Grand Committee
(9 years, 11 months ago)
Grand CommitteeRead Full debate Read Hansard Text
Small Business, Enterprise and Employment Bill
(9 years, 11 months ago)
Grand CommitteeRead Full debate Read Hansard Text
The Deputy Chairman of Committees (Lord Brougham and Vaux) (Con)
My Lords, I do not think that there will be a Division but if there is we will adjourn for 10 minutes.
Clause 114: Power for administrator to bring claim for fraudulent or wrongful trading
Amendment 61ZA
“( ) This section shall not come into force until the Secretary of State has carried out a full review of the impacts of abolishing the time limits for administration and the effect of such a change on this section.”
Lord Stevenson of Balmacara (Lab)
My Lords, I speak to Amendment 61ZA in the name of myself and my noble friend Lord Mendelsohn, who is not able to be present today—I am sure to the considerable dismay of his growing fan club. I am sure that no one involved in this section of the Bill would resile from the view that we in the UK have an incredibly successful insolvency regime in terms of the numbers of businesses saved and jobs rescued from businesses that have gone into administration or insolvency. We have a much admired insolvency service within BIS and we recognise the good work that it does. From a regulatory and professional perspective, Britain’s regime is the envy of many countries around the world. It is a powerful regime with a strong track record of success. If we want to change it, we have to be clear that what we are doing is well argued and it should be done with care and caution.
The Government have returned to the subject of insolvency on a number of occasions, including in the Legal Aid, Sentencing and Punishment of Offenders Act, the Deregulation Bill and now in the Small Business, Enterprise and Employment Bill. It certainly gives the impression of a Government who are tinkering, rather than going for a bold expansive plan for this area. That is a pity because as we go through the Marshalled List today I think we will find that there are a number of issues which may need attention, if not now, in the near future.
Our amendment deals with Clause 114. Broadly we support any moves that make it easier for administrators or any other wronged parties to take action against fraudulent trading and to catch delinquent directors. The clause aims to do just that and we think it is a sensible change to allow administrators the same right as liquidators to bring wrongful and fraudulent trading actions, therefore allowing more actions to be taken overall. However, we have some reservations about how this clause will work in practice.
Company administration is a useful and important tool, which is often successful in terms of saving jobs and recouping creditors’ money. It aims to give the business the opportunity to trade out of the position that it is in. Often, employees who would lose their job under liquidation can retain their job under administration and move on to continue to work for a company under either similar or, usually, new ownership.
On that basis, it is important that we recognise that administration is an important tool for businesses that are struggling. However, administration is, at the moment, defined in terms of a short-term procedure, time-limited to 12 months. But some of the processes which are required to get a business back on its feet can take longer than 12 months. Therefore, this may act as a disincentive for businesses to go into administration; they may prefer liquidation.
In the other place, a similar amendment took as an example a business that had traded fraudulently or wrongfully. Clearly, it should be held to account for that, but in cases where that is likely it is important that we do not see businesses continuing to trade beyond the point where they are insolvent because they are frightened of the administration process. Does the Minister agree that extending the provisions on liquidations to administrations is unlikely of itself to deliver much practical change if businesses treat administration as a dynamic and short-term procedure and the existing time limits remain in place?
The period of one year, even allowing for possible extensions which I am aware are available within the procedures and can be granted but need to be applied for, does not generally allow enough time to begin a wrongful trading action and see it through to conclusion before the end of the administration. This means that somebody else has to take on responsibility for that after the period of administration has occurred. There is a possibility, although I agree it might be remote, that the short timeframe could create incentives for delinquent directors to adopt obstructive and delaying tactics to hold up proceedings, and therefore get away with wrongdoing. So we on this side are not convinced that extending the wrongful and fraudulent trading provisions into the realm of administration will be successful as long as the provision for automatic termination of administrations within one year remains. That is why the amendment we have proposed to this clause gives the Government the opportunity and space to address these concerns by investigating whether that period of administration should be extended in more general terms or, if not, by considering the likelihood of this new regulation delivering what the Government intend.
The Minister’s colleague in another place suggested that the evidence from Companies House data for a sample of cases has shown that around 90% of administrations are concluded within two years. We think, therefore, that a two-year period would be better for this new initiative, although we would like to see more evidence before a decision is reached. I beg to move.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
I thank the noble Lord for helping us to probe the effectiveness of Clause 114, which of course was put forward as part of the Red Tape Challenge. Like him, I am sorry that the noble Lord, Lord Mendelsohn, is not here today. I thank the noble Lord, Lord Stevenson, for his kind words about BIS and the Insolvency Service, which of course has been intimately involved in preparing for the Bill and associated legislation.
Because of our concern to help small business, insolvency has recently been subject to the Red Tape Challenge, and suggestions made from across all parts of the industry have been incorporated into this Bill. Alongside measures being taken forward elsewhere, these clauses on insolvency will lead to improvements in the efficiency of our processes. The efficiencies will provide a total of over £30 million a year more for creditors, many of whom of course are small businesses—which underlines the purpose of the Bill.
Administration is the primary corporate rescue procedure in the UK. It is well respected internationally for its speed and the size of its returns to creditors, which many compare favourably with similar procedures in other countries such as Chapter 11 in the USA, which was mentioned at Second Reading. We are working with the industry to take forward the voluntary reforms set out by the Graham review, while taking a new power—this is important—in case the voluntary reforms do not bring the desired confidence.
Amendment 61ZA would delay the introduction of this clause and would force government to review the impact of abolishing the administration duration time limit. Administration is a dynamic procedure, and we want administrators to take swift action to restructure and rescue businesses where at all possible. For this reason, there are time limits; I think there is agreement that there should be.
Currently, administration lasts for 12 months with the option to extend it by six months. With the consent of creditors, we are seeking to extend this to 12 months. We do not consider that an administration should last indefinitely and do not intend to review the time period further. To allow companies to remain in administration for longer than necessary would add unnecessary expense to the procedure and, in some cases, might even give the insolvent business an unfair advantage over competitors.
I take the point the noble Lord, Lord Stevenson, made, that where an administrator commences a wrongful or fraudulent trading action he fears that the claim could take more than a year or two to complete. However, I do not think that that time limit will necessarily reduce the effectiveness of the right proposed under Clause 114.
During debate in the other place, concern was raised as to whether this clause will be used, bearing in mind that it may take longer to conclude such a claim. However, Clause 124 will enable creditors of the company to consent to an extension of the administration by an additional year, and the court has power to grant extensions beyond that.
Clause 114 was suggested by insolvency practitioners as part of the Red Tape Challenge. Our earlier consultation suggested that delaying its introduction pending a review, or completely removing the time limit on administration, would not be well supported by many stakeholders, particularly creditor groups. For this reason I hope that the noble Lord will be reassured and will withdraw his amendment.
Lord Stevenson of Balmacara
I thank the noble Baroness for that reply. I should have said at the outset that I was grateful to her and to her colleagues for organising a couple of meetings on this issue, which a number of noble Lords present attended and which were very helpful in providing us with background to this section of the Bill.
In her response the Minister alluded to the question which has been long debated but is still unresolved, of whether Britain should have a Chapter 11-style approach to trying to maintain companies that get themselves into difficulties. I have amendments later on in the Marshalled List, where we will come back to the more substantive issues here, so I will not deal with that in any detail now. However, it is worth saying that while the detail of Chapter 11 is not appropriate for translation across to the British system—or at least not at present—the one important thing that comes through in that is a very strong sense that existing companies should be retained and encouraged to try to trade themselves through the difficulties that they may be experiencing at the time. It is in that sense, and that sense only, that the questions posed in my original statement still hang in the air.
There is an awkwardness here. A one-year administration when many processes need to go beyond two years, a need to apply to courts or to other authorities to get an extension of the administration period, perhaps to two years, and the knowledge that most administrations actually complete within two years all suggest that there is a bit of a case here which would provide the struggling company, which will eventually be successful but is currently going through difficulty, an easier route through. I do not put it any stronger than that. That was behind the letter but the Government have set their mind against it. We will probably have to come back to this at some future date but at this stage I withdraw the amendment.
Lord Flight (Con)
My Lords, I will repeat and add to the comments made about the UK insolvency regime. It is fair to describe it as probably the best in the western world. It is thus rated by the World Bank. It returns more money to creditors faster and cheaper than the systems of the US, Germany or France. UK insolvency practitioners return more than £4 billion a year to creditors, including HMRC. There are some 1,700 insolvency practitioners in the UK and around 10,000 professionals who work in insolvency. Most insolvency practitioners are accountants or lawyers. They are all qualified and regulated, and have a statutory objective to maximise returns to creditors. According to the latest figures, for 2012, UK IPs saved more than 750,000 jobs and advised more than 95,000 businesses, with just under 50% continuing in some form.
Our arrangements have developed from statute law, from common law and from practice over many years. I am nervous about quite a lot of the tinkering with the system in the Bill, which is not necessarily for the better. As your Lordships will know, the professional body representing the profession is R3. The members range from senior partners of the big four accountancy firms to those who run their own small businesses. I am grateful to R3 for getting me up to speed considerably in this territory and I apologise in advance if I get some things wrong. It is not really my main territory.
It strikes me that the Treasury has not had as much dialogue with R3 as it might have done. I asked if anyone had had a meeting with the Minister and the answer was no. It is probably R3’s fault, but before this legislation gets completed it would be sensible for the Government to have a session with R3 going through its concerns in more detail.
Clause 116 appears to state that any proceeds of a claim—for example, transactions that undervalue—received by an administrator would be unavailable to the holder of a floating charge. This strikes me as unfair because the actions of a director that led to the claim will be putting the floating charge holder in a worse position, whereas the successful action will benefit unsecured creditors. This does not strike me as particularly equitable. This issue may be able to be dealt with by modifying the clause and, as far as I can tell, the clause does not automatically mean that unsecured creditors are excluded but it certainly needs a little more explanation.
Clause 124 allows an administrator to extend administration for a year—previously, it was six months—with the consent of creditors. This gives the administrator too much flexibility to let residual matters drag on if a long extension can be obtained. It is not unknown for the insolvency practitioner to get case fatigue when dealing with less interesting matters that are not at the front end, which is to the disadvantage of all creditors, and the extension could exacerbate this. I might add that this point is not especially supported by R3 but I do not see the need for an extension from six months to a year.
These two clause stand part Questions have been tagged on with my Amendment 61AJ, which goes with Amendment 61VA, and is about something entirely different. From this coming April, directors who commit fraud, are negligent or wrongly take money out of business can walk away with more than £160 million a year—money that is owed to creditors, including small businesses and the taxman. To prevent this from happening, the creditor representative groups, including the Chartered Institute of Credit Management and the British Property Federation, are calling on the Government to grant insolvency litigation a permanent exemption from the Legal Aid, Sentencing and Punishment of Offenders Act 2012. These groups wrote an open letter to the Prime Minister last October outlining their concerns but have not received a response. The issue is relevant to the Bill because it deals with tackling director conduct and returns to creditors.
From this April, the new regime for insolvency litigation will thus leave creditors out of pocket and create a system whereby directors who have committed misconduct could get away with their actions. The current funding regime for insolvency litigation also protects the public interest and public money—the two objectives that LASPO originally sought to address. It deters white collar crime and puts money back in the hands of creditors.
Insolvency litigation is a vital tool for recovering and returning money from rogue directors back to creditors, and conditional fee arrangements and after-the-event insurance are needed to fund insolvency litigation because there is often no money in an insolvent state to fund this type of action. There are many other benefits to using the current regime; the costs in a successful case are paid for by the director who has committed misconduct and, in most cases, the simple threat of the CFA-ATE regime leads to the directors or third party settling before being taken to court.
The impact of the reforms on insolvency litigation was not considered during the consultation phase of the policy, nor in the Bill’s impact assessment. The Government therefore granted a two-year exemption to allow time to seek alternatives to the current regime. Independent research, which considered virtually all cases that used insolvency litigation in 2010, has since shown that no alternatives will ensure that the same amount of money is returned to creditors. Since the report showed that there were no alternatives, the Government have changed their justification for the temporary exemption from allowing time to find alternatives to allowing those involved time to prepare for the changes. The change in justification, without any government review, is less than desirable—especially as independent evidence demonstrates that the current regime has clear benefits.
My amendment has been drafted in consultation with barristers; its wording is that of the current exemption and would therefore provide insolvency litigation with a permanent exemption from the litigation funding changes made by LASPO. This is an issue that is slightly aside from the main part of the section on insolvency but I should like to think that the Government will consult further on this territory.
I should also have started off by declaring my interests, as listed in the register.
Lord Stevenson of Balmacara
My Lords, I have little to say in response to the substantive points raised, but I would like to put it on the record that we have also received a lot of assistance from R3, and I certainly commend the suggestion made by the noble Lord that perhaps a discussion with that group might be helpful to round out the understanding of the position it is adopting in these matters.
Baroness Neville-Rolfe
My Lords, I thank my noble friend Lord Flight for his arresting figures on the strength and success of the insolvency industry, returning more money to creditors—£4 billion a year—than most other similar regimes, as well as a job-saving role. That is a cameo of success that we can only support. Indeed, I would be delighted to meet representatives from R3, as my noble friend Lord Flight has suggested and the noble Lord, Lord Stevenson, has supported. I reassure the Committee that R3 representatives met officials during the course of the Bill, and clearly they have met opposition Peers, but it would make a great deal of sense for us to try to fit in a meeting before Report. In the mean time, I will try to deal with some of the concerns which have been raised.
Clauses 116 and 124 concern corporate insolvency, and primarily administration. These measures are part of ensuring that the administration procedure, which is critical to the success of distressed companies in the UK, remains fit for purpose. Clause 116 is technical and relates to the order of priority for the payment of claims in a corporate insolvency. Generally speaking, after payment of the expenses and preferential creditors such as employees, any debts secured by a floating charge—bank debt is often a floating charge—are paid, and only thereafter are the ordinary unsecured creditors paid. However, the proceeds of a wrongful trading claim do not follow this order of priority. Such a claim is where a court has ordered that the directors should pay money to compensate creditors for their loss, having knowingly caused the company to trade while insolvent, such as where the directors have caused an insolvent company to take customer deposits for orders that they ought to have known could not be fulfilled.
Case law has established that these proceeds are not treated as assets belonging to the company prior to the insolvency. They are therefore not assets of the company at the time that the floating charge crystallises at the onset of formal insolvency. This means that the proceeds are not paid to the floating charge holder. Instead, they form part of the sums available for payment to unsecured creditors. I hope that I will be forgiven for explaining all this, but I found it very helpful myself.
It has been suggested that it is unfair that such proceeds are not available to the holder of a floating charge because the actions of the director which led to the claim may have worsened the position of the floating charge holder. Of course, a bank whose debt is not fully paid by floating charge realisations will rank alongside other unsecured creditors in respect of that part of the outstanding claim and may still share in those assets as an unsecured creditor. Furthermore, it would be open to the floating charge holder to give up its priority and claim for the entire debt as an unsecured creditor.
I would also highlight that the claims to which this clause relates are a very narrow band which have arisen primarily where assets have been sold or transferred for less than their worth, where favoured creditors have been paid off shortly prior to the insolvency, or where the directors have caused the company to trade wrongfully or fraudulently. Those claims will almost always be against the directors or persons connected to them. The intention of this clause is merely to put the existing legal position in respect of wrongful trading into statute. This will provide clarity and remove the risk of future challenge.
Clause 124 extends the period for which an administration can be extended by creditor consent, and I would stress “creditor consent” as this is not an automatic extension for the administrators. As my noble friend Lord Flight explained, an administrator complained that they can be too leisurely about a case, which is not what we want to happen. Administration automatically ends after a year, but there are times when not all matters can be concluded within this period. For example, selling a company’s property, particularly in difficult market conditions, may take longer.
Creditors can currently consent to extend an administration by up to six months. Usually this is enough time to finalise matters, but not always. Administrators must therefore apply to the court for any longer or additional extensions, a costly process that is ultimately paid for by the creditors. Insolvency Service data show that around 12% of administrations last for between 18 months and two years. That equates to around 300 cases per year where, in future, court applications costing around £5,000 will not be required, which will mean a substantial saving to creditors. If creditors are content to allow an administration to continue, they should be able to agree to that. If not, they can refuse consent. In setting the maximum period to which they can consent we have drawn a balance between making sure that the administrator tends to matters quickly and efficiently, and saving the unnecessary costs of applying to court.
Lord Leigh of Hurley (Con)
I hope that the Committee will allow me to come in after the Minister has spoken—I wanted to hear what she had to say. I declare of course my interests as on the register. Despite the accolades and praise I received in this place recently for my advisory abilities, sad to say they do not apply to my investment abilities. I have seen administrators and liquidators up front at the wrong end, so I have some personal experience—if not professional experience—of what happens when things go wrong. Of course, I very much welcome the Government’s work in controlling legal expenses and pay tribute to the work of the noble Lord, Lord Mitchell, on related matters. In this particular part of business life, however, there is a role for contingent and after-the-event funding. I rise simply to suggest that there may be a happy medium of a temporary exemption to allow time to see how things pan out during the Bill’s passage, if Amendment 61AJ cannot be accepted as a whole.
Lord Flight
My Lords, I thank the Minister for her helpful and constructive response. I am particularly pleased that she is happy to look at the new clause proposed in Amendment 61AJ and to meet with R3 to go through these issues.
Lord Stevenson of Balmacara
My Lords, Amendments 61ZB and 61ADG are in my name and that of my noble friend Lord Mendelsohn, who is today occupied by affairs in Gibraltar—for those who are interested in following his movements.
Our Amendment 61ZB omits the phrase “creditors’ committee or” from Clause 118. It has always been the case that officeholders in liquidations and bankruptcies require official permission to carry out certain functions as part of the process. That is for the very simple reason that the insolvent estate needs to be protected from powers that could have a negative impact on it financially and, as a result, on its creditors and employees.
Those permissions are normally obtained from creditors’ committees or, where there is none, from the Secretary of State or the court. Clause 118 gives liquidators the ability to exercise any of those commonly used functions without gaining approval first. Likewise, Schedule 10 gives trustees in a bankruptcy the ability to exercise any of those powers without the need to obtain approval of either the court or a creditors’ committee or, where there is none, the Secretary of State.
We accept that insolvency practitioners are regulated professionals who are paid to work in the interests of creditors and to protect the monetary value of the estate, and that in most cases any misconduct would be dealt with by their own regulatory structures. However, in the small number of bankruptcy cases in which creditors’ committees are used, we feel that these committees can be a very useful way of empowering creditors. Obtaining permission from creditors’ committees is also accepted to be far less costly than an application to the court, or even to the Secretary of State; they are likely to be local and therefore less costly to reach, and since they are stakeholders in the enterprise, in a way, they will know the background and are therefore more likely to reach quick decisions.
We therefore have some doubts over whether the need to seek permission from such a committee should be removed altogether under the Bill. What does the Minister believe will be the implications for the continued existence of creditors’ committees if this opportunity to influence the process is removed altogether?
Our amendment would not prevent an IP seeking the permission of the court or the Secretary of State, but would still leave power in the hands of the creditors’ committee. We regard Amendment 61ADG as a consequential amendment, affecting as it does Schedule 10. I beg to move.
Lord Flight
My Lords, the Government’s aim in Schedules 9 and 10 is to create a more efficient process for the Government’s official receiver to be appointed trustee of a banker’s estate—I mean a bankrupt’s estate; it might be a bankrupt banker. This would mirror the provisions for compulsory liquidation and therefore seem logical but the changes set out in Schedule 10 go further and remove the requirement for the official receiver to tell creditors whether or not they can hold a meeting to appoint a trustee. This means that creditors will not be informed that they have an up-front opportunity to appoint an alternative trustee, should they wish to do so, because there will be no process in place to inform them. The schedule would see a dramatic reduction in creditors’ power to influence insolvency proceedings and I fear that this could lead to a reduction in trust and confidence in the UK’s insolvency regime.
My Amendment 61WA—I mis-referred earlier on but Amendment 61VA also relates to this point—seeks to provide that the official receiver becomes a trustee on making the bankruptcy orders, and to omit the existing provisions which require the official receiver to decide whether to hold a creditors’ meeting to appoint a trustee and to notify the creditors if he decides not to do so. I take the view that three creditors or the proposed threshold of 10% by value of the creditors should be sufficient to requisition the qualifying decision-making process.
In addition, there is no provision in the Bill requiring the official receiver in each and every bankruptcy case to inform creditors of their rights to appoint an insolvency practitioner as trustee or for the mechanism to do so. This lack of provision disenfranchises creditors and surely flies in the face of increasing creditor engagement. Amendments 61WA and 61VA are intended to address these points.
Baroness Neville-Rolfe
My Lords, I thank the noble Lord and my noble friend for these amendments. I hope that I have understood their thinking correctly.
I will start by talking about Clause 118, which Amendment 61ZB seeks to amend. The clause removes the need for trustees to seek sanction before exercising certain statutory powers. That is a cost-saving measure, which arises, as I have already said, from the Red Tape Challenge; it receives considerable support externally and helps to achieve efficiency, as my noble friend Lord Flight explained.
The requirement for sanction was originally designed to protect creditors from an unregulated insolvency profession, preventing officeholders from taking steps that could have a negative impact on the bankruptcy estate such as continuing to trade a bankrupt’s business, which you have to look back in time to imagine. Now, of course, we have a much more highly regulated insolvency practitioner profession. Failure to act in the interests of creditors is a regulatory matter, and it would be for the trustee’s regulatory body to take appropriate disciplinary action.
The amendment would make an exception for cases where there is a creditors’ committee and the trustee wished to appoint the bankrupt to assist in dealing with certain tasks. This sometimes happens where the bankrupt is involved in a particularly unusual trade or there is some urgency to the matter and the trustee cannot find someone to perform vital tasks.
Let us take the case of a bankrupt and a remote farm—which is close to my own personal experience many years ago—perhaps in winter when weather conditions are challenging. That may mean a quick decision is required to instruct the bankrupt to continue to feed the animals or to engage a vet to look after sick animals, and so on. The requirement for sanction where there is a creditors’ committee would add unnecessary delay and cost.
A further reason for resisting the amendment is consistency. If accepted, trustees would be able to exercise all other powers without permission except this one, and then only where there is a creditors’ committee. That might add unnecessary complexity to the insolvency framework.
Amendment 61ADG would have the effect of removing a part of Schedule 10, which updates the section of the Insolvency Act 1986 which itself dealt with the process of interim receivership. Noble Lords will be aware that an interim receiver is appointed to protect assets where a bankruptcy petition has been presented and there is a real risk that assets could be lost before the petition is heard.
While the official receiver is acting as interim receiver, he or she is protected from liability where they dispose of an asset which subsequently turns out not to be part of the person’s estate, provided that when they did it they had good reason to believe that it was. Schedule 10 makes amendments to extend that protection to insolvency practitioners when they are appointed to that role. Amendment 61ADG would act to remove the protection for insolvency practitioners while leaving it in place for official receivers. I suspect that that was not the intention of the amendment.
Amendment 61WA would introduce a requirement into the Insolvency Act for the official receiver to notify creditors how they may go about removing and replacing them as trustee. I am grateful for the noble Lord’s probing amendment to government Amendment 61W, which my noble friend Lord Popat will introduce later on in this debate. However, I will just say that it is intended that these matters will be dealt with by guidance to official receivers, and I do not agree that we should introduce new regulation when we are trying to cut red tape. I hope that that explanation is helpful, and that on that basis the noble Lord will withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her comments. In answer to her direct question of whether she interpreted our comments correctly, as far as I am concerned she did. I will leave the noble Lord, Lord Flight, to respond, but my impression is that she also got to the heart of his comments.
I am still concerned about two things, although I will read what the noble Baroness said in Hansard and reflect upon it. As the noble Lord, Lord Flight, said, we have a brilliant IP insolvency system, which comes high in the rankings. However, that is because it spends a lot of time and effort bringing creditors into play. Whenever we see this dilution coming through in the Government’s Bill here, I worry about that. I understand the cost argument. It must be right that cost is taken out of this where it can be, but the creditors are important, particularly in relation to small businesses, which are after all the subject of the Bill. Creditors can often be critical friends as well as antagonists in these matters, so simply to disengage them from an area is not right. I think that we share the common view that, where possible, we should be careful about doing anything that diminishes the role that creditors or creditors’ committees may play. However, I take the point that there are costs that need to be balanced up.
“( ) In paragraph 52 of Schedule B1 (administration), after sub-paragraph (2)(a) insert—
“( ) by 10% of the number of creditors who have debts with the company,””
Lord Stevenson of Balmacara
In moving Amendment 61ZC, I shall also speak to Amendment 61ZD in my name and that of my noble friend Lord Mendelsohn. I have further information to share with those who follow my noble friend’s actions carefully. He is not in Gibraltar; Gibraltar is here and he is in a meeting not far away and hopes to join us later.
The Government’s aim in Clauses 119 and 120 is to increase creditor engagement by allowing the development of communications as technology improves. The clauses abolish the power of the officeholder to summon a physical creditor meeting in all types of insolvency procedures. Instead of these physical, face-to-face meetings, the insolvency practitioner will need to hold virtual meetings through other means, such as via the phone, over the internet or through written correspondence. The insolvency practitioner will be able to hold a physical creditor meeting only if it is requested by a required proportion of creditors—10% of the value of the creditors.
