House of Lords
Oaths and Affirmations
Burma: Ethnic Minorities
(9 years, 5 months ago)
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Baroness Berridge
To ask Her Majesty’s Government what discussions they have had with the Government of Burma concerning the persecution and trafficking of the Rohingya Muslims and ethnic minorities in Burma.
The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con)
My Lords, the United Kingdom raises the problems in Rakhine with the Government of Burma at every opportunity. The Minister of State for Asia Pacific called the Burmese ambassador to the FCO on 18 May to express concern, calling for an urgent humanitarian response and regional co-ordination. In parallel, our ambassador in Rangoon delivered the same message, with the EU and US, in a démarche to Burmese Ministers and again bilaterally on 4 June.
Baroness Berridge (Con)
My Lords, I thank my noble friend the Minister for that Answer. Approximately 90,000 Rohingya Muslims have been trafficked this year alone. Laws are now proposed to restrict religious conversion and to make it punishable by up to 10 years imprisonment should a Buddhist marry a non-Buddhist, and Rohingya Muslims have been stripped of their right to vote. The root cause of this is militant Buddhist nationalism, which seeks to link Myanmar’s identity to that of being a Buddhist. What representations have Her Majesty’s Government made about the recent case of Htin Lin Oo, a Buddhist, who was sentenced to two years in prison earlier this month after being charged under the penal code with insulting Buddhism simply because he tried to argue that the conduct of extremist Buddhist nationalists, who were preaching hatred and inciting violence, was contrary to the teaching of Buddhism?
Baroness Anelay of St Johns
My Lords, first, I recognise the work that my noble friend does so well for all of us as co-chair of the All-Party Group on International Freedom of Religion or Belief. We are extremely concerned about the approach of the Burmese Government to those who wish to express their own religious identity. We are one of the most outspoken countries in the world about not only freedom of religion and belief but freedoms generally. The Burmese Government are left in no doubt. As to those who are prisoners of the regime, we make it clear that there should be proper treatment of prisoners and proper judicial process. It is wrong around the world if people are inhibited from practising their own belief.
Lord Anderson of Swansea (Lab)
To be credible we have to be consistent, as the noble Baroness and her committee have always been. The US Commission on International Religious Freedom puts Burma in the worst category and states that its Government are wholly unwilling to investigate and prosecute those who are guilty of abuses against Muslims. The US puts Burma in its “country of particular concern” category. I am pleased that the Government and the EU are making representations with the US, but is it normal to make this joint démarche when, to be powerful and credible, we always ensure that we work with the EU and the US?
Baroness Anelay of St Johns
Indeed, yes. We work with both the EU and the US on these matters. With UK support, the issue of Rakhine was discussed at a briefing of the UN Security Council on 28 May, where I raised the matter of Burma with Prince Zeid, the High Commissioner for Human Rights, in Geneva on Monday. I will continue to do so. Later this morning, I meet the US Ambassador-at-Large for International Religious Freedom and I will discuss the matter with him personally.
Lord Alton of Liverpool (CB)
My Lords, as one in five Rohingya has now fled since 2011, does the Minister agree that hate speech is a key issue here and that many admirable Buddhist monks and civil society actors are speaking out against this? Can we not do more to help them in what they are doing? Will she also say a word about Kachin state, which is covered by this Question on ethnic minorities, where some 100,000 people have been displaced and more than 200 villages have now been burned to the ground?
Baroness Anelay of St Johns
My Lords, with regard to freedoms—or lack of freedoms—in Burma, we have made it clear that it is essential for Burma to address the dire situation not only of the Rohingya community, but of other persecuted communities, regardless of the region. We want to see improved humanitarian access, greater security and accountability and a sustainable solution on citizenship applying country-wide.
Lord Wallace of Saltaire (LD)
My Lords, can the noble Baroness say something about the critical engagement we have with the current Burmese Government? For example, I understand that we are training Burmese military. How much leverage does the closeness of our relationship with the Burmese Government give us to make constructive criticism of this sort?
Baroness Anelay of St Johns
My Lords, the noble Lord is right in his assumption that this relationship gives us more leverage. It is not merely a matter of providing technical training to the military so that they know the proper way to behave within the confines of reacting to what they may consider to be public disorder. We are also providing technical support in advance of the November elections so that they may be carried out in a proper manner.
Baroness Warsi (Con)
My Lords, is my noble friend aware of the allegations of sexual violence perpetrated by the Burmese army against a number of ethnic minorities during this conflict? I congratulate her on her new role as the Prime Minister’s special representative on preventing sexual violence in conflict. What specific work do she and the Foreign Office intend to do in this area?
Baroness Anelay of St Johns
I am grateful to my noble friend. It was an honour to be appointed last week by the Prime Minister as his special representative on preventing sexual violence in conflict. When I had meetings in Geneva, it became clear that colleagues—not only in the United Nations but in countries and NGOs around the world—are ready and willing to work with the UK on these matters. As to what happens next in practical terms, I assure my noble friend that I have already identified countries where specific action can be taken by me and those around the world with whom I am working. Burma is clearly at the top of the list, as are Syria and Iraq.
Baroness O’Loan (CB)
My Lords, the Minister is clearly aware that the new protection of race and religion laws in Burma will make life much harder for Burmese minorities to marry, start a family or change religion. Do the Government agree with Burma’s Cardinal Charles Bo that these laws represent an unacceptable and regrettable erosion of religious freedom?
Baroness Kinnock of Holyhead (Lab)
My Lords, does the Minister agree that the recent disenfranchisement of the Rohingya by the withdrawal of their ID cards is a further, outrageous attack on an already severely persecuted group? Does she accept that the forthcoming elections in Burma cannot possibly be free and fair when hundreds of thousands of people are being denied the right to vote and while the military maintains its 27% stake in the Burmese Parliament?
Baroness Anelay of St Johns
My Lords, I entirely agree with the noble Baroness that the withdrawal of what are known as the white cards from the Rohingya was an improper act. This is the politest phrase I can think of in the circumstances. It severely imperils the appropriateness of the election results. However, we must recognise that Burma is on the cusp of having the opportunity to elect a civilian Government for the first time. This does not prevent our remaining outspoken about the fact that the Rohingya should not have had their ability to vote withdrawn.
Economic and Social Inequality
(9 years, 5 months ago)
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Lord Howarth of Newport
To ask Her Majesty’s Government what measures they will prioritise to reduce economic and social inequality in a One Nation Britain.
Lord Ashton of Hyde (Con)
My Lords, the Government believe that the best way to reduce inequality is by delivering full employment and reducing the number of workless households. By restoring growth to the economy, low-income households will become more likely to enter work, and households will reap the benefits of a growing economy. More people are in work now than ever before, and since 2010 the number of children in workless households has fallen by around 390,000.
Lord Howarth of Newport (Lab)
My Lords, while the Prime Minister sloganises about the Government’s one-nation approach and as the Chancellor forswears any tax increases on the well off and remains bent on hitting the poorest again with a further £12 billion of cuts in social security, is it not inevitable that inequality will worsen, with its associated pathologies of ill health, underperforming education, poor productivity, slow economic growth—as the IMF pointed out this week—and, whatever tokenistic legislation they pass, a budget surplus continuing to recede beyond the horizon?
Lord Ashton of Hyde
My Lords, I do not agree with the noble Lord. Income inequality in the UK has actually come down, and this is reflected in household incomes since 2007-08. The annual average disposable income of the poorest fifth of households has risen by £100 in real terms, while over the same period the largest fall has been in income for the richest fifth of households, which has reduced by £3,000 per year. The way to address inequalities, both social and economic, is to get people into work so that they can reap the benefits of full employment.
Lord Hylton (CB)
My Lords, does the Minister agree that much social inequality is caused by the acute shortage of affordable housing? Will the Government put their fullest energy into bringing forward surplus government and local authority land and brownfield sites so that the gap in provision of new affordable housing can be met?
Lord Ashton of Hyde
My Lords, housing is of course extremely important. The effect on low-income families for housing is particularly acute so, as we all know, the Government are working on this. But the most important thing is that people in whatever kind of housing it may be are able to work and produce benefits for their families.
Lord Morgan (Lab)
My Lords, is not the main cause of inequality in fact inequality of wealth, which was not dealt with in the Answer? No Chancellor has attempted to deal with it since David Lloyd George quite a long time ago. However, have not the present Government made matters significantly worse by failing to tackle inheritance fairly and by failing to set proper taxation on wealthier property? Is it not appropriate to consider the Government’s policy on equality on Waterloo Day?
Lord Ashton of Hyde
My Lords, the facts do not bear out the noble Lord’s question. I accept that wealth inequality is higher than income inequality—although he is shaking his head—and that is the case both in the UK and across the OECD. However, it has not changed since records began in 2006. Internationally, the level of wealth inequality in the UK remains below the OECD average and significantly lower than that seen in the US.
The Lord Privy Seal (Baroness Stowell of Beeston) (Con)
My Lords, we have not yet heard from anyone from either the Liberal Democrat Benches or the Conservative Benches, but because we have so far had some contributions from the Opposition Benches, perhaps I may suggest that we start with my noble friend Lord Lang and then go to the noble Baroness, Lady Hussein-Ece.
Lord Lang of Monkton
My Lords, in addition to the excellent answers already given by my noble friend to the noble Lord, Lord Howarth, should he not also draw attention to the fact that raising the tax threshold has also been an enormous advantage to those at the lower end of the social equality scale? This, together with the other excellent points he has made, completely confounds the arguments coming from the Benches opposite.
Lord Ashton of Hyde
My noble friend is absolutely correct. Since 2007-08, the annual average disposable income of the poorest 20% of households has risen by £100 in real terms, while the average annual income since 2007-08 of the richest 20% has fallen by £3,000.
Baroness Hussein-Ece
My Lords, the Minister talked about people who can work and should work, but he has not mentioned the inequality of those families which are headed by someone with a physical or mental disability who cannot work. Children in such families are increasingly living in poverty, and inequality is rising. Can the Minister say how these cuts to welfare, which can only be described as ideological, will impact on those families? Will he tell us whether the Government will undertake to do an impact assessment to ensure that inequality does not get worse for those families?
Lord Ashton of Hyde
My Lords, the noble Baroness is absolutely right, and we do want to pay attention to those who are not able to work. She is completely right on that. I will not undertake to do an impact assessment, but I will pass that on.
Lord Davies of Oldham (Lab)
My Lords, my noble friend Lord Howarth mentioned the IMF report. The report rejects the trickle-down effect, rejects the idea that increased inequality makes economies more dynamic and counsels that the best way to stimulate economies is to support the worst-off 20% in any country, and—wait for it—the other aspect would be to increase the strength of trade unions. What is the ministerial response to this report?
Lord Ashton of Hyde
We think that the best way to help the lower—the poorest—in this country is to enable them to get to work. That is why having a record number of people in work is a good thing.
Prisons: Secure Colleges
(9 years, 5 months ago)
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Lord Ramsbotham
To ask Her Majesty’s Government what contracts have been let for the proposed secure college.
The Minister of State, Ministry of Justice (Lord Faulks) (Con)
My Lords, contracts for the construction and operation of the secure college pathfinder have not been signed. We are now considering the next steps.
Lord Ramsbotham (CB)
My Lords, I thank the Minister for that reply, and I am very glad to note that there is a pause. What the troubled young people concerned need more than anything else is long-term contact with a responsible adult. This is being denied to them, and becomes less likely the larger the establishment. This need has been recognised by both the Department of Health, in particular its children and young people’s mental health and well-being taskforce, and by the Department for Education, which has legislated for local home authorities to be responsible for the delivery of health and social care and education plans for those with learning difficulties. Could the Minister please encourage his Secretary of State to take advantage of the Chancellor’s budget cuts, ditch this whole proposal and listen to the advice which is already being acted on by other ministries?
Lord Faulks
As the noble Lord and the House will know, there is a new Secretary of State. He is looking at the whole question of the custodial estate, in particular the youth custodial estate. He will of course consider all the factors which featured in the debate about secure colleges. At this stage, I can say that a considerable focus of his attention will be on education, which lies at the heart of secure colleges. It is very important that these young men—and they are mostly young men—have proper access to good education.
Lord Beecham (Lab)
My Lords, the Minister’s reply is matched for opacity only by the very similar reply given yesterday by his colleague Mr Selous to my honourable friend Dan Jarvis. That reply said that:
“The Coalition government legislated for secure colleges and we are now considering the next steps. We remain clear that education should be at the very heart of youth custody”.
What next steps are the Government contemplating? Is it a possibility that the Government will resile from their ill-informed and ill-advised policy of establishing a massive secure college on the Glen Parva site in Leicestershire?
Lord Faulks
The difficulties that exist with youth custody are well known, such as reoffending. Of course, as the House will be aware, the good news is that the number of those in youth custody has reduced from 3,000 to 1,000. This means that those in various forms of youth custody present real problems and real challenges. The secure college pathfinder was a solution favoured by the last Government. We have not ruled out using a secure college. It has not yet received approval at Treasury level, but all of the ideas which it incorporated have not been abandoned. They contain many sound approaches to providing the right answer to this difficult problem.
Lord Elton (Con)
My Lords, when my noble friend makes his recommendations to his Secretary of State, will he emphasise the importance of treating young prisoners as human beings and not as statistics? By that I mean that after they come out of education they have to go back into education seamlessly, which means very close correlation between the local education authority and the prison. Therefore, if you have only one gigantic one you hugely increase the distances to be dealt with, which in itself is a handicap in delivering a good programme.
Lord Faulks
My noble friend makes an important point about the continuity in respect of educational gains which can be attained by secure colleges. He will of course be aware that one of the difficulties with this particular cohort is that they very rarely had any continuity in their education before they went into a youth custody institution. One hopes that not only the habits they will acquire in youth custody but the appetite to learn can be consolidated by the sorts of links he describes.
Lord Reid of Cardowan (Lab)
My Lords, will the Minister bear in mind the very pertinent point made by the noble Lord, Lord Ramsbotham? Whatever the structure, a key element in combating recidivism is the relationship between the young offender and another more mature mentor. In many cases, this can assist in killing two birds with one stone. Some of the people who have proved to be very adept and effective at this are themselves ex-offenders, or indeed, ex-members of Her Majesty’s Armed Forces, both of which groups find it very difficult to get jobs when they come out of prison or the Armed Forces. It is good for the young people, but it is also an opportunity to provide employment for two groups of people who find it particularly difficult to be employed.
Lord Faulks
The noble Lord makes a valuable point. The use of appropriate mentors and role models is extremely important, particularly in a cohort that has very often lacked such role models and mentors in the past.
The Earl of Listowel (CB)
My Lords, following the theme of the importance of continuity of relationships for these young people, is the Minister aware that the policy of the Children’s Minister in the other place, Edward Timpson MP, has been to restrain the removal of children in local authority care from their local authority area and local family community to a children’s home perhaps hundreds of miles away? That is his policy; can the Minister reconcile it with this policy, which, given that about 50% of these young people will have experienced care, will mean that many will have to be placed a long way away from their local authority, community and family if this plan is proceeded with?
Lord Faulks
Of course I understand the noble Earl’s concern. He has been a consistent supporter of those at this level of challenge to the community. Of course, there are challenges with the limited number of people who are now in custody because, by definition, there will not be a suitable secure children’s home or secure children’s training centre in every part of the United Kingdom. However, it is a principle that will be very much borne in mind.
Lord McNally (LD)
My Lords, the House is aware of my interest as chairman of the YJB. Is the Minister aware of how grateful YJB staff are for the widespread support in this House for the work that they do? Is he also aware that, as indicated by the Question asked by the noble Lord, Lord Ramsbotham, there is increasing and welcome co-operation among Whitehall departments —health, education and justice—to make sure that young people who receive education while in custody continue to get education, training or job opportunities once they go through the gate?
Lord Faulks
I am very happy to acknowledge the joined-up thinking to which the noble Lord refers. I pay tribute to him as the chair of the Youth Justice Board for all the valuable work that the Youth Justice Board and he do in helping with these great difficulties that confront the Government. I think that the YJB is joining in with a stocktake generally of the youth offending teams. I know that education is a major concern across government, and it is something that the Secretary of State will have very much in mind.
Employment: Elite Professions
Lord Kennedy of Southwark
To ask Her Majesty’s Government whether they plan to implement the recommendations of the Social Mobility and Child Poverty Commission report on non-educational barriers to elite professions.
The Parliamentary Under-Secretary of State, Departments for Business, Innovation and Skills and for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)
The noble Lord will be aware that the recommendations of the Social Mobility and Child Poverty Commission are for employers rather than the Government. Recruitment practices are also a matter for employers. Clearly, participation in higher education is one of the key factors in improving social mobility and we now have record levels of disadvantaged students entering higher education.
Lord Kennedy of Southwark (Lab)
Does the noble Baroness agree that it is outrageous and ridiculous to make any suggestion that client expectation is a barrier to elite professions doing more to break down non-educational barriers to entry? Elite professions need to do much more to improve the diversity of the people that they employ and to ensure that, no matter where you went to school and where you grew up, if you have made the grade and got the talent you get a fair chance of getting the job.
Baroness Neville-Rolfe
My Lords, there has been a lot of hot air over this report, but what really matters for social mobility is education, getting people into work and working with employers, which we have been doing through the social mobility business compact. It has been focusing on work in schools to raise aspiration, providing fair work experience and inclusive recruitment practices, which picks up what the noble Lord said.
Baroness Eaton (Con)
Would my noble friend agree with me that the best way of improving social mobility is the creation of jobs? Could she perhaps tell the House how the Government are performing on their target of 1,000 jobs per day?
Baroness Neville-Rolfe
I very much agree with my noble friend that having a job is key. This is a Government for working people. To come back to the first point, we know that families with working members have much better outcomes than those with only non-working members. This Government are about education for others, employment and better apprenticeships and we are making great progress.
Baroness Deech (CB)
Does the noble Baroness agree with me, drawing on my experience as a tutor for admissions, that certain government and coalition policies have actually made social mobility more difficult? First, certain potential students cannot afford to leave home and go to better universities; they are forced to stay at home because they cannot afford the maintenance. The Government have not tackled that. I appreciate that tuition fees are not a barrier, but maintenance is. Secondly, the removal of legal aid and the cutting of lawyers’ fees has made enormous difficulty for young, poor people from disadvantaged backgrounds wanting to join the legal profession. It is much worse than it was before.
Baroness Neville-Rolfe
I do not entirely agree with the noble Baroness. In England I believe that we have a sustainable and fair higher education system based on affordable student loans. That is despite dire predictions in this House and elsewhere. I defer to my noble friend Lord Faulks on legal aid. There are opportunities in the professions and the legal and professional firms are really making some progress in trying to widen things. We must encourage them to do that rather than complaining about it.
Lord Lea of Crondall (Lab)
My Lords, is the Minister, who seems to be an expert on hot air, aware of the report just a couple of days ago on this matter in the Financial Times—not noted for its hot air—which reports that one of the employers on this very question of bias in recruitment said, “Some of these people did not go to public schools, so they would not understand our public school jokes”? Well, they wouldn’t, would they?
Baroness Neville-Rolfe
I am not clear what question I am supposed to be responding to. You have to remember that it is not surprising that leading professions and companies seek to recruit from top universities as well as other universities—they are doing both. I speak as a businesswoman when I say that companies need students and candidates with social skills, persistence, know-how and brain power. As I said in reply to the Question, it is very good news that we now have a record level of disadvantaged students entering higher education. This cannot be a one-sided debate.
Baroness Hayman (CB)
The Minister referred to social skills. Does she agree that one reason often quoted by employers for the lack of access to good jobs for young people is insufficient emphasis in the national curriculum in state schools on those softer skills that prepare young people for the world of work? Would she undertake to discuss that issue with colleagues from the Department for Education?
Baroness Neville-Rolfe
The noble Baroness makes an excellent point. I would of course be happy to discuss that with my colleagues in the Department for Education. Graduates need to leave university with a range of skills so that people can succeed in the professions or wherever they choose to go. This is also an important part of the work to which BIS can contribute.
Business of the House
(9 years, 5 months ago)
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Baroness Stowell of Beeston
That the debate on the motion in the name of Lord Flight set down for today shall be limited to two hours and that in the name of Baroness Wheatcroft to three hours.
Pensions: Reforms
(9 years, 5 months ago)
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Lord Flight
That this House takes note of recent and proposed reforms to the state and private pensions, including the triple lock, the introduction of a single tier pension and increased pensions freedom.
Lord Flight (Con)
My Lords, I start, if I may, by declaring my interest and congratulating Dr Altmann—my noble Friend Lady Altmann—on her appointment. I can think of no one better to do the job that she is doing. She is enormously respected in the industry and I look forward to her being a powerhouse in further reforms of pensions and retirement saving. I have been involved in the management of pension funds for 45 years. I am still a trustee of my company’s old pension scheme and have advised the industry body TISA on its major pension reform project.
The first point I would like to make is that I think it is desirable, if possible, for pension reform to have cross-party consensus. This was broadly achieved with the auto-enrolment scheme. For individuals, pension and retirement saving is long term and the one thing that is not desirable is too many changes with changes of government.
I congratulate both the last Government and this one on the reforms that are now being implemented. We have had the most significant reforms to pension saving for a generation.
I have long supported abolishing the obligation to buy an annuity. Indeed, I recollect that I had a Private Member’s Bill on this in the other place. The crucial point is that people are at the mercy of the interest rate cycle. If someone buys an annuity when interest rates are extremely low, they will get a bad deal for the long term. Those are the present circumstances.
With regard to the ability to withdraw money from pension savings subject to an income tax charge, I think that is ultimately desirable and a good thing. One of the big disincentives to saving was that people could not withdraw money if they really needed it for other purposes.
We all heard the Chancellor’s announcement yesterday, and read about it in our papers, with regard to issues around people not being able to withdraw money and charges. I make the point that there are two sides to the story, and a number of regulatory requirements were introduced at the very last minute that need to be dealt with. The fundamental point is that if there is a substantial withdrawal, the life company is obliged to make sure that the individual has had advice on the steps that they are taking, which is quite difficult to organise. I know that the number of inquiries that the industry has had to deal with in the last few weeks has been huge. I am hopeful that in a co-operative way the Government can get together with the industry and sort out these problems so that people can freely withdraw cash and are not overcharged when they do so.
Similarly, I have strongly supported the single-tier principle. The great problem with pension tax credits was that they discouraged people from saving. I hope that it will end up as a complete single tier, as under the present arrangements some people will get more, some less, than they were otherwise going to get. Some issues still need addressing, such as the fact that a wife who has relied on her husband’s pension contributions for her state pension will not be able to do so, yet has not really had time to make alternative provisions.
The triple lock is generous, and there are questions as to whether this will be affordable long term: already 46% of adults are over 50. However, it must be borne in mind that pensioners typically have a higher rate of inflation as a result of energy costs going up than the official inflation figure, so there is a fundamental case for the relative generosity. As noble Lords will be aware, the triple lock means that pensions will go up by whichever is the greatest: inflation, 2.5%, or earnings.
