Grand Committee

Thursday 22nd January 2015 Grand Committee

Thursday, 22 January 2015.

Crime and Courts Act 2013 (Consequential Amendments) Order 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

14:00

Moved by

[Baroness Williams of Trafford]

That the Grand Committee do consider the Crime and Courts Act 2013 (Consequential Amendments) Order 2015.

Relevant document: 15th Report from the Joint Committee on Statutory Instruments

[Baroness Williams of Trafford (Con)]

My Lords, I hope I can be relatively brief on this order, which makes minor and technical amendments to Section 195S of the Proceeds of Crime Act 2002, which extends to Northern Ireland only.

Amendments have been made to Part 4 of the Proceeds of Crime Act by the Policing and Crime Act 2009 and by legislation devolving policing and justice functions to Northern Ireland. New Sections 190A, 193A and 195A to 195S have been inserted. These new sections provide new and extended powers for use in Northern Ireland for the search, seizure and detention of property to prevent its dissipation or wanton devaluation, so that it is able to satisfy a confiscation order. The powers mirror those introduced into Part 2 of the Proceeds of Crime Act, which relate to England and Wales, and to Part 3 of the Proceeds of Crime Act, which relate to Scotland.

Amendments should have been made to Section 195S to add immigration officers as appropriate officers whose exercise of the functions is covered by the code of practice under Section 195S, and to define who is a senior officer in relation to an immigration officer. However, these amendments were unfortunately not made to Section 195S, resulting in technical defects.

If the changes to Section 195S we are now seeking to make are not made, the result would be that if a code of practice were made under Section 195S, that code would not cover the exercise of the new powers by immigration officers in Northern Ireland. This is obviously not acceptable. The guidance on the use of these powers is an important safeguard to ensure that law enforcement officers, including immigration officers, use the powers in a proportionate and consistent manner.

The order, if approved by the Committee, will allow the Secretary of State to make a code of practice that covers the use by immigration officers of the new and extended search, seizure and detention powers in Northern Ireland. This order does not affect England and Wales or Scotland. It has recently been debated in the House of Commons, with all in favour of this amendment. On that note, I beg to move.

[Lord Rosser (Lab)]

I thank the Minister for her explanation of the reasons for and purpose of the order. The order amends the Proceeds of Crime Act 2002 to add immigration officers to the officers to whom the code of practice governing the exercise of the powers concerned will apply. The order also defines “senior officer” in relation to an immigration officer.

As the Minister has said, the order addresses an oversight at the time of the passing of the Crime and Courts Act 2013. We accept the need to rectify situation.

[Baroness Williams of Trafford]

My Lords, I thank the noble Lord, Lord Rosser, for his brief comments. With that, I commend the order to the Committee.

Motion agreed.

Police and Criminal Evidence Act 1984 (Codes of Practice) (Revision of Code A) Order 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

14:04

Moved by

[Baroness Williams of Trafford]

That the Grand Committee do consider the Police and Criminal Evidence Act 1984 (Codes of Practice) (Revision of Code A) Order 2015.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

[Baroness Williams of Trafford (Con)]

My Lords, the statutory instrument before us will bring into effect a revised Code of Practice A issued under the Police and Criminal Evidence Act 1984, also known as PACE. This code, laid before this House under Section 67(7) of PACE, governs the police’s use of stop-and-search powers. It sets out what the powers are, the preconditions for their use and how they should be exercised.

I shall briefly explain how we have arrived at the revised Code A before us. On 30 April last year, the Home Secretary announced to Parliament a comprehensive package of measures to reform the use of stop and search. The principal aim of these reforms is to ensure that the police use their powers effectively, fairly and in a way that promotes community confidence. There was overwhelming evidence that reform was right and necessary. The Home Office carried out an extensive public consultation on the powers, which attracted more than 5,000 responses and presented a clear case for reform.

Additionally, HMIC published a report in which inspectors reviewed the use of stop-and-search powers in all 43 forces of England and Wales. The findings of the HMIC inspection were very concerning. It reported, for example, that 27% of stop-and-search records they examined did not contain reasonable grounds to search people; many of these records had been endorsed by supervising officers. If the HMIC sample was representative, it means that a quarter of the 1 million or so stops carried out under the Police and Criminal Evidence Act last year could have been illegal. This is why the Government have committed to revising the Police and Criminal Evidence Act Code of Practice A: to make clear to all officers what constitutes reasonable grounds for suspicion. This is the legal basis on which police officers carry out the vast majority of stops. It is also why the Government have made it clear that, where officers are not using their powers properly, they could be subject to formal performance or disciplinary action.

The proposed changes to the code do not alter the nature of the stop-and-search power. Rather, the intention of the revised Code A is to provide a clear direction to those leaders, trainers, supervisors and officers exercising the powers themselves that the use of this power is conditional on there being a genuine and reasonable suspicion that the officer will find the article in question. Therefore, the police cannot choose to stop and search on the basis of a hunch, a social or racial stereotype or otherwise. The revised PACE Code A before your Lordships is central to the use of stop and search; for this reason, it is essential that we get it right. The revisions have been subject to an eight-week consultation and enjoy a broad spectrum of support. If we are to improve professionalism in the police, increase public confidence and enhance accountability, I urge noble Lords to support this revision of Code A. I beg to move.

[Lord Paddick (LD)]

My Lords, as a former police officer with more than 30 years’ experience, and as someone who has been concerned for some time about the use of stop and search by the police, I welcome these regulations. The important aspect of the new guidance is the fact that stop and search has to be conducted on the basis that the prohibited item will actually be found on the individual. That is the crucial point. I still have concerns that it is not merely changes in legislation or guidance to police officers that is required, but a change in the culture of the police. The evidence that my noble friend the Minister presented showed that not only did a number of the stop-and-search forms examined by HMIC not contain the necessary evidence from the officer who conducted the stop and search, but these stop-and-search forms were actually supervised and no action was taken. While welcoming particularly this aspect about the prohibited item, I think more needs to be done. Hopefully, the Minister will be able to reassure us that the College of Policing is following up the changes in the guidance with a commitment to improving the training given, both to front-line officers and to their supervisors.

[Lord Rosser (Lab)]

Once again, I thank the Minister for her explanation of the background to, and purpose of this order, which we support. The order, as the noble Lady has said, brings into force a revised code of practice that is intended to make clear what constitutes reasonable grounds for suspicion when police officers decide to exercise their statutory powers of stop and search. It also indicates that, if these powers are not exercised lawfully, performance or disciplinary procedures could be instituted.

As the Minister said, and as the Explanatory Memorandum also states, Her Majesty’s Inspectorate of Constabulary found that 27% of the stop-and- search records that they examined did not contain reasonable grounds to search people. The inspectorate attributed this to poor levels of understanding among officers about what constitutes reasonable grounds and poor supervision.

On the point that has just been raised by the noble Lord, Lord Paddick, in relation to culture as much as anything, the Explanatory Memorandum indicates that a review is taking place of the national training on stop and search through the College of Policing. Perhaps the noble Baroness could indicate when it is expected that the review will be completed. The Explanatory Memorandum also states that,

“the College of Policing will consider introducing a requirement that stop and search training should be subject to assessment and refreshed on a rolling basis”,

with failure to pass meaning that,

“officers could not use the powers in the course of their duties”.

Can the Minister indicate when a decision is likely on whether to introduce this requirement referred to in the Explanatory Memorandum?

Perhaps I may also raise a few points on the consultation that took place on the revisions to the code of practice. Were any significant issues raised by the campaigning and community support groups and organisations referred to that responded not adopted and, if so, what were they? If I read it correctly, the Explanatory Memorandum indicates that responses were received from six police forces and one police and crime commissioner. In view of the importance of appropriate use of the stop-and-search powers for good police and community relations, that would seem, on the face of it, to be a low level of response from the police. Perhaps the Minister could comment on that in her reply and say whether the Metropolitan Police was one of the forces that responded.

The Explanatory Memorandum sets out in paragraph 12 the success criteria for the changes. One of the criteria is:

“Reduction in the use of stop and search and improvements in police and community relations”.

Is there a target for the reduction in the use of stop and search? The Explanatory Memorandum states that the implementation and impact of the changes in the code of practice will be monitored “on an ongoing basis”. When is it likely that information on the progress being made will first appear in the public domain?

Having asked all those questions, I repeat that we support the order.

[Baroness Williams of Trafford]

I thank my noble friend and the noble Lord, Lord Rosser, for their very constructive comments on this order. My noble friend Lord Paddick makes an excellent point about not just amending the legislation but changing the culture in which the police operate and the importance of training in embedding the new attitudes and approach to stop and search. I assure both him and the noble Lord, Lord Rosser, that the College of Policing is making very good progress in its review of national training. The Government expect the college to publish a first draft of stop-and-search standards in February. I hope that that is helpful.

There were a number of other questions on which I hope that it will be okay to write to the noble Lord, Lord Rosser, in due course. I thank both noble Lords and commend the statutory instrument to the Committee.

Motion agreed.

Motor Vehicles (Variation of Speed Limits) (England and Wales) Regulations 2014

Thursday 22nd January 2015 Grand Committee

Motion to Consider

14:14

Moved by

[Lord Popat]

That the Grand Committee do consider the Motor Vehicles (Variation of Speed Limits) (England and Wales) Regulations 2014.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

[Lord Rosser (Lab)]

I apologise to the Minister. I would not normally seek to intervene before he even started but I failed to find both impact assessments on these issues. As I understand it, we are dealing with an increase in two speed limits: from 40 miles per hour to 50 miles per hour on the single carriageway and from 50 miles per hour to 60 miles per hour on the dual carriageway. I inquired in the Printed Paper Office but it appeared to have only an impact assessment for raising the speed limit on dual carriageway roads. Before we start, has there been an impact assessment on increasing the speed limits on single carriageway roads or is there only one impact assessment?

[Lord Popat (Con)]

My Lords, there are two impact assessments and I would be happy to give the noble Lord the one on the roads going from 40 miles per hour to 50 miles per hour sometime later today.

[Lord Rosser]

Then there is an impact assessment on that?

[Lord Popat]

Correct.

[Lord Rosser]

I can say only that I just inquired about it and was not given one in the Printed Paper Office, where they had a good look for it.

[Lord Popat]

My Lords, I have a copy of it here. I am quite happy to pass it to the noble Lord.

[Lord Rosser]

Maybe I am getting horribly confused—that is quite likely—but the one I have just been given by the clerk is the one I already have. It says:

“Raising the speed limit for HGVs … on dual carriageway roads”.

[Baroness Sherlock (Lab)]

I have this other one, too.

[Lord Rosser]

I see—I now also have the single carriageway one here. Maybe the clerk has only the one of them. I am sorry.

[Lord Popat]

My Lords, thank you. These draft regulations are being made to increase the national speed limit for heavy goods vehicles of more than 7.5 tonnes on single carriageways from 40 mph to 50 mph and on dual carriageways from 50 mph to 60 mph, in England and Wales. The freight and logistics sector is an essential part of the UK economy. Improving conditions for growth in the logistics sector is critical to the Government’s growth agenda. Raising heavy goods vehicle speed limits, particularly on single carriageway roads, will lead to quicker journeys and lower costs for the sector, aiding economic growth and generating economic benefits of £11.8 million per year. It will also reduce frustration for the many drivers who find themselves stuck behind slower-moving lorries on busy roads and are unable to overtake.

These speed limit changes are part of a wider package of associated measures that the Government are bringing forward to continue to increase economic efficiency and remove outdated restrictions. The new limits will better reflect the capabilities of modern heavy goods vehicles. They will also ensure that heavy goods vehicle speed limits are proportionate to those of other large vehicles, such as coaches and cars towing caravans, and to the speed limits on motorways.

Vehicle-specific speed limits are set out in the Road Traffic Regulation Act 1984, but the current speed limits have been in place since the 1960s. Since then, huge improvements have been made in vehicle design and highways engineering, and these limits are now outdated. What is more, our expectations of faster journey times and lower-cost goods are relying on heavy goods vehicle drivers systematically breaking the law. On single carriageways, the current 40 miles per hour speed limit causes unnecessary cost to vehicle operators and congestion. Because of the 20 miles per hour differential between heavy goods vehicle and car speed limits, lengthy queues of traffic often develop behind heavy good vehicles that adhere to the 40 miles per hour speed limit. This leads to avoidable accidents where following drivers become frustrated and make unsafe overtaking manoeuvres.

It is for these reasons that in July last year, the Government announced plans to increase the national speed limit for heavy goods vehicles to 50 miles per hour on single carriageways. The Government commissioned research into the potential impacts of the change and conducted an impact assessment and full public consultation. We also looked at what we could learn from other countries who are also leaders in road safety, such as the Netherlands and Norway, which already have 50 miles per hour speed limits for heavy goods vehicles on rural single carriageway roads.

Our impact assessment suggested that the change in speed limits could, in isolation and based on current road safety figures, result in an increase in fatal accidents of two to three per year as a result of higher average speeds. It also suggested that reducing the speed limit differential between heavy goods vehicles and other traffic could reduce accidents.

The public consultation highlighted that some respondents had reservations about increasing the speed limit due to concerns about road safety, road maintenance and the environment. To address these concerns, we are taking forward a package of measures to improve heavy goods vehicles’ safety, including encouraging local authorities to consider whether lower speed limits are appropriate on some roads because of high numbers of pedestrians or cyclists, the road condition or where there is a possible risk of air quality limits being exceeded. We will also conduct an evaluation study of the impacts of the change within five years of it coming into force.

In November last year, the Government also announced plans to increase the national speed limit on dual carriageways for heavy goods vehicles from 50 to 60 miles per hour to complement the decision about the single carriageway speed limit. This change will modernise the speed limit and bring it into line with the behaviour of professional heavy goods vehicle drivers, but the Government’s analysis suggests that it will not result in significant changes to average heavy goods vehicles’ speeds. This is because heavy goods vehicles already travel at the same speed limit on dual carriageways as on motorways, which have a 60 miles per hour speed limit. It is implausible that lorries will travel faster on dual carriageways than on motorways because motorways have fewer obstacles and are built to higher standards. So we think that the practical effects of this change on dual carriageways alone are limited.

The proposed new speed limits received significant support in the public consultations and I believe that they represent a pragmatic change that reflects the needs and capabilities of a modern transport network. I beg to move.

[Lord Rosser]

I thank the Minister for explaining the purpose and reasoning behind these regulations. I have one or two points that I wish to raise and if the answer to those points is in the impact assessment I have just been given, I hope he will accept that I have not really had a chance to digest its contents in the few minutes that I have had it.

The Minister has not indicated that there has been lobbying for this increase from the road haulage industry. Perhaps he can say whether that is the case, bearing in mind that many are of the view that increasing HGV speed limits is a priority for the haulage industry.

We do not intend to oppose the increases in the speed limits but we wish to express some reservations about the way the Government appear to have handled this matter and to make some comments on the supporting documentation. It seems from the work undertaken that the safety impacts of the single carriageway increase from 40 to 50 miles per hour are somewhat inconclusive. It would be helpful, although I have no doubt that the information is in the document that I have just been given, if the Minister could say what the Government’s impact assessment shows that the increase to 50 miles per hour will result in, in terms of any additional fatalities or serious accidents each year. Once again, I accept that that information may be in the document that I have been given. Could he also indicate how many fatal accidents involving heavy goods vehicles in excess of 7.5 tonnes there are currently each year on single carriageway roads, so that we can see whether it is accepted that there will be an increase and, if so, at what kind of percentage level that increase is projected to be?

The evidence of a link between increased speed and crashes is well documented. It is estimated that one-third of deaths on the road are caused partly by excessive speed. There has been nothing but anecdotal evidence to suggest that road safety will improve due to less of what is described as “risky overtaking” in the Explanatory Memorandum, as a justification for these measures, if the speed limit for HGVs is raised.

As I look at the Explanatory Memorandum, the single carriageway speed increase appears to have been objected to by nearly three-quarters of respondents to the Government’s consultation, so one could suggest that not very much weight has been given to the results of the consultation. Is it not also the case that the increase in the speed limit is being pushed ahead before the Department for Transport has concluded its promised review of rural road safety?

The consultation on increasing the speed limit for HGVs on single carriageway roads, according to the Explanatory Memorandum, was launched in November 2012 and went on for three months, until the beginning of February 2013. A decision to proceed was not made, presumably, until very recently—that is, 2014. One could construe that the delay was, at least in part, because the Government knew from the responses that the change was likely to be controversial, but perhaps the Minister could comment on that point.

There does not appear to have been too much of an attempt to assess the impact of higher speed limits on dual carriageways. The Government have, presumably, not properly assessed costs and benefits for the dual carriageway increase because they are of the view that, in reality, the speed at which vehicles go will remain the same. However, the majority of respondents to the consultation did not agree with that assertion, which, if it is incorrect, could lead to significant impacts for road safety, the environment and road maintenance. Higher average speeds for larger vehicles will increase fuel consumption, emissions of CO₂ and particulates and noise levels. However, it is not clear why the Government want to increase the speed limit for heavy goods vehicles over 7.5 tonnes from 50 to 60 miles per hour on dual carriageway roads.

