House of Commons

Monday 29th February 2016 Commons Chamber

Monday 29 February 2016

The House met at half-past Two o’clock

Prayers

Monday 29th February 2016 Commons Chamber

[Mr Speaker in the Chair]

Business before Questions

Transport for London Bill [Lords]

Motion made, That the Bill, as amended, be now considered.

[Hon. Members]

Object.

Bill to be considered on Monday 7 March.

Oral Answers to Questions

Monday 29th February 2016 Commons Chamber

The Secretary of State was asked—

[Rehman Chishti (Gillingham and Rainham) (Con)]

1. What recent discussions he has had with his international counterparts on progress in the campaign against Daesh.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

7. What recent discussions he has had with his international counterparts on progress in the campaign against Daesh.

[Byron Davies (Gower) (Con)]

11. What recent discussions he has had with his international counterparts on progress in the campaign against Daesh.

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

On 20 January, I attended the first Defence Ministers meeting in Paris, where we reviewed and agreed options for intensifying the military operation against Daesh in Iraq and Syria. On 11 February, I attended the full counter-Daesh ministerial in Brussels, where we agreed an accelerated campaign plan, including agreeing on the importance of the liberation of Mosul and Raqqa, and pressing Daesh from all sides.

[Rehman Chishti]

The international community had previously asked Arab countries to do more in the fight against Daesh. Having just returned from leading a parliamentary delegation to Saudi Arabia, I understand that the Saudi authorities are prepared to send ground troops into Syria to defeat Daesh but require air cover from their international partners. Will the United Kingdom and other international partners look at that request?

[Michael Fallon]

I welcome the contribution that co-operating Gulf states, including Saudi Arabia, which was present at the Daesh meeting in Brussels, are making to the fight against Daesh, and I welcome the Saudi redeployment of F-15 aircraft to the coalition air campaign. I have seen the reports my hon. Friend mentioned that Saudi Arabia is prepared to send troops to the fight in Syria. We will wait to see the details of any plan before commenting on what support the UK would provide as part of the global coalition.

[Kevin Hollinrake]

Russian airstrikes are clearly targeting civilian populations in Syria, killing and maiming innocent men, women and children, as well as degrading the moderate Syrian forces that we are relying on to defeat Daesh in the region. Will the Secretary of State outline what actions we are taking now, and might take, to protect these populations and underpin our military strategy in the region?

[Michael Fallon]

I know that my hon. Friend will welcome the cessation of hostilities at the weekend. That appears largely to be holding for now, but it will succeed only if there is a major change of behaviour by the Syrian regime and by its principal backer, Russia. Russia must honour the agreement by ending attacks on Syrian civilians and moderate opposition groups and using its influence to ensure that the Syrian regime does the same. As for the second part of my hon. Friend’s question, there has been some progress in the past few weeks in reaching besieged areas. Some 60,000 people have recently been reached with aid through the United Nations food convoys.

[Byron Davies]

Continuing on the theme of the Russian bombing, what are my right hon. Friend and the Government doing to highlight Russia’s indiscriminate behaviour, and what contact has he had with the Russian authorities to end this outrage?

[Michael Fallon]

My right hon. Friend the Foreign Secretary and I have been very clear and public that Russian actions have been undermining the prospects for ending the conflict in Syria. We welcome the Russian contribution to the most recent agreement that came into effect on Saturday. Russia can and should play a positive role in the fight against Daesh and in ending the conflict in Syria. I have to tell the House, however, that over 70% of Russian airstrikes have not been against Daesh at all but against civilians and moderate opposition groups in Syria—an appalling contribution to a conflict that must be ended.

[Derek Twigg (Halton) (Lab)]

What discussions has the Secretary of State or other members of the Government had with our allies inside and outside the middle east about extending military action, including airstrikes, to Libya?

[Michael Fallon]

There have not been discussions about extending airstrikes to Libya because at the moment there is no Government in Libya. We have been working to assist the formation of a new Government in Libya, and it is then for that Government to make clear what assistance they require. We are party to the Libyan international assistance mission, and we will see exactly what kind of support the new Government want—whether it is assistance with advice or training, or any other kind of support.[Official Report, 2 March 2016, Vol. 606, c. 6MC.]

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

Last week in Iraq, members of the Defence Committee were informed of the full horror of Daesh, specifically in Ramadi. As it is forced out of territory, it leaves behind minefields of improvised explosive devices, including in people’s fridges and toilets, but there are no resources available to remove them. What conversations is the Defence Secretary having with partners to ensure that those resources are made available?

[Michael Fallon]

The hon. Lady is right to say that Daesh has been seeding with improvised explosive devices those towns and villages from which it has been expelled. The British contribution to the training effort of the Iraqi forces has focused on counter-IED training, which we are now supplying at all four of the building partner capacity centres. If there is more we can do to assist the Iraqi and Kurdish forces in that training, we will certainly do so.

[Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)]

What support will the UK Government give to the United Nations, which is today giving fresh aid to Syria, and to the albeit very fragile ceasefire?

[Michael Fallon]

We have been making our contribution through the United Nations and we are ready to help do more. It is not easy for convoys to get through to some of the very hard-to-reach areas. Last week’s aid drop was not entirely successful; it was dropped from a great height into a high wind, and a number of the pallets did not reach their target. The best way of getting aid in is by land convoys, but that is not easy in some of the particularly hard-to-reach areas.

[Richard Benyon (Newbury) (Con)]

Members of the Defence Committee also visited Jordan and Lebanon, and we were particularly concerned to see that Daesh was threatening the borders of relatively stable countries that Britain has assisted with huge and impressive investment. What more can my right hon. Friend and the Government do to support those countries in dealing with the clear and present danger of this evil organisation?

[Michael Fallon]

My hon. Friend is right to say that Daesh represents a threat to the stability of the entire region, including the neighbours of Iraq and Syria. We have already made a huge contribution towards training the Jordanian forces, and we have more to do. We have recently been playing role in Lebanon, too, in helping its border defences.

[Brendan O'Hara (Argyll and Bute) (SNP)]

Does the Secretary of State believe that the use of the much-vaunted Brimstone missile against Daesh has, as both he and the Prime Minister assured us it would,

“cut off the head of the snake”

in Raqqa?

[Michael Fallon]

Brimstone is one of the precision munitions available to our armed forces, alongside Paveway bombs and the Hellfire missile. The United Kingdom forces have flown more than 2,100 combat missions against Daesh and have carried out more than 600 strikes, including with Brimstone missiles. One of the points for review at the recent ministerial meeting was what more we can do to target the infrastructure that supports Daesh—its command and control, logistics and supply routes—as well as our efforts in support of Iraqi forces.

[Brendan O'Hara]

I thank the Secretary of State for that answer, but will he comment on recent reports in The New York Times that say that, although Daesh numbers have fallen in both Iraq and Syria, those in Libya have doubled in the same period? Is it not the case that, rather than diminishing Daesh, the current bombing campaign is simply displacing it?

[Michael Fallon]

No, I do not think there is direct evidence of movement from one country to another. Daesh is on the back foot in Iraq. The Iraqi and Kurdish forces, with support from the coalition, have liberated Tikrit, Baiji, Ramadi and other cities, and Daesh is being pushed back there. That is not happening yet in Syria, and I, like the hon. Gentleman, am extremely concerned about the proliferation of Daesh along the Libyan coastline, which is why we have been urgently assisting the formation of a new Libyan Government.

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

As the Secretary of State has said, coalition efforts have a significant effect on stopping and degrading Daesh not only in Iraq, but, to a lesser degree, in Syria. Does he agree, however, that a conventional, full-frontal assault on Mosul and Raqqa might well have the opposite effect to that we are seeking, and that trying to do something about Daesh’s poisonous ideology and funding is possibly more important than purely conventional attacks?

[Michael Fallon]

I agree with my hon. Friend. We have to look at all those things and deal with Daesh across the board. We have to combat its ideology, we have to cut off its financing and we have to deal with the message that it is putting out to local populations. Preparations for the liberation of both Mosul and Raqqa will require very careful preparation to reassure the Sunni population, particularly of Mosul, that it will be able to enjoy better security once Daesh is thrown out.

[Toby Perkins (Chesterfield) (Lab)]

As we consider these issues, our thoughts are very much with the brave members of our armed forces who are serving in the middle east, with all those who are living under the brutality of Daesh and with the victims of the terror attacks that have been carried out all over the world. The Secretary of State is absolutely right to say that we can simultaneously welcome the progress towards a ceasefire and the contributions that the Russians have made, and condemn the previous Russian attacks on the moderate forces that the coalition is working with. Will he tell us how reliable he feels the estimate of 70,000 moderate Syrian ground forces is at this moment in time?

[Michael Fallon]

I am grateful to the hon. Gentleman, and I am grateful for the official support that has been given to the campaign against Daesh. The 70,000 figure was not the Government’s figure; it was a figure produced independently by the Joint Intelligence Committee. We have no reason to believe that it is wrong. Indeed, the civil war in Syria has been raging for six years, so considerable forces, of which the 70,000 are a formidable part, have been engaged against the Syrian regime.

[Toby Perkins]

Just two days ago, ISIS launched a series of attacks on the headquarters of the Kurdish forces in Tal Abyad, to the north of Raqqa. Given that we were hoping that the moderate forces were waiting to take the fight to Daesh, that is obviously very concerning. Will the Secretary of State tell us a little more about how effective he thinks UK airstrikes have been in achieving our objectives of weakening Daesh and supporting moderate forces to take back control and liberate Raqqa?

[Michael Fallon]

The UK is playing probably the second most important part in coalition air activity in the strikes, in surveillance and in intelligence. As I have said to the House, Daesh is being pushed back in Iraq. There is no doubt about that. It is being pushed up the Tigris and it is being pushed back west along the Euphrates. In Syria, the position is much more complicated. We are concerned at some of the more recent reports that may suggest co-ordination between Syrian democratic forces and the Assad regime, which is not helpful to the long-term aim of defeating Daesh.