Happily, auto-enrolment is up and running but it is still very modest, at 1% contributions. By 2018, these are to increase to 3% from the employee and 4% from the employer, and effectively 1% is expected from the Government. I make the point that this really is still not enough even under the assessment by the DWP, which has recommended that contributions need to be in the order of 15% of earnings per annum. Still, I think that auto-enrolment is going to be crucial. I am hopeful that, as we have seen so far, the number of people opting out will be very modest.
Areas still to be looked at are the relationship between pension saving and care providers. There have been some useful suggestions that pension accumulation could go straight to care providers without a tax charge where there is the need. In a sense, it is robbing Peter to pay Paul that the Government might otherwise have to pay through other channels, so it is a question of making that easier. I am also a strong supporter of the passing on of residual pension savings to children. This could be a very powerful savings incentive, just as owning a house was very much driven by the attraction of parents being able to pass something on to their children.
A crucial point is that retirement savings are not just about pensions. Different routes have come up. I particularly support the Government’s measures with regard to ISAs, both increasing the maximum and allowing the surviving spouse to inherit the full tax benefits of ISAs on the death of their spouse. This was a very fair and necessary reform. The figures are extremely impressive. ISA totals at the end of the last tax year stood at £470 billion. They are likely to be in the order of £530 billion now, with some 13 million ISA savers. Interestingly, the total volumes of cash ISAs versus security ISAs are roughly the same; the amount going forward is greater with cash ISAs but the total accumulated is roughly the same. ISA saving is running at something like seven times individual money-purchase pot saving, and it is equal to some 60% of total contributions into pension schemes, of whatever sort, by employers and employees. Its great virtue is that it is simple, and in my experience large numbers of the self-employed are using ISA saving for their retirement provisioning.
Many in their 30s and 40s have opted to go into the buy-to-let market as an alternative, largely because property returns have been superior to equity returns. I am amazed to note that there has been such an increase in the number of private sector landlords over the past seven years, making a total of some 3 million landlords, a lot of whom are likely to be individuals in the buy-to-let market. For a lot of people it is the appreciation in value of their owner-occupied house that they will look to as some source of retirement income. There is a need for properly regulated property equity release schemes.
My biggest point is that retirement is an out-of-date concept born of an age when many men did hard physical work and really had to retire. In my experience most people want to work longer, partly for the money but substantially for the companionship. Look at this very House, where I believe the average age is now 71. I greatly welcome the reforms and more reforms and incentives for people to work longer. It is inevitable that in due course the retirement age will rise to 70. It is a function of longevity. Indeed, 70 today is a lot younger than 65 was 40 or 50 years ago in terms of people’s health and life expectancy.
However, people are still not saving enough to provide for their retirement years or in an economic sense. About a third of the population has less than £250 in savings and two-thirds are still not saving at all for retirement. Even allowing for the fact that a lot of people have more than one pension pot, the average pension pot saving per saver is still only £55,000, whereas the DWP target is for people to have a non-state pension income of £8,500 per annum. At a macro level, our savings rate has been too low for too long. The cumulative current account deficit of the last 15 years is some £700 billion and has been financed by selling businesses, property, and in a sense the family silver. It is a major reason for low investment and poor productivity growth. Our economy needs a savings rate closer to 10% than its present much lower rate. I am pleased to note that the Government are committed to addressing the savings gap.
Some issues still need to be considered and resolved, such as the pot follows member versus aggregation debate—I personally think that pot follows member makes more sense—and the need for full and meaningful transparency of cost disclosure. There is also a huge need to get pension savings better managed. I much welcome what the Mayor of London has initiated with regard to small local-authority pension schemes.
Most people with money purchase pensions go for the default option. That is actually not a bad decision, as they are often quite sensible funds, but some 90%—even 92%—are NEST savers, which is particularly illustrative of the fact that people really do not understand the territory. As regards pension direct-contribution savings of all sorts, I am concerned that as people get over 50 a lot is shifted into bonds for investment. Bonds may be safe in the short term but are highly dangerous in the long term if you get a burst of inflation with much higher interest rates. Those over 50 are increasingly having too much of their pension savings automatically placed into bonds under what are known as lifestyle arrangements.
It is a tragedy that RDR has resulted in a massive contraction of pension advice. More than 70% of the population has no source of advice. The Government’s arrangements for advice on the principles are all very good but leave people hanging in mid air when finding out what product to select. It is a tragedy that defined benefit saving has virtually collapsed over the last 15 years. A major cause has been IFRS17, which requires the calculation of the pension liability to be related to gilts, and therefore an artificially low interest rate in the long term.
The reality is that pension schemes that appear to be in deficit are going to be in huge surplus as and when bond interest rates return to normal. The main reason why companies have wanted to close their defined benefits schemes is because of the risk of deficits which they are required to make good. We want to encourage savings and the limits need to be reviewed. My own view is that it would be sensible on the contributions side to limit the tax credit to 20% for everybody and to have a maximum of £50,000. I would also abolish the overall lifetime limit, which is often quite complicated to arrive at.
On 29 June, there will be a seminar in Room 3 to present the proposals of the industry group that has worked with TISA on what other things might be done for the pensions industry. Two of its best suggestions are, first, for everyone to have a digital passport, which would make anti-money laundering requirements much easier to deal with and provide individuals with easier access to information by product, for transfers and to enable them to review their pension and other savings. In a sense, it would be a pension dashboard that people could tap into. The second suggestion is that there should be a much more powerful Minister for Savings and Pensions within the Treasury to co-ordinate, develop and implement savings policy.
The real need is to make pension saving easier. Even among your Lordships, when I have asked people what their attitude is many not surprisingly find it far too difficult and are turned off by it. I believe that is even more true of the country as a whole and that the further reforms that we ought to be looking at over the next five years should involve measures to make retirement saving much easier for people. It is staring us in the face that that is one of the reasons why ISA saving has been so successful.
Lord Hutton of Furness (Lab)
My Lords, it is an enormous pleasure for me to follow the noble Lord, Lord Flight, of Arundel. He brings tremendous expertise and knowledge to our proceedings on pensions and in a sense, although I hate to say this, has made my speech pretty well redundant because I want to echo everything that he said. He made some very important points but that will obviously not stop me, as a former politician, making my own speech in my own way. I hope to avoid repeating all the things that he said but he has done the House a great service. I say that because pensions and retirement saving will be one of the most important issues facing Parliament for the next few years, and the reasons why are self-evident.
Britain is changing; we are getting older and the demographic forces at work will literally change the face of our society in our own lifetime. It is therefore absolutely obvious—I think it has been to us all for a long time—that if we are to manage the effects of that change sensibly and avoid the calamity of the next generation of pensioners finding themselves living a life of poverty, which has been the curse of just about every previous generation of pensioners, then we have to take matters into our own hands. In simple terms this primarily means that, as individuals, we all have to accept more direct personal responsibility for ensuring that we have adequate means in our retirement years to sustain and afford the lifestyle that we want.
This is also a critical point in understanding the reforms of the last 10 years and making sure that they work because, as the noble Lord, Lord Flight, said, we have the best chance of managing this demographic change effectively if we can try to maintain and sustain the consensus about retirement savings and pensions that has existed since the noble Lord, Lord Turner, and his fellow commissioners produced their ground-breaking report in 2005. Sometimes in politics, consensus is not a good thing and you need someone to stand up and say something difficult to change things. That in fact was what the noble Lord and his fellow commissioners did. In the process of producing their report, they established a new common ground between all the main parties. This is one area where we should all strive to sustain that consensus—and, to their credit, the previous Government did that. They took forward auto-enrolment, which is a fundamental pillar of encouraging greater personal financial responsibility for retirement, and implemented those significant reforms. They also took forward a very necessary change to the social security state pension in the United Kingdom. The new single-tier flat-rate pension is an excellent idea. There have been and there probably will continue to be disagreements about aspects and details of those policies. I do not think, however, that there is anyone left standing who does not think that those reforms are some of the essential things that we need to do to encourage more people to save more for their retirement. That is the holy grail that we now have to pursue.
The last thing any of us should want to encourage is a return to the decades of disagreement and division that were the hallmarks of the previous 20 years of pension policy. It will not help us build for the long term, and that is fundamental if we are to encourage more people to save more for their retirement years. A constant chop and change will, by definition, undermine any policy designed to encourage long-term saving. We have to sustain the consensus. We have to maintain it; we have to work at it if Britain is to be a nation of savers. As the noble Lord said, we have an awfully long way to go if we want to be a nation of savers. Our savings rate at the moment is a matter of dispute among economists as to how to best calculate it, but it is probably about 6%. Once automatic enrolment and the reforms that the Turner commission recommended have matured fully, we know that people will be saving around 8% or 9% in the defined contribution schemes in their workplaces. The simple truth is that that will not be enough. It is not going to give people sufficient retirement income for the extra decade or more that they can now expect to live.
I will talk primarily about workplace savings and pensions because these are absolutely fundamental. As I said, we are going to have to take more personal responsibility for our income in retirement, and that is clearly the logic behind the reforms to the basic state pension. The fundamental question that is inevitably going to arise during the course of this Parliament, particularly when we get to 2017-18, when automatic enrolment has matured, is “Are people saving enough?”. It has been a success so far: we have 2 million new people saving in workplace retirement accounts, and opt-out rates have been very low. However, of course people are contributing only about 1% of their salaries today. I do not think many people will notice that coming out of their pay packets. When that starts to creep up to 3% or 4%, people are definitely going to know. Will that increase the rate at which people opt out of these new savings plans? Probably. I think we can expect the opt-out rates to start rising. Therefore, there is going to be a pretty obvious moment in this Parliament when we are going to have to stop and ask ourselves, “Will the current course be sufficient to equip people with the income they need for their retirement?”. I do not think it will be. The question is not “Do we have to look at this issue again?” but “When will we have to look at this again?”. Of course, there are two aspects of this equation—how much people are putting in, and how many are opting out. At some point, we will have to look at both issues.
I welcome the Minister to her place on the Front Bench. As the noble Lord, Lord Flight, said, she is a lady of tremendous status and knowledge of pensions, and we look forward to her time as Pensions Minister with great excitement. To encourage her a little bit, I do not think she needs to start digging around in the undergrowth just yet. It will be important to see what happens in 2017-18, when we get to the point where people are contributing the maximum amount envisaged under the legislation. That moment is going to come during this Parliament. There are some cases of public policy of which we can say, “We tried to encourage people, but they did not take up our incentives. They just went on in the way that they were doing before”. We could do that on this occasion. We could shrug our shoulders and say, “It is all too difficult. We have had 10 years of legislation. We tried to encourage people to save, but they did not”. I do not think we can ignore any evidence that is emerging that people are not saving, or that their savings are not sufficient. We are going to have to do something.
Obviously the question then is “What are we going to do?”, because making people save—removing the right to opt out—is a very big policy step to take. So, too, would be increasing the contributions into these pension plans because, of course, legislation restricts the amount that employers can contribute to 3%. That is a very big step to take. If we get anywhere near that, I would strongly suggest to the Minister that she ought to have another look at the Work and Pensions Committee’s report from the last Parliament and its recommendation that the Government set up an independent pensions commission. I was the Secretary of State who decided not to do that in 2005, so I am holding my hands up and saying, “I am guilty”, but I think that we now need to have another look at this, at the 10-year mark since the noble Lord, Lord Turner, produced his report. We are at this critical juncture, and we may well face some important decisions in the next couple of years about going further, and probably faster, in encouraging more people to save. If we are to take the noble Lord’s advice and maintain the consensus, as I think we should, we must also ask: who and how? What is the best way in which to maintain that cross-party consensus? Would it be best served by the Minister coming to this House and making an announcement, or by bringing together people with knowledge and experience of the industry and the changes that are taking place in society and asking them to report to Parliament on the next steps? There is a precedent, in that we did that a few years ago with the independent Committee on Climate Change, to try to take as much of the politics as we could out of it. There is a useful precedent that the Minister might want to follow. The adequacy of savings will be a major issue in this Parliament and we have to address that before we go any further.
The issue of adequacy can also be tackled from the other end of the telescope. There is the question of what we do with the legislation on auto-enrolment, but there is another debate that the previous Pensions Minister, Steve Webb, opened, which was long overdue, on the adequacy of defined contribution as a savings platform. I think that DC is a good thing and an inevitable thing, as the noble Lord said, because employers were leaving DB and they are not going to come back. There has to be a better savings platform for people in the workplace, and defined contribution will do all the heavy lifting in the decades to come. But it is pretty clear that the track record of defined contribution has been pretty patchy, and there are a lot of concerns about whether it can do all that heavy lifting. The debate that the former Minister opened up on defined ambition pensions is a very worthy one, which I hope that the Minister will find it within herself to prosecute.
I am particularly not a fan of collective defined contribution schemes, not because I have anything in principle against them but because I do not think that they can be grafted on very neatly to the UK pensions savings system. I hope that I am wrong, but I do not think that I will be. Employers are not really showing any signs that they want to share more of their longevity or interest-rate risk with their employees. I do not think that that is going to happen. But there is a lot to be said for the writings of the leading US pensions thinker, Robert Merton, and I hope that the Minister has had the opportunity to read them, or will have shortly. Robert Merton won the Nobel Prize for economics with his work on financial instruments. He has a very clear view of the inadequacy of DC and the fact that it is focused on the wrong risk. We are managing volatile assets and trying to focus on that, and we look at the pension pot and try to grow that, but there is no one really managing the risk that the income that the saver might have when retiring on a DC plan is going to be inadequate. Of course, the wonderful thing about defined benefit plans is that you will know pretty well all the way along what your retirement income is going to be; it will be expressed as a fraction of your earnings, whether it is a career average or final salary. So you will know what your retirement income is and you can plan accordingly. That is a great comfort and peace of mind to savers. Unfortunately, in the switch from defined benefit to defined contribution, we have completely lost the fundamental and important language of income. We talk about assets and the value of those assets, but no one can really talk about income to someone saving on a DC plan: “What is the retirement income that I can expect to see?”. I hope that that will be looked at in the department and, if the Minister is so minded, the department will task a new independent pensions commission with responsibility for looking at it. This is an issue that needs to be explored more fully—a fundamental, almost do-or-die issue. If defined contribution is going to do the heavy lifting, we must keep our focus on DC as a savings platform, in addition to being concerned about whether people are saving enough or at all.
The noble Lord also drew our attention to the other significant reform of the last Parliament—the change to the rules about annuitisation. It is absolutely right that in today’s times people should have more control over their money. We do not want to be treated like idiots or children. At a time when annuities do not look like a good deal for a lot of savers because of the historically low rates of interest, it is right that they have more choice. That is particularly true if that saver also has the benefit of some legacy DB in their savings plan, as they might have accumulated a few defined contributions pots because their jobs have moved and they have changed.
So I have no objection in principle to the reforms, but it is important that the Government are doing something to monitor this and make sure that they know what is going on in the marketplace. They must know what people are doing. I do not see that they have any means at their disposal at the moment for collecting that information. and they need them. They need to bang heads. One can disagree with a policy—people can think it is a good or a bad thing—but, it having been legislated for, it is unacceptable for financial service providers to block people’s access to their pension pots if they want to cash them. If that is what is going on, Ministers need to act.
The Minister has an enormous agenda. I wish her the very best. She has the good will of everyone in this House behind her in tackling some of the enormous responsibilities that she has been charged with.
Lord German (LD)
My Lords, I pay tribute to the noble Lord, Lord Flight, for introducing this debate. He is well known for his commitment to savings. Reflecting on the comments by the noble Lord, Lord Hutton, I must say this is unlikely to be a debate in which there will be a great deal of controversy, but it is a debate in which there will be some need and desire to predict what we might do in the future and to take that step forward.
I congratulate the new Pensions Minister, who has a long and tremendous record as a campaigner and advocate and latterly as the champion for older people. I shall start by quoting her words in the Sunday Times on 31 May 2015. She said:
“I also want to continue the pensions revolution that my predecessor, Steve Webb, so ambitiously started ... we have seen some important changes that will alter the pensions landscape for generations to come”.
I hope she will not mind if I spend a few moments paying tribute to her predecessor Steve Webb who, I understand, was the longest-serving Pensions Minister, certainly in my lifetime—perhaps someone will correct that, but I think that is the case. He recognised that society owes a debt of gratitude to older people for the contribution they have made to making our country a better place through their hard work during their lives. He brought in a pensions revolution addressing some key issues by the legislation he oversaw.
The three factors in that revolution were: preparing people for their retirement; getting people to save more; and making adequate state pension provision—that is so important for lower-income workers and women who depend so much on the state pension. It is worth recognising that the level of the state pension moved, in purchasing terms, from the lowest it had been for almost 30 years in 2008 to the new promised single state pension, which is likely to be more than £150 a week and will be supported by the triple lock. As the noble Lord, Lord Hutton, said, this ambition was shared across parties, but the big changes occurred under the previous Government on Steve Webb’s watch. We on these Benches pay tribute to his knowledge, understanding and drive.
Now we move on—it is time for implementation and to learn lessons, changing and adapting as we move forward putting these ideas and this legislation into practice. I take the point about a savings revolution being needed, so first among all these must be raising awareness and understanding, which the noble Lord, Lord Flight, mentioned. Financial education should start in school. Saving for a pension is not something which crosses your mind when you are getting that all-important first job, but it is important that it does. Later in life, understanding how to make your savings work best for you is a critical judgment, so there is plenty of work for the new Minister, and we on these Benches wish her well with the challenge.
I want to touch on some of the issues that the Government now face. I recognise that in some ways I will be reiterating some of the contributions that have already been made, but perhaps I will be treating them in a slightly different way. On the triple lock, the Government like the concept and have agreed to keep it for the full five-year term of this Parliament. If it is good for the foreseeable future, why not enshrine its use in legislation so that it would take another Act of Parliament to change it? We on these Benches believe that is right, just and a fair answer to raising the state pension. It is a true buffer against a Government making real-terms reductions for a group of our people who can make no alternative arrangements if and when that happens. That is why we would not just keep it but legislate for it.
Auto-enrolment has been a big success so far in the number of people who have been brought into saving. Its rollout to deal with inertia in pension saving has been a success story, but, as the noble Lord, Lord Hutton, said, it has some challenges ahead. With millions of new pension savers now enrolled in a pension scheme, the most encouraging feature so far has been the small number who have voluntarily withdrawn from pension saving. But the most challenging group of companies and people to be auto-enrolled is yet to come, as the self-employed and micro-businesses are brought within the ambit of the legislation. In her response, can the Minister tell us in what ways the Government intend to help this group of people with the bureaucracy that they will face? Will the Government be on hand to help this most difficult segment of our working population into saving?
So far, we have seen no real evidence of companies reducing pay in order to make the employer contributions that the legislation requires. However, as the levels of contribution have to be ramped up, and as wage increases so far have been fairly low, it will take some time to see whether this is happening on any scale and whether there will be a reduction in pay awards in order to make those employer contributions. Yesterday we were told that wage increases are now running at 2.7%, so there is beginning to be a greater possibility that some of that increase may be foregone in order to meet the costs of the employer contributions. We need to be wise to that fact and look out for it.
This issue is closely tied to the increase in contribution levels envisaged in the legislation, and to where we need to go beyond the current legislation. As others have said in this debate, people need to save more for their pensions, and companies will have to match that increase in their contributions. Perhaps the Minister can tell the House what studies of these effects are currently under way and when meaningful results will become available.
A further issue is that of exclusion from saving for lower-paid workers. As the thresholds have risen —now in the £10,000 range, with further rises promised—there is a danger that the earnings trigger will exclude a number of workers from saving who would benefit from being in a pension scheme. Is the Minister contemplating lowering the earnings trigger, so that it brings more lower-paid people into pensions saving?
During the coming months and years, we on these Benches will want to examine tax exemptions on pension contributions. In particular, we will want to consider whether there should be a single rate of tax relief on pension savings—which the noble Lord, Lord Flight, alluded to. We do not want simply to make changes that might create cliff-edges in the way that government investment might work. For example, by simply reducing the tax relief on those earning more than £150,000, you create a cliff-edge immediately.
The issue of charges and fees on pension savings has already been raised in Questions in this Session. We on these Benches will want to examine the Government’s intentions in this matter—not just fee and charge caps but also transparency. In the savings journey travelled between the pension saver and the pension investor, and then back again as savings are withdrawn, there are many tiers of influence, each with the potential to make a charge to the next tier. Savers deserve to know what is happening to their money in each of these tiers, and many of the charges are hidden and not known, so transparency and fee caps will be very much on the agenda for my noble friends on these Benches.
The defined ambition schemes introduced in the last Parliament, providing more certainty of pension outcome than defined contribution schemes, were referred to by the noble Lord, Lord Hutton. There needs to be a genuine debate and examination of the way in which these schemes can be progressed and the take-up of the principle that is outlined within them.
The early evidence on pensions freedom should be available to us fairly soon. We are told that 60,000 people have now withdrawn some of their pension pots, so some early evidence will be available on how the work of this scheme has been for them, particularly their relationship with the Pension Wise scheme. The particular evidence that we want to see includes the inclusion of housing wealth in the assessment, which was, again, something raised by the noble Lord, Lord Flight. With housing wealth being sometimes 10 times the average pension pot of an individual, it is an important factor. We need to assess how important a factor that has been in people’s decision-making about their new freedom and whether that has been fully taken on board in the advice and guidance given by both financial advisers and Pension Wise.
Secondly, has appropriate consideration been taken of making appropriate savings for future retirement? We will also want to examine in depth the effectiveness of the second line of defence recently put in place by the FCA. We need to know what the pensions industry is doing to adapt to all of these changes. It has to adapt because more flexible approaches are demanded by savers as they seek to draw down their money. There is a whole host of new ways in which people take their retirement, and the circumstances in which they do this will also vary. The use of these flexibilities will increase, not decrease.
We are in a new world. Retirement dates are not fixed and people will make choices as they see their future in differing ways. It may be that we will need to consider a more regulated market in this decumulation phase in order properly to protect consumers’ interests. We want to see the evidence of the market and what it is doing. Is it offering appropriate new financial products? We need to examine the early evidence of what the market is offering, and deal with restrictions placed by some companies on people being able to access their money. Also, can and should NEST step in where there are gaps in the market offering?
The Government may have some money in hand in order to support some of these matters because they expect to get tax receipts as the pension freedoms kick in. Tax paid at the marginal rate on the average £17,000 draw-down, reduced to tax on under £12,000 after the 25% tax-free sum is deducted, will not meet the extra £12 billion-worth savings in welfare that the Government are looking for, so they should put some of this extra tax into supporting a better savings culture in our country—an enhanced savings strategy. Noble Lords may wish to consider how that is to be determined during the course of this Parliament, but it is, as both of the previous contributors have said, a significant factor in the way that we need to move forward.
This has been a bit of a canter around the pensions landscape; each item is worthy of a debate on its own. To return to my opening remarks, the legislative foundations are in place, but there is a need to examine the many points of implementation. We look forward to working with the Minister on these matters, and where necessary challenging the Government on their approach. But that is for the future. We wish the Minister well today. I am sure that she recognises the challenges ahead of her. We look forward to her maiden speech and to working with her in the coming years.