Our amendments would set a threshold for calling a physical meeting at 10% of the number as well as the value of the creditors. As this is a probing amendment, I am open to other suggestions. Indeed, the noble Lord, Lord Flight, has already suggested that a minimum of three could convene such a meeting. I understand that and would be interested to hear the Minister’s response to it. The amendments also seek to encourage the holding of meetings if there are no real cost savings. I cannot quite see the point of cutting creditors out if we are also trying to make sure that they have a part to play in the processes.
We fear that the net impact of the Government’s proposal will be that, rather than increasing creditor engagement, these clauses will reduce it. The Federation of Small Businesses believes that the proposal will be detrimental to small businesses and the BPF also has concerns. As we have touched on, creditor engagement is a core part of a strong, transparent, fair and trusted insolvency regime. By their very nature, insolvencies can be complicated and confusing for those who do not deal with them often. They can also be daunting and time-consuming for creditors.
We believe that creditors’ meetings are an essential part of creditor engagement, trust and confidence in the insolvency regime. At present, meetings are usually called at the very outset of an insolvency proceeding and periodically afterwards. The meetings achieve a number of important goals, including helping to establish who all the creditors are and what they are owed, updating creditors on the process and progress of the case and finding out more details around the financial affairs of the debtor. Creditors will often be able to provide details to the IP of which they would otherwise have been unaware. The first meeting in a creditors’ voluntary liquidation, under both individual and company voluntary arrangements, also gives creditors the opportunity to question the directors of the insolvent company or the debtor himself or herself. This first meeting is a useful opportunity for creditors to participate in the process and is the most appropriate and convenient forum for agreeing the basis of the IP’s fees and establishing a creditors’ committee, should that still be permitted.
The drawbacks of alternative styles of meeting are clear. For example, a report published a few months ago by the Federation of Small Businesses revealed that some 45,000 small businesses do not have broadband and that thousands of others have very slow broadband speeds. In rural communities particularly, access to broadband can be very limited; so networks of information will not exist to allow such meetings to be held in the new virtual reality. Other areas, particularly outside London, have particular difficulties and it is therefore important to bear in mind that while the new virtual reality is coming, it may not have reached us all and, therefore, the Bill is sometimes in advance of where people are now. We are worried that this approach will reduce creditor engagement and, as a result, the amount of money that ends up in creditors’ pockets will be reduced. We are also worried that part of the process will be complicated. Our Amendment 61ZC ensures that there would be a more workable threshold whereby physical meetings can be staged, if required. I beg to move.
Lord Flight
My Lords, my nine amendments in this group also relate to creditor meetings. The Government’s aim, as I understand it, is to increase creditor engagement by allowing development of communications and new technology. The fear is that, in fact, the reverse will happen. The clause would abolish the power of the officeholder to summon a physical creditor meeting in order to act in insolvency procedures. Instead of those physical face-to-face meetings, the insolvency practitioner will need to hold virtual meetings through other means, such as on phones or the internet. The insolvency practitioner will be able to hold a physical creditor meeting if requested by a prescribed proportion of creditors—10% in their value.
The concerns are that rather than increasing creditor engagement the proposal will, as I say, serve to reduce it. The Federation of Small Businesses believes that the proposal will be detrimental to small business, and the British Property Federation also has concerns. The Government are concerned that creditor meetings are sometimes poorly attended. A 2013 report by Professor Kempson found that only 4% of creditors attend meetings. The report also showed that 86% of unsecured creditors, mostly small businesses, often or sometimes attend or vote by proxy at physical creditor meetings. It is these small businesses that will be harmed as a result of the proposal. Even where physical meetings are poorly attended, they still remain a vital tool for both the insolvency practitioner and creditors in getting all the facts, making important decisions and providing any information on the insolvent business or individual.
Insolvency practitioners should be encouraged to use new forms of media to hold meetings but all options should be available, including holding a physical meeting. The proposal should be dropped and Clauses 119 and 120 should not form part of the Bill. However, two possible compromise solutions could be considered. The first is to retain the requirement to call the first meeting, a proposal that would take into account the fact that the first meeting is the most important, where creditors are most likely to attend and important decisions taken. A further compromise could be that three creditors could call a physical meeting; this would be added to the existing proposal for a prescribed proportion of 10% of the value of creditors. Therefore, a physical meeting could be called by either three creditors or 10% of the value of creditors, whichever is smaller.
In December 2014, R3 surveyed its members on the proposals and found that 86% of insolvency practitioners believed that the proposals would reduce trust and transparency; 78% believed that the proposals would reduce creditor engagement; 87% agreed or agreed strongly that virtual creditors’ meetings were not suitable in all cases; 74% said that physical meetings were useful for finding things out that they did not know previously; 65% said that physical meetings were good for getting the views or input of a large number of people; 63% said that things go wrong with virtual meetings; and 48% would describe physical meetings as more useful than virtual meetings.
During the passage of the Bill through the Commons, the Opposition tabled an amendment in Committee to replace 10% of the value of creditors to allow a physical creditors’ meeting with just one creditor. The amendment was supported by the Federation of Small Businesses and the British Property Federation. It was passed, but was subsequently reversed on Report, so basically I think that I am still arguing the same case, and I would suggest that Clauses 119 and 120 should be deleted.
There are some additional amendments which I have included for consideration, while on 8 January the Government themselves tabled further amendments to Schedule 9. I have serious concerns about those amendments and propose that they should be amended further in order to avoid a potential hiatus, cost delays and confusion to the process of appointing a liquidator. As currently drafted, the proposal also throws up practical issues around the appointment of liquidators, who are currently appointed in Section 98 meetings at the start of the liquidation process. Those are physical meetings. If these issues are not dealt with, the liquidation procedure could be crippled and thus harm the interests of creditors. While the latest set of amendments recognises the unequivocal need for the appointment of the liquidator, the amendments do deal with what happens if the deemed consent procedure is overtaken by a creditor nomination or competing nominations. It must be necessary to allow reasonable time for creditors to engage, but the liquidation should not be unduly delayed.
There is obviously some tension between the two perfectly proper principles. The detail of the process is destined for the rules, but because the two principles are fundamental, I would submit that either the proposed process should be fully explained, or a virtual or physical meeting should be required. My Amendments 61UA and 61UB endeavour to address these points. The first is to ensure that the person nominated as the liquidator under the section takes office immediately and that the deemed consent procedure will not apply in these circumstances. This is because the procedure involves allowing a specified time to elapse for creditors to object before the decision is final. If this provision were to apply, it would mean that the period of time that the liquidation would be left in limbo to enable a liquidator to be confirmed in office would be taking place at a time when prompt action is essential to deal with the issues.
The second amendment would provide that the corporate representative is able to nominate a liquidator on behalf of the corporate creditor under Section 100. Corporate representation is dealt with under Section 434B of the Act. However, as modified by the Bill, that section would not allow a corporate representative to act for the purposes of nominating a liquidator under Section 100 because the amended section would allow such representation only for the purposes of a qualifying decision procedure or a meeting. As neither of these procedures would apply to the nomination of a liquidator under Section 100, special provision should be made to allow corporate representatives to act in these circumstances.
The issue of creditor meetings and the various points under it are the main substantial territory where the profession has particular concerns about the provisions of this Bill. It is particularly around creditor meetings and creditor arrangements that it would be helpful if the noble Baroness could have a very full discussion with the professional insolvency practitioner body.
Lord Leigh of Hurley
I rise to support my noble friend Lord Flight—I do not want to get into the habit but in this instance I do. I, too, pay tribute to R3—I hope my noble friend the Minister is not feeling left out here. I have also had a chance to speak to the people from R3 and meet them. I have known them for many years because when I was chairman of the corporate finance faculty of the Institute of Chartered Accountants in England and Wales, R3 was set up and I have remained in touch with it. R3 does a good job, as had been said around the Room. The insolvency profession in the UK is the envy of the world and R3 has helpfully given us some information to prove it.
All that having been said, there are instances of insolvency practitioners charging frankly eye-watering fees, in some famous instances greater than the sums they have returned to creditors, and in some instances there have been suggestions that they have stopped at the point where no more fees could be taken out of the company concerned. For this reason, more perhaps than many other reasons, I feel it is helpful to encourage creditors to meet. Creditors in these circumstances will include people who are in fact investors in a company, through mezzanine debt or something like that, and have a vested interest. As I confessed earlier on, I have been in such rooms. It is useful to see and meet fellow creditors because a dialogue will then exist between creditors outside the liquidator’s fees, and plans and actions take place. Often in such circumstances, there is, for example, potential litigation—which was discussed in earlier clauses—that might take place against a bank, perhaps, or even against a director, so meeting other creditors in the same environment is very helpful.
The suggestion that 10% of creditors should be required to call a physical meeting does not sound onerous but it could build delays into the insolvency process and increase costs. Attention has been drawn to a recent insolvency, that of a wedding gift website. In that instance, 10% of the value of the creditors was equivalent to hundreds of individuals. In the case of small businesses where debts are typically low, in value terms, it would take a large number of creditors to get to the 10% threshold. For these reasons, I support the amendment.
Lord Cope of Berkeley (Con)
My Lords, I, too, am sympathetic to a lot of what my noble friend Lord Flight said and what the Federation of Small Businesses and others have represented to us all, or to many of us anyway.
I am particularly concerned about the position of trade creditors who find themselves involved in a liquidation, a bankruptcy or whatever. What matters to them is not 10% of the total amount owed by the company; it is the percentage of their own turnover that matters. What can be quite a small sum in the bankruptcy as a whole may be a very large sum relative to the business of the trade creditor. At the same time, I understand that in some respects the system of meetings we currently have is a rather Victorian process, carried forward. I encourage the Government to consider looking for ways in which the process can be streamlined and brought up to date.
I want to make a quite separate point which is just about relevant to this point in the Bill. It is that once we have finished with this Bill and it becomes a law, the Insolvency Act 1986 seriously needs consolidation. When we get to the stage where sections such as 246ZF and a whole lot of others will be littering the Insolvency Act and a whole lot more as a result of this Bill—quite apart from other amendments that have been made or may be made to it—it will be a terrible muddle. I realise that the legal publishers will straighten it all out for us to some extent in their consolidated publications on legislation, but the Act seriously needs consolidation. Once all this is over, I hope the Minister will urge that on the department and get the process to move, because we all know that it is a very slow process.
Part of my interest in this is that the trade creditors need to have an idea of what is going on. If they look at the Act and discover it littered with sections such as 246ZF and so on, it will be even more difficult for them to do so. As others have said throughout the debate, it is important that there is transparency. Understanding of what is going on needs to be possible, even for those who are not doing it all the time. Of course, the creditors will have guidance from the insolvency practitioners, and I share the view of them that has been expressed. I have much less experience than my noble friend Lord Leigh; I, too, am a member of the Institute of Chartered Accountants, though by no means as distinguished a one as he, but I do share that view.
Baroness Neville-Rolfe
I thank noble Lords for their contributions to this debate. These are important amendments that touch on the process for collective decision-making in insolvency proceedings. As I expected, the issue has attracted a great deal of interest. It was good to hear support from the noble Lord, Lord Cope, for the need to reduce needless processes and to hear what he had to say about consolidation—which, I agree with him, is one for another day.
Modern technology means that it is now possible for all creditors to make decisions remotely, online or by correspondence, which can provide greater opportunities for creditors to engage if they are unable to travel or do not have time to attend a physical meeting. Removing meetings as the default method will also lower the cost of making decisions—costs which, as several noble Lords have said, are ultimately borne by creditors.
The noble Lord, Lord Stevenson, talked about broadband. He was probably hoping that I would rise to the bait, as a previous campaigner on the rollout of broadband. We are actually making a bit of progress now on the rollout of broadband and also on mobile. The figures that he quoted from the FSB apply to small businesses still using dial-up internet access at that time, rather than not having access to broadband. However, the noble Lord made a good point. If you use a video or internet option for a meeting, you do not have to have broadband at home. I have poor broadband where I am and when I was a director of a company I often used to arrange a time to go to a local café. Sometimes you can use proxies, if that is the right thing to do on that particular occasion. You do not always have to have physical meetings; I think we are all agreed on that. The officeholder in an insolvency will have a duty to consider the best decision-making process to use. If a lot of rural creditors are involved, obviously they should avoid using an internet link-up and a physical meeting may be more appropriate.
Face-to-face meetings of creditors are currently used as the default method of consulting creditors and making decisions. For a long time, insolvency officeholders and creditors have travelled to meet in the same room so that they may agree an appointment, remuneration, or how to deal with an asset, but these meetings are usually poorly attended. Professor Elaine Kempson reported that only an estimated 4% of creditors attend them. In today’s digital world we have to question whether holding a meeting that few or no creditors attend is effective. If creditors want a face-to-face meeting they will be able to require one to be called. As I have said, they bear the ultimate cost and benefit from any reduction in what have been referred to as eye-watering fees. If our proposals are accepted, creditors will not be required to be in a specific location at a particular time in order to participate in the voting process. Instead, they will have other options available, including making increased use of different sorts of communication technology.
Turning to the individual amendments, I will respond first to Amendment 61ZC. The duty to maximise returns to all creditors is very important, but business rescue is, rightly, the primary aim in administration. In many administration cases, the administrator is not required to consult creditors on the proposals; for example, where there is insufficient property to make a distribution to unsecured creditors other than out of the prescribed part. Amendment 61ZC would extend the power given to smaller creditors and would allow 10% of the total number of creditors to require that they should be consulted on the administrator’s proposals as opposed to 10% by value—so moving from value to number. Allowing a decision procedure to be required by a certain number of creditors would be a significant step, so we cannot take it lightly.
The insolvency industry and other stakeholders will no doubt wish to express opinions on this matter, and I was interested to hear from the noble Lord, Lord Stevenson, that the Federation of Small Businesses has already expressed an interest in a slightly different approach. In view of the various comments that have been made both here and at the very useful open meeting we held, I think that we should give some further consideration to the general issue of thresholds and return to it on Report.
Amendment 61ZD would have a significant effect on the use of deemed consent and decision-making processes. The deemed consent procedure as described in Clause 120 allows officeholders to consult creditors in uncontentious matters without the need for a formal decision-making process. Once notified, creditors must object by a deadline or the proposal will be passed. The amendment would mean that where the insolvency practitioner officeholder had identified that a face-to-face meeting would not lead to an additional cost saving, deemed consent could not be used. The effect of the amendment would seem to stand in the way of the point of this measure, which is about reducing red tape, and I hope that we might be able to find other solutions to deal with the essentially probing nature of the amendment.
Amendment 61CA would prevent the use of the deemed consent process where a liquidator is appointed in creditors’ voluntary liquidation proceedings. In practice, the creditors often nominate the same person as liquidator of the company. As I have said, the deemed consent procedure is intended to be used where decisions are not contentious; uncontroversial liquidator appointments would be a good example. The amendment would mean that even in routine cases an active decision would need to be sought from creditors in all cases. I worry that these amendments would undermine the Government’s—and I think stakeholders’—objective of cutting red tape.
Finally, I will address the question of whether Clauses 119 and 120 should stand part of the Bill, along with Amendments 61ZE, 61DA, 61LA, 61UB and 61XA, which have been suggested to Schedule 9—I think that I am making my noble friend Lord Cope’s case for him here. I have already set out why it is important that the process of decision-making in insolvency proceedings should be modernised. I reassure my noble friend that we are not seeking to abolish meetings but merely to ensure that they are used only where enough creditors want them. Amendments 61ZE, 61DA, 61LA, 61UB and 61XA would prevent the clauses from operating in the various insolvency procedures by removing important changes made by Schedule 9.
Turning to Amendment 61UA, the relevant provisions on representation of corporations are already being amended by paragraph 55 of Schedule 9. The result will be that when a creditor decision is made through any decision procedure, a corporation will be able to authorise others to act as its representative. That seems okay to me. Amendment 61VA is also concerned with thresholds. The risk we see here is that a minority of vexatious creditors might create mischief in a bankruptcy by requiring decisions on the removal of the trustee to be taken, endangering the smooth running of the process. As I have already said, we will revisit our thinking on the question of thresholds, reflect on that and come back. I hope that the noble Lord will feel able to withdraw his amendment and that noble Lords will withdraw their opposition to these important clauses.
Lord Flight
My Lords, I am grateful to the Minister for agreeing to reconsider the thresholds. I say simply that, rather like the AGM of a company, it is healthy to have a physical meeting. The danger of meetings merely on the telephone is that they do not get recorded accurately and the whole process does not get off to a good start. I am quite genuinely concerned that our excellent system of insolvency runs the risk of getting into trouble if you do not kick off with a creditors’ meeting each time.
Lord Stevenson of Balmacara
I thank all noble Lords who have spoken on this group. I think that together we have arrived at a conspectus view, which has persuaded the Minister that a little more thinking on this would be welcome. I am grateful to her for that.
I do not think that we are in any sense trying to be negative about what is being proposed. This is the future—we understand that. I just think that we are not quite there yet and that the sentiment from all sides is that we perhaps need to encourage people to do things in a more innovative way but not lose some of the values in the original proposals. If we can get somewhere along that line, I would be very grateful. I am also grateful to her for her comments about broadband. We are on the same side here and we want this to happen. She made the point herself: if she has to leave her wonderful kitchen in her rural farmhouse to find an internet café in order to participate in the wider world, something is not quite right yet in the Government’s plans.
Baroness Neville-Rolfe
I would like to inform noble Lords that I have broadband. I do not have mobile, which is actually a joy.
Lord Stevenson of Balmacara
Now we know that to be successful in the world of business is to be selective in the use of your technologies. That is a lesson for us all. In the mean time, I would like to withdraw the amendment.
Lord Popat
Lord Popat (Con)
My Lords, this is a group of technical amendments to the provisions in the Bill relating to decision-making in insolvency proceedings, the way in which certain liquidators are appointed and clarifying the operation of the fees power in Clause 136. These amendments are part of the result of detailed discussions with stakeholders and contribute to the Government’s goal of ensuring that insolvency processes, including how decisions are made, are quick and efficient. I beg to move.
Lord Popat
“( ) In paragraph 83(8)(d) omit “98,”.”
“( ) In paragraph 108(1) omit “, 50(1)(b)”.”
“15A In section 92A(1) (members’ voluntary winding-up in England and Wales: progress report to company) for “sections 96 and 102” substitute “section 96”.
15B In section 93(1) (members’ voluntary winding-up in Scotland: company meeting at year’s end) for “sections 96 and 102” substitute “section 96”.”
The Deputy Chairman of Committees (Lord Skelmersdale) (Con)
In calling Amendment 61DA, if this is agreed to, I cannot call Amendments 61E to 61L inclusive by reason of presumption.
Lord Popat
“(4) After subsection (4A) insert—
“(4B) The company’s creditors may in accordance with the rules nominate a person to be liquidator.
(4C) The liquidator must in accordance with the rules seek such a nomination from the company’s creditors.”
(5) In subsection (8), for “this section” substitute “subsections (1) to (4A)”.”
“18 (1) For section 96 (conversion to creditors’ voluntary winding up) substitute—
“96 Conversion to creditors’ voluntary winding up
(1) The winding up becomes a creditors’ voluntary winding up as from the day on which—
(a) the company’s creditors under section 95 nominate a person to be liquidator, or(b) the procedure by which the company’s creditors were to have made such a nomination concludes without a nomination having been made.(2) As from that day this Act has effect as if the directors’ declaration under section 89 had not been made.
(3) The liquidator in the creditors’ voluntary winding up is to be the person nominated by the company’s creditors under section 95 or, where no person has been so nominated, the existing liquidator.
(4) In the case of the creditors nominating a person other than the existing liquidator any director, member or creditor of the company may, within 7 days after the date on which the nomination was made by the creditors, apply to the court for an order either—
(a) directing that the existing liquidator is to be liquidator instead of or jointly with the person nominated by the creditors, or(b) appointing some other person to be liquidator instead of the person nominated by the creditors.(5) The “existing liquidator” is the person who is liquidator immediately before the winding up becomes a creditors’ voluntary winding up.”
(2) In section 96 (as inserted by sub-paragraph (1)), after subsection (4) insert—
“(4A) The court shall grant an application under subsection (4) made by the holder of a qualifying floating charge in respect of the company’s property (within the meaning of paragraph 14 of Schedule B1) unless the court thinks it right to refuse the application because of the particular circumstances of the case.””
“22 For section 100(1) (appointment of liquidator) substitute—
“(1) The company may nominate a person to be liquidator at the company meeting at which the resolution for voluntary winding up is passed.
(1A) The company’s creditors may in accordance with the rules nominate a person to be liquidator.
(1B) The directors of the company must in accordance with the rules seek such a nomination from the company’s creditors.””
Lord Popat
“(a) the company’s creditors under section 100 nominate a person to be liquidator, or(b) the procedure by which the company’s creditors were to have made such a nomination concludes without a nomination having been made.””
“( ) In the entry for section 95(8), in column 2, for “s. 95” substitute “s. 95(1) to (4A)”.”
“(b) for “99(3)(a)” substitute “99(3)”.”
Lord Popat
“( ) for “replacing” substitute “removing”;”
Lord Popat
““(4A) Where the bankrupt’s creditors decide to remove a trustee, they may in accordance with the rules appoint another person as trustee in his place.
(4B) Where the decision to remove a trustee is made under subsection (4), the decision does not take effect until the bankrupt’s creditors appoint another person as trustee in his place.””
Lord Popat
Lord Popat
(a) for the words from “case” to “died” substitute “following cases”;(b) after “hold office” insert “—”
“(3A) For subsection (3)(b) substitute—”
“(2) For subsection (3) substitute—
“(3) The official receiver may ask the bankrupt’s creditors to appoint a person as trustee, and must do so if so requested by not less than one tenth in value of the bankrupt’s creditors.
“(3A) If the official receiver makes such a request the bankrupt’s creditors may in accordance with the rules appoint a person as trustee.””
Lord Mitchell
Lord Mitchell (Lab)
My Lords, I will be dealing with this in place of my noble friends Lord Stevenson and Lord Mendelsohn. I will also address Amendments 61ADB, 61ADC, 61ADD and Clause 126 stand part. Pre-packs have become very much part of the discussions that we are having, and you read in the press about some of the activities that are occurring. The amendments that have already been made to the Bill help considerably but we want to raise some issues.
We want to look particularly at the whole area of bad pre-packs and some of the things that have been happening. At Second Reading I referred to the situation where on Friday afternoon the company is Smith & Jones and by Monday morning it is Jones & Smith; it is the same people running it, with many of the same directors and maybe even the same bank, but the poor old creditors and maybe HMRC and a few other people have just been dumped in the mean time. This is a process that we really have to address. It has become a fixed process where people make these arrangements so that if a company is failing it is possible just to push a button and get rid of all the nasty bits and continue with all the good bits as if nothing had happened. We all know examples of where this has occurred.
When you think about who loses in a pre-pack, it is the creditors most of all, but the creditors are themselves companies and have their own creditors, their own employees and everything associated with those companies. When a company goes down and creates a pre-pack, the trail of creditors and their own creditors that are then affected badly causes a lot of people to lose their jobs. When I hear people saying that pre-packs are a really good thing because they maintain employment and maintain the company, maybe they do—and there are lots of good examples—but there are also the creditors that have been left behind, including HMRC itself, which have to deal with the issue that they are no longer getting the money that is due to them. I may be wrong about this but I believe that if there are parties that have legal claims against companies that then go into a pre-pack, some of those die at that point as well. I am not so sure that that is a good thing either.
When you think about who gains from a pre-pack, first of all the lawyers gain—they always do—and the insolvency practitioners gain, as they always do. What I find hard, as a businessman who has set up lots of companies, is that the rules as I understand them—the rules of free enterprise and the capitalist system—are that if you put your money at risk and you invest in a company and you have shares and it does incredibly well, you benefit; but if it fails, you lose. To me, that is what capitalism is about. To have a situation with some of these pre-packs where the shareholders do not lose, they just come back in another guise, seems wrong. I want the Minister to reassure us that the Bill really offers protection.
Amendment 61ADA aims to clarify that the reforms are targeted solely at pre-packs. Clause 126 gives the Secretary of State a power to introduce regulations to address problems in relation to sales to connected parties in pre-packed administration. Following an inquiry by the BIS Select Committee and the Graham review into pre-packs, the Government intend to create a reserve power under Clause 126(4) that:
“The Secretary of State may by regulations make provision for … prohibiting, or … imposing requirements or conditions in relation to, the disposal, hiring out or sale of property of a company by the administrator to a connected person”,
unless there has been a third-party scrutiny of the proposed sale. This power expires at the end of the period of five years beginning with the day on which the provision comes into force unless it is exercised during that period.
Amendment 61ADB would remove the reserve power granted to the Secretary of State to prohibit pre-packs altogether. Given the sensitive nature of this subject and the potential negative impact on UK plc, we feel that, if such a move were ever to be taken, it should be subject to public scrutiny and debate in Parliament rather than simply being a reserve power for the Minister to execute.
Amendment 61ADC would ensure that new regulations made under the clause were targeted only at the bad pre-pack practice to which I have referred, which we all want to discourage, rather than applying more generally to all pre-packs.
Amendment 61ADD digs at the Government’s policy of waiting to see whether the voluntary system works and then legislating for powers. Our amendment asks for the relevant powers to be legislated for within a year of the passing of this Bill. I beg to move.
Baroness Wheatcroft (Con)
My Lords, I speak in support of Amendment 61ADD, which would bring in these powers more quickly. The Graham review did a very thorough job and made its proposals, but surely a year is long enough to see whether the industry is going to take note of what was said and respond. As the noble Lord opposite said, there is no doubt that there have been some highly dubious pre-packs and, although I am sure that our insolvency practitioners are, indeed, the envy of the world, some may not be quite as worthy of envy, apart from in respect of the fees they charge. There is a need to deal with this issue more speedily.