[Alison McGovern (Wirral South) (Lab)]

2. What steps his Department is taking to support British jobs and industry through its procurement process.

[Mr David Hanson (Delyn) (Lab)]

16. What steps his Department is taking to support British jobs and industry through its procurement process.

[The Minister for Defence Procurement (Mr Philip Dunne)]

In the strategic defence and security review published last November, the Ministry of Defence agreed a new strategic objective of contributing to the nation’s prosperity. We do that in many ways, not least through our procurement spend of some £20 billion a year with UK industry, around half of which is in the manufacturing sector. The British defence and security industry is the largest in Europe, and it plays a vital role in delivering battle-winning capabilities for our armed forces. As a Department, we are driving greater innovation into defence procurement, maximising opportunities for small and medium-sized businesses, investing in skills and contributing to a more prosperous economy.

[Alison McGovern]

That sounded good, and I am glad that the Department has such an objective, but the manufacturing industry in my constituency tells me that the Government have taken far too little action in favour of manufacturing, not least on business rates. In pursuit of those objectives, will the Minister tell me when he last spoke to the Department for Business, Innovation and Skills about refreshing and improving its industrial strategy?

[Mr Dunne]

I can tell the hon. Lady that I have meetings with colleagues in the Department for Business, Innovation and Skills on a monthly basis. In fact, I was in its offices earlier this month. We are constantly looking for better ways to encourage medium-sized and small businesses, in particular, to engage in the Ministry of Defence supply chain, and I am pleased to tell the House that we have confirmed with the Cabinet Office a target of 25% of MOD spend through SMEs, both direct and indirect.

[Mr Hanson]

I am genuinely interested in the Minister’s approach. I would like him to explain to the House why, for example, 60% of the steel for the new Royal Navy offshore patrol boats is being procured from Sweden, when in my part of the world, Wales, we have a real crisis on our hands with the steel industry.

[Mr Dunne]

I am happy to try to respond to the right hon. Gentleman, particularly in relation to the specifics that he has raised. About 20% of the steel used in the three offshore patrol vessels has been sourced from UK steel mills. As the prime contractor, BAE Systems issued invitations to 24 companies to tender for the steel contract. Only four were returned, of which only one was from a British contractor. It won the contract to provide steel, which was then sourced from a wide range of suppliers.

[Mr Nigel Evans (Ribble Valley) (Con)]

On Friday, I visited BAE Systems at Samlesbury, where I saw not only the skills that help it to manufacture parts for the Typhoon and the joint strike fighter, but the results of the millions of pounds it is investing in the training academy for 112 apprentices, which will open later this year, and in 3D printing, which means that it will be able to make parts and prototypes both in plastic and in metals. Does the Minister agree that such investments will help to keep BAE Systems at the forefront of its field in the world?

[Mr Dunne]

My hon. Friend speaks magnificently not only for his constituents, but for the largest UK defence contractor, whose main centre of engineering innovation is in his constituency. I congratulate him on that and applaud him for it.

[Ben Howlett (Bath) (Con)]

Given that Ministry of Defence procurement operates under European law, what assessment has the Minister made of a potential exit from the European Union on UK SMEs that rely on MOD contracts?

[Mr Dunne]

As my hon. Friend knows, the UK defence and security industry is the largest in Europe. As the default position, we continue to place contracts on the basis of open competition. EU procurement directives apply to our procurement, which means that EU contractors are eligible to compete for our contracts in the same way as UK and other international companies, other than when we declare an article 346 exemption for warlike stores, which accounts for about 45% of our procurement.[Official Report, 2 March 2016, Vol. 606, c. 5MC.]

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

On procurement, I hope that the remarks about Europe made by my hon. Friend the Member for Bath (Ben Howlett) also apply in relation to our overseas territories. During the last recess, I had the chance to visit our servicemen and women in the Falklands. Will the Minister join me in paying tribute to the 1,200 personnel there? Will he confirm that this Government will work closely with the Falkland Islands Government to improve the accommodation there and will procure such improvements through British providers?

[Mr Dunne]

My hon. Friend might have preferred to put that question to the Secretary of State, who has just visited the Falkland Islands. He is the first United Kingdom Defence Secretary to do so for over a decade. I can confirm to my hon. Friend that, as part of the SDSR conclusions, the Ministry of Defence has committed to investing £180 million in the Falkland Islands, including the improvements he seeks to the accommodation.

[Bill Esterson (Sefton Central) (Lab)]

18. There are more than 15,000 high-skill, high-value jobs in the defence sector in the north-west alone, with earnings that are more than 40% higher than the national average. We have heard previously about the lack of a proper industrial strategy for defence with respect to steel, so when will the Government look at the wider economic benefits when it comes to protecting those high-skill, high-value jobs and to creating new ones in the context of defence procurement?

[Mr Dunne]

The hon. Gentleman should have a word with the leader of his party. Government Members care about both security and prosperity, and the hon. Gentleman may like to remind his leader that grandstanding on a Saturday places at risk not only the ultimate security of the nation, but the tens of thousands of jobs and the hundreds of companies in the submarine industry in this country.

[Kate Hollern (Blackburn) (Lab)]

Perhaps the Minister should listen to the questions, stop throwing out allegations of grandstanding and take the issue of the steel industry in this country seriously. The chronic under-investment in steel in this country by this Government is nothing less than a national disgrace. As my right hon. Friend the Member for Delyn (Mr Hanson) said, 60% of the steel required for the Royal Navy’s offshore patrol vessels has been sourced from Sweden, to name but one example. Does the Minister not agree that the MOD should consider wider employment, industrial and economic factors in its procurement policy? Its policy is obviously not working given that, as he has said, such a low level, in truth, comes from British companies.

[Mr Dunne]

UK suppliers make a significant contribution to the supply of steel for our defence programmes, including some 94% of the steel in the aircraft carriers—77,000 tonnes—being sourced from UK mills. The Government and I recognise that there is an issue that is affecting steel production in this country. That is why we established the steel procurement working group, on which the Ministry of Defence is represented. I instructed the Department and wrote to our major defence prime contractors last December to ensure that the guidance on steel procurement was implemented across defence. That will enable proactive engagement with the UK steel market on procurement pipelines through the supply chain and ensure that cost calculations can be taken into account over the whole life, and not just at the initial price.

[Mr Speaker]

The exchanges today are, to put it mildly, a tad long-winded. There are a lot of questions to get through. What is required is a pithy question and a pithy answer. It is not very difficult.

[Jess Phillips (Birmingham, Yardley) (Lab)]

3. What assessment he has made of the potential effect of the planned 30% reduction in his Department’s civilian workforce on front-line service personnel.

[Mr Jim Cunningham (Coventry South) (Lab)]

10. What assessment he has made of the potential effect of the planned 30% reduction in his Department’s civilian workforce on front-line service personnel.

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

Our civilian workers do an excellent job. I recognise that reductions in our workforce will require the Ministry of Defence to look strategically at the way in which we operate. The majority of the planned reductions are under way and there is an opportunity to identify further efficiencies across defence. Our priority is to deliver a smaller, more productive workforce that will ultimately generate savings for reinvestment in front-line capability.

[Jess Phillips]

Does the Minister acknowledge that further cuts to the civilian workforce will inevitably shift the burden on to armed forces personnel? How does he think that will affect the retention, recruitment and morale of our troops, which, according to servicemen and women in my constituency, are already worryingly low?

[Mark Lancaster]

No, I do not, because the savings of approximately £300 million that we will be able to make will ultimately be reinvested in front-line capability.

[Mr Jim Cunningham]

Does the Minister think that expertise may be lost as a result of the cuts to the civilian force?

[Mark Lancaster]

Under the “whole force” approach, we have tried to find the balance both between regular and reserve service personnel, and between MOD civilians and contractors. This is a mix that successive Governments have followed. We try to use the right people in the right place at the right time.

[Emily Thornberry (Islington South and Finsbury) (Lab)]

Civilians at Defence Equipment and Support fulfil one of the MOD’s most important responsibilities—making sure that our troops have the right kit—yet they, along with the rest of the MOD’s civilians staff, face 30% cuts. DE&S requires highly specialist expertise, for example to make sure that our aircraft are safe, so will the Minister explain how he can impose 30% cuts without losing such vital skills?

[Mark Lancaster]

I am afraid that the hon. Lady may be misinformed. DE&S does not face 30% cuts. We are not imposing a blanket 30% cut across the whole of defence. If anything, she is slightly scaremongering and should perhaps reflect on her comments.

[Emily Thornberry]

The Minister is telling us that although there will be 30% cuts across the civilian staff, some areas will face cuts to civilian staff higher than 30% and other areas will face 20% cuts. It is in the strategic defence review that there will be 30% cuts to civilian staff, but he tells me that they will not be at DE&S, so where will they be instead? In the last two years alone, DE&S has lost 5,000 staff. At the same time, the cost of contractors has spiralled. We are in the ludicrous position where the Public Accounts Committee says that we are spending £250 million on contractors who are advising us on how to reduce our reliance on contractors. Surely the Minister ought to learn from experience and make these cuts in a strategic way, as opposed to introducing arbitrary cuts.

[Mark Lancaster]

I am grateful for the pithy question. There is a basic misunderstanding here. The hon. Lady needs to understand that many of these programmes are already in place. For example, the footprint strategy, which will see our footprint reduced by some 30%, will naturally mean that there is less need for civilians in certain parts of the estate. Some of the measures are already under way, so we do not simply have to impose a blanket 30% cut in DE&S.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

4. What recent assessment he has made of the effect of EU membership on the UK’s national security.

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

NATO is the cornerstone of the United Kingdom’s defence. The European Union plays an important complementary role in supporting NATO’s response to international crises, by applying economic, humanitarian and diplomatic levers that NATO does not have. The Government therefore believe that the United Kingdom’s continued membership of a reformed European Union will make us safer and stronger.

[Drew Hendry]

Cyber threats pose a significant risk to the defence of the UK, and that issue was identified as one of four security challenges in the 2015 defence review. The EU network information and security directive was created in 2014 to enhance data security throughout EU member states, and it is vital that cyber security continues to be a priority for the MOD. Does the Minister agree that remaining a member of the European Union greatly enhances our ability to respond to future cyber threats?

