme, the actress Prunella Scales and her husband, the actor Timothy West, spoke frankly of their 15-year journey with her dementia and how they cope with it. After 15 years, she still beats him at chess. Judging by the public response to the programme, their openness did much to promote a willingness in others to speak out and to talk openly about what dementia means in people’s lives.

The Government clearly recognise the importance of this. However, their plan to reward GP practices with a payment of £55 for each dementia diagnosis was strongly and rightly criticised by both the BMA and patients’ groups. The plan will fade out in March.

The answer must surely lie with patients themselves. A strategy should address all those large numbers of people who have reason to be fearful, to offer them the chance of an assessment at a memory clinic. But—and it is a very important “but”—they will come forward for a diagnosis only if they feel that there is something that can be done; otherwise, they may prefer to live in denial and delay getting help. In response to my programme, many people said, “But I don’t want to know. There’s nothing you can do”. That is not the right message.

What happens when you get a diagnosis of Alzheimer’s? The Alzheimer’s Society quotes a recent poll that found 90% feel unsupported after a diagnosis. The report Living and Dying with Dementia in England also stated that,

“people with dementia are not being appropriately identified for end of life care, and that they have less access to, and receive poorer quality, care than people with other terminal illnesses”.

The Dementia Action Alliance also finds the response far from satisfactory. Its recent Carers’ Call to Action makes constructive suggestions, including pre-diagnosis support from the GP; post-diagnosis education for the patient and their family; a dementia adviser or support worker to provide ongoing face-to-face personalised dementia expertise; a planned map of action for the future; and support to remain active and integrated in the community. Those are just some of the 20 suggestions. In some places, some of this is happening. In Scotland, a named link worker is made available for the first year after diagnosis. In England, the town of Crawley teaches the community’s waiters, teachers, shopkeepers and bus drivers how to recognise and then respond to dementia sufferers amongst them. We need more of these initiatives.

I now turn to the legal aspect of this debate. The encouragement of elderly people, especially those with early dementia, to write an advance directive and sign a lasting power of attorney is most important. The response package to a diagnosis refers obliquely to the need to “plan for the future”. That is left deliberately vague, I think to avoid causing pain, but the pain from not facing up to these legal matters will be the greater the longer they are not addressed. The advice needs to be more clearly and regularly spelt out, and given more emphasis.

The concept of capacity is what matters. The progress of dementia is medically unpredictable both in terms of the symptoms, and the timescale over which those symptoms progress. What matters for capacity is not the length of time since diagnosis, but the insight the person with dementia possesses at the time. Barbara Pointon, who wrote to me in response to the programme, said:

“We were only just in time. Four months later and Malcolm”—

her husband—

“could no longer sign his name”.

That was in 1993, before the Mental Health Act. She went on:

“No one told me about Lasting Powers of Attorney”—

as it was then—

“I just picked it up by chance … but it is an essential document and should be tackled early”.

However, the LPA is a long and difficult document to handle; it is also costly to register. The noble Baroness, Lady Afshar, who apologises for not being able to join the debate, teaches law and said of the LPA:

“I have found the form for giving lasting power of attorney exasperating … I had to make the application 3 times, each time needing signatures from witnesses and attorneys and all corrections have to be made in 15 working days”.

She goes on:

“I cannot see how the average little old lady would be willing to go through all these hoops”.

She is not the only Member of this House to have reported the same complaint to me, so improvements need to be made there.

The need for people with early dementia to sign such documents at the earliest moment is evident. In November last year, an International Longevity Centre report urged policymakers to ensure there are no unnecessary barriers to data sharing between health and social care services and the family, and went on to say that there needs to be,

“a major public relations programme to make more in the population at large”,

aware,

“of the ways in which they can make things easier for themselves and their loved ones by planning ahead”.

Last October, Age Scotland launched just such a national campaign, funded by the Scottish Government, urging people to take out a power of attorney. It remains to be clarified whether an LPA in Scotland will be recognised across the UK. Dementia is something we all fear for ourselves and for those we love. I ask the Minister and the Government to take steps to answer the needs expressed here with the utmost urgency and, indeed, sympathy.

20:06

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Bakewell, not only for giving us the chance to debate this important matter, but for having introduced the whole subject with such a clear and informative exposition which has laid out very clearly the challenges we face.