Baroness Drake (Lab)
My Lords, I refer to my interests in the register as a trustee of the Telefónica/O2 and Santander schemes and as a member of the boards of the Pensions Advisory Service and the Pension Quality Mark. I begin by congratulating the Minister on her appointment; I look forward to debating with her in this Chamber. She has certainly assumed responsibility for pensions at a time of radical change, but I have no doubt that she is more than capable of embracing it.
Commenting on the freedom of choice agenda is made difficult when the Government’s strategic objectives for the long term remain unclear. People now have open access to their savings, but when the state has auto-enrolled workers into schemes, compelled employers to contribute and invested billions in tax relief, there is a public policy interest in knowing what the Government’s intended long-term outcomes are. As the noble Lord, Lord Flight, conceded in opening this welcome debate, we no longer have a private pension system; rather, we have a long-term saving system. We no longer talk about desirable replacement incomes, because people are no longer required to secure an income. What is the desirable savings pot size for the median earner that policies should be targeting? What is the Government’s aspiration for contribution rates and how will they achieve them? What is the intended balance between individual freedom and societal outcome? As my noble friend Lord Hutton indicated, these are matters of some significance, on which society requires the political system to come to a consensus position.
Let us take employers, for example. Their workplace pensions are key to delivering savings. The Government’s pension proposition has to be attractive to the senior managers who decide on their company’s pension arrangements if we are to avoid a drift to simple minimum compliance. Employers’ disengagement from pensions was, after all, a major reason for the decline in savings that led to auto-enrolment and employer compulsion. Yet their behavioural response to the freedom agenda has attracted very little analysis. There are more changes to come—tax relief, lifetime allowance, annual allowance, salary sacrifice—but what is the impact of policy decisions on the level of employers’ engagement with pension saving? Saving for retirement is a 40-year project and policies must work not only for today’s older workers who have been able to save but also for younger people who are still to save if they are to get to retirement and have a reasonable existence.
There is clearly benefit in giving greater freedom to the saver, but the impact of the extent of the freedoms, the speed of their introduction, the response of the market, the shift of the risk to the individual and the impacts on employers were never fully considered. The Government are dependent on the market to deliver the choice agenda, yet we know that there are features of the pensions market that hinder the proper functioning of competition—complexity, consumer inertia, asymmetry of knowledge—and that legitimise more state intervention than would otherwise be the case.
We see problems emerging that were raised in this House only days ago, in particular by my noble friend Lord Bradley. It was therefore welcome to hear the Chancellor acknowledge that there are concerns that some companies are not doing their part to make those freedoms accessible and that the Government are now considering a cap on charges and have asked the FCA to investigate. Yet the FCA warned some months ago, in its interim report on the retirement income market, that consumers were poorly placed to drive effective competition and that the introduction of greater choice and more complex products would reduce consumer confidence and weaken the competitive pressure on employers to provide good value.
What of the requirement on the independent governance committees to report on draw-down products? Will the Minister be asking them to give the matter priority? The Chancellor advised that he wants to make sure that savers are treated fairly, but the FCA’s rules on treating customers fairly contain no explicit requirement on providers to act in the best interests of savers. They rely on effective competition to deliver for the saver, yet time and time again experience shows that competition is not able to deal with conflicts of interest and the failure to deliver value for money. The Government need to find a sustained resolution to the dysfunctions in this market. We cannot go on endlessly dealing only with the symptoms.
What is required is not an alignment of interests but a hierarchy of interests, where conflicts of interest are resolved in favour of the saver. Providers have to be able to make a profit but only on products which are designed and operated in the saver’s interest and which provide value for money. Now, we face an urgent need for substantive data so that regulators and the Government can identify early and respond quickly to emerging problems. It would be helpful to know from the Minister how the Government intend to meet this need.
New freedoms come with new inefficiencies, which undermine value for money. These include some providers’ restrictive processes for accessing the freedoms, their charges for advice, for transfer out and for transfer in, charges for looking after your money, charges for accessing your money, embedded commission and other charges, which need to be addressed.
There is a danger in the current debate that the message simply becomes, “Everyone must be free to make a dash for the cash and no barriers must be put in their way”, but of course that cannot be right either, and we need a measured debate on this matter. The Government are right to require individuals to take advice in certain circumstances, such as when seeking to transfer substantial defined benefits or protected rights into cash. The risk from pension scams is growing.
It is right that people take time to consider their options, because choices taken can be irreversible. We want providers to behave more responsibly. It is difficult to compel providers to provide certain products, and one would not want to compel the inefficient ones simply because of the debate that is currently taking place. We know that some employers and trustees are reluctant to provide access to choice through their workplace schemes. They are concerned about their own liability. Some fear associating with poor decision-making by savers or assisting access to products in case there is a mis-selling scandal. They are waiting to see how the market evolves.
Providers are setting their own access processes and requirements for customers wanting flexible access. Some face problems. As Martin Wheatley at the FCA observed, the timescale for delivering the freedoms and design products was challenging, and providers struggled to complete due diligence testing on their products. Many have had to significantly change their business model, systems and procedures. For some, that remains a big challenge. Some providers may also be cautious because they fear the risk of mis-selling. When advice should or should not be required is an example of the struggle between public policy and what the market feels it wants as its operating model.
The issue of the ease and cost of transferring from one scheme to another so that people can access their freedoms becomes of increasing importance, as the Government are now discovering. However, we know that there are real inefficiencies in facilitating ease of transfer between one pension scheme and another.
Much of the recent debate is focused on the post-55s, significant numbers of whom were in good occupational schemes. They may not be reliant solely on their DC pots; they may have other incomes, such as from DB schemes, but over time this will change. The savings of future generations may all be DC. Greater freedom and irrevocable decisions put more risk and responsibility on to the individual.
The Minister wishes to promote greater financial awareness and understanding, and the decision to provide guaranteed guidance was a welcome step in that direction. However, the need for guidance over a working life will grow as the personal responsibility to make provision for retirement and other needs increases. Access to advice at a cost that is reasonable, particularly for those on moderate incomes, will not be readily available. People will be left with limited support if there is no source of independent and impartial guidance. People need guidance from a trusted source, delivered by an entity that has no commercial interest in the customer’s next steps. This allows the guidance to be personalised and gets closer to the boundary of the advice—without stepping over it—that can be delivered by a commercial organisation that has a vested interest.
Guidance should be offered at the main life event touch points, such as student loans, childcare costs, changing employment and starting to save. If the future is greater personal responsibility, the provision of support and guidance needs to be more radical. The noble Baroness has been radical in the past and I am sure that she will be so in the future.
Perhaps I may conclude by making a personal plea to the Minister: could she please pay full regard to the position of women in pension reforms? We now face a situation where a little over one in three of the people who are auto-enrolled are women. In part, the problem has evolved because of the earnings trigger—the level of earnings that you have to achieve before your employer is obliged to auto-enrol you into a pension scheme. Fortunately, after several years of argument, the Government have frozen the value of the earnings trigger rather than relentlessly tracking the income tax threshold. I fear that there is a loss of focus on the need for the private pension system to work for women as much as for men. At the moment, two in every three of the people being auto-enrolled are men. I hope that the sororal commitments of the Minister, which have been ably and warmly demonstrated in the past, are not diminished by ministerial office.
Lord Kirkwood of Kirkhope (LD)
My Lords, it is always a pleasure to follow the noble Baroness, Lady Drake. She is an expert and the House is lucky to have access to her experience. I support most of what she has said, but I would underscore her last point about the importance of the entitlement of women in the past and in the future. It was one of the issues that Steve Webb dealt with best, and my noble friend Lord German has paid a substantial and appropriate tribute to him. We are all agreed that we need to be solicitous of women’s rights and entitlements in the country’s future pension provision policy.
I declare an interest. I am the chairman of the General Medical Council’s superannuation DB scheme. It has been a source of education for me on some of the complexities of investment policy and will inform some of the things I have to say. I applaud the noble Lord, Lord Flight, not only for the debate today but for the keen interest he takes in this issue. We are on different sides of the park on some of the economic arguments but no one can take away from him the fact that he has been dedicated to trying to get people to consider a savings policy. He, too, has great knowledge from which we benefit.
I welcome again—I will keep welcoming her for a long time to come—the noble Baroness, Lady Altmann, to her ministerial role. I am going to offer her some quite gratuitous advice: she should refuse to resign. If over the next five years she is threatened with a ministerial reshuffle, I hope she will promise to come and tell some of her friends on all sides of the House that that is a possibility because we know where the Prime Minister lives and how to give people a really hard time. It is stark-staringly obvious why I say that. One of the reasons Steve Webb was a successful Minister is that he was not one of 14—he was in place for five years. If the noble Baroness is given a full term, I am confident that she will make a positive contribution. If the ministerial role is chopped and changed it will be to no one’s advantage. We will be solidly behind her when she refuses to resign. I hope she will take that piece of advice.
I would also advise the Minister to do nothing, take no steps and make no changes until she is absolutely sure that the department has given her the full brief on winners and losers in both the long and short terms. I do not need to tell her that. It is important that we recognise the significance of some of the changes that may be made for ordinary people and the political ramifications of those changes.
As a Scot, perhaps I may remind her that quite a bit of the industry is based in Edinburgh. There is quite a lot of politics going on in Scotland at the moment as well. If she were kind enough to visit Edinburgh, I would personally organise the pipe band. There is a serious point to be made about the other parts of the United Kingdom as well because this is a UK-wide policy area. A lot of it is—and should be—based in the City but there are other parts of the kingdom furth of London. I do not think I need to tell her that, either.
This has been a very good debate which will repay careful study. I want to support some of the things that other noble Lords have said. I am sure the Minister knows already that the game has changed. Thinking about pensions needs to be done entirely differently in the future. I was encouraged that, in his important remarks, my noble friend Lord German referred to the need to look after low-paid households and low-paid members of schemes—particularly DC schemes. I agree with what the noble Lord, Lord Hutton of Furness, said about the significance of DC schemes and the decisions we will have to take about them. I support—well, half support—what he said about the need for a new commission.
Will the Minister go back to the department and ask for the papers about the Pension Provision Group to be dug out? The group was set up by Harriet Harman in about 1992, and a splendid Scot called Tom Ross chaired it. The group was independent and had access to specialist departmental support staff. It did an analysis of the waterfront and came up with the recommendation that eventually led to the Pensions Commission. That valuable contribution from the noble Lord, Lord Turner of Ecchinswell, was therefore spawned by the work done by Tom Ross’s group.
The plea from the noble Lord, Lord Hutton, to have a full-blown rerun of the commission—which I would support—falls on deaf ears because it is too complicated or would take too long. Perhaps I may recommend an alternative. It is not as good, but it would do. It could be done within 18 months and would produce a SWOT analysis which I think the Minister would find very useful. This would be a small, independent group which would look at where the gaps are. As other noble Lords have said, all the reforms that have been put into place have rightly been made with all-party support. We are grateful to be in this position. We should also be grateful for the quality of the industry that we have behind us. We are global leaders in this area.
Although the situation is urgent and needs attention, we should not forget the industry in our deliberations. I think it was really fed up and ticked off by the announcement in Budget 2014 that all these changes would happen “just like that”. I understand why that was done. Some information is market sensitive and some things have to be announced in ways that protect it. However, we must give the industry an honest chance to participate in some of our thinking about the future. We need to be looking at how the pieces of the jigsaw fit together. There are gaps and I think that the Minister will be driven to address them. It would be better if she anticipated them and started thinking about them before they happened.
A total savings culture change is necessary, and I was very interested to see that Mr Martin Wheatley of the FCA said the other day:
“You can no more live in modern society without finance than you could without housing or water”.
Coming from the chairman of the FCA, that is a pretty powerful statement, and I absolutely agree with it. It is the sort of thinking that should underlie all of our policies in the future. In the long term the culture will change, and I am sure that the Minister’s experience will serve her well in driving the agenda.
I agree wholeheartedly with the noble Lord, Lord Flight, when he says that we should promote the Minister to a senior role in the Treasury. If my experience is anything to go by, she will find that the ideas she may have in the future will be blocked by people along the road. This agenda needs to be driven by someone who is in the middle of the spider’s web. I know that she will be in the middle of her own spider’s web, but she needs a bigger web. She needs Treasury support to do what she needs to do, and I think she probably knows that.
In the short term, running repairs are necessary, as is identifying the gaps. A Pension Provision Group analysis would help in that. I concur entirely with the noble Lord, Lord Hutton of Furness, in what he said about occupational schemes. Come 2018, we will need to be vigilant about what is happening to these schemes. I am very worried about this. If I have read the data from the auto-enrolment declaration of compliance report correctly, at the moment there are as many people—5.2 million to 5.3 million—outside auto-enrolment as are inside, and that is only looking at bigger employers. The next phase of auto-enrolment will involve smaller employers. The effect of earnings of £10,000 triggering access along with job definition and self-employment restrictions means that we are leaving a whole lot of people outside the scheme, and that is even before we get to the version of the problems described by the noble Lord, Lord Hutton. He is right to remind us about that. Indeed, he made a powerful speech in the debate on the Queen’s Speech which I read with interest; he has persuaded me about this.
I shall make a quick point about the triple lock. My noble friend Lord German said that there are some savings to be made, and he is correct. Her Majesty’s Government are making huge savings over a 50-year or 60-year schedule, as the Institute for Fiscal Studies has pointed out, by suppressing the accrued rights of S2P from maturing in the future. They are also making huge changes in terms of extending the state pension age. I agree with the noble Lord, Lord Flight, that within reason it is a sensible thing to do, but people need time to plan for it. So any attack on the triple lock, certainly in this Parliament, should not happen. Colleagues should remember that the triple lock can still exist and be cheaper because all you need to do is change the definition of earnings or reduce the increase from 2.5% to 2%. Those are the factors. I would not put it past the Treasury to do this if things get tough later on, but if it happens, I can tell the noble Baroness that she will meet stout resistance from, I suspect, all sides of the House. If the Government do try to do that, we will start to look seriously at the savings they will be making over the long term in terms of SPA and abolishing S2P rights. She will have a fight on her hands if that is tried, so I am warning her of it right now. I will say it only once, because it is important.
Finally, I think that the Pension Wise service is wholly correct, but wholly inadequate. I said earlier that I learn an enormous amount as the chairman of a defined benefit scheme. It is a struggle, although it has a really supportive sponsoring employer who could not do more to support the trustees in trying to defend the interests of the scheme members. It is now fantastically complicated trying to stay ahead of the curve, given the volatility of the asset market and gilts. The noble Lord, Lord Flight, knows more about those than I do. Investment rates and contribution rates over a 40-year period are nearly impossible for individuals to work out, a point made by the noble Baroness, Lady Drake. It is almost impossible for ordinary people to comprehend during a 40-minute Pension Wise interview. They need continuous help.
As the chair of a small superannuation fund, I get fortnightly briefings about the state of the market to try to stay ahead of the game. If ordinary people who know nothing more about the pensions industry than the man in the street do not get enough help, then I am not surprised that they get into ISAs. Maybe we should be thinking more carefully about that, which is another important point made by the noble Lord, Lord Flight. Right now, I am certain that while the guidance guarantee was correct, it is inadequate. It really needs to be substantially beefed up if it is to be safe.
In conclusion, I say to the Minister that I wish her well. I am sure that she will be successful and that she will be in her role for five years, because if she is not there will be more to-do about it, in my view. She is part of a one-nation Government who are contemplating £12,000 million of cuts, if the Chancellor is to be believed. We will also be looking to her to fight the good fight within government, to make sure that low-income families in particular, who are trying to save and to make proper provision for an adequate retirement income, are properly protected by this one-nation Government over the course of these cuts. I wish the Minister well.
Lord Stoneham of Droxford (LD)
My Lords, I, too, congratulate the noble Lord, Lord Flight, on initiating this debate and on his remarks. I have known him for nearly 50 years, and I can honestly say that I have never agreed more with one of his speeches than the one he made today. I also join in welcoming the noble Baroness, Lady Altmann, and I look forward to her maiden speech, particularly given her experience at the consumer interface. I hope that one of the things she will concentrate on as the new Minister is that area of pension policy. I and my colleagues on these Benches, my noble friends Lord German and Lord Kirkwood, saw the legislation through the coalition Government from these Benches. It is good to see that this was actually one of the most successful parts of the coalition Government.
I join in thanking Steve Webb today for all the work that he did in the coalition. That team effort was built on his very successful working with Iain Duncan Smith and the noble Lord, Lord Freud. This produced reforms that in my view would not have happened with a single-party Government. It built—and this is another lesson for pension policy—on the reforms initiated by the previous Government and the foundations prepared by the Turner commission, whose membership included the noble Baroness, Lady Drake. Turner’s vision was of a simple state pension that adjusted to life-expectancy improvements, with automatic enrolment into private pension savings and with the full back-up of the state-sponsored scheme that is now NEST. The coalition’s achievement was really to review and then reform the structure of pension policy, which is now simpler and more coherent. However, as has been raised in this debate, we still need to cope with how to raise the actual level of saving.
Steve Webb brought huge experience of pensions and expertise into government. I was very proud to have been associated with Steve in the pension review which our own party carried out in 2003-04, which set out the case for a citizen pension. This has effectively become the higher state pension and is set at the level of pension credit. It was in our manifestos in 2005 and 2010, and it included a commitment to the triple lock. Despite the restraints on public spending that we had in the last Government, it is good that both those measures—the triple lock and the introduction of the higher single state pension—were supported.
Steve Webb had to fight hard in government to get that, particularly the single state pension, especially in the middle of the Government between 2012 and 2013, and it is right that he should be proud of that legacy. He has effectively restored the Beveridge commitments that there should be a basic state pension approaching 20% of average earnings to provide a minimum standard of living while at the same time acting as a platform on which private pension savings would be built. The triple lock stops the withering away of the relative value of that state pension, which has been going on since 1981.
A couple of other reforms were important in the coalition Government. We undertook a review of public pensions, which was conducted very thoroughly by the noble Lord, Lord Hutton. It has not been mentioned in the debate. It was not a popular thing to do, but it had to be done. The coalition, and the consensus that that report helped to introduce, helped the introduction of those reforms, which are ongoing.
Although auto-enrolment had been envisaged by the previous Labour Government, it was reviewed by the coalition. It has been well introduced and we have had success so far, but as the noble Baroness, Lady Drake, warned us, there are issues that we will need to follow up. I hope that the Minister will give us some of the latest figures on auto-enrolment, as the figures that I have seen have not been updated since last year. Contributions are still too low, but the introduction of auto-enrolment has to be phased in. It is a start, and what we need now is stability of policy-making.
Two other reforms were introduced by the previous Government. Steve Webb was always concerned about charging. He imposed a cap on the auto-enrolment schemes, which was welcomed. The Government then got into the issue, which again I support, of providing choice and the ability for people to use their pension funds more flexibly. That was almost inevitable once people began to question the returns they were getting from annuities, as the noble Lord, Lord Flight, said. We need to encourage more saving. Frankly, if people feel restrained and do not have that choice, that in itself will be a deterrent to saving.
Looking to the future, there are a number of priorities that the noble Baroness, Lady Altmann, could look at. As people have said in the debate, there is a need for stability: people need certainty that these policies will now be bedded down and continued with. I think Steve Webb mentioned this recently: if there is one area where the Government could have done more it is improving communication and education. People need to save more, and if they are to be encouraged to do that they have to have a better understanding of and confidence in the policy, which needs greater stability.
I hope that we will use the digital facilities to help them. I will give one example. In the previous Government we tried to have better communication with people who were about to take their state pension, because there is very little communication with them. I suspect that this is the experience of others: every year I get a letter about my winter fuel allowance, telling me that it has been paid into my bank account. Frankly, that money and that communication should be used to prompt people either when they are undercontributing or when their pensions are not adequate to meet the requirements of their retirement. Just as endowment policy companies have been forced to write to people where their policies clearly were not delivering what they were meant to deliver, we should look at improving communication with regard to state pensions. It can be done more easily and cheaply digitally than by a letter through the mail, which I still get for my winter fuel allowance.
Now that the structure is in place for policy, clearly we have to look at other means of improving better saving. I support the views of the noble Lord, Lord Hutton, that we must look at the defined contribution alternatives and particularly the defined ambition schemes as a way of widening the debate to deal with the issues and people’s concern as they look at their savings and the poor returns that they could be getting from their defined contribution schemes.
Providers will be the key in the future. The confidence which consumers and potential pensioners have in the providers of their pensions is essential. There is still a lot of distrust over charges, because they are misunderstood and often hidden. If we are going to get into the whole issue of freeing up draw-down options, we must deal with the fact that every time we have had a reform in pensions and financial services, it has provided an opportunity for further fraud and mis-selling. If we introduce these things too quickly and before proper regulation is in place, we will have difficulties, and that will undermine confidence in savings. If there was a criticism, it is probably fair to say that the opening up has been done too quickly, which leads to the possibility that we will have more problems in the future.
We could have done with a few more years of Steve Webb in charge. However, I am sure that the noble Baroness will contribute to the ongoing debate in this important area, and I know that Steve Webb will be contributing to the debate outside Parliament. We on these Benches salute Steve Webb’s achievements in government and we hope that the noble Baroness, Lady Altmann, will defend and develop his legacy and that of the coalition in government.
Lord Bradley (Lab)
My Lords, I also congratulate the noble Lord, Lord Flight, on initiating this wide-ranging and thoughtful debate. I was particularly struck by his statistic on the average age of the House. Having recently reached state retirement age, I am pleased that I still fall below the average age in this House. I also welcome the noble Baroness, Lady Altmann, to her new position as Pensions Minister and, like all noble Lords, I look forward to her maiden speech at the conclusion of this debate. As has been rightly said, we know that she has tremendous expertise in this area, which everyone in this House will benefit from. She is warmly welcomed.
In the limited time available to me, I will concentrate on the issue that I believe is currently foremost in the public’s mind—that is, how the pension freedoms flowing from the Taxation of Pensions Act and the Pension Schemes Act, which came into force in April of this year, are being implemented and how they are impacting on customers. I said at Third Reading of these Acts that implementation was barely nine weeks away, that I remained deeply concerned at the speed at which changes were being introduced and that the issue,
“will be closely scrutinised both inside and outside this House to ensure that the public’s interests are properly and fully thought through and protected”.—[Official Report, 5/2/15; col. 797.]
It is clear that this remains our number one priority, although I recognise from the very thoughtful contributions to this debate that there are a number of other important issues, such as the single-tier pension, the triple lock and auto-enrolment, which we must return to in future debates.
Let me be clear again that Labour supports the introduction of greater flexibilities in how people access their defined contribution pensions, as we believe that it is right for people to choose how to use the money that they have saved. However, we have said that there are three tests for the reforms. The advice test—is there robust advice for people providing for their retirement and measures to prevent mis-selling? The fairness test—the new system must be fair, with those on middle and low incomes still being able to access the products that give them the certainty in retirement that they want, and the billions that we spend on pension tax relief must be available across the board. The cost test—the Government must ensure that this does not result in extra costs to the state, either through social care or pensioners falling back on means-tested benefits, such as housing benefit. We will continue to monitor the implementation of the reforms against these tests.
In the run-up to the introduction of the reforms, we called for the FCA to introduce a second line of defence, requiring providers to give information to those looking to access their pension pots. We were pleased that during the passage of the Bill the Government accepted that call from this side of the House.