[Michael Fallon]

Our recent strategic defence and security review identified cyber as one of the key threats facing this country. My Department has now taken overall responsibility for cyber security, and we are spending more than £2 billion to ensure that we keep the institutions of government properly protected and do our best to spread good practice in our industry.

[Sir Edward Leigh (Gainsborough) (Con)]

17. On a scale of one to 10, and in terms of preserving our national security, how would the Secretary of State rate and compare our membership of NATO with our membership of the EU?

[Michael Fallon]

As I have said, NATO is the cornerstone of our defence and the EU plays a complementary role. I have not yet come across any NATO Defence Minister who thinks that we should leave the European Union or that we would be safer and stronger outside it. Taken together, membership of those two organisations—the alliance and the union—keeps us stronger and safer in an uncertain world.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Does the Secretary of State think that President Putin would shed a tear if the UK left the European Union? Is it not clear that we are better off being part of that collaboration and sitting round the table with France, Germany and Italy, and thinking about all those security issues? Are we not better off and safer remaining part of the European Union?

[Michael Fallon]

The European Union was able to impose sanctions on President Putin for what he did in annexing Crimea and his aggression in eastern Ukraine. I think that President Putin would certainly welcome any fracturing of either NATO or the European Union.

[Sir Gerald Howarth (Aldershot) (Con)]

Does my right hon. Friend accept that by advancing the rather quaint idea that somehow our membership of the EU enhances our national security, he is merely playing into the hands of people such as Mr Juncker and Chancellor Merkel who, if Britain votes to remain in the EU, would advance towards a European army and permanent structured co-operation, the result of which would be to undermine NATO—the very organisation that the Secretary of State says is the cornerstone of our national defence?

[Michael Fallon]

We have made it absolutely clear that we would not support any move towards a European Union army of the kind that my hon. Friend suggests. These two organisations have different memberships and slightly different objectives. As I have said, NATO is the key part and cornerstone of our defence, but legal, economic, diplomatic and humanitarian levers are available to the European Union that NATO does not have. Being a member of both gives us the best of both worlds.

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

When the Secretary of State talks to fellow European Defence Ministers, he must acknowledge that some would prefer a European defence force ultimately to replace NATO. What is his view on that, and will he acknowledge that most of our European security successes are bilateral and not as part of the EU?

[Michael Fallon]

I have not heard a fellow European Defence Minister call on us to help to create any kind of European defence force. At the last NATO meeting I attended in Brussels last month, it was interesting that Germany specifically asked for NATO to help police the Aegean sea and deal with the migrant pressure. There is a role for NATO in some of these operations, and a role in other areas for the European Union. We are fortunate in being members of both.

[Victoria Prentis (Banbury) (Con)]

Does the Secretary of State agree that it is essential that all members of our armed forces serving away from home are able to vote in the June referendum?

[Michael Fallon]

Yes. The arrangements for voting in the referendum, as I understand it, are exactly the same as in a general election. Following my hon. Friend’s reminder, we will of course make every effort to ensure as high a turnout by the armed forces as possible.

[Chris Heaton-Harris (Daventry) (Con)]

5. What plans he has to reform compensation for armed forces veterans affected by mesothelioma.

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

When I announced to the House on 16 December that veterans diagnosed on or after that date with diffuse mesothelioma as a result of their service would have the option of receiving a lump sum of £140,000, I also committed to looking at whether it could be extended to veterans diagnosed before that date. We have kept our word and I am delighted to confirm that the option of a lump sum payment will be extended to veterans in receipt of a war pension for mesothelioma diagnosed before 16 December 2015.

[Chris Heaton-Harris]

That is thoroughly good news. Following the campaigns of many in this House, including my hon. Friend the Member for Northampton South (David Mackintosh) and my friend the hon. Member for Wythenshawe and Sale East (Mike Kane), this announcement will be very, very welcome. How will people affected be able to claim the money?

[Mark Lancaster]

I am grateful for my hon. Friend’s kind comments. I have instructed the Veterans Agency to contact all those we know of with immediate effect. I hope the payments will be made on or shortly after 11 April.[Official Report, 2 March 2016, Vol. 606, c. 6MC.]

[Mike Kane (Wythenshawe and Sale East) (Lab)]

Will the Minister join me in paying tribute to Members, such as the hon. Member for Daventry (Chris Heaton-Harris) and others, who have campaigned on this issue? I welcome the direction of travel. Will he also pay tribute to Rhod Palmer, a third generation Royal Navy sailor who has just recently been diagnosed and stands to benefit, who thought of the wider issue that more research needs to be done into this devastating disease?

[Mark Lancaster]

I recognise the actions of Members on both sides of the House who have campaigned to ensure that change comes forward. I am delighted to be able to stand here today to make this announcement. It is absolutely the right thing to do.

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

I have recently been contacted by my constituent, George, whose father sadly passed away from this rare cancer. He is concerned that research is not being properly funded. Does the Ministry of Defence currently fund such research and will the Minister commit to looking at funding levels for mesothelioma research?

[Mark Lancaster]

It is, rightly, a matter for the Department of Health, but I am more than happy to take it up with my colleagues in the Department to see what can be done.

[Mr David Anderson (Blaydon) (Lab)]

I am delighted to welcome today’s announcement to the House, but I would just like to add a little word of caution. We must make sure that when people are given the option—specifically, widows who may survive by many years servicemen who die from this deadly disease—there are no unintended consequences. We must make sure that if widows choose the option of a lump sum, it will not have the impact of their losing benefits over the years.

[Mark Lancaster]

I pay tribute to the hon. Gentleman, who has been one of the campaigners ensuring that this change has come forward. He is absolutely right to make that point. I emphasise to the House that this is very much an option and I will ensure that when recipients are notified they are fully informed about what the options actually mean.

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

8. When he expects work to deal with radiation contamination at Dalgety Bay to be completed.

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

The Ministry of Defence has been actively undertaking site monitoring and removal since 2011. We are keen to move to the next stage of investigation when the other three parties involved agree to site access. Discussions around that have already taken place and it is anticipated that an agreement will be signed shortly. We will continue to work closely with all parties to ensure that the matter is resolved as quickly as possible.

[Roger Mullin]

After 26 years, this non-action is just not good enough. In recent weeks, Defence Infrastructure Organisation officials have cancelled meetings with landowners to discuss access arrangements, have failed to turn up to meetings with local elected officials, and are treating the local community with contempt. When I meet the Minister on Wednesday, I hope I can get a detailed timeline for when action will be taken.

[Mark Lancaster]

I do not entirely accept what the hon. Gentleman says. My understanding is that we have been making positive progress, and that action has been taken through monitoring and removal on the beach since 2011. I am absolutely clear what the MOD’s responsibilities are in this matter. I look forward to meeting the hon. Gentleman later this week. I hope we can have a constructive approach to moving this issue forward.

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

9. Where he expects the Type 31 general purpose frigate to be built.

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

The new light general purpose frigate will be crucial to the longer-term future of the UK’s warship-building industry and will form a central part of the national shipbuilding strategy, which is due to be published later this year. No decision is expected to be made on the build location until the programme has further matured.

[Stewart Malcolm McDonald]

Given the expectations raised by the Government following the strategic defence and security review, that answer is most unwelcome. Does the Minister not agree with me—I may be biased as a Glasgow MP—that, given that the finest ships anywhere in the world were built on the Clyde, it would be the perfect location for this building to take place?

[Mr Brazier]

To date, £3.5 billion has been spent on the aircraft carrier programme in Scotland. In 2014, we placed a £348 million contract for three offshore patrol vessels, helping to sustain 800 Scottish jobs, and helping, too, to secure the skills for the eight Type 26 global combat ships planned to be constructed on the Clyde. The general purpose frigates may also be built on the Clyde, but it is too early to commit to a decision.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

In making decisions on the general purpose frigate, will the Minister keep in mind the need to avoid the difficulties that the Type 45s have had in their electrical and mechanical propulsion systems?

[Mr Brazier]

Yes; they are fine ships, but mistakes were made under the last Government.

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

We have already heard today how the patrol vessels have been made with Swedish steel, and the Ministry has admitted to me that the Tide class tankers are being made in Korea with Korean steel but cannot tell me where the steel will come from for the Type 26, so what assurances will we have that British steel will be used in the manufacture of the Type 31?

[Mr Brazier]

My hon. Friend the Minister for Defence Procurement has already given a comprehensive answer on the use of steel. There will be an opportunity to bid, as has always been the case, but we clearly cannot commit in advance. We do not even know for certain that British companies will bid. We cannot commit at this stage.

[Mrs Madeleine Moon (Bridgend) (Lab)]

12. What plans he has to change the number of Ministry of Defence police officers.

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

As part of the Defence efficiencies programme, we are reviewing a series of options that are expected to change the way we police or guard some of our establishments. It is too early to say what the impact will be on the numbers of the MOD police.

[Mrs Moon]

What legal advice has the Minister sought or received in relation potentially to removing armed MOD police from civilian establishments and replacing them with armed forces personnel?

[Mark Lancaster]

We are looking at a number of options on how to make the best use of our MOD police and to move them away from simply static guarding towards taking a more proactive role in the communities and our service communities. A number of discussions have taken place, but these options are yet to be fully explored. I shall come back to the House in due course.

[Mr Speaker]

Ah, get in there—I call Michael Fabricant.

[Michael Fabricant (Lichfield) (Con)]

Thank you, Mr Speaker. I shall indeed try to get in there.

While I do not wish to detract in any way from the wonderful work done by MOD police, will the Minister take this opportunity to praise the work of the Royal Marines who police our nuclear facilities in Scotland?

[Mark Lancaster]

I am of course delighted to join my hon. Friend in praising the work of the Royal Marines up in Scotland. I have seen their work first hand in recent years.

[Andrew Stephenson (Pendle) (Con)]

13. What support his Department provides to members of the armed forces who are subject to legal claims relating to their service.