I also have qualms about the definition of “connected persons”. I would be grateful if my noble friend the Minister would explore whether in a certain situation where a company borrows money from the bank and the bank then sells that debt to an organisation, which may eventually end up being part of a pre-pack that buys the business, that purchaser of debt should, indeed, be classed as a connected person. At present, they would not be connected persons. This was recommended by the Graham review, which wanted to keep things very narrowly defined and not bring in debt at all. However, I think there is sufficient evidence to suggest that this is at least worth investigating.
Lord Flight
My Lords, I think there is a consensus that pre-packs need to be cleaned up, as it were. However, it would be a great mistake to get rid of them and I will cite some figures in that respect in due course. I am less than comfortable with Clause 126 as it stands, which enables the Secretary of State to make regulations where approval is required for the sale of an asset to the connected parties, although it does not appear that that is the case now. I would be concerned if onerous obligations were put on an insolvency practitioner to obtain, say, creditor consent, which is likely to take significant time and could impact the deliverability of a transaction, and which would be in the interests of the creditors. Insolvency practitioners are meant to have the expertise and experience to make sound commercial decisions. My concern is that regulation is being put ahead of commercial needs.
In reference to what the noble Baroness has just said, the Graham review made some very sensible pre-pack pool proposals for reviewing and giving either the thumbs-up or the thumbs-down to pre-pack arrangements. I think that these are starting to be adopted and that is a very useful route to go down. As has been said, the current drafting of the clause goes beyond pre-packs and captures all connected party sales in all types of administration. For example, a business could end up going into liquidation instead of administration as a result of the clause. This would lead to job losses and the UK business rescue culture would be undermined.
The Government’s aim is to provide great confidence to unsecured creditors and other affected stakeholders, and a pre-pack represents the best outcome to them. The clause provides the Government with a reserve power to prohibit not only pre-pack administration sales but sales to connected parties, as has been mentioned. The concerns about the clause as it stands relate to the unintended consequences of the wide manner in which it is drafted. The Government have confirmed that the clause is aimed at pre-packs, yet it captures all types of trading administrations, which could include a straightforward business sale. For example, there may be a case in which a company could be put into trading administration and no pre-pack deal is on the table; the administrator conducts open and wide marketing, and there are a number of bids to buy the company. The administrator could be prevented by the clause from selling the business to any of the workforce of the company, because they would be considered to be a connected party. This could mean that the good and best offers cannot be accepted by the administrator, and the creditors would lose out. Jobs would also be lost and the UK’s business rescue culture undermined.
I am certainly opposed to the risk of pre-packs being prohibited. The benefits of pre-packs were identified in the Graham review and previous research. Given the proposed areas of reform to pre-packs to boost transparency and confidence, the clause to ban pre-packs—that is the intention—is greatly mistaken.
The extent of pre-packs is often overstated. There are around 20,000 corporate insolvencies in the UK a year, about 3% of which—between 600 and 700—are pre-pack sales. Yet only a small percentage of all corporate insolvency pre-packs attract public scrutiny over a perceived lack of transparency, but this has obviously affected policymakers.
Pre-packs preserve jobs. In 92% of pre-pack cases, all the employees were transferred to the new company; whereas that happened in only 65% of business sales. Average returns to secure the creditors in pre-packs were 35%, compared with 33% in straightforward business sales. In addition, the Graham review found that pre-packs certainly have a place in the UK’s insolvency landscape, preserve jobs, bring benefits to the UK, and reform would be worth while. I am therefore uncomfortable with Clause 126, which goes too far, and there ought to be a less draconian way in which to tidy up the scope for abuse of pre-packs.
Lord Leigh of Hurley
My Lords, if we cast our minds back some five or six years, all the professions at that time forecast that we would be faced with an unprecedented level of receiverships, administrations and insolvencies. It is worth reflecting—I am sure we would all agree—on the success of the coalition’s long-term economic plan and that the number of administrations has been dramatically less than anticipated by every forecaster, in particular the insolvency profession, which geared itself up for many more administrations than proved to be the case. As my noble friend Lord Flight has said, pre-packs in fact make up around 3% of the total number, which is a small number in itself.
The other great improvement in that recession—to the extent that it was a recession—compared with the previous one has been the role of the banks and accountants. Last time around, banks appointed investigative accountants to look into businesses, but those accountancy firms were the same firms that were appointed as the administrators—and stayed as administrators for many months. In some instances, that lasted years and enormous fees were taken out of companies by the same firm that had been appointed by the bank to investigate whether a business was viable. So it is pleasing to see that the role of the administrator has changed.
The beauty of the pre-pack is that it is extremely quick. I agree with the noble Lord, Lord Mitchell, that it is wholly unacceptable where Smith and Jones turns into Jones and Smith and everyone loses out, except perhaps Smith and Jones or Jones and Smith. I also agree that one needs to focus on the bad pre-packs where it all seems to be a bit cosy and there is no form of review. I welcome the Graham report. Teresa Graham served with me on the council of the Institute of Chartered Accountants in England and Wales and I have spoken to her about her recommendations. I am apprehensive about some of them. I am not convinced that the pooling idea will work, and finding six people at short notice in certain difficult parts of the country to convene and form an opinion would be tricky. I would welcome a speedy assessment of whether her proposals need to be fine-tuned or amended.
I want particularly to say that I have seen pre-packs that have in practice been extremely helpful. I am thinking of where a retailer has ended up with a very large number of branches in areas that have changed, but because of the way UK property law is run, it is impossible to get out of onerous leases by doing it any way other than through a pre-pack. The pre-pack has led to a business being trimmed down and subsequently able to run successfully. In those instances, the only loss has been for the landlord who has a tenant with an inappropriate lease. I definitely would not want to throw out the good with the bad, but I agree that we need to focus on the bad and address how the Graham report recommendations will pan out much more quickly than perhaps is envisaged.
Baroness Neville-Rolfe
My Lords, it is good that Gibraltar has ensured that we can enjoy the experience and comments of the noble Lord, Lord Mitchell, today. Perhaps I may start by dealing with his point about Smith and Jones—or Popat and Neville-Rolfe becoming Neville-Rolfe and Popat on a Monday morning. I think that the answer I am about to give him shows the fine judgments here. As my noble friend Lord Flight said in his last intervention, pre-packs are speedy and can be helpful. The noble Lord, Lord Mitchell, will know that an insolvency practitioner has a duty to sell the business for the best price possible, and if in the example Jones and Smith are making the best—or, as sometimes happens, the only—offer, then the best outcome may be for a sale to the existing management. Jobs can be saved and business can continue as a result. However, I have listened to what he said about pre-packs, and what we are all trying to do is get this important provision right.
Clause 126 creates a power for the Secretary of State to legislate to restrict sales to connected parties of businesses or assets of insolvent companies by administrators. A sale to a connected party is where the insolvent business is sold to a purchaser previously involved with the insolvent business. The most common form of connection is where someone is a director of both the insolvent and the purchasing businesses. A pre-pack occurs where the sale of the viable parts of an insolvent company’s business is arranged before the administration starts. The sale is then executed at, or shortly after, the appointment of an administrator. Perhaps I may respond to a point made, I think, by the noble Lord, Lord Mitchell, about the application of the clause. The clause in fact goes further than pre-packs, as I am sure he is aware. That is because, unfortunately, bad practice is not unique to pre-packing. It also applies to any sale in administration where creditors are not given a chance to hold a meeting to discuss and approve the sale.
Lord Mitchell
I thank the Minister for her reply. We all know what we want in this: to make it work, to make it fair, and to make sure that the bad practice is removed and that there are barriers to it. I thank the noble Baroness, Lady Wheatcroft. The word that stuck in my mind was about “dubious” practice, and we have to make sure that that is removed. I am also grateful for the contributions by the noble Lords, Lord Flight and Lord Leigh of Hurley.
I agree that we always have to be aware of the rule or curse of unintended consequences. I am sure that when the noble Baroness and her team take a look at what we have discussed today, they will come back on Report with all these points incorporated into the Bill—I hope. With that in mind, I beg leave to withdraw the amendment.
Lord Stevenson of Balmacara
My Lords, in moving Amendment 61ADE, I will also speak to Amendment 61ADF, which is in my name and that of my noble friend Lord Mendelsohn, who is sadly still absent. I am thinking in terms of search parties, particularly if my noble friend Lord Mitchell is proposing to stand in his place, which, of course, he is perfectly entitled to do.
As the law stands, in order to receive a dividend in an insolvency, a creditor must first submit a claim to the officeholder, who, where necessary, will request further evidence to verify that claim. Clauses 128 and 129 simplify the process for what the Government term “small debts”, so that in future such creditors do not have to prove their ownership of the debt in the same way. Clause 128 takes care of company insolvencies, while Clause 129 takes care of individual insolvencies. We do not object to the principle behind such moves, but I am quite concerned that the figure of £1,000 that the Government have floated for the prescribed amount is a little too high, and I would be interested to hear how the Government arrived at £1,000. I appreciate that provisions will remain in place for the insolvency practitioner to require further information where they have suspicion or doubt, but the clauses seem to set a dangerous precedent that a business can claim amounts of up to £1,000 without any evidence.
We all know that in the event of a corporate insolvency, or even a personal insolvency, there is a certain amount of chaos around. In the corporate case, employees are often desperately attempting to find alternative employment, with the pressure of their mortgages hanging over their heads and the business that they expected would be capable of paying them, and to which they were dedicating their careers, looking increasingly vulnerable and unable to do so. Under those circumstances, many normal practices might go out of the window. It is also the case that insolvent companies have been in a less than ordered state in the run-up to declaring themselves insolvent or bringing administrators in, and they are often scrambling around to find anyone that they are not on stop with to purchase supplies in order to stay afloat. Purchase order numbers and other systems may well become irregularly used. In those circumstances, it is a very dangerous step for any business to be able to say, “We have an outstanding invoice for £826, can you send it to us? We do not need to provide any evidence under the new law, and documentation is not required to show whether the goods were received”.
I understand the thinking behind this, but I am just a bit worried about some of the issues. The particularity of this applies more to personal insolvency, as we are talking about claims up to £1,000, which is obviously quite a significant amount in those circumstances. Again, is it right to remove the need for proof for any bill up to £1,000 in a personal bankruptcy when some of the limits are relatively small, particularly in relation to DROs? It is clear that we should all try to make sure that costs are taken out of bankruptcy administrative processes. Where these are small amounts, there may well be a way that they should be dealt with that does not require too much effort and red tape. However, a bar of £1,000, particularly for individual insolvency, is quite significant. I would be grateful if the Minister could respond to us on these points. I beg to move.
Lord Popat
My Lords, I thank the noble Lord, Lord Stevenson, for tabling these amendments to Clauses 128 and 129.
Clauses 128 and 129 are part of a package of measures designed to streamline and modernise insolvency proceedings and remove unnecessary burdens. Creditors will be the ones to benefit from efficiency savings as lower costs will mean increased dividends.
Clauses 128 and 129 will provide a power to make rules that will allow an insolvency officeholder to pay a dividend to a creditor without the need for the creditor to submit a formal claim. This may be done on the basis that the creditor’s debt has been recorded in the insolvent’s accounting records or statement of affairs. As a safeguard, the officeholder will still be able to require a creditor to provide a claim and, if necessary, supporting evidence, before accepting that a debt is owed and paying a dividend.
During debate in the other place, the Government agreed to undertake further consultation on what the limit for a small debt should be. I would not want to pre-empt that process now by setting the limit before stakeholders have had a chance to put forward their views. We will invite views from stakeholders shortly and will carefully consider the responses submitted before setting out in secondary legislation what the limits will be. The noble Lord quoted a figure of £1,000 for both corporate and personal insolvencies. We believe that draws the right balance between delivering efficiency savings and ensuring that adequate scrutiny is undertaken, but we will, of course, listen to what stakeholders have to say. The stakeholders will give us evidence of what the amount should be. I will also add for the sake of clarity that the small debt limit relates to the amount of the debt and not the actual dividend that the creditor is likely to receive, which is likely to be a significantly smaller sum. It seems inevitable, however, that at some point, whether due to inflation or perhaps something else that is less foreseeable, the limits will need reviewing. Setting the limits in secondary legislation will provide greater flexibility to amend them where it is considered appropriate without needing to amend primary legislation on each occasion.
I hope that the noble Lord has found my explanation reassuring and, on this basis, will withdraw his amendments.
Lord Stevenson of Balmacara
I am grateful to the Minister for his comments. I understand the point that while consultation is going on, obviously it would be premature to come to a resolution on this. However, I suggest that it might be sensible to think about a different approach for the corporate to that for the personal. They are completely different beasts. Presumably we are talking about personal insolvencies at the DRO level and I think that there should be some relationship to the new limits that have been brought in for that, which give us a sense of what the amount—admittedly reduced by the proportion that will be available for reallocation to creditors, which might be as low as 10, 15 or 20 pence in the pound—should be. I understand where the Government are coming from. This is a matter that should be borne in mind but, after those comments, I would be grateful if this amendment could be withdrawn.
Lord Popat
“(2) In section 415A of the Insolvency Act 1986 (fees orders: general), after subsection (1A) (inserted by section 17 of the Deregulation Act 2015) insert—
“(1B) In setting under subsection (1) the amount of a fee in connection with maintenance of recognition, the matters to which the Secretary of State may have regard include, in particular, the costs of the Secretary of State in connection with any functions under sections 391D, 391E, 391J, 391K and 391N.””
“Power to license an approved redress scheme for complaints
(1) The Secretary of State must make provision requiring all regulated persons to be members of an approved redress scheme for dealing with complaints from debtors received in connection with insolvency practitioners.
(2) The Secretary of State may approve a redress scheme to adjudicate on complaints from debtors about insolvency practitioners.
(3) The Secretary of State may by regulation require all insolvency practitioners to be members of such a scheme.
(4) The regulations may require insolvency practitioners to adopt their own complaint handling procedures, with debtor complainants only able to refer their complaint to the redress scheme once the usual procedures are exhausted.
(5) A “redress scheme” is a scheme which provides for complaints against members of the scheme to be investigated and determined by an independent person.”
Baroness Hayter of Kentish Town (Lab)
My Lords, this amendment stands in my name and that of my noble friend Lord Stevenson. I welcome the provision in the Bill which would empower the Secretary of State to designate a single regulator for all insolvency practitioners in place of the current seven regulators. It can only be in the interests of practitioners to have a single system for authorisation, technical standards, training, codes of ethics and conduct, discipline and other matters. It will also be in the interests of consumers as there would be a single standard of practice and, if my amendment is agreed, a single system of handling service complaints from debtors.
At the moment, there is no proper system for dealing with service complaints. Any that are made are handled broadly as disciplinary matters against the practitioner, which may well not be appropriate where there has just been a bit of poor practice, some delay, a lack of communication or similar. Furthermore, there is no system of redress should such a complaint be found to be justified, as the disciplinary committee will be concentrating more on the fitness to practise of the practitioner than on righting any wrongs caused by the inadequate work.
As the Minister knows, the EU directive on ADR requires that there should be an appropriate redress scheme in place for every industry and service. That might cover this issue but, due to legal uncertainty about whether the debtor in this case could be considered a consumer under the directive, it would be good to ensure that any such person can have their complaint heard and considered once it has gone to the practitioner in the first instance.
When I was involved in trying to set up such a system when I was on the Insolvency Practices Council, the challenge was made rather greater by the fact that there were seven different regulators. Given that the Bill enables, albeit perhaps well in the future, a single regulator to be designated, this would be an excellent moment to develop and licence a single ADR scheme, which would be independent of the disciplinary process handled by the new regulator. There is an obvious precedent in legal services, where service complaints had been handled by the various regulators, such as the Bar Council, the Law Society, the Council for Licensed Conveyancers and two others dealing with notaries, I think, and patent lawyers. Once the Legal Services Board was set up to oversee those front-line regulators, the new Legal Services Ombudsman was established to adjudicate on complaints from clients.
In the case of insolvency practitioners, Clause 141(3)(g) allows complaints to be investigated. However, it is unclear whether this would be done in the form of a disciplinary route so that complaints would lead to disciplinary action being taken by the regulator—which of course is completely right and proper. Alternatively, more in the area which I am looking at, of service complaints, the individual will be looking for redress and not for discipline to be taken against the practitioner.
I do not envisage the creation of a new ombudsman, given that perhaps we have too many of them already, but also given the very small number of practitioners and therefore the even smaller number of complaints. However, it would be possible for an existing ADR scheme, which could be the legal ombudsman, to handle these rather than—as we have now done thanks to this House—enabling the legal ombudsman to do that, meaning that they can now take complaints against CMCs. Alternatively, it could be done by the residual ADR scheme which is being set up under the auspices of BIS, thanks to the EU directive.
It is important for there to be a single system of such complaints, given that there will be very few of them. In addition, it might come under the auspices of the new regulator, but it should be independent of it. Handling complaints is very different from being a regulator. As I said, much as I welcome what is in the Bill, it is important that the two are different, as we have seen in various other professions.
Before I move the amendment, I note in passing that there are 2,000 or fewer practitioners who are about to face a complication in their regulation thanks to this very same Government’s rather mad idea of creating two new categories of insolvency practitioner. I note that that is not being handled by the Minister, but it is happening elsewhere in the same Government. At present there is just one type of insolvency practitioner, albeit regulated by seven different bodies. That regulation comes from the fact that insolvency practitioners as individuals emerge out of different professions. Some of them have been lawyers, some accountants, while others have gone straight into being insolvency practitioners, which explains the seven different regulators.
What we now face under the Deregulation Bill—although in this sense it is a regulation Bill—is a different way of cutting and chopping the profession. Instead of having different regulators because of the original profession, the proposal is that we will now have three sorts of insolvency practitioner: those who do only individual insolvencies, those who do corporate insolvencies, and those who do both corporate and individual insolvencies. We will have another split in the profession, albeit done by the type of debtor this time rather than the type of practitioner. I do not expect the Minister to be able to solve that today, but it is slightly nonsensical.
On the main issue, the intention here is to try to tease out the difference of having complaints handled such that the process is independent from the regulator, albeit the ombudsman could come under the auspices of the regulator, as is the case for the Legal Services Board. However, it is very important that any decisions are independent of the regulator and are taken via an independent process. I beg to move.
Baroness Neville-Rolfe
My Lords, I thank the noble Baroness, Lady Hayter, for Amendment 61AF, which proposes an approved redress scheme for debtor complaints about insolvency practitioners. This is an important issue and I am grateful to the noble Baroness for bringing her great expertise on redress to our Committee.
At present, all insolvency practitioners and/or their firms must have a complaints process which debtors and others impacted by their actions are free to access. If the debtor is not satisfied with the response, they can make a complaint to the complaints gateway, which is hosted by the Insolvency Service. All complaints referred to the gateway are reviewed by the Insolvency Service before being sent to the appropriate regulatory body for consideration.
A review of the gateway last summer found that this system works well, and the increased number of complaints suggests that access for complainants has improved. Information captured via the gateway—which is, if you like, a single point of contact for consumers and debtors—enables the Insolvency Service to monitor how complaints are dealt with by regulators.
I note what the noble Baroness said about the ADR directive. Although that is not for this Bill, I will look at how it fits in and the impact of changes to the insolvency practitioners’ profession that she mentioned. I would always share her wish that people understand the system.
Turning to the issue of the single regulator, the measures in the Bill aim to strengthen the current regulatory regime for insolvency practitioners by building trust and confidence without the need for further intervention. However, if that is not the case and self-regulation in this industry does not work as we hope, this would be the point to consider using the power to introduce a single regulator. I agree with the noble Baroness that were that the case, the complaints system, including arrangements for redress, is one of the things that would need to be considered at that time. However, given that we already have a bespoke system for dealing with complaints about insolvency practitioners under the existing system, I hope the noble Baroness would agree that the introduction of an additional scheme such as the one proposed is not necessary at this time. I hope that the noble Baroness has found my explanation helpful and will agree to withdraw her amendment today.
Baroness Hayter of Kentish Town
I thank the Minister for that. I agree with what she said about the complaints gateway. If we could do that for all the other ombudsmen, that would be wonderful. I know that under the other bit of the department attempts are being made to move in that direction. The idea that any consumer would have a single point of entry is excellent.
I am not proposing an additional scheme here. Really, my point is that when we have a single regulator it should be borne in mind that complaints that seek redress are different from those that lead to disciplinary action. I am just flagging that up. I hope at the point that this was to be implemented at some date in future that the need to make the redress part of the ombudsman environment, not simply under the regulator, is what is best. This is very close to that and I certainly do not want to set up any new additional bodies. I hope that those thoughts might be taken into account. With that comment, I beg leave to withdraw the amendment.
“Special review
The Secretary of State shall conduct a special review assessing the needs of high technology small businesses (as defined in section 33(2)) and micro businesses (as defined in section 33(3)) facing challenging trading conditions.”
Lord Stevenson of Balmacara
My Lords, this amendment is in my name and that of my now lost noble friend Lord Mendelsohn. Given that most of his supporters have now left the Room in the vain hope that he might turn up, I think we will stop running this riff—but I am still very worried about him.
This is a probing amendment focusing on small businesses and high-tech businesses, and is intended as an opportunity for a debate on whether there is a case for introducing some elements of the Chapter 11 insolvency regime that exists in the USA, with particular reference to small businesses—perhaps more to microbusinesses—and those specialising in higher-tech areas. I will make a point about that at the end.
It is well known that, in the US, a company experiencing financial difficulty—or its creditors—can file with the federal bankruptcy court under Chapter 7 or Chapter 11. In Chapter 7, the business stops operating and a trustee sells its assets and distributes the proceeds to creditors. However, in most cases Chapter 11 is invoked, where the original management continues to run the business as a debtor in possession, but all major business decisions must be approved by the bankruptcy court.
In most cases the company will try to develop a plan to try to return to profitability, and compromise with creditors at the same time. If a plan is not developed, the company is liquidated. The rescue plan, if there is one, has to be voted on by the creditors and stockholders, and confirmed by the bankruptcy court. Even if creditors or stockholders reject it, the court can still confirm the plan if at least one impaired class of creditors has voted to approve it, and it concludes that the plan treats objecting creditors and stockholders fairly.
Baroness Neville-Rolfe
My Lords, I am glad to have this opportunity to debate Chapter 11, and am only sorry that some other noble Lords are not here to join in that debate—but we did, of course, have a good discussion in our open meeting, which the noble Lord, Lord Stevenson, kindly attended. I think that the conclusion of that was that we could not adopt the process here—and I do not think that anybody is asking for that. There is no hard evidence to suggest that if adopted here, it would produce better outcomes for businesses or creditors than the current procedures. Critics have suggested that its higher costs would make it less successful at rescuing small companies. In a sense, as we are talking about the small business Bill, that is not the sort of thing that we are looking for today.
However, I was glad to hear the suggestions from the noble Lord, Lord Stevenson, about aspects of Chapter 11 that we might take on board. In that spirit, I will look in detail at the specific points that he has suggested. We had our own look, and there are some things that we think could benefit the UK rescue regime. For example, we have recently consulted on widening the list of essential suppliers that must continue to supply the company in administration. That is a key feature of the Chapter 11 model. Previous consultations on other aspects of Chapter 11 have not attracted stakeholder support, but again the key is to find the aspects that are valuable and then one might get a more positive answer.
The noble Lord, Lord Stevenson, was concerned about breathing space for distressed companies. Such companies being rescued, in many cases upstream of formal insolvency, avoids the costs of insolvency. I think that our administration system already provides the breathing space that we need to help companies to restructure. In addition, insolvency legislation already provides a breathing space for small companies considering a voluntary arrangement, which we have not discussed today, but obviously that is another aspect of the overall issue.
The final point that I was going to refer to is one that occurred to us in looking at the noble Lord’s amendment, which is concerned with innovation by smaller micro-tech businesses, and the fact that they are key drivers of growth and economic prosperity for the country. We found in our other discussions on IP that the valuation of intellectual property is a challenge, and obviously it is also important when trading is difficult when you get to administration or indeed insolvency. The Intellectual Property Office is developing a new toolkit to help businesses to better manage their intellectual property, which is going to be launched before the end of this Parliament. Following Second Reading, I encouraged the Insolvency Service and the Intellectual Property Office to get together and have a work programme to engage with the insolvency profession to ensure that, if insolvency occurs, valuable intellectual property assets are recognised and dealt with in the best way possible.
A final area that we could put on our list of good ideas is that where formal insolvency cannot be avoided, our fast, accessible out-of-court insolvency procedures should suit small businesses by avoiding many of the court costs associated with other regimes. I do not know that much about the American regime but I know that there is a substantial legal profession there, so if one were looking for change, that would be another important area.
I am grateful to the noble Lord for this debate; I am sorry that it has been a bilateral one, but I hope that some of the things I have said will reassure him and that he will feel able to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for those comments. I was indeed hoping that we would be able to have a broader-based discussion, but even bilaterally it is still helpful; it will be in Hansard, obviously, and perhaps it will be read by others. There are some good ideas here, though not for today, and I hope that there will be opportunities to bring these issues forward in future.
The point with which the Minister ended is one that I meant to begin with. The death of this would be to try to graft on the additional oversight that exists in America. We do not have that structure here of specialist courts dealing with this sort of area, and we certainly do not have the inquisitorial judge process that would be required in order to get behind some of the corporate issues that would be raised.