In my few moments I do not want to merely repeat much of what she has said. I found her arguments persuasive, and I agree with them in large measure. I want to raise an associated issue which concerns wills, powers of attorney, and the flow of funds to voluntary groups, many of which are providing services to dementia sufferers. Like the noble Baroness I fear there is another issue which may be falling between different governmental stools. Some noble Lords will be aware that I undertook the review of the Charities Act for the Government. A couple of years ago I produced a report about it entitled Trusted and Independent: Giving charity back to charities. There were a number of proposals to try and improve the position of charities, some of which have formed the basis for legislation now before your Lordships’ House, including the Protection of Charities Bill, which is in pre-legislative scrutiny. One issue that was raised was the number of charities. There are over 160,000 registered charities, and probably as many again unregistered charities, so in all a third of a million charities. There were great concerns about duplication. Many members of the public felt that charities were overlapping and that money was being spent on administration and fundraising which could be better deployed in providing the services for which the charities had been established in the first place.

There is room for a debate on that topic, but not tonight. The freedom for people to decide what they do with their voluntary giving seems a pretty important principle. But there is an issue as to why charities do not merge. In my research, this is for one of two reasons. One is amour propre among the trustees, they cannot bear to collaborate and they would rather work on their own than work together. But there is another important technical reason that concerns bequests and wills. This is where we come to the relevance of our debate tonight. As many Lords will know, bequests and wills are a very important source of fund-raising for charities, but they obviously take time to emerge because unfortunately it requires the person who made the bequest to die before the money changes hands. Importantly, where two charities merge, and as a result one disappears, a bequest to the latter may well be null and void unless the wills are drawn appropriately widely.

I will give a quick example. Let us assume that the noble Baroness, Lady Bakewell, and I have both set up separate dementia charities, and after a period of time we agree that we should merge them. We go to the Charity Commission, we get it blessed, and it is all done properly and above board. We also agree that because her charity is larger and more famous than mine, hers should be the surviving charity, and that the Hodgson charity should just disappear. But if the Hodgson charity was hoping for a legacy, it may be that because of the way trust law is drawn, that bequest will be null and void, because there is no longer a Hodgson charity to which the bequest can go, and therefore the bequest must go back into the estate from which it was originally drawn. That seems to me an entirely counterintuitive outcome. The person leaving the money wishes to leave some to the dementia sector, and the merger has been approved by the regulator—so why should the bequest then fall foul of what I would consider a narrow technicality? I understand that that is not my noble friend’s direct responsibility, but I use this opportunity to urge him to remind his colleagues in the Ministry of Justice and the Cabinet Office, as well as the Law Commission, that there is an issue here that is worth tackling. It applies with equal force to powers of attorney, to which the noble Baroness referred. As people live longer, there may be longer periods when they are not compos mentis. The role of family members and advisers holding a power of attorney needs to be similarly properly and widely drawn to avoid the counterintuitive outcomes that I have just described. I am not clear whether the prescribed form of the lasting power of attorney has sufficient flexibility built into it to enable this to happen.

Finally, this issue also applies to standing orders and direct debits. Banks will refuse to redirect such payments to the surviving entity. Instead, they require all direct debits and standing orders to be re-signed. Noble Lords will be perfectly aware that if you tried to get all direct debits and standing orders re-signed, the fall-out rate would be very high indeed, with a very big consequential loss of funding to the charity hoping to receive them.

To conclude, the issue of the implications of dementia is an important and growing topic. My intervention seeks merely to urge the Government to ensure that legal practices are kept up to date with the evolving conditions of our society and, in so doing, maintain the badly needed flow of funding to charitable and voluntary groups, dealing with the very difficult problems of our society, including dementia and other progressive diseases.

20:12

[Baroness Flather (CB)]

My Lords, the noble Baroness, Lady Bakewell, has brought to us a subject that we all need to consider. I cannot see anybody here who is a child anymore, and I think that it is important for us to think about this. I have always felt that in this country—and maybe in other countries as well—people do not want to think about the end of life. They are frightened of dying. It is a very strange thing, because the one thing that we are certain of we are most frightened of, and you would think that that was very strange indeed. I do, because I have never felt frightened of dying. When I was 12 years old, I remember very clearly thinking at bedtime, “What is it that I would have done if I do not wake up tomorrow morning?”. It does not make a lot of sense, but at least I thought about it and it did not worry me. It actually made me think about things that I should try to do.