The impact assessment says that the average speed at which HGVs travel in “free flow conditions” is about 53 miles per hour and asserts that the limit of 50 miles per hour is, “out of date”, apparently because it is,

“systematically ignored by professional HGV drivers”,

averaging 53 miles per hours—that is, three miles per hour more, in what are described as “free flow conditions”. If the Government regard a speed limit as being out of date because people are proceeding on average three miles per hour in excess of it, surely on that basis they must be pretty close to regarding the 30 miles per hour speed limit as being out of date, unless the Minister is going to tell us that in free-flow conditions motorists, including lorry drivers, do not go at average speeds in excess of 32 or 33 miles per hour when there is a speed limit of 30 miles an hour. Perhaps the Minister could comment on the view that a speed limit is out of date if it is being exceeded, on average, by three miles per hour, and where that leaves us in relation to the government view on a 30 mile per hour speed limit.

14:30

If heavy goods vehicle drivers are averaging 53 miles per hour on dual carriageway roads, why is that an argument for increasing the limit to 60 miles per hour when, in their own impact assessment, the Government state that they “do not expect” a change in the average speed of heavy goods vehicle drivers? If the Government’s argument is that they are doing an average of 53 miles per hour in free-flow conditions at the moment, when the speed limit is 50 miles per hour, what is the argument for increasing it to 60, when the Government’s view is that they will continue to do 53 miles per hour? Perhaps the Minister could comment on that point when he comes to respond.

The Government, as I said, refer to average speeds being 53 miles per hour in free-flow conditions on dual carriageways. Free-flow conditions, as I understand it from that impact assessment, mean when heavy goods vehicles are not held up by other traffic or by obstructions such as junctions, hills or bends. The change for dual carriageways means that these vehicles will presumably be able to travel up to 10 miles per hour faster when at, on or approaching junctions, hills or bends. But is it not the case that more accidents happen at junctions or on hills or bends than in what the impact assessment describes as free-flow conditions? Where was that issue addressed in the impact assessment? Was it even addressed? No doubt the Minister will want to comment on that in his reply.

The consultation period on raising the speed limit for heavy goods vehicles over 7.5 tonnes on dual carriageway roads was considerably shorter than the consultation period in respect of single carriageway roads. Why was that? Why was the consultation of just some six weeks on the speed limit on dual carriageway roads deliberately held over the summer holiday period from 24 July to 5 September, when many people are away? Perhaps the Minister could comment on that in his reply.

The Explanatory Memorandum sets out from what sources the responses had come to the consultation on the single carriageway speed limit increase, saying more than half came from private individuals. How many replies came from private individuals to the consultation on dual carriageway roads? That figure does not appear to be given in the Explanatory Memorandum. The number of local authorities responding to the dual carriageway consultation is—or was—well down on that for the single carriageway consultation. Does the Minister think that has anything to do with the fact that the consultation period was not only shorter but held over the summer holiday period?

The Explanatory Memorandum also refers in paragraph 8.8 to encouraging local authorities to consider lowering local speed limits. Can the Minister confirm in respect of which roads within its area the local authority could make the decision itself to lower speed limits, and in respect of which roads within its area the local authority could not make that decision? In relation to lowering speed limits, can a lower speed limit be placed on a road by a local authority for a heavy goods vehicle of more than 7.5 tonnes than applies to other vehicles, or is it the case that if the speed limit is lowered by a local authority, it has to apply to all vehicles?

The quick look that I have had at the impact assessment on single carriageway roads says, I think, that these vehicles are currently travelling at an average of 45 miles per hour. Could the Minister confirm whether that is the same as applies in the dual carriageway impact assessment, where the figure was 53 miles per hour on what were described as free-flow conditions? On a single carriageway, is that 45 miles per hour in free-flow conditions? Presumably it therefore does not apply when there is an obstruction—an obstruction being described as a junction, a hill or a bend. Once again, if the average speeds are 45 miles per hour, why are the Government pushing for an increase in the speed limit to 50 miles per hour?

I would be grateful if the Minister could answer some of those questions but I appreciate that he may wish to reply in writing. I can confirm that, despite all the questions that I have asked—which may not have seemed to the Minister entirely helpful—we are not opposing the regulations.

[Lord Popat]

I thank the noble Lord for a number of interesting points. I shall endeavour to answer as many as I can. Failing that, I shall be happy to write to the noble Lord.

The first question he raised concerned whether there was any lobbying by the haulage industry. It has been known for many years that the logistics industry has been pressing the Department for Transport to raise the speed limit and modernise the law. It feels that the law as it stands unnecessarily criminalises professional drivers and encourages risky overtaking by other road users. For the motorist who is trying to overtake, a lorry that is going at a much slower speed can be quite frustrating. Quite often, it can create long queues and congestion in certain areas.

The noble Lord asked what impact the speed limit change will have on road safety. The change will remove outdated restrictions set up in 1960 and 1980 and allow our roads to be better used and to better reflect the capabilities of modern heavy goods vehicles. This is one of the many changes being made to ensure that road transport regulations are fit for purpose. We have an excellent record on road safety—one of the best in the world—and I am confident that both our rural roads and lorry freight will continue to become safer. Better vehicle design, highways, engineering and changes in behaviour have all contributed to these improvements.

As to dual carriageways, in practice, because the Government do not believe that raising the speed limit to 60 miles per hour will result in changes in average heavy goods vehicles’ speeds, the change is not expected to have any impact on road safety. On single carriageways, analysis indicates that the direct effect of the speed limit changes on road safety on their own will be relatively small. The impact assessment identified a small additional risk to road safety resulting from the increase in speed—an additional two or three fatalities a year, assuming no other changes. However, it also identifies a potential benefit from a reduction of speed variants and dangerous overtaking. It is difficult to assess the size of the benefit so the impact assessment does not include a figure for that. The Government will be carefully monitoring the impacts of the changes.

[Lord Rosser]

My Lords, it may be that the Minister intended to deal with this in writing, but does he have the current figure for the number of fatalities on single carriageway roads involving HGV vehicles in excess 7.5 tonnes? I think he said the projection is an increase in fatalities by three or four, or two or three—I am not sure—and presumably there will be a likely increase in serious injury. The answer will perhaps come in the written response—I am happy to wait for it—but does the Minister know whether it represents a significant or minimal increase in fatalities involving HGV vehicles in excess of 7.5 tonnes on single carriageway roads?

[Lord Popat]

The impact assessment states an additional two to three fatalities a year, assuming no other changes. However, it also identifies a potential benefit from a reduction of speed variants and dangerous overtaking. We do not have figures for the number of lives that can be saved and accidents that can be prevented by the increase in the speed limit. We have problems with dangerous overtaking when a lorry is being driven at a slower speed than the one suggested in the SI, so overtaking becomes easier.

The noble Lord asked about road casualties. The most recently published Reported Road Casualties Great Britain annual report highlights the lowest figure in road deaths since national records began in 1926. Deaths decreased by 2% in 2013, compared to 2012, and were down to 1,713.

[Lord Rosser]

Is the Minister referring to the overall reduction in road deaths?

[Lord Popat]

The figure is in the recently published report of road casualties in the United Kingdom overall. It is the lowest figure since national records began in 1926.

[Lord Rosser]

I suggest, as does the Explanatory Memorandum, that that is not attributed to increasing speed limits. The Government’s Explanatory Memorandum gives reasons for the improving road safety record. It states:

“Better vehicle design, highways engineering and behavioural change have all contributed to these improvements”.

There is no claim in the Explanatory Memorandum that increasing speed limits will reduce deaths.

[Lord Popat]

An increase in speed limits is just coming into force. It is not the reason for fewer deaths. The reasons for a low numbers are more professional drivers, better vehicles, better signage and all that. This is why the department wants to review this after five years. We believe that, on the balance of probabilities, the number of accidents and deaths will not go up if we increase the speed limit as suggested. Bearing in mind that heavy goods vehicles break the law by driving at over 50 miles per hour on dual carriageways, we are suggesting 60 miles per hour. Remember that lorries have a meter so that they cannot exceed 56 miles per hour anyway.

[Lord Rosser]

So why do the Government want to increase the speed limit to 60 miles per hour if the Minister is telling us they cannot do that speed?

[Lord Popat]

I am saying that by increasing the limit to 60 miles per hour, the chances of their breaking the law, which they are doing now, will be less than at the moment.

[Lord Rosser]

I thought the Minister just said that there is a device on lorries that stops them going in excess of 56 miles per hour, so why do the Government want to increase the speed limit to 60 miles per hour?

[Lord Popat]

All lorries have speed limiters set at 56 miles per hour. There is no harm in increasing to 60 miles per hour. There is no point in moving the limit to 56 miles per hour. The Government are increasing the limit to 60 miles per hour in case some then can do up to 60 miles per hour. The point is that the speed limit is currently 50 miles per hour. We know that lorries break that law. By increasing the limit to 60 miles per hour, the number of people breaking the law will be minimal.

[Lord Rosser]

The Minister will accept that if that is his argument, that is an argument for increasing the 30 mile per hour limit because people exceed 30 miles per hour. I hope he not advocating that.

[Lord Popat]

I had better write to the noble Lord on our reasons for increasing the speed limit. The noble Lord asked why the Government are proceeding with the change on single carriageways when most of the consultation responses supported no change. We carefully considered the evidence provided during the consultation. We took into account the high number of hauliers represented by responding trade associations, whose membership ranges from 300 to 14,000 members. Arguably the majority of respondents were in favour of an increase in the limit.

We consider the benefits of change, including time savings and a reduction in congestion and frustration, to be worth while and are confident that rural roads and lorry fleets will continue to become safer and that any road safety concerns can be addressed.

The noble Lord asked about the delayed announcement. We were unsure whether we had fully addressed all possible impacts, so we took the time to do a thorough impact assessment and a review of the impact assessment. The noble Lord asked whether the Government have not assessed the costs and benefits of the change on dual carriageways because we do not predict a change. We carried out a sensitivity test of the impact of a very small change in speed. It is set out in the impact assessment. It resulted in a benefit to business of £8.9 million per year. The safely impact was an additional 0.18 fatal accidents per year.

On local authorities’ ability to change limits, yes, the advantage of this measure is that if, in certain areas, a local authority feels that the speed limit is too high, it is empowered to change the speed limit to as low as 20 miles per hour.

[Lord Rosser]

The noble Lord was entitled to say that I ought to know the answer already, but obviously the fact that I am asking the question indicates that I do not. Is it in relation to any road within the local authority’s area that the local authority can decide, if it so wishes, to reduce the speed limit?

[Lord Popat]

Yes, if the local authority feels that, in certain parts of the area, having higher speed limits is not safe, it has the right to reduce the speed limit to 30 miles per hour.

[Lord Rosser]

I am simply asking the question because I do not know the answer. Is it correct that that would apply on a main trunk road going through the local authority area—that the local authority, if it so wished, could decide to reduce the speed limit?

[Lord Popat]

The answer is yes. We talked about the speed limit being out of date. Let me write to the noble Lord on the subject. My briefing says that if the local authority, within its contested areas, is worried about the safety of people living around there, it has the power to reduce the speed limit. But let me write to the noble Lord on the subject.

[Lord Rosser]

I am happy to accept a written response from the Minister on that point.

[Lord Popat]

My Lords, we talked about the speed limit being out of date. I said earlier that, while heavy goods drivers already exceed existing speed limits, they cannot be caught by speed cameras, so enforcement is often very difficult. They currently break the law anyway. Heavy goods vehicles have to be fitted with speed limiters that limit them to a maximum speed of 56 miles per hour, and the average speed for heavy goods vehicles on motorways is already 53 miles per hour. Therefore, these changes are unlikely to have a big impact on speed.

I hope I have given a sufficient explanation of all the issues raised by the noble Lord; failing that, I would be very happy to write to him, as he raised a number of issues. It is a contentious issue, and I am certainly happy to look at it again and drop him a line where there is doubt.

Motion agreed.

State Pension Regulations 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

14:48

Moved by

[Lord Bourne of Aberystwyth]

That the Grand Committee do consider the State Pension Regulations 2015.

Relevant document: 16th Report from the Joint Committee on Statutory Instruments

[Lord Bourne of Aberystwyth (Con)]

My Lords, this is the first set of new state pension regulations to be made under the Pensions Act 2014; further secondary legislation will follow over the next 12 months in the run-up to the introduction of the new state pension in April of next year. These draft regulations are largely technical and in many respects replicate the regulations governing the current scheme, although the legal language has been updated where appropriate. However, I should flag up at the outset two provisions governing the new scheme that differ from the current scheme and will be important for people in their planning for retirement.

First, Regulation 10 sets the accrual rate for increments—also known as extra state pension, paid where a person defers claiming their state pension—at the equivalent of around 5.8% per annum. The Government announced their proposal for the deferral rate on 22 July last year. The rate, which is based on advice from the Government Actuary’s Department published at the same time, is slightly higher than the rate of 5.2% assumed in the original estimates.

The rationale for moving from the current accrual rate of 10.4% per annum—set around 20 years ago but not introduced until a decade later—is to ensure that people get an actuarially fair return but not a bonus if they delay claiming their state pension. This is necessary to ensure that the costs of the new scheme do not exceed those of the current scheme. However, there may be other advantages in deferring claiming, such as in relation to tax. Typically this will be where a person continues in work beyond pension age and is a higher rate taxpayer, which means that if they draw their state pension it would also be taxed at the higher rate or alternatively that the higher rate of pension might send them into the higher rate tax band. If, on retirement, they are no longer a higher rate taxpayer, their state pension—including the increments on it for having deferred claiming—would be taxed only at the standard rate. That may be one reason why people would wish to defer.

The second factor to draw noble Lords’ attention to is Regulation 13. This sets the minimum qualifying period for entitlement to the new state pension. As announced on 13 December 2013, the minimum number of qualifying years of paid or credited contributions required will be 10. This is the maximum permissible under the enabling powers in Sections 2 and 4 of the 2014 Act. Setting this minimum qualifying period at 10 years is intended to ensure that entitlement to the new state pension is restricted to those who have a strong connection with and have made a significant contribution to the United Kingdom.

This approach is consistent with that adopted in many other European and OECD countries. Indeed, we in the United Kingdom adopted such an approach to the current basic state pension until 2010. A person needed then to have qualified for at least a quarter of the full basic state pension for any state pension to be payable. This 25% de minimis condition was perceived as having a disproportionately adverse effect on women in the United Kingdom—particularly ethnic minority women—who faced barriers in working outside the home. While this was undoubtedly the case historically, by the time the condition was lifted in 2010, under the changes brought about in the Pensions Act 2007, relaxation of the contribution conditions and improvements in the crediting arrangements, particularly for time spent raising children, meant that very few women in the United Kingdom would have failed the condition even in 2010, had it been retained. In effect, the change addressed a historical problem which, in reality, did not largely apply to the cohorts affected by the change.

Although not explicit in the draft regulation, I should point out that under the European legislation governing the co-ordination of social security systems, insurance or in some instances residence in another EEA member state will count towards the 10-year minimum qualification period but not the entitlement. In other words, it would affect a person qualifying but not count towards the amount they were paid by the UK authorities. I will try to give an example later on that might make that clearer. The same would also apply where people have been insured in a country with which the UK has a bilateral agreement—such as the USA or Israel—that allows for co-ordination of the two countries’ schemes in this way. It is not in my speaking notes but I will try to explain that. If a person has five years’ qualification in the United Kingdom and five or more years’ qualification in Europe, that would enable them to qualify but the pension they would be paid would be based on only the five years they were in the United Kingdom. I hope that that is helpful.

Turning to the remainder of the provisions, Regulation 1 is technical but importantly specifies that the regulations come into force on 6 April 2016—of course, we know that that is the operative date—alongside the state pension provisions in Part 1 of the Pensions Act 2014. It also ensures that the regulations reflect the Act by restricting the new state pension to people who reach pensionable age on or after that date.

Regulations 2 and 3 deal with prisoners under the power at Section 19 of the 2014 Act. These provisions will, thankfully, have only limited application but it is worth noting that the number of older people serving prison sentences has been on the rise over the past decade. Since 2002, the number of prisoners aged 60 and over in England and Wales has increased from around 1,500 to close to 4,000.

In essence, Regulation 2 provides that a person is disqualified from receiving the state pension if they are in prison as a result of a criminal offence or are serving part or all of a prison sentence in hospital—typically a secure psychiatric hospital. The basic principle that a person should be barred from drawing their pension while in prison dates back over a century and is based on the premise that to pay the pension would constitute double provision by the state as the person’s “bed and board” is being provided and could therefore be construed as rewarding criminal activity.

The disqualification under the regulations also applies where a person is serving a prison sentence overseas but with the caveat that it does not apply if, in similar circumstances, the person would not have been imprisoned here in the United Kingdom.

The new regulation is more explicit than the current provisions in one respect in that it clarifies that a person continues to be barred from receipt of their pension if they are “unlawfully at large”—a splendidly Dickensian phrase. This is common sense. It would simply be absurd to put a pension into payment—in effect as a reward—if a person managed to escape from his prison or psychiatric unit where they were effectively a prisoner.

Regulation 3 covers the position of persons being held on remand in connection with a criminal charge. The principle here is relatively straightforward and has been applied for many years. Payment of the pension will be suspended while the person is being held on remand. If at the conclusion of court proceedings a prison sentence, including a suspended sentence, is imposed, payment of the pension is barred for the period during which the person was held on remand.