[The Minister for the Armed Forces (Penny Mordaunt)]

Where there are allegations of serious wrongdoing, they need to be investigated, but we are very aware of the stress this places on our service personnel and we must honour our duty of care to them. This will involve funding independent legal advice and pastoral support. We are also aware, however, that a great many allegations are being made on grounds of malice or by some law firms for profit. We will shortly bring forward measures to close down this shameless and shoddy racket.

[Andrew Stephenson]

The allegations that British soldiers murdered innocent Iraqis were found by the al-Sweady inquiry to be wholly false. Does my hon. Friend therefore agree that we should do all we can to reclaim costs from law firms that shamefully promoted these allegations and that anyone who received financial backing from them would be well advised either to return it or to make a donation to Help for Heroes?

[Penny Mordaunt]

I thank my hon. Friend for raising that important point. The defence in the case that he mentioned cost the British taxpayer £31 million, and the law firm involved, Leigh Day, has been referred to the Solicitors Disciplinary Tribunal. We are looking at ways in which we can recoup costs, in that case and in others. Those who have their own associations with Leigh Day will need to make their own judgments.

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

May I ask the Minister to speak more clearly, over the heads of the current brave soldiers and other servicemen, to those who might wish to join the Army, the Air Force or the Navy? It is very worrying for young people to think that, in serving their country, they might end up being accused of dreadful crimes.

[Penny Mordaunt]

I thank the hon. Gentleman for giving me an opportunity to send that clear message about a matter that obviously causes huge stress to individual service personnel. It corrupts their operations, and it undermines human rights by undermining international humanitarian law. I fully understand why someone who wanted to join the armed forces would be concerned about all three of those issues, and we shall be introducing a number of measures to address them.

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

The Minister and, indeed, the Secretary of State have been very vocal about the importance of introducing a Bill to protect service personnel from spurious, costly and stressful legal actions. However, there have been apparently well-informed reports that the Bill is ready to proceed, but is being held up in Downing Street for fear that it might somehow impinge on the forthcoming European Union referendum debates. Can the Minister confirm that her Department will do as much as possible to ensure that the Bill is introduced at the earliest opportunity, and is not delayed for spurious external political reasons?

[Penny Mordaunt]

I can give my right hon. Friend those reassurances. I think that, in all respects, the information on which he based his question is not correct. A number of measures will be introduced, some of which may be attached to pieces of legislation, and we hope to be able to make announcements before local government purdah kicks in.

[Kirsten Oswald (East Renfrewshire) (SNP)]

14. Whether he plans to send armed ground forces to Libya.

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

We do not envisage deploying ground forces to Libya in a combat role. The United Kingdom is considering, with our partners, how we can best support a new Libyan Government. Planning to date has focused on capacity building and security sector reform, but it is too early to say exactly what form that support would take. Before taking any military action in Libya, we would seek an invitation from the new Libyan Government.

[Kirsten Oswald]

I was disappointed to read in the media the Secretary of State’s recent statement that he had personally authorised the use of United Kingdom bases for United States airstrikes in Libya. The matter was not brought to the Chamber in advance. Furthermore, yesterday’s papers reported that the Government had now deployed British advisers to Libya. Will the Secretary of State commit himself to stopping this mission creep, and to ensuring that no further such action is taken without the leave of the House? Will he also explain his assessment of whether the action to date was lawful according to UK standards relating to the use of force, international humanitarian law, and human rights law?

[Michael Fallon]

The United States followed standard procedures, and made a formal request to use our bases. Once we had verified the legality of the operation, I granted permission for the United States to use our bases to support it, because they are trying to prevent Daesh from using Libya as a base from which to plan and carry out attacks that threaten the stability of Libya and the region, and indeed, potentially, the United Kingdom and our people as well. I was fully satisfied that the operation, which was a United States operation, would be conducted in accordance with international law.

[Mr Speaker]

With exemplary brevity—Tom Brake.

[Tom Brake (Carshalton and Wallington) (LD)]

In what level of military involvement do the Government believe the British military must engage in Libya before the Prime Minister will bring any decision regarding military intervention in that country to the House?

[Michael Fallon]

As I have said, we do not intend to deploy ground forces in any combat role. Before engaging in any military operation in Libya, we would of course have to seek an invitation from the Libyan Government, and would also have to involve this Parliament. As part of the international community, we have been party to the Libyan international assistance mission, and we are ready to provide advice and training in support of the new Libyan Government. A training team of some 20 troops from the 4th Infantry Brigade is now moving to Tunisia to help to counter illegal cross-border movement from Libya in support of the Tunisian authorities.

[Mr Graham Allen (Nottingham North) (Lab)]

rose—

[Mr Speaker]

Order. I do not want the hon. Member for Nottingham North (Mr Allen) to go to bed a very sad and miserable boy, so I call him to ask the last question.

[Mr Graham Allen (Nottingham North) (Lab)]

15. If he will direct an official of his Department to meet representatives of Airwars to discuss the process for external organisations to submit reports of civilian casualties related to UK military activity.

[The Minister for the Armed Forces (Penny Mordaunt)]

Airwars has been proactive in submitting written reports of civilian casualties and we are grateful for its efforts and for the value that they add. Each case has been individually reviewed and it has been demonstrated that the civilian casualties were not caused by UK activity. Our targeting processes are extremely robust in this respect and in others, but I would welcome any further ideas about how value may be added.

[Mr Allen]

I understand that the Department is now seeing people to discuss accurate civilian casualty numbers, and I will be most grateful if that is indeed the case. However, the report on compensation for the families of the innocent victims of our bombing has been with the Department for some five months. Can it now be surfaced?

[Penny Mordaunt]

I have committed to review any such reports of civilian casualties and I have oversight of the whole process, including compensation. I would be very happy to look at the report, but if the hon. Gentleman has any specific cases that he wishes to raise with me, he should please do so.

[Amanda Milling (Cannock Chase) (Con)]

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

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

Our priorities are our operations against Daesh, which I reviewed earlier this month with some 40 of my international counterparts, and delivering our defence review commitments to increase the size and power of our armed forces to keep this country safe.

[Amanda Milling]

In the light of Russian aggression, the threat of Daesh and growing cyber-attacks, can my right hon. Friend confirm that this Government are committed to spending 2% of GDP on defence in every year of this Parliament? Does not the failure of the hon. Member for Islington South and Finsbury (Emily Thornberry) to match this commitment show that Labour is a risk to our security?

[Michael Fallon]

rose—

[Mr Speaker]

Order. Resume your seat, Secretary of State. I appreciate the earnestness and commitment of the hon. Lady, but questions must be about Government policy, for which Ministers are responsible—

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

Labour haven’t got any.

[Mr Speaker]

Order. Be quiet, Mr Bridgen! Ministers are responsible for Government policy, not that of the Opposition. On the Government’s policy, the Secretary of State will comment; on that of the Opposition, he will not.

[Michael Fallon]

Let me confirm that this Government are committed to spending 2% of GDP on defence every year in this Parliament. The defence budget will rise by 0.5% above inflation every year of this decade and additional funding will be made available to the armed forces and intelligence agencies through the joint security fund. We have the largest defence budget in the European Union and the second largest in NATO, and this investment keeps us safe.

[Mr Speaker]

A model of the genre to be circulated without delay to all members of the Cabinet.

[Rachael Maskell (York Central) (Lab/Co-op)]

Alcohol misuse and dependency continue to create serious health risks, including those that can lead to loss of life, in the armed forces, where its use is three times higher than in the civilian population. It is now a year since the Defence Select Committee highlighted the fact that the Government’s alcohol strategy for the armed forces had made no noticeable difference. What steps is the Secretary of State now taking to set targets to manage alcohol consumption patterns and to address this serious issue?

[Michael Fallon]

The Army is taking steps to address this problem, particularly under the new Army leadership code. If I may, I will write to the hon. Lady with further details.

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

T5. Can the Minister confirm that the last Government looked at all the alternatives to our continuous at-sea nuclear deterrent, and that none offered the protection that we need? Does he agree with the two former Labour Defence Secretaries who have said that it is “self-evident that a British nuclear deterrent will be essential to our security for decades to come”?

[The Minister for Defence Procurement (Mr Philip Dunne)]

I can confirm to my hon. Friend that in 2013 the Trident alternatives review concluded that no alternative system was as stable, capable or cost-effective as the current Trident-based deterrent. There is no alternative. The part-time deterrents and half-baked measures currently being suggested by some Labour Members could be ruthlessly exploited by our adversaries and would present a real danger to the safety and security of the United Kingdom.

[Chris Evans (Islwyn) (Lab/Co-op)]

T2. What role does the Secretary of State see the Russian bombing of targets and civilians in Syria playing in driving the refugee crisis to the shores of Europe?

[Michael Fallon]

Russia’s failure to halt airstrikes on the civilian population seemed designed to push that population towards the Turkish border and to make it Europe’s problem. That is why it is enormously important now that the ceasefire holds and that Russia returns to a more constructive path of working with us to get this terrible civil war ended.

[Alex Chalk (Cheltenham) (Con)]

T9. Given the rapid growth in the volume and sophistication of cyber-attacks, a number of which are thwarted by GCHQ in my constituency, what steps are being taken to ensure that our rising defence budget actually translates into enhanced sovereign capability in cyber?

[The Minister for the Armed Forces (Penny Mordaunt)]

I pay tribute to all my hon. Friend’s constituents who work to protect our country against cyber-attacks, which are indeed growing. We have increased spending in this area to £2.5 billion, and as 80% of cyber-attacks are preventable by some extremely simple, straightforward good practice, a lot of that investment will be going to protect British businesses and private individuals in that respect.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

T3. The strategic defence and security review supposedly included £12 billion of additional expenditure on equipment, but with £16 billion extra allocated for nuclear submarines, massive cuts have been made elsewhere to support that. A written answer referred me to the defence equipment plan, but it has insufficient detail on the changes, so will the Minister commit to providing further clarity on the changes within the 2015 SDSR?