If you try to talk to people about dying, they are upset. You cannot even use the word “death”. You have to say “passed away” or “not with us any longer”, or use other euphemisms. As human beings, we all have to accept the inevitability of dying. Therefore, like anything else that we arrange in our lives, we should arrange our death. We should plan what we want done when we die, and how it should be done. We should plan around our own personal worries about being ill and sick and having dementia—anything and everything.

The idea of making advanced decisions and having a lasting power of attorney are excellent, but how do you access the wishes of that person? I have looked through all the bits of paper that I have seen, and there is nothing that tells us how it can be done easily and clearly. We very much need to concentrate on the decision of the person who is ill and may be dying, who does not want to be resuscitated time and again. There are cases of people being resuscitated three or four times in a matter of months. That is just not right in the sense of humanity—it is not right for that person. There is no quality of life for that person.

I first read about Dr Gawande in a wonderful article in the New Statesman. That man has his finger on the absolute pulse of what we need to be doing and thinking about. He believes in looking after people, but he also believes in respect for the patient’s views, to the point when he says that the time may come when a patient needs to be able to ask for assisted dying. That man must have a most wonderful understanding of human beings, and the more that we follow what he suggests, the better we will be.

I hope that we can find a way in which to make sure that our advance decisions, such as through the LPA, are there to let everyone know our wishes. We would like to know that whatever we have wished for will be accessed before it is too late. There is talk about a national database, but could we not wear a little bracelet like the Medic Alert bracelets, when we are getting very ill, which would say, “Please look at the database for my wishes”? At least that way people cannot say, “Oh, we did not know that you had wishes”. That is the point—whether anybody knows that you have wishes. I am hoping that my son will have power of attorney for me, but he is a doctor, so it is very simple for me. Not everyone has a son who is a doctor, however, and it is very hard even for family members always to make the right decisions. Therefore, discussion between the parent and the attorney or child is essential.

I hope that something will come out of this discussion and that we will have some way of actually finding out what the person’s wishes are. The noble Baroness, Lady Bakewell, said that it is very difficult to make a power of attorney. She referred to the experience of the noble Baroness, Lady Afshar, who took a very long time to do it. That is ridiculous: if you are trying to do something, and it is so difficult to do, then obviously a lot of people will be put off from doing it. It seems such a good idea that it should not be difficult to do it, and it should be possible to simplify the forms. I hope very much that something will be taken back and we will be assured that we can make decisions while we are capable and that they will be followed.

20:18

[Lord Joffe (Lab)]

My Lords, I enthusiastically support my noble friend’s Question to Her Majesty's Government and concur with everything that she said in her impressive opening speech. The issue of advance decisions is not a minor one and must be addressed. With an ageing population and much suffering towards the end of life, it is of critical importance because every one of us will die one day and we would all wish our last days to pass with a minimum of suffering and with the care and treatment that conforms to our wishes. Advance decisions are the key means of achieving this, as otherwise it may be too late if we have lost the ability to communicate.

I speak with some authority on the issues raised, as I was diagnosed with having signs of early Alzheimer’s disease five years ago. However, I was fortunate in receiving invaluable advice from my NHS GP and consultant. This was that, while current treatments did not slow the underlying disease, there were treatments available that would provide symptomatic benefit in coping with the disease. More importantly, the advice was that I should start to wind down my commitments and plan my future. Following this advice enabled me to eliminate my worries about losing my memory and to plan the rest of my life. I strongly endorse what my noble friend has said about the importance of early diagnosis. It seems to me that a responsible general practitioner should be considering with elderly patients, and taking up with them, the issue of how they want to plan the rest of their lives.

As part of this planning process, advance decisions are the natural way to ensure that their wishes are followed as to how they would like to be treated and cared for when they no longer have the capacity to make such decisions themselves or to communicate. Advance decisions are not only about refusing aggressive medical treatment to prevent intolerable suffering. They can, and should where possible, go beyond that to record the patient’s decisions and wishes—for when they no longer have the capacity or cannot communicate —on their treatment or non-treatment, on who should care for them, on how their costs should be provided and on the extent to which they would hope their families and loved ones would care for them. They may or may not decide to include a request to reject aggressive medical treatment in order to prolong their lives, but the importance of recording their wishes for their end of life is paramount. Unfortunately, the current evidence is that only about 4% of UK citizens have signed advance decisions. This contrasts with the position in the USA, where such decisions are common and are encouraged by positive legislation in most states. Indeed, President Obama in 2009 announced that he and his wife had living wills and encouraged everyone to have one.