We also called for the Government to consult on developing a charge cap for income draw-down products, with a focus on those offered by a saver’s own pension provider, on the assumption that these customers may have taken the least active approach to choosing a new product. At that time we highlighted the research from Which?, and I quote from it again:
“Based on a scenario of someone with the typical pension pot of £36,000, drawing down £2,000 a year, we calculate that a cap of 0.5% would leave someone in our scenario around £10,300 better off than with charges at 2.75%. A 0.75% cap would mean that they have a total of around £8,800 more over their retirement and a 1% cap would give them around £7,500 more”.
So obviously it is pleasing that the Government are now consulting, through the FCA, on these caps. As we have heard in the debate, though, these charges and the consultation must be transparent, and we must come to a sound but quick conclusion to ensure that customers do not continue to be ripped off by high charges.
During the implementation phase, in the wake of consistent concern about fraud, we asked the Government to take action to give savers greater protection. We suggested that a Labour Government would introduce a new cross-government task force on tackling fraud and scams, overseen by the Pensions Minister. We also suggested a new kitemark so that savers could recognise regulated pension products, and a cooling-off period so that savers had the time to make a final decision about their pension pot to protect them from handing over a lifetime’s savings to potential fraudsters. I am sure that the new Pensions Minister will want to reflect on those proposals in her new role.
Let us consider a little further what has happened in the three months since the introduction of the flexibilities. Already, in the wake of their introduction, many concerns have been reported about fraud and, as my noble friend Lord Hutton mentioned, restrictions on the public’s access to their savings. First, I turn to fraud again—I think it is a very important matter. There remain persistent concerns that companies offering fraudulent or poor-value products will use the reforms as an opportunity to persuade savers to part with their cash. The Daily Mail reported on 23 May this year that:
“Pension savers are being warned to be on their guard against fraudsters who pass themselves off as working for Pension Wise, the Government-backed pension guidance service—but whose aim is to con you out of your savings”.
Research from the consumer group Which?, published six weeks after the pension reforms came into effect, found that one-third of over-55s who are not yet retired have already been contacted by someone looking to sell them a potentially poor product. The Minister has suggested that tackling this kind of fraud is one of her priorities in her new role as Pensions Minister. What action are the Government taking now to monitor the levels of potential fraud in the market, and how are they ensuring that, alongside the prevention of fraudulent products, savers are protected from products that may offer a higher degree of risk than they realise they are taking on without full knowledge?
Secondly, there is the difficulty of accessing savings. The Daily Telegraph has been running a campaign highlighting the difficulties that some savers face in accessing their pension savings in the way that they want to. There are two main issues: first, providers do not yet offer the type of income draw-down products, or options for taking some of their savings as cash, that the savers actually want. The ABI has been robust in defending pension providers’ behaviour in this context and highlights the fact that these reforms have been introduced at speed. A Financial Times report on 13 June quoted Huw Evans, chief executive of the ABI, who said that the industry said that it had been set an unrealistic timetable to implement the changes announced by the coalition Government in the 2014 Budget. He went on to say:
“So much has been done at the last minute … The first thing we need is absolute regulatory certainty about what providers can do and what they can’t do”.
I would be grateful if the Government would comment further on what they are doing to look at that issue.
The third issue that I want to highlight is advice, which several noble Lords have mentioned, and which is a crucial part of public confidence in the new system. Let us consider providers requiring savers to access advice before accessing their pension pot. Several providers require savers to access advice before taking out their pensions as cash or in an income draw-down scheme. This highlights two problems. First, some providers see a lack of regulatory clarity around their responsibility if savers take up options that prove not to be of best value, or indeed detrimental to their finances. The FCA has published guidance to providers but says that it will review it this summer. Providers argue that this could be seen as a consequence of the rushed nature of the reforms. Secondly, there is a lack of affordable advice to those with smaller pension pots. Pension Wise can offer only guidance, not regulated advice. I would be grateful if the Minister would clarify the circumstances in which the Government believe that people should take advice before accessing their pension pot, and set out what they are doing to ensure that affordable services are there for all those who need them.
Most importantly on the question of advice, what action are the Government taking to monitor the take-up of Pension Wise and advice from citizens advice bureaux, and the level of customer satisfaction with the service? I put down some Parliamentary Questions on this matter but, unfortunately, to date they have not been answered—otherwise, I might not have had to press the Minister on those points today. There also appears to be an absence of any plans for the collection and publication of data on Pension Wise usage. This would be an important measure, providing basic user feedback on the service itself, its quality and whether it was helping people to navigate the new pension freedoms.
What action are the Government taking to monitor the type of products that people are accessing, and the implications of this for access to means-tested benefits and further cost to the Government as a consequence? What current assessment have they made of whether the increase in tax revenue that they were predicting in 2014 from the freedoms will be realised? Are the Government enabling people to sell annuities that they have already purchased in exchange for a cash sum? What progress are they making on that reform?
As I said, time is very limited and these are extremely important issues for us to debate. I commend all the contributions that have been made. I am sure that all of us across the House seek to ensure that the consumer’s interests are always protected and that the public remain confident that the new freedoms being rolled out are in their best interest. I know that we will receive a very thoughtful response in the maiden speech of the noble Baroness, Lady Altmann, to all the issues raised in the debate. I welcome the Minister to the Dispatch Box.
The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con) (Maiden Speech)
My Lords, I am proud and honoured to stand here today as a Member of this House and thank my noble friend Lord Flight for initiating this debate and for the many important and interesting points he raises, which I look forward to discussing with him. I also thank other noble Lords for their kind words. I must say that I am finding this such a friendly place. I am enormously grateful to my two supporters, my noble friends Lady Wheatcroft and Lord Freud, and to the doorkeepers and all the wonderful people who make this great House work so well.
I am particularly pleased to be among so many notable experts—especially all the noble Lords who have spoken so eloquently today—who have a deep knowledge of the UK pensions system. As someone who has studied and advised on pensions policies independently, I am excited to have joined the Government, with the opportunity it gives me to work inside this House to try to deliver the important pension reforms already under way, and initiated by my esteemed predecessor Steve Webb.
In the past 15 years or so, I have worked really hard to help ordinary pension savers. I have been involved in a number of campaigns trying to achieve justice for those who have lost out in our pension system, and it has been a privilege to have been able to make a difference to so many people’s lives. That is what motivates me. I earnestly hope that, in my new role, I will be able to help many more—time will tell. I thank the many noble Lords who have already shown me such warmth, kindness, support and friendship since arriving in the House.
As this is my maiden speech, I hope I may share with noble Lords a few words about my background. My mother, a wonderful woman, well liked by everyone, tells me that I always had a strong sense of social justice, helping others wherever I could. Even at school I would stand up for those who were bullied. I remember my parents being proud of me for defending my friend one day and telling me, “Don’t stand by, stand up, stand strong”. I often think of those words.
My parents and their families were refugees from eastern Europe who arrived here with nothing. All my grandparents were so grateful for the freedoms and opportunities they enjoyed in this wonderful country of ours. I have been asked why I chose Tottenham as my “place”, and can assure noble Lords that this is not because I have a hidden talent for playing football. Actually, my father’s parents lived at their small shop in Tottenham—the Hale Bargain Store. I have many fond memories of serving in the shop and then walking to football at White Hart Lane, holding hands with my father and granddad in the Tottenham Hotspur glory days. As I am the last member of my family of Altmanns, I have chosen Tottenham as my “place” as it holds so many special memories of my time there.
Sadly, my father passed away in his 50s and never reached retirement. This is quite poignant for me given that my career has focused on helping people prepare for, and enjoy, retirement. After reading economics and studying at Harvard, I completed a PhD on pensions and later-life poverty at the London School of Economics. I then worked in the City and spent many interesting years managing institutional assets, mostly pension funds.
I took time out after having my third child and then returned to corporate life as an independent consultant, working on pensions and investment policy. I advised the Treasury and the No. 10 Policy Unit, while also working with many top international firms on pension investment, risk management and member security. That work led to public recognition as a pensions expert and consumer champion, which is ultimately why I am here today, among such distinguished company.
Turning to the subject of today’s debate, I first express my gratitude for the important work done by the Pensions Commission in generating the momentum that has brought us to the point we have now reached. The commission’s excellent analysis showed that any system of private pension saving needs to be considered against the background of the state pension and, rightly in my view, concluded that means-testing must be reduced; state pensions should be flat-rate with the widest possible coverage and should rise in line with earnings; and that private saving must be facilitated. That is why the delivery of the new state pension, rolling out auto-enrolment to all employers and ensuring that customers are treated fairly in the new pensions landscape will be major priorities for me as I do my utmost for the pensioners of today and the future.
The reforms put in place so dedicatedly by my predecessor in the last Government—I echo the many tributes paid to Steve Webb—are now reaching a critical stage. I am well aware that the real tests for success are still to come, notwithstanding the encouraging trends so far. I am also actively aware that, as the noble Lord, Lord Hutton, mentioned, maintaining a consensus is vital. I think there is broad agreement that a base level of state pension is essential. The value of the basic state pension as a proportion of earnings had been in almost constant decline since 1978. However, with the introduction of the triple lock, the previous Government helped to ensure that today’s pensioners now receive the highest share of basic state pension relative to earnings in two decades, so that pensioners are protected even in tough times. I repeat the Prime Minister’s commitment that this triple lock will be maintained during this Parliament.
As many noble Lords have said, the current state pension system is one of the most complex in the world. State pension provision has undermined private pension saving as too many pensioners just ended up on means-tested benefits that penalised their private income. The new state pension introduced by my predecessor—I echo the remarks of the noble Lord, Lord Stoneham, in that regard—will significantly reduce pensioner means-testing. People therefore have a better chance of knowing what to expect from the state pension, so they can plan any additional personal retirement income they may want or need on top. Unfortunately, the new state pension has not yet been properly understood. This is mainly because of the complexity of contracting out, and we need to communicate this more clearly. I absolutely agree with the noble Lord, Lord Stoneham, about the importance of communication. This is an area on which I have already spent an enormous amount of time in my new role. I reassure my noble friend Lord Kirkwood that among the plethora of briefings that I have requested from my team, I have already asked for submissions on winners and losers and will now add to that ever-growing list a request regarding the Pension Provision Group. I should also let him know that I hope to be in Edinburgh in the middle of July and look forward to the band.
Rising longevity means that successive generations are spending longer and longer in retirement. This is, of course, pretty good news. However, we all know that there are also huge cost implications for state pensions, which is why we will have an independent review of the state pension age by 2017. I want the review to consider not only rising life expectancy but wider social, occupational and gender factors. I reassure the noble Baroness, Lady Drake, and the noble Lord, Lord Kirkwood, that I am acutely aware of the disadvantages faced by women in our pension system.
Let me now address the pension freedoms. There are some who say that the financial industry or the Government know best what people should do with their private pensions and that most people cannot make sensible decisions for themselves. I disagree. Yes, some may be reckless and most will certainly need protection, guidance and even advice but the new pension freedoms are right, in my view. I have long been an advocate of trusting people with their own money. I was acutely aware of how the one-size-fits-all approach of the past meant that too many people—unless they had very large pension funds—were forced to buy annuities that were often not suitable for their needs. I am most grateful for the support for the new pension freedoms, in particular from the noble Lord, Lord Bradley.
The previous system most benefited the wealthy but we have now offered more choice and flexibility for the majority of savers as well. I should like to stress an important point: the reforms are particularly helpful in that they use the tax system to incentivise people to keep money in their pensions into later life. By taxing lump sum withdrawals, removing the 55% tax on death and allowing pension savings to pass to the next generation free of inheritance tax, there are strong reasons for people to keep pensions rather than spend them too soon. Most importantly, these reforms will also encourage more people to save in pensions in the first place.
Of course, we must also make sure that customers have good value options to choose from. The pensions industry needs to help individuals to act as they would like to and as the law now allows but, so far, too many firms are not offering many of the new options to their customers, or they are imposing hefty charges, lengthy delays or exit penalties on those wishing to transfer to other providers. This is most disappointing.
My right honourable friend the Chancellor of the Exchequer announced yesterday in another place—this was welcomed by the noble Baroness, Lady Drake—that we will be launching a consultation next month, asking the industry, consumer groups, media and individuals to submit evidence of the reality facing customers in this new landscape. We need the evidence to inform any action that might be required to ensure that the market works as intended and customers are treated fairly. We must not allow consumer rights to play second fiddle to the interests of large financial firms. So far, it is clear that competition has not always addressed consumer detriment but, ultimately, it is in the interests of providers to look after their customers well. Their long-term success requires a new approach, and I assure noble Lords that I am at least as concerned about this as they are. I intend to take action to drive fair treatment of customers. I am also concerned about the transparency of all fees and charges for pensions and savings products. The noble Lord, Lord German, rightly mentioned this. I share the sense of urgency expressed by the noble Lord, Lord Bradley, and I reassure him that I will reflect on his other remarks.
It is also important that the pension freedoms have been accompanied by the creation of Pension Wise. I am grateful for the support of many noble Lords, including the noble Lord, Lord German, and the noble Baroness, Lady Drake, for this service. Pension Wise has already been used by thousands of people. Its free and impartial guidance helps pension savers understand the options available to them and the risks and costs associated with each. People also need to be alive to the risk of scams and we must keep working hard to raise awareness of this important issue. I can tell the noble Lord, Lord Stoneham, that I have also already had conversations with the FCA about this issue, financial advice and the difficulties faced by advisers and their customers in accessing affordable advice. In addition, we need to improve financial education, as the noble Lord, Lord German, rightly said. Public understanding of the long-term savings and investment market is currently inadequate.
As well as problems with pensions, I have, for many years, been concerned about the looming crisis in social care funding. The ageing population means that there will be an enormous surge in the numbers needing to rely on care in coming years, and there is simply no money set aside to pay for this. There is still much more to be done to incentivise saving for later-life care, whether as part of pension provision, separate care savings plans, a widespread insurance system or a combination of all these.
Turning to auto-enrolment, the coverage and adequacy of pension saving had been in rapid decline for many years. Unfortunately, the rising costs and risks of defined benefit pension provision led, as we have heard today, to employers closing traditional defined benefit schemes. I have great sympathy with the many employers who have been struggling with ever-increasing pension liabilities in the current, exceptionally low interest rate environment. Pension provision is clearly moving towards defined contribution, which employers are using to replace defined benefit. It is encouraging, however, that automatic enrolment has so far been successful and that opt-out rates have been really low, especially among young people, so that coverage of workplace pensions is once again increasing.
I can inform the noble Lord, Lord Stoneham, that as of last week 5.25 million people have been automatically enrolled, 44,757 employers have met their automatic enrolment duties and the number of eligible employees participating in workplace pensions has increased by 900,000, to 11.7 million. But we must not be complacent: half of all employees have been automatically enrolled but this accounts for only 4% of employers and contributions are low, as the noble Lord, Lord Hutton, rightly remarked. The hardest work is just starting, as there will be many challenges in ensuring that the huge numbers of remaining employers manage the auto-enrolment process. In particular, I am conscious of the situation of micro-employers and I reassure the noble Lord, Lord German, that I am actively engaged in ensuring that auto-enrolment for the smallest employers is successful and that they are given an easier way to manage this issue. I have already had many meetings on this topic.
Of course, a major factor in people’s retirement income is how much and for how long they save into a pension but, as life expectancy keeps rising, it is also imperative to help people stay in the labour market in later life, including beyond the state pension age if they choose to do so. As my noble friend Lord Flight rightly said, we need to retire the traditional concept of retirement. In that vein, I was amused by and grateful for the remarks by the noble Lord, Lord Kirkwood, about my possible retirement from my new ministerial role, even before I have made my maiden speech.
In conclusion, my aim as Pensions Minister is to try to make pensions work better for people. As I explained to your Lordships at the start of this speech, I have been involved in all aspects of pensions for my entire career. In this work I have always believed that pensions are not just about money. Ultimately, they are about people. We all hope to have a pension one day to help us enjoy our later life. Pensions are precious and need to be nurtured. So many of us have taken them for granted. As the Prime Minister announced to the press when asking me to join his Government:
“What we are doing is taking the country’s leading expert on pensions, on savings, on financial education, and … she will be at the heart of Government, making sure we complete this great revolution where we are giving people much more power to save, to access their pension, to pass their pension on to their children, because we want to create a real savings culture in our country for everybody”.
I realise that my new role in government and as part of this House is a huge responsibility. There is much to do. I have had the privilege of working with a large number of noble Lords from all sides of this House over the years, and I hope I can count many as friends. I would like to get to know and work with more of your Lordships in a spirit of co-operation and consensus rather than confrontation.
These are national and social imperatives in which we all have an interest, and I will try my best to make policy work better for people from all walks of life. With that in mind, I look forward to working with the House on the challenges ahead.
Lord Flight
My Lords, I congratulate my noble friend Lady Altmann on her speech, which was very helpfully down to earth and displays that she has already got her feet more than under the table in dealing with a lot of what must be dealt with. I am sure we all wish her success.
I thank the noble Lord, Lord Hutton, for his kind remarks and for what he has contributed, particularly his work on the changes to public sector pensions. This was difficult and sensitive territory, and a workable compromise emerged. I just make the point—which I think the noble Lord, Lord Hutton, was perhaps making—that it concerns me that the gap between the pensions available to those working in the public sector and those working in the private sector is wider than I wish it were. There is a somewhat miserly DC arrangement left in the private sector, and there is the DB arrangement left in the public sector. I am not quite sure what the noble Lord, Lord Hutton, was recommending, but he asked: is just DC pension provisioning sufficient? I have a rather unthought-out vision of whether there could be a pooling arrangement that amounted to more of a DB scheme and where longer-term risks could therefore be taken in the way investments are made. There is a need, certainly in large organisations, for employer co-operation. It is very sad that we had the best pension system in the world with our DB system, which was able to function because it could take a long-term view of the management of its assets.
Whenever I have asked the Government why they do not do something about IFRS 17, which has made a mockery of DB pension liabilities, the answer I have always received was, “This is for the profession, and not the Government”. I am aware, however, that when the same issue arose in the US, Congress rightly did not stand for such nonsense, and used its power to stop an accounting standard damaging pension arrangements.
I also thank the noble Lord, Lord German, for his kind remarks. He made some very useful points, to which my noble friend Lady Altmann responded. The question of what tax relief should be is important, and, strangely perhaps, we are in agreement that it should really be set at a universal level.
I thank the noble Baroness, Lady Drake, for her very well thought-out contribution to this debate. She raised a lot of sound intellectual questions about what needs to be looked at. My only concern about more involvement by the FCA is that it creates yet more complexity. As many noble Lords will be aware, the whole issue of why the industry is perceived as not having responded adequately to the changes has been largely the result of what it is obliged to do under FCA requirements.
There is not time to go through other contributions, but this has been an extremely valuable debate, with many very constructive contributions made across the House. I find it very encouraging that the spirit of consensus is here and looks as though it is staying.
Economy: Creative Industries
Baroness Wheatcroft
That this House take note of the contribution of the creative industries to the United Kingdom economy.
Baroness Wheatcroft (Con)
My Lords, it gives me genuine pleasure to introduce this debate on the economic importance of the creative industries. It should not be so much a debate as a celebration, because our creative industries are thriving. The latest government figures show that the creative industries together were worth almost £77 billion to the economy in 2013, and they have grown considerably since then. They are on a roll: they have been growing at three times the rate of the UK economy as a whole for several years. They are creating jobs at a remarkable pace. Between 1997 and 2013, job creation in the sector grew by 3.9% a year; the economy as a whole managed just 0.6%—much better than many countries, but the creative industries show just what can be done. There are now 1.71 million people employed in the creative industries.
But statistics tell only part of the story. We all know that the creative industries do not generate just money and employment; they bring joy and enlightenment—they improve life for everyone. At the Globe Theatre, Shakespeare has been brought to life for children who never thought they could enjoy it. Some of our modern novelists are opening doors to the imagination for people who never thought beyond the reality that for them was really quite mundane. Harry Potter turned a generation of youngsters into readers when their parents had almost given up hope.
Whether it be music or film, theatre or museums, art or books, the UK is delivering quality, variety and innovation. On Wednesday evening America’s First Lady, Michelle Obama, dropped in to see the Victoria and Albert’s magnificent exhibition—ground-breaking in its use of technology and imagery—of Alexander McQueen, under the title “Savage Beauty”. If she had had a little longer to spare, there are many other things that she could have taken in. I particularly would have liked her to take a look at what the British Museum has on now, as I am deputy chairman there. She could have seen a fantastic exhibition of Greek sculpture, “Defining beauty”, and indeed it is beautiful.
There are so many other cultural delights to savour in this country, and there is no doubt that our arts and culture bring visitors to the UK in droves. Tourism is now the UK’s fifth-largest industry. I am glad to say that in this year’s election campaign, unlike the previous one, every one of the main parties had tourism in its manifesto, a recognition of how important it is. Our arts, our culture and our heritage strongly influence the decision of people to visit the UK. According to the Association of Leading Visitor Attractions—I declare an interest, as a director of the association—the number of visits to the country’s top museums, parks and heritage sites rose by a remarkable 6.5% last year. Most of those visits are from people who are going to bring more money into the economy and go away happy rather than feeling robbed—and you cannot say that for every industry.
Our creative talents are flourishing in every sector. Our theatres and orchestras attract culture-hungry visitors to the UK and, of course, are significant earners overseas. We are currently very successfully exporting Her Majesty the Queen, in the shape of Helen Mirren and “The Audience”, which is playing to an ecstatic audience on Broadway. We are excelling in a way that other countries envy. I was delighted to learn, courtesy of the Arts Council, that its money is being spent in part on the Hip Hop Foundation, without whose benefit we would not now be enjoying what Rizzle Kicks brings to the audience. We have talent on a grand scale. I am still bemused why “Britain’s Got Talent” has to resort to giving the first prize to a dog that cannot even do its own stunts—we have people who can do their own stunts.
In the creative industries, this House boasts representatives of virtually every aspect of the sector, from composing to broadcasting to writing and film producing, and I am much looking forward to hearing from so many experts here today. Only this week, I was able to shake hands with Lionel Richie in the Peers’ Dining Room. Sadly, he was eating rather than doing the cabaret, but it was good to see him here. This House welcomes talent from the creative industries.
Government has played a part in fostering the creative industries, of course. In times of austerity—and we have certainly been living through them—there are inevitably going to be cuts. Budgets have to be rationed, but the investment in the creative industries has continued to be something that the Government have taken very seriously. Particularly noticeable are the tax reliefs for the film industry, introduced in 1997 by a Conservative Government and built on by successive Administrations. I cannot deny that another very creative industry has grown up around those tax reliefs, but let us not get involved in that niggle, as steps are being taken to deal with that. Let us concentrate on how successful the actual tax reliefs have been.
In 2008, the total spend on making feature films in the UK was £723.1 million, and by last year that figure had more than doubled. Inward investment into the industry has trebled over the same period, to reach more than £1.2 billion by last year. This is money that could easily have gone elsewhere, for there are other countries just as keen as we are to bring the film industry and big blockbuster movies into their economies. That is why the tax reliefs make a difference, and why they are staying. For every pound that the Treasury puts into the film industry, it is getting £12 back. That does not sound like a bad deal to me.