[Mr Dunne]

I am grateful to the hon. Gentleman for taking such an interest in the equipment plan, which is a bit of a specialist subject. We will be publishing the next annual iteration of the equipment plan, just as we have done for each of the past three years, and it will demonstrate that there will be an additional £12 billion committed to spending on military equipment over the next 10 years. That will take it up to £178 billion, but he will have to be a bit more patient before he sees how that is allocated.

[David Mowat (Warrington South) (Con)]

In December 2014, the Secretary of State told this House that the legal aid wrongly claimed by Leigh Day and co—because of inadequate disclosure—should be reimbursed. Is it still his view that it will be reimbursed in full? Given the timescales that have passed so far, when does he think the money will be received?

[Penny Mordaunt]

We are awaiting the Legal Aid Agency’s response to our request to revoke the legal aid award on the grounds that it would not have been made in the first place had the agency been made aware of all relevant documentation in that case. We are still waiting on that judgment, but we believe it is imminent.

[Ian Austin (Dudley North) (Lab)]

Not content with comparing himself to our country’s wartime leader—the greatest ever Briton and saviour of the free world—this weekend the Mayor of London compared his opposition to the EU to James Bond taking on a sinister supranational organisation. May I therefore ask the Secretary of State whether, in all his dealings with the intelligence and security services, and with the special forces, such a similarity has ever occurred to him?

[Michael Fallon]

I do not think it would be wise, and it certainly would not be proper, to discuss any conversations I have had with the intelligence and security communities.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

Will my hon. Friend confirm that the Ministry of Defence has had to spend £100 million on legal claims? Will this Government make sure that we spend money on our troops, and on giving them the best support and equipment, rather than on filling the wallets of unscrupulous lawyers?

[Penny Mordaunt]

My hon. Friend raises a good point: the money we are having to spend on dealing with malicious allegations against our armed forces would be better spent on equipment and training for them. I can assure him that commercial legal spending in the Department is down a third on last year’s. I think he was making reference to the amount spent on Iraqi historic allegations, and we are doing what we can to ensure that this works more effectively and efficiently. I have had some good conversations with the Attorney General’s office about this and he will be visiting the team shortly.

[Patrick Grady (Glasgow North) (SNP)]

T4. Given the increasing double-counting of defence expenditure towards both the official development assistance and the NATO targets, through mechanisms such as the conflict, security and stability fund, what discussions has the Secretary of State had with the Chancellor about the redefinition of ODA at the OECD level?

[Michael Fallon]

It is for the OECD to classify overseas development aid spending, and it is for NATO to classify what is acceptable as defence spending, which it will do after each member state submits its return.

[David Rutley (Macclesfield) (Con)]

Given the importance of our nuclear deterrent to our national security, will my right hon. Friend tell the House what representations he has had from the Labour party in support of this Government’s clear policy in this important area?

[Michael Fallon]

I have so far received some rather conflicting representations on the future of our nuclear deterrent. Like many Members across this House, there are mainstream Members of the Labour party who support—as every previous Government have done— the renewal of the nuclear deterrent that has helped to keep this country safe. There are some other Labour Members who seem to think that we can turn our nuclear submarines into water taxis.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

T6. Germany and Sweden have stopped selling weapons to Saudi Arabia as a result of concerns over Saudi actions in Yemen. Will the Government do likewise and impose a ban on arms sales to Saudi Arabia?

[Mr Dunne]

All our defence exports to the King of Saudi Arabia or to any other country go through the same rigorous export control system that we have in place. We are proud of that system as it is more rigorous than that of any other country, and that will continue to be the case while this Government are in post.

[Suella Fernandes (Fareham) (Con)]

I recently visited the Royal Marines on Arctic warfare training in northern Norway with my hon. Friends the Members for Plymouth, Sutton and Devonport (Oliver Colvile) and for Torbay (Kevin Foster) and the hon. Member for Stoke-on-Trent North (Ruth Smeeth). Will my hon. Friend join me in applauding 1 Assault Group Royal Marines and 45 Commando, which are known as some of the most elite commando forces in the world, and explain how the strategic defence and security review will support the Royal Marines?

[Mr Dunne]

My hon. Friend is very brave to have joined the Royal Marines in the Arctic. I pay tribute to her and her colleagues for doing so. The SDSR is committed to maintaining amphibious capability. We will be making modifications to one of the two Queen Elizabeth carriers to ensure that that persists for the life of that platform.

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

T7. Under this Prime Minister, the number of RAF police personnel has dropped 340, from 1,480 to 1,140. Royal Military Police numbers have dropped 80, from 1,700 to 1,620, and Royal Navy Police numbers have dropped 40, from 340 to 300. Does the Secretary of State think that those cuts are acceptable?

[Penny Mordaunt]

The tasks that we allocate our personnel are there for operational reasons. That is how we allocate not only the liability of each of our services, but the trades that sit within them.

[Mrs Flick Drummond (Portsmouth South) (Con)]

Along with many of my colleagues, I also went away during the recess. I had the pleasure of visiting the Falkland Islands. People there expressed concern about leaving the EU from an economic point of view, but will my right hon. Friend confirm, from a national security point of view, that a Conservative Government will always defend the right of the islanders to determine their own future, and reject calls from the Leader of the Opposition for a power-sharing deal?

[Michael Fallon]

As I said earlier, it was a pleasure to be the first Defence Secretary to visit the islands for more than a decade and to meet many of the 1,200 service personnel who are based there and to confirm our investment programme of £180 million over the next 10 years. Unlike the situation with the Labour party, nobody can be in any doubt about our commitment to the right of the islanders to determine their own future, and not to have it bargained away by a possible Labour Government reaching some accommodation with Argentina.

[Mr Speaker]

Alex Cunningham. Not here.

[Jo Cox (Batley and Spen) (Lab)]

My constituent, Chris Hartley, was wounded while serving with our armed forces in Sierra Leone in 2000 when a rocket-propelled grenade exploded next to him, resulting in the loss of his right leg above the knee. He is unable to get funding or NHS support for a life-changing operation that would allow him to work and to restore some of the pride that he had before his injury. Will the Minister convene a meeting with a colleague from the Department of Health and me to explore what can be done to help my constituent who gave so much in the service to this country?

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

I would be delighted to do that.

[Mark Pritchard (The Wrekin) (Con)]

Is it not the case that, if the United Kingdom leaves the European Union, France and Germany are more likely to dominate Europe’s defence structures, which means that, in the medium term, over the horizon, we are more likely to see European defence structures compete with, rather than complement, NATO?

[Michael Fallon]

My hon. Friend has made his views in this great debate very clear. As I said to the House earlier, NATO is the cornerstone of our security and the European Union complements that, with a number of other levers and weapons at its disposal—humanitarian, diplomatic and economic. There is no doubt in my mind that the fracturing of either the alliance or the Union would not aid the collective security of the west.

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

Have any embedded British pilots flown any missions at all into Libya?

[Michael Fallon]

No.

[Mr Speaker]

Last but not least, I call Mr Philip Hollobone.

[Mr Philip Hollobone (Kettering) (Con)]

Since the parliamentary vote on Syria at the beginning of December, there have been 319 RAF airstrikes against Daesh in Iraq and 43 RAF airstrikes against Daesh in Syria. As we are meant to be targeting the head of the snake, why have there been seven and a half times more airstrikes in Iraq?

[Michael Fallon]

There were more airstrikes in Iraq than in Syria in December and January because we were engaged in assisting the Iraqi forces in liberating Ramadi, which was where most of the military action was, and assisting the Kurdish forces in the liberation of Sinjar, further north. As I discussed with my fellow Ministers in Brussels, it is also important to continue to attack the infrastructure that supports Daesh, including the oil wellheads from which it derives its revenue, and some of our strikes have been on those oilfields in eastern Syria.

Child Refugees: Calais

Monday 29th February 2016 Commons Chamber

15:36

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

(Urgent Question): To ask the Home Secretary to make a statement on child refugees in Calais.

[The Minister for Immigration (James Brokenshire)]

Last Thursday, a judge in France ruled that the authorities in Calais could proceed with clearing the tents and makeshift accommodation from the southern section of the migrant camp located there. Over recent weeks the authorities, working with non-governmental organisations, have ensured that the migrants affected by the clearances, which have begun today, were aware of the alternative accommodation that the French state had made available. For women and children, that means the specialist accommodation for about 400 people in and around the Jules Ferry centre, or the protected accommodation elsewhere in the region. For others, this means the recently erected heated containers that can house 1,500 people.

The French Government have also, with the support of UK funding, established more than 100 welcome centres elsewhere in France where migrants in Calais can find a bed, meals and information about their options. To be clear, no individual needs to remain in the camps in Calais and Dunkirk. The decision to clear part of the camp in Calais is of course a matter for the French Government. The joint declaration signed in August last year committed the UK and France to a package of work to improve physical security at the ports, to co-ordinate the law enforcement response, to tackle the criminal gangs involved in people smuggling and to reduce the number of migrants in Calais.

Both Governments retain a strong focus on protecting those vulnerable to trafficking and exploitation, and have put in place a programme to identify and help potential victims in the camps around Calais. The UK is playing a leading role in tackling people smuggling, increasing joint intelligence work with the French to target the callous gangs that exploit human beings for their own gain.

The UK shares the French Government’s objective of increasing the number of individuals who take up the offer of safe and fully equipped accommodation away from Calais so that they can engage with the French immigration system, including by lodging an asylum claim. It is important to stress that anyone who does not want to live in the makeshift camps in Calais has the option of engaging with the French authorities, who will provide accommodation and support. That is particularly important for unaccompanied children. When an asylum claim is lodged by a child with close family connections in the UK, both Governments are committed to ensuring that such a case is prioritised, but it is vital that the child engages with the French authorities as quickly as possible. That is the best way to ensure that these vulnerable children receive the protection and support they need and the quickest way to reunite them with any close family members in the UK.