If a sentence of imprisonment is not imposed—typically where the person is found not guilty, but also if the court were to impose a fine—the suspension is lifted and arrears of pension paid for the period the person was held on remand. As I said, this is a common-sense approach because periods spent on remand prior to sentencing will normally count as time served when it comes to a person’s release from prison.

Regulations 4 to 11 deal with deferral of the state pension. In addition to Regulation 10, which I mentioned at the outset, these set out the detailed terms and conditions that underpin, first, inheritance of deferral benefits built up by a person who deferred their old state pension—that is, the state pension that is currently payable until 6 April next year—and, secondly, deferral of the new state pension.

Regulations 4 to 6 deal with the former—inheritance of old scheme deferral benefits—under the powers at Section 8 of the Pensions Act 2014. In the same way as the new state pension will not be inheritable, any increase from deferring the new state pension will not be inheritable either. However, deferral inheritance will continue to be available where the late spouse or civil partner had deferred an old state pension. The rationale for retaining inheritance rights here is that in these circumstances the availability of such rights may have been a key factor in a person’s original decision to defer their pension, particularly where their spouse or partner is, or was, significantly younger than them.

These provisions basically replicate the current provisions governing when and how a survivor can choose a lump sum payment instead of increments, and how and when such a choice can be changed. That is in respect of the old state pension. This will ensure parity of treatment of survivors of people who deferred under the old arrangements, regardless of whether the survivor is covered by the old or new schemes.

Regulations 7 to 9 are made under the power at Section 16 of the Act and cover arrangements for people who, having initially claimed their pension, subsequently decide to “suspend” their entitlement—and thus, in effect, revoke their claim—in order to build up an increase under the deferral arrangements. Although the language has been modernised—the current regulations predate the removal of the retirement condition in 1989 and so are still couched in terms of an “election to be treated as not having retired”—the requirements and restrictions imposed by these regulations mirror those applied under the current scheme. Basically they are that entitlement can be suspended only prospectively, but not more than 28 days in advance, and must be done in writing or by phone; and that the suspension is lifted from the point when a person makes a further claim to state pension, which may be backdated for up to 12 months.

15:00

Regulations 11 and 12 are made under the powers in Section 18 of the Act and deal with periods during which increments or extra pension do not accrue and the treatment of part-weeks in the calculation. The provisions in Regulation 11 largely mirror those that apply under the current arrangements by preventing a person from being able to accrue a pension increase while they are drawing another payment out of public funds, such as pension credit—clearly, that would be unfair. Regulation 11 prevents duplication of provision by precluding increments from accruing for any period during which a person who, although not claiming their state pension, is receiving another benefit out of public funds that would be abated or not available to them if they were drawing their state pension. The provision also applies where another person is receiving an increase of a publicly funded benefit in respect of the person who is deferring their state pension. Regulation 12 simply provides that, when the total number of weeks for which a person’s state pension has been deferred is totted up to calculate the value of the increments, any odd days are counted as a full week.

Regulation 14 and the schedule deal with the sharing of state pension rights on divorce. Currently, additional state pension can be included in the assets that are considered for sharing in divorce proceedings. From April 2016, only the protected payment—that is, an amount above the full rate—will be shareable.

The department is in effect the servant of the court and supplies information about the value of the individual’s state pension. It also implements orders from the court. The regulation and schedules introduce the concept of old and new pension-sharing arrangements to assist the courts and the department in administering pension sharing. I commend the regulations to the Grand Committee.

[Lord German (LD)]

My Lords, I will address my remarks, if I may, to Part 4 of the regulations—that is, Regulation 13. As I understand it, the regulations effectively replace what is called the home responsibility protection with a 10-year minimum qualifying period for a UK state pension. Prior to 2010, we had in the UK both the HRP and a 10-year minimum qualifying period. From 2010 until now, we had the HRP only. That is now being replaced by the 10-year minimum qualifying period, which was the position before 2010.

I refer to the Explanatory Memorandum and, in particular, paragraph 7.21, which, without the benefit of an impact assessment, is one of the major ways of discovering how many people will be affected by the shift that is announced in the regulations. This is what worries me more than anything else. In the Explanatory Memorandum, the Government look at the difference between a seven-year and a 10-year minimum qualifying period. The number of affected individuals in the United Kingdom who reach retirement age between 2016 and 2020 is approximately 3,000—the figure for the seven-year qualifying period is 6,000 to 10,000, while that for the 10-year period is 9,000 to 12,000, so the average difference between the two is 2,500 to 3,000 people. However, the following sentence says:

“In comparison, we estimate that 18 to 23 per cent (6,000 to 10,000 people) of the total number of individuals living overseas reaching state pension age in the same period will not qualify for a state pension because of the 10 year MQP”.

Then there is an estimate of that saving the Exchequer £650 million by 2040. This figure, I presume, relates mainly to those people living in other countries who have made a contribution to a UK state pension through their national insurance contributions, but who have not reached 10 years of qualifying and do not live either in the EEA or in a country that has a bilateral arrangement with the UK—for example, contributors to a UK pension who live in Australia, Canada, New Zealand, South Africa and other places. That is presumably why this figure is so high.

In that four-year period from 2016 to 2020, somewhere between 18% and 23% of all those pensioners who are expecting to receive a UK state pension are now not going to receive one. I would be grateful if my noble friend could provide—in writing if he does not, as I suspect, have the information to hand—a breakdown of who will be affected, where those people are affected and what the average rate of payment into a UK state pension has been in terms of minimum qualifying periods. If in fact there is a greater number between seven and 10 years, would that figure of 18% to 23% of people affected fall dramatically, if there were a seven-year qualifying period? It would be interesting to know what the rates of contribution had been for those people.

There is of course a second issue, relating to those who live within one of the countries that have a bilateral arrangement with the United Kingdom. I presume that those who live in an EEA country would in fact be entitled, because of contributions made through that European Economic Area member state, to a pension of some sort from the country where those contributions had been made. I want to ask my noble friend whether that is correct. Has an assessment been made of what that pension would be in each of the European Economic Area countries? More specifically, for those countries where there is a bilateral arrangement—my noble friend mentioned Israel and the United States of America—would the contributions which would enable people to get their pensions if they did not reach the 10-year minimum qualifying period, providing they had made sufficient contributions in those countries, for example, entitle them also to some form of pension ability in those countries, given that we have a mixed and bilateral system? I wonder whether my noble friend would agree with me that now is perhaps the time to reconsider the arrangements that we have with other member states in the European Economic Area and with other countries, particularly those of the Commonwealth, where we perhaps need to revisit whether we have a consistent, safe and sane system.

My noble friend also referred to the assistance that will be given to people to understand the new changes. It is not in the regulations, obviously, but paragraph 9 of the Explanatory Memorandum refers to guidance. Could my noble friend tell me whether any guidance is given to those people in the country who are now seeking, part-way through their working life, to emigrate to Canada or Australia, for example, that their state pension rights will be affected by these regulations, and perhaps much more dramatically than they would have been in previous years? I understand that this is a very narrow area to consider, so I would be happy, if necessary, to have a detailed reply in writing, but I would like to see the breakdown of how this affects people who have been contributing to a UK pension in countries such as Canada, New Zealand, Australia and South Africa.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for his very helpful explanation of the regulations and the noble Lord, Lord German, for his contribution, too. Generally speaking, the regulations seem to broadly reflect the intention of the legislation, so I shall concentrate on only two or three points on which I would like some clarification, which mostly have already been raised by the Minister—although I confess that I was not planning on talking about prisoners, or his idea of people being “at large”. I completely agree that people should not be rewarded for this, but the Government’s argument for not giving them a pension is that the state is taking care of their bed and board—which, presumably, the state is not doing if they have absconded. However, I shall let him off on that point for now.

Regulation 10 sets the accrual rate for increments when someone defers claiming their state pension. The rate has now been set at 5.8% per year, which is slightly above what we were told in Committee. Have the Government had time to reflect further since the Bill became an Act about the reasons behind the decision to stop people being able to take a lump sum when they defer, instead of an enhanced ongoing pension? During the passage of the Bill through this House, my noble friend Lady Hollis of Heigham challenged the Government and said that doing this was removing the only opportunity for some future pensioners, particularly those of lesser means, to acquire a lump sum to use in retirement, which might be the last opportunity to fix some particular problem with the house or buy a car. She pushed the Government on that.

I understand—the Minister can correct me if I am wrong—that of the 1.2 million who defer their pensions, only 63,000 take the lump sum, which on average is worth about £14,000. Could the Minister remind us of the reasoning for this? I seem to recall at the time the Minister for Pensions Steve Webb said it was to “simplify the system”, but I do not think it is very hard to understand that you can have a lump sum or a higher weekly amount. So I do not find that reason hugely compelling. Furthermore, government policy on pensions has evolved a bit in recent times, and the idea that people who have been saving for their retirement should be allowed to take a lump sum rather than a weekly pension has become rather flavour of the month. For example, it is there in the Taxation of Pensions Act, whereby people who would have had to spend their retirement savings on an annuity in future may take it out and spend it on a Lamborghini—I believe that is the phrase—should they be so moved. Has the Minister had any second thoughts on that, in the light of changing government pension policy?

Secondly, Regulation 13 was raised by the noble Lord, Lord German. I shall not repeat all the questions that he asked, some of which I would have asked myself, but I will be very interested to hear the Minister’s answer. I am interested in the rationale—that the reason for doing this now is because of the profile of the people who would be affected not being the people one would have expected when the legislation was going through. The Explanatory Memorandum suggests that only 2% to 3% of the people affected would be living in Great Britain, versus 18% to 23% overseas, but the absolute numbers are broadly comparable. We are talking 9,000 to 12,000 in Great Britain and 6,000 to 10,000 overseas. The memorandum says:

“Current projections by the Department indicate that in the medium and long term, abolition of the de minimis condition would have disproportionately benefitted people living outside the UK”.

What is expected to be the short-term impact?

As the noble Lord, Lord German, said, the changes made by the last Labour Government in the Pensions Act 2007 are the context for this. It meant that people who reached state pension age on or after 6 April 2010 needed only 30 qualifying years to qualify for a full basic state pension—and, of course, the HRP, as the noble Lord, Lord German, said. With fewer than 30 years, they qualify for a BSP of one-30th of the full rate for each complete qualifying year that they have built up. That means that somebody reaching state pension age from 6 April 2010 who would not be entitled to any BSP would only be somebody who had built up not even one qualifying year. So it is quite a significant difference. The Labour Government estimated that to mean that, by 2025, over 90% of people reaching state pension age would be entitled to a full BSP. It is quite a big difference from that to someone with, say, nine qualifying years, who as I understand it would not receive anything at all. Labour tried in various ways during the passage of the Bill to soften the transitioning, which would have dealt with some of the issues, but the Government rejected it. Have the Government had any further thoughts on that?

On another point, that is only one of many reasons why someone might not find themselves entitled to a full new state pension, which has become a bit of an issue of late. I understand the desire for simplicity, but in trying to advocate for the single-tier pension, there is a danger that the Government have led many people to believe that they will all qualify for the new state pension, when, in fact, we now know—from freedom of information papers released after Christmas—that 55% of people will not be on the new flat-rate state pension. Obviously, this is partly down to the way the Government have presented this. In an unusual bout of politicians declaring their responsibility, I gather that the Pensions Minister Steve Webb told the Daily Telegraph:

“I think I may have been guilty of oversimplifying the new flat rate state pension”.

Could the Minister tell the Committee, given that that misapprehension is out there, for whatever reason, what steps the Government are taking to correct it? What kind of information campaign is going on to make sure that people who are approaching retirement within the next 10 years will have a better understanding of what they can reasonably expect to get?

15:15

I am just very conscious that we discussed all this in both Houses of Parliament during the passage of the Bill, and it attracted some, but only minority, interest in the media. Now that we are running up to the introduction of the new state pension, there is a huge amount of media interest, but that is very close, and too late for anyone to take any action. What are the Government doing to notify people?

Finally, I should like to ask the Minister for an update on the issue of mini-jobs, raised during the passage of the Bill. I hope he will give me enough licence to raise this. This is the issue of people who have more than one job, but with none of them individually taking them over the lower earnings limit for national insurance. Thus, no matter how many hours they work, they are not gaining any qualifying years towards the new state pension. What is the Government’s latest thinking on this?

[Lord Bourne of Aberystwyth]

I thank noble Lords who have participated in the debate on these regulations. I will try to cover the points raised; where I fail to do so, I certainly undertake to write to noble Lords. I turn first to the points made by the noble Lord, Lord German, on an issue that is, perhaps, somewhat tangential to the regulations themselves, but certainly an issue that I know the noble Lord feels strongly about, and is impacted by these regulations. Let me return to the basic point here, and answer some of the points raised by the noble Baroness, Lady Sherlock, as well.

The 10-year period signifies a close connection with the United Kingdom. I suppose there is nothing magic in a period: that is the period chosen, and, of course, we have to do this within the broad envelope of public spending. That is the basic rationale here. The question raised by the noble Lord, Lord German, concerned what happened to pensioners, or prospective pensioners in some cases, who were in countries such as South Africa, Canada, Australia and New Zealand, which did not have a bilateral arrangement with the United Kingdom and were clearly not in the EEA. It is fair to say that they are not able to build up the qualifying period in the same way as people within the United Kingdom and people in the EEA or countries with bilateral agreements with the United Kingdom, such as the USA and Israel, which I mentioned. That has been the position through successive Governments. This is nothing new in these regulations and nothing new with this Government: this has been built up over a period of time. This is not seen as a key priority at the moment, in relation to pensions reform. I do not know the number of people who will be affected or the breakdown of how many are in each country. I will write to both noble Lords with whatever statistics we have on this to elucidate that point. The fundamental point is, however, that 10 years has been picked as signifying a close connection with the UK. The EEA is in a particular position with regard to the co-ordination of pensions policy, so that is why that is affected.

In relation to the point raised by the noble Lord, Lord German, on guidance and communications, I will, again, seek to provide more information in writing. We have a communications campaign going on that will set out the broad principles: they are operational and will influence how the scheme operates. This was launched in November and aimed at broadening awareness and understanding of how the state pension is changing. This has been trialled: there are regional trials in the north-west and the north-east as a control to see how that is being perceived. There is also an online campaign with an offshoot of YouTube—PensionTube—for people to find out more information. We are seeking to communicate the changes being made to the system as things move forward.

Turning to the point made by the noble Baroness, Lady Sherlock, I can confirm that those unlawfully at large are not, so far as I am aware, getting food and lodging at the expense of the public purse. A different point applies there. That is the point in prison. If they escaped from prison, it would be a bit perverse to reward them for escaping from prison or a psychiatric unit by saying that they could have their pension. Presumably if we were in that position, we would know where they were and would recapture them, but that is the point.

The noble Baroness made a particular point about the lump sum or annuity where somebody has deferred and then seeks to crystallise the amount in a lump sum or annuity. The reason for dispensing with the lump sum payment arrangements was that the new deferral arrangements would help to flatten the expenditure profile and offset some of the costs of the early years over a period which, if there was an ability to take a lump sum, would expose us on the public spending front, as I understand it. The new state pension scheme—this may be hard to believe—is simpler, and the deferral arrangements reflect the change. Offering a choice of deferral payments has made the current system rather complex, and people are unsure what is best for them. That is basically the reason. The lump sum is seen as a somewhat inflexible savings vehicle. That is the reason that we have gone for the annuity option.

I will have to write to the noble Baroness on this point. I think I have seen this somewhere, but I had better be careful what I say. I think it is possible after 2016 to buy additional qualifying periods pre-2016. I am not sure whether that affects qualification or only the amount of the pension that could be drawn down. I think that is probably a point on which we need to get back to the noble Baroness. I will write on that point. I think at the very least I have seen something about it affecting the amount of the pension that you can draw down. You can certainly contribute post-2016. Whether you can use that for a qualifying year, I am not sure, but I will write to the noble Baroness on that point. There is a communications campaign.

The noble Baroness raised a number of points. The mini-jobs point was raised by the noble Baroness, Lady Hollis, in the Chamber. I am afraid I do not have the current state of play on that because it is somewhat wide of these regulations, but I will ensure that the noble Baroness gets a response on that point.

With regard to the fact that not everybody will be getting the full amount, the reason is that if those who have contracted out—and many have currently contracted out, although that ends in 2016—were to get the full amount, it would be double-counting. You would have the benefit of contracting out in the other pension and then you would get the full amount with the state pension. That would be unfair, so that is why. Nobody is worse off. There are provisions now to prevent that opting out counting. That is purely what this is. That number will decline over time because opting out is ending, but the figures that the noble Baroness cited are correct. Not all those getting the new pension will get the full amount because they are getting the benefit of the opt-out.

[Baroness Sherlock]

Did the Minister say that nobody would be worse off? Did he mean that?

[Lord Bourne of Aberystwyth]

I hope I did not, because I am not sure that is the case. If I did, I certainly correct that point. I am not sure that nobody will be worse off. I could not say that.

When that story broke, as it were, this was not new news; it was old news and the BBC and perhaps others—I should not single the BBC out—were being lazy in reporting. We are clearly correcting that via the media. I think it has been corrected. The reason for this is to ensure that there is no double-counting. As I cannot be certain, I would not go so far as to say that nobody is worse off, but I think it would be perceived as fair by most fair-minded people that if you have opted out of the state system and the state has, as it were, contributed to a different pension, you should not be able to count that again for the benefit of the state pension. I think it is fair to say that most people are better off, but I would not like to put a particular figure on the amount.