However, I think we have recognised that there are some things here that might have an effect. I was particularly pleased at the idea of a work programme between the IPO and IS; it is a great idea, and I look forward to having some way of accessing it at some point in future. With that, I beg leave to withdraw the amendment.
“Review
Within three years of the passing of this Act, the Government must conduct a review into the process of applying for debt relief orders and consequent application to the Insolvency Service which must include, but is not limited to, an assessment of the impact on charities and non-profit organisations.”
Lord Stevenson of Balmacara
My Lords, I promised when I introduced the last amendment that I would have no truck with any mention of my noble friend Lord Mendelsohn other than the fact that he has put his name to this amendment. Unfortunately, I have received a message from him, or at least I think it is from him because it is not signed and his writing looks suspiciously unlike that which I am used to. If the Committee is as worried about him as I am, he says that he wishes to thank the Committee for the references made to him today and assures the Committee that he is in excellent health and looks forward to speaking to me later.
In moving Amendment 61AH I should declare my interest as the retiring chair of the StepChange Debt Charity. Debt relief orders were introduced in 2009 to help some of the most vulnerable people and make sure that they got relief from their debts. It is a key tool for people with few assets, a low income and a relatively small amount of debt, to obtain what has now become known as debt forgiveness. Unlike bankruptcy, the DRO is an administrative rather than a court-based procedure. Under the Tribunals, Courts and Enforcement Act 2007, people could apply for a DRO only through a debt advice intermediary authorised by an authority whose competence has been verified by the Secretary of State for Business, Innovation and Skills. At present there are 12 competent authorities, many of whom are charities like the StepChange Debt Charity, but also Citizens Advice. One or two commercial organisations do provide DROs to people who need them, but the overwhelming majority—over 80% last year, according to the Insolvency Service—are provided by charitable debt advice agencies.
However, it costs the StepChange Debt Charity more than £2 million a year to support clients through this process. Given the numbers that we have as compared with others, I suspect that the total cost in the charitable sector is probably between £8 million and £10 million, so it is quite a high-cost operation. At the moment, out of the £90 fee that clients must pay to the official receiver to obtain a DRO, the Government via the Insolvency Service remits just £10 to the competent authorities. This comes nowhere near the actual cost of advising and processing a DRO application, which we estimate to be around £250. Clearly, this funding situation is not sustainable in the long term. With the pressure on charitable bodies, it is not possible for us to raise funds to do this because it is not an area which attracts much funding. We are therefore worried about how we will be able to sustain the service in the future. Indeed, it gets worse because the Government have now laid instruments to widen access to DROs and they predict that approximately 3,600 more people each year will now enter into a DRO. We welcome the extension of the reach because it is a good system at its heart, but it is clear that the effect will be to place an even greater strain on the resources of the charitable debt advice sector.
The StepChange Debt Charity would not wish to see an increase in the DRO application fee because that would defeat the central purpose of these orders, which seek to provide an alternative route to debt relief for those who are unable to afford the relatively high bankruptcy fee costs. Clients recommended a DRO by our advisers have on average just £6 a month surplus to save towards the existing fee. Even if they can make it up, it will be about 15 months before they can access the debt solution that they desperately need. Increasing the fee is not the solution. We have argued that the responsibility is on the Government to make a greater commitment to covering the costs of the competent authorities when these are charities delivering their statutory duties. We have suggested that one way of doing that is by looking at the balance of the fee between the Insolvency Service and the competent authorities. We have had a private discussion about this at one of the informal meetings that have already been referred to by the Minister. The point was made and I take it fully that it would be quite wrong not to expect the Government to act on anything other than a cost-recovery basis. However, what is appropriate for these hard-pressed charities? Why can we not also recover our costs in preparing what is an important avenue for a certain group of people?
This amendment signals the urgency with which we think this issue needs to be addressed, but we do not go into the specific details. The amendment would require the Government to review the adequacy of the funding arrangements for DROs to ensure sufficient funding for charities acting as a competent authority in carrying out their function as authorised intermediaries. If the Committee would like my view to feed into this, it is that there is a parallel here with what happens in Scotland. In Scotland, the Accountant in Bankruptcy operates a similar system, but it is conducted increasingly at arm’s length from the AIB, which encourages other bodies to take on the responsibility of preparing and proposing to the authority—in this case the Accountant in Bankruptcy—that a DRO should be ordered. In other words, the burden of responsibilities and the costs come across to the competent authorities, but so does the fee. That is the essence of it.
A broader look at this could involve some engagement with creditors because although there are very small creditors in this system, deliberately, there are always some. There may be a way in which a body such as Citizens Advice or our charity could have a convening power to allow for creditors to make more of a contribution to this area. There are solutions here. I do not think that we are stuck in a cul-de-sac from which there is no escape. It is worth trying to do a little work on it and I offer StepChange Debt Charity as a specialist agency willing to have negotiations with the Insolvency Service, if it would like that, to see if we can come up with a solution. I beg to move.
Baroness Neville-Rolfe
My Lords, I start by paying tribute to the noble Lord, Lord Stevenson, for building up StepChange. I can only express my regret at the news that he will be stepping down. He leaves a great legacy there and I know that he will be much missed. I pay tribute also to the other DRO facilitators, including Citizens Advice.
Turning to the wider subject, last Friday the Government introduced legislation to increase DRO eligibility. This included raising the debt and asset limits to make DROs more accessible for the most vulnerable debtor: those with low levels of debt and limited resources, and for whom bankruptcy is too expensive. The noble Lord, Lord Stevenson, mentioned high bankruptcy application costs. He may already be aware that we will be introducing in 2016 a new debtor petition application process, which will allow a person to pay the application costs by instalments. As part of the announcement last week, the Government committed to fully reviewing DROs again two years after the changes come into effect on 1 October this year. We, of course, consulted on these changes, including on the fee paid to the facilitators of DROs. The majority of respondents, including CAB, which is the largest facilitator, stated that they did not want to increase the fee, being mindful of the need to keep this important service affordable.
The noble Lord, Lord Stevenson, has agreed today that increasing the fee is not the solution. As he pointed out, the Insolvency Service receives £80 for its element of the DRO application process. Unfortunately, as I have explained to him outside the Committee, Treasury rules preclude the Insolvency Service from setting its fee at less than this figure, which represents full cost recovery. It is important that the Insolvency Service works hard to keep its costs as low as possible. The DRO unit has recently undertaken a lean review and is focused on continually improving its service. This service includes verifying DRO applications, providing an advice service to the facilitators and considering creditor objections to the granting of DROs. The Insolvency Service has also committed to an upgrade of the IT system providing the electronic DRO solution, which may help. The upgrade will improve response times and make the system more user-friendly, potentially saving time and resources for DRO facilitators. I must thank facilitators such as StepChange for providing a lot of input into those improvements.
This Government do not feel that there is a need for an additional review. However, we will continue to look at ways to improve the administrative processes, which will be of benefit to the facilitators and affect the underlying costings. I note what the noble Lord, Lord Stevenson, said about good practice in Scotland. More broadly, before I finish, the Government are very keen to ensure that anyone facing debt worries seeks independent, reputable and free debt advice at an early stage. We have put the funding of free debt advice on a sustainable footing through the Money Advice Service. The Government have also commissioned an independent review of the Money Advice Service to make an assessment of the need for debt advice and education. The review, and the Government’s response, will be published shortly. We have had a good debate on this important subject, albeit again a bilateral one. I hope that on this basis, the noble Lord will feel able to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for her kind words about me and my contribution to StepChange. I am sorry to leave it—it is a terrific organisation—but I am sure it will be in good hands after I have gone.
We are edging towards the point where this issue needs more exploration and discussion. As I have said, we are willing to participate, as I am sure many others will be. It costs us £250 per applicant to do something that we want to keep in play and we only get £10 back. That is too big a gap and we need to address that issue. There are other money sources around but it is a hard time out there for charities and it is not easy to see how this can be done on a sustainable basis.
I am glad the points have been raised. I stand ready to discuss these matters, should that be required, and in the interim I am happy to withdraw the amendment.
House of Lords
(9 years, 11 months ago)
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Employment
(9 years, 11 months ago)
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Lord Holmes of Richmond
To ask Her Majesty’s Government what assessment they have made of the latest United Kingdom employment figures.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
We are seeing a strong, broad-balanced and sustained recovery of the UK labour market. Employment is at an all-time high and the number of vacancies is at a record high. The main out-of-work benefits are at their lowest level since 1990.
Lord Holmes of Richmond (Con)
My Lords, average earnings up, unemployment down, more people in full-time—yes, full-time—employment since 2008: this is an economic recovery. Does my noble friend the Minister agree that a high-employment, low-inflation economy is the only way for us to dig ourselves out of deficit and that we need to ensure that everybody is enabled to have meaningful employment—not least young people and disabled people?
Lord Freud
One of the best things about this recovery in jobs is that they are going to some of the people who in the past have not taken part in these recoveries. That includes the disabled, where there is a strong improvement of 250,000 jobs over the past year with some 3 million now in employment. We are in a really healthy position in reducing long-term unemployment among youngsters.
Baroness Uddin (Non-Afl)
My Lords, notwithstanding the Government’s election bandwagon rhetoric, what assessment does the Minister make of the changes to employment support for disabled people, in particular those with autism spectrum disorders, in light of the Access to Work review by the Work and Pensions Select Committee?
Lord Freud
I hope that noble Lords in the House will agree that I was not using rhetoric but gave the facts and figures. As I have just said, disability employment has improved strongly over the past year with 250,000 more disabled people now in work. The employment rate for disabled people now runs at 46%, up 2.5 percentage points on the year. That is strong improvement for the people who need it.
Baroness Bakewell of Hardington Mandeville (LD)
Given the encouraging increase in the employment figures, will the Minister comment on the disappointing fall of 84,000 in the 16 to 24 age bracket? Can he give any information about regional variations? For example, is the problem worse in rural areas?
Lord Freud
My Lords, one of the myths about the improvement in employment is that it is concentrated in the south, particularly in London. The reality is that the bulk of the improvement—75% to 80% of it—has taken place outside London. The youth figures are extremely encouraging, because youth JSA figures are now running at some of the lowest levels we have seen for many years.
Baroness Sherlock (Lab)
On youth unemployment, maybe the Minister could look again at the figures. I welcome any rise in employment, but there are 763,000 young people out of work. Last summer, when the Government scrapped their youth contract wage incentive, youth unemployment started going up straight away and it has now risen for three months in a row. Will the Minister tell the House what he plans to do about it? Maybe it is time for him to look at Labour’s compulsory jobs guarantee for young people.
Lord Freud
My Lords, the trouble with Labour plans in this area is that they are extraordinarily expensive. The Future Jobs Fund, on which some of them are based, cost 20 times what Work Experience costs—and that produces just as good results. We cannot afford to have these artificial job creation schemes: we want real jobs in the real economy, and I am pleased to say that we now have the highest level of private sector employment that we have ever had.
Lord Dobbs (Con)
May I take this opportunity to apologise to noble colleagues on the Labour Benches, because a little while ago, on the subject of unemployment, I suggested that Labour Governments always end office with unemployment higher than when they went in? Is my noble friend aware that, according to the Office for National Statistics, since the war every Labour period of government has indeed ended with more people out of work? Is he further aware that those same statistics show that every Conservative Government have ended their period of office with more people in work? May I apologise to those on the Labour Benches for not having made that point clear enough in the first place?
Lord Freud
I am very pleased to answer my noble friend’s question. I was aware of those figures, and they underline the point: it is how you run the economy effectively that drives the employment figures, not how you manipulate those figures later with odd schemes.
Lord Lea of Crondall (Lab)
My Lords, will the Government announce an independent inquiry into the evidence reported in today’s Guardian that Ministers in the Minister’s department have been instructing officials to manipulate the unemployment figures downwards?
Lord Freud
My Lords, I do not need to make an inquiry into that; I can give an assurance right here and now that Ministers have not been doing anything like that at all.
Lord Winston (Lab)
I speak as somebody who does not regard himself as a politician. Does the Minister not agree with me that discussions like this come very close to what we hear on a Wednesday in another place? Would it not be much more sensible to look very carefully at the statistics we are discussing and, when we talk about employment and unemployment, to look carefully at how much people earn, and at what kind of job security, and what kind of training, they have? Then we could arrive at a sensible discussion that would reflect much better on this noble House.
Lord Freud
The noble Lord makes an excellent point. This is a complicated area. We have had some large-scale debates in which we have had some very interesting contributions from all over the House. One of the most important things that the Government are trying to do is restructure the market so that we have sustained genuine employment. One of the most encouraging figures that we have seen is that the number of untrained people who have moved into the middle section of the market has improved quite strongly over the past four years.
Baroness Whitaker (Lab)
My Lords, I welcome what the Minister said about genuine employment, but following the questions from the two noble Lords opposite, which he must have welcomed, can he say what is the median annual pay of those new jobs?
Lord Freud
All I can say on what is happening in the market in terms of real disposable incomes is that we are now seeing inflation falling below the level of pay increases. In the latest set of figures, regular pay went up by 1.8%, compared to a 1% rise in inflation in the same period. We have seen some extremely encouraging forecasts. I cite the Ernst & Young ITEM Club forecast that real disposable incomes were likely to rise by 3.7% in 2015.
Alcohol: Impact on Accident and Emergency Services
(9 years, 11 months ago)
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Lord Brooke of Alverthorpe
To ask Her Majesty’s Government what discussions they have had with the drinks industry about contributing to National Health Service accident and emergency costs.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, the alcohol industry has responsibilities to reduce harm caused by its products. We have challenged the industry to deliver action through the responsibility deal. It is important to recognise that individuals also have responsibility for their behaviour. The Government set the legislative framework, and the United Kingdom has relatively high taxes on alcohol, which are the main way to compensate society for its costs. Our alcohol strategy seeks to prevent and reduce harm from alcohol.
Lord Brooke of Alverthorpe (Lab)
My Lords, I am grateful for the pleasant words from the Minister, but I omitted to pick up on just what action the Government intend to take. Does he share the concern of his new CEO for the NHS, Sir Simon Stevens, that more than 1 million people are now presenting at A&E each year with alcohol problems? Not only that, but they are in the main accompanied by their friends and often family, who swell the numbers and are equally intoxicated. They are creating great difficulties for nurses, doctors and other A&E patients. Many of those people do not come from their home; they come from drinking establishments from which some of them have been ejected. Many of those establishments have personnel there looking after security for the protection of the interests of the drinks industry. If the drinks industry can pay for those people to protect its interests, why cannot it be required to pay to protect the interests of nurses, doctors and other people in A&E who are intimidated by people who are drunk?
Earl Howe
My Lords, alcohol-related attendances at A&E are certainly a matter of concern; we fully recognise that. Having said that, there is no evidence to suggest that current pressures in A&E departments are related to trends in alcohol-related attendances. We are taking a range of actions to prevent and reduce harm both nationally and in many local areas. We are certainly not just treating this as a financial issue. This is an issue to do with people’s health, and it is important. The industry is playing its part through the responsibility deal, which is already yielding some encouraging results.
Baroness Finlay of Llandaff (CB)
Do the Government accept that currently, the cost to the NHS of these attendances is about £120 per taxpayer for England? The arguments for minimum unit pricing are very strong, given that the attendance range peaks between the ages of 35 and 55 and yet, in that age group, you can drink your whole maximum weekly recommended amount of alcohol for less than £10 with the current pricing system. Minimum unit pricing might bring in more money to cover the cost to the NHS.
Earl Howe
My Lords, we are keeping the developing evidence on a minimum unit price under review. It has only ever been part of our alcohol strategy—which, as I said, includes a range of actions. We acknowledge the need to give careful consideration to any possible unintended consequences of MUP, such as its potential to impact on the cost of living, the economic impact of the policy and, importantly, a possible increase in illicit alcohol sales that could ensue.
Lord Avebury (LD)
My Lords, is it necessary to refer to the alcohol industry for measures to alleviate the £21 billion-worth of harm that it causes? Should my noble friend not instead refer to the calculations by the University of Sheffield showing the amount by which alcohol harm can be reduced by increases in taxation?
Earl Howe
My Lords, we have taken a strong policy on taxation in recent years, particularly to reduce the availability of cheap, strong alcohol. Since the 2010 general election, duties on spirits have risen by more than 18%, which is well above RPI, and on wine by more than 21%, again well above RPI. We have also introduced a ban on the sale of below-cost alcohol, which should stop the worst cases of cheap and discounted alcohol sales.
Lord Hunt of Kings Heath (Lab)
My Lords, can I ask the noble Earl about the attitude of the drinks industry? He said that it is responsible but can he confirm that the long delay in the publication of new guidelines from the Chief Medical Officer on safe drinking levels is because she wants to reduce those levels but the drinks industry objects, and the Government have given in to it?
Earl Howe
Not at all, my Lords. As I explained the last time the noble Lord asked that question, the reasons were purely technical and nothing to do with a disagreement. The CMO is overseeing a review of the alcohol guidelines so that we can ensure that people make better-informed choices. That is now under way and in its second phase. During the review we will look at any significant new evidence that relates to pregnancy, in particular, to consider whether our advice needs to be updated. We expect to consult on new guidelines by the middle of this year.
Lord Garel-Jones (Con)
Would my noble friend consider obliging the purveyors of this habit-forming, hallucinatory drug to place a government health warning on their products?
Earl Howe
My Lords, again, there has been a great deal of progress in alcohol labelling. Independent research published in November showed that just under 80% of bottles and cans of alcohol on shelves now have the correct health labelling: a clear unit content, the CMO’s lower-risk drinking guidelines and a warning about drinking when pregnant. That fulfils an industry-wide responsibility deal pledge.
Lord Singh of Wimbledon (CB)
My Lords, does the Minister agree that the drinks industry should bear the cost of treating people with alcohol-related sickness and illness who end up in A&E that is proportionate to their number? For example, it is 80% in some hospitals on a Saturday evening.
Earl Howe
My Lords, as I said earlier, there is actually no evidence that the A&E pressures we are now seeing are attributable to trends in alcohol-related attendances, and we have a mechanism through duties on alcohol to compensate society for the harms that alcohol causes.
Tourism and Hospitality
(9 years, 11 months ago)
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Lord Lee of Trafford
To ask Her Majesty’s Government what is their latest estimate of the number of people employed in the tourism and hospitality sectors.
Lord Lee of Trafford (LD)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper and, in doing so, I declare an interest as the chairman of the Association of Leading Visitor Attractions.
Lord Gardiner of Kimble (Con)
My Lords, the tourism and hospitality industries are major employers in the United Kingdom. In 2013, Deloitte estimated that tourism and hospitality supported 3.1 million jobs, accounting for 9.6% of all jobs. Both the Government and the industry are committed to nurturing growth in tourism through the creation of high-quality jobs, while giving young people every opportunity to forge rewarding and lasting careers in the sectors.
Lord Lee of Trafford
I am grateful to my noble friend. According to the British Hospitality Association, at present there are 158,000 job vacancies in the hospitality sector, at all levels of skills. Given that figure, first, what are the Government doing to encourage the take-up by SMEs of apprenticeships and, secondly, is there not an opportunity here for a major partnership programme between government and industry—between the prisons and the hospitality sector—to provide a training bridge for prisoners, to give them hope and a career opportunity post coming out of prison? That would do something to turn and improve our appalling recidivism rates, in parallel to the Evening Standard’s excellent programme to encourage business start-ups in prisons.
Lord Gardiner of Kimble
My Lords, SMEs account for 80% of the tourism industry, so it is extremely important that we help SMEs to flourish through things like the deregulation task force. They are a very important part of the sector. The British Hospitality Association is looking to create further employment by the end of this year, with pledges of 60,000 jobs. The work that the Prison Service and, I think, the Clink Charity are undertaking with restaurants at certain prisons that I have heard of has been immensely successful. This is an example of where, in partnership, we can make some real progress.
Lord Morris of Handsworth (Lab)
My Lords, given the scale of the tourism and leisure sector, and indeed the robust economy that we hear so much about, will the Government at least try to persuade the industry to adopt the living wage?
Lord Gardiner of Kimble
My Lords, I think that the Government are very clear: where employers are in a position to pay the living wage, we very much encourage it. However, I repeat that a lot of the businesses involved are SMEs and family businesses, and that may not be possible. Still, we very much encourage that, where it is possible, it should be done.
Baroness Liddell of Coatdyke (Lab)
My Lords, I am well aware that many of these employers in the tourism sector are SMEs and have particular difficulties, but the tourism industry is a major part of the British economy. Was the Minister as shocked as I was to see a major hotel chain named and shamed last week as not paying the national minimum wage? Could he advise the House what proportion of those employed in the tourism industry are on the national minimum wage, how many are on the living wage, how many are on zero-hours contracts and what initiative the Government are prepared to take to raise the level of skill and training in the tourism and hospitality sector?
Lord Gardiner of Kimble
My Lords, the first thing is to say that there are two trail-blazer programmes specifically designed to enhance training in the tourism industry. That is very important. The government apprenticeship schemes and the Tourism Industry Council are working extremely hard at focusing on improving skills. Anyone who does not pay the minimum wage is breaking the law. I do not know the precise breakdown of the figures as to who is paying the living wage but, as I say, we encourage those who are in a position to do so to pay it. Of course, zero-hour contracts are in part a feature of the tourism industry because it is seasonal. Obviously if there is any wrongdoing or abuse it needs to be investigated, but it is a feature of the tourism industry.
Lord Walpole (CB)
My Lords, I declare an interest in that I have a garden which is open to the public. What is the number of people in East Anglia who are employed in these trades, and does the Minister know what percentage of the population of East Anglia that might be?
Lord Gardiner of Kimble
My Lords, I am afraid I am not a magician. What I can say is that the countryside is a very important feature of tourism. Some 13.4% of employment in rural areas relates to tourism, and it is 10.4% of all enterprises, so tourism is hugely important in the countryside. In many constituencies, tourism is the most important industry sector, so it is hugely important for the success of the rural economy.
Baroness Oppenheim-Barnes (Con)
My Lords, is my noble friend aware that a few years ago—no, actually quite a few years ago—tourism was in my ministerial portfolio? Is he aware that it was my complete favourite because it never asked for money but only brought money into the country—for example, carriage by sea was one of our biggest invisible exports? We did not have any problems about training, as people knew their jobs and did them wholeheartedly, in this country and abroad.
Lord Gardiner of Kimble
My Lords, I think that we all want to improve the training skills of young people and indeed all people in that sector, and that is something that the sector itself very much welcomes. I agree with my noble friend. The value of tourism in 2013 was £127 billion.
Lord Stevenson of Balmacara (Lab)
My Lords, a report published recently by the Federation of Small Businesses revealed that some 45,000 small businesses do not have broadband at a high enough speed, while others have very slow speed in connectivity. This is particularly prevalent in rural areas. Could the Minister enlighten us about what is happening to support those groups?
Lord Gardiner of Kimble
My Lords, across the whole rural sector and, indeed, in some urban areas we definitely need to have advances in the broadband sector. It is essential. It is why the Government, in all the press cuttings in all parts of the country, are looking for improvements in coverage. Work is going on to ensure that we get up to 95% by 2017. I hope we will improve on that. The difficult parts are some very remote areas. We are trying to fund ways in which we can get to those parts of the community where broadband is vital for businesses, farmers and everyone involved in those areas. It is a very important issue.
Wealth Inequality
(9 years, 11 months ago)
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Lord Newby (LD)
My Lords, domestically, we have invested heavily in HMRC to ensure that the wealthy pay the tax they owe. We have led efforts through the G20 and the OECD to reform the international tax rules to tackle the issue of multinationals artificially shifting their profits to avoid paying tax. Since 2013, we have been the first G7 country to meet the UN commitment to spend 0.7% of GNI on development aid.
Lord Dubs (Lab)
My Lords, given what the Minister has just said, will the Government give their full support to the Private Member’s Bill on Friday which will ensure that we continue to meet the commitment to spend 0.7% of GNP on development aid into the foreseeable future? Secondly, is it not shameful that the world is still so unequal? We should all be ashamed that the richest 1% have all the wealth and that 99% should have very little. Is it not bad for governance and bad for the future of the world that that should be the case?
Lord Newby
My Lords, I can give the noble Lord the absolute assurance that the Government support the Bill that will be debated on Friday. As to global inequality, noble Lords might like to contemplate the fact that to be part of the 1%, the wealth threshold is just over £500,000; so we are all part of the 1%.
Lord Naseby (Con)
My Lords, is it not time that some of our leading charities set about solving the problems they were set up to solve rather than getting involved in financial lobbying and somewhat dubious forecasting? Does my noble friend agree that, looking at what the British Red Cross and Médecins Sans Frontières do, they are the blue chips of our charities, and perhaps some of our other large charities could follow the example that they have set?
Lord Newby
My Lords, the advocacy role of Oxfam and other charities is extremely important. The list of proposals in the report we are debating includes issues such as promoting women’s economic equality and women’s rights. Those goals are shared by all international development charities, which do a very useful job in bringing these important issues to wider public attention.
Lord Kinnock (Lab)
Does the Minister share my concern that the current division in wealth in our country—where the richest 1% of income getters have 14% of the wealth—repeats a situation that was last reached in 1914? If he does, will he tell the House what policies the Government are pursuing to try to close that gap, and especially what fiscal policies they are pursuing to have a necessary effect on the richest people in our country, whatever their place of origin?