The UK is committed to safeguarding the welfare of unaccompanied children and we take our responsibilities seriously. No one should live in the conditions we have seen in the camps around Calais. The French Government have made huge efforts to provide suitable, alternative accommodation for all those who need it, and have made it clear that migrants in Calais in need of protection should claim asylum in France.

[Yvette Cooper]

This morning the French authorities started to move people out of the southern part of the Calais refugee camp, in theory into container shelters and reception centres elsewhere. The charities say that there is not enough alternative accommodation and around 2,300 people have nowhere to go. That includes many from Syria and Afghanistan, and over 400 children and teenagers with no one to look after them, such as the 12-year-old boy I met from Afghanistan with a huge scar across his face, which had happened when his home was attacked.

Unaccompanied children are not allowed into the new container shelters and the Jules Ferry centre for women and children is full. The tents and volunteer support network are about to be bulldozed and there is no safeguarding plan in place at all. There is a massive reality gap between what the Minister said and what is happening on the ground. Save the Children warns that things are extremely chaotic and this is making

“an appalling situation for children even worse.”

This is dangerous. The Minister well knows that there is a serious risk that those children will now just disappear into the hands of traffickers, criminal gangs or prostitution—another 400 children on top of the 10,000 who Europol says have already disappeared in Europe.

Some of those children have their closest family here in the UK. Citizens UK estimates that there are up to 150 such children. That is why they are there, rather than heading to Germany or Sweden, and the Government say they agree that child refugees should be reunited with their family. They also agree that if their closest family is in the UK, they should be able to apply here for asylum, and have promised funding to help that happen. A court case confirms that relatives in Britain should be able to look after children while they apply, and the United Nations High Commissioner for Refugees has offered to process cases and speed things up, but that is not happening for the kids in Calais. Even if they manage to apply, their cases are taking nine months. They do not have nine months—their remaining tents are being bulldozed now.

So will the Minister make urgent representations to the French Government to provide immediate safeguarding support for children and young people, and not to remove their accommodation until there is somewhere safer for them to go? Will he accept the offer from the UNHCR to help process applications and set up a fast system to reunite children with family who are here? Finally, will he agree to Lord Dubs’ amendment to help child refugees?

The Minister has talked a good game on stopping trafficking and modern slavery, and he is right to be appalled at the criminal gangs, but this is where it gets real. The Minister has the power now to stop the trafficking of hundreds of children on our doorstop. Will he do it?

[James Brokenshire]

We do take our responsibilities seriously, as I indicated in the statement that I made to the House. On the level of alternative accommodation, I mentioned the welcome centres that are available around other parts of France, which now number more than 100. Around 2,500 people have left those camps to go to the reception centres. I stress the importance of getting asylum claims into the system in France.

The right hon. Lady highlights, rightly, the interests of children in and around the camps. We are obviously aware of the containerised accommodation adjacent to the Calais camp. Priority, we understand, is being given to women, children and other vulnerable migrants. This is in addition to the 400 places in heated tents already available for women and children.

In response to the right hon. Lady’s point about close family members, I can tell her that we remain committed to our obligations under Dublin III. The UK and France are running a joint communication centre at the camp, which informs individuals of their rights to claim asylum in France and gives them information on family reunification.

Equally, to assist in the handling of such cases, the UK and France have established a senior-level standing committee and agreed single points of contact with respective Dublin units, and the UK is about to second an asylum expert to the French administration to facilitate the improvement of all stages of the process of identifying, protecting and transferring any relevant cases to the UK.

The right hon. Lady referred to a period of nine months, but it should take nowhere near that amount of time. We remain committed to seeing an efficient and effective process for what we judge to be a small number of cases that might have that direct connection to the UK. She will also be aware of the broader family reunification provisions, over and above Dublin, that would allow children to be reunited with their parents, with direct applications not only from France, but from elsewhere in Europe and, indeed, from the region, where there is that direct link. The Government have also committed an additional £10 million through the Department for International Development to support better reunification and to assist children in transit in Europe, but we are very cautious not to make an already difficult situation even worse.

Therefore, the emphasis is on giving practical support to the French Government, who are leading in this regard, and providing expert support. Equally, there is the support that we are giving in Greece, Italy and countries in the region so that such children are more easily identified and helped at the earliest opportunity.

[Damian Green (Ashford) (Con)]

My right hon. Friend is right that the best way to protect the maximum number of vulnerable children is by minimising the number who are taken to live in squalor in the camps outside Calais in an attempt to make a dangerous and illegal crossing to this country, and the way to do that is by maintaining our close co-operation with the French authorities and doing what we can to strengthen the Dublin convention. Does he agree that the worst thing this country could do is anything that would disrupt our close relationship with the French authorities on this matter?

[James Brokenshire]

I agree with my right hon. Friend. We have established a very close working relationship between the UK and French Governments, and between the Home Secretary and Bernard Cazeneuve. There are regular meetings at that level and at operational level, highlighting the exchange of expertise to which I have already referred. My right hon. Friend is right; we will need to maintain that sort of support in the months and years ahead.

[Keir Starmer (Holborn and St Pancras) (Lab)]

I thank my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) for raising this issue. The Opposition have repeatedly raised the plight of the 26,000 or so unaccompanied children in Europe, who are in desperate need of protection. I listened to what the Minister said this afternoon, and I have listened to what he has said before, but there is, as my right hon. Friend has said, a reality gap here.

I have been to see the camps in Calais and Dunkirk for myself. The squalor is hard to describe, and it is worse in Dunkirk than it is in Calais. There are 300 or so unaccompanied children in Calais, and they are not there by choice. In Dunkirk the conditions are such that the volunteers—there are only eight of them—are so busy trying to keep people safe and provide them with somewhere to sleep that they cannot even count the number of unaccompanied children. There is no process on the ground for these children, there is no meaningful advice for them and the reunification rules are not working. That is the reality on the ground. We have to start from that position. That was all borne out by the judgment of the upper tribunal in January.

The situation is now urgent because of the action that has been taken today. I urge the Minister to look at the issue again and consider what practical support can be given in the next 24 hours to these desperate children, who until now have not had the support they need.

[James Brokenshire]

The joint declaration signed between the UK and French Governments last August actually provides for the direct financial support that we are giving to the French Government to provide the centres outside the immediate area of Calais. Indeed, as I have already highlighted, there is the Jules Ferry centre, and there is the work we are doing on a regular basis to identify and highlight the appropriate support that is there. I stress again: there is no need for people to be in those conditions. There are services—[Interruption.] There are facilities and services away from the camps that are available to support people. We take our responsibilities seriously, which is why—[Interruption.] The hon. Member for Hackney North and Stoke Newington (Ms Abbott) keeps interjecting from the Opposition Front Bench. We are working closely with the French Government to see that there are experts in place, and I have already indicted that an additional person is going out next week to see that there are procedures in place so that there will be efficient and effective reunification for what I judge to be a small number of cases. However, support and alternative accommodation are available in France, and I would urge people to take up those choices.

[John Redwood (Wokingham) (Con)]

I am glad the Government put a high priority on reuniting children with their parents, or orphans with close relatives—that is the best answer. However, is it not the case that the European Council’s conclusions at its last meeting were very clear: the best way to help is to prevent these things from happening in future, by ensuring that the EU enforces its border controls when people first enter the EU and provides safeguarding and support for those who need it when they first enter the EU, rather than putting them through the ordeal of a long journey across the whole of its territory?

[James Brokenshire]

It is also about ensuring that there is support in and around the region to prevent people from going out in boats, putting children’s lives at risk. That is why the work done at the London conference, in providing additional education to ensure there is a sense of positive hope, was absolutely the right thing to do. That was backed up by our £2.3 billion commitment to aid and assistance in and around the region. My right hon. Friend is right about ensuring that the hotspots initiative is in place to see that help and support are given at the first opportunity, and that is what the Government are committed to doing.

[Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)]

Does the Minister not understand that France’s Dublin procedures for unaccompanied children are just not fit for purpose and that it takes up to a year even for take charge requests to be issued? In that light, should we not be welcoming, rather than challenging, the recent tribunal decision in ZAT to shortcut the admission of three children from the horrendous Calais camps so that they can join their families here? As the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper) suggested, should we not be looking to welcome the other 100 or so Calais children identified by Citizens UK as having family in the UK, so that they, too, can be reunited with their loved ones? Just how much public money has been spent on litigation in this case in an attempt to prevent refugee children in Calais from reaching their families here? Would not that money be far better spent on ensuring that Dublin III processes are fit for purpose and on safeguarding those children?

[James Brokenshire]

The most appropriate thing to do is to see that those young children receive help and support at the earliest opportunity, which is why I emphasise again the need to see that asylum claims are made quickly in the French system. The Dublin III arrangements can operate effectively; indeed, senior French representatives have told us they see no reason why appropriate claims cannot be completed within a period of two months. There are clear processes and procedures that should be adopted, and we urge everyone to get behind them and make them work effectively.

[Helen Whately (Faversham and Mid Kent) (Con)]

As other hon. Members have said, the conditions in the camps are awful, and action did need to be taken by the French Government—as long as it is not heavy-handed. However, when I spoke to migrants there, they were very wary of the French Government and French officials. I welcome the fact that the Government are working so collaboratively with the French, but will my right hon. Friend advise us what outreach the Government are doing to encourage people to apply for asylum through the French system, so that they can come here legally if they have a right to do so?

[James Brokenshire]

The number of asylum claims made in and around the area of Calais over the recent year or so is about 2,800, and there has been a significant increase, which we support and encourage. We have people who go into the camps to deliver and make very clear the message about the need to make claims quickly so that assistance can be provided.

[Keith Vaz (Leicester East) (Lab)]

On our visit to The Hague last week, the Home Affairs Committee was told that 90% of migrants who enter the European Union had been able to do so because of criminal gangs. Will the Minister tell the House how many people have been prosecuted by individual countries as a result of that smuggling? The long-term solution is the proper operation of the hotspots that have been created in Italy and in Greece, and, as the right hon. Member for Wokingham (John Redwood) said, the tracking of children before they have to make the long journey to Calais. The short-term solution is for the Minister to ring his opposite number in France to see whether a more humanitarian approach can be arrived at, because this is the fault of the French Government, who have been warned about Calais and have done nothing about it.