If I have missed anything, I will certainly pick it up in writing to noble Lords who have contributed to this debate. I thank them once again for their helpful contributions and commend these regulations to the Grand Committee.

Motion agreed.

Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

15:25

Moved by

[Lord Freud]

That the Grand Committee do consider the Universal Credit (Work-Related Requirements) In Work Pilot Scheme and Amendment Regulations 2015.

Relevant documents: 16th Report from the Joint Committee on Statutory Instruments, 21st Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

The regulations before the Committee today introduce powers to test a range of approaches to establish how we can best support working universal credit claimants who are on low earnings to progress in work and earn more. This is a core principle of universal credit.

I take this opportunity to update noble Lords on where we are with universal credit. Universal credit is now in almost 100 jobcentres. Some 55,000 people have claimed and almost 27,000 people—including couples and families—currently benefit from the much enhanced support that it provides. For example, we are seeing that universal credit claimants spend twice as long looking for work than claimants on current benefits. Two-thirds of claimants surveyed believe that universal credit provides better financial incentives to work and earn. Early evidence shows that universal credit claimants are taking up more work when compared to those people on jobseeker’s allowance.

Universal credit is working for not just claimants but for employers, too. It removes the inflexibilities that exist in current systems and means that employers will now have access to a more engaged and flexible workforce—people willing to take up more hours as they are available without the fear of having to stop and restart their benefit claims. This is excellent progress and from next month we will roll out universal credit nationally. By the spring, universal credit will be in one in three of the country’s jobcentres.

A key question we are now looking to address is how we will support working claimants who are on universal credit and in some of the lowest-income households, typically earning less than £12,000 a year. Our aim is clear: we want to help encourage, influence and support low-paid claimants who can earn more to progress in work and increase their pay. The potential benefits of this support are significant and wide-ranging. There will be more people working and earning more, and living more independently of benefits. We will strengthen our ability to tackle and reduce poverty. Employers will benefit, too. They will have a more engaged and motivated workforce and will benefit from the rewards that that will bring. To realise these benefits, it is crucial that we put in place the right help and support. It is a key reform, a unique challenge and it is transformational.

I want to be open about the challenge that we face. It is no easy task. This is the first time any nation has attempted to support working claimants in such a large-scale way to increase their earnings. Because we are one of the first nations to try to do this, there is very limited evidence on what works. For this reason, we must run trials to learn what is effective. We must do things differently if we are to succeed. The approaches of the past—static trialling of rigid, fixed approaches—will simply not work here. We therefore must look to do things differently. Our approach to trials needs to be more flexible. We need the ability to tweak and change things as we learn about what works and what does not. This is about trialling to refine and perfect our approach. Having broadly defined trialling regulations, as we are discussing today, with clearly defined parameters and safeguards will allow this tailoring and tweaking. On the other hand, a traditional approach of defining every element of a trial would have left us locked into one approach, even if it proved to be ineffective. To test changes and variations, we would then have to stop and come back to Parliament to secure brand new powers to test something slightly different.

15:30

The approach we are looking to take is endorsed by some of the world leaders in trial design and theories. Jim Manzi, a predominant expert in trial principles, is clear that many trials fail because we cannot accurately predict how people will respond. He recommends that, in order to understand what works, you must be able to be responsive in your approach so that trials can be flexed and adapted to learning. There is clearly a strong case to have the flexibility that we are seeking with the powers today.

I now turn to transparency. I am fully committed to being transparent about what we plan to test. I have given a clear commitment to share with the Social Security Advisory Committee details of any future trials under this regulation. We are also committed to publishing regular updates on universal credit, including details of our future plans, such as our publication in October 2014, Universal Credit at Work. We will also publish formal evaluations of these large-scale trials to ensure that our findings are available publicly. Noble Lords have my commitment on this.

I should like to spend a few moments outlining what we will do first with the proposed powers. From April 2015, we plan to launch the first large-scale trial in universal credit. This first trial aims to set the baseline for effective interventions of a core in-work service. In doing so, it will explore the impacts of providing tailored support based on the individual’s circumstances, setting and embedding clear expectations for our claimants, and reinforcing the consequences of non-compliance so that claimants fully understand the implications of their actions.

This first trial will be delivered by Jobcentre Plus and will focus clearly on providing tailored, personalised support to low-earning claimants. These conversations will be led by our work coaches. They will be responsible for setting the relevant and appropriate goals and building the right aspirations. They will help the individual to consider what they could do to increase their earnings and they will also define what activities they should undertake.

Some of the activities that we will set will be mandatory, particularly where they offer a claimant a strong opportunity to increase their salaries. This is to encourage claimants to engage with the support on offer. We will also be testing the impact of the regularity of very challenging conversations with claimants on the progress they are making, comparing fortnightly discussions and conversations every few months. This overall approach will be tested against much lighter support that consists of two telephone calls with a work coach. This is our control for the trial, against which we will measure whether intensive treatment delivers better results.

We aim to trial this first approach with more than 15,000 low-earning in-work universal credit claimants across the country, subject to us seeing positive early results. Testing on this scale is necessary for us to gather robust statistical evidence to demonstrate whether our interventions are effective at helping people to progress in work. Importantly, the larger numbers give us more granularity in the data, helping us to understand not only whether something like this works but how it works and for whom.

It is also important to trial across a different range of geographical areas, hence the requirement to be able to test in many different locations. Local labour markets vary immensely from area to area, so restricting trials to just one or two areas would give us a less clear indication of whether something would work well across the country. The first trial will be run as a randomised controlled trial, perhaps one of the most effective ways to test new approaches. It is certainly endorsed as the gold standard approach by many external experts.

It is important that we do not lose sight of why we are doing these trials. It is to learn about the best ways to support and drive greater independence from benefits by getting individuals to earn and work more.

Given the challenge that we face and the clear need to test a range of measures, we are seeking regulations that enable us to test this and optimise the approach over time. The regulations are broadly worded but they do not provide unlimited powers. They set out clearly defined areas and parameters for us to test in, and provide a number of protections and safeguards to ensure we only require more from those who can do more.

I recognise that this is a marked departure from the more static DWP trialling approaches of the past. However, we believe that this more dynamic approach provides the best opportunity to build the evidence we need while retaining the right balance in safeguards and flexibilities. I commend the regulations to the Committee.

[Lord Farmer (Con)]

My Lords, rolling out universal credit and optimising such a colossal and innovative system without an iterative process of trial and error should be inconceivable. I am grateful for the opportunity to discuss these regulations because I see them as a sign of a fresh wind blowing through large-scale publicly funded social policy projects, which is an unapologetically experimental approach, as the Minister said, in the most robust sense of the word.

I also understand a randomised control trial methodology is to be implemented, as the Minister said, and it is the gold standard when it comes to experimental design. I am not a social scientist: I am a businessman and conscious that writers such as Jim Manzi, as has been mentioned, have been taking my world by storm by insisting that leaders there can and should use what he refers to as RCT experiments to test decisions in a controlled, low-risk environment before committing their firms and shareholders to large-scale and expensive changes.

We owe it to the people who are the subjects of similarly large-scale social programmes and the taxpayers who fund them to test what we think will work best and learn from that process whether they are in fact being aided effectively and cost-effectively. Both are important.

The Washington State Institute of Public Policy has led the world by raising the bar for policy development in this regard. All sorts of approaches might make a little difference but let us sink our resource into the ones that will help people make the most progress. Honing the many facets of the most effective approach requires the iterative and flexible piloting legislated for in Section 41 of the Welfare Reform Act on which these regulations are based.

As one who is used to having a free hand when it comes to undertaking the necessary fact-finding and research prior to investing my own and my clients’ money, I want to emphasise how innovative and important this flexibility is. As we have heard, static trials have been the standard fare of DWP research contracts but the Minister has already made clear how innovative the proposed assistance is. We have to roll out in-work support that ultimately could help hundreds of thousands to escape a low-income existence while, at the same time, testing and adjusting the assumptions different forms of support are resting on for a wide range of diverse people.

Moreover, it is my understanding that the DWP expects about 1 million universal credit claimants to fall within the “working but could do more” category. If the department wants to help such an enormous and diverse cohort effectively, it seems entirely appropriate that a flexible research model is adopted.

However, I have some questions. First, what does the 1 million figure represent as a percentage of all universal credit claimants and what benefits in terms of cost savings might there be to the country if people can be consistently helped to overcome barriers to raise their wages? In other words, what is the great prize that these trials can place within our reach?

Secondly, I am pleased to learn from the September 2014 minutes of the Social Security Advisory Committee that detailed guidance will be given to work coaches on the pilot, so that anyone randomly chosen to take part in this test-and-learn approach who is deliberately working fewer than full-time hours in order to get a business off the ground will not be forced to take part. A research agenda must not become the tail that wags the dog. Forcing someone to accept help to build up their hours when they are already taking steps to improve their circumstances and possibly even to employ others would be a perverse use of public time and money. It would also undermine the purpose of the trial.

Obviously, there need to be two-way safeguards. Selected claimants may be particularly concerned about complying with all the requirements placed on them under universal credit, not least to avoid sanctions, as they may be in a financially precarious position. They may not realise that there are exempted categories in the guidance. Will the Minister give an assurance that all people who are chosen for trials will be made fully aware of the characteristics, including permanent disability, that mean that their involvement is not mandatory? Given the lack of public and media awareness of exemption for many disabled people from the withdrawal of the spare-room subsidy through the use of discretionary housing payments, I suggest that all effort is made to make this clear from the outset, to avoid much worry and the proliferation of misinformation.

Thirdly, although my head believes that flexibility is indispensable, in my heart I worry a little about the power over claimants’ lives that these regulations are giving to researchers. The Minister mentioned tailoring and tweaking. The 21st report from the Secondary Legislation Scrutiny Committee referred to the very broad nature of the powers permitted by this instrument and raised similar concerns to mine over the transparency of research design and process. Will the Minister say how we will know when researchers have made modifications to these? As the Secondary Legislation Scrutiny Committee also asked, what controls will exist on the extent of these trials?

Finally, my wholehearted support is behind this Government’s ambition to help a million universal credit claimants to increase their earnings, but is the money to embark on this vast exercise in the departmental business plan for universal credit?

[Lord German (LD)]

My Lords, I start by thanking the Minister for giving us an update on where we are with universal credit—27,000 people and 100 jobcentres. I wonder whether I can tempt him to tell us where we might be by the end of April, for example, with the number of people who are receiving universal credit and the number of jobcentres that are supplying it. It is important to note what progress we are seeing.

In-work progression, which is the target that this pilot and these regulations are trying to attach themselves to, is one of the challenges of the next five years. I believe that we will find that this area requires a great deal of attention. It is an issue that relates to a drop in unemployment, so we have to make sure that those who are in employment are given the best possible hand-up and help. I could not help having a wry smile when my noble friend referred to the way in which DWP does this sort of trialling, saying that it was unique and distinctive. I congratulate him on that because we need to find out how universal credit has been doing. As you find out, you adjust, you change and you move on, rather than having a simple blanket approach, which is a recipe for difficulties in the future.

However, there are issues, and I welcome the comments of the noble Lord, Lord Farmer. I particularly welcome what he said about the wind of change. I wonder whether this is a sign of Harold Macmillan coming back to see us again and a revitalised way of looking at social policy. I raise that as an interesting point.

15:43

In the challenge of finding a way of developing and helping in-work progression, given the flexibility that has been given by these regulations, there are issues which need to be pinned down. As far as I can judge—my noble friend will tell me whether this is right—paragraph 7.1.2 of the Explanatory Memorandum sets out the four areas or themes which will underpin these pilot studies. Is that a suitable balance between sticks and carrots? The detail we are given is quite limited on the support we can offer, the role of employers, the impact of conditionality and using financial levers. In any striving to help people to progress and to develop their income, it is important that there is a range of levers, some of which are going to be sticks and some of which will be carrots. Will my noble friend indicate whether in his view that balance is adequately described?

It is true, as my noble friend said, that there is very limited evidence on what works to help people get improvement in their earnings. Starting early with this challenge as universal credit rolls out is an important way of helping those who are trying to strive and find their way out of in-work poverty.

My question is about who will be selected in the random sampling. Perhaps I have not got this right—my noble friend will correct me—but I understand, for example, that a single claimant who is not responsible for a child or qualifying young person would have to be earning less than £111 a week to receive universal credit, without any housing element. That is the kind of level at which we are trying to assist people so that their earnings rise beyond the figure where they no longer qualify for universal credit. These figures are found in Annexe 1 of the impact assessment on universal credit produced by the Department for Work and Pensions. It has also been uprated. However, I do not know whether it is completely uprated in terms of the current position in relation to universal credit work allowances.

My second point has been alluded to by the noble Lord, Lord Farmer, and is about what sort of people might be included or excluded. Will people with disabilities be included or excluded? One of the challenges this country faces is ensuring that people who have the ability to work but who have disabilities are able to find and get work. It would be useful to know how that category will be determined and whether there will be other exclusions from the random sampling.

Finally, I have a statistical question. I may have heard my noble friend incorrectly, but I thought he said that there could be up to 15,000 people involved in this piloting, testing and trialling work. At the moment there are 27,000 people on universal credit. A pilot of 15,000 out of 27,000 seems an extensive test. It would be more than half the people on universal credit, which is why I return to my first remark, which encouraged my noble friend to tell us where we might be on numbers on universal credit by the end of March.

[Baroness Sherlock (Lab)]

My Lords, in thanking the Minister for that explanation, I am expressing more than just the usual courtesy. As has been alluded to, the Secondary Legislation Scrutiny Committee commented on the very wide nature of the powers that the Government are seeking through these regulations and the remarkable paucity of information in any of the material available to us about the way in which they intend to use them. Therefore, although I am very grateful, and without sounding too churlish, I would rather have had some of that information so that I could have considered it more carefully before getting to the stage where we are asked to consider the regulations. I will do my best, but I may end up intervening in the Minister’s reply. I hope that he will bear with me if I have misunderstood some of the information that he gave us today. However, I thank him for it.

The Minister mentioned that these powers are very wide, and that is certainly true. This is quite an interesting point for us to be at. We discussed the question of in-work conditionality extensively when the Bill was going through this place, particularly in Committee. One reason that it is so worthy of attention is that it is very new. The Minister mentioned that it is new internationally, but certainly people currently in work are going to get a bit of a shock. At the moment, if you have been on benefits and you get a job, you do not expect the department to ring you up at work saying, “Come and talk to me because you’re not working enough”. I think that people who feel that they have escaped the tender ministrations of the jobcentre are going to be a little taken aback when they find that it starts following them to work.

I wonder what thought the Government have given to this cultural shift and how they are going to engage with people who, when they think they have done the brilliant thing of getting a job, will find that it might be a job but it is not good enough, not big enough or not well paid enough. Under the current system, if someone is working at least 16 hours a week, they can claim tax credits. However, under universal credit there will be no minimum hours requirement, which is the Government’s reason for introducing conditionality for people in work.

I should like some clarification on how this is going to work. Some points have been touched on by the noble Lords, Lord German and Lord Farmer; others have not. First, in the various pilots, will there be the same level of income which triggers entry to or exit from the scheme? I am also interested in hearing the answer to the question from the noble Lord, Lord German, on what that level of income is. Will the income threshold be the same for a household or a benefit unit—the rather ugly phrase favoured by the DWP? In other words, is it a threshold for each individual in a household of, say, two or more adults, or is it for the whole household? For example, if one person in a couple were earning more than the threshold for two individuals, would the second person then not be under any pressure to increase their hours, change their working pattern or increase their income?

Next, the Explanatory Memorandum states that the DWP will impose,

“different sets of requirements on different groups of claimants selected for the pilot”.

The Minister began to outline how that might happen, but the committee’s report flagged up the ethics of an approach which deliberately seeks to test different approaches to claimants simply to work out the behavioural impacts. The noble Lord, Lord Farmer, commended the benefits of randomised control trials to test the evidence if done in a low-risk, controlled environment. However, the problem here is that the risks are not merely to the resources invested by the state but the impact on the individuals. Can the Minister tell us what discussions the department had about the ethics of that? I will come on to the question of sanctions in a moment. In a randomised control trial of, say, pharmaceutical drugs, there can come a point where a trial is stopped because it becomes clear that the evidence is very strong one way or the other and, as the drug is so effective or so ineffective, allowing a control group to carry on without it or continuing to give it to the group being tested would simply be unethical. Has any consideration been given to how the ethics would be weighted as the requirements are imposed and the evidence starts to come in?

Next, I turn to the numbers, which the noble Lord, Lord German, began to prod. I am very interested in them. I think that we all want to know what the denominator is. Are the numbers going to change? If we start off with, say, 15,000 out of 55,000, is that going to change proportionately? Will we see a different proportion of the universal credit claimant base involved all the way through? What proportion of that 55,000 will be eligible for the scheme? It presumably includes some people who would not, for a variety of reasons, be eligible, so that is not necessarily the denominator. What is the denominator? This was something that the Secondary Legislation Scrutiny Committee specifically asked the Minister to tell us, and I shall be very interested to hear what he can tell us about this.