Lord Newby
As the noble Lord will know, in terms of wealth, the largest assets held by most people in the UK are housing assets. The Government have taken a number of steps in terms of taxing high-value housing. There is a lively debate about that in terms of the upcoming election. As for income, I remind him that the top 1% is now paying 28% of all income tax receipts, the highest ever level.
Baroness Hussein-Ece (LD)
My Lords, does my noble friend accept that the evidence of growing inequality in society reflects the stagnation in social mobility? British society is becoming more and more unequal and polarised, with fewer opportunities for young people, particularly those from deprived backgrounds, to progress in the 21st century than was the case in the previous century. What steps are the Government taking to address that?
Lord Newby
My Lords, I make two principal points. The first is that the increased level of employment means that there are now 390,000 fewer children living in workless households, which sets a very important example in those households about their future life prospects. The other point to bear in mind is that there are now record numbers of people from disadvantaged backgrounds going to university, which, as we know, is one of the best ways of ensuring that people get a good, well paid job.
Lord Davies of Oldham (Lab)
My Lords, does the Minister not know the evidence which indicates that inequality in this country is increasing? The policy of looking after the rich, based on some kind of theory of a trickle-down effect, is not working. How can there be a situation, under this Administration, where the rich are getting wealthier but the average family is £1,600 a year worse off?
Lord Newby
My Lords, it is simply not true: income inequality has not risen under this Administration. The £1,600 figure—which was immensely dubious even when it was first used three years ago—is now completely outdated by the fact that wages are rising in real terms. The key thing in terms of prosperity and, indeed, income distribution is to increase the number of jobs, to increase the number of well paid jobs. We have increased the number of jobs and vastly increased the number of apprentices. That is the how we are going to enable people from the bottom end of the income scale to do better in the future.
Lord Lawson of Blaby (Con)
My Lords, my noble friend the Minister referred to the forthcoming Private Member’s Bill to enshrine the 0.7% ODA figure in law. Is he aware that the Economic Affairs Committee of this House produced a unanimous report a short while ago pointing out very clearly and cogently why that would be wholly wrong?
Lord Newby
My Lords, I am, the Government are, and we disagree with the committee.
Baroness Deech (CB)
My Lords, does the Minister agree that the poverty gap can never be closed—both in this country and, especially, abroad—until women are freed from subjection, given full education, allowed to work and provided with childcare; until we end warfare in some countries, improve health and make sure that everybody speaks the language of the country in which they live; and until they achieve their full educational potential? These are issues almost greater than this House can tackle.
Lord Newby
My Lords, that is a very important point. I pay tribute to the role of the charities in promoting women’s rights, as I said earlier. If we look at countries with very high levels of poverty and civil strife—Pakistan is an obvious example—the proportion of women who are illiterate is still shockingly high.
Yemen
(9 years, 11 months ago)
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The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con)
My Lords, with the leave of the House, I shall repeat a Statement made a short while ago in the other place by my honourable friend Mr Ellwood. The Statement is as follows.
“As the House will be aware, violence in Sana’a has escalated, with heavy clashes breaking out yesterday between the Houthis and Yemeni security forces. The situation is evolving rapidly, a fragile ceasefire was negotiated by implementation and has been, at best, partial. The Presidential Office and President Hadi’s home are now under Houthi control.
I am deeply concerned about the situation in Yemen. I urge all parties to step back from conflict in Sana’a, Marib and other parts of the country and ensure that a ceasefire holds.
Those who use violence, the threat of violence and abductions to dictate Yemen’s future are undermining the security of all Yemen’s citizens and eroding the political progress made since 2011.
The UK is playing an active role in encouraging all parties to work peacefully together to implement and enforce a ceasefire and return to dialogue within the framework of the GCC Initiative, National Dialogue Outcomes and the Peace and National Partnership Agreement, reached between President Hadi and the Houthi leadership last September.
The PNPA is a framework for peaceful political transition and I call on all parties to work through the cross-party National Authority, effectively a National Assembly, to implement the agreement, including a new constitution.
I spoke to HMA Sana’a yesterday. The British Embassy in Sana’a remains open and all our staff are safe. We are obviously keeping the situation under close and active review. Since March 2011, we have advised against all travel to Yemen”.
My Lords, that concludes the Statement.
Baroness Morgan of Ely (Lab)
My Lords, the implications of renewed violence in Yemen are far reaching, given that al-Qaeda in the Arabian peninsula has established the country as its base and is using Yemen as a launch pad in its efforts to destabilise Saudi Arabia. Can the Government set out what long-term support is being offered to the Yemeni authorities to help to counter the threat of al-Qaeda in the Arabian peninsula, and how that support is likely to be affected by these recent events?
Baroness Anelay of St Johns
My Lords, the noble Baroness is right to point to the fact that al-Qaeda in the Arabian peninsula has its home in Yemen. We have been working with the Yemeni Government to ensure that we can have a peaceful political transition. We are involved in capacity building now and will continue to do so in future, which involves a new constitution and planned elections. We are also deeply involved with colleagues in DfID in providing humanitarian aid. The humanitarian situation is dire and millions of Yemenis continue to live without food, shelter or water. We have provided more than £173 million from 2011-14 and committed a further £78 million for 2014-15. Chaos breeds a place for terrorists. Our work is to prevent chaos.
Baroness Falkner of Margravine (LD)
My Lords, does my noble friend agree that the most critical point about this current instability in Yemen is that we need to work to prevent it becoming sectarian, and it has all the hallmarks of being yet another conflict backed by Saudi Arabia and Iran? What conversations have the Government had with the United Nations Special Envoy, Mr Jamal Benomar, regarding an immediate ceasefire, in so far as that can be achieved, so that we can go back to the peace process?
Baroness Anelay of St Johns
My noble friend is right to draw attention to the fact that it is important that this does not become a sectarian matter. In the past it has been a three-way battle between the three groups of AQAP, the Hadis and the Houthis. It is important that that does not develop into a sectarian matter. We are working closely with the UN on all these matters, and I know that it has been meeting for a discussion of this today. I assure my noble friend that everything is being done by our embassy through the G10 and the Friends of Yemen to ensure that we get back on track with the peace process.
Lord Anderson of Swansea (Lab)
Our key concern must surely be for the safety of the few British nationals who remain in Yemen and, of course, with our own diplomatic staff—and also, of course, for the danger of a boost to al-Qaeda there and in the wider region. Given that the interests of Saudi Arabia are very involved and that it has been intervening at the border in the past, does the Minister see any danger of a wider and possibly military intervention by Saudi Arabia?
Baroness Anelay of St Johns
As the noble Lord will be readily aware, we are working through the Friends of Yemen with a wide variety of actors to try to get back on track with the peace process. Of course, he is right to point to the security problems in the area. We know that Saudi Arabia is a main actor in trying to protect its own borders. He can be assured that our embassy staff work constantly in negotiations with other countries to ensure that cross-border activity is prevented.
The noble Lord has given me the opportunity, for which I am grateful, to pay great tribute to our ambassador in Sana’a, Jane Marriott, and all those who work with her, along with those who travel out of necessity from the FCO to do work there. We advise others not to travel, but some have to in order to keep us safe.
Lord Howell of Guildford (Con)
Could my noble friend illuminate for us, as she usually does, who is on which side in this conflict? I understand that the Houthis are Shiite peoples, which presumably means that they are against ISIS and are backed by Iran. Is that correct? I make one other point. Does not the horrific threat to Japanese citizens by ISIS bring home to us the point that this whole area is not just a western issue, and that we should take constant steps to involve in efforts to keep the peace and sort out the turmoil in these areas the responsible nations—the rising, rich nations of Asia—which are just as much threatened as we are? Are we in close contact with Beijing and Tokyo and the other, rising nations, in solving this problem collectively and globally rather than just as a western issue?
Baroness Anelay of St Johns
My noble friend is absolutely right. This is a matter for all who want peace throughout the world. Destabilisation in Yemen threatens security in other countries. My noble friend refers to the fact that the Houthis are Shia and my noble friend Lady Falkner was right to point out that it is important that this does not become sectarian. Regardless of religion, AQAP and the Houthis and the Hadis have been combatants against each other. It is important that we work together internationally to prevent further escalation and chaos in Yemen.
Lord West of Spithead (Lab)
My Lords, 48 years ago this month I was first involved in operations in Aden against an outfit called FLOSY, and Yemen has had pretty dodgy situations ever since. I fear that, unfortunately, it is already a sectarian struggle in Yemen; that is part of the problem. However, my question relates to the safety of British people. We were at one stage setting up a coastguard organisation. The links between Yemen and Somalia are huge, with a constant flow of traffic. Are we still running and setting up that coastguard organisation and, if so, how many people do we have in-country doing that?
Baroness Anelay of St Johns
My Lords, I will refer to the core issue, which is the safety of British citizens. There are very few British citizens registered with us in Yemen and we have good contact with them. Clearly, if they have not registered, we do not know they are there, and that is a rather different matter. I emphasise again that since early 2011 we have advised against all travel to Yemen. Security of the area is a matter of agreement between the main actors there. My focus has to be, as the noble Lord stressed in his question, the safety of British citizens in Yemen. We are monitoring that on an hour-by-hour—if not minute-by-minute—basis. If they cannot contact the British embassy, they may contact any EU embassy and receive the same service.
Lord Lea of Crondall (Lab)
There are problems in the history of this. The bin Laden family, as is well known, had Saudi connections and lived in Yemen. The Wahhabi doctrines pumped out of Riyadh are what inspired the bin Laden campaign. Will the Minister comment on our relations with the Saudi Arabian regime, which are very active, as we understand it? Can it be ascertained whether the Saudis are still facing two ways on the question of the theological doctrines that they are trying to export to the rest of the Arabian peninsula?
Baroness Anelay of St Johns
My Lords, the noble Lord will be aware that there are discussions in London tomorrow at which the Saudi Arabian Government will be represented. Those discussions will focus on joint action against the spread of terrorism. I think that it would be wrong of me at this stage to posit what the Saudi Arabian position might be and how it might develop. Tomorrow is a vital meeting. We hope that it will set us on a track that will mean we can then more broadly work with the rest of the countries in the United Nations to ensure that more stability returns to such a strife-riven region.
Baroness Symons of Vernham Dean (Lab)
My Lords, I am sure the whole House will feel relief at what the Minister has been able to say about the safety of our staff in the embassy. However, in the past, the British embassy and the British ambassador—a different, former ambassador—have been directly targeted. Will the Minister assure us that all non-essential staff have already been able to leave Sana’a? She mentioned the role of the GCC in its efforts to move towards a ceasefire. Can she give us any information about whether the Arab League has made any statements about the current position?
Baroness Anelay of St Johns
No, I am not in a position to answer the latter question but I will certainly take it up at the earliest opportunity when I leave the Chamber. I will also update the noble Baroness about the Arab League, and I thank her for that point.
With regard to the security of British citizens, all efforts are being made to secure the safety of those who have needed to remain within the embassy at Sana’a. When the ambassador wrote an article last year about her experiences there, she made it very clear to all of us that, in her words:
“The Al Qaeda cell in Yemen is a real threat to the UK’s security. They are the reason you can only take limited liquids on board a plane and why you have to remove your shoes … at security”.
These are brave people doing tough work. If anybody can aid the Yemenis in getting back on to the right track, they will.
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Lord Faulks
That this House do not insist on its Amendment 74 and do agree with the Commons in their Amendment 74C.
“(6) Subsection (7) applies to an order under this section the effect of which is to bring into force the Secretary of State’s power to provide secure colleges for the detention of any or all of the following—
(a) persons who are male and aged under 15;(b) persons who are female. (7) A statutory instrument containing the order may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(8) The reference in subsection (6) to the Secretary of State’s power to provide secure colleges is to the power under section 43(1)(c) of the Prison Act 1952 (as inserted by section 29 of this Act).”
The Minister of State, Ministry of Justice (Lord Faulks) (Con)
My Lords, in speaking to this Motion, for the benefit of the House I should say that, with the agreement of Her Majesty’s Opposition, it is proposed that Motions B and C be put together and be debated together.
As to Motion A, we have spent a considerable amount of time debating the Government’s plans for secure colleges and our ambition to improve the education and reoffending outcomes of young people in custody. I am pleased that, since the last time we met to debate these provisions, which deal with who should be accommodated in secure colleges, the House of Commons has accepted a government amendment to the Bill to give Parliament a vote on the matter. I therefore beg to move that this House does not insist on its Amendment 74 and agrees with the Commons in its Amendment 74C, and I hope that noble Lords will welcome the Government’s response.
Before I go into the detail of the amendment, I take this opportunity to thank noble Lords for the quality of their scrutiny during the passage of the Bill. There have been many hours of informed and passionate debate on the important and sensitive issue of how young offenders are detained and the support that they receive to become rehabilitated. As well as those who featured prominently in our debates, there were other noble Lords who brought their expertise to bear on the issues, whether in meetings, of which there were a number, or in correspondence, and I acknowledge their contributions also. The co-operation that we have encountered has led us to find a compromise, which I am hopeful and even—dare I say?—confident will satisfy noble Lords.
As the Secretary of State and my other ministerial colleagues have made clear throughout the passage of the Bill, we do not want to prevent girls and under-15s in future being able to benefit from the pioneering approach and enhanced provision that secure colleges will offer. We recognise that these groups are more vulnerable and require tailored support, but as noble Lords will know, girls and younger boys are already safely accommodated together on the same site as older boys in both secure training centres and secure children’s homes, demonstrating that such an approach can work well. Our plans for the pathfinder secure college to open in 2017 have been carefully developed, in consultation with a number of noble Lords, to provide separate and tailored facilities for younger and more vulnerable children, should they be placed there. Of course, their placement will always be as a result of the intervention of the Youth Justice Board.
We recognise, however, that there remains concern about the accommodation of girls and under-14s in secure colleges. While I am confident that secure colleges will be able to meet the needs of these vulnerable groups and achieve improved outcomes for them, I appreciate that noble Lords are, and were, seeking further safeguards and a clearer role for Parliament. When this House last considered amendments made to the Bill in the other place, I made a commitment that, before girls or under-15s were introduced to the first secure college, the Government would lay a report before Parliament setting out the arrangements for accommodating, safeguarding and rehabilitating these groups. Today, I am able to go further and am seeking to amend the Bill to make the commencement of the power to provide secure colleges for the detention of girls and under-15s subject to a resolution of both Houses of Parliament. This will give Parliament a clear role in approving the use of secure colleges to detain these groups and will enable that decision to be informed by learning on how secure colleges are operating. The Government will, of course, fulfil the earlier commitment that I made to produce a report, and this will be laid before Parliament ahead of the debates on the commencement of the power in order to provide further detail on the plans and to inform the debate in both Houses.
I hope noble Lords will feel that their concerns have been recognised by the Government and that our response goes some way towards allaying those concerns. I believe that the amendment before the House represents a practical and common-sense solution that provides Parliament with the safeguards it is seeking, while ensuring that the opportunity remains for girls and under-15s to benefit in future from the enhanced provision that secure colleges will deliver. I therefore ask the House to accept this amendment in lieu of its previous amendment.
Lord Ramsbotham (CB)
My Lords, I am content to agree with Commons Amendment 74C and am most grateful to the Minister not only for the way in which he has presented the Government’s change of heart but for his courtesy in giving me and a number of other noble Lords advance warning, by letter and also in discussion, of what it would contain. I say again how much I, and I am sure many other noble Lords, have appreciated the courtesy and admired the skilled advocacy that he has deployed throughout the passage of this Bill. I do not include the Minister in any criticisms that I make of the secure college proposal, on which he and I may not agree, but which I will continue to oppose as strongly as I am able for as long as it takes. As I have said before, I regard the very idea of building the biggest children’s prison in the western world as a stain on our treasured national reputation for fairness, decency and humanity under the rule of law.
I appreciate that the Minister is under the strict riding instructions from a Lord Chancellor whose jurisprudential credibility has been forensically unpicked by my noble friend Lord Pannick and a Secretary of State for Justice who has wreaked havoc on the ability of the prison and probation services to protect the public. With that track record, noble Lords will appreciate why I pray that that same person never gets his way with his pet plan for the detention of vulnerable and damaged children.
At each stage of the Bill, I have drawn attention to some new development or piece of evidence that adds to the strength of the case against the secure college proposal, and today is no exception. First, last week came the welcome announcement that, thanks mainly to the determined efforts of the Youth Justice Board, there are now fewer than 1,000 children in detention. Does it really make sense to hold one-third of them in one place and plan a repeat with yet more?
Lord Glenarthur (Con)
My Lords, I share many of the misgivings of the noble Lord, Lord Ramsbotham. However, the fact that the there is to be a report and a draft statutory instrument does go a long way towards meeting many of the concerns over which I pressed my noble friend on the Front Bench at the last stage. I record my warm thanks to him for moving as far as he can, or the Government will allow, in this particular direction.
Baroness Howarth of Breckland (CB)
My Lords, the Minister will not be surprised that I share the misgivings of the noble Lord, Lord Ramsbotham. I shall make only a couple of points, because I think that he has set out the arguments clearly. I thank the Minister for listening to us with care. I wish that he could use his considerable advocacy skills to go back to those who are pressing this and to discuss whether the evidence that we have put forward points to alternative secure provision.
In my time, I have been responsible for accommodating the most difficult children, so I am not someone who denies the need for secure provision of some kind. At the moment we are in total conflict with the work being done by local government—I say this as a vice-president of the Local Government Association—where departments are working really hard with the Youth Justice Board to ensure that young people are accommodated as near to their families as possible. A young person from the south of England who goes to Leicestershire has little likelihood of being able to make any proper contact with his or her family, should that be the plan. I accept that some young people are better separated from their families, but they are the minority. Most young people do better if they have contact with their families, even when their families are difficult.
This geographical spread is going to make it difficult for local authorities to meet their targets in relation to the best care in the interests of these children. It will stand in the way of their officers providing continuity of care that will take these young people into employment and that will make sure that there is family therapy when needed. All these services are local. Having maybe three smaller units that accommodate young people would be of real benefit.
I know that this is difficult, but I would just ask the Minister to go back and suggest that we look at this issue again. It is not that we do not want to look at secure provision, but the proposal for a prison of this size for children is looked on with great disbelief by colleagues whom I talk to internationally. It would be a disgrace to childcare in this country were this to go forward.
Lord Elton (Con)
Having erupted with virtually no notice into the final stage of the Bill in this House, I repeat the apology that I made to my noble friend after that for your Lordships to hear it. I have not changed my view of the proposals, but I very warmly welcome the wise concession that my noble friend has extracted from the Secretary of State and the department that this will be reviewed again before it becomes law. If it is to come to us again, I would ask your Lordships to study the issue in as much detail as they can and to read the debates which have already taken place on it.
I realise that, in addressing my noble friend, I am technically addressing the Secretary of State and the cohort of civil servants who are advising him. It is they who need to be persuaded that the enlightened and successful way of treating young people in these difficulties is along the lines suggested by the noble Lord, Lord Ramsbotham, and not according to the rather ancient, I am afraid, guidelines against which I remember struggling when I was a Minister the department back in the 1980s. I am most grateful for this concession, which I think gives the House an opportunity to be extremely effective in the next Parliament if this proposal recurs.
Lord Woolf (CB)
My Lords, I will just indicate, first, that I am very much in agreement with those who have praised the Minister on the concession that he has obtained and, secondly, that I am very much in favour of, and support, the words of caution that have been said on the desirability of reconsidering this proposal.
Lord Beecham (Lab)
My Lords, as we have already heard this afternoon, widespread concern over the proposal to include under-15s—I think the Minister inadvertently referred to under-14s in his opening—and girls in secure colleges has been voiced repeatedly in debates in this House during the Bill’s troubled passage through the legislative process. I will not rehearse the arguments again, save in one important respect. The numbers involved are small, which, as indicated by the noble Lord, Lord Ramsbotham, and the noble Baroness, Lady Howarth, implies that of necessity the group will contain members coming from even greater distances than the majority of young people who will be housed at Glen Parva—which, it will be recalled, will contain about one-third of the national number of children in detention and will already therefore, on present plans, cover a large geographical area. Thus girls and under-15s—the most vulnerable groups—will be even further from the homes and communities to which they will return.
As we have heard, the Government have at last conceded—no doubt thanks to the eloquent advocacy of the Minister, who does listen carefully to debates in your Lordships’ House—that a final decision will be taken on the basis of the affirmative resolution procedure. So far as it goes, that is of course welcome, although we have to recognise that it does not go very far, since such resolutions cannot be amended. Will the Minister at least accept that there should be separate resolutions for each of the two categories—girls in general and those under the age of 15? That would possibly allow separate decisions to be made in the light of evidence at that time, if it was thought to be necessary, rather than treating both in exactly the same way.
The parliamentary procedure that has now been laid down, after the concession for which we are grateful, will follow consultations. I asked a number of questions about the nature of the intended consultations in the debate of 9 December, to which the Minister in his reply—in fairness, he was replying to many things—made no reference. Therefore, I am constrained to repeat some of those questions.
Lord Faulks
My Lords, I am grateful to all noble Lords for their contribution to this short debate, echoing to a considerable degree the concerns that were reflected in previous debates. I do not seek to diminish their value, but I hope that I will be forgiven for not replying in full detail to all the points made, for example, by the noble Lord, Lord Ramsbotham. His concern and opposition to the Bill has been thoroughly exposed and well articulated. He knows that the Government do not accept his criticisms but of course respect his expertise in this matter.
I am grateful for the acknowledgment that the Government have listened to the concerns expressed both in and outside the House. Although it has not been made explicit today, in previous debates there has been an acknowledgment that the Government’s proposed reforms, however much some noble Lords think that they are misconceived, stem at least in part—we would say centrally—from our aspirations for educating and rehabilitating young people in custody. With 68% of young people who leave custody going on to reoffend within one year, doing nothing is simply not an option. The secure colleges reflect the Government’s vision for transforming youth custody.
Concerns have been expressed today, as in previous debates, about the geographical issue: effectively, that young people may find themselves a long way from home, which may be contrary to their interests. Noble Lords will aware that the YJB operates an assisted visits scheme in the existing youth custody estate which contributes towards travel and subsistence costs for families and carers visiting a young person in custody. The scheme also covers childcare and modest accommodation costs where required. The noble Baroness, Lady Howarth, conceded that not all families want to remain in very close contact with the young people, but, where they do, this has enabled and should continue to enable there to be contact.
We also anticipate that the operators of secure colleges will utilise a range of technological solutions that will allow young people to contact their families more easily. These will be supplementary to, not in place of, the proposed entitlement of one visit per week. We expect providers to forward innovative solutions that address the individual needs of young people in secure colleges, including a visits scheme that enables young people to remain in close contact with their families or carers. In designing the secure college pathfinder, we have considered how we could facilitate visits for young people, and the site has numerous flexible areas where the operator could choose to accommodate visits. Details of the visits scheme, including a booking system and any incentives, will be developed with the secure college operator in due course.
The noble Lord, Lord Beecham, repeated questions that he had asked previously about who would be consulted. The position is that I am not from the Dispatch Box going to commit a future Secretary of State to consult any specific body, but the noble Lord has given the House and any future Secretary of State a useful list of those who might be consulted. I can see that any Government coming before the House seeking approval, through affirmative resolution, would be well advised to consult widely and to provide evidence of that consultation to Parliament.
Apart from the report which I have undertaken on behalf of the Government to provide to Parliament, there will be a report from Ofsted and the Inspectorate of Prisons. However, I bear in mind the advice that the noble Lord has effectively given to any Secretary of State that a number of people could usefully contribute to the consultation—and, no doubt, those who have different views from a putative Government will seek consultation and advice from those bodies and bring before the House their views.
The Government are not guilty of unseemly haste. They have been enthusiastic about continuing to press forward with secure colleges and intend to begin the process of building before the general election. The question that I think lay underneath the questions asked by the noble Lord, Lord Beecham, was whether this was a sensible way to proceed given that a Government not of the current complexion might conceivably not proceed to build secure colleges—indeed, it was said in the House of Commons that the Labour Party, if it was in power, would not do so. The question is what would happen.
Ministry of Justice officials are committed to providing value for money for the taxpayer, which includes ensuring appropriate termination rights in contracts, and the costs attached to terminating a contract, should that happen, would vary depending on when the contract was signed and how far the construction had progressed. The standard termination provision for these types of industry-standard contracts will be included within the commencement agreement. These provisions will represent a reasonable and balanced position for the Ministry of Justice in relation to such contracts and will meet the standards set out in Managing Public Money. The Treasury is considering the pathfinders business case, and this is very much in line with the Government’s process and project timelines. A decision will be made shortly.
The noble Lord, Lord Beecham, also asked whether the Government would bring forward separate statutory instruments in relation to under-15s—not under-14s; I am sorry that I inadvertently referred to under-14s—or to girls. I anticipated that there might be some questions in that regard. The position is that it is probably unlikely that any Government would decide to bring forward such a proposal at the same time—in which case, there would be two separate statutory instruments. However, if it is was prudent and wise to consider whether there was a proper case for addressing under-15s and girls at the same time, on that assumption I do not think that we would bring in separate statutory instruments because it would be perfectly open for Parliament to view them as a whole. That said, I will bear in mind what the noble Lord said and, while not giving any commitment to that effect, I can see that there could conceivably be different arguments that pertain to those different groups. So I respond in that way—I hope positively, but not giving any commitment on behalf of the Government.