[James Brokenshire]

I think that is an unfair criticism. The French Government have taken significant steps to provide alternative accommodation and to see that there is information so that people are able to make their asylum claims effectively. However, the right hon. Gentleman makes a powerful and important point about the role of organised crime. The figure of about 90% that he highlighted has been confirmed by Europol, so the work we are doing with our organised immigration crime taskforce is absolutely right. By getting intelligence to Europol, we are taking action against gangs that, frankly, do not care whether these young people live or die.

[Bob Stewart (Beckenham) (Con)]

I have a great deal of time for the United Nations High Commissioner for Refugees. Will my right hon. Friend outline the UNHCR’s role in Calais?

[James Brokenshire]

We are working closely with the UNHCR in relation to the resettlement programme, particularly through work in-region to see how unaccompanied children could potentially come to this country. The UNHCR is monitoring the situation in and around northern France but, as far as I am aware, has no formal remit.

[Fiona Mactaggart (Slough) (Lab)]

The Minister is aware that for 12 years we have had juxtaposed immigration controls in the northern ports of France. How does he think one official will be able quickly to determine the asylum claims to be refugees here in Britain of the 50 children identified by respectable charities as having family in the UK? One person cannot do that job.

[James Brokenshire]

The right hon. Lady should be aware that there is not just one person but a senior-level connection between officials in both Governments, so broader teams are working on these exchanges. If there is information to support a claim highlighting a close family connection under the Dublin III regulation, we will stand by our obligations.

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

I strongly welcome the considerable efforts that the Government have made to keep children and families together close to places where many of the refugees come from, such as Syria. However, if 300 minors were living in a squalid camp in Dover, they would be taken into care and given a place of safety, and there would be an investigation into the adults responsible for getting them there, so why is that not happening in France?

[James Brokenshire]

I cannot comment on the operations of the French Government, but I can say that we stand ready to support them in joint efforts to see that children and other refugees are appropriately housed and supported. We are providing funding to identify vulnerable children and ensure that the necessary facilities are there. We have given and will continue to give the French Government that support.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

As the hon. Member for East Worthing and Shoreham (Tim Loughton) said, if these were British children, the test that would have to be applied to the Government’s actions would be that of the best interests of the child. The Minister is describing colluding with the French Government in a process that will push these children into the hands of people traffickers. Is he really saying that we apply such a different standard to the children of refugees compared with our own?

[James Brokenshire]

I utterly reject the right hon. Gentleman’s assertion. The joint working that our enforcement agencies are engaged in in confronting the people traffickers, going after the gangs and seeing that there is not such exploitation is part of the joint agreement that was signed last August. We are supporting the French Government to identify the vulnerable and see that they are given support, and we will continue to do so.

[Dr Sarah Wollaston (Totnes) (Con)]

Will the Minister give a categorical assurance that children and young people who have a legitimate claim to be in the UK because of having close family relatives here will not be disadvantaged by starting their asylum claim in France? Although he has made it clear that there is not currently any formal process for the UNHCR to be involved in processing such claims, will he consider that for the future?

[James Brokenshire]

I can certainly say that if there are children who qualify under the Dublin regulation—in other words, if they have close family here—we will stand by our obligations. We will ensure that they are processed efficiently and effectively, which is precisely why we are taking the action we are with the French Government.

My hon. Friend highlights the issue of the UNHCR’s role. There is a clear process, and we are working to ensure that it operates. As I have said, we believe that it can be made to operate efficiently and effectively, and we will work with the French Government to achieve that.

[Alison McGovern (Wirral South) (Lab)]

I must be mishearing, because the Minister seems to be implying that it is the responsibility of children to declare themselves to the relevant authorities. That cannot be correct—it is our responsibility here to make sure that children are cared for. As my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) said, the UNHCR has offered to set up a fast process for us. The Minister has implied, but not yet said, that he has told it no, so will he be specific and say whether he has told it yes or no?

[James Brokenshire]

French non-governmental organisations operate in the camps to help identify unaccompanied children and to help them to register with the authorities so that they can be properly looked after. That is the right approach, and it is precisely what the French Government seek to do. There is a process between the French Government and the asylum system, and that is the way in which assistance can be given. I strongly urge everyone to get behind that process, to ensure that children in need receive the care they require.

[Mr Philip Hollobone (Kettering) (Con)]

The fact that there are many unaccompanied children wandering across Europe without any effective means of support is the biggest stain on how the European Union is operating its border and asylum policy. Will the Minister confirm that many thousands more children would be in such an awful plight were it not for the fact that this Government are providing such a huge amount of aid to Syria and neighbouring countries so that other children do not make this perilous journey?

[James Brokenshire]

I entirely support what my hon. Friend says about the impact that aid assistance is having on the region. There is a sense of support, hope and opportunity for young people to get the education they need and to be well looked after. Equally, we will continue to work with other European partners on the entry points into the EU, to ensure that the people who have made journeys are processed and that children with claims of settlement are reunited with their parents.

[Andrew Gwynne (Denton and Reddish) (Lab)]

May I politely say to the Minister, and through him to his French counterpart, that this response is just not good enough? The real danger for children is now, during the demolition and dispersal of the camps in Calais and Dunkirk, when they are at real risk of being picked up by the gangs responsible for child sexual exploitation and people trafficking. Will the Minister get on with putting in place a proper and coherent registration system so that children can be picked up by the relevant authorities and looked after as they should be?

[James Brokenshire]

My understanding is that the French Government are approaching this work on a phased basis. Places of worship and schools will not be subject to the clearance as a consequence of the court ruling, and the French authorities are focused on areas with unoccupied tents and are encouraging migrants who remain to move to the new accommodation in Calais or elsewhere in France. On children in need of support, I underline again the need to ensure that claims are made, and the NGOs are going in there and helping to identify children in need of help.

[James Berry (Kingston and Surbiton) (Con)]

The Minister will remember the evidence given by the Mayor of Calais to the Home Affairs Committee and what she has said in public, which is that the majority of those in the camps have been informed that they need to claim asylum in France, but they do not want to do so because they want to come to the UK. Does he agree that it is incumbent on the French Government and the Calais authorities to ensure that children, who cannot make asylum applications on their own, are assisted in doing so, and that adults are informed again that they must claim asylum in France, which is a safe country?

[James Brokenshire]

I entirely agree with my hon. Friend. Again, I underline the fact that there are French NGOs operating in the camp to identify unaccompanied children and ensure that claims can be made.

[Nick Thomas-Symonds (Torfaen) (Lab)]

The Minister has said that for unaccompanied children with family connections claiming asylum in France, the process should take two months. How long do the UK Government say the asylum process should take for children with family connections in the United Kingdom, and what practical steps is he going to take to ensure that that is achieved?

[James Brokenshire]

In respect of asylum processing and deciding whether to uphold claims, we in this country have done a great deal to ensure that claims are properly assessed and that straightforward claims are dealt with within six months. The Government have done a great deal of hard work to introduce that effectiveness into the system, and that has been recognised in the recent independent inspector’s report.

[Damian Collins (Folkestone and Hythe) (Con)]

Does the Minister agree that we and the French Government should make efforts to encourage people to seek assistance in France from the authorities, rather than living in squalor, vulnerable to criminal gangs? Does he also agree that we must make sure that we have strong security at our borders, so that people realise that it is not worth putting their lives in the hands of people traffickers, because they will end up losing their lives, as so many have done?

[James Brokenshire]

My hon. Friend knows from his constituency interests the work that the Government have done to secure the port area around Calais and the Eurotunnel terminal at Coquelles. We keep that security under review in a joint group with the French Government. He makes the powerful and important point that asylum claims should be made at the earliest opportunity so that help and assistance can be given at the earliest opportunity.

[Andy Slaughter (Hammersmith) (Lab)]

The press are reporting this afternoon that riot police are using tear gas and water cannon to support the destruction of the “jungle” camp. I do not know whether that is what the Minister meant by the French authorities engaging with young people and encouraging them to move on. Given that there is plenty of money to provide fencing, and bilateral co-operation with the French, why can he not simply get together with his French counterpart, identify the young people who have a legal right to come to the UK and get them over here immediately?

[James Brokenshire]

It is a clear question of people claiming asylum, and children are being supported by the work of the NGOs that the French Government have put in place precisely for that purpose. We have taken a consistent joint approach, building on the agreement of last August, to support the French Government in their work to ensure that those in need of help get it.

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

Everyone has concerns for vulnerable children in the camps in Calais. When children have identified that they have relatives in the UK, how many of those relatives the UK Government are preventing from travelling to France to be reunited with the children? Why does he think refugees would rather be in the UK than in France?

[James Brokenshire]

These issues are often complex. The factor at the forefront of our minds is always what is in the best interests of the child. When we receive applications under Dublin or under family reunification, we always have to assess what is in the best interests of the child and whether the parents or other close family members can support the child. We give that focus to every case.

[Peter Grant (Glenrothes) (SNP)]

Exactly a week ago, I asked the Prime Minister for an assurance that the United Kingdom Government’s response to the refugee crisis would be driven entirely by humanitarian need and not influenced in any way by considerations of the impact that it might have on the referendum that is likely to happen at the end of June. The Prime Minister was either unable or unwilling to give such a general assurance last week. Will the Immigration Minister please give that assurance, at least in relation to these most desperate and vulnerable young people?

[James Brokenshire]

I think that the hon. Gentleman can see from the Government’s actions that we take our responsibilities very seriously. With the funding that we have committed not just in and around Syria but in Europe, and with the additional £10 million fund that the Department for International Development is operating to ensure that children in transit who are in need of help, counselling or other support can receive it, that is precisely what we will do.

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

Has the Minister had any discussions with his French counterpart to find out the reasons why the migrants in Calais did not claim asylum in the other safe countries that they travelled through before arriving in France?