I am also interested in having more information about the control groups. The Minister mentioned one control group, which I think he said would get just the occasional phone call. How big will that control group be, and can he tell us more about it? Will it be spread right across the country? Will it cover the full range of categories of claimants who will be covered by the other pilots? Will that change as different categories of claimant come on-stream with universal credit? That question applies also to the pilots. Will the pilots cover all the different categories of claimant as different kinds of people are brought on?

Secondly, on the flexibility of trends, I understand why the Government want a flexible power to tweak things as they go. However, coming back to the points made by the noble Lord, Lord Farmer, I want to understand how that impacts on the Government’s ability properly to evaluate the evidence. If you try to compare the effectiveness of a strategy with the control group but you are constantly tweaking things, how good will the data gathering be? How well will the department be able to understand the causality to enable it properly to understand what happens? The state generally does not always have a great track record on this. If we are to spend all this time and money on a trial, as well as put people through it, we want to be really sure that the findings are robust. I am very glad that the Minister committed to publishing the findings, but we want to have confidence and know the study is replicable. If it is tweaked too often or becomes too different, it will be quite hard to evaluate that. Could the Minister explain that?

Next, could the Minister say a little more about what kind of support will be offered to people in work? He indicated what kind of pressure or interventions there are in terms of encouraging them to come in, but what help will they then be given? I seem to recall that this was advocated at one point by saying, “People get lots of help to develop their careers if they are high-flying executives, but get nothing if they are lower than that”. What actual help will be offered to them? Will it be mentoring or work coaching?

Then there is the voluntary or otherwise nature of this, which was flagged up before. Again, will any of the pilots make this a voluntary option or will it always be compulsory? This point was raised in the other place by the Conservative MP Nigel Mills, who in fact suggested that the Government trial both. He also asked how soon after taking a job in-work conditionality would kick in. For example, if I got myself a job for 16 hours a week, it goes really well and I have been out of work for a long time, presumably the department would not ring me up on week two and say, “No, tough: you now need a better job on 30 hours a week or one that is better paid”. How long will a claimant get in a job before in-work conditionality kicks in?

Next, and this is a really important point, can the Minister tell us more about how caring responsibilities will be taken into account? This is something that exercised the Grand Committee considerably when the Bill went through the House. I have met many people in this circumstance. The noble Lord is aware that in the past I ran a charity that worked with single parents. We ran programmes helping people into work. We often found that lone parents took a job, say on 16 hours a week. One of the reasons employers liked these people was that they stayed in the job a long time so the employers had much lower turnover than with some other employees. One of the reasons that the lone parents stayed a long time was that they had found an employer who enabled them to combine their job with their families. For example, the employer would be flexible if occasionally a child was sick or if the employee had to leave early because a problem arose at school. The employee would be very loyal to that employer and stay for a long time because it worked for both of them. However, it meant that they might work fewer hours than they were capable of. I am just concerned—and raised this in Grand Committee at the time—about what happens to those people and what pressure they will be put under. Presumably, we would not want to see a lone parent who had been in a very successful job for maybe 10 years but at 16 hours a week being pushed into giving it up to take a better paid but less flexible job that she might have to give up anyway or that could be less secure. How will the Government deal with something like that?

Also, how will the Government consider the impact on childcare? I raised the issue in Grand Committee of a lone parent of a 13 year-old who began to have problems at school. That parent had taken a job of 25 hours a week because that enabled her to get home in time to make sure that the teenager came home from school and was not out on the streets having “difficulties”. If she were required—the implication is that she now would be—she would have to take a job of, say, 35 hours a week at minimum wage. She could also be forced to do 90 minutes’ travel either way because that is what the guidance says. Those are then very significant hours, and getting childcare for a 13 year-old is not easy. It is not often available, and it is very hard to get them to accept a child like that. So how much flexibility will be there?

I do not apologise for the large number of questions as these are very significant matters. Next is the issue of sanctions. Is it intended to use the full range of sanctions available? In other words, could somebody lose all their universal credit for three years for failing to take action that they were advised was necessary to increase their hours or earnings, such as, that lone parent? What if someone is concerned about jeopardising their existing job for other reasons? It has been confirmed that universal credit claimants will have to take a zero-hours contract, although not an exclusive one. If they were, for example, required to take additional hours at short notice but were also expected to take a job interview elsewhere or meet their adviser to think about getting a different job, they could be at risk of jeopardising things.

15:59

We have had problems in the past where a Work Programme adviser, for example, asked someone to come to an interview, and they were not able to do so for a very good reason—they might have had a job interview or they might have been asked to work extra hours—but they were still sanctioned and had to appeal. They would be successful, but the Work Programme adviser had to say, “Even though you had a perfectly sensible reason—you had a job interview or you were in hospital—I still have to sanction you. You go through an appeal and I am sure that when you get to it, the DWP people will make it okay”. That is hugely stressful and, frankly, a waste of everybody’s time and money. Could the Minister tell us how that will work?

I have some other questions about the scheme. What will be the success measures of the pilots? Is the aim to see people earning more, working more or just stop getting universal credit? Will the DWP be tracking all of those things? For that to work, it would have to track people on what happened to their earnings and working hours, even if they left universal credit altogether. Can the Minister confirm that it will be doing that?

Who will deliver the support? Will it be the jobcentre staff or will it be outside contractors? Can the Minister confirm, for the record, what the resource implications will be? The Explanatory Memorandum states that there is no impact on the public sector. That seems improbable, at least I hope it is improbable. The Secondary Legislation Scrutiny Committee said:

“It is, in our view, misleading to say there is no impact on the public sector: provision may already have already been set aside for piloting and no additional costs are envisaged, but the testing will cost up to £15 million”.

Could the Minister confirm that?

There have been some issues about the effectiveness and value for money of the various previous labour market trials, and I will not dwell on the private misery pointed out by the National Audit Office, which reckoned that only two of the 14 trials had been seen to be effective. When these regulations were considered in another place, my old friend Stephen Timms asked whether in-work conditionality and the work around it had been included in the strategic business case signed off by the Treasury last autumn or would be included in the outline business case, which we believe is going to be coming in the summer this year. The Minister was unable to answer then, but said that she would look into it. Since there has been a reasonable gap between that committee and this, is the Minister now in a position to provide that information?

There are a large number of questions, and it is quite possible that more might emerge from the Minister’s answers. I will be very grateful if the Minister will do his best to share the answers with the Committee.

[Lord Freud]

I thank noble Lords for what has been a series of good contributions to this debate. These regulations are driving at a very simple question: how best can we support lower-earning, universal credit claimants to progress in work and increase their earnings? Let me try to deal with all the questions.

My noble friend Lord Farmer asked how many people would be affected in relative terms. As he said, there are about 1 million universal credit claimants in low-paid work and that is as a proportion of a total of 7.7 million people. We cannot at this stage quantify the monetary benefits of that in-work support. One of the reasons for these trials is to find out whether it is cost effective to provide support above the bare minimum and whether we get a return. However, universal credit has, bluntly, astonishing returns on its investment, saving the Government and the taxpayer £38 billion from now until 2022-23. When it is fully in, it will have an economic benefit of £7 billion a year.

I was urged by my noble friend Lord German and the noble Baroness, Lady Sherlock, to give extraordinarily precise figures on this. We are ramping up very rapidly now, and by spring, as we said, we will be in one in three jobcentres; we are currently in about one in eight. Clearly that implies that the 15,000 people will be a much smaller proportion of the current 27,000 that we see. However, I am not in a position to give more numbers.

As to the balance between sticks and carrots, an issue raised by my noble friend, most of the areas we are looking at will focus on how we support and help people. We need to learn how to do that. At the same time, we are working closely with employers. We have implemented a couple of programmes to find out what kind of support and incentives work. There is a great deal of emphasis on the support element. Basically, the intensive work coach discussions are a kind of mentoring process in which one goes through the options.

All noble Lords who have contributed are interested in the safeguards that we have in place. There are a number of regulatory safeguards to ensure that conditionality is applied to claimants only when it would be appropriate. The trials are limited to those in the all-work requirement conditionality group. In other words, they explicitly exclude those who are disabled, an issue which was of some concern. Claimants in the other conditionality groups will not be part of these trials and those in specific circumstances, such as recent victims of domestic violence, will be excluded from the outset.

Beyond that, as a more formal protection, we realise that claimants will have individual circumstances and it will be for the work coach, after discussions, to work out what the tailoring requirements should be. That will give the work coach the scope to set reasonable, achievable requirements and earnings goals, taking into account the kind of commitments mentioned by the noble Baroness, Lady Sherlock, in regard to caring responsibilities and so on. The result will be a personalised claimant commitment that places reasonable expectations on clients.

My noble friend made a point about transparency to Parliament. Given that we are trying to ensure that we have an accountable and flexible process—that is the delicate balance that we are trying to achieve—for transparency we will share information as we change the trials with the Social Security Advisory Committee. We will do that by letter and I shall ensure that the information is placed in the Library so that Parliament can see what is happening.

In response to a question from my noble friend, we are discussing with SSAC the issue of self-employed people trying to start businesses. We will take account of that circumstance, among others, and people building businesses will be able to do so and guidance will be provided.

In response to the noble Baroness, Lady Sherlock, the regulations expire after three years of being in force. Where we need to gather more evidence, we can extend these regulations by a further period of up to 12 months without returning to Parliament. Such an extension does not expand the powers within the regulations, which strictly define limits to testing work-related requirements and will have been subject to full scrutiny. All it does is extend the period.

My noble friend and the noble Baroness, Lady Sherlock, asked about the business case, the question asked by Steve Timms. A letter has been sent to Steve Timms, which I can give chapter and verse on. The strategic outline business case approved contained a light-touch regime and £15,000. The objective of that £15,000 was to find out, against the control of that light touch, whether we can do better.

The core of the question asked by the noble Baroness, Lady Sherlock, was about how we treat people. The real protection, which is not explicit in the regulations but is nevertheless there, is that under these regulations our expectations of in-work claimants cannot exceed what we expect from out-of-work claimants. The level and extent of sanctions will therefore be within those existing constraints. That is the constraint we have for this trial.

Getting into some of the detail of the trial, the reason there is a figure of 15,000 is that 5,000 are the control. We are looking at two main types, which I described in my opening remarks. Then we will segment that 5,000, looking at four or five different categories and geographically. That is how the numbers add up as we run this trial to 2016.

As we see people, we will start supportive conversations with them almost immediately. We will start to have tougher conversations after a person has been in work for two months. That is the initial testing. I think I have dealt with carers.

Ethics are a very interesting issue as we move into other, more elaborating trialling. This first trial is rather straightforward and is within the context of the kind of conditionality we do anyway, and we have a requirement to be reasonable to the individual with the safeguards I have described. However, I appreciate the point the noble Baroness made that for future trials and as the system develops we may have to think about ethical controls more on a medical model. For this trial, we have SSAC overseeing it, which means there is a group of experts having a look as we run along.

The noble Baroness asked about couples versus individuals. Members of a couple are treated as joint claimants so their earning threshold is set on a joint basis and conditionality is imposed on the basis of their combined income. If that exceeds the household threshold, neither partner will be part of the trial. That reflects the underlying philosophy of universal credit.

16:15

I was asked what kind of help was on offer. I will quickly run through some of the elements that we are expecting to test. There will be an underlying expectation that claimants will take all reasonable steps to increase their earnings in return for the support that we provide, which includes a clear understanding of what is specifically required; a motivation process, to encourage them to progress in work and take action, which could be around skills acquisition; help to identify what is realistic; giving responsibility to the claimant to identify opportunities—that is the new philosophy, whereby we are coaching and not telling people; help in having the right conversations with their current employer about what the opportunities are; looking at what the barriers to progression might be—in confidence or motivation, or in skills or childcare; looking to what support is available to address those barriers; and providing supportive and challenging conversations on action and progress.

Clearly, sanctions are there to deter non-compliance. We are testing what a mandatory system would be; there would be no point in having a voluntary system in the testing when you are trying to test for a national system. All that builds very much on what we have learnt and—again, through our test and learn approach—developed about the role of the work coach to give responsibility for individuals. We are moving that approach, which has been very successful, into this new sphere.

We will tweak trials once we have learning and evaluation to show whether it is the right thing to do. Sometimes one can learn pretty fast, but sometimes it takes a bit of time. The noble Baroness will be delighted about how we are going to track information. We now have an astonishingly valuable tool of real-time information; we know what people are earning, so we can now measure the effectiveness of trials. We can start to do a lot of trials, because we can relatively cheaply see what is happening by earnings.

I must pick up the noble Baroness’s throwaway line about the value for money of previous trials, about how only two of 14 were effective. The expert on this, Jim Manzi, to whom I have the privilege of talking on a couple of occasions on other issues, said that one in 10 trials finds you something. That is the whole reason why we need to do so many, because the fall-down rate is high, and that takes us back to why we need the flexibility and dynamic approach, which is something that Governments have not done because of the restrictions.

The noble Baroness asked about pressure and when we would talk to someone about looking for a new job. We will have to take individual circumstances into account. Sometimes, it may be reasonable to expect people to take up new employment, but we will never impose a sanction if claimants have a good reason not to do so. I think that the noble Baroness picked up on some of the reasons that would be accepted.

Not only does the system have to work but it has to be cost effective. The cost of making these interventions could be very substantial if they were intensive. We need to know that they are value for money, and that is one of the key tests when we establish what a national system will look like. Then there is the question of how the controls look. We will keep that control group of 5,000 constant. The control element is that light-tough regime, which is already in the universal credit business case.

What are we looking for? We are looking to help people to earn more, which is not just about looking for more hours; it could involve more skills. We will find that out. That is a good outcome. I think that I have dealt with all the issues.

[Baroness Sherlock]

The Minister has done very well. I do not like all the answers, but he has done very well at trying to address many of the points. I will just pick up a couple of them.

First, can he tell us who will deliver the support? Will it be Jobcentre Plus staff or others, and what are the resource implications for the public sector? On the business case, if the £15 million and the light-touch control group are in the original business case, what about the rest of it? I may have misunderstood his comments on that, but where is that to be found?

As for tracking outcomes, obviously RTI works for those who are paying tax and national insurance, but for this to work properly the Government would also need to track people who were not to be found on the system and to find out why not. I am sure the Minister would rebut this, but there is a growing concern—he will have seen both recent media reports and the work of the Work and Pensions Committee—that the ways in which sanctions are being imposed at the moment are completely arbitrary. The only success measure for Jobcentre Plus staff is how many people are driven off the benefit rolls rather than into work. No one bothers to find out the numbers, but the suggestion is that only about one-fifth of people leaving benefits go into work—nobody knows what happens to the rest.

This was a real issue, as I am sure the Minister is aware, in one well known phase of welfare reform in the United States. Researchers tracked people longitudinally and found that a lot of them had simply ended up dropping out of the system completely. At this stage I am not making a value judgment about that, but for this to be properly effective the Government would need to follow those people through and find out what had happened to them to understand what the consequences of that were.

The Minister mentioned skills and the kind of support that is available. If one of the barriers to someone’s progression that is identified is a lack of skills, will the pilots be able to provide skills, or resources to enable people to get skills, which might enable them to earn more and break free of the threshold that would be constrained by this? I also asked whether the same income threshold would be applied for entry to or exit from all the pilots. Is that one of the things that is going to be flexed in any way? Is it the same for all of them?

On the question of ethics, the Minister said at the start that these regulations comprise strictly defined limits. In a manner of speaking they do, but only in the sense that I am strictly defined by the law of gravity, which still gives me quite a lot of latitude in how I go about behaving. The Minister also said that he will give us no information on numbers. Presumably, that could theoretically mean that the entire universal credit population could be put into this without any need for further recourse to Parliament. Is that right? In other words, when does this stop being a pilot? I am trying to establish whether the regulations were really designed to be able to pilot something. The scale of this is such that I am beginning to wonder whether Parliament would really see this as being a pilot. Although I am very glad that the Minister is going back to the SSAC, there is no obvious way to scrutinise this here. Will he give some more thought to that?

Finally, I want to clarify something relating to the sanctions. If the Minister is saying that the requirements will be no worse for people in work than for those out of work, my response would be that I would hope not, otherwise the incentive for getting a job would seem to be rather small. However, that presumably means that somebody could lose all their universal credit for three years for a failure to comply with a brand new requirement exercised by his staff—something that has never been done before. Is the Minister confident about that? I realise he has said that nobody will be sanctioned without good cause, but we both know that there are plenty of examples of people who have been simply because there is a significant amount of error in the way that the guidance has been applied. Cases are constantly being brought forward, and he will be aware of that. How will he check up on that? How will he quality-test the nature of that?

I am aware that I have asked a lot of quite specific questions. I would be grateful if the Minister, with his normal customary kindness, would allow his officials to go through the record and write to me on anything that has not been picked up.

[Lord Freud]

I will certainly go through the record but I am doing my best to answer everything. There is a technical question about income in and out. At the top end, a single person stops being in this trial when he or she hits 35 times the minimum wage—I think, from memory, that it is £116-something. I may be corrected, but that is the top end. The bottom end for a single person is, effectively, £76, and for a couple it is £116, we think.

Essentially, we are trialling this group because people would have come off the out-of-work benefits system at 16 hours times the minimum wage up to where they would get out of conditionality entirely because they would have satisfied 35 hours times the minimum wage. We do that for singles and couples. My figures are being hastily checked but that is the principle behind the answer.