And the film industry is making winning products that we all enjoy. The Oscars are flowing in our direction, the film industry is a success and, of course, it nurtures so many skills and businesses around it. It needs wig-makers and set builders, for instance, as well as make-up artists, sound engineers and catering—and I now know that that means hot food available at any time, or it gets dangerous. Pinewood, where my noble friend Lord Grade is chairman—although, sadly, he could not be with us today—runs apprenticeship schemes, as do other film-makers, and has links into many local schools, explaining to the children the career possibilities that the industry has to offer. Those highly effective tax reliefs are being extended into high-end television programmes, animation programmes and video games, which will all flourish with the new regime. The UK has proven expertise in these sectors and is a major exporter. In highly competitive markets, it makes sense for the Government to bolster the chances of success.
The nurturing of these industries is crucial, and not just because of their own earning capacity. Let us not overlook the pleasure that they generate, although I gather that your Lordships’ House comes under some threat in the new James Bond movie. The skills that these industries nurture are important too, because they feed into other industries. The design and engineering skills that are crucial to the creative industries now feed into every sort of manufacturing, from fast-moving consumer goods to cars and heavy engineering. Successful marketing, an industry in which the UK has long excelled, needs the slickest design and the best video production techniques. Design is what gives mundane products the edge and opens up international markets to them.
The London Olympics provided a fantastic demonstration not just of our sporting prowess but of our ability to put on a show. Here I raise an issue which continues to concern me about some of the smaller companies involved in the 2012 extravaganza. I have mentioned it in this House before, because it smacks of unnecessary bullying by the big commercial operators and hurts the smaller firms. Having been involved in the 2012 Olympics is a fantastic calling card for a small company. It should enable them to win new contracts, particularly if they are interested in working on the next Olympics. But the fierce rules of the International Olympic Committee, drawn up to protect the major sponsors, still prevent many of those small companies from boasting of their achievements. I know that the Government have looked at this before, but I do urge them to look again and see whether there is no room for manoeuvre here. Of course, I would draw no parallels with FIFA, but it looks to me as if the smaller companies need a degree of protection rather than allowing the big companies to trample over them.
One thing that would make a huge difference to the economy in this country is improving productivity by finding a way in which to lift those small companies up more quickly into becoming bigger companies. “Scaling up” was the phrase used at a conference that I attended this week, run by the Enterprise Research Centre. It made much of the fact that, in the US in particular, they are far more effective at scaling up their businesses than we are. There are lessons to be learnt by listening to companies that want to grow about what is holding them back. It is not access to finance or red tape and regulation—with the exception of planning, of course, but that is a problem still for so many businesses. My noble friend Lord Grade is eloquent on the issue of the nearly 10 years that it took to get permission for Pinewood to extend its development. So much was put in jeopardy over that 10-year period. In the end, Pinewood got the sensible solution—it was allowed to go ahead, but after 10 years of agony.
What would really help those small companies, many of them in the creative industries, to benefit in negotiating new markets? They want help in finding their way into export markets. PLASA, the trade association which represents companies in the entertainment and technology field—I should say that it stands for Professional Lighting and Sound Association, in case, like me, noble Lords are a bit of a nerd when it comes to acronyms—finds that its members have difficulty in negotiating the numerous government schemes around to help companies. I know that the Government are moving to simplify the system, and BIS is at work, but anything that could be done to make it easier for smaller companies to access the help that already exists would be important. One thing would be to get them on more trade missions, as creative companies do not dominate them at the moment, and they would really be useful contributors. That would help—and it would help, too, if we could persuade our bigger companies to nurture and mentor the smaller companies. It happens a bit in manufacturing, where Unilever is doing it; there is no reason why it should not happen in the creative industries more than it does.
The creative industries are so diverse and so exciting that I could far outlast my allotted time in talking about them. I am conscious that there are many aspects of the creative world that I have not touched on, but I shall rely on others to do justice to our brilliant creators of books, music and television. If the creative industries are to continue to flourish, it is important that our schools nurture the creative urge in children from the earliest age but do not stop when they leave primary school. We all have the ability to be creative in one way or another, and it would be to the country’s benefit if that ability were fostered. In today’s digital world, people need to have mastered the basics of education, but if we are to continue to build a world-beating creative sector and industry generally, we need people who can think creatively. Where would Apple be without the benefits of a talented British designer? An appreciation of arts and culture fosters the creative instinct. Let us ensure that our children are given the chance to enjoy the rich variety of delight that the creative arts have to offer.
Lord Bragg (Lab)
My Lords, I thank the noble Baroness, Lady Wheatcroft, for securing this debate. It is most important and most timely. Unfortunately—when I say “unfortunately”, I mean it with complimentary intent—her speech was so comprehensive and brilliant that I could spend most of the rest of my speech saying “as the noble Baroness, Lady Wheatcroft, said”. She has enabled me to cross out several pages of what I was going to say, which will be a relief for everybody in this House—but then I thought, “Well, repetition has its place”. It had better have. We remember:
“A horse! a horse! my kingdom for a horse!”—
one of Shakespeare’s best lines; or in “Macbeth”—
“Tomorrow, and tomorrow, and tomorrow”—
another good line; so I am going in behind those two. My next remark is exactly like the noble Baroness’s, so I am going to stop this and get on with it.
The creative industry in this country is a beacon. It has high skills of a world-class order, a phrase which I shall use time and again. That can be proved but, as the noble Baroness, Lady Wheatcroft, said, we do not have the time. It is niche-rich in the crafts and arts of film-making; in everything to do with stagecraft and the people who appear on stage; and in the performing arts. One of its great practitioners and exemplars, my friend the noble Lord, Lord Lloyd-Webber, is in his place today, and I am very pleased to see him here. He has proved that bringing talents together in this city can topple what was thought to be an unassailable fact, that only Americans can do musical theatre. That went for a burton some time ago.
The creative arts in this country are also extraordinarily efficient. There is still a lingering idea that these are long-haired—I am sorry about that—people drooping around the place who cannot really knit. In fact, if you look at plays, exhibitions, films, programmes and concerts, you find that they open when they say they will, they run for as long as they say will, and they almost all come out making some sort of profit and give great delight and hurt not. They also produce massive returns for a little investment, as the noble Baroness, Lady Wheatcroft, also said. For £1 of state investment £2, £12 or £16 comes back. It is an extraordinary economic feat and, again, despite being put to the fore in the opening speech, that fact is often obscured. We somehow do not like to think that the arts make money. We think it is art for art’s sake, meaning they will get on with it and we need not bother about it.
We have to bother about it now because of the power that the arts are bringing to us all over the place. Reputationally, they have become our cultural world service. Wherever you go, people know about British writers, British theatre, British actors—and on and on it goes. This is a benign influence. It not only brings money back to the country but shines the right sort of light on this country and brings the right sort of prestige in area after area. I compare what is going on in the arts with what is going on in scientific research in this country. We have less than 1% of the world’s population yet we publish more than 16% of the research documents in science. We are second only to America. We punch way above our weight, and we do almost precisely the same in the arts.
We also are provenly dynamic in bringing together and cohering communities that have almost fallen apart and in enlightening those which have been lying quiet for some time. A small example is in the county of Cumbria, where a grant to the Kendal Brewery Arts Centre will give it a place in the cultural rural economy of the Lake District which will undoubtedly enhance it. The word “subsidy” should be made redundant. I think it should be banned because it is nothing like a subsidy. It is an investment and “investment” has a positive and decent ring to it. That investment in Kendal will create more jobs and activity and bring what the Lake District desperately needs, which is a coherence of the cultural possibilities in that area. We see the same in Manchester, Gateshead and cities and towns all over the country. We have more than 350 literary festivals and almost as many music festivals, art festivals, dance festivals and documentary film festivals. There is nothing like it anywhere else in the world. They are bringing not only pleasure to people like us—me, everybody here, and everybody else—but a feeling that there is something that can be done with that which we thought was just a side issue, and on it goes.
The popularity of the arts is astounding. Who would have thought 15 or 20 years ago that the British Museum would be the greatest visitor attraction in this country? Who would have thought 10 or 15 years ago that more people would go to Tate Modern than to Arsenal? Who would have thought that you could scarcely get a ticket for the RSC or the National Theatre or for the work done by the noble Lord, Lord Lloyd-Webber, or all over the West End? Whether it is a straight play or musical theatre or whatever, the venues are packed out and people are piling in to see these creations in the arts which are coming from the people who live here.
We have such resources when we decide to put them together. We are working towards something that has ceased to be a small matter or something we can ignore. Take the BBC, for instance. It is a unique cultural institution. It is the biggest institution of its kind in this country and probably in the world. It is a great force for the arts. The Proms are about to start. Radio 4 is the biggest commissioner of drama in the world. We have had “Wolf Hall”, and we have arts programmes. Then, there are arts on ITV and Channel 4, and Sky Arts commissions new drama and new arts programmes and is rolling along. That conglomeration in one place makes this city, as well as Manchester, Glasgow and, to a certain extent, Cardiff, a whirlpool of interconnecting talents and possibilities which brings together people who are creating an industry which is worth calling and treating like an industry. I have not even mentioned the great schools of drama, music and dance which bear comparison with—and, in fact, exceed—most in the rest of the world.
So why are we slashing and tampering with key investments when the arts are in such a strong state? It makes no sense to me. State intervention in various areas can seem risky, but it is not at all risky in the arts, as the noble Baroness, Lady Wheatcroft, pointed out. There does not seem to be a single risk-taker. All over the place, small amounts are being put in and huge amounts are coming back, but in many cases it depends on a key contribution from the state or local authorities. It is almost like a virtuous triangle: the state puts in something which is almost like a key—it unlocks, it is an enabler; then sponsors come in; and then the box office comes in and the thing will roll. Why do you need the key in the lock in the first place? It is because quite a lot of what happens in the arts has to happen with no money coming in. It is called research, preparation or rehearsal. Nothing is coming in at all. That happened, for example, with “Matilda”. The amount of time that took to research could not be paid for by box office or sponsors, because there were none; it was not being performed. It had to have something to keep it going. Now it is cascading money into this country from performances all over the world. The key question is: why do the Government not feed what is patently so successful and works across the social waterfront? What is to be gained by starving it? It is baffling.
Look at what the Government do with their money elsewhere. Look at Defra, whose antics seem directed at laming the farming industry. That gets money all over the place and wasted all over the place, and nobody seems to bother very much. Look at our defence procurement, which is ridiculous and scandalous—these ships that have not been built for planes that have not arrived, or pilots whom we cannot train. What has that to do with any sense? But we go along with it, we bear it, and we think it is for some common good. I do. I wish they would move faster and that our defence was better, but there you go; we put up with it. It gets masses of money compared with what is given to the arts. And so it goes on. The amount that we spend on law, sometimes on cases that last more than 30 years, has gone beyond ridicule. It is a disgrace. It is silly. Noble Lords, I am sure, will be interested to know that in Athens, where the sort of law that we approve of started, every case took one day and took place in the marketplace. We could learn a little from that, but we need not go that far. We could learn something from all the money that is spent and squandered in those ways.
So why are the creative arts penalised—as they are at the moment—when they should be not only celebrated but encouraged to grow? It is a thriving sector; it is not, as people think, an add-on. William Morris wrote:
“I do not want art for a few, any more than education for a few, or freedom for a few”.
What we want is as many people as possible to be awakened to the possibilities of art. As we have said, it is to do with comprehensive and compulsory teaching in schools, letting people use their imaginations and following through people’s imaginations. We know that children are very imaginative and what they can do, and then it stops, not because of some biological clock-stopping but because it is not given opportunities and cultivated. But if we have a layer of possible creativity from the very beginning, there is very little that we cannot achieve in this country.
We have a fair chance of catching up with the mineral-rich countries, the population-rich countries and the industry-rich countries if we follow this line in our economy, if we release, as it were, the dark matter in more and more people—still too few, as William Morris said. We should let loose ideas and liberate people who can come forward—as many have done increasingly, but not enough—to challenge, to change and to make things glow, whether in science or the arts, and create an economy that feels completely different. It will have to be, because this is the century, in my view, in which all the prizes will go to the most creative. We have all the building blocks in place. What we need is enlightenment from the centre.
Baroness Bonham-Carter of Yarnbury (LD)
My Lords, those are two very hard acts to follow, but I will try. I thank the noble Baroness, Lady Wheatcroft, for bringing this debate. Back in 2007, I brought a similar debate. In those days, “creative industries” was a relatively unused term that was rather resented by the cultural community, but I think it was wrong. The fact is that the creative sector, alongside being central to the well-being of society as well as individuals, also means well-being for the economy, as we have already heard. The Victorians understood this. They created a department of science and art and invested in what was to become the V&A in order to develop skills needed to feed British industry—and the creative industries sector emphatically means well-being for this country’s economy.
As the House of Lords Committee on Soft Power recognised in a report last year, the UK’s cultural collections, institutions, industries and media continue to create powerful channels of communication that help us to increase the UK’s profile, forge links internationally and widen our sphere of influence. I am fortunate enough to be the Prime Minister’s trade envoy to Mexico and have seen this at work first hand. I have also seen how these cultural and creative elements increase our prosperity by fostering trade and investment.
The year 2015 is the year of the UK in Mexico and of Mexico in the UK. It is a celebration of cultural, educational and business exchange, but at its heart is culture. But it is not just about the likes of the wonderful Mayas exhibition, which opens tomorrow at Tate Liverpool. This weekend there will be a V&A sponsored event called “Digital Futures”. Workshops and events happening in Mexico City and Dundee will be linked via the web, and the two communities will be able to develop and design projects together. That is creativity and industry.
Before the election, we Liberal Democrats published a strategy paper, The Power of Creativity, to which the chair of Arts Council England, Sir Peter Bazalgette, contributed this thought:
“There’s a new political agenda for the arts in addition to their intrinsic value. It features the importance of the rapidly growing creative industries and the way the arts supply them with vital talent”.
Artists have long been intrigued by discoveries of science and technology. All those who saw Mike Leigh’s wonderful film about Turner will have seen how he was inspired by the scientific research of colleagues in the Royal Academy. Increasingly, inventors are recognising the value of creative skills in maximising the potential of their products, and are working in ever closer collaboration with those who possess those skills.
Notions of “us” and “them”, a perceived opposition between those who practise science and those who practise art, and between those who are creative and those who pursue commerce, are being proved obsolete. To ensure that our next generation is a generation of creators, schools need to be encouraged to promote not just science or art but the art-science crossover. The success of those in the creative industries lies in the fusion of technology and creative skills. Yesterday I was at a British Council event where the brilliant, and if I may say so very handsome, Thomas Heatherwick was present. He is the creator, among other things, of the Olympic cauldron, a wonderful example of the fusion of technology and creativity.
We have a skills shortage in the creative industries, and yet they offer such vibrant, exciting, rewarding careers for our young people. I know this, having worked for many years in the television industry. To enhance access to these skills and careers, we must address our education system. Does the Minister not agree that Ofsted should be asked to monitor the curriculum so that no school can easily drop subjects such as music, art or drama; that the rollout of new high-status GCSEs in creative subjects should be completed as soon as possible; and—I cannot believe that I am still asking this—that Darren Henley’s national plan for cultural education should finally be fully implemented?
Then there is the careers advice that is on offer, or the lack of it. I welcome initiatives that are helping young people, such as First Story, a charity run by Katie Waldegrave and William Fiennes. They nurture creative talent and help to build communication skills through providing creative-writing workshops in state secondary schools. The National Art & Design Saturday Club, run by the Sorrell Foundation, founded by Sir John and Lady Frances Sorrell, similarly provides schoolchildren with the environment in which to learn from industry experts, for free, in colleges and universities across the country. The club helps young people to gain qualifications and gives them an understanding of careers in the creative industries. Does the Minister not agree that we need more institutions and businesses from the creative industries collaborating with schools in this way to provide high-quality careers advice? We also need more schools coming on board to show what a career in the creative industries can mean.
Then there is the problem of the lack of diversity across the creative industries. It is essential that they reflect 21st-century UK—our vibrant, creative, multicultural country—but they do not. That means that so much potential is being excluded. As the now well-deserved “Sir” Lenny Henry drew attention to in his BAFTA TV lecture last year, between 2006 and 2012 the number of BMEs working in the UK TV industry declined by 30.9%. Creative Skillset conducted a census that showed quite clearly that black and Asian minority ethnic representation in the creative industries in 2012 was just 5.4%—the lowest rate since it started taking a census—and it is not getting better.
The then DCMS Minister of State, Ed Vaizey, who I am glad to say is still the Minister of State, responded and established a round table that was cross-party—it included me as a member—and included representatives from across the industry to address the issue. Will the Minister confirm that it will continue to meet—I hope that I can say “we”—and will push for actions and results? It cannot be yet another talking shop.
To pick up on something that the noble Lord, Lord Bragg, said, support for culture and the arts feeds into the economy at regional level. It is of great concern that in certain parts of the country disproportionate cuts have been inflicted by local government. It is also, as he said, short-sighted. We know that putting money into culture is an investment rather than simply a subsidy—I agree that we should get rid of that word—in that it revitalises local economies and regenerates neighbourhoods that have seen traditional industries decline. I declare an interest as a trustee of the Lowry in Salford, which is a prime example. This place of culture has been a resounding success as a catalyst for the regeneration of Salford Quays, the development there of Media City and the consequent expansion of the local economy. Does the Minister agree that it would be a good idea for local authorities to be required to publish their spending per head on culture and the arts?
As I mentioned earlier, I had a career in television before politics. Charter renewal is upon us and I hope the Minister will agree that the BBC, funded by the licence fee, should be protected and celebrated, and that Channel 4 should remain in public ownership, because as well as showcasing British culture and creativity at home and abroad, the broadcast media also function as an important stimulus for the creative industry as a whole and as such are a major contributor to our creative economy. We are a creative nation living in a rapidly changing world driven by young people and young technologies. The creative industries, as the noble Baroness, Lady Wheatcroft, said, are on a roll. We are ahead of the game. Let us make sure that we stay there.
Lord Berkeley of Knighton (CB)
My Lords, I cannot disagree with a single word that I have heard so far. In fact, when the noble Lord, Lord Bragg, mentioned repetition in:
“A horse! a horse! my kingdom for a horse!”,
I felt that the only retort I could make would be a vocalisation of the opening of Beethoven’s fifth symphony—ba ba ba bom, ba ba ba bom! Those notes were a great beacon to the civilised world in the Second World War. Everything that we create has repetition and variation. It is a synthesis of what has passed. That is why it is so important. In looking forwards, we look backwards and we educate.
I congratulate the Government on honouring their manifesto pledge to empower local people and councils to have more say in the siting of onshore wind farms. This does indeed affect the economy and culture of areas such as mid-Wales, where national monuments such as Offa’s Dyke and Repton’s Stanage Park, which is grade-1 listed, have been under threat of visual blight.
It is in many ways a privilege to stand here in your Lordships’ House as one of several representatives of the creative industry of this country, because the artistic achievements, the sheer talent and the rewards that this part of our society generates are nothing short of magnificent. As we have heard, those rewards are so diverse: they bring £76.9 billion into our economy by the Government’s own figures. They entertain and amuse us and they shine a light on to what it is to be a human being.
Schopenhauer said that because of its non-representational nature and being independent of natural phenomena, music is able to reveal truths about the essence of things, of life indeed, and we know that it can often communicate where words fail. That civilising quality is not restricted to paying audiences or to congregations worshipping in some of the most glorious churches and cathedrals anywhere in the world, or listening to great choirs singing the masterly polyphony of our past—Byrd, Tallis, Gibbons—and now the living work of my colleagues such as James MacMillan, newly knighted, to whom I offer many congratulations. Yet he would be the first to tell you—and he did when he came and performed here at Parliament—that this rich and, for the moment, thriving community must be restocked, as he was clearly doing with the schoolchildren he brought to play to us. Far too many children get little or no music or exposure to the other arts, as the pianist and animateur James Rhodes also told us recently. Yet we know that through music and the arts children thrive and have an emotional outlet and, as with sport, learn to listen and co-ordinate as part of a group.
Let me take an extreme example of the conundrum that we find ourselves in. The news that Sir Simon Rattle is to return to these shores has been welcomed by many, but his desire to see a new concert hall has met with rather more divided enthusiasm. Yet we do not have an orchestral venue in London that can compete with the Wigmore Hall’s acoustics for chamber music, or those of Kings Place. Some say that having a new hall that would be the equal of the Musikverein in Vienna or the Concertgebouw in Amsterdam cannot be contemplated while music education is so underfunded and could really do with the several hundred million pounds being talked about for the new hall. However, Sir Simon Rattle, when he went to the City of Birmingham Symphony Orchestra, was the catalyst for the building of the wonderful Symphony Hall, Birmingham, and I have no doubt that his commitment, charm, celebrity and talent will galvanise some of the wealthy businessmen in the City of London—in other words, tap funds that would probably not anyway be going to music education.
Were that to be successful, we would gain a brilliant new hall without compromising the essential work in schools that we all value so highly. So here is a very practical suggestion for the Minister—one that will cost nothing. Act as an enabler and a motivator to still further the pre-eminence of this country’s standing in the cultural world by giving the capital a hall worthy of those not only abroad but in Birmingham or Manchester.
This issue is interrelated to education, as Sir Simon Rattle would be the first to tell you, because there is not much point in building a fabulous hall if we are no longer getting the young players coming through to refresh our orchestras and ensembles for the future. That includes the hugely successful musicals by the noble Lord, Lord Lloyd-Webber, and the whole of the pop industry as well—this is not an elitist plea. Great musicians work in different areas. Indeed, I have done that during my life and have found it most enriching.
This is an area that is ripe for research and development, yet as we have heard—unlike for the film industry, for example—no funds are available. That is another area that the Government might look at. Additionally, there are no funds at present for librettists to work up a scenario before the exquisitely expensive undertaking of mounting a new opera or musical begins—and so too late in the day something that might have been ironed out at a developmental stage remains to spoil the end product. We all say, “If only, if only”. I know, of course, that money is scarce. I am deliberately trying to assist the Government with ideas that are possibly doable. I accept that the music hubs are a very good development but I really would like to see the Minister from the DCMS holding hands with the Education Minister—we are, after all, talking about the arts community. To further improve music in schools is, I think, the most crucial matter.
That takes me, in a roundabout way, to the BBC and its future. So many artistic achievements are initiated and brought to a wider audience—to those who of course pay for them and the BBC—by the corporation, which is doing a job that we perhaps take for granted. In declaring an interest here as both a composer and a broadcaster, I must say that many guests, especially those from less-privileged backgrounds, who have appeared on my programme “Private Passions” describe the ray of light that was the BBC Third Programme, now Radio 3. The playwright Alan Plater, for example, said that he owed his entire music education completely to the BBC. If I may say so, “In Our Time” on Radio 4 is a quite remarkable tool of enlightenment and education.
Finally, on intellectual property, if the Government wish to safeguard this thriving economy, as they say they do, then they must be alive to the difficulties that all creators face in how to protect their rights, given the avalanche of new technology. Of course, we all embrace the wonders of the internet and the ability to share and spread ideas but, if it is allowed to castrate our recording and publishing industries, we and the Exchequer will suffer grievously. I am not entirely satisfied that the Government have fully got to grips with our—the creators’, and hence the economy’s—needs in this respect. There is so much to celebrate but also much to nurture and reinvest in. As we have heard, many small companies are in desperate straits, but the facts are there: investment in this section of our society reaps incredible rewards.