In 1998, a document called Five Wishes was prepared with the help of the American Bar Association in the USA. It combined the living will and healthcare power of attorney. The five wishes include the kind of medical treatment the person wants or does not want; the kind of “comfort care” they would like—which embraces pain management and palliative care—and what they would want their loved ones to know, such as forgiveness and final wishes for burial and memorials. According to Wikipedia, more than 18 million copies of this document have been distributed worldwide.

It is encouraging that the Government have expressed their support for addressing the issue of advance directives. However, comforting words and setting up forums are not enough to lead to change in the foreseeable future. What is clearly needed is speedy and energetic government leadership, including appropriate resources, to achieve real change in one of the most important areas in which an ageing population needs support. More particularly, the Government should actively promote to patients the need for an advance decision and for the NHS to ensure that all health providers, including GPs and the hospital and ambulance services, have appropriate procedures for recording and making accessible advance decisions to their staff before patients with life-threatening illnesses or injuries are treated.

20:24

[Baroness Greengross (CB)]

My Lords, it is a privilege to take part in this debate. I declare an interest—apart from my involvement in the International Longevity Centre—as chair, and now co-chair with a Member of the Commons, of the All-Party Parliamentary Group on Dementia, as ambassador for the Alzheimer’s Society and as a “dementia friend”. I congratulate the noble Baroness, Lady Bakewell, on initiating this debate. It is important and has covered a whole lot of areas. I very much agree with her and my noble friend Lady Flather, because one of the issues that the noble Baroness talked about was our unwillingness to face the issue of dying. We forget that dementia is a terminal illness and, if we are going to get things right, we have to be able to talk about dementia as we can now, thankfully, talk about cancer much more easily than we used to be able to.

Although we can talk about dementia a bit more, we do not all realise that there are more than 100 different types of dementia, and some of them are illnesses that enable people to slip in and out of mental capacity and spend a long time being at least partially capable of making decisions and planning their future—in other words, being mentally competent. We all have a certain amount of pride. We want to be sure that we are remembered with some dignity and that some of our dearest wishes will be complied with if we are unable to make sure ourselves that they happen.

It is understandable that everyone is frightened of dementia, because it is now the leading cause of death in women in this country, and the third leading cause of death in men. More than 80% of people in care homes have dementia or significant cognitive problems. It is not a minority issue but it affects so many people. It does not affect just the person with dementia; it affects particularly that person’s carer and sometimes many more people in the family and the immediate friends of that person. Carers do a most amazing job, and I congratulate the Government on having given carers more rights in the Care Act, which is important.

However, one of the most popular areas of advice sought from Carers UK is the Mental Capacity Act. Carers’ thoughts and wishes can be looked at much more easily if a lasting power of attorney has been appointed, because the carer and the person with dementia can rest more easily knowing that the plans for the future will be carried out in accordance with his or her wishes. Many people feel tremendous responsibility that, when they cannot manage their affairs by themselves, their children should not be faced with terrible decisions. They want—I want, and I am sure many noble Lords want—to be sure that there are plans in place so that our wishes can be carried out, and that we do not present our children with dreadful problems and responsibilities. If they have to make decisions, they must try to make sure that they correspond with our wishes.

We are quite accustomed to knowing about this when it comes to money. We know that we can, or have been able to for a long time, make decisions about our money, but very few people know that the lasting power of attorney now includes decision-making possibilities about our health plan. People would be hugely eased if this was better known—if the information was more available. In fact, the lasting power of attorney can deal with our health issues and our welfare issues, as well as our financial issues, and help us to feel relaxed about how our children are going to deal with the future, when we die. They can be carried out, but only if we are all clear about the procedures. It is very important that people do not forget to get things in place in time, as the noble Baroness, Lady Bakewell, made quite clear. The lasting power of attorney can make it very clear who is going to make decisions, which adds to the dignity of the person who has dementia and is going to die at some stage. It is that person’s wishes and advance decisions, not other people’s, which will be taken as read.