[Baroness Sherlock]

Is that for all pilots? It is not a variable?

[Lord Freud]

Yes. Let me make absolutely sure that I have got the figures right. It is £76 for the individual. However, it is not £116 but £126 for the couple. The figure for an individual at the top end which gets you out of conditionality is £230. So it is within that range of earnings. Clearly quite a lot of people may be doing fewer hours if they are earning rather more.

[Baroness Sherlock]

I am grateful to the Minister and I thank him for establishing those ranges. However, what I am trying to get at is whether exactly the same ranges will be applied in all the different pilots, or are the Government testing whether the ceilings should be set at different levels?

[Lord Freud]

We are going to stay in that range because that is the group for which in-work conditionality would apply. There is no point in testing other ranges. However, we will have information, which I think is the underlying point of the noble Baroness’s question, on how different segments of earnings within that range respond to the different types of regime.

[Baroness Sherlock]

The Minister is being incredibly helpful. I apologise for my having to work this out on the hoof, but I think the Minister is saying that only people whose earnings are within that range will be subject to a pilot. I am trying to establish whether people who are at different points in that range may be subject to different trials. I will say that again. Will people on the same income within that range be subject to different pressures or levels of support requirements?

[Lord Freud]

The answer to that is no. We will put people in within that range. We will then have a process of personalising and tailoring the claimant commitment, which may contain an element of what their earnings are or could be. So I can answer no and yes. It will not be done at a mechanical level but may be done at an individual level.

16:30

[Baroness Sherlock]

I am very grateful to the Minister—I had not understood that at all. In that case, we are saying that each of these 15,000 people might have a different target of earnings that would allow them to exit from the conditionality and the programme. That raises some very significant ethical questions and I would strongly ask the Minister to consider giving more thought to this. I am very slowly doing a PhD. Before I am allowed to do anything involving other people—human subjects—I have to go to an ethics committee which puts me through my paces quite carefully. The consequences here are not just differential levels of support but that, potentially, two people in almost identical circumstances might do the same things, but one would lose three years’ worth of universal credit while the other loses nothing. That is a radical step for the Government to take. Has the Minister really thought through the ethics of that?

[Lord Freud]

This is how one delivers personalised support. The claimant commitment is in the system. Elements of the claimant commitment have a mandatory aspect but with others it is just an agreement. In reality, in the trials we will set the claimant commitment rather carefully. It is an agreed document between the work coach and claimant. Elements of that claimant commitment may be mandatory but quite a lot of it will not be. The likelihood is that as we run the trials we will look extraordinarily closely at making sure that we do not have any unsatisfactory sanctioning behaviour. We will test for that. This is a trial.

Although 15,000 people sounds a lot, when universal credit is fully rolled out, we will be dealing with 20 million people—8 million-odd households, comprising 12 million-odd adults and then a number of children. We are talking about a very small number so that we can micromanage it in terms of that kind of concern. The noble Baroness, rightly, is focused on us getting that right, and we are utterly conscious of that particular issue. The numbers will allow us to make sure that there are not those kind of arbitrary differences, as she described them, particularly when the sanctioning regime can move quite rapidly.

Skills is clearly one area where we could do a lot more development as we find the programme beginning to work. In this first trial, we plan to signpost the National Careers Service and colleges. There will be money available to support that through the adviser discretionary fund.

On RTI, the figures are that around 94% of people in formal employment are captured in the PAYE process. Some self-reporting may be required but we will get the bulk of them. Clearly, we will look at other things than just the RTI, but the RTI should give us a good feel for this. We will look at whether there are some anomalies going on where people fall off the system. That is one of the most important things that we will find out from the trial.

The light-touch regime in the business case is funded. Clearly, we will only introduce a less light-touch regime if it offers value for money. That will be part of a negotiation, if we discover it is worth doing. We will not spend hundreds of millions of pounds on a regime that somebody made up in a darkened room when it has no effect. That is why we are doing these trials. Who will deliver these trials? To start with, it will be Jobcentre Plus, as I have described. That is the first iteration; we could go on to other iterations. I described, I hope, the light-touch regime, which involves two work coach conversations. One happens when someone enters work and the other occurs eight weeks later. That is what the control is based on.

I think that I have dealt with the question of sanctions. The noble Baroness will be quick to correct me if I am wrong, but I think that I have covered everything. However, on her point about the numbers, by March, we will have moved to one in three jobcentres. I am sure that she will be the first to acknowledge that, and she will have seen the escalation: 54,000 have already applied for universal credit and the figure is moving up rapidly. That is when we will start pulling out the people on universal credit who are in work to test them.

This is about the commitment by this Government to deliver a universal credit that genuinely supports working-age people when they are out of work and then in work. It gets rid of the distinction which, in my view, has been invidious in our support system. If we are going to do that, we have to understand how best we can support the in-work claimants and get them to get their earnings up. The regulations before us today combine oversight and flexibility in the optimum way.

During the passage of the Bill I was very clear that, in driving through this approach, we would do it through a regulatory structure, so that we could have these debates, keep an eye on it and get that balance. It is a very delicate balance but we will build an evidence base on how we can improve people’s careers and improve earnings among the low-earning. If we get this right and learn how to do it properly, this piece of research will be a key element in improving the economic performance and productivity of the country. That and the fact that people’s lives will be better when they earn more are the two fundamental reasons that I commend these regulations to the Committee.

Motion agreed.

Regulatory Reform (Scotland) Act 2014 (Consequential Modifications) Order 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

16:39

Moved by

[Lord Wallace of Tankerness]

That the Grand Committee do consider the Regulatory Reform (Scotland) Act 2014 (Consequential Modifications) Order 2015.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

[The Advocate-General for Scotland (Lord Wallace of Tankerness) (LD)]

My Lords, the main purpose of this order is to provide for two new statutory appeals regimes. The first is in connection with decisions regarding electricity generating stations to be situated in the Scottish offshore region and the second is in connection with Section 36 consent decisions made under the Electricity Act 1989. These new regimes aim to establish a uniform statutory appeal regime to challenge certain marine licensing decisions made by Scottish Ministers across inshore and offshore regions.

The order is made under Section 104 of the Scotland Act 1998, which allows for necessary or expedient legislative changes to be made in consequence of an Act of the Scottish Parliament. This particular order is made in consequence of the Regulatory Reform (Scotland) Act 2014, which I shall refer to as the 2014 Act.

The 2014 Act is primarily intended to improve the way regulation is developed and applied in Scotland. It is the intention of the Scottish Government to strike a balance between the need to licence offshore renewable energy projects and a right to challenge those decisions. Therefore, the 2014 Act aims to amend the procedure for challenging decisions to enable any challenges to proceed quickly to the Inner House of the Court of Session. Currently, applicants for marine licences seeking authority under the Marine (Scotland) Act 2010 to carry out all types of licensable activity in the Scottish inshore region who wish to appeal Scottish Ministers’ decisions may appeal to the sheriff court. Third parties with title and interest may raise judicial review proceedings in the Outer House of the Court of Session.

Section 54 of the 2014 Act amends the Marine (Scotland) Act 2010 to provide for statutory appeals in connection with certain decisions made by Scottish Ministers. Those decisions relate to applications for marine licences in the Scottish inshore region in connection with electricity generating stations as well as to whether to hold a public inquiry in relation to the determination of such applications. The 2014 Act allows such appeals to be made by aggrieved persons to the Inner House of the Court of Session, provided that the court has granted permission for the appeal to proceed. To ensure consistency across inshore and offshore regions, this order amends the Marine and Coastal Access Act 2009 to provide for the same fast-tracked appeal regime in relation to such decisions for electricity generating stations to be situated in the Scottish offshore region.

Similarly, this order amends the Electricity Act 1989 to provide for that same appeal regime in respect of decisions made concerning applications for consent to construct, extend or operate generating stations, which is also referred to as Section 36 consent, as well as decisions on whether to hold a public inquiry in respect of such applications under that Act. This provision is required as there is currently no statutory right of appeal against Section 36 consent decisions.

Although the main purpose of the order is to provide for the two new statutory appeals regimes which I have just outlined, the order also makes minor or consequential changes to give the 2014 Act full effect. These include the following: first, the repeal of Sections 1(1)(d) and 5 of the Health and Safety at Work etc. Act 1974—the 1974 Act, which were repealed previously in England and Wales, but not Scotland, due to a number of extant regulations made in part under Section 1(1)(d) of the 1974 Act, but which now appear to be spent and suitable for repeal. Secondly, they include minor amendments to the Income Tax (Trading and Other Income) Act 2005 and the Corporation Taxes Act 2009 to ensure that the definition of a “waste disposal licence” in those Acts includes an authorisation under the integrated authorisation framework established by Sections 16 to 19 of the 2014 Act.

Finally, they include the extension of Sections 47 and 50 of the Copyright, Designs and Patents Act 1988—the 1988 Act—to Part 3 of the 2014 Act. The sections of the 1988 Act provide, inter alia, that copyright is not breached by copying material that is open to public inspection in pursuance of a statutory requirement, or which is on a statutory register, or by acts done that are specifically authorised by Acts of Parliament. This amendment is necessary as the move from environmental regulation under various UK enactments to the new powers in Part 3 of the 2014 Act has the unintended consequence that the provisions of Sections 47 and 50 of the 1988 Act would no longer apply. The order applies those sections of the 1988 Act to the relevant sections of the 2014 Act to ensure copyright is not breached. Similar provision is also made in respect of the Copyright and Rights in Databases Regulations 1997.

I consider this order to be a sensible use of the powers under the Scotland Act 1998. It again demonstrates that this Government continue in their commitment to working with the Scottish Government to ensure that the devolution settlement works. I commend the order to the Committee. I beg to move.

16:44

[Baroness Smith of Basildon (Lab)]

My Lords, I thank the Minister for his detailed explanation, which I found extremely helpful. I was struggling with the copyright changes and it is helpful to understand why they were brought forward.

I have a few comments and only a couple of questions. My understanding is that the order is purely consequential; there does not appear to be any new policy development coming through. However, what impact will it have, if any, on the development of offshore wind facilities in Scotland? Will it have a substantial impact on it?

In article 4 of the order, subsection (4) of proposed new Section 36D of the Electricity Act 1989 states:

“An application under this section must be made within the period of 6 weeks beginning with the date on which the decision to which the application relates is taken”.

Is six weeks the normal period of time, or was it chosen as the most reasonable period of time to allow for an application made under that section?

Again in article 4 of the order, subsection (2)(b) of proposed new Section 36D states, as one of the conditions that has to be met for a court to grant permission for an application to succeed, the court would have to be satisfied that,

“the application has a real prospect of success”.

That also appears as one of the conditions in proposed new paragraph 5C(2)(b) of Schedule 8 to that Act on page 4. Is it normal legislative language that the court should grant permission only if there is a real prospect of success? I am not sure whether I have seen that language; I have seen “reasonable” but I am not sure that I have seen “real”.

Could the Minister also clarify what the language in proposed new paragraph 5C(2)(a) means. It states that the court must be satisfied that,

“the applicant can demonstrate a sufficient interest in the subject matter of the application” .

I am unclear exactly what that means.

From what I have seen I think we can support the order. However, those points of clarification would be helpful.

[Lord Wallace of Tankerness (LD)]

My Lords, I thank the noble Baroness for her general support of this order. It is consequential, and it is neutral in terms of whether it will give rise to more applications for offshore wind turbines. However, in the regimes that are in currently in place, the Scottish Parliament can competently legislate for the inshore marine area but not the offshore marine area. This order is to ensure that there is consistency between the two regimes. It simplifies matters by giving direct access to the Inner House of the Court of Session—the equivalent to the English Court of Appeal—rather than having to work up through the sheriff court and subsequent appeals, as was the case previously.

The noble Baroness also asked whether the period of six weeks was normal. I rather suspect that it replicates the arrangements already in place. As to having a sufficient interest in the subject matter, it is normal, especially in more recent times, that there should be some interest or title to sue. I have to be careful about the use of that term of art. However, not just anyone can come off the street and raise an issue. There has to be some nexus between the aggrieved person and the proposal under challenge.

[Baroness Smith of Basildon]

I thought my asking a question might allow for further enlightenment when I saw the Minister seeking advice.

If someone does not have sufficient interest, why would they make an application? It seems to be a given. I do not understand why a person would make such an application to the court if they did not have any interest in it.

[Lord Wallace of Tankerness]

They might just have a remote interest and generally be interested. For the sake of argument, let us say that the development was somewhere off the east coast of Scotland and this was a person who was just generally interested in wind farm developments and was living in a stately pile in Argyll. You would not actually say that there was a sufficient interest for them to merit a title to raise an action. I am told that the six weeks replicates what was under the 2014 Act. That is certainly my understanding; if that is not the case, I will certainly write to the noble Baroness.

I will also have to check up—as we are introducing this measure, as it were, at the behest of the Scottish Government—as to whether the term, the “real prospect of success”, is normal. I know that there have been substantial reforms of the Scottish civil jurisdiction in very recent times and much of it is still to be implemented, but I will write to her and confirm whether that is a new term of art or something that goes back into the mists of time. The general point is that we are giving effect to something the Scottish Parliament could not legislate for under the 2014 Act, to ensure that there is consistency between what it can legislate for and what it can not.

Motion agreed.

Microchipping of Dogs (England) Regulations 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

16:51

Moved by

[Lord De Mauley]

That the Grand Committee do consider the Microchipping of Dogs (England) Regulations 2015.

Relevant documents: 17th Report from the Joint Committee on Statutory Instruments, 13th Report from the Secondary Legislation Scrutiny Committee

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, these regulations deliver one of the main measures contained in the package of policies set out in my Written Ministerial Statement of 6 February 2013 to tackle issues relating to dog welfare and irresponsible dog ownership. We have amended the Dangerous Dogs Act 1991 so that its criminal provisions on dangerously out-of-control dogs are extended to private property. We have also increased the penalties available for the worst dog attacks and provided authorities with new preventative powers in the form of community protection notices. In addition, these regulations will make it compulsory for all dogs in England to be microchipped.

Over the past three years, an average of just over 100,000 stray dogs a year were passed to English local authorities and welfare organisations. Of those dogs not able to be reunited with their owners, some 38,000 dogs were re-homed and a further 8,000 were put down. The annual cost incurred by local authorities and welfare organisations in dealing with stray dogs is more than £30 million. That is not to mention the distress caused to dogs and owners.

Since we first announced our intention to introduce this requirement in February 2012, the number of dogs microchipped is estimated to have risen from 58% to 70%; but we consider that we are close to the ceiling of the number of dogs that would be microchipped if we were to maintain the voluntary approach. Microchipping a dog is a welfare measure. Increased traceability allows lost dogs to be reunited with their keepers more quickly and therefore avoids dogs having to spend unnecessary time in kennels with possible resultant welfare problems or the need to be re-homed. I expect compulsory microchipping to have the additional benefits of reducing kennelling costs to local authorities and welfare organisations and allowing abandoned and nuisance dogs to be traced back to their keepers, who may then, if appropriate, be held to account.

The regulations require that, from April 2016—unless a vet has certified that a dog should not be microchipped for reasons of its health—all keepers of dogs in England must have their dogs microchipped. The regulations define “microchipped” as both having a compliant microchip implanted in the dog and, crucially, having the keeper’s up-to-date details on a reunification database. The details of the dog and its breeder, where known, also need to be recorded. This should help to encourage more responsible breeding as breeders will be more traceable.

Only trained people, including vets, veterinary nurses and others who have passed an approved dog microchipping course, will be able to implant microchips. Microchips and database operators must meet certain standards, including the ability to supply information to authorised persons to enable dogs to be reunited with their owners on a 24-hours-a-day, seven-days-a-week basis.

In keeping with the Government’s wish to have light-touch enforcement of the regulations, the microchipping requirement is enforceable primarily by the issue of a notice. Any keeper of a dog found without a microchip can be handed a notice by a local authority authorised person or a police constable requiring them to get their dog microchipped within 21 days. There is then a fine on conviction, currently up to £500, for non-compliance with such a notice. Finally, all dogs must be microchipped before they can be transferred to a new keeper, unless a vet has certified otherwise.

Microchipping is a relatively simple process which a number of animal welfare groups and local authorities have been offering free for many years. Blue Cross and Battersea Dogs & Cats Home offer free microchipping at their respective centres, and the Dogs Trust has offered to meet the cost of microchips and has set aside £6 million to help ensure all unchipped dogs are microchipped ahead of April 2016. Animal welfare groups are already campaigning to raise awareness of this new obligation as well as of the benefits of microchipping. We also plan to undertake significant communications activity ahead of April 2016 to ensure breeders and keepers are aware of this new duty.

These regulations will help tackle the problem of stray dogs and help to reunite keepers with lost pets more quickly. They will also lessen the burden on animal charities and local authorities and protect the welfare of dogs by encouraging responsible ownership. I commend these regulations to the Committee. I beg to move.