Lord Lloyd-Webber (Con)
My Lords, first, I wish to apologise to my noble friend Lady Wheatcroft. I have been working in America and I am afraid that, because of my timing, I missed the first couple of minutes—I am so sorry. I congratulate her hugely on bringing this debate. How thrilling it is to hear the word “investment” rather than “subsidy”. As I am sure all noble Lords know, the creative industries grew, according to the DCMS figures, by 10% in 2013, which is three times greater than for the wider economy. We employ 1.7 million in the creative industries—or we did in 2013—which is 5.6% of total employment in the UK. The speakers preceding me have dealt with the various issues that I wanted to talk about so eloquently that I will now restrict myself to talking about the world of theatre and music.
Once again, I have boring statistics, but they are interesting—the West End received 14.7 million visitors last year and paid nearly £104 million in VAT. Others, I am sure, will work out how much of that came back to the arts but I am afraid that I do not have those figures. Broadway lagged a little behind with 13 million visitors but its gross paid admission for last year was a staggering $1.36 billion. That makes one realise how extraordinary it is—and how lucky I am—to be working in live entertainment, which of course you cannot pirate. Therefore, I completely support the views of the noble Lord, Lord Berkeley of Knighton, about how we must protect all forms of intellectual copyright. Luckily, in theatre, that is not so much of an issue.
As I have been working in America now for the past few months, I thought that I would remind the House of our representation on Broadway. I quickly note—I apologise if I leave any out—that we have “Les Misérables” running on Broadway, “Matilda”, “The Audience”, “Skylight”, “Wolf Hall”, “The Curious Incident of the Dog in the Night-Time”, “Mamma Mia!” and some musical about a bloke in a mask. I was really interested to see how the Tony awards went this year. The award for best play went to “The Curious Incident of the Dog in the Night-Time” and best musical went to a musical called “Fun Home”. Next year—much to my chagrin I am afraid, as I have a musical coming to Broadway next year—I know that it will be won by a musical called “Hamilton”, which has already been tried out at the Public Theater in New York and is, in my view, a ground-changing musical that will change many people’s attitude about what the musical can achieve. I mention that because all these shows have something in common. “Fun Home”, “Hamilton” and “The Curious Incident of the Dog in the Night-Time” all started in publicly supported, or subsidised—or I should say “invested in”—theatres. The Public Theater and the Circle in the Square Theatre, where the two American shows started, are somewhat dissimilar to our system because, although there is some public finance available, support comes, on the whole, from philanthropists.
This is all by way of saying that it is absolutely vital that we realise the importance of the investment that we have in the arts. Five of the eight British musicals and plays being staged in New York came from either the Royal Shakespeare Company or the National Theatre. We have to consider, as other noble Lords have said, that every pound we spend will come back over and over again.
That brings one to education, because music in education is something that I feel extremely passionate about. I have seen the amazing impact that music has had on students at Highbury Grove School in Islington where, as I am sure many noble Lords know, every child is, in their first term, given a free violin. Through music, that school, which was considered to be pretty much at the bottom of the heap a few years ago, has now turned around and had its first child enter Oxford, which is a pretty extraordinary achievement. It is now a school that everybody wishes to attend. Music in education is absolutely vital. It concerns me that, when I was a junior at the Royal College of Music, it was free, but now you have to pay.
That leads me to my real concern—on which I ask the House to support me—that we must make sure that our young people have access to the training that they need in music and theatre and all areas of the creative industries. It is extremely worrying that, to go to a stage school or theatre college, you now have to pay such an enormous amount of money that it is being left to foundations and others to fill the funding gap with scholarships. It concerns me how many people may be slipping through the gap. The other night, in New York, an extremely well-known film director—I will not mention his name, although the noble Lord, Lord Bragg, will probably be able to guess; he is of the same political persuasion as the noble Lord—said to me that he was worried that the best stage school in Britain was Eton. We must address the fact that funding is vital now for young people in all the performing arts.
Finally, picking up on the point made by the noble Lord, Lord Berkeley of Knighton, about the concert hall in Britain, I use the opportunity to remind noble Lords that one of the difficulties that we face in the West End is that many of our theatres were built in the Victorian era. A very positive thing that the Government could do would be to look at perhaps relaxing the guidelines on the listing of these buildings to make them more appropriate to today’s use. As I said, there are difficulties when you consider that many of our theatres have galleries, with separate entrances for those galleries. However, they are not really fit for modern performances, and that is an issue that one day will have to be grappled with in a major way.
In conclusion, once more I say passionately that the word “investment” should be substituted for “subsidy”.
Viscount Colville of Culross (CB)
My Lords, I declare an interest as a BBC producer. I congratulate the noble Baroness, Lady Wheatcroft, on her continued support for the creative industries.
This debate comes at a very important time for the broadcast industry in which I work. There are great British success stories from across the independent media production sector. Not only have there been increasing numbers of commissions from foreign broadcasters but the global streaming giants, such as Netflix and Amazon, are also investing in original content from the UK. My former colleague Alastair Fothergill, who runs Silverback Films in Bristol, has just completed a multimillion-pound deal with Netflix to produce an eight-part landmark natural history series called “Our Planet”, which will be a follow-up to “Planet Earth”, and there is serious talk that Jeremy Clarkson could set up a production company to start making programmes for Netflix.
British independent TV, radio and digital production companies are riding the wave of this new economy. The sector has in 10 years gone from a small cottage industry to making £3.1 billion last year. A third of that content is being provided for foreign, internet and broadcast channels. However, two-thirds is still being made for UK channels. This country is still the most important market by far for the independents. In fact, almost all the production in certain genres, such as output for children, religion and high-end science, history and arts, is made for the British market, and the BBC is one of the most important clients. It spent 46% of it content investment last year with independents, generating nearly half a billion pounds in revenue. BBC Worldwide is also the largest distributor of television content outside the United States, and so sells on the independents’ work across the globe.
However, I fear that the Government are putting this great success at serious risk. Their manifesto commitment to freeze the BBC licence fee is threatening one of our great success stories, and I am told that a freeze would be a good outcome. There is a possibility that the licence fee will be reduced, as well as being top sliced for non-broadcast services, which is what is happening under the present charter agreement. If the freeze goes ahead, by 2020 the BBC will have shrunk by half—maybe more—compared with the previous decade. Of course, there are strenuous efforts to generate funds from elsewhere—BBC Worldwide generates £1 billion in revenue—but the licence fee remains at the core of its funding.
The role of the BBC is crucial in supporting the independent production market across the whole of the British television industry. A reduction in its spending is mirrored by a reduction in spending by other public service broadcasters. What Ofcom said in its latest report is interesting. It stated that,
“ITV may be incentivised to invest only to the degree required to compete effectively for share. It mainly competes with BBC One, given the comparative reach and share of the two channels ... The level of BBC (and especially BBC One) investment in first-run original programmes therefore appears to be a contributory factor in stimulating ITV to spend more through competition”.
Indeed, the figures for investment by the two channels bear out the extent to which they shadow each other. The Ofcom report shows that in 2008 the BBC spent nearly £1 billion on original output, while ITV spent almost the same amount. By 2013, BBC1 was down to £747 million and ITV to £794 million. I fear that a freezing of the BBC licence fee will see spending by UK public service broadcast channels reduce further over the next charter period.
A reduction in public funding will affect the upfront revenue for production companies and will threaten what is becoming one of their most important sources of revenue: intellectual property, to which my noble friend Lord Berkeley referred—that is, the rights paid for reuse of the original content. Under the Communications Act 2003, the PSBs in this country are mandated to let independent production companies keep much of their intellectual property, once the original programme has been shown a number of times and for a certain length of time on digital catch-up services. For instance, when BBC Store is set up later this year to allow audiences to buy their favourite programmes, independent producers will be able to negotiate an extra fee for their content. In a world in which more and more programme content is watched at different times on the internet, there are all sorts of opportunities for independent producers to exploit this IP.
However, the ability of producers to exploit their intellectual property is not mandated for contracts outside those of the public service broadcasters in this country. It does not apply to Netflix, Amazon or a host of foreign markets, which are buying content from this country. Most of the producers are simply paid a one-off fee to make the programme and all the subsequent rights are held by the company which commissioned it. The producers do not have the right to exploit their content or to reuse it in ever more imaginative ways. A reduction in BBC funding would obviously inhibit the growth in extra IP revenue for independent producers and it would not be easily replaced by the contracts negotiated with foreign-based buyers.
I know that the Government want a smaller BBC but a smaller BBC will have wider ramifications for the whole media economy in this country. It is the bedrock of one of our most dynamic industries. I should like to ask the Minister whether he is concerned that a reduction in the BBC licence fee would adversely affect the economic success of this great British success story. After all, is not this Government the champion of business—small business and entrepreneurs?
Lord Haskel (Lab)
My Lords, I have just spent a few wonderful days at an example of the creative economy at work. I have just come back from the Aldeburgh music festival. Aldeburgh is a charming seaside town in an area of outstanding natural beauty, but music has transformed it into a world-class cultural and learning centre—a centre of excellence. Last year, 25,000 tickets were sold to audiences from more than 20 countries. This is the tourism referred to by the noble Baroness. However, that does not reflect all the work that goes on. Master classes for promising musicians are given by world-famous artists. These same world-famous musicians give free outreach performances to develop new audiences, given during the day in a bandstand on the beach or in a car park in Ipswich—“restocking”, as the noble Lord, Lord Berkeley, put it.
Then there are the new commissions and first performances, activities which continue throughout the year. Last year, 100,000 tickets were sold to people who demand a good infrastructure of places to stay, places to eat, places to shop, galleries to visit, walks to take and bicycles to ride, as well as to hear music, make music, develop talent and create new music.
Aldeburgh may be a charming town but it is away from the amenities of London or any other major city, so it has little creative infrastructure to sustain it. It is a clear example of the creative economy creating and working, showing that something can be done, as my noble friend Lord Bragg put it.
I use the phrase “creative economy” because I am a little wary of the words “creative industry”. I am wary because these broad classifications can be misleading. I know that the City likes them and they can be used to produce impressive numbers—the noble Baroness gave us some, as did other noble Lords—but I learnt to be wary of broad classification very early on. I trained as a textile engineer and started work just at the time when the industry lost its quota and tariff protection and was obviously in trouble. The word was that there was no future in textiles, but some of us were not put off by that broad classification. Some created the fashion industry. I went into the aircraft industry and started creating fabrics that met the stringent requirements of the Air Registration Board, designed to suit the airlines. Others went into the health industry, with fabrics that deterred bugs but were designed to suit the hospital decor. You see, we were not going to be categorised.
That is why, when the DCMS produced its list of creative industries, I was a little wary. You can have creative industries such as film and video or television and radio, but large parts of these industries are not creative, such as managing the buildings, managing the studios and supplying the equipment. Software and computer services is deemed to be a creative industry, but I agree with the noble Baroness, Lady Wheatcroft, that it is as creative to write software for a milling machine or a 3D printer in the engineering industry as it is to write software for a computer game. We even have technology and algorithms to create augmented reality, so where does creativity begin and where does it end? It is essential that the DCMS has a clear view on this because it is the activity that is important to investment—the investment to which the noble Lord, Lord Lloyd-Webber, referred—and not just the industry. Arts may set the agenda but technology and engineering deliver it. You have to differentiate.
This is why I am in favour of the innovation index created by NESTA, which tries to measure the activity rather than the industry. What is the current thinking at DCMS about this? What is now on its list of creative activities? Designing and making a piece of jewellery is certainly creative, but what about selling it? Does not that distort the picture? The problem is that these creative activities are intangible—difficult to measure and difficult to separate.
However, the Office for National Statistics made a move towards this when it modified its way of measuring GDP last September and tried to include some of these intangible activities. It was right to do so because we need a more accurate and up-to-date picture. Creative activities are changing all the time and we have to be aware of this to ensure that the creative infrastructure is in place.
The Minister will know that at present the most important infrastructure for the creative industries is broadband. Every time he goes to a meeting or has a discussion, I am sure that this is the one issue that comes up again and again: the quality, width, availability and security of broadband. Can the Minister assure the House that the concerns of the creative sector are being taken into account when installing broadband? The impression that you get is that it is not. Now that we have the internet of things, the creative economy will need to be even better served.
Another infrastructure concern of the creative community is what I can refer to only as the creative ecology. By that I mean the carefully balanced mix of ownership, finance and control. In TV and radio, in theatre, in heritage, in art, we have a mix of ownership and finance—of publicly owned and financed, socially funded, and privately funded and owned. This mix has grown up over the years and there is a balance that seems to work for our creative sector, particularly as the arts move between them. The mix seems to support and stimulate each other and helps the arts make money, as my noble friend Lord Bragg said. Does the Minister’s department plan to maintain this balance or to alter it—for example, by changing the BBC licensing arrangements or the way in which public arts activities become private or commercial? Many noble Lords are very concerned about the BBC. This is a very delicate balance and I hope the Government will be very careful if they come to tamper with it.
I thank the noble Baroness for this debate. It is important to hear the views and experiences of noble Lords because the creative economy is not only wonderful days at Aldeburgh but an important part of developing every sector of our economy in surprising ways and surprising places. The noble Baroness spoke of scaling. She is right. High-value and high-growth areas of the economy, whatever the industry, benefit from creativity. It is part of the knowledge transfer network—the science and the arts together, as the noble Baroness, Lady Bonham-Carter, put it.
I declare an interest as honorary president of one of these knowledge transfer networks. It was in this capacity that I heard that point made very strongly at the Graphene Show 2015, which was held in Manchester in April—I am sorry the Minister was not there—to celebrate the 10th anniversary of the discovery of graphene. The development of such a product requires the arts and industry to come together. If noble Lords want to see it in action, I hope they will come to the Cholmondeley Room on Tuesday, at 6.30 pm, where I am hosting an event to demonstrate it. I look forward to hearing from the Minister.
Baroness Kidron (CB)
The creative economy is built on the skills, talent and imagination of the many. The notion of the exceptional is dispelled by a sector that, as we have already heard, provides 1.7 million jobs. While it is quite right to celebrate it, it is far from clear how new skills, talent and imagination are to be nurtured in order that we fulfil the promise of this vibrant sector.
My interests in this area are many. I am a working film director, I run a small production company, I am married to a playwright, I am a president of Voluntary Arts and a trustee of several organisations that have arts and education at their core. Rather than pointing out my own overcommitted schedule, I am just trying to make clear that I am embedded in the communities of which I wish to speak.
Her Majesty’s Government and the coalition before them supported the creative industries handsomely, with tax credits, loan schemes, enterprise guarantees and innovation funds, but these welcome investments do not automatically ensure exponential growth. Like any supply chain, it is only as good as its weakest link. So while the Government and the Treasury have been fair to the creative industries at this end of the chain, to make good on this investment we must look more carefully at the supply side.
For my generation of artists and creators, going to university was free, as were art school, film school and adult learning. There was a commitment to the arts as a tool of social mobility. Many of us remember commedia dell’arte and Brecht in primary school, mountains of clay and the help of the local potter, free recorders and violins—all standard interventions in perfectly unexceptional state schools. When we left our family homes, often much younger than 25, we lived in cheap flats or unwanted social housing on housing benefit. Small enterprise grants, schemes from the local council or a lowly industry job for which you were paid kept us going. We were not lazy or disaffected; we were writing, painting, imagining and making work while modestly receiving investment—I believe that is the word—from the state. It was an unintended consequence of our fervent activity that the faces that fill our screens, play our concert halls, represent us at the Venice Biennale, claim their BAFTAs, Tonys or Oscars and write our national stories are now proud contributors to the £76 billion that the creative industries contribute to the creative economy.
I do not want to misrepresent my community. There is a great deal of interest in making money and creating wealth, but there is a very indirect line between investment in the creators and the actual creation of that wealth. It is a delicate ecosystem that is not obedient to the laws of economics that one might reasonably apply to manufacturing or to more tangible services. Nevertheless, it is one that delivers very real economic results.
Our current pre-eminence on the world stage in the arts and creative industries is the result of multiple routes, many pockets of support and a fair amount of public tolerance that allowed a diverse population to develop its talent, skill and imagination. From this rosy past, we might consider the context for today’s young people. It is simply a tragedy that successive Education Ministers have devalued the arts in a structural way within the curriculum and by successive public utterances that suggest that studying science is the only way to job security and well-rewarded employment. This simply is not so. Our creative industries are burgeoning. We have an impending skills gap of at least 750,000 in digital alone—a sector that repeatedly cries out for those with maths and art, which is actively discouraged by our school system. Outside the creative industries lie another 950,000 creative jobs; that is one in 12 jobs in the UK.
What about student debt that has sucked the less privileged out of the humanities, arts and performing arts as they listen to the mood music and take a more cautious approach to their education or bypass further education altogether, or the proposal in front of us to deny housing benefit to the under-25s? These are the same under-25s who are routinely working for months on end as interns for no money in order to build their CVs, which automatically excludes the less well-off and those whose family homes are not in the few urban centres that house the creative industries. My concern is not about any single policy but a matrix of policies, of which these are but a few, creating insurmountable obstacles to the talented youngsters who might otherwise have been our next generation of creatives.
The Government may not feel that they have the resources to tackle all aspects of this environment, but they can give everyone a fair start. STEAM not STEM is what we need in our schools. STEAM not STEM is what the Commons CMS report, Supporting the Creative Economy, recommended. So do the CBI and an increasing number of mainstream employers who bemoan the lack of critical thinking and creative skills in our graduates. So too do Professor Ian Livingstone and Alex Hope, who worked on the computer curriculum, Sir Ken Robinson, teachers and head teachers and, indeed, noble Lords on all sides of this House.
I ask the Minister: when are we going to see arts, technology and science presented as an equal and interconnected whole, both in the curriculum and with the right mood music to accompany it? Without this commitment from government, I fear that the next generation will be a pale, posh shadow of the current one.
I turn from schools to our broader community. There is a tendency when talking about creativity to insist on the notion of the individual genius. I have been lucky enough to know a number of artistic geniuses. Even the more narcissistic and self-regarding of them would say that great art is made by groups of people and not by individuals, schools of thought, traditions of practice and active participation of colleagues; that their own practice is made possible by reflecting other people’s creativity, both past and present. This misconception is important, because the powerful notion that creativity is the realm of the exceptional individual casts a shadow over the creative ecosystem. People voluntarily coming together in groups is often seen as secondary to the real thing.
As president of Voluntary Arts, I recently attended the Epic Awards. One went to a music studio in Kirriemuir in Scotland that gives expression and skills to dozens of young people living in isolated villages across the valleys. Another went to two women from County Donegal who designed tiny micro-libraries, each no bigger than a bollard, open 24 hours a day, working on an honour system and situated in places of natural beauty. The local community walks or cycles to borrow a book, exercising the mind and body simultaneously. A third award went to the inspirational woman who, from her home in Birmingham, co-ordinates 170 other devoted knitters to knit prosthetics for women who cannot have, or who are waiting for, reconstructive breast surgery.
These outposts of creativity do more than simply charm. They are part of our national narrative of what it is to be an engaged citizen. From this great pool of an estimated 10 million UK citizens who pursue voluntary cultural activity emerge inventors, designers, small companies, creative services and individual artists. They are participants and wealth makers in our creative economy. I therefore ask the Minister to make a meaningful commitment to this important and much-overlooked group by protecting arts provision and the spaces to convene at local level. This is best done by ring-fencing arts budgets in the local authority settlements, or we will lose the fragile infrastructure upon which these communities depend.
I end by mentioning someone who is both an artist and a scientist. My friend of many years, Sir Antony Gormley, has an artistic practice that starts with the extraordinary task of wrapping himself in cling film and making a cast of his own body from which he then makes his sculpture, often on a monumental scale. There is no rational explanation for why this process should result in work of such meaning for populations as diverse as Gateshead, Aboriginal communities in Australia and the inhabitants of New York or St Petersburg. However, I have seen first hand how his work electrifies and moves people all over the planet. Sir Antony is a net contributor to tourism, our GVA, our soft power and our national identity. He employs artists and engineers, he works with foundries and galleries worldwide. No government policy could engineer such an endeavour as his—it is beyond reason; it is art—but government policy has the power to invite all our citizens to take their creativity seriously, and at the very least it should attempt to do no harm.
In a conversation last week, Professor Brian Cox said, “Physics has taught us that there was a beginning and that there will be an end, but it is art that will help us understand how to spend the vast time in between”. Without the next generation of creative children, without creative communities up and down the country, without the freedom to invent new artistic practice that is neither measurable nor sensible, we threaten the future growth of our creative industries and by extension its contribution to the economy. Perhaps more importantly still we may find that we have an inadequate supply of artists to imagine how we might spend the vast time that Professor Cox informs us we shall have to fill between the beginning and the end.
Lord Inglewood (Con)
My Lords, what we have heard in the Chamber this afternoon, since my noble friend Lady Wheatcroft initiated this debate, proves that it is axiomatic that the creative activities of this country are central to our economic well-being. As the noble Viscount, Lord Colville, said, this has been enhanced by the applications of digital technology
Having started there, I think that the next question we need to ask is: what are we, as a society, going to do about that? While it is very easy to talk about creativity, it is sometimes perhaps a bit less obvious exactly what we mean by it. In my assessment, it entails two elements —an imaginative and interesting mind, coupled with an ability to express what that mind wants to convey. The question we then have to ask ourselves is this: is our education system achieving that for the next generation? I am no expert on education, which has never been a political topic on which I have any great expertise, but it is my impression—and, regrettably, this has been confirmed by someone in your Lordships’ House who knows a lot about it—that increasingly there is a tick-in-the-box, results-led framework around what is happening. It seems that the ghost of Mr Gradgrind is fingering the collar of successive Secretaries of State, and I believe that that is bad for creativity.
Another instance of the kind of thing that concerns me is the teaching of history. As far as I can see, history is increasingly being presented to the children of this country as being a combination of the Romans and the Holocaust. If one tries to imagine one’s perspective of the wider world based principally on those two points, a very strange picture emerges.
In the context of a discussion on creativity and the creative industries, one of the absolutely central things is to appreciate that failure is both inevitable and important. Second chances are especially important. We have simply got to avoid being too hidebound by formal qualifications in response to some kind of actual or moral audit that may surround in particular the early stages of these activities. Ability and potential are far more important than the qualifications which have been acquired. What matters is the potential to achieve something interesting and great and valuable for the future.
That being the case, the culture of the society we live in is important. Is it the case that we British people collectively value the attributes which are the seedbed of creativity in our society? I am afraid that if we look at society’s general attitude towards museums, concert halls, art galleries, architecture and landscape, we probably do not. Yet, if we listen to the evidence presented to us by my noble friend Lady Wheatcroft or read the essays published recently by Sir Peter Bazalgette of the Arts Council, it is increasingly clear that these things really do matter. But so frequently what is often reflected in various parts of the press is the fact that we Brits pride ourselves on being plain people who know what we like, and we do not like that fancy stuff. That is a very bad context for encouraging creativity more widely. While I would never stand up in your Lordships’ House and commend the French way of managing the economy, I do think that the French attitude to culture is one that we could emulate to our advantage in this country.