It is very important that those caring for people with dementia know that they can get the right advice. I would like to see an Admiral nurse available to every family dealing with dementia. That is not going to happen for a long time, but we need more Admiral nurses and more volunteers for the early stages, so that everybody who is diagnosed—and we need more than 50% of people to be diagnosed—has access to help and advice, either from a volunteer or, later on, from a person who knows enough about the situation to take someone’s hand, whether that is the carer’s or the person’s with dementia, and guide them through this very difficult maze of questions that require answers. If we can do that, we will make life better for people with dementia and those who are affected along with them.

I hope that the Minister will make sure that the Prime Minister’s and the Government’s wonderful achievement in getting a G8 discussion to focus on dementia happens and will be carried forward. It will happen: it will happen with the global envoy; with the national plan, which must be renewed; with the increase in money for research, which must be continued; and with a commitment from everybody in power in this country to make sure that dementia is in the forefront of our thoughts. It is very important and I am sure that the Minister feels the same way.

20:29

[Baroness Wheeler (Lab)]

My Lords, I, too, congratulate my noble friend Lady Bakewell on securing this key debate. Like other noble Lords, I am a huge admirer of her campaigning work on behalf of older people, her mission to get us talking openly and frankly about the ageing process and especially about dementia—drifting into this “unknown world”, as she referred to it in her excellent Suppose I lose it? programme—and her willingness to relate and talk about her own experiences, asking the question that all of us ask ourselves as we get older about whether our memory loss or lapses are just an only-to-be-expected part of the ageing process or represent the early stages of dementia. I really liked her reference in the programme to being as busy and involved as she ever was and to the fact that, despite her fears, if dementia was looming she simply did not have the time to notice it. I hope that that is the case with us all. She is certainly right that staying alert for symptoms and confronting fears early is the best way to grow old.

My noble friend has focused on the urgent need to address end-of-life care for people with dementia and the excellent recommendations set out in the Dementia Action Alliance’s The Carers’ Call to Action. Encouraging the preparation of living wills and LPAs also applies to serious or degenerative illness and long-term conditions where, although the person is stable and may have a good quality of life for many years to come, the unknown can still be expected, such as with stroke or heart disease. Although we all agree on the need to keep hammering home the message about preparation for what is or may be to come, going down the actual route of finding out about and preparing documentation and legal forms before anything happens is something we just do not like to face or we put off.

On dementia, it is important to encourage early stage sufferers to take out advanced directives or statements, or a personal welfare LPA. However, we have to recognise that the growing problem out there relates also to finance and resources issues, with legal disputes over wills made by dementia sufferers rising sharply. In the Newcastle Journal, a recent article reported that a local firm of solicitors estimated that disputes involving cases where wills were contested as having been made by people lacking the appropriate mental capacity had risen by over 50%.

Some of those claims related to wills made by people who did not know that they were suffering from dementia at the time, or they involved people who, because of fear and stigma, did not tell the solicitor about their illness and therefore the solicitor was not able to undertake any process to try to test their mental state or capacity. Where property and assets are involved, we also need to stress the importance of good legal advice to avoid vulnerable people making wills that turn out to be invalid, and of taking out the finance and resources LPA, conferring powers for people to act on their behalf if they become incapable of doing so themselves.

As well as being costly, the process of preparing an LPA is daunting. As you get older, understanding the legal processes and documentation, as well as appointing attorneys and replacement attorneys, become more and more difficult, as your contemporaries and the people you would trust to do this are the same age as you and you fear that they may pop off before you. Children and family members undertake this role but, in the case of single people without family, it can be a real obstacle. Affordability is also a key issue for probably most of the vu1nerable people we are talking about. Many solicitors undertake this work on a fixed-fee basis, but the leader of our local carer support organisation, of which I am a trustee, recently told me that for most of the carers and cared for whom we deal with, being unable to afford the legal costs was a major issue.