[Baroness Miller of Chilthorne Domer (LD)]

My Lords, I congratulate the Government on bringing these regulations forward. The Minister was right when he said that the voluntary scheme is probably reaching its upper limit and that to catch the last pool of dogs that are not chipped, compulsion is needed. At the same time as congratulating the Government, I congratulate the many animal charities he mentioned—Dogs Trust, Battersea Dogs & Cats Home and the Kennel Club—on how proactive they have been in working on this issue. I congratulate Dogs Trust on coming forward with its offer of free chipping because that makes a tremendous difference. The Minister mentioned that the saving to the public purse would be over £30 million every year, which is a significant sum.

I have three questions. First, Regulation 6 relates to the conditions to be met by a database operator. The Minister mentioned that Defra will advertise the reunification databases but, if you are dog owner, how do you know which databases are approved? The regulations state that the database must be approved and lays out all the things that have to be done for it to be approved, but how will the dog owner know which databases advertising on, say, the internet have that approval from Defra and which are just rogue databases which will not meet the conditions?

My second question relates to another detail of the conditions that have to be met by a database operator. I can see why the Minister mentioned that telephone and online requests will need to be answered at all times. Having no knowledge of who is going to be operating these databases, I am slightly concerned about whether a 24-hour-a-day, seven-days-a-week service is practical. I am sure that the Minister’s department may have done some research into this.

My last question relates to Regulation 8, which concerns a change of keeper. It is rather worryingly ambiguous that,

“where a dog is transferred to a new keeper, the new keeper must, unless the previous keeper has already done so, record their full name, address”,

and so on. The point is that the person who is giving up a dog that they do not want might say, “Well, it’s okay Fred. I’ve done all that. There’s no need to worry about it”. How would the new keeper know that the previous keeper had recorded all that information? When you transfer a car, there is a very definite document. Therefore, I wonder whether this regulation depends simply on trust or whether there will be something to back it up.

I congratulate the Government and I warmly congratulate the dog charities and all the other charities involved on all their efforts in this area. I think that this will hugely benefit not only dog owners but lost dogs too.

17:00

[Lord Trees (CB)]

My Lords, I have some general points to make and also some rather specific ones. I make it clear from the beginning as a veterinary surgeon that I very much welcome this legislation. It is a very progressive step and one that we have needed for a long time. I think I can say unreservedly that the entire veterinary world supports the proposals. As the Minister said, it will benefit animal welfare and assuage public concern by aiding the identification of strays and reuniting them with their owners. It will contribute to addressing the problem of dangerous dogs, provided that their owners have had the dogs microchipped. In addition, reducing the problem of strays will save a lot of money for local authorities and charities.

Having made those positive comments, it is important to stress that this measure of itself will not at a stroke solve all the issues that occasionally surround dogs. Alone, it will not prevent dangerous dogs attacking people or the exploitation of breeding bitches, because the breeding history of bitches, for example, is not required to be recorded on the database of the microchip. I referred to that in an earlier debate in Grand Committee on the Deregulation Bill in November. Nor will it solve all the problems associated with the illegal importation of dogs. It is an extremely valuable tool in addressing these problems but it is not the definitive solution. Key to making it part of that solution is enforcement of these regulations. I urge the Government to consider very carefully and thoroughly all means to facilitate and enable their enforcement.

I have a number of technical and specific points, which I will go through quickly in the interests of time. I would appreciate a response to some of the more important ones but I am happy to receive a response in writing if that is appropriate.

First, the term “authorised person” is used in two different contexts in the regulations and I think that they should perhaps be differentiated. In Regulation 11 it is used in the context of those enforcing the regulations, whereas in Regulation 6 it is used in reference to persons reading the microchips and interrogating the database, which could include vets and others. Do these latter groups need to be authorised by a local authority or the Secretary of State? This seems unnecessary. Moreover—this is a very important point that concerns the veterinary profession—veterinary surgeons do not want to be put in the position of being enforcers of these regulations. Not only would this make client relations very difficult but it would have a negative consequence for animal welfare if people were reluctant to take their animals to veterinary surgeons.

Secondly, in Regulations 4, 16 and 17—this is a small technical point—the term “transponder” is used in a way which clearly refers to the microchip reader. I understand that the reader is technically a transceiver, whereas the transponder is part of the microchip. Perhaps those regulations need to be reworded to be clear.

Thirdly, and this is of some significance, the site of implantation is not referred to in the regulations. However, microchip readers have a relatively small sensitivity range of a few centimetres. There are ISO-defined standard sites of implantation that are internationally recognised, and in the UK we all use as convention a single site of implantation on the dog in the midline of the back between the scapulae—the shoulder blades—so perhaps the site of implantation should be defined in regulations.

Fourthly, with respect to Regulation 5, “Details to be recorded”, should there be provision to add the details of the dam which would ultimately help enforce the Breeding of Dogs Act 1973 and the Breeding and Sale of Dogs (Welfare) Act 1999?

Fifthly, regarding Regulation 8, “Change of keeper”, which was referred to by the noble Baroness, I was a bit puzzled. While Regulation 8(1) refers to the fact that,

“the new keeper must, unless the previous keeper has already done so”,

change the record and so on. Not to do so is not an offence. The offence is committed by the former keeper if they have not had a microchip inserted. Perhaps there needs to be more clarity here as there will be confusion in the minds of the public in dog areas about who is responsible and what penalties might follow if they do or do not do certain things.

Sixthly, regarding Regulation 9, “Implanting of microchips”, the term “veterinary nurse” is used alongside “veterinary surgeon”. “Veterinary surgeon” is a legally and professionally protected term while “veterinary nurse” is not. It is used here in a context suggesting that these are both specifically professionally protected terms. However, given that a new charter is to be granted to the Royal College of Veterinary Surgeons, probably in February, which will place all professionally accredited veterinary nurses on the register of veterinary nurses and the term “registered veterinary nurse” is a protected title, perhaps the word “registered” should be prefixed to “veterinary nurse” in this context.

Seventhly, Regulation 9(1)(c) and (d) deal with qualified persons other than veterinary surgeons or veterinary nurses implanting microchips. There is no objection in principle to such other suitably qualified people implanting microchips. Problems with incorrect implantation appear to be rare, although to be honest we have not had formal reporting systems in place for a few years. However, cases are recorded of serious effects from incorrect implantation leading to, for example, paraplegia. The requirement in Regulation 9(1)(c) for training on a course approved by the Secretary of State appears to be a very prudent and sensible measure which I welcome.

Regulation 10, “Adverse reactions”, includes a requirement in paragraph (2)(b) to notify the Secretary of State of migration of a microchip from the site of implantation. We are constantly in this House quite rightly concerned not to overburden people with regulation. I wonder if this regulation is necessary. Migration of microchips happens on occasion. It does not reflect incorrect implantation, nor is it likely to be of any health consequence to the animal. It is implied in the regulations that the chip has been found and read, so why should it be a requirement? It is an offence punishable by a fine not to report that to the Secretary of State?

Finally, there are a number of questions around databases, which have been in part referred to by the noble Baroness opposite and were brought to the attention of the Minister by the Microchipping Alliance and others. One important point that might bear repetition is that, given the number of databases that exist, the tracing of an animal would be facilitated if there were a single portal of entry for inquiries that could then be distributed to the relevant databases. In conclusion, I warmly welcome these regulations and strongly support them, but ask that the Minister and the department consider some of the points I have raised.

[Lord Grantchester (Lab)]

I thank the Minister for his introduction to the order. Although operating a farm, I do not have an interest to declare regarding dogs. From this side of the Committee, the Labour Party supports microchipping of dogs. I start by paying tribute to the many organisations that have tirelessly campaigned and worked for the introduction of compulsory microchipping of dogs. Blue Cross and Battersea Dogs & Cats Home have been offering free microchipping, and the Dogs Trust has offered to meet the cost of all microchips, setting aside £6 million for the provision of microchips to vets, local authorities and housing authorities. The Kennel Club has gifted microchip scanners to every local authority in England and Wales. This is remarkable co-operation and determination from the sector to make this work. I note that several housing associations, as part of Wandsworth Borough Council, have introduced this as a tenancy condition for people on their estates.

In the 2012 consultation, the measures before us today were supported by 96% of respondents, so the regulations have been long anticipated. It was Labour’s Animal Welfare Act 2006 that provided powers to the Secretary of State to introduce secondary legislation to promote the welfare of vertebrate animals in England. However, it is somewhat disappointing that there appear to be questions around some of the provisions—that the Minister’s department may not have met all the various concerns of sector organisations or provided enough clarity.

The immediate concern involves the measures implicated in the Deregulation Bill. The Minister was not present in Committee on 18 November when his colleague, the noble and learned Lord, Lord Wallace of Tankerness, replied to our amendments. The measure relevant to this was contained in the clauses whereby certain requirements of the Breeding of Dogs Act 1973 and the Breeding and Sales of Dogs (Welfare) Act 1999 were to be repealed because of the imminent introduction of microchipping. Section 1(4)(f)(g) and (h) of the 1973 Act specifically requires that bitches are not mated before one year-old; that they do not give birth to more than six litters each; and that they do not give birth to more than one litter in any 12-month period. These provisions are designed to provide essential protections for the welfare of the breeding bitch.

In contrast, under the microchipping provisions, the information required on the database serves to notify of the details of dog and owner only, providing no information about breeding welfare, the number of litters, and so on. Does the Minister agree that, as the information objectives differ, the repeal of the requirements in that section of the 1973 Act on the grounds that they were redundant after the introduction of these microchipping regulations is entirely false? The Minister may reply that the Deregulation Bill is another matter, and we look forward to Report, when the Government’s position may be clarified. However, the first date in December for deliberation of this order was postponed due to some defect. What was that about? It does not seem to have been in relation to the data requirements of the microchip. It is entirely possible that the Minister does not want the microchip to record any details in addition to those provided for, which would then anticipate difficulties for the Government’s one-in, one-out regulation-reducing requirement, which would be a shame.

During the Committee’s proceedings on the Deregulation Bill on 18 November, the noble and learned Lord, Lord Wallace of Tankerness, stated that the Government had,

“decided to consult the key stakeholders”,

on the repeal, to consider whether there was,

“enough evidence to support retaining”,—[Official Report, 18/11/14; col. GC 154.]

certain provisions. It appears that interested organisations are unaware of this, and I ask the Minister to provide details. I have yet to receive any information. Could the Minister clarify this before the return of the Deregulation Bill for further consideration?

17:15

Is the Minister satisfied that the data requirements under Article 5 are sufficient? There does not appear to be an obligation for the breeder always to be recorded as the dog’s first keeper. Is the Minister confident that, in time, that would be the effect of the order, as it appears that it would be simple for the breeder to take a lifetime update service costing £16 further to extend the welfare benefits of microchipping to all future owners?

The success of this measure will very much depend on the public’s full compliance with updating new information. Has the Minister set up any mechanisms whereby that could be monitored? How long would a dog owner have to comply with the microchipping provisions before a notice would be issued? As the noble Baroness, Lady Miller, asked, will the Minister clarify who is responsible for updating the database with the details when a dog’s keeper changes, as required by Regulation 8?

It appears from the Explanatory Memorandum that there are currently four microchipping databases. Indeed, the Kennel Club runs one of them, Petlog. The Minister may say that it is not up to him to prescribe the number, but I wonder whether some consolidation could take place. It could be a simple task for one organisation, such as the British Cattle Movement Service. My reason for raising this is contained in Regulation 6(1)(i) and (j). Sub-paragraph (j) states that each database must be set to,

“automatically redirect on-line requests relating to dogs whose details are recorded on other databases”.

Can the Minister satisfy me that the links will be working satisfactorily every time? There is some anxiety that there should be one central inquiry point that could direct the inquiry to the right database. What provision is there for the transfer of data should an operator go out of business?

There is a provision in the regulations that all dogs imported into the country should be microchipped within 30 days. What is the situation regarding dogs microchipped overseas? Presumably they would comply under Regulation 3(3). What links will there be to databases overseas? Would a UK citizen taking a dog overseas, that then strayed, be confident that he might be reunited with the dog through an overseas database?

In Committee on the Deregulation Bill, the Minister, the noble and learned Lord, Lord Wallace of Tankerness, made clear that the Control of Dogs Order 1992 remains, whereby any dog on any highway or in a public place must wear a collar or badge attached to a collar with the name and address of its owner on it. He said:

“It is considered appropriate to retain that, even after compulsory microchipping is introduced”.—[Official Report, 18/11/14; col. GC 156.]

It would be a fair assumption that the public may not realise that both belt and braces will be required after the introduction of compulsory microchipping. The department must be careful not to give mixed messages. The Explanatory Memorandum states that the cost to the public purse of publicising these measures will be £400,000. Is the Minister satisfied that it is prudent, bearing in mind the connotations of that word, that these costs are contained in the maximum? The Microchipping Alliance understands that the Government intend to produce guidance to accompany the legislation. Can the Minister confirm that? It would be extremely helpful in providing clarity on many of the questions I have asked today. There is every possibility that the data on the microchip may not correspond to what is on the badge. Will the Minister consult relevant organisations on the wording of the guidance so that the precise workings of the regulations are those intended? Will the Minister consult local authorities, police and organisations on the publicity for the measures so that their messaging can complement that of the Government?

I hope I have not punctured the euphoria that these regulations may induce from their passage today. I merely hope that I pointed out several areas where clarity is needed to get the operation of these regulations correct. In this regard, I am grateful to the noble Lord, Lord Trees, for casting his professional eye for detail over these regulations. If I am right, if there is an identity badge and a microchip attached to a dog, there should be less concern to local authorities that they will be inundated with lost dogs at a considerable cost because ordinary members of the public coming across a stray do not possess scanners. We must be far from complacent. In agreeing this order today, can the Minister satisfy me that local authorities are confident that they have the resources necessary? The prize of saving some £32 million annually in dealing with some 102,000 stray dogs per year is certainly worth while, especially when considering the welfare benefits to dogs and the anxieties of their owners.

[Lord De Mauley]

My Lords, I am most grateful to all noble Lords for their comments and questions. Let me do my best to address them. My noble friend Lady Miller of Chilthorne Domer raised a number of questions. She started off asking which databases are approved. We will be publishing a list of the databases that inform us that they are compliant by 6 April this year, which is the date by which the microchipping database operators must comply with the requirements set down in the regulations. In answer to her second question, they will not be approved unless they can perform 24 hours a day, seven days a week. She asked a question about change of keeper. I suspect I might return to that but basically the buck stops with the new keeper. The new keepers are the people in whose interest it is to make sure that the dog is microchipped, because they are the ones who will suffer if the dog does not come back to them. I will return to that in a moment.

The noble Lord, Lord Grantchester, raised a number of points. He referred to the issue of dog breeding and he should be aware—I know he is—that this is not the primary purpose of these regulations, which is to allow more easy reunification of a dog and its owner when the dog has strayed. I will return to the breeders issue in a moment. The noble Lord raised issues related to the Deregulation Bill. We are looking at those issues and the record-keeping requirements on dog breeding. My colleagues dealing with the Bill are well aware of the issues, and they are considering whether any action or clarification is necessary.

[Lord Grantchester]

My anxiety is raised because the Minister at the time mentioned a consultation and yet the various sector bodies in the industry seem to be unaware of that consultation.

[Lord De Mauley]

I understand that. I will return to him in writing on that particular point.

[Lord Stevenson of Balmacara]

I am sorry to add to the cacophony of voices on this. It is not my topic but I am in charge of the Deregulation Bill on this side. I just point out to the noble Lord, and I am sure he is aware of this, that we will be on Report within a few days, so it is important for us to know whether we should be pursuing this issue. We would therefore be happy if the letter could come expeditiously.

[Lord De Mauley]

I take that point on board: expedition is the name of the game. The noble Lord, Lord Grantchester, asked whether full discussion on guidance would be taking place with a number of interest groups that he referred to. I can assure him that there is very active two-way communication with those groups. He asked about the adequacy of local authority resources. It is very clear from our discussions with both dog welfare organisations and local authorities that this is about saving them money. It is not going to involve them in more expense but will reduce the amount of time it will take to identify who the owner is, so I am pretty confident about that particular point.

The noble Lord, Lord Trees, raised a number of important questions. First, I thank him for his support for the regulations and acknowledge his point that these measures, on their own, are not a silver bullet. Indeed, we never expected them to be that, but they will, over time, enable us to tackle some of the other issues that he and I are concerned about. He and the noble Lord, Lord Grantchester, asked whether there would be a single point of contact for the six databases. Regulation 6 requires that database operators must be able to redirect online inquiries to other databases if someone comes through to a database that does not hold the details linked to the microchip. All databases will have a system whereby, if an inquirer enters the microchip number on the wrong database, a pop-up—that may be the wrong technical expression, but I think he and I understand what I mean by that, although perhaps “window” might be a more appropriate word—will be automatically generated on the screen which, when clicked on, will redirect the person to the correct database.

The noble Lord, Lord Grantchester, raised the important point of whether the first keeper will always be the breeder. There is also the issue of whether that is dealt with in guidance. Yes, the breeder, as defined by the regulations, is always considered the first keeper of a puppy. This is covered in the Explanatory Memorandum to the SI and will be included in the guidance.

The noble Lord, Lord Trees, asked for clarity about who is responsible for change of ownership. I have touched on that already. Regulation 8 is clear that it is the responsibility of the new keeper to update the database where there is a change of keeper. He also suggested that there is some question over the use of the word “transponder”. This is essentially a technical issue but there is not a problem. The chip must conform with the FDX-B protocol set out in ISO standards, which is referred to in the regulations. The important point is that the chip must respond to a scanner at a given frequency.