Potentially for the economy, it is just as important for people to go to art and drama colleges and music schools as it is for them to train to be accountants. After all, we should remember that when Dr Johnson was looking at Thrale’s brewery before it was to be sold, he commented that you were not simply looking at vats and furnaces, but at,
“the potentiality of growing rich beyond the dreams of avarice”.
Are we as a society training people properly for the creative industries? My guess is that we are not.
I want to touch on one particular instance which arose earlier in the debate: the discussions on the future of the BBC. Over the past few years I have done quite a lot of work in and around television and the media, and there is a wide range of opinion about the role and place of the BBC in the creative economy. What is interesting is that I have never heard anyone demur from the proposition that the BBC fills a very important role in training people in the sector who then go on to do great things in the non-public areas of television and broadcasting. If the BBC is demolished for whatever reason, that training function will be lost unless it is specifically reinstated, and it is self-evident that that is not in the national interest.
What else could be potentially damaging to the creative industries? We need to be on our guard against the pernicious influence of conventional wisdom and political correctness, because they can and do get in the way of imagination and important contributions. I am thinking about this in the context of the present furore surrounding the remarks of Sir Tim Hunt, a man I have never met and know nothing about, and I do not think I understand what his great achievement was. However, it reminds me of the debate when Galileo suggested that the universe was not organised in quite the way the Roman Catholic Church would have us believe. Against that background, Sir Tim Hunt is a Nobel prize winner. Is there anyone in your Lordships’ House who would not swap their peerage for a Nobel prize? Is there anyone sitting in this Chamber who has not on occasion said something silly or done something that perhaps they would rather they had not? I do not think so. What Sir Tim Hunt did was to say something silly and foolish, which I am sure on a moment’s reflection he regrets deeply, but is the response of University College London and the Royal Society right? The peccadillo he committed is far less than the peccadillo they have committed, and I hope personally that he will be reinstated to the positions he held before. In this House we are quite rightly concerned to look at our rules of self-regulation and we exclude those who have served prison sentences, but there is no suggestion that those who commit parking offences should be expelled. We must be on our guard against political correctness and conventional wisdom.
It has also been mentioned that people in the creative world are often rather difficult. I am sure that that is right. Here in Parliament we live in a world where the whips exercise great influence and power. Almost by definition, the people who are some of the greatest contributors to the creative world are those who are the most difficult and whose way of life perhaps might be criticised by, to pluck an example, the Archbishop of Canterbury. Were Francis Bacon and Lucian Freud, to name just two, people whose other activities made them easy to deal with? The answer is no, and while not every difficult person is a great artist, nevertheless sometimes we have to accept that that is the way God made us all.
Finally, let us remember that a vast amount of the output of the creative industries is, let us be clear about it, pretty good rubbish, but that is the price we pay for works of genius. There is a process of sifting and elimination, and we should not criticise because a certain amount of what is made by the creators in our society is either not to our taste or, frankly, pretty meretricious. If you do not have all that, you will not get the gems either.
The noble Lord, Lord Berkeley, touched on the fact that it is important that those who achieve something get the rewards to which they are entitled. I should comment in parenthesis that my wife is a retired photographer, so I have a slight first-hand experience of this. It is important that the rules on intellectual property should reward properly those who have made a contribution.
In a completely different way, I should declare that I am involved in hill farming, I am the chairman of the Cumbria Local Nature Partnership and president of the Uplands Alliance. My home area, like that of the noble Lord, Lord Bragg, has been nominated by this country to UNESCO to be recognised as a world heritage site because of its importance as a cultural landscape. That is self-evident because it is difficult to conceive of the Romantic poets without the Lake District. As we speak, some farms in the heads of the dales are closing down and going out of business because the returns are simply such that people are not prepared to go on. If we want a creative industry, we have to make sure that the people who are doing things that matter and make a contribution can make a livelihood from so doing.
In a world where the underlying economic approach to government seems to be dominated by 19th century concepts of political economy, I have always been slightly amused—I was a junior Minister in the Department of National Heritage some 20 years ago—by the relationship between politicians and artists. It is a rather uncomfortable one and it has always brought up a wry smile in me because they are not natural bedfellows. Nevertheless, it is important to recognise that wealth in this country and in the contemporary world is not calibrated simply in pounds and pence, rather it is that if you approach these matters in a slightly more relaxed way, you end up creating a lot more money than otherwise you would have done, for the benefit of everyone.
The Earl of Clancarty (CB)
My Lords, I want to focus on the arts, education and the BBC. As many have already pointed out, the creative industries as a whole are becoming increasingly successful. Yet because the current definition of this group is wide, these industries are also dizzyingly various in character. The successes of some are not necessarily the successes of others, and the problems of some are not necessarily the problems of others, although—as I will come to—there are significant overlaps. It is becoming all too easy for some of the so-described creative industries to get lost in the mix. I cite in particular the arts and cultural sector as an area which, in contrast to some others, has been neglected of late.
The arts and cultural sector is of course important in its own right for its intrinsic value, for its contribution to what we might term an all-important cultural economy. I will return to this, but the arts and arts education also have another value within the context of this debate as part of the engine which drives many of the creative industries. We neglect that engine at our peril. For example, Jo Twist, the chief executive officer of UKIE—the UK Interactive Entertainment Association, the trade body of the UK’s games industry—has said that what the games industry is crying out for most is people from the arts: fine artists, musicians and film-makers. The industry has to go abroad to find these people, which is a crazy situation. As Jo Twist says, the reason for this is that:
“In all parts of creative industries there is not often as much crossover as you’d like to see”.
The Arts and Humanities Research Council analysis called the Brighton Fuse project, which was carried out in the Brighton and Hove area, looked at 500 new digital businesses. It discovered that those businesses containing a good balance between employees with backgrounds in arts and backgrounds in technology were growing three times faster than those without this balance. All the evidence points to the importance of the arts to the new digital and tech industries, but our arts education in schools and universities does not reflect this reality. Instead it is suffering from the cuts in general, which in schools have particularly affected arts departments. Moreover, too many arts departments, despite the dedication of arts teachers, are treated as isolated outposts within schools.
Ofsted needs to report on the quality and presence of the arts within schools. It is crucial that STEM becomes STEAM, so that we will grow an education culture which protects the integrity of science and art subjects but also allows them to talk closely to each other. Each must understand the relevance of the other in order to allow that cross-over to take place which Jo Twist advocates. This imbalance has also dragged down design and technology, which should be a bridge between sciences and the arts, and which is another significant subject of relevance to the digital industries. However, in the past 10 years there has been a 50% fall in the number of students studying it at GCSE level.
Sciences and the arts must have parity as subjects within schools, and all performance measures must be reformed to reflect this. The Education Secretary is wrong—yet again—when she said this week that the EBacc, whose core subjects exclude arts but include a science,
“sets every child up for life”.
If any kind of education is to set up a child for life, if indeed one believes in such a thing, then it ought at the very least to be a rounded education.
Rohan Silva, who was involved in the early stages of the development of Tech City, made the case in the Evening Standard this week for a new campus in east London to service the new tech companies, like the one that is planned for New York. This is an interesting idea, but a trick is missed if it is only about computer science and engineering. If it were to happen, it should be a campus for computer science, engineering, art and design, with each getting equal billing. Then we really would have the edge. In some ways this would be no different to what I understand is now happening in China, where new art and design colleges are being located near to a town’s manufacturing centre.
The arts and culture sector of the creative industries is important in its own right, both for its commercial return but also, I think more importantly, for its inherent value and its contribution to the cultural economy. Because of their particular character the tech industries have needed tax breaks to get going, while the arts, through their very different character, often need public subsidies or public investment. I do not mind which term is used, but they need most particularly that core funding which enables day-to-day maintenance. That is the very money that is being denied to them, although the influx of additional Lottery money is of course welcome.
I have never understood the argument that the DCMS has had to do its share of cutting, perhaps because it is quite simply wrong. The Arts Council has said that £1 of public money invested in the arts will give a return of at least double that, because the multiplier effect is greater than for any other industry. The more the arts are funded, the more will be given back to the country. I am whole-heartedly anti-austerity, not just for the arts, and I believe that cuts to the arts should be reversed. It is curious that in Germany, which is the arch-architect of austerity, subsidies to the arts have continued to increase year by year. There has been none of this false heroism or this idea of the department doing its bit by cutting. This has happened in Germany for two reasons. First, Germany has a strong belief—it seems to be much stronger than we currently have here—in the democratic value of the arts, or in other words in its cultural economy. Secondly, people in Germany are aware of the degree to which the arts help their financial economy.
In the UK those who are suffering most are those on the front line: those artists, writers, musicians and theatre companies, for example, who now struggle to survive. They can less easily afford to produce new and innovative work which, within what should be a balanced ecology, feeds into the established commercial arts. Individual artists, writers and musicians, while themselves on decreasing incomes, are now more and more being asked to work for free. This is an unacceptable pressure.
In terms of the regions, we desperately need cuts to local authorities as well as to the Arts Council to be reversed. In the longer term, if real power is given to the regions—the idea of the northern powerhouse is a step in the right direction—and cities gain tax-raising powers, this would tremendously boost our creative industries. However, what worries me in the longer term are not just the cuts themselves—which are bad enough, and any further cuts of whatever size will be bad news—but the more deep-seated and possibly less easily reversible changes that are taking place.
I have always been a supporter of our museums, and I am glad that we have free admission to national museums in this country. They are great institutions with marvellous collections—which we own—which also put on exhibitions which are often wonderful. However, it is in the interests of our cultural economy that the dedicated staff of the National Gallery should be supported in their strikes against the privatisation of gallery staff. I support the reinstatement of Candy Udwin. Gabriele Finaldi should step in to ensure that staff are not privatised. Such privatisation would diminish the National Gallery as a public space, notwithstanding that this has already happened elsewhere, as the noble Baroness, Lady Wheatcroft, has pointed out previously. It is still a creeping privatisation of our national museums.
The other thing I want to say about the national museums is that the kind of issues that partnerships with Shell and BP have thrown up are not going to go away. That is the reality, whatever one may think, and there are respected artists among others who defend these sponsorships. I think it is worth future Governments bearing in mind that public funding is neutral and not tainted.
Yesterday morning, while sitting down to breakfast and listening to the “Today” programme, as quite a few of us do, I heard a discussion about the planned memorial for Philip Larkin in Poets’ Corner. “Who is Philip Larkin?” asked my 10 year-old daughter, which set off a discussion about whether Larkin would in fact have approved of such a thing as a memorial in Poets’ Corner. This is just one moment among millions across the country that the BBC enables. If there is one single entity which has had a massive influence or even the greatest influence throughout its existence on the creative economy, on the culture of this country, on literature, drama, poetry and music of all kinds and on the visual arts, then that entity is the BBC. It continues to have that influence to the good of the whole country in big and seemingly little ways. It has done so because of its unique structure, its set of ethics and its particular commitment to quality through its internal production teams. I hope very much that there is not a significant hollowing out of the corporation in that respect.
It is because of this ongoing contribution to our cultural economy in the broadest terms, for the good of all, that I think that the introduction of a German-style household broadcast levy is a good idea. A subscription fee would be the end of the BBC because it would destroy its essential universality. If, heaven forbid, we lost the BBC, we would have a much less diverse and significantly poorer broadcasting culture. I would also add that I suspect that television in its traditional format—in the home, as a big screen in the corner of the sitting room, however the programmes get to it—will be around longer than perhaps some people think. Watching television will remain for some—indeed, on certain occasions, for all—a communal experience. That is precisely why cinemas and concert-going have survived, in the face of earlier doubts about both.
Whereas one can have optimism for the creative industries in general, I fear for the arts, which are in danger of being subsumed into a wider grouping that is now being treated as essentially, if not wholly, commercial in character and which seem to be travelling in a BIS direction. I fear also for the existence of an arts or culture department that has traditionally and rightly been there to protect and develop a necessary cultural economy. If the arts are to survive and thrive, these trends must be reversed. That would be good for the rest of the creative industries, too.
Lord Burns (CB)
My Lords, I also express my thanks to the noble Baroness, Lady Wheatcroft, for introducing this well-timed debate. It is not at all surprising that we have heard a great deal today about the extraordinary growth of the creative industries and their impact around the world, but it is by any standard a hugely impressive performance and it deserves our recognition. As we have heard, not only is it one of the most rapidly growing parts of the economy, it is also a global success story. It provides an enormous number of jobs and inspires and entertains millions of people.
Of course, it is a huge and varied sector that covers a wide variety of activities. My main contact with the creative industries has been in music and broadcasting. I was chairman of the Royal Academy of Music for more than 10 years and saw the extraordinary flow of talented students engaged in all types of music, almost all of whom go on to be employed in music or in the creative industries more widely. I was also chairman of the Monteverdi Trust, the funding arm of Sir John Eliot Gardiner’s world-class Monteverdi Choir and Orchestras, whose performances are wonderful. They will be on at Aldeburgh next weekend, I think, with two or three concerts. Sadly, their activity is disproportionately overseas because of financial necessity.
In broadcasting, I was an adviser to the Secretary of State for Culture, Media and Sport for the BBC charter review 10 years ago. As the noble Lord, Lord Bragg, reminded us, the BBC is one of the most cultural and creative organisations in the world. I have also been chairman of Channel 4 for more than five years. I declare that interest, although I do not intend to address it in much detail.
I begin by saying that in none of these activities was I involved with the creative output. Unlike the noble Lord, Lord Berkeley, I neither played nor composed any music and unlike the noble Lord, Lord Bragg, I did not make or commission any television programmes. My role has been rather different. In the creative industries there is usually a need to balance at least two objectives: one is to produce great creative quality; the other is to ensure that the relevant creative organisation is financially stable. In my relationship with these organisations, I learnt at an early point that creative organisations that become overinfluenced by their financial objectives find the creative spirit being squeezed and success difficult to maintain. On the other hand, when those involved with the creative side try to escape the financial realities of life, problems emerge through a different and often more immediate route. With these organisations I have, by and large, played the role of trying to balance the objectives of creative success and financial stability in an uncertain and risky world. I would argue that one of the important aspects of the success of the creative industries in the United Kingdom is that they have managed this balancing act extremely well. Today, my focus is on what we can do to protect and sustain this success.
First, I think everyone who has spoken today has agreed that we must focus on how we nurture creative skills and performance among young people. I am in little doubt that that is achieved by giving the widest number of young people the opportunity to sample creative and cultural activities and to provide opportunities for those who demonstrate talent to take it on to the highest level. Talent inevitably lies in many unexpected places and we must give it the best opportunity to flourish. As many noble Lords have said, this has clear implications for schools and the opportunities that are made available outside school. The narrower the curriculum and the fewer the opportunities for young people to be exposed to these activities inside and outside school, the less chance there is of uncovering real talent. Certainly, as far as music is concerned, there are some worrying trends in that direction.
Secondly, one of the components of the UK’s success has been having a varied and competitive environment. It is very good that we have many outstanding music conservatoires, several great drama and dance schools and many world-class orchestras. Similarly, we have been very fortunate in having a competitive broadcasting ecology with public service broadcasting at its core, which offers enormous opportunities for making the high-quality television programmes that have been spoken about and supports the British film industry. Clearly, organisations that have demonstrated success should be encouraged, but plurality of providers gives the best opportunity for continuous innovation. We have been fortunate in this country in the way that the broadcasting industry has been organised.
I also stress the importance of the many talented people involved in the management, administration and technical tasks of all kinds of creative organisations, both large and small. The truly creative part of the creative industries is often merely the tip of the iceberg. None of it would get anywhere without the long chains of people who take these creative ideas to audiences and customers and present them in an attractive and enticing way. Above all they ensure that the creative organisations are managed efficiently. Creative organisations, like any other organisation, have to be efficient if they are to survive. When they need financial support they must be prepared to explain the basis on which that support is justified.
Clearly, there is a need to develop great performance skills, as well as the capacity to write new material and to curate new productions. That is true for both music and broadcasting. But by their nature many creative industries are risky and unpredictable. Success requires long time horizons, willingness to experiment and to innovate, and an ability to manage the risks involved. Above all, we must recognise that in the creative industries financial success is likely to be the result of creative success, rather than an ambition for financial success on its own.
As we have heard, because of those risks, there is a natural temptation for creative industries to look for security of finance. Often, this means turning to the Government. Of course, the Government must be an important player, as they are with many cultural and creative organisations. However—as a former Treasury official, noble Lords would expect me to say this—we should be cautious about asking them to do too much. In my experience, both music and broadcasting have been very fortunate to have multiple sources of revenue. The box office or its equivalent has to play its part and is often crucial to the long-term sustainability of an organisation. Often this is not enough, but we have been able to look to trusts, private benefactors and long-term private sector investors, as well as government support. That has been a very healthy part of the United Kingdom creative industries. It can be a great struggle, even for the most gifted of performers and even for those who excel on a worldwide stage, but I suspect that it will always be like that. The competing priorities for public money, and indeed for private money, are stark, as always.
Finally, we must never lose sight of the fact that our creative industries are competing in a global marketplace. This has huge advantages because, as in many other sectors, scale is very important in creative industries. The additional cost of multiple performances, DVDs or streaming of performances and programmes is very small relative to the initial investment. The opportunity to get back the R&D, including failures or rehearsal time, by playing to a worldwide audience is critical. At the same time, we must recognise that competing in a global marketplace also means that there are many overseas creative organisations standing ready to step into our domestic market and compete with domestic industries here. This is a ferociously competitive sector and we can never be complacent about our success. I am optimistic but, as we have heard, there could be many obstacles in the future.
In short, I support other noble Lords in arguing that we must cultivate our creative talent, and encourage the outstanding managers, administrative staff and technical experts who bring us so many great experiences and those who are willing to bring financial support and long-term support to the creative industries. It is an industry that can succeed only if we take a long-term approach.
Lord Clement-Jones (LD)
My Lords, it is an exception that two hours seem to have flown by enormously quickly in this House today. This has been a very life-enhancing debate, and we have been blessed with some passionate speeches from a great number of noble Lords who are immersed in the worlds of the arts and creativity. I thank the noble Baroness, Lady Wheatcroft, for having instituted the debate and for her superb opening. I could emulate the noble Lord, Lord Bragg, by saying that I agree with everything that everybody has said during the course of the debate and sit down, but of course I have no intention of doing that and will put my own gloss on the proceedings. The only question, really, is how Hansard will report on the introduction from the noble Lord, Lord Berkeley. I do not know whether they will put something in square brackets that says “[Opening bars of Beethoven’s Ninth]” or something like that—it will be a challenge, I suspect, but one which Hansard will be well up to meeting.
This has been a celebration, as the noble Baroness, Lady Wheatcroft, described it. However, of course, one of the persistent themes of this debate has been the need not to rest on our laurels but to nurture all those different elements, whether they be intellectual property, skills, education, finance or broad creative impulse, across the board. I will go through some of those elements, but I think that one of the most important factors to come up in this debate is that we are united on the fact that this is not purely about economics; it is about the pleasure that the arts and creative industries deliver and the importance of creativity for its own sake.
I was very much taken by the quotation from the noble Baroness, Lady Kidron, when she talked about “the vast time in between”. I thought about filling in the gaps by talking about the vast time in between House of Lords debates on the creative industries. However, perhaps we are filling it with proper arts and culture ourselves.
During the last Government, significant policies benefiting the creative industries were developed. Just a few of these include the setting up of the Creative Industries Council—and the resulting Create UK action plan—established at the beginning of the last Parliament, which has the DCMS Secretary of State and the BIS Secretary of State sitting on it. We on these Benches think that the Secretary of State for Education should also be involved in that process, for reasons which many noble Lords have enunciated during the course of the debate. As the noble Lord, Lord Haskel, emphasised, we take a very broad view of the definition of creativity. We believe that the nurturing of creativity should be taken in that spirit right across the tech and creative industries.
The noble Baroness, Lady Wheatcroft, mentioned the tax reliefs that have been so important for all the various sides of the industry—not just the film tax credit, but also high-end television, animation, orchestra, regional theatre and other tax reliefs.
A great many noble Lords talked about the linkages between sciences and the arts, starting with my noble friend Lady Bonham-Carter. So many of the creative industries are interconnected and have great economic impact on each other. The CEBR report for the Arts Council last year demonstrated that the creative talent in arts and culture plays an important role in supporting commercial creative industries. The Arts Council itself plays an important role in supporting apprenticeships.
The noble Baroness, Lady Kidron, and the noble Lord, Lord Bragg, talked about the importance of public financial support. I entirely agree that we should not regard this as subsidy; it is an investment in the future and in creativity. I agree with my noble friend that we should ensure that local authorities publish what they are spending on the arts in their areas. I was very much taken by what the noble Lord, Lord Lloyd-Webber, had to say about the successful productions in New York and the fact that five out of eight had received public funding because they were National or RSC productions. That is a very important point.
We heard from the noble Lord, Lord Haskel, the noble Earl, Lord Clancarty, and my noble friend Lady Bonham-Carter that in the digital economy there is increasing convergence—symbiosis, really—between platform and content, between the tech sector and the creative industries and the skills that are needed in those sectors.
There is cross-over with tourism, too. The noble Baroness, Lady Wheatcroft, talked about the galleries, museums and theatres that attract tourists: the Tate, the National Gallery, the British Museum and so on. The recent UK Music report Wish You Were Here reveals the fact that the number of music tourists in the UK has increased by 34% between 2011 and 2014. That is a very important sector as well. The noble Lord, Lord Haskel, described the importance of the Aldeburgh Festival. BALPPA members assert the increasing importance of UK creative content and licensing for attractions.
We want to see creative businesses continue to thrive across the country, not just in London, so that our economy can continue to reap the benefits. It is vital that we nurture that. Clustering is of great importance. We have seen how clusters have arisen over the last few years, often specialising in a number of discrete areas, such as Brighton’s Silicon Beach for video games or special effects in Dundee. I declare an interest as a Barbican trustee, and I have a particular interest in the City’s culture cluster. Like the noble Lord, Lord Berkeley, whom I am delighted to see is so supportive, I am very keen to see a world-class music centre in London and I very much hope that that feasibility study comes to a good conclusion. With my antecedents in Kendal, I was delighted by what the noble Lords, Lord Bragg and Lord Inglewood, had to say about the importance of the investment in Kendal.
There are so many sectors that we could cover today and many noble Lords have covered them, but by exception we have not mentioned publishing. That is another great international success. It is a £4 billion industry in a whole range of genres, including teaching materials. I am concerned about the future of some of our authors. The median income of our authors has been falling over the years, with the rise of the digital economy. One of the areas where I would like to see movement is the law of unfair contracts which currently is not able to govern their contracts because it does not cover intellectual property.