Thankfully, however, the advance decision or statement process is straightforward, and I commend the excellent Age UK factsheet covering this. I wish that I had seen it when our family was experiencing the first hours of my partner’s major stroke seven years ago—or, obviously, ideally beforehand. The Alzheimer’s Society’s two-page advance decision form is also excellent. I hope that it is out there in GPs’ surgeries, hospitals and hospices so that professionals can guide patients and their families to it. There was no advice at the hospital or talk with me or our family about these issues from medical, nursing or any other staff when my partner faced a really critical 24 hours in A&E and the ICU. I hope that these processes have now much improved and that the Minister can reassure me that he is confident that that is the case.

The developments in medical science mean that more lives are now saved than ever before, but they also mean that preserving life without any real hope of a full recovery is ever more real. The advance decision and statement process recognises that competent and informed adults who are capable of understanding the implications of their decisions have an established right in common law to refuse medical procedures or treatment.

My noble friend stressed the importance of medical and social care advice and support for patients contemplating living wills and for their carers and families. It is all part of the vital communication process that needs to take place with people facing long-term or terminal illness concerning the reality of their situation and the impact of the treatment options, as well as the need for a meaningful discussion about their end-of-life wishes. The medical and nursing professions have improved considerably at having these conversations with patients, and the hospice movement has led the way on this. However, the experience of patients and carers shows that there is still much to be done to improve medical and nursing skills in this regard, and I hope that the Minister will be able to tell us how training and development issues are supporting this.

I was fortunate to be present at one of last year’s Radio 4 Reith lectures by Atul Gawande, the American physician, well known international lecturer and New York Times columnist, which led me to read his recent book, Being Mortal: Illness, Medicine and What Matters in the End. This deals with end-of-life care and how difficult it is for surgeons and other medical staff to have the “hard conversations” with patients that need to take place.

Although set in the context of the American healthcare system and focusing mainly on people with terminal illness, the case studies are of US Medicare and hospice care, so they have a strong resonance with our experience here. Dr Gawande describes pretty graphically how difficult it is for medics to discuss with patients what he calls the “larger truth” about their condition and the ultimate limits of doctors’ capabilities in treating them, let alone what matters most to patients when they face serious or degenerative illnesses or they near the end of their life. It is a very thought-provoking book and I commend it to noble Lords as it deals with the importance of trying to ensure that patients are not kept alive artificially if suffering from a terminal illness.

In a hospital in Wisconsin, over a number of years a systematic campaign took place to get medical staff and patients to discuss end-of-life wishes. This was developed into a hospital-wide standard procedure with the use of a multiple-choice form, much along the lines of our advance decision process but with a more detailed questionnaire. In time, 85% of patients who died in that hospital had a written advance directive, and doctors virtually always knew of the instructions and followed them. I quote from the book:

“This system meant that people were far more likely to have talked about what they want and what they don’t want before they and their relatives find themselves in the throes of crisis and fear. The discussion, not the list of questions, was what mattered most”.

I conclude by underlining my noble friend’s reference to the national dementia strategy, which urgently needs to be updated, and echo the calls made in her programme by Professor Rowan Harwood for it to address how we actually care for people with dementia and support the carers and care workers that care for them. His work at the Queen’s Medical Centre in Nottingham in adapting Ward B47 to meet the complex needs of patients with dementia seemed to display the understanding about care and treatment that we must aim for in the future. It also resulted in savings in hospital costs, so I look forward to the Minister’s comments on this.

19:35

[The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)]

My Lords, I am very grateful to the noble Baroness, Lady Bakewell, for bringing this important issue to the House. At a time traditionally associated with making resolutions it feels like a particularly appropriate moment to be considering how we plan for later life together with our families and loved ones. I hope she will agree with me that the contributions from all speakers this evening have combined to make for an excellent debate.

I am sure all noble Lords would agree with the basic premise that all citizens should be cared for and treated in a manner that they themselves would choose, at a time in their life when they may no longer be able to make decisions themselves. The Mental Capacity Act 2005—the MCA—provides the legislative framework for how caregivers should support individuals who may lack the mental capacity to make decisions themselves. The Act and its associated code of practice emphasise the importance of treating each person as an individual and of seeking out their particular wishes and preferences, to ensure that any decision made is in the best interests of that person.

Noble Lords will, I am sure, be aware of the excellent work of the Select Committee of this House which scrutinised the implementation of the MCA last year. Its report, published in March 2014, highlighted that awareness of the Act was poor and that as a result many individuals were not aware of or taking up their legal rights. The Government embraced this finding and set out a programme of work in our response, which was entitled Valuing every voice, respecting every right. The response sets out the great challenge we face—essentially that of bringing about a change in culture whereby individuals are comfortable talking openly with friends and families about their wishes for later life and where wider society treats those who lack capacity with the same respect as those who have capacity.