I hope that that is a sufficient response to the debate, and that the noble Lord, Lord Ramsbotham, will forgive me if I do not go into the merits of the scheme as a whole, having regard to the responses I have given to various debates in the House and the various meetings that we had with him and other concerned Peers. In those circumstances, I ask noble Lords to join me in accepting the government amendment in lieu of their previous Amendment 74.
Lord Faulks
That this House do not insist on its Amendment 102B and do agree with the Commons in their Amendments 102C to 102M.
“(2B) The court may disregard the requirements in subsection (2A)(a) and (b) if it considers that it is appropriate to do so for reasons of exceptional public interest.
(2C) If the court grants relief or makes an award in reliance on subsection (2B), the court must certify that the condition in subsection (2B) is satisfied.””
“(3D) The court may disregard the requirement in subsection (3C) if it considers that it is appropriate to do so for reasons of exceptional public interest.
(3E) If the court grants leave in reliance on subsection (3D), the court must certify that the condition in subsection (3D) is satisfied.””
“(5B) If the tribunal grants relief in reliance on section 31(2B) of the Senior Courts Act 1981 as applied by subsection (5A), the tribunal must certify that the condition in section 31(2B) as so applied is satisfied.””
“(3E) The tribunal may disregard the requirement in subsection (3D) if it considers that it is appropriate to do so for reasons of exceptional public interest.
(3F) If the tribunal grants permission in reliance on subsection (3E), the tribunal must certify that the condition in subsection (3E) is satisfied.””
“(6B) If the tribunal makes an award in reliance on section 31(2B) of the Senior Courts Act 1981 as applied by subsection (6A), the tribunal must certify that the condition in section 31(2B) as so applied is satisfied.””
Lord Faulks
My Lords, as I indicated, Motion B and Motion C will be debated together for the convenience of the House.
These clauses have been the centre of much highly intelligent debate in this House. I am grateful for the scrutiny and valuable insight that noble Lords have given to the Bill, though I firmly hope that today will mark the end of that process for this particular Bill. Our amendments draw on those debates and the many other discussions that have taken place in less formal settings. The general arguments around these clauses are well rehearsed, and I do not intend to detain your Lordships unnecessarily by going over old ground. Instead, I will focus on the Government’s specific amendments, turning first to Clause 64.
Our ambition for this clause is relatively modest: it is simply to limit the time and resources spent on judicial reviews brought on grounds highly unlikely to make a substantial difference to the outcome for the applicant. However, we accept that there have been and are concerns that, exceptionally, even these types of case could engage crucial issues which should be heard by the courts. That is why we have tabled an amendment that permits the court to grant permission or a remedy where it considers that reasons of exceptional public interest mean that that is appropriate.
I accept that “exceptional public interest” is an unusual formulation, and I will limit myself to two observations on this that, I trust, will give noble Lords the comfort they might require as to how it will operate. First, a high degree of public interest specific to the case is required for the exception to be met. We think that that is a fair compromise in the light of my second observation: we have purposely not defined the term “exceptional public interest”, meaning that the judiciary will apply the term in practice to the facts at hand. For fear of appearing to seek to fetter that discretion, I will forbear from setting out further detail on how the Government would wish to see the term applied in future.
I simply add this: in one regard it could be said that it is always in the public interest for a government body, local authority or anybody amenable to judicial review to follow to the letter the law. One can see the force of that argument.
However, that, in a sense, is what public law is all about. It could also be said that simply saying that something is in the public interest is almost tautologous, when we are dealing with a public law remedy. Hence the requirement that there must be “exceptional public interest”—although, as I have said, we think that is a matter for the judges to decide. It will also be for the judges to decide first whether, on the facts of the case, the “highly likely” threshold has been met, and secondly, in appropriate cases, whether there are reasons of “exceptional public interest” which none the less make it appropriate to grant permission or a remedy.
Lord Pannick (CB)
My Lords, I am very pleased that the Government have given way on the issue of principle in Motion B and have indicated that the identity of those contributing up to £1,500 funding for a judicial review will not need to be disclosed. The Minister said that our earlier debates on these issues had been highly intelligent. Without, I hope, debasing the currency, I want to make some observations.
The issue of principle is that the courts will now retain a power to hear a judicial review even if it is said that the alleged defect would not have made a difference in the individual’s case. I would have preferred the concession to be drafted in more generous language than an exceptional public interest, but concession it is. As the Lord Chancellor said in the House of Commons on 13 January at col. 811, and as the Minister confirmed this afternoon, it will be for the judges to decide how and when that test should apply. Indeed it will.
In applying the criterion, I am sure that the courts will have very much in mind Mr Grayling’s explanation of the purpose of the clause. He said that it is designed to prevent judicial reviews being heard when they are,
“based on relatively minor procedural defects in a process of consultation … That is what these proposals are all about”.—[Official Report, Commons, 13/1/15; col. 812.]
I am confident that the courts will have careful regard to those explanations by the Lord Chancellor and that if the judicial review is not concerned with minor procedural defects but with allegations of systematic or deliberate wrongdoing, or errors of law in the interpretation of statutes which have a general effect, the discretion will be exercised so that the case is heard in the traditional way, as it should be.
In applying the clause, I would also expect the courts to pay close regard to what the noble and learned Lord, Lord Woolf, then Lord Chief Justice, who I am delighted to see in his place today, said in R v Offen, 2001, 1 Weekly Law Reports 253. In the Court of Appeal, the noble and learned Lord was considering Section 2 of the Crime (Sentences) Act 1997, which requires courts to impose an automatic life sentence on a person convicted of a second serious crime,
“unless the court is of the opinion that there are exceptional circumstances”.
At paragraph 79 of his judgment, Lord Woolf said that the meaning of “exceptional” depended on the statutory purpose, and where the statutory mischief did not exist, the case was indeed exceptional.
Applying that approach, as I am sure that the courts will do in the present context, the judges will be able to say—and I hope that they will—that the statutory purpose here is the very limited one identified by Mr Grayling of striking out judicial reviews which raised what he describes as “relatively minor procedural defects”.
Other cases, particularly those raising allegations of substantial errors of law or of systematic wrongdoing are outside the legislative aim and are therefore, on the approach of the noble and learned Lord, Lord Woolf, exceptional. They can be heard in the normal way. For those reasons, I am confident that we have arrived at a tolerable result at the end of this saga.
We have arrived at a sensible solution because, and only because, this House was prepared twice to disagree with the House of Commons. It should be noted that the concern about Mr Grayling’s proposals was expressed across this House. My amendments were supported by a very large majority of Cross Benchers who voted; they were signed by the noble and learned Lord, Lord Woolf. The amendments were supported by the Labour Benches, led on this occasion by the noble Lord, Lord Beecham, with his customary wit and fire; he signed the original amendments. There was a very substantial rebellion in support of retaining judicial discretion from the Liberal Democrat Benches; the noble Lord, Lord Carlile of Berriew, also signed the original amendments. Also of importance on the Floor of the House and behind the scenes, there was substantial support from noble Lords on the Conservative Benches who are wise and experienced, and respectful of the value of the rule of law, with some forceful speeches in support of retaining judicial discretion, in particular from the noble Lord, Lord Deben. I am very grateful for all that support.
I express particular thanks to the Minister, the noble Lord, Lord Faulks, who has assisted the House by the force and clarity—indeed, the good humour—of his advocacy as the acceptable face of the Lord Chancellor’s department at all stages of the Bill. I know that he has worked tirelessly and successfully behind the scenes to arrive at a compromise which can be agreed by the Lord Chancellor and by noble Lords concerned about this clause. That is a remarkable achievement.
I should add one further observation and I do so with regret, but it needs to be said. I regret that on 13 January, when the House of Commons considered this matter for the final time, a Lord Chancellor again expressed comments that display an astonishing lack of understanding about the role of judicial review—one of the cornerstones of the rule of law. Judicial review does not, as Mr Grayling complained at col. 819, involve public bodies being “blackmailed”. He also suggested,
“severe doubts about whether secondary legislation should be subject to judicial review”.
These doubts appear to have no basis whatever other than the fact that the courts have, on a number of occasions in the last year, held that regulations made by the Lord Chancellor were outside the scope of his statutory powers.
Furthermore, judicial review is not, as the Lord Chancellor again suggested,
“now overtly used by campaign groups and third parties to seek to disrupt the process of government”.—[Official Report, Commons, 13/1/15; cols. 819-20.]
Such comments make no sensible contribution to the debate. They demean the office of Lord Chancellor because they disrespect and undermine the vital role of judicial review in ensuring that the business of government is conducted lawfully.
However inconvenient and embarrassing it is to Mr Grayling to have his decisions repeatedly ruled to be unlawful by our courts, however much he may resent the delays and costs of government illegality being exposed in court and however much he may prefer to focus on the identity of the claimant rather than the substance of their legal complaint, it remains the vital role of judicial review in this country to hold Ministers and civil servants to account in public, not for the merits of their decisions but for their compliance with the law of the land as stated by Parliament. The discipline of the law plays a vital role in promoting the high standards of administration in this country that we are in danger of taking for granted. It helps to concentrate—and rightly so—the mind of a Minister or civil servant taking a decision whose legality he or she will be answerable for in public before an independent judge.
Lord Horam (Con)
I would like to comment on the remarks of the noble Lord, Lord Pannick. He said that this has been something of a saga. It has indeed been a saga, albeit, as I think he would agree, a highly intelligent and rationally argued one on all sides. The reason it has been a saga is that there is a real issue here: on the one hand we value the role of judicial review, which, as he rightly says, is a protection for the citizen against illegal and wrong actions by the Government, and it is important that that is kept in place, but on the other hand, unfortunately, in recent years an abuse of judicial review has crept in in many areas. We have heard at some length the sort of examples where that has taken place. To give one example, the noble Lord, Lord Adonis, had tremendous difficulties with the introduction of the academy programme when he was Minister for Education in the previous Government, because of the judicial reviews that were brought in against that particular idea, and it took him some years for that all to be sorted out.
At the moment these problems are concerned not so much with education or issues of that kind but with development. Many schemes up and down the country to provide more houses, roads, commercial opportunities, schools and hospitals are held up by judicial reviews that are usually—indeed, very often—almost without merit and are brought forward on tiny issues of procedure. These judicial reviews are used as a weapon of delay, which is something that any Government, Labour, Conservative or coalition, should be concerned about.
There has been an issue of getting the right balance between on the one hand protecting the legitimate and longstanding use of judicial review, and on the other avoiding this abuse of judicial review, particularly using it as a weapon of delay for infrastructure development. This is an important issue, so important that not only are the Government concerned about it but the Opposition are using their day tomorrow to talk about the need for more infrastructure development. It is a common cause for all Governments, frankly, that we get infrastructure development—I am sorry that that is such an ugly phrase, but the House knows what I mean—going with some speed, because we are falling behind. We are 24th in the world league for infrastructure development, whereas we are fifth in the economic league, so we are well behind where we should be in terms of building roads, houses and all the rest of it, and we need to move that on. The truth is that judicial review has sometimes been used in a very unfortunate way to delay that sort of development.
My noble friend has had the difficult task of getting some sort of balance into this debate, and that it why it has taken some time for this House and the other House to reach a conclusion. A conclusion has, I hope, now been reached, and that reflects good will on all sides of the House. I hope that what has been achieved will be of value and do some good. When we pass legislation in the House, we unfortunately never know exactly what effect it will have, but I hope this will have some effect and I therefore pray that the effort that has gone into it on all sides of the House and at the other end of the corridor will be of good value.
Lord Woolf
I also share the hope expressed by the noble Lord, Lord Horam, that what has been achieved will be worth while. However, I am bound to say that my view originally was that these proposals to restrict the court’s powers in relation to judicial review were unnecessary and misplaced. On the points made by the noble Lord, Lord Horam, I should point out that these amendments would not have assisted in any way whatever. What has assisted is the fact that the courts, aware that there are problems in some areas of judicial review, and of their own motion, put in place a specialist way of dealing with the questions of development to which the noble Lord referred. That is quite independent of these amendments. None the less, the changes that have been achieved to the original proposals enable me, like the noble Lord, Lord Pannick, to accept that this can be accepted, although with reluctance.
Lord Beecham
My Lords, it is a pleasure to follow the noble Lord, Lord Pannick, in his customary forensic and formidable critique of the decisions made, and the manner in which they are made, by the Lord Chancellor. As we have heard, the House has secured an amendment to the “highly likely” test. The courts will be able to allow a case to be brought or to grant relief where they deem there is an exceptional public interest, notwithstanding that it would be highly likely that the defect in procedure would not have affected the outcome.
It is, however, somewhat unclear what is meant by “exceptional public interest”. The Richard III case attracted more public interest than any judicial review case that I can recall, and certainly more interest from the Lord Chancellor, who constantly relies on that one case to justify his assault on judicial review. Would such exceptional interest have allowed the court to deal with that case if it had been demonstrated that it would have failed the “highly likely” test? If not, will the Minister give us some examples, given that the courts are now directed that they must strike down a claim unless such exceptional public interest exists? Further, if judicial discretion remains, it would surely have been better not to substitute “must” for “may” in the injunction to apply the test contained in the amendment.
The final government amendment deals with financial information to be supplied by those contributing to the funding of judicial review applications; and again under pressure from this House, and again, no doubt, with the advice of the Minister, the Government have moved, in this case to promising a consultation on the limits beyond which disclosure would be required. That is, of course, welcome, although it is not clear whether Parliament will have an opportunity to debate the outcome of such a consultation before the rule committee makes its decisions. Perhaps the Minister will give me an indication about that.
I have always acknowledged the need to get behind the facade which can be erected via a shell company or other device, such as was used in the Richard III case, partisan supporter of that much maligned monarch though I am, but it is a pity that the Government have not sought to consult on how to do that, rather than come forward with what originally certainly looked like a device which could have a chilling effect on genuine supporters of a claim for review. Nevertheless the change embodied in the amendment, as far as it goes, is welcome.
It has been striking, as this Bill has gone through both Houses, how little support it has attracted from government Back-Benchers in either Chamber, with the notable exception of the noble Lord, Lord Horam. In the last round of ping-pong in the Commons three Conservative lawyers—Geoffrey Cox QC; the former and widely lamented Attorney-General, Dominic Grieve, and the former Solicitor-General, Sir Edward Garnier—all voiced stringent criticisms. We are, however, where we are, and thanks to deliberations in this House, and, I suspect, to the wise counsels of the Minister, it is a better place than we might have been. I only hope that after the general election we will have, whoever forms the next Government, a Lord Chancellor and Secretary of State for Justice who, if not judicial, will at least be judicious.
Lord Faulks
My Lords, I am grateful to all noble Lords for their contributions to this debate. I am grateful to the noble Lord, Lord Pannick, for his observations about the rule of law and its importance. I find no difficulty in agreeing with his critique of the rule of law, its role and its importance, and judicial review as a part of that.
There is perhaps one area where I would not wholly agree with him, and that is in his submission in relation to “exceptional”. I say submission because, as he will appreciate, those looking for clarification on what “exceptional public interest” may mean, pursuant to the rule in Pepper v Hart, might be interested in what was said in debates. They might have their attention drawn by the noble Lord, Lord Pannick, or indeed by some other counsel, to what he himself said in the course of the debate. I do not think that that is quite within Pepper v Hart. He referred, for example, to what the noble and learned Lord, Lord Woolf, said in one particular case. I think that different judges have used the word exceptional to mean different things in different contexts. I see the noble and learned Lord nodding. I simply say that “exceptional public interest” will depend on its context, and we are content to leave it to the judges to decide what it means. The noble Lord, Lord Beecham, did his best to tempt me into giving examples—even trailing the Richard III case, which he said was a classic case in which the public were interested. The public can be exceptionally interested in something without it being a matter of exceptional public interest. I trust that judges will be able to make that distinction.
As for the rule committee, it is, as noble Lords will know, separate from the Lord Chancellor, who has been much maligned in the course of this debate. It will decide what is appropriate on the basis, I hope, of a wide consultation on the issues. No doubt it will bear in mind, among other things, observations that have been made during the course of this debate. I am grateful for all the contributions to the many debates that we have had.
Lord Beecham
Will the Minister indicate whether there will be an opportunity for this House, and indeed the other place, to debate the outcome of the consultation before the rule committee makes its mind up?
Lord Faulks
No, I will not give that undertaking. The rule committee will have the basis for consultation and the basis of the debate and it will be subject to the usual parliamentary procedure, meaning that each House will have the option to vote against—so to that extent. That is perhaps an answer.
The debate has been of a very high quality. Indeed, I pay tribute, as other noble Lords have, to the scrutiny that the Bill generally—not just the matters that we are dealing with today—has received from every quarter of the House. There have been different fields of expertise brought to good effect in the course of the consideration of the Bill by your Lordships’ House. There have been a considerable number of amendments to the Bill in many different areas. Today, and in the course of the most recent debates, we have focused on the modification of the reforms of judicial review and in relation to parliamentary oversight of under-15s and girls in secure colleges—and, indeed, on the secure college rules, which will now be subject to an affirmative resolution. However, there have been other important amendments, such as the new offence of revenge pornography; the custody arrangement for 17 year-olds; various provisions to clamp down on dishonest personal injury claims; and extending reporting restrictions to young people, to name but a few.
Broadcast General Election Debates (Communications Committee Report)
(9 years, 11 months ago)
Lords ChamberRead Full debate Read Hansard Text
Lord Inglewood
That this House takes note of the Report of the Communications Committee on Broadcast general election debates (2nd Report, Session 2013–14, HL Paper 171).
Lord Inglewood (Con)
My Lords, in December 2013, the Communications Committee decided to write a short report on broadcast general election debates, which was published the following May. We anticipated that in the run-up to the general election, which we knew was to be held in May this year, it was a topic likely to be controversial and of interest. Even if about nothing else, we have been proved right about that.
We were of the view that the topic was surrounded by misunderstanding, so it would be helpful to the House and more widely to clarify a number of things. We also concluded that it was not an appropriate topic on which to seek a response from the Government, as it is essentially a controversial party-political matter and hence none of the Government’s direct business. As a result, we made this expressly clear.
Secondly, we recognised that, whatever the shortcomings of the present legal and regulatory framework, it would not be changed before the May general election, so while we have made a number of somewhat generalised comments about aspects of debates of this kind, I am not proposing to consider them further this afternoon. They belong to the post-general election political world, and on another occasion.
Thirdly, we do not directly make any recommendations about what might or might not happen over the next few weeks. While, perhaps counterintuitively, there may be a better case for debating this topic in your Lordships’ House rather than the other place, at the end of the day what happens will be determined by the broadcasters, the political parties and the contemporary titans of the political scene.
Finally, I record my thanks to all the members and staff of the House who worked on this report, and in particular Professor Richard Tait, our special adviser.
In this forum, I do not think it is necessary for me to point out that the leaders’ debates in the previous general election campaign were a first in this country, albeit they are long established elsewhere and hence not such a noteworthy element of elections as they were here in Britain in 2010. For example, they have been a feature of United States elections for more than 50 years and are an accepted phenomenon in many democratic countries. Nor do I think it very useful to spend time working out why they have taken so long to be accepted here, save that to comment that in 2010 all the stars came together and so there were three leaders’ debates on ITV, Sky and BBC, in addition to other debates, wider election coverage and party political broadcasts. As a generalisation, it seems clear that they were appreciated by the voting public and achieved very considerable viewing figures, both in absolute terms and in comparison with other electoral programmes.
Evidence was given to us that the debates might dominate the campaign and/or make it too presidential. Certainly, these aspects need consideration. However, last time, it should be recalled, they were a novelty, which invariably attracts attention, but they did not crowd out the rest of the campaign and should not be allowed to do so in the future. They are merely part of the general election campaign and not its entirety, although obviously the public profile of different aspects of any election campaign depends to a great extent on how it resonates with the electorate.
It is clear that broadcasts appear to have added to viewers’ understanding of the issues; to have energised younger voters in particular and helped them to make up their minds; and to have engendered discussion more widely. On top of this, they generate considerable further debate in social media. In the 2010 election, voter turnout increased by some 4% from that in 2005. While there is obviously no direct statistical correlation between the two, it would be surprising if there had not been some connection. Finally, post-2010 general election polling, given to us as evidence, suggests that the public expects them to take place again this year.
I turn from the debates in 2010 to the context of possible debates in the coming weeks. There are two important points from which any discussion must start. First, they are governed by the general law and rules which determine impartiality and, in particular, impartiality in the context of a general election. Secondly, they are television programmes just like any other.
I turn now to the legal and regulatory framework. The only political programmes that have any special legal status are party political broadcasts, which to many seem rather old-style these days. The detail of the rules governing them is set within the framework of the Broadcasters’ Liaison Group under the rules of Ofcom and the BBC Trust. All other political programmes must comply with general rules relating to impartiality and the straightforward rules for the general election.
The entire grid of general election programming falls within this wider framework—not only debates between aspirant Prime Ministers but also other party leaders, senior party figures and all other permutations of programming covering political issues. Furthermore, appropriate coverage and balance are required for Scotland, Wales and Northern Ireland, in addition to the United Kingdom as a whole.
It should be noted that Ofcom has recently issued a consultation, which closes, I understand, on 5 February, about who might be the “major parties”. Such an endorsement, if given, accords the right to at least two party political broadcasts and ensures that their campaign is given what is known as due weight. It has nothing per se to do with any leaders or prime ministerial debates. The BBC, which has a separate but similar—although not identical—system of governance, works somewhat similarly in this respect. We explain the details of this in chapter 3 of our report.
The second important point to remember, as I have already mentioned, is that any debates are programmes like any others. Disregarding any public service broadcasting considerations, much of the original impetus for having the debates in this country was that TV producers thought that they would make good television. From this it flows that nobody can be compelled to participate, even though it does not seem automatically to follow that the absence of any party will veto a debate, so long as coverage across the wider piece is not partial. However, it is worth noting that the evidence we received suggests that the public expect some debates in some form in this general election. They do not, of course, have to be the same as they were in 2010. Provisional ideas from the four broadcasters involved this time—BBC, ITV, Sky and Channel 4—have suggested a different configuration in response to the current political landscape. However, I do not think that the House needs me to draw to its attention that those ideas have not received universal endorsement.
We have also made a number of suggestions which we feel may enhance their impact on society as a whole and improve their relevance and assimilability. However, again, that is for those who are actually involved.
As I have already pointed out, the 2010 debates engendered a lot of interest over social media, and five years on this is unlikely to be diminished. This secondary consequence, if I may call it that, may well be supplemented in the general election by additional, specially commissioned streamed material, which will of course not be subject at all to the rules on political impartiality.
In parallel to that, general election programming in general provides a whole range of educational and similar possibilities for public service broadcasters and others wishing to add to their range of offerings to the public in the digital space. From this, it follows that broadcasting cover of a general election is not merely a matter of traditional television; rather, it is a much more multifaceted application of a whole range of media tools available today to communicate perhaps the most important date in the democratic calendar, its importance and the issues involved.
As I spelled out in my opening remarks, the Communications Committee, in its report, was not trying to lecture anyone about whether there should or should not be leaders’ debates and, if there are, what form they should take, although it concluded that the evidence it received about a year ago suggested that there might not be electoral benefit for a party walking away. However, that is for the parties and their leaders and not for us.
Rather, as discussion of this topic becomes noisier, we hope and believe that we have laid out the law, rules and context of that discussion, which we hope will clarify matters not only for those engaged in the discussions and arguments but also for all the rest of us who are onlookers, not participants, and for those who will be casting their votes on 7 May. If comments and criticisms at this stage are based on misunderstandings and/or ignorance, their value is diminished and the public are misled.
To conclude, I suspect that a lot will be said, written and, I dare say, litigated about this topic in the next few weeks. When the committee concluded this report, we felt that such an eventuality was highly probable. We have not been disappointed. I beg to move.
Lord Dubs (Lab)
My Lords, first, I congratulate the noble Lord. He was chair of the Communications Committee and he played a large part in stimulating us to adopt this as a topic for investigation. I think that he was absolutely right to do so. It turned out to be one of the most interesting things that we have done in that committee.
I should like to set the context a little. We are of course in a situation of declining turnouts in elections—I will say a bit more about that in a minute—with the notable exception of the Scottish referendum. It bucked all the trends, and at some other point it may be worth thinking about why that was the case. Another part of the background is that there are fewer public meetings. I remember when there were massive public meetings. We filled Wandsworth town hall to hear Jim Callaghan when he was Prime Minister, and all that added to the sense that an election was coming up and there was a sense of excitement. However, some of that has now gone.
Perhaps I may refer to something that a friend of mine, Chris Mullin, the former MP for Sunderland, said at a book festival in Keswick in the Lake District. He was talking about his remarkable diary, which is good reading for everybody. He is a friend of mine, so I can plug his book quite happily. He was asked by a member of the audience in the theatre in Keswick, “Is the day of the political meeting over?”. He said, “No, it has been transmogrified into the book festival”. He said—I am more or less quoting him—“When I was MP for Sunderland, I had a job to get six people to come to a public meeting. Here, in this packed audience, there are over 200 of them paying £9 a head”. Book festivals are thriving but politics and political debate are not.
Therefore, having looked at the question of the party leaders’ debates, I assumed, along with most members of the committee, that they would happen. Indeed, we said in our report—this was mentioned by the noble Lord, Lord Inglewood—that we thought it would be a pretty poor show if any party leader who had been offered a place in the debates were to climb down and not take part, as he would be seen to be running away. Somehow implicit was our belief that these debates would take place. I should say that the book festival analogy is not that close; I just wanted to mention it as an example of something that is increasing in interest in terms of political debate.