We have had a wonderful description of the power and value of music—and also a reference to Lionel Richie, although whether the two can be taken together I am not sure—from the noble Lord, Lord Berkeley. I was very inspired by that. The music sector is another sector of huge importance to us. We are the second largest exporter of music after the United States. We have heard about the setting up of music hubs, which is a very important development. Our live grass-roots music venues are under threat due to perverse planning consents. That is a matter of concern because they are the seedcorn of our music industry. I would like to see action taken on, and reform of, some of our planning legislation for that very reason. We heard from the noble Lord, Lord Lloyd-Webber, on the whole issue of the fabric of our theatres, which is a matter of considerable concern.
Many noble Lords talked about broadcasting—the noble Earl, Lord Clancarty, the noble Viscount, Lord Colville, the noble Lords, Lord Bragg and Lord Haskel, and my noble friend Lady Bonham-Carter—and particularly the role of the BBC, the coming charter and the importance of the BBC in the whole creative landscape. The BBC has a massive role in this area and we must make sure that any changes made to the charter, whether they involve freezing the licence fee or decriminalising its non-payment, protect the future of the BBC.
I entirely agree about the future of linear TV. It is by no means dead and our public service broadcasters have a continuing role to play. In that context the future of Channel 4 is extremely important. It has a unique and important role. It describes itself in its annual report as a “creative greenhouse”. In some respects that probably undersells its role. The success of Film4, for instance, is legendary. I need only mention “Mr Turner” and “12 Years a Slave”. That channel is engaging with younger audiences, increasingly via the internet, and plays a very important role in that respect. The multichannel sector should not be forgotten either. The scale of its investment is growing and is also extremely important. The noble Viscount, Lord Colville, mentioned the “must carry” aspects, which are very important. We need to get rid of some of the trammels on our public service broadcasters in that respect.
Many noble Lords talked about the overseas markets. I have a particular interest in China, and the film co-production treaty with China that the BFI has led. I was delighted to see that Amanda Nevill was awarded a CBE in the Birthday Honours List for all her work with the BFI, and Pinewood is not only investing in the UK but also entering into joint ventures with major Chinese companies, which is terrific.
Education is one of the themes that came through very powerfully in the debate. I entirely agree with the noble Baroness, Lady Kidron, when she said that the supply chain is only as good as the weakest link. Many of us are very concerned about the EBacc and the fact that we do not have STEAM but still have STEM. We really must get to grips with this over the coming years. There should be no disjunct between technical and creative skills and between the sciences and the arts. We need to make sure that the core subjects cover both; otherwise, we will not equip ourselves for the new age. As my noble friend said, we need to implement the findings of Darren Henley’s review.
There are many other areas of great concern. The noble Lord, Lord Lloyd-Webber, talked about access to stage school and the noble Baroness, Lady Kidron, talked about disincentives to study the arts and humanities at universities. However, we must keep the “steam” up on apprenticeships, which are extremely important.
I will not deal with incentives and finance. The noble Lord, Lord Burns, had it spot on when he talked about balancing creative success with financial stability. A number of initiatives were taken by the previous Government and I very much hope that we will build on them.
I will be uncharacteristically brief in talking about intellectual property, which involves many big issues. The biggest problem coming down the road concerns the EU’s digital European economy proposals to make it impossible to split licensing by territory. That could have a fundamental effect on the financing of creative properties and I hope that the Government have taken that on board. I have always felt that you should have a mixture of education and enforcement. That is very important. Education is important but I hope that the Government will continue their work on enforcement. I look forward to hearing what the Minister has to say.
Baroness King of Bow (Lab)
My Lords, I congratulate the noble Baroness, Lady Wheatcroft, on securing this debate and draw the attention of the House to the fact that I work for a public service broadcaster— Channel 4.
A generation ago, in 1998, the Labour Government defined the creative industries as comprising any business with the potential to generate,
“wealth and job creation through the generation and exploitation of intellectual property”.
It seems strange now that, in the fairly recent past, the Blair Government became the first in the world to recognise the creative industries as an industrial sector in their own right. The Creative Industries Mapping Document published by former Secretary of State, Chris Smith—now the noble Lord, Lord Smith—set out for the first time to measure and map the impact of the creative industries on the rest of the economy. He wrote in the foreword to the document:
“The most successful economies and societies in the twenty-first century will be creative ones. Creativity will make the difference—to businesses seeking a competitive edge, to societies looking for new ways to … improve the quality of life. This offers the UK enormous opportunities. We have a well-deserved reputation for creativity; we can draw on both a strong historical base and vibrant contemporary developments”.
It is worth touching on the historical base that the noble Lord, Lord Smith, mentioned because it puts the future potential of our creative industries in context. It is incredible to recall that, at its height, the British Empire was the largest ever in history and held sway over one-fifth of the world’s population. The BBC Empire Service began in 1932 and is today, of course, known as the BBC World Service. The global footprint of the World Service is the widest reaching of any broadcaster or country and it is the most trusted news source in the world. The BBC news reaches more than 230 million weekly users. If you add our news to our other intellectual property exports—music, film, TV, games, digital content, publishing, architecture and so on—it is clear that Britain has done something truly remarkable. We have lost an empire but won the battle for global cultural pre-eminence. That pre-eminence now showers us with revenue and is the real venture capital of our economy.
As John Woodward wrote in his excellent review of the creative industries, published recently in March,
“the UK has risen to become the pre-eminent global hub and talent magnet for investors seeking creativity, innovation, world-class skills and cutting-edge engagement with the new digitally-led creative economy”.
One of the purposes of this debate, and what noble Lords have done in it, is to ask: how did this happen and how we can ensure that it continues to happen? Tellingly, Mr Woodward’s explanation of how it happened is:
“Over the past 40 years a combination of natural talent, education, training, and crucially, the provision of state-funded access to a broad range of cultural activity, have all contributed to the UK becoming a global powerhouse for the creative industries”,
but that,
“the recent public spending cuts to arts bodies and to regional economic support structures now risk eroding the national DNA that originally propelled the UK to the top of the global creativity league”.
If we want to secure our future, we must secure our creative industries. As my noble friend Lord Bragg said, this calls for enlightenment from the centre. I liked his comments on repetition, such as:
“A horse! a horse! my kingdom for a horse!”.
A couple of us have requoted this. I like a bit of repetition as much as anyone else but there are too many arts organisations crying, “A grant! a grant! my kingdom for a grant!”. Our kingdom’s cultural hegemony was built on state-funded access to a multiplicity of cultural goods but the scale of cuts to state-funded arts projects and institutions now risks critically undermining not just our collective creativity, our creative industries and our cultural heritage but the life-blood of Britain’s economy. That is why this debate is so important, and why it is so important that we see clearly the risks ahead.
What are the risks? The first is that we do not protect our PSBs and the extraordinarily innovative yet fragile creative ecology that they have spawned. Virtually every Peer speaking today has referred to our creative infrastructure. Secondly, there is the risk that through excessive funding cuts, as I have said, we fatally undermine access to arts and culture for all British kids, not just a lucky few. This was articulated by the noble Earl, Lord Clancarty, the noble Baroness, Lady Kidron, my noble friends Lord Haskel and Lord Bragg and many others. Third, there is an enormous risk that our education system does not do enough to promote creativity, as was outlined by the noble Baronesses, Lady Bonham-Carter, Lady Kidron and Lady Wheatcroft, and by the noble Lords, Lord Burns and Lord Clement-Jones, and others. Fourthly, there is the risk that we do not secure the digital economy or its infrastructure adequately, for example in broadband.
The fifth risk is that the creative economy is limited to London and the south-east, and that we fail to introduce the regional structures required to hardwire creativity throughout Britain. We have not touched on that enough in this debate but I am sure we would all agree that we need to pursue that incredibly important strategy. Sixthly, there is the risk that we fail to respond adequately to regulatory challenges as they emerge, particularly those that require a constructive relationship with the EU. Seventhly, and following on from that, we need our IP regime to promote innovation and not stifle it, as the noble Lord, Lord Clement-Jones, mentioned. I encourage the Government to think harder about how we effect that difficult balance between the incentive to innovate and ensuring that we have appropriate returns from copyright. There will be instances, and the digital world throws up many of them, where the current situation is not as we would wish it to be.
Eighthly, there is diversity, which I thank the noble Baroness, Lady Bonham-Carter, for raising. I should flag up that, as I mentioned at the beginning, I am a diversity executive for the broadcaster Channel 4. It was really instructive of the noble Baroness to have highlighted the role that Lenny Henry has played and the link with talent. Let us remember that this is about talent. Lenny Henry highlighted the fact that BAME talent has left, or been pushed out of, the television industry. Too often, people greet the diversity initiatives that are set up to deal with this sort of issue by whispering complaints—let me be blunt here—that they are just about getting black people jobs, that they lower the bar, that they undermine meritocracy and that they prevent the best person getting the job. So let me put the record straight and explain why intelligent diversity strategies grow our talent pool and our economy.
I will do this by way of an example that I never tire of repeating—please forgive me, those who have heard me say this before. It relates to the legendary former head of Film4, Tessa Ross, who was a great advocate for diversity. She was concerned that, despite Channel 4 having a remit to push diversity and find hidden talent, she could not find any black film directors. Tessa looked and looked. She asked her people to look. The cry went out across the land: “Black film directors—where are they?”. The response came, “Oh no, there aren’t any. Well, there aren’t any of note”. You know how it is: you want to employ black people and women and disabled people and working-class white boys from Scunthorpe, but you just cannot find any who have the right experience or the right qualifications. It is even a bit like this round here in the House of Lords, isn’t it? How else do you explain that 77% of the Lords are men? Obviously we do not discriminate against women, and we are not in favour of men over women. It’s just that women are not as experienced as men, or they have not risen up through the ranks, or they are not the experts in their field, or they cry in the lab. You know how it is. Honestly, what a load of nonsense.
Back to the head of Film4 searching for a black film director—she knew there must be black people out there who had the talent to be film directors but just had not had the opportunity. She decided to widen the recruitment field, to change the qualifications required. I say to any person in any industry, in any business: if you want to improve things, do that. Widen your recruitment base. She turned to somebody who had no experience as a film director. He was a visual artist. As we all know, Steve McQueen did not get the Oscar for best film due to political correctness. He got it because he is one of the most talented film directors in the world, because Channel 4 had an innovative approach to diversity and because Channel 4 had—and has—a strategy to go out and find the talent without qualifications, rather than let that talent be lost for ever.
The TV industry is currently working hard to promote diversity, and the Creative Diversity Network, which I work with, has done just that. I know that the Minister in the other place is well acquainted with the issues that the Creative Diversity Network is pursuing, so I ask the Minister: what will the Government do to spread the best practice identified by the Creative Diversity Network for the TV and film industries further afield to related creative fields such as radio, the music industry, publishing and theatre?
While I am on the subject of diversity, it is imperative to point out the huge diversity of the creative industries themselves. We have heard about fashion design, architecture, film, video, special effects, software, music, publishing, theatre, TV, tourism —the list goes on and on. Yes, these are disparate fields, but, as the Creative Industries Mapping Document pointed out all those years ago for the first time, these are the areas that make up the knowledge economy on which our future rests.
I end by turning to the BBC. As so many have pointed out, the BBC goes to the very heart of what it is to be British. I have already quoted my noble friend Lord Bragg, who said in this Chamber:
“The BBC is not so much the family silver as the family itself”.—[Official Report, 3/6/15; col. 432.]
I will be frank. Many are worried that the Government want, with ideological zeal, to cut the BBC down to size, to something far less than it is at the moment. I am sure many of us will urge the Government not to use the BBC’s charter renewal as an inadvertent exercise in cultural vandalism. I quote an article that said:
“Proverbially, when the bombs rain down, the captain of the last nuclear submarine will judge Britain ended when Radio 4 ceases to sound”.
The cultural industries have given Britain a sense of itself, and none more so than the BBC. Those industries will protect our future and, as such, they could hardly make a greater contribution to the United Kingdom’s economy.
The Earl of Courtown (Con)
My Lords, I join other noble Lords in thanking my noble friend for securing this debate, and I thank all noble Lords for their contributions in this very far-reaching debate on the creative industries.
The interest shown this afternoon is a testament to the essential role played by our creative industries in our national life. As my noble friend Lady Wheatcroft said in her opening remarks, and as many other noble Lords have said, the official figures published in January confirmed the leading role played by the creative industries in our economic recovery. The sector contributed £76.9 billion to the UK economy in 2013, 5% of the total UK economy. The year-on-year growth, from 2012 to 2013, was a staggering 9.9%, three times that of the economy as a whole, and higher than for any other Blue Book sector. In that year, the sector accounted for 171,000 more jobs, 5.6% of total UK jobs, and a 1.4% increase on the previous year. Over the longer term, there has been a 3.9% rise in the number of jobs in the creative industries each year between 1997 and 2013, compared with 0.6% in the UK economy as a whole.
Lord Haskel
Do the Minister’s figures include the non-creative part of the work that went on in those industries?
The Earl of Courtown
The noble Lord, Lord Haskel, mentioned having to define the creative industries in his speech, and the noble Baroness, Lady King of Bow, also read out a long list of creative industries. It is very difficult to compare the creative industries as I understand it, and I shall have to write to the noble Lord, Lord Haskel, on that issue.
The sector is also leading the way on exports. The value of services exported by the creative industries in 2012 was £17.3 billion, which is 8.8% of total UK service exports, and an incredible increase of 11.3% over 2011, compared with 2.8% for total UK service exports. As with the sector’s domestic performance, creative industries’ exports are playing a key role in our export drive. While the sector is showing impressive growth here in the UK, however, we do not exist in isolation, and cannot be complacent. Our global competitors are working hard, too. The Government are fully committed to helping the sector as it implements its strategy to maintain its global competitiveness, including through allowing the use of the Treasury building for the filming of the latest Bond film, as my noble friend Lady Wheatcroft said.
Over the past five years, the Government have showed their commitment to the sector through setting up the Creative Industries Council, as the noble Lord, Lord Clement-Jones, said. It will provide a strategic focus for industry and government. We also put in place a range of generic and sector-specific financing and fiscal measures, such as the creative content tax reliefs, as noble Lords have said. The film tax relief alone has generated over £7.8 billion of production spend in the UK, supporting over 1,200 films. We have expanded the original scope of the tax reliefs to cover the high-end TV, animation, video games, children’s TV and commercial theatre production sectors, with a new relief for orchestras due to come into force next year. We provide funding for agencies such as Arts Council England, the British Film Institute, Creative England and Innovate UK to invest in and support the creative industries. Arts Council England invested £1.4 billion of public money in arts organisations and cultural programmes between 2011 and 2015, and the BFI is investing nearly £500 million between 2012 and 2017 to help the film industry grow, build audiences and stimulate a vibrant film culture in the UK. Through the British Business Bank established by the Government, creative businesses have received more than £80 million of equity finance since May 2010, and through UKTI, in the financial year 2014-15 the Government have helped provide export support to around 13,000 creative companies, one-quarter of all companies assisted by UKTI, and delivered £467 million-worth of business wins.
On the education and skills front, we have supported the sector with over £400 million in our music and cultural education programmes, with a further £109 million available in 2015-16; £20 million co-investment funding in Channel 4/Creative Skillset’s industrial partnership; our co-investment in Creative Skillset’s skills investment fund, including a further £2 million each year in 2015-16 and 2016-17; and a new curriculum for IT in schools. Our £1.7 billion public investment in broadband infrastructure, as mentioned by the noble Lord, Lord Haskel, will greatly help creative businesses to set up in the regions and enable them to reach new customers around the UK and the globe. We are also committed to a fair and robust IP enforcement regime, touched on by the noble Lord, Lord Clement-Jones, with funding for the Police Intellectual Property Crime Unit up to 2017, backed up by a strong programme of consumer education, including £3.5 million for an education campaign to run alongside Creative Content UK.
As my noble friend Lady Wheatcroft said, we intend to build on this solid programme of support over the next five years. Our manifesto gave commitments to continue the existing creative content tax reliefs and expand them when possible; to back plans for the Factory in Manchester and a modern world-class concert hall for London; to continue to require ISPs to block sites that carry large amounts of illegal content; to build on progress made under voluntary anti-piracy projects to warn internet users when they breach copyright; and, through our review of the BBC’s royal charter, to recognise the important role played by the corporation in supporting our creative industries.
A number of noble Lords raised the issue of IP in relation to the digital single market. Last month, the European Commission published its strategy for developing the digital single market. This will involve some reform of the EU copyright framework with legislation expected at the end of the year. The Commission’s strategy document is at a high level and, of course, the detail will be all important. It is proposing not a full rewrite of the entire framework but targeted harmonisation measures that will still be of significant impact. Among these are measures to make it easier for businesses to provide portable services that people can access when they are travelling or on holiday and for people to buy copyright content across borders; to harmonise rules on the use of copyright material for specific purposes, such as research; and to clarify the rules on intermediaries using copyright content to ensure there is a level playing field. Proposals will also be made to modernise copyright enforcement focusing on commercial-scale infringement. In July last year, the European Commission announced a new action plan to tackle IP infringement. We fully support the plan. It provides a good mix of voluntary initiatives and awareness-raising activities and focuses on tackling commercial-scale infringement which causes the most harm to our economies. The digital single market package overall represents an important and timely opportunity to ensure that Europe is in the best possible position to take advantage of the digital revolution.
The noble Lord, Lord Berkeley, mentioned the importance of safeguarding IP. The Government recognise the challenges and importance of safeguarding intellectual property here and abroad. It is essential that rights can be enforced effectively, and we are taking a range of actions to address this. As I mentioned, in September 2013 we launched an online IP crime unit dedicated to tackling serious and organised online piracy and counterfeiting and protecting legitimate UK businesses. The unit has so far made 52 arrests and has also diverted more than 11 million views from copyright-infringing websites to an official police warning page since July last year.
Overseas IP regimes can be difficult for businesses to navigate and successfully enforce, so we provide specialist IP attachés to help UK businesses in some of the more important and challenging international markets: China, India, Brazil and south-east Asia. During a visit to China in 2014, the UK facilitated a landmark agreement between the China-Britain Business Council and Chinese e-commerce giant Alibaba that will help address the tens of millions of pounds lost to Chinese counterfeiting and piracy via the online platform each year. In June last year, the Government and the European Commission hosted the inaugural international IP enforcement summit in London, with great success. It was attended by experts from Governments, enforcement authorities and multinational businesses around the world. The summit discussions clearly demonstrated the unremitting desire of all those who attended to work together to overcome the challenges that we face around the world in tackling IP crime, whether by reducing the flow of funds to criminals, better customs enforcement at external borders or ensuring that IP rights work in the interest of employment and economic growth.
Several noble Lords mentioned issues relating to the status of the arts and education, and I will deal individually with as many of those as I can in the time that I have left. The Government have created a number of new programmes that give children the enriching experiences they need at a young age, such as music education hubs, a national youth dance company and the British Film Institute Film Academy. Such programmes develop the creative thinking that is powering the UK’s world-beating creative industries and spark a love of the arts that can last a lifetime.
My noble friend Lady Wheatcroft mentioned the supplier recognition scheme in relation to the Olympic site. The SRS is a first for the Olympic movement; it is the first time that the IOC has allowed such a scheme. More than 780 companies have benefited under the scheme. Some categories of companies, which my noble friend mentioned, were excluded from the scheme, but I am afraid that there is no scope for changing those categories. They are not dictated by the Government but relate to contracts between the IOC and the major international companies.
My noble friend also mentioned the difficulty for creative SMEs in the export environment. UKTI provides tremendous support for creative businesses. Some 13,000 creative companies were helped in 2014-15—a quarter of all companies helped—and some £467 million of business was secured. UKTI set up a sector advisory group to gather creative industries together to advise it on prioritising export markets and exploiting inward investment opportunities.
My noble friend also mentioned cultural education, which concerned a number of noble Lords. As part of the Government’s plan for education, all pupils will experience a broad and balanced curriculum. The arts are a key part of this. Art and design and music are compulsory for five to 14 year-olds. In 2015-16, the Government will provide more than £109 million to support art and cultural education projects, an increase of £17 million from last year.
The noble Lord, Lord Bragg, mentioned his concern about the cuts in funding for the arts and creative industries, as did many other noble Lords. We absolutely recognise the intrinsic social and economic value of the arts to people of all backgrounds. Nevertheless, we all need to play our part in contributing to government savings—I know that the noble Earl, Lord Clancarty, and I will not have a meeting of minds on this issue. We are working with arts organisations to ensure that they have a broad funding base that incorporates public and private funding.
The noble Baroness, Lady Bonham-Carter, mentioned the need for more links between creative businesses and schools, and with careers advice, which I think the noble Viscount also mentioned. We agree that liaison between industry and education is important and welcome the recommendations in the Create UK strategy, which has been developed by industry members of the Creative Industries Council. This includes extending the role of the National Careers Service last year, which should help with the work. The new Careers and Enterprise Company will also strengthen links between employers and schools.
The noble Baroness also mentioned her diversity round table with the Minister in the department. The Minister for Culture, Media and Sport has taken an active interest in this issue, and I will speak to him about his plans to continue this group.
The noble Baroness also mentioned STEAM, not STEM. I realise that this area has concerned a number of noble Lords. The Government are strongly committed to arts and STEM subjects. Young people should have the opportunity to study arts subjects alongside an academic curriculum. Between 2012 and 2014, the number of pupils taking music and art and design GCSEs rose by 4% and 7.5% respectively.
The noble Lord, Lord Berkeley, mentioned the new London concert hall, which was also mentioned by the noble Lord, Lord Clement-Jones. The Government and the GLA are jointly funding a feasibility study into the case for a new concert hall for London. The study will examine how the hall might be funded.
My noble friend Lord Lloyd-Webber mentioned equality of opportunity in arts training. The organisations in the Arts Council’s 2015 to 2018 portfolio have committed to ensuring that their workforces are diverse. The creative employment programme will continue to offer the opportunity for paid internships in cultural organisations so that young people have a fair chance at opportunities, regardless of background.
The noble Viscount asked whether Netflix and similar services should be covered by rules to ensure fair payment for creators. Services such as Netflix and Spotify are very popular and have done much to encourage the lawful use of creative content on the internet, but the way these firms pay creators and copyright owners is highly debated, as I am sure he is aware. The European Commission has said that it will consider fair remuneration for creators in its review of EU copyright. The Government look forward to hearing the Commission’s proposals on the digital single market. The noble Viscount also mentioned the importance of SMEs and start-ups, and I could not agree more with what he said.
Time has caught up with me. I have not been able to answer a number of questions, for which I apologise, but I will write to noble Lords and place copies in the Library.
The Government are committed to continuing to support the UK’s creative industries at home and abroad. The UK’s creative industries are tremendous ambassadors for the wealth of creativity that exists on these islands. From One Direction to 007, from Sam Smith to Stella McCartney, “Game of Thrones” to Grayson Perry, these icons are known all over the world, and that is what makes Britain’s creative talent known and loved around the world. The Government are committed to helping the creative industries to make sure that they continue to be the envy of the world.
Baroness Wheatcroft
My Lords, I thank my noble friend the Minister for his response, which was detailed and positive. I also thank all noble Lords who have taken part in the debate this afternoon. It has been upbeat, with fascinating speeches from all sides of the House, and it has demonstrated that it is wrong to think that you have to be Labour to be a luvvie. It has been a positive debate. I had hoped for a celebration and it has very much been a celebration, with a few qualms as well. I thank noble Lords again and I beg to move.