The noble Baroness asked specifically about lasting powers of attorney—LPAs, to use the abbreviation—and living wills. An LPA allows someone with mental capacity to appoint an attorney to look after their affairs in the event that they lose capacity at some point in the future. As well as the traditional property and finance LPAs, the MCA legislated for health and welfare LPAs, which, I believe, are the focus of the noble Baroness’s question. There are currently more than 1.3 million LPAs registered, and applications are increasing at a rate of 20% year on year. This is good news, but we do not intend to rest on our laurels, especially when we look into the statistics and see that for every three finance and property LPAs registered, only one health and welfare LPA is recorded. The Office of the Public Guardian, which has responsibility in Government for registering LPAs, is using all available opportunities to raise awareness of LPAs through conference events, media engagements and work with multiple partners across finance, legal, health and care settings.

A number of noble Lords voiced concerns that executing an LPA is difficult and complicated. A good example of recent success is the LPA digital tool. This tool allows applicants to enter all the required information step by step on a personal computer and then simply print it out, add the relevant signatures, and send it to the OPG. This online service was the first so-called “government digital exemplar” to pass the Government Digital Service’s stringent new 26-point test. We believe and hope that this user-friendly service will help drive further increases in LPA registrations.

In 2015, the Department of Health and the OPG will continue to work closely to raise awareness of health and welfare LPAs. The department is in the final stages of production of a statement of rights which will inform the public about their rights under the MCA, including their right to make an LPA. In addition, the OPG is looking at how LPAs are used and will look to include use within the NHS as part of this project. This should lead to potential new guidance for the health system on LPAs.

Noble Lords will I am sure be aware that overall policy responsibility for the Mental Capacity Act lies with the Ministry of Justice. This was referred to by the noble Baroness, Lady Bakewell. I can inform the House today that the Ministry of Justice plans to run a campaign to raise public awareness of the options for planning for the future and encourage members of the public to think about what would happen in the event of their death or if they lost their mental capacity and needed someone to make decisions for them.

As for living wills, an issue which was mentioned by a number of noble Lords, the House will be aware that this term has no strict legal meaning but in common usage can be taken to describe an individual’s wishes and views about any future medical treatment or indeed any other care, support or lifestyle preferences. An advance decision to refuse treatment however does have a specific legal meaning under the Mental Capacity Act. End-of-life decisions are intensely personal matters. As individuals, our views on how we would like to be cared for can change over time, even when we still have full mental capacity. The Government’s policy is to seek to ensure that individuals are aware of their rights under the law—to make them aware that they have the choice to make a living will or advance decision to refuse treatment—but fundamentally to allow the individual to decide if they want to exercise this right. Our awareness raising efforts here are tied closely to our work to raise understanding of the wider provisions of the MCA. This work is multi-faceted: professional training, which I will mention again in a moment; revising our national governance structures; and ensuring that the MCA is a key line of inquiry in the Care Quality Commission’s new inspection model for care homes and hospitals.

The noble Baroness, Lady Bakewell, cited various obstacles which she felt can deter people from registering an LPA. One of these was the cost factor, which was also mentioned by the noble Baroness, Lady Wheeler. The OPG appreciates that the cost of making an LPA may be an important factor for those who wish to plan ahead. The cost of an LPA is £110. LPA forms, however, have been designed so that they can be completed without a solicitor. However, if a person chooses to seek advice from a solicitor they will have to pay the solicitor’s fees, which may vary and, of course, are a consideration. Another obstacle cited by the noble Baronesses, Lady Bakewell and Lady Flather, was that of complexity. We need to look at the balance of the arguments here. On the one hand, as I have mentioned, there are more than 1.3 million current instruments registered and LPA applications are increasing at quite a rate. Nevertheless, the OPG recognises that it is important to ensure that the LPA process is as straightforward as possible and acknowledges that some people find the existing LPA forms too complex to complete without legal assistance. It continually reviews its forms to make sure that they are easily understood. The OPG is also rewriting and restructuring its guidance and correspondence on LPAs so that it is clear, consistent and accessible to all.