Those leaders’ debates were absolutely compelling. Of course, we all had to stop canvassing during the election to watch them, so they had an effect on local activity. I thought that, by any standards—and this was the evidence that the committee got—the 2010 debates were a success. They worked well; they added something to British politics and campaigning and they were very revealing—as were the debates in Scotland more recently. Of course, as the report shows, they particularly appealed to young, first-time voters, who watched in large numbers. They admitted that the debates had sometimes persuaded or influenced them into thinking hard about policies, and had possibly even helped them to make their decision on how to vote.
Certainly, the majority of people who listened to the debates said that they had a better understanding of the issues, that they learned something and that the debates overall had influenced them to vote. Indeed, many of them watched the whole of the debate; they did not just switch on for 10 minutes and then switch off, as one might expect if politicians are held in such low repute, as they say—but that is a subject for another debate.
I will refer to some of the figures on turnout that are in the report. In 1992, the general election turnout was nearly 78%. By 2001, it was down to 59%; in 2005, it went up to 61%; and in 2010, it went up to 65%. Of course, one cannot attribute the improvement in 2010 to the broadcasts as simply as that: it may be that it was going to be a closer election and therefore there was more interest in it. However, I would have thought that the debates were helpful. As I said, most of the viewers stuck with them right through the period of the broadcast, which was quite long.
It has been said that the debates are helping to make our election campaigns more presidential—some would say too presidential. They would probably have become that willy-nilly, just because of the way the media operates, and so on. It would probably be a pity if we got too presidential, but there is nothing we can do about that. It is also clear that the debates on television tended to dominate the campaign—so much so that some other aspects of the campaign, for example the party leaders’ press conferences, got much less attention. All eyes were on the debates and the media wrote about them, so the emphasis switched a bit. That has happened, but that is not an argument against having the debates.
We did not feel that it was appropriate for us—as the noble Lord said—to specify who should take part in debates in the future. There was, of course, a formula that was used in the past, which was that it should be only party leaders who had a realistic prospect of becoming Prime Minister. I am not sure that that applied last time: with all due respect to the Liberal Democrats, Nick Clegg was not on his way to becoming Prime Minister. We probably felt that that was too limited an approach.
However, how does one then draw the line in a different direction? If it is done on opinion polls, they go up and down; if it is done on the European elections, they always have a slightly eccentric outcome in terms of who wins. They are more a protest vote in Britain than anything else, so they do not give us too good an indication. Certainly, I assume that Ofcom has taken an amalgam of all these things—an amalgam of Members of the House of the Commons, of parties that secured good support in elections and of opinion polls—so it is a bit of a hit-or-miss system. It was a lot easier when there were just two big parties. It would be very undemocratic to wish that we were back in the two-party system, but these things were clearly easier when we had just two parties.
During the European Union elections, there were two debates between Nick Clegg and Nigel Farage. They were not quite party leaders’ debates, but they were an interesting extra. I am not personally sure what conclusions one should draw from them: it is difficult to know, but they were interesting. What they show, of course, is that a minor party gets more of a boost than a major party. That is to say, the protest party gets a wonderful platform, and that has a distorting effect on the way the public see it, because if they are going to make Nigel Farage equal to the Prime Minister and the Leader of the Labour Party, that puts him in a much better position. There is, therefore, a downside to this, but equally it would be pretty undemocratic to say that only the leaders of parties with a significant number of seats in the Commons should be allowed to take part. So there is a problem.
In our report we considered whether, if one leader withdraws, the debates should go ahead. We thought that no one would want to do that because of the stigma that would be attached to it, as I said earlier.
I am interested in the formula that has been touted a bit that there should be one debate between the two main leaders, one between the two main parties plus the Liberal Democrats, and a wider debate which would include four parties, or possibly five if the Greens are to be included. I believe in democracy and that there should be one debate at least in which some of the smaller parties can have their say. On the other hand, I am concerned that if there are to be five parties to the debate, would that not, as it were, lessen the tension? Would it not get the main party leaders off the hook because all these people will be having their say and somehow the tension that we have seen in previous leaders’ debates—and we certainly saw in Scotland—would disappear? So if the leaders of the big parties do not want to be under pressure, it might be easier if more parties were there—which may be why David Cameron has said that he wants the Green Party there. I would like to see a mix of participation, some debates with two or three parties represented and some with more. That would be a better way of doing it than simply staying with one formula that would fit them all.
I will make two further comments. The people who moderate the debates are important. We do not necessarily want only white men of a certain age doing this: there should be a mix of gender and ethnicity in the moderators of these debates. That would help to project the debates in a better way and stop them being seen simply as part of the Westminster circle.
In our report, we refer to the possibility that broadcasters could use the debates as a way of reaching out to the public and getting them involved. They could use the debates as a peg for wider public involvement. I am not quite sure how that could be done but it certainly has support, and I would like to see it happen. Assuming that the debates go ahead, I would like to see the broadcasters use them as a basis for education, outreach work and so on, so that they are a part of a wider effort in the community. That would be a good thing.
Our report is a good one. I will be disappointed if the debates do not go ahead and I hope that four parties will take part—and I would not mind if the Greens took part as well.
Lord Clement-Jones (LD)
My Lords, it is a pleasure to follow my fellow committee member, the noble Lord, Lord Dubs. I thank my noble friend Lord Inglewood for his measured introductory speech and his excellent chairmanship of the committee. I cannot guarantee that I will be quite as measured in my comments on the report.
The committee said last April that it feared that the jockeying for position among the parties could result in the failure of the debates to reach our screens. Sadly, it was right. As the noble Lord, Lord Dubs, and my noble friend Lord Inglewood have both said, the debates were a valuable addition to the last general election campaign and to our democratic process. The debates reached some 15 million viewers, a far greater number than the individual interviews with leaders which had average viewing figures of 9.4 million.
The link with turnout is not proven but clearly turnout was up on the previous 2005 general election. As the YouGov polls show, there is a strong appetite, particularly among young people, for the debates to take place again. Most of the public expect the debates to take place and, to say the least, it would be sad if the 2010 general election ended up as the exception rather than the rule.
However, we now see that the Prime Minister is reluctant to trust the objective mechanisms by which Ofcom and the broadcasters determine who should take part. As my noble friend has said, the committee’s report took care to explain the regulatory framework. A vital component and the important starting point for determining the participants in the debates—but not the format, of course—is Ofcom’s determination of major party status. This is, as he also explained, required by the broadcasting code created by the Communications Act 2003. There are slightly separate processes by which the BBC does the same. It is flexible. Ofcom now reviews major party status more frequently. The latest consultation document is dated 8 January 2015. Ofcom’s determination is not, as the committee agreed in its report, purely based on vote share or opinion polling, but in my view, and indeed in the committee’s view, the consultation document is admirably clear and objective. Being a major party does not necessarily mean absolute equality of treatment.
The committee gave this process a clean bill of health. The objective of both the BBC and Ofcom is to achieve due impartiality in election coverage, and Ofcom’s consultation proposals achieve this.
Mr Cameron, however, is attempting to argue with Ofcom’s judgment by saying that he will debate only if the Green Party, which has not been determined to be a major party, is included. It would be sad if the Prime Minister, in his desire to gain party advantage, put a barrier in the way of further development of this valuable aspect of the general election and of the electorate’s ability to connect and to engage with the general election campaign. The debates are a powerful tool in helping the electorate to make up their mind who to support, particularly for young and first-time voters. Apart from setting conditions about who should participate, it is also noticeable that the Prime Minister alone among the leaders has criticised the timing of the debates at the previous election. Surely having an election campaign of 25 rather than 17 days with the debates spread across those days answers this criticism.
Just as important as the committee’s analysis of existing practices were its recommendations about future debates, using lessons from the US in particular. Both the noble Lord, Lord Dubs, and my noble friend referred to improved voter information linked to the debates, better communication of the process and principles involved in setting up the debates, and a dedicated online portal associated with the debates. All of these would be welcome.
Furthermore, we considered whether there should be more voter participation in supplementary questions and, as the noble Lord, Lord Dubs, mentioned, more diversity in the presenter team with, say, a mixed panel. I hope that the broadcasters will take on board all these recommendations. I also hope that despite what has been said so far the Prime Minister does not pursue narrow party advantage by refusing to allow these debates to take place. I suspect that if he does, the electorate will be unforgiving. In those circumstances, I hope that the broadcasters, subject of course to the impartiality rules, would consider an empty chair strategy.
Lord Grade of Yarmouth (Con)
My Lords, I join those thanking my noble friend Lord Inglewood and his committee for what has turned out to be a prescient and relevant contribution to the debate. This debate this afternoon is an unusual event in that it is a debate about a public debate about debates. Possibly this is a first. There are an awful lot of claims made for leaders’ debates—a new phenomenon in this country—about voters’ rights, democratic rights and so on. Perhaps I might recall a little history. It was mentioned earlier that the first televised leader debates were in 1960. These were the famous Kennedy-Nixon debates which some would say that Nixon lost because he had not had a shave. That is a piece of historical anecdotal evidence. What people have forgotten is that three elections went by subsequently where there were no leaders’ debates. It was not until 1976 that President Ford agreed to debate with Jimmy Carter and lost after making what was probably one of the first significant gaffes in what is now a cornerstone of all electoral campaigns, the opening of the gaffe season—“spot the gaffe”. We are in for quite a few weeks of that to come.
Despite the fact that there were three presidential elections in the United States without a leaders’ debate, I did not notice any damage to the American democratic way of life and the way of their political life. Yes, leaders’ debates are interesting, and are nice to have, but they are not absolutely essential to the democratic processes in this country.
I was interested to read Charles Moore in the Telegraph on Saturday. For those on the Benches opposite who perhaps did not quite get through their Guardian and make it to the Telegraph on Saturday, he addressed this question of context:
“The real question is, what makes us think that the demands of the broadcasters are the same as the rights of the voters? These debates are not, as Paddy Ashdown imagines, prescribed by some ‘independent’ body: Ofcom can do no more than modify what others propose”.
Lord Ashdown of Norton-sub-Hamdon (LD)
I wonder whether my noble friend will allow me to comment. I did not actually say what he claims I said, I said that, for instance, they had been equipped legally to take decisions of this nature in other cases.
Lord Grade of Yarmouth
I will ensure that Mr Moore reads Hansard as quickly as possible to correct that. I am grateful. He went on to write:
“The essentials of our democracy are the House of Commons, the constituency and the ballot box, not the media. Obviously politicians should speak to voters and the voters should speak to politicians. The media help this happen. But beware when a medium tries to hijack this process … In elections, the telly news increasingly could not be bothered to go round the country reporting speeches and examining the sheer variety of voters’ concerns. It preferred to confect a daily agenda involving a ‘gaffe’ by one party or another”.
He concludes:
“In a general election that returns 650 people to Parliament, no leaders’ debate is in any sense necessary”.
I agree with him in that respect. A debate may be desirable, watchable—sometimes—and certainly something that, in the word used in the report, the public “expect” to see. However, there is a big difference between expecting to see something and having the right to have it produced on your behalf.
As to the empty chair issue, I put myself in the position that I have been in, in past existences, as editor-in-chief of various networks. If I was asked, in the event that a senior member of one of the leading parties in a debate was, for some principled reason, not prepared to attend, whether we would put in an empty chair, I would regard that, without having to consult m’learned friends, as a breach of the statutory obligations on impartiality. In my view, it is unquestionably, editorially, a political statement. Reading a principled statement from the absent party explaining why it did not wish to take part seems to me to cover the point. I agree with most people, who would say that no individual leader of any party should have the right to veto a debate, but an empty chair is a step much too far.
In conclusion, I can only quote the words of Sam Chisholm, an old friend of mine, who was one of the architects of the success of the Sky enterprise. I was going in to discuss some deal with him, when he patted me on the head and said, “Michael, in every negotiation, there is a difficult conversation, and we are about to have it”. He then boxed my ears for half an hour, explaining why he could not do the deal that I wanted him to do.
We are at the early stages of some very difficult negotiations. A huge amount is at risk here, and I can understand perfectly well the Prime Minister’s point of view about the fairness of including the Greens. The simple way through this is not for the other parties to try to ascribe motives to the PM but for them to try to explain to the public, in a democratic fashion, why they believe the Greens should be excluded. If they will drop their principled objections, we can get on, and the public can have the debate they expect to have.
Baroness Healy of Primrose Hill (Lab)
My Lords, I congratulate the noble Lord, Lord Inglewood, on securing this debate at such an apposite time. I also thank him for his excellent chairmanship of the Communications Committee, on which I served, which produced this important report into broadcast general election debates.
Our wide-ranging report, published a year before the 2015 general election, was conducted in a much cooler climate, where the advantages and possible disadvantages could be weighed up. We found that the broadcast general election debates helped to energise and engage the public in the electoral process, with the most striking impact being on the young and relatively disengaged. Now the climate has become more heated and who will participate in these proposed TV debates is a subject for endless speculation in the media and in Parliament.
As our report stated,
“we are persuaded that they served the public interest by increasing engagement with the electoral process and perhaps contributed to a higher voter turnout”.
At a time of apparent public alienation from mainstream political activity, any effort to re-engage the electorate must be of value to a parliamentary democracy. Turnout among 18 to 25 year-olds increased by seven percentage points in 2010, which was three points higher than the average increase in turnout compared with 2005. My party recently revealed that one million voters have disappeared from the electoral register and we know from the Electoral Commission that there are an estimated 7.5 million eligible voters who are not registered. I would argue that any means by which more people become interested in the outcome of the next general election and take the opportunity to register to vote by 20 April will be a good thing for society, and television debates could have a valuable role to play.
Our report highlighted the public’s expectation that the debates should happen again. But we warned:
“The road to broadcast general election debates in 2015 is unlikely to be smooth. Experience from 2010 suggests that there will be disputes and these will be hottest on the question of participation: who is invited by the broadcasters to debate?”.
This is the key to our report. The debates are first and foremost television programmes, and as such it is up to the broadcasters to invite participants. It is not up to politicians to decide whether the debates should happen.
Today’s debate is an opportunity calmly to assess the pros and cons of broadcast general election debates and to look at the factors that need to be taken into account. We can leave the name-calling to others. The 2010 debates took place within a framework of codes, statements and guidelines which constituted the legal and regulatory framework and ensured that all political parties were given due weight across the patchwork of coverage laid on by the broadcasters during an election period. Televised debates took place not only between the leaders in the running to become Prime Minister, but also between the leaders of the main parties in the devolved nations, in the midst of which there was a whole range of other programming in which smaller UK-wide parties also gained coverage. As in the run-up to the 2010 debates, there is much misunderstanding as to how participants are decided, as other noble Lords have made clear. However, it is not a matter for politicians to decide.
The key point I wish to make is that more than 22 million people watched these debates in 2010 and, although the jury may still be out on whether voting intentions were changed by them, it cannot be denied that people were better informed having watched them. That is not to say that the format and presentations were perfect and cannot be improved upon, as my noble friend Lord Dubs said. Indeed, we made strong suggestions to the broadcasters to consider the balance of gender and ethnic diversity among the moderators and to make more of the opportunity to inform voters and encourage the public to be interested in the electoral process. Although we did not support the US system of an independent commission on debates—the CPD—we found a number of very positive lessons to be learnt from the way in which the commission approaches its work around the debates, including a whole range of activities related to voter information and encouraging the public to be interested in the electoral process. As its chief executive Janet Brown told the inquiry, the CPD’s objective,
“around the debates is to try to use them as vehicles not only to educate voters about the candidates, the parties and the issues but particularly to get young people involved in understanding why this matters”.
Of course, there is no compulsion for politicians to appear even if they rashly determine to withstand public expectations, now made even more compelling by the debates having taken place in 2010, but it is worth noting that our report finds that it would be far from certain that this would necessarily mean that the debates could not proceed while remaining compliant with the broadcasters’ legal and regulatory obligations. As the report said:
“We only note that we cannot suppose that the political parties will deem it is in their best interests to find out by withdrawing, against a backdrop of wide public support and manifest expectation that the debates do take place again”.
The questions of whether the debates will go ahead and who will participate are, I suggest, awaited with almost the same anticipation as the results of the 2015 election itself.
Baroness Grender (LD)
My Lords, I thank the Communications Select Committee for its excellent report. I note that the committee was at pains to stress that these are not recommendations for government, given that government has no say in the matter. It appears that some people in government need this to be clarified, so I welcome the fact that we have this debate.
For me, this debate is all about whether you believe in open debate and greater democratic engagement. It is a simple test. We speak so often in the world of politics about wanting to open up politics to a wider audience. The TV debates are a great opportunity for that and the evidence in the report is clear.
There are some parts of the current proposals from broadcasters about TV debates that my own party would prefer to change. For instance, in our view, it would be extraordinary for David Cameron and Ed Miliband to debate the past five years without Nick Clegg being there to talk about this period of government. But for Liberal Democrats the priority is to make sure that the TV debates happen. That is not because we speculate about who will win or who will lose in them; it is because the evidence is compelling that the debates last time engaged people in politics in a way that had not happened before.
For instance, at the time, 87% of people discussed the debate with someone else. We have already heard from other noble Lords about the average viewing figures. It is also argued that they increased voter turnout, although I appreciate that that is a harder argument to make, and seven out of 10 people want them to happen again. As the committee’s report makes clear, the TV debates are a major improvement in our democratic process and it would be a serious setback for them not to be repeated.
For me, the engagement of young voters, described today by others, alone is the reason. The majority of young voters said that they had become more interested in the campaign because of the debates. This is democratic gold and we should not throw it away. If the debates were part of the reason—and I appreciate that I speculate—for the 7% increase in the number of young voters in 2010, it is the duty of everyone here who believes in engagement in politics to ensure that those debates happen again.
The noble Lord, Lord Dubs, talked earlier about canvassing. I was out canvassing the night after the first debate. It is not normally a welcome knock on the door—other noble Lords who have done it will recognise that—but I remember clearly knocking on one door where six young people were renting, one of whom was a teacher, and they were literally calling each other to the door to come and talk to me about politics. It was not “Cleggmania”; it was just to ask me questions in a follow-up to the debate. We want that kind of vibrant engagement, and TV debates generate it in a way that I am not sure that other vehicles do.
So now all eyes are on the broadcasters and the question is: do they have the ability to use an empty chair or podium? The broadcasters rightly take their guidance from Ofcom, which has given guidelines about who should be entitled to major-party coverage. The BBC’s director-general, the noble Lord, Lord Hall of Birkenhead, described the possibility of an empty chair as a “very interesting” development.
I got as far as reading the Guardian and therefore am going to quote from it. Roger Mosey, a former head of BBC News, wrote in an article in that paper last week:
“The BBC guidelines do not specifically cover a national leaders’ debate, but the principles they set out argue not just that they can wheel out the empty chair but that they should. On general output, BBC published editorial policy is that one reluctant participant cannot stop an item: ‘The refusal of an individual or an organisation to make a contribution should not be allowed to act as a veto on the appearance of other contributors”’.
I hope that the broadcasters, and in particular the BBC, will feel able to pay attention to those words. For the BBC, I hope that that will happen without it being threatened over the future of the charter review.
Lord Grade of Yarmouth
I wonder if there may be some lack of distinction in the generic use of the term “empty chair”. Is that a generic term used to describe someone who does not show up rather than the graphic realisation of a set with, let us say, three of four chairs occupied and one not occupied? There may be a distinction between the guidelines and a casual use of the term “empty chair”, which denotes something more generic.
Baroness Grender
Having, in a general election, witnessed an empty chair because Simon Hughes was running late, I completely recognise the physical embodiment of that. By the way, we should always make sure that Simon Hughes is at least an hour early because he will be late and there will be an empty chair. Yes, of course I recognise what the noble Lord described, but Roger Mosey was very clear in his article that this should be used as a means to explain that you cannot veto.
The suggestions in the committee’s report about engagement through social media and websites are welcome. I share its view and hope that broadcasters will make full use of some of the recommendations. While on the subject, in 2010 the media—both print and broadcast—did themselves a bit of a disservice. Having won a great victory in engaging the voter, they then spent disproportionate broadcast time and attention on the somewhat glorified and over-spun “spin room”. I recognise that it is always a temptation for journalists to write and broadcast about themselves, thus emphasising to the viewer just how excluded they are—so I would like broadcasters to consider not overblowing that next time.
What is the block on opening up democracy and having leaders’ debates? Sadly, it appears to be one person, who believes that he can veto or dictate democracy. It is not for any one politician to try and dictate the terms of the debates. We all know that each political party will inevitably seek to serve its own interests. That is why we have a regulatory body in Ofcom to make decisions as to who is a major political party. It is not a decision for David Cameron to make as to which of the minority parties are at the debate. This is, after all, a Prime Minister whose record on the environment was left by the wayside along with the modernisation of the Conservative Party. His actions over the past week lead me to only one possible conclusion: that he is doing everything he possibly can to avoid these debates. That is in the face of all the evidence about voter engagement. It is a very cynical use of the green movement—as cynical as strapping a harness on a husky and heading to the Arctic. Anyone who cares about open and democratic debate should see it for the campaigning tactic that it is—and voters deserve better.
Lord Horam (Con)
My Lords, the noble Lord, Lord Dubs, in his very interesting and reflective speech, raised the question of whether the large, public political meeting was at an end. Certainly, I have been at a few very large public political meetings in my time. I remember as a cub reporter on the Financial Times going to Kelvin Hall in Glasgow and Alec Douglas-Home, no less, being able to fill the entire hall with outflow on top of that. It was an astonishing occasion, full of good Glaswegian and Scottish politics. Further on, I remember, as a political activist, the Hillhead campaign of Roy Jenkins, who was able to fill several halls, one after the other, with very large numbers of people. I always remember Roy Jenkins on those occasions speaking to the people of Glasgow as though he were addressing the Reform Club. I think they took this as a compliment, because he was not speaking down to them. One trick he used in his speeches was that there was always one word that nobody else could understand. In this case, I remember, it was “periphrastic”; I shall leave that with you, just to mull over.
More recently, in Scotland during the referendum debate, there were huge meetings. Indeed, Nicola Sturgeon has had huge meetings since that debate finished. Clearly—I am glad about this—the old-style public political meeting is not at an end. In the coming general election, it will depend on the interest shown, which I think will be profound, because the result is so uncertain. So there will be many important political meetings. None the less, over the past few years the broadcast element of the debates has become more important.
I congratulate the committee on its report. I am now a member of that committee but I was not a member at the time, so I can say in all frankness that the report is very well reasoned and logical. Its conclusion about public debates on TV is extremely simple, and I shall quote it as saying that,
“it must be recognised that the decision about who is invited to participate in television programmes will have to continue to be one that is consistent with the legal and regulatory framework around broadcasting”.
That is the nub of the matter; that is what has to happen. But how do we fill in that excellent statement of principle by the committee? It was filled in by Ric Bailey of the BBC, who in his evidence to the committee said that,
“the best way to make a judgment about these things is to look at how real people vote in real elections. Our starting point would be the last general election, but we would also look at subsequent elections. We would also look at any other evidence that might be relevant to setting out the political context. That might include a consistent, robust trend in opinion polling. All of those things we will take into account and, just as we do with any other election and any other coverage, we would make an editorial judgment based on that. That is something that we do at each and every election”.
That fleshes out the position very clearly.
However, if we look at the forthcoming general election in the light of the principles stated and the conclusions of the committee, and what Ric Bailey said about how the broadcasters would interpret those, the position is pellucidly clear. There are two parties: one, the Conservative Party, has the Prime Minister at its head; the other has the leader of the Opposition. Between them they have the majority of seats in the other place—about 250 to 300 each, or whatever—and they both have around 30% or so in the opinion polls. One or other of them will provide the Prime Minister after the election. If I may pursue my Glaswegian analogy, those two parties are the “old firm”, as it were—the Rangers and Celtic—of this discussion.
At a second level there is UKIP, which currently has 15% in the opinion polls and two Members of Parliament. It used to have no Members of Parliament, but two got in recently in by-elections. There are also the Liberal Democrats, who are part of the coalition, and have 56 seats. They now rate about 7% to 8% in current opinion polls. And there are the Greens, who have one seat, and 11% in the opinion polls. In terms of activists, the two major parties have about 170,000, in the case of the Labour Party, and about 150,000, in the case of the Conservative Party. The Liberal Democrats, UKIP and the Greens have between 40,000 and 50,000 activists and members. So there is clearly a second tier of parties, which are there and should therefore be considered.
The obvious conclusion is that we need two debates. All five parties—the two major parties, the Liberal Democrats, UKIP and the Greens—should take part in the first debate. Then there should be a second debate in which Ed Miliband and David Cameron take part, as the only two people who are likely to become Prime Minister. If you want a third debate—I recognise that there are several elements among the broadcasters: Sky and Channel 4 as well as ITV and BBC—you could certainly have a debate between the Chancellor of the Exchequer and his shadow opponent, Ed Balls.
It seems to me that the situation is utterly clear. You must have two or three debates. Five parties have to contribute and, in the final analysis, you must have a debate between the two people one of whom will become Prime Minister after the next general election.
As I said, I thought that the committee’s report was rational and logical. Raising the debate to an even higher level—I hope—I remind the House that Plato said that we reach correct decisions if we allow reason to triumph over emotion. I hope that reason will prevail in this context.