The noble Lord also asked about the term “authorised person”. To clarify, the reference to authorised person is in respect of someone enforcing the regulations. Vets are not defined as authorised persons in the regulations; there is no provision limiting the provision of information to others to aid reunification of dogs and their keepers or to deal with other matters such as faulty microchips. These relationships will not be affected by the regulations and we would expect relevant consents from keepers to be in place already in relation to disclosing personal data. We would expect vets, re-homing centres and microchip manufacturers that already have a working relationship with database operators to have some secure identifier, if they do not have one already, from the database operators to ensure that they are bona fide inquirers for data protection purposes.

The noble Lord asked about a recommended site for implantation. This will be covered by the implantation training, so we do not consider it necessary or appropriate to legislate on this point. The training also advises implanters to check that the dog does not have a chip in a different implantation site and to check for any microchip migration.

The noble Lord, Lord Grantchester, asked whether there were any conditions that database operators must meet and whether they applied to the UK only. Regulation 6 sets out the conditions to be met by the database operator. Databases do not have to be located in any particular country but the conditions apply to any database that holds itself out as being compliant with these regulations. He also asked what happens if a dog strays while it is overseas. I am afraid that that will depend on whether an analogous set of rules applies in that country.

I have done my best, although I suspect that when I go through Hansard, I may find questions that have been left unanswered. If I may, I will write on those. I think noble Lords all share with me the strong view that irresponsible dog ownership is a complex problem to which there is no single, simple solution. We have introduced a series of measures, of which these regulations are the latest. We believe they will help promote animal welfare and encourage responsible dog ownership. The draft regulations will help lost dogs to be reunited with their keepers more quickly, so reducing any suffering of the dogs and distress to their keepers. The increased traceability of dogs to keepers will ensure that keepers can be held to account better if their dogs are allowed to roam and cause a nuisance. They will also save local authorities and re-homing centres money, which can be better spent elsewhere to promote dog welfare and encourage responsible ownership.

Motion agreed.

Films (Definition of “British Film”) Order 2015

Thursday 22nd January 2015 Grand Committee

Motion to Consider

17:30

Moved by

[Lord Gardiner of Kimble]

That the Grand Committee do consider the Films (Definition of “British Film”) Order 2015.

Relevant document: 17th Report from the Joint Committee on Statutory Instruments

[Lord Gardiner of Kimble (Con)]

My Lords, as may have been seen from this month’s BAFTA nominations, the British film industry is thriving. Alongside such critical success, the UK film industry has a turnover of £7.3 billion and is worth more than £1.4 billion to the economy, employing more than 66,000 people. Production spend on films made in the UK exceeded £1 billion in 2013.

This is very much as a result of film tax relief. Since its inception in 2007—I know the noble Lord, Lord Stevenson, has a long interest and connection with this concept—film tax relief has supported 1,680 films, with total production expenditure of £7.8 billion, of which 72% was incurred in the United Kingdom. The Government are committed to building on this and safeguarding it for the future.

The order updates the statutory test that is used to assess whether a film is a British production and eligible to apply for film tax relief. Certification as such is a requirement for film production companies to claim tax relief on production costs. The revised test aims to benefit particular areas of film production, such as visual effects and post-production, in which the United Kingdom excels.

In the Budget of 2013, the Chancellor announced that the Government would consult on tax options to support visual effects industries, and that was launched in May 2013. The United Kingdom has historically been a leader in visual effects production and is currently home to a number of world-renowned and award-winning visual effects houses making a significant contribution to British culture and creativity. Recent successes include the Oscar-winning film “Gravity” and “Paddington”, and work is currently under way on the latest “Star Wars” film.

Nevertheless, the sector has been adversely affected by rapid changes in the global industry, and there have been reports that activity may be moving overseas. Evidence suggests that the UK’s visual effects industry saw a 23% decrease in employment during the three years to 2013. There has also been a proliferation of incentives available in non-European jurisdictions. This has been a significant contributing factor in more films undertaking their visual effects outside the UK and Europe. Without further support, British visual effects houses may be forced to reduce headcount and investment in infrastructure, resulting in a decrease in the sector’s economic contribution and ultimately fewer British films being made.

The Government have responded in two interrelated ways. First, the Government have made the UK’s film corporation tax relief regime more attractive. The rate of tax relief for films with a qualifying budget of £20 million or more has been increased from 20% to 25% on the first £20 million of UK expenditure, with any excess UK expenditure still receiving the existing 20% tax credit. The minimum spend threshold in the UK has been reduced from 25% to 10% of a film’s overall budget. It is anticipated that this will encourage more films to carry out their visual effects and post-production work in the UK. These measures are now in force, having been introduced via the Finance Act 2014.

The second action is to modernise the statutory test used to assess whether a film is a British production. This is the purpose of the draft order before the Committee. This points-based test, often referred to by the industry as the cultural test for film, ensures that relief is targeted towards qualifying British productions. These changes are straightforward and mirror elements from the existing cultural tests for high-end television, video games and animation programmes. The amendments increase the points available if certain percentages of a film’s production work, including visual effects, take place in the UK. They also increase the points awarded for the language spoken in the film. For example, if more than 75% of a film is in the English language, it will now score six points rather than four. Finally, points that are awarded for a film’s British setting, subject matter, characters and language will now equally be awarded for other European Economic Area states. These measures are designed to encourage co-operation with European film industries while still ensuring that activity takes place in the United Kingdom. The effect of these changes is that the number of points available increases from 31 to 35. The pass mark is accordingly raised from 16 to 18 points.

These measures have the strong support of the film industry, including the British Film Institute, which is the Government’s lead agency for film, the British Film Commission, which works to attract inward investment to the UK, the major film studios and the leading visual effects houses. The Government believe that this order is essential to encourage further film production work in the UK while ensuring that tax relief benefits only productions that carry out work in the UK and enrich our cultural perspective. In combination with the changes to the corporation tax relief regime, these measures will further growth and ensure that the UK remains at the forefront of a very competitive global film production industry. That will in turn increase the opportunities for British artists and help ensure that the British film industry remains a world leader and continues to provide so much pleasure to us all. I beg to move.

[Baroness Bonham-Carter of Yarnbury (LD)]

My Lords, I echo what the Minister said in congratulating the previous Government on introducing tax breaks for British films. Of course, since then the coalition Government have extended that to animation, high-end TV, video games and, most recently, regional theatre and live-action children’s TV, all of which have contributed enormously to the creative industries and their success. Tax breaks for the British film industry have paved the way and brought huge inward investment into the industry: millions of pounds of private funds to the independent sector and, from the private sector, millions more pounds spent on infrastructure. I am told that next week’s British film industry figures will be very positive, so the industry is happy.

We obviously support this order, particularly the extra points for production activity undertaken in the UK as that gives even greater incentive to bring work into the country. I have what is not really a question but more an observation. It is something I have picked up from talking to people in the industry: things are working well. The Minister has probably answered this already, but too many tweaks and changes should on the whole be avoided. I think I am right in saying that there is another order in the pipeline. The observation is to leave things that are working so well as they are.

[Lord Grantchester (Lab)]

My Lords, I enjoyed the Minister’s explanation of the order before us today. If a film that has been supported by the Government and the taxpayer in this way should be very successful—he mentioned “Paddington”—and especially profitable, is some element of the profits returned to the pot, if that is the right expression, for further use by British films to encourage the British film industry or does it escape from the system? Is it in some way self-fulfilling that the profits of a publicly supported film go back into making more British films?

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am very pleased to respond in this debate. First, I declare my interest as a former director of the British Film Institute. I thank the Minister for his kind words about my contribution in that time.

I have spent many happy hours over the last few years debating issues that come up on the DCMS brief with the Minister. I have usually been able to, I think, in his own words, “trip him up” on something and cause him difficulty. I am normally rewarded, because is it often a delight to have a two or three-page letter—indeed, the last one almost ran to four pages—in which he finally gives me the answers that I have asked for, usually to my complete satisfaction and sometimes even far beyond that.

Today is different. I have consulted widely with my remaining friends and colleagues in the industry and have sought comments from FACT and the British Film Institute. Nobody has a word of doubt about this order. They are delighted with it, and it seems otiose for me to stand here and even question the Minister about it, so I shall give the Committee one anecdote and ask three very small questions. I do not expect a letter.

When I was director of the British Film Institute, which I was for nearly nine years, I spent most of my time trying to argue with officials and Ministers in what was then a Conservative Government that we needed a better definition of a British film. It is therefore somewhat ironic to be considering an order which not only deals with that but improves the current definition and brings it forward. There is a little irony within that irony, which is that the order does not define a British film at all; it defines a film as British if it is made in the EEA, which must have come as a bit of a shock to those who perhaps take a view different from mine about the benefits that flow from the European Community, but let us pass over that.

The reason for the anecdote is that part of the work I was doing at the British Film Institute developing a public policy issue around this stemmed from work that was initiated by the late Prime Minister Mrs Thatcher, who held a very high-profile summit in Downing Street in 1990, from which most of the policy that we are now concerned with started. Indeed, other Members of your Lordships’ House were at that meeting and could talk about it as well. It was the beginning of government interest in film, but it constantly worried us because of something within the idea that more people should be going to see films, which was Mrs Thatcher’s view. She recalled her time in Grantham when the whole village used to go to the village cinema twice a week to catch the latest films, which were, of course, largely British. In the early 1990s, it was feast or famine. There were occasional rushes of successful British films that were invested in by American studios, but that tended to fade away and we were back to the usual diet. The main diet in British cinemas at the time we went to see her was films that were often made by British people, or had British expertise in them, but were financed, often produced and almost certainly made outside Britain, and we wanted to resolve that. It has taken a very long time, but the situation is now transformed. As the Minister said, between 150 and 200 British films a year benefit. It is an extraordinary transformation of the arrangements.

17:44

This is a good-news story. There was a sense that we had a natural talent here and that there was something in the water that made our people very good at film-making. The expertise and skills which were originally developed in the great studios on a ring around London, of which there are only two or three left, have now transferred into fantastic computer-based skills. The people with those skills are operating largely out of Soho. This was originally the place where all the costumes were made for the films made in Britain but it is now where, 24 hours a day, people are working on creating characters and animations, and making things happen that drive the world’s film industry. Long may that continue.

In my experience—I think it is still true—just about every Government in the world support the film industry in a way. I repeat: every Government, including that of the United States of America. The US system of support for film exports has been the envy of the world and it is something that we may want to come back to at some future date. It provides a guarantee against loss for those who export their films from America and, as a result, that puts the American distributor who takes films abroad in a very strong competitive position. We do not have as much support here, although that is changing. I use that as a means to simply say that there is nothing unusual about using the tax system to try to help films.

Film-making first got a tax break in the 1994 Budget. It was then changed in 1999 and again in 2005 or 2006. Since then, the situation has been transformed, and I think that these changes will help. The irony, as I mentioned, is the fact that it is now a pleasure to read about the way in which films can qualify as being British—not just in terms of whether they are made here, which was the original definition, but now in terms of set-dressing, the talent, the writing, the audio-visual work and the post-production work, which are all part of this extraordinary industry. It is a collaborative industry beyond all collaborative industries, yet it relies on individual skills of the high order that we have in Britain today. That is my anecdote in terms of what I have experienced, and I have pleasure in seeing this measure before us.

I have three questions. In the Minister’s introduction—and I see it in some of the background notes—there was a suggestion that the reason for this order, as is said in the paper Modernising Film Tax Relief, which was originally from the Treasury, was in some senses to improve the way in which a film receives its tranche of money and, to avoid a step-change between low-budget and high-budget material. I think that that is right but I am anxious to check that I am reading it correctly. A paper that accompanies the order says that the reason for doing this is to try to make sure that the film is more culturally British—or, as truth is, that it comes from the EEA states—in order to better qualify for the state aid regulations that operate in relation to this issue. I would be interested to hear the Minister’s response to that. What is driving this? Is this about better and more efficient use of the tax break or is it something that has come from outside and is there a need to make sure that we do not fall foul of the European regulatory concerns?

My second point is not unrelated to that. The cultural test for film, which is the subject of the order, is said to be aligned to the other three cultural tests relating to animation, programming, high-end television and video games; of course there is also drama as well. That is not mentioned in the order but presumably it is in the background. When the Minister comes to respond, perhaps he could sketch out how close the alignment is. Are they exactly the same or are there differences in what they do? Many of the considerations applying to film will certainly also apply to high-end drama in terms of post-production, talent, location and shooting. Indeed, that was the subject of a number of debates on the recent success of “Wolf Hall”, the television production which has just started.

My third point is about the money, given that 150 to 200 films a year benefit from film tax relief, and given that the Explanatory Memorandum says that one of the things that it is hoped will happen as a result of this is that there will be,

“greater investment within the UK from overseas and in international co-productions, resulting in higher levels of economic contributions from the sector, more stability for a highly skilled workforce, and the creation of culturally important products”.

I have to confess that when we tried to persuade Mrs Thatcher that it would be quite a good thing to finance the film industry with tax support in order to get more co-productions, she gave one of her handbag expressions and we soon dropped that. It did not go down very well: she did not seem to like the idea of British taxpayers’ money going on some foreign films. The truth is that European sensibility will be useful to the British film industry and that most films have to be made in English if they are going to be successful at all in the export market, so I think it is a self-solving problem.

However, my real point is that the Exchequer impact study for this—I do not think there is a separate one for the measure before us—suggests that the impact on the Exchequer will be a loss of £10 million in 2014-15; £20 million in 2015-16; and then nothing, nothing and nothing from 2016 to 19. That does not quite square: if more external productions are going to come to Britain to be made here and if there are going to be more co-productions—I hope there will be—then surely there will be a continuing drain, or is something else going on here? I would be grateful if the Minister could respond to that point.

Other than that, I want to stress again that this is a terrific move. It is going in the right direction by giving more credit to some of the things that need to be recognised. The skills we have in post-production are terrific, and the overall scheme requiring just over 50% of the points, I think, for the film to be allowed to qualify as British or, as we say, European in content is the right way to go forward. It will be a boost and a further step in fuelling the success that we have seen in the recent awards ceremonies, with hopefully more to come in the Oscars.

[Lord Gardiner of Kimble]

My Lords, with this cast list we have had a very agreeable debate. I am very pleased, and acknowledge the support that has come from your Lordships on this matter because it is something that is clearly in the interests of the British film industry. I would like to place on record the Government’s thanks to the British Film Institute and the industry for their assistance in developing this policy. That is the reason we are here today. It is a prime example of an industry and government working together to secure the best that we could possibly achieve.

My noble friend Lady Bonham-Carter referred to support, but also raised an element of concern for some that there are too many changes. My understanding is that no further changes are envisaged. Perhaps I should say that the cultural test has been amended on three occasions, in 1999 and twice in 2006. On each occasion, this was to update the test to reflect changes in policy as to what should qualify a film as a British production. Like today, those changes were all designed to ensure that we were ahead of the game and in no way disadvantaged.

The noble Lord, Lord Grantchester, asked about use of profits and the profit-returning element. Of course, although there are profit reliefs, a hugely successful film will make a contribution to the Exchequer. We obviously want to ensure that the more films we have with tax relief, the more will come into the Exchequer. Interestingly, the Government are investing £47 million of lottery funding and more than £23 million of Treasury funding to support film and audiences in the UK. The total public funding for film in 2011-12, for instance, was £366 million. From all angles, on the point that the noble Lord was making, the Exchequer gets a good return on very successful films.

The noble Lord, Lord Stevenson, continues to look very well on the handbagging he may have received from the late Lady Thatcher. There is no doubt about it: she was interested in concepts of this sort. Perhaps with someone with the reputation that she has, when one gets down to how she was in practice, she was rather different from the persona that has some currency.

The noble Lord, Lord Stevenson, asked a number of questions, which I shall endeavour to answer. If the answers are not fully sufficient—it is a Thursday—he might like a letter from me. The noble Lord alluded to a point about the changes and approval by the European Commission. Yes, these changes, along with the changes to the rates and qualifying expenditure for film tax relief made in the Finance Act 2014, were approved by the European Commission in a state aid notification on 17 March last year. I hope that that is also satisfactory.

As to what was driving the change, and whether it was because of the requirement of approval or to remove a tax cliff et cetera, this was very much designed to encourage more production in the UK by taking a broader definition of what qualifies as a British production. We obviously wanted to ensure that we retained the talent and skills in certain areas of production, particularly, as I emphasised in my earlier remarks, in the visual effects and post-production houses, where we excel but where we were concerned that quite a lot was going abroad. Again, that was important.

On the alignment of all the tests, the ambition is to align the cultural tests for the creative sector tax reliefs as far as possible. Given the slightly different nature of the activities, there may be an element of that, but we would certainly wish to align all of them wherever we can. The Government will be consulting on the alignment of the high-end TV cultural test with the film test shortly, so that will be work in progress.

As to the expected cost to the Exchequer, and the possibility of a decrease from 2015 onwards, this exercise is about the cultural test, but I should write to the noble Lord on this one. This may be a more intricate issue, but I promise that I will not write four pages and I hope that there will be clarity. On that basis, and following this good Thursday debate, I commend the order to the Committee.

Motion agreed.

Committee adjourned at 5.57 pm.