The noble Baroness, Lady Bakewell, asked whether Scottish powers of attorney were recognised in England and Wales. We are aware of the important question of cross-border recognition of powers of attorney, and are considering how best to address it. We are in frequent communication with our colleagues in the devolved Administrations—for example, in Northern Ireland, where that Administration is consulting on new mental capacity legislation based on our Mental Capacity Act. Clearly, raising awareness of issues surrounding mental capacity is a UK-wide concern. My officials intend to share learning with colleagues in the devolved Administrations as part of our upcoming work programme. I will be happy to write to the noble Baroness with the precise legal response in terms of the validity of Scottish lasting powers of attorney in England.

I agree with the noble Baroness that raising awareness is important. We recognise that awareness among the general public of what an LPA is and the benefits of having one is low. We are working to increase this level of awareness, as I described. Having said that, we would not seek to tell adults that they should have an LPA; ultimately we believe that this is a matter of personal choice. My noble friend Lord Hodgson asked whether someone could use a power of attorney to make decisions about legacies. There are exceptions to the decisions that an attorney may make. I would be happy to write setting out these exceptions in more detail.

I take the point made by the noble Baroness, Lady Flather, that it is important for people to know if someone has an LPA in place. Good practice is always changing, but we should not forget that lasting powers of attorney are registered by the Office of the Public Guardian, which maintains a register. Those who wish to know whether an LPA is in place may apply to the OPG to search the register. The noble Baroness, Lady Greengross, stressed the importance of carers. I absolutely agree that carers do a fantastic job supporting those who lack capacity. I am pleased to say that my department has worked closely with the Standing Commission on Carers—

[Baroness Flather]

My Lords—

[Earl Howe]

There is limited time.

[Baroness Flather]

Yes, I will be quick. The Office of the Public Guardian charges a lot of money to give the information.

[Earl Howe]

I will write to the noble Baroness about that. The Standing Commission on Carers, which represents the needs of carers to the government policy-making process, is a body we are working closely with. It will help us channel our new statement of rights directly to carers, providing them with an understanding of the rights of the person they care for under the law.

The noble Baroness, Lady Wheeler, spoke about the need for professional training. I agree that that is vital. Health and social care professionals need to learn the basics of the MCA through their initial training and to keep updated on this through continuing professional development. Health Education England provides national leadership for planning and developing the whole healthcare workforce. The mandate set for it by the Department of Health specifically states that Health Education England should,

“work with … partners … to improve skills and capability to respond … to the needs of people who may lack capacity as well as maximise the opportunities for people to be involved in decisions about their care”.

The noble Lord, Lord Joffe, indicated that he felt that there was a lack of government leadership in this area. I would defend, in fact, our leadership record. We do not want to shy away in the least from our responsibilities when it comes to supporting better implementation of the Act. The legislation underpinning the MCA has been widely praised. Indeed, only a few months ago, we were visited by a delegation from the Swedish Government, who are looking to learn from our legislation as they draft their own. The problem is not the framework. The problem is a lack of understanding at the local level on the ground. It is the Government’s belief that the primary drivers of better implementation of the MCA are local organisations—hospitals, care homes, local banks and solicitors. That is why we intend to make the new national mental capacity forum, which we are setting up, predominantly outward looking. Its emphasis will be on forging collaborations, but then taking these out into the country and putting actions in place at the local level. I would be happy to write further on that, when I do write, as I shall, after this debate.

I have overshot my time but, in conclusion, I emphasise that planning for a time in later life where we are unable to make our own decisions is something that we are all likely to benefit from and which can ease the burden on our loved ones. Unfortunately, as the noble Baroness, Lady Flather, reminded us, I know many people find this type of conversation uncomfortable—even morbid, perhaps. That is to an extent understandable: no one wants to dwell on the possibility of a serious debilitating disease or, indeed, on death itself.

Ultimately, however, planning for the future can be greatly empowering. It can provide a degree of comfort as we approach a vulnerable period in our lives, it can allow us to determine how we are treated—which itself can improve our well-being and health outcomes—and it can provide comfort to our friends and family. The Government are determined to support our citizens in this regard, and the thoughts and expert advice of noble Lords are, as always, most welcome.

House adjourned at 8.56 pm.