Lord Macdonald of Tradeston (Lab)
My Lords, I thank the noble Lord, Lord Inglewood, for this opportunity to discuss the informative and well judged report of your Lordships’ Communications Committee, which he summarised so well in introducing the debate. I declare a past interest in election broadcasting, having been in or around the ITV side of negotiations in eight general elections from 1970, when Harold Wilson lost to Ted Heath, through to 1997, when John Major lost to Tony Blair. Alas, there were no leadership debates in all that time and no agreement either in 2001 or 2005.
In my view, the explanation for the lack of agreement has never really changed. No party ahead in the opinion polls would risk its leader saying the wrong thing or performing poorly before polling day. The risk always outweighed the possible reward. Westminster veterans also recalled the alarming precedent of the 1960 televised debate in America, of which the noble Lord, Lord Grade, reminded us: Richard Nixon looking shifty and sweaty on screen and John F Kennedy going on to be elected President by the narrowest of margins. Television, with its close-up intimacy, was seen to encourage emotional responses that campaign managers could not predict or control.
Party managers here in Britain also argued that we do not elect presidents. We vote for MPs whose parties appoint their leaders, who may then become Prime Minister. Broadcasters should note the Communications Committee’s recommendation that in the context of televised leaders’ debates, they have a role to play in helping the British public to understand that they are not electing a president.
Today, the concern of established political parties might be the fear that charismatic celebrities with sweeping assertions and simple solutions will have a popular appeal that cannot easily be countered in the soundbite format of a multiparty debate on prime time television. Of course, that impact can now be amplified online by the explosion of social media.
The counterargument is that millions of citizens no longer register to vote and, with turnout in long-term decline, leaders must make better use of television and new media to reconnect with voters—as the leaders’ debates did in 2010, with good audiences and a pretty positive response.
I welcome the recommendation of the Communications Committee that stated:
“We encourage the broadcasters, in particular the PSBs”—
public sector broadcasters—
“mindful of their obligations and public purposes, to take very seriously the opportunities to develop activities around the debates to provide voter information and stimulate the public to be interested in the electoral process more generally”.
On traditional television channels—even ratings-conscious commercial channels such as ITV—general election programming frequently took priority over selling airtime to advertisers. Indeed, public service broadcasters have never given up on their efforts to make election coverage both serious and popular.
Finally, after a very long wait, we got a televised leaders’ debate in the general election of 2010, thanks to Prime Minister Gordon Brown breaking with precedent and agreeing to participate. The 2010 negotiations with broadcasters were still sensitive, and the agreement on the format was very detailed, with no fewer than 76 rules. These rules are still useful for 2015. The Communications Committee recommends that broadcasters should continue to oversee and produce the election debates, and I agree.
The regulator, Ofcom, is also clear that, although it gives guidance on which parties it judges are best qualified for inclusion in debates, the final decision on structure and participants remains with the broadcasters. As noble Lords will be aware, on recent electoral results and polling figures Ofcom judged that UKIP was now a major party but did not accept that the Green Party was yet a major player.
The broadcasters—BBC, ITV, Channel 4 and, this time, Sky—have proposed three general election debates. The first is to be between Conservative and Labour; the second will include the Liberal Democrats; and the third will also include UKIP. However, as we have heard, the Prime Minister has said that he will not participate in any debates if the Green Party is excluded. The political rationale seems quite clear. Including right-wing UKIP in the third debate would allow Nigel Farage to attract votes from the Conservatives, so also including the left-wing Greens would balance things up, since they are more likely to attract votes from Labour and the Liberal Democrats.
Back in 2010, it was David Cameron who was demanding a leaders’ debate and accusing Prime Minister Brown of dithering and being a bottler. Now, as Prime Minister, it is Mr Cameron who is being accused of being the bottler—but it seems unlikely that broadcasters will press on without the Prime Minister, or replace him with a chair or even a long statement. So what happens now? I read that ITV is open to including the Greens. With the proposed exclusion of the Green Party having boosted its opinion poll ratings, other broadcasters might also come to see its inclusion as fair play.
For the broadcasters, the change in format could be pretty minor. Instead of having first two, then three and then four leaders answering questions, there would by the end be five. If that leaves too little time per leader, running times can simply be extended for the last debate. That seems the easiest option for the broadcasters; the format is, after all, for them to decide. They could reasonably assume that giving the Green leader Natalie Bennett her 15 minutes of fame is unlikely to lead to a walkout by Messrs Miliband, Clegg and Farage. On the other hand, if these leaders agree to debates that include the Greens but Mr Cameron finds another reason to refuse to debate, he risks being seen as the dithering bottler of the 2015 general election. That will not go down too well with an already pretty cynical electorate. I therefore think and hope that the debates will happen.
Lord Finkelstein (Con)
My Lords, I thank my noble friend for holding this debate on this important topic. I wish to detain the House only briefly, with just a few direct points.
When I was 23 years old, I was selected to run for Parliament for the first time. I was not remotely ready to be a Member of Parliament. I seemed to my prospective constituents to be what I undoubtedly was: preposterously young and immature. I still have a letter from the citizens advice bureau after one of my campaign visits. It said:
“Dear Mr Finkelstein. It was very nice to meet you. And your mother”.
This much I did know, however. If you want to make yourself look good, you should challenge your opponent to a debate so it was the first thing I did. He either agreed to it and awarded you a status as his equal or avoided it, so you could accuse him of running scared. This much I knew, but Ken Livingstone knew more. He accepted my invitation but held the debate at the Kilburn Irish Centre. I was not elected Member of Parliament for Brent East. I therefore come to this debate as a pragmatist, aware of why people call for debates and of what makes them turn out well or badly. The thinking of my old as well as noble friend Lady Grender is entirely clear to me.
With this in mind, here is my attitude. First, on the whole and taking one thing with another, I would rather have an election debate between the leaders than not. Should anyone question their value, the report to which the noble Lord directs our attention makes the case admirably. Secondly, while I realise that the House of Lords is often a machine for the discovery of hitherto unknown constitutional principles, the holding of leadership debates is not such a principle. We had almost a century of elections since the universal franchise without television debates. The party that believes they are in its interest suddenly discovers that they are vital to democracy then forgets this point again, or the other way round.
I notice, for instance, that my friend Alastair Campbell has been attacking the Prime Minister over what he wrongly asserts is a refusal to debate. He says that if Mr Cameron was confident then he would debate, and the principle involved means that the broadcasters should go ahead with an empty chair. Yet here is Alastair’s diary from 3 March 1997:
“We went back to Islington and on the way TB suddenly said he didn’t think it was really in our interests to have a television debate. Bizarrely Gordon, Peter and I had all come to pretty much the same conclusion over the weekend. GB felt Major was now seen as the underdog and therefore a TV debate was likely to help them. Our general view was that whilst we could see it would be good for TV, we were not convinced it would be good for politics. TB said can you imagine how ghastly the build up would be? It’s really all balls that it would improve democratic debate”.
I gently note the contrast between this and Alastair’s position now. I gently view many remarks about the imperative of the debate in the same way.
Thirdly, there is a way of reconciling the desirability of debates with inevitable and necessary political pragmatism, which everyone in this House shares when it suits them—a way of doing it sensibly and doing it right. That is to hold the debates on a fair basis that does not obviously favour any one party. There should be at least two debates: the first between the two serious candidates for Prime Minister, and the second between all the parties with a serious chance of securing seats at the election. This is an arrangement that all the party leaders would agree to and that would not favour any one of them. There would be no cause for an empty chair because a fair offer to debate had been made on a basis that everyone could agree to. It could allow the debates to go ahead—which, on the whole, I am mildly in favour of—but if not, then not.
Lord Collins of Highbury (Lab)
My Lords, I thank the noble Lord, Lord Inglewood, for introducing this timely debate, and all the noble Lords on the Select Committee for producing this excellent report. As Harold Wilson was fond of saying, a week is a long time in politics, and to some the events of five years ago will seem like an age. In the light of recent events, I am sure I am not alone in being grateful to the committee for casting some light on this topic.
This report, particularly the evidence scrutinised by the committee, provides an excellent description of both the regulatory environment and the political background to the negotiations that led to the 2010 leader debates. I hope that understanding better how we got the debates agreed in 2010 will help the process this year. The thrust of the committee’s recommendations reflect, as we have heard in this debate, the public’s view that broadcast general election debates should take place during future campaigns. From the evidence to the committee, the format by which these debates were negotiated before the last general election was thorough and businesslike, and delivered an outcome that was beneficial to our democracy. If we could do it then, I see no need to change the process now. Then, as now, the broadcasters’ approach to negotiation and production displayed great professionalism and impartiality.
As the committee rightly says, the negotiators should ensure that the format evolves to maintain or increase the levels of voter engagement. However, this must be balanced against such changes jeopardising the debates’ taking place. The 2010 debates provided an unprecedented opportunity for voters to see the party leaders debate the critical issues facing our country, and were watched by more than 20 million people. As the report highlights, they were not without their critics, but there is no doubt that they had an impact on the public engaging more with the electoral process and, as we have heard, it is possible that they contributed to a higher voter turnout. As my noble friend Lord Dubs illustrated, turnout was noticeably higher than in 2001 and 2005; in 2005, the turnout was 61.4% and in 2010 it had risen to 65.4%.
What the debates did was generate debate. They generated debate in homes and offices throughout the country. For people like me, who were knocking on the doors in key seats after each debate, the impact was obvious. People wanted to talk, and it was about what they had seen and heard the leaders say rather than about what they had read in the newspaper.
It is interesting that this debate is talking about impartiality. In the past 100 years, most general elections have been reported in newspapers that have displayed very little impartiality and have taken a very partisan approach to politics. Fortunately, most people who read newspapers do not necessarily follow the editorial tone of the owners.
My noble friend Lord Dubs referred to political meetings and canvassing. We have heard this in the debate. I strongly believe—this is perhaps something else we should consider in terms of political engagement—that knocking on people’s doors and having a conversation is not an activity we should restrict to elections. Engaging with the electorate is something political parties and political activists should be doing outside general elections. That may also need to be reflected in what the broadcasters consider.
As we have heard, the debates also generated large audiences, which have not been seen for an election in modern times. They had not only noticeably higher average ratings than programmes such as “Question Time” and “Newsnight”, but unlike those programmes, people stayed watching. They saw the whole programme. They did not turn the TV off.
Another small point put in evidence to the committee was that the debates took place across the country, and I think this created real local pride. This should continue. We should avoid our politics being seen as simply focused on London SW1.
Coming together in 2010, the political parties may have had different motives for agreeing to the debates, but one thing was clear: they were enthusiastically endorsed by all those who took part, including David Cameron. As general secretary of the Labour Party at the time, I was very conscious that we could not afford to run campaigns in the way that we had done in the past. Resources were tight, and in quite a few elections we faced a press that was uniformly hostile to the party. It therefore made sense to make our case directly to the British people. We did that on the doorstep, but it was really important that we used the debates in that way to put the case. Like the committee, I recognise that the way in which the debates are currently set up provides important safeguards which ensure that all political parties are given due weight in broadcast election coverage.
The foresight of this House’s committee is to recognise that we cannot take for granted that debates will take place in future. A whole range of obstacles could stand in their way. As we know from recent events, chief among them is, of course, the risk that one of the political parties decides to withdraw. For all the reasons set out in the committee’s report, I believe it would be a major setback to our democratic processes if these debates were not repeated in 2015 because of one politician’s unwillingness to participate. The decision as to who should take part in the televised debates should not be in the hands of any party leader, each of whom inevitably has their own political interests to defend. As my noble friend Lady Healy said, it must be a decision independently and objectively arrived at. The broadcasters, who have strict obligations of political impartiality under the BBC charter and their Ofcom licences, have together made such an objective determination. As the noble Lord, Lord Inglewood, highlighted in his introduction, this clear requirement on broadcasters to report elections with due impartiality also requires them to give “due weight” to the coverage of the “major parties” during election periods.
It is up to the broadcasters who to invite and they have decided to invite only the major parties as defined by Ofcom.
Lord Grade of Yarmouth
We have heard in the course of this debate that ITV might be reconsidering its position in respect of the Greens. Given the noble Lord’s principled stand that it is for the broadcasters to invite parties to participate, if the broadcasters came to the Opposition and said that the Greens were going to take part, is that something that he could accept?
Lord Collins of Highbury
Ed Miliband has made it absolutely clear that if the broadcasters decide to invite the Greens, that is up to them, but he will participate in the debate. The principle that we are trying to establish is that it is not for Ed Miliband or for David Cameron to say, “This is how it must be”. If we are going to defend the broadcasters’ right to produce their own TV programmes independently, and do it in a way that is impartial in respect of their obligations, then it is not for Ed Miliband or David Cameron to say that they must have this and they must not have that.
I want to be clear that it is not for Ofcom either to decide who to invite, but I can understand why the broadcasters would want to adopt an objective procedure, such as that used for setting the minimum number of party election broadcasts. It is a recognised process and it ensures objectivity. However, I, too, agree with the committee’s view that we should not adopt the suggestion that eligibility to participate in televised debates should be based on an established vote share threshold or solely on opinion polling. The process that Ofcom has adopted and that it is now consulting on is a very good one and takes into account a range of factors.
I do not see, either, the need for the creation of a debates commission, which, if it does not have the buy-in of the parties or the broadcasters, will make it more likely that debates will not happen. Instead, it is better if the decision about who is invited to participate in television programmes continues to be one for the broadcasters, consistent with their legal and regulatory framework.
As we heard in the debate, and from members of the committee, there is uncertainty about whether a decision by one of the political parties to withdraw would necessarily mean that the debates could not proceed and still remain compliant with the broadcasters’ respective obligations. My party’s view is that if the broadcasters choose to invite major leaders such as Ed Miliband, Nick Clegg, Nigel Farage and David Cameron to a debate and one of them decides not to show up, they can decide to go ahead without that leader. They can empty-chair him. We have heard arguments in this debate about impartiality and due weight. Every day on the “Today” programme I hear somebody say, “We did invite this person, but they decided not to participate”. It is common in broadcasting.
I end with the point that, as Ed Miliband has made clear, if the broadcasters want to invite someone else, that is up to them. All Ed Miliband wants is to get these debates on and, like the committee, so do I.
Lord Bourne of Aberystwyth (Con)
My Lords, I am pleased to wind up for the Government in this debate and very much welcome the opportunity for this House to discuss the Communications Committee’s detailed consideration of the broadcast general election debates. The Government are grateful for the committee’s report and its clearly thought-out findings. I thank the committee and its members, including my noble friend Lord Clement-Jones, the noble Lord, Lord Dubs, the noble Baroness, Lady Healy, and, in particular, my noble friend Lord Inglewood for bringing the committee’s good work to the attention of the House in this debate.
The reports of the committee, and our consideration of them, are becoming a staple of House of Lords business, with one report last week and another this—and quite right, too. This report, published in May 2014, almost a year before the forthcoming election, gives consideration to the growing prominence of televised election debates by reviewing the impact of the broadcast debates in 2010; examining the regulatory context for these and future debates; and looking at proposals for change. I should say in passing that the debates also went out on the radio. I remember listening to the first one in 2010 on the radio, travelling through mid-Wales, and enjoying it—intermittently, as noble Lords will appreciate, because of the nature of the terrain heading back to Cardiff.
The report does not contain recommendations to government, since its subject is not the Government’s direct responsibility, but it provides the House with a valuable reference document, setting out the legal and regulatory framework around broadcast general election debates, with key contributions and evidence from broadcasters including the BBC, Channel 4, ITV and Sky. As my noble friend Lord Finkelstein rightly said, there is no constitutional principle that the debates should take place. If I may say so in the context of his contribution, Brent East’s loss is certainly the gain of your Lordships’ House—as I am sure noble Lords would join his mother in saying.
My noble friend Lord Grade and the noble Lord, Lord Macdonald, referred to the earlier experience in the United States of the first presidential debate in 1960. My noble friend Lord Grade referred to the fact that it did not happen at every presidential election thereafter, which is quite true. Other countries that have had broadcast debates, such as Canada, Australia and Germany, have also not had them for every election; it has been somewhat intermittent, differing from country to country. So experience is clearly built upon.
The first ever broadcast general election debates in the United Kingdom took place in April 2010 and were televised in successive weeks by broadcasters ITV, Sky News and the BBC, as well as being broadcast on BBC Radio 4 and BBC Radio 5 Live. The first ever debate, on ITV1, attracted an audience of 9.4 million viewers between 8.30 pm 10 pm—a 37% share of the total TV audience over that period, beating Coronation Street and EastEnders to become the most watched programme of that day. The average viewing figures for successive debates were 4 million for Sky and 8.1 million for the BBC, meaning that the total of the three audiences was above 22 million. In the case of the BBC and ITV, these impressive viewing figures achieved much higher audience figures than typical BBC current affairs programmes.
The noble Lord, Lord Dubs, referred to the importance of the debates, given the changing nature of election campaigns and contests and the relative death of the public meeting over a period of time—although my noble friend Lord Horam rightly referred to the experience in Scotland, which shows that that is not necessarily the case. Clearly, you only have to look across the Atlantic to the 2008 presidential campaign and the number of people that President Obama could pack into an arena to see that there is nothing inevitable about the death of the public meeting, although admittedly the election background there is somewhat different from our own.
Perhaps most significantly, evidence referenced in the report illustrates that the broadcast debates served to increase engagement with young people—many noble Lords referred to that point—with many first-time voters energised by the debates. For example, as many as 55% of the 18 to 24 year-olds said that, as a result of having seen the first debate, they had become more interested in the campaign; 74% of them considered that they had learnt something about the parties’ policies from the debates; 50% of this demographic, along with 51% of 25 to 39 year-olds, said that the debates had helped them to make up their minds how to vote; and 92% of younger voters said that they had talked about the debates with others. The committee also received evidence from Channel 4 that among 18 to 24 year-olds, television still remained more popular than newspapers and online for the consumption of news.
These figures provide clear evidence that there is a public appetite for the broadcast general election debates and, as highlighted in the report, there is a high level of public perception that broadcast debates will happen again in 2015. These points were referred to by my noble friend Lady Grender among others. The committee was persuaded by this evidence that the broadcast general election debates served the public interest by increasing public engagement with the electoral process, and recommended that they should take place during future campaigns.
The noble Lord, Lord Collins, referred to the relative ease of the agreement in 2010. I think that it was relative; certainly concerns were expressed by some political parties. I think I am right in saying that Plaid Cymru, the SNP and the Greens all raised concerns. The relative fragmentation of the party system since will make agreement more difficult, as I think noble Lords would accept.
However, an important area of consideration for this report is the regulatory context of the broadcast debates and how this could come to have an impact on participation. Due accuracy and impartiality remain at the heart of licensed broadcasting services and under the Communications Act 2003, Ofcom—the United Kingdom’s independent communications regulator and competition authority—is required to set standards for programmes on television and radio that exist in the form of the broadcasting code.
The broadcasting code applies to all broadcasters licensed by Ofcom but not to the BBC, where oversight of the output falls to the BBC Trust as the sole regulator for impartiality and accuracy. However, both regulators apply broadly similar standards. In the case of the BBC there is a set of editorial guidelines and election guidelines to ensure impartiality and accuracy, while under the broadcasting code there are specific rules that apply during election periods and which include the requirement for broadcasters to ensure that their coverage is duly impartial and gives due weight to major parties.
Ofcom also sets rules to require the allocation of party election broadcasts through its list of major parties. The list reflects the fact that some political parties have a significant level of electoral support, and a number of elected representatives, across a range of elections within the United Kingdom or the devolved nations. Reading the report, I was reminded that I had taken part in a general election debate in Wales, although I was not a candidate for the election. In fact, three of the four people participating in the debate were not candidates. So clearly there is a different position for Scotland, Wales and Northern Ireland in relation to their general elections—and quite right, too.
The Ofcom list of major parties is important because rules on party political and referendum broadcasts, and certain parts of the broadcasting code, impose obligations on licensed broadcasters by reference to the major parties on the list. In determining the composition of the list, Ofcom looks at evidence of past electoral support and evidence of current support as demonstrated by opinion poll data—although there is nothing scientific, I think, in this process. More information on the analytical framework that Ofcom uses to assess the evidence of past electoral and current support can be found in its consultation regarding the composition of the list of major parties that was published on 8 January this year.
Designation of a party as major political party does not of itself—this point was made by many noble Lords—entitle that party to a right to participate in an election debate or limit the debate to the major parties that are set out on the list. That is a matter for the broadcasters, although no doubt they will pay due attention to the list. This consultation is published in advance of the general election taking place in May 2015 and the English local and mayoral elections taking place on the same day, and it closes on Thursday, 5 February 2015.
Following the consultation, Ofcom will obviously consider carefully any comments and views received before publishing a statement by, as I understand it, early March 2015, and, if appropriate, any revised list of major parties. This will permit the broadcasters and political parties to plan ahead, aware of Ofcom’s decision on the list of major parties, for the May 2015 elections.
It is important to note that, while Ofcom has an important role in the regulatory framework under which broadcasters must produce television programmes during election periods, it does not determine the structure, format and style of any possible TV leaders’ election debates. The decision on which leaders are represented in any broadcast debate is an editorial matter for broadcasters in agreement with the political parties taking part.
The requirement of “due impartiality” means that broadcasters must always strive to achieve a balanced presentation of a range of points of view on matters of political or industrial controversy and relating to current public policy. However, within the statutory framework set up by Parliament, it is the responsibility of the broadcasters to make judgments about individual programme content. This is also recognised within the committee’s report, which highlights that the decision on who is invited to participate in televised debates will continue to be one that is consistent with the legal and regulatory framework around broadcasting.
Having set out the regulatory context, the report looks at proposals for changes to the debates, including the case for a body to oversee and produce broadcast election debates independently of the broadcasters. However, it determines that there are no compelling arguments for the introduction of such a body. This is a view that is widely held.
The report concludes by making a number of informative recommendations for reforms if the debates are to take place in 2015 and beyond. These recommendations, aimed largely at the broadcasters, include the proposal to establish a single online portal or hub for the debates to ensure their easy discoverability alongside other election resources, as well as a recommendation to ensure that the format evolves as necessary to maintain or increase voter engagement. This, too, seems popular.
A significant observation by the committee, and an important recommendation from the report, was that the broadcasters should exercise their editorial judgment to reflect the committee’s concern about the lack of diversity, in both gender and ethnicity, in relation to the debate moderators in the 2010 debates, a point referred to by the noble Lord, Lord Dubs. The Government encourage the media and creative industries to continue to take proactive steps to change and improve diversity right across their sectors. In broadcasting, BBC, ITV, Channel 4 and BSkyB have all set out a number of actions and some challenging targets for increasing ethnicity on and off screen. While the Government believe that it is for the media industry itself, including broadcasters, producers, media organisations and others, to take the lead and promote equality among its employees, we ensure that broadcasters in particular are subject to a strong legal framework designed to promote gender balance. The Department for Culture, Media and Sport is also playing a part in raising the profile of the issue. Ministers have chaired a series of round-table discussions with leaders in the broadcast, film and performing arts industries to discuss what more they can do to tackle it.
The committee’s report serves as an important and valuable document, setting out the legal and regulatory framework around broadcast general election debates and making a number of very useful recommendations to broadcasters ahead of future potential debates. Once again, I thank the committee for its good work and contributions and for producing this insightful report into an important part of our political life.
Lord Berkeley of Knighton (CB)
Before the Minister sits down, perhaps I may point out that he touched, almost inadvertently, on a rather important point. In mid-Wales, it is quite hard to catch political broadcasts or, indeed, anything else on the radio because of the terrain. The Minister cannot do much about that this evening, but I thought he might like to reassure your Lordships’ House that the sheer beauty of the terrain in mid-Wales more than made up for the damage it inflicted on his listening on his car journey.
Lord Bourne of Aberystwyth
My Lords, it was not at all inadvertent. I had the great privilege of representing Mid and West Wales for 12 years in the National Assembly for Wales and I was unable then to do a great deal to improve reception. I can probably do even less now. However, the point is extremely well made about what a beautiful area it is, as the noble Lord knows very well. I hope that something can be done to improve reception for people in that area on all sorts of radio.
Lord Inglewood
My Lords, I would like to thank all those who have taken part in the debate, both those who have been members of the Communications Committee and those who have not, for the general reception which they have accorded to it. I add as a proviso that this is the last time that I will speak in my capacity as the “ancien chairman” of the Communications Committee.
I was particularly pleased that a number of the illustrations used came from outside the M25. It is important that, in considering these topics, we think of the country as a whole, by which I mean the United Kingdom as a whole. I was especially glad to hear the noble Lord, Lord Dubs, refer to the Keswick Words by the Water Literary Festival. My natural modesty almost forbids me, but the rules of procedure mean that I should declare an interest. I am speaking on a panel there at the next festival quite soon.
If you think about it in military terms, we are in a period in which the political parties are now engaged in a war in order to win the democratic mandate to run this country for the next five years. The battle that is decisive is to be fought on 7 May. We are now in a period of skirmishing where the various parties are—if I can change the analogy—like dogs before a dog fight, looking at each other, growling, snarling and seeing what they think is going to be the best move for them. Of course, that is where we are in the context of the general election debates.
I was talking to our excellent special adviser quite recently, who said that he thought that one of the important consequences of the report—this point was made by the noble Lord, Lord Collins, and my noble friend Lord Bourne—was that the discussion of this topic in the media by the commentariat is a great deal better informed and more precise and accurate than it has been on previous occasions. I would like to think that this report may have contributed to that. He also made a telling comment, which was that no one has yet walked away. We are at the period where the dogs are looking at each and circling around each other. The important point to remember about this topic is that, while it may be only a short time until the formal general election campaign gets under way, there is still a long way to go.