[James Brokenshire]

The reasons are often quite complex. The Chair of the Home Affairs Committee highlighted the role of people traffickers and smugglers, as well as those who sell false hope through a whole host of different means and networks, including social media. Other reasons may relate to the existing diaspora communities and the whole issue of language. Through the actions on which we are supporting the French Government, and indeed those that we are taking ourselves in the camps, we are giving the clear message that people should claim asylum in France.

[Mike Kane (Wythenshawe and Sale East) (Lab)]

I say to the Minister in all earnestness that there is precious little evidence of UK expertise on the ground in any of the camps. He was wrong in what he said about Christian places of worship, because one was wiped out by the French authorities just a few weeks ago. What advice would he give to the likes of the Caritas Social Action Network, Citizens UK and civil society organisations, as well as elected Members and anyone trying to help individuals who have the right of leave to remain in the UK or who have a close family connection, about how they can continue to give such help?

[James Brokenshire]

I would say to anyone in that situation that they should claim asylum in France, which will ensure that there is a direct connection and that we can make the system work. I stress that the fact that different messages are being given does not help the situation. In respect of the whole issue of the clearance of the camps, I understand that the court specifically ruled that it should go ahead with the exception of places of worship and schools. The French Government should therefore adopt that approach in the actions they are taking.

[Suella Fernandes (Fareham) (Con)]

Before I entered this place, I worked as counsel on hundreds of asylum and trafficking cases. A core principle of the Dublin regulations is that the first country of entry should take responsibility for the claimant, which imports fairness and equity into the system. Will my right hon. Friend reassure the House of his commitment to that principle, and confirm that to discard it without legal basis would be undemocratic and illegitimate?

[James Brokenshire]

I agree with my hon. Friend about the benefits and the strength of the Dublin arrangements. We believe that they should be upheld, not undermined. They include the core principle that those who make a claim should do so in the first safe country in which they arrive. Equally, the principle of family reunification for close family members operates under Dublin III, and the Government stand by that principle.

[Mr Robin Walker (Worcester) (Con)]

I recently met constituents from St Stephen’s church in Worcester who have been to the camp in Dunkirk. They describe the situation for children as appalling. There is very poor sanitation, and with men-only kitchens, there is a danger that children and the women looking after them are missing out on food. I completely agree with the Minister that everyone in the camps should claim asylum in France, but where that does not happen over a long period, what more can we do to reach out and get that information to the most vulnerable? How can we make sure that the humanitarian assistance that reaches the camps reaches the most vulnerable in the camps?

[James Brokenshire]

I again underline the specific facilities there, such as the 400 places for women and children, and the 1,500 places in the new containerised area. We are giving support at 102 centres away from the Calais area to which people can go to receive support, which will ensure that they can make their case. On the specific element of vulnerability, we are supporting the French Government and ensuring that the NGOs are in the camps. Equally, our own officers are going into the camps to reiterate the message that help and support can be given, and that the way to get it is to claim asylum. In that way, we can ensure that assistance is given as early as possible.

EU Referendum: Civil Service Guidance

Monday 29th February 2016 Commons Chamber

16:02

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

(Urgent Question): To ask the Prime Minister if he will make a statement about the instructions issued by the Cabinet Secretary to permanent secretaries in respect of EU referendum guidance for the civil service and special advisers.

[The Minister for the Cabinet Office and Paymaster General (Matthew Hancock)]

The referendum on 23 June on the European Union represents the biggest constitutional decision for the nation in a generation. The Government’s position is clear: Britain will be stronger, safer and better off remaining in a reformed European Union. Today’s Government document setting out the process of leaving underlines that case, showing that a vote to leave could lead to up to a decade or more of damaging uncertainty, with real consequences putting jobs and investment at risk. I concur with that assessment.

Because of the significance of the referendum, as the House knows the Prime Minister took the decision to allow collective responsibility to be suspended on the referendum question. This approach was discussed and agreed by the Cabinet on 20 February. The process is clear: Ministers may depart from the Government position in a personal capacity on the specific question of the referendum. On all other matters, including on other EU business, the Government will operate as normal, and in all things the civil servants support the Government position.

Guidance on how this will work in practice was set out and published by the Cabinet Secretary last week. The guidance is clear. Other than on the specific question of the referendum, all Ministers can commission and see all documents, as normal. On the question of the referendum—and on this question alone—Ministers who disagree with the Government position naturally cannot commission policy work on the in/out question or see documents setting out details of the case to remain. All Ministers can ask for factual briefing, and for facts to be checked in any matter. All Ministers can see documents on EU issues not related to the referendum question, as normal.

The guidance is clear and has been published. The process was agreed at Cabinet as the best way to manage the unusual situation of Ministers who disagree with the Government remaining in post. I hope that this clarity will allow Members on both sides of the House to focus on the main debate about whether Britain will be better served by leaving or remaining in a reformed European Union and then let the people decide.

[Mr Jenkin]

Clarity on this issue is one thing that we do not have. Nobody objects to the Government making their case in the referendum, but most people expect the civil service to be impartial in carrying out its support for Ministers. It is established in law that Ministers are accountable for their Departments. Voters expect Government facts and figures to be impartial and accurate, whether they are used by Ministers who support remain or leave.

Why does the Cabinet Secretary’s letter go far beyond the limits that were placed on dissenting Ministers in the 1975 referendum? Sir Peter Thornton, the permanent secretary of the then Secretary of State for Trade, Peter Shore, was quoted as saying:

“It was jolly difficult putting forward anti-Common Market briefs to Mr. Shore, but I hope we did what he asked”.

What a different atmosphere from today!

Worse than that, a Q and A briefing that has been circulated following the letter states that Ministers may not see any papers that

“have a bearing on the referendum question or are intended to be used in support of their position on the referendum”.

That has been described by one Minister, the Minister for Employment, my right hon. Friend the Member for Witham (Priti Patel), as “unconstitutional”. How can such a wide ban be justified?

How does my right hon. Friend the Minister for the Cabinet Office reconcile this with his comment on Radio 4 this morning that

“the Government is functioning on all questions, other than specifically the in/out question, in an entirely normal way”?

He also said:

“There are no rules other than those set out last Monday in the letter from Jeremy Heywood.”

What about the Q and A briefing?

Does the Minister deny that permanent secretaries have been instructed to conceal information requested by Downing Street or the Cabinet Office from a dissenting Minister? The Cabinet Secretary’s letter states that “Departments may check facts”, but civil servants have also been told that they cannot

“provide arguments or new facts”.

How is that consistent with the duty of honesty in the civil service code, which requires a civil servant to

“set out the facts and relevant issues truthfully”?

Does the Minister agree that where any guidance or instruction conflicts with the code, the code must prevail?

How does this situation best serve the democratic process if Ministers on opposing sides of the debate finish up disagreeing about information from the same Department which is meant to be impartial and accurate information provided by professional civil servants?

[Matthew Hancock]

Let me answer those points in turn. First, the Government are functioning perfectly well—in fact, I came to this House from a meeting with the Minister for Employment, my right hon. Friend the Member for Witham (Priti Patel), on childcare policy, and it was carried out in an entirely normal way. On Friday I visited a prison with the Justice Secretary, and those two points demonstrate that things are functioning as normal.

The civil service code, and the Constitutional Reform and Governance Act 2010, makes it clear that it is the duty of civil servants to support the position of the Government of the day, and it is only because the Prime Minister is allowing Ministers to remain in government while disagreeing with a single policy—the in/out position—that this situation arises at all. The letter from the Cabinet Secretary makes it clear that factual briefing is allowed.

Finally, the 1975 guidance made it clear that no briefing or draft speeches contrary to Government consideration were allowed to be drafted by civil servants. In fact, it went further because it said that if someone wanted to oppose the Government position, they had to inform No. 10 of any invitations to appear on the radio or TV. We have not put that provision in place. On all these things, the clarity in the guidance from the Cabinet Secretary that was published on Monday last week shows the rules, and those rules are consistent with the civil service code and, indeed, the law.

[Mr Tom Watson (West Bromwich East) (Lab)]

I fear that the Minister is having a Jim Hacker moment. In 114 days, the country faces an important decision. The referendum will dictate how in future the UK handles exports and imports, the world of work, the new contours of the digital age, human rights, intelligence sharing, the fight against crime, and how we adapt to climate change, and here we are today discussing guidelines for civil servants and special advisers.

Sadly, I am not in the strongest of positions to lecture the poor Minister on handling splits in his party, but in the way that Opposition Front Benchers are almost duty bound to do, I would like to give him some advice. The Justice Secretary has a history of letting his special advisers off the leash. Does the Minister really think that a memorandum from a mandarin will change that?

When we have a Prime Minister who allows his spin doctors to brief that the Justice Secretary will be sacked after the referendum, or that his chum the Mayor of London has breached the old school code and that the Prime Minister is “hurt and upset”, I understand how the Minister would have been overcome with a wave of ennui at the prospect of answering an urgent question from the Chair of the Public Administration and Constitutional Affairs Committee about the conduct of special advisers. However, answer for their conduct he must, and I wish to ask him how many special advisers have informed No. 10 of their intention to work on the no campaign. In the event of ministerial visits where a Minister and their special adviser campaign for a no vote after the event, will the cost of travel be carried by the Minister? How will that be monitored and made public? The guidelines state that special advisers are not allowed to campaign for a no vote in office hours. For the avoidance of doubt, please define “office hours”.

When the inevitable happens and special advisers to those Ministers who are defying their leader completely ignore the memorandum from the Cabinet Secretary, on a scale of one to 10 how confident is the Minister that the Prime Minister will enforce the code? Does the Minister have the confidence to admit that these attempts to dilute the freedom of rebellious Ministers will only detract from the key issues that matter to voters in the referendum? It seems that the out campaign is attacking the referee, not the captain of the opposing side, yet the Prime Minister has a simple choice: either he gives his Ministers free rein to run their Departments, or he sacks them. It cannot be fudged for the next 114 days.

[Matthew Hancock]

Unfortunately, I have had to scrap most of my proposed reply to the hon. Gentleman, given his gracious acknowledgement that he is not best placed to throw rocks on this particular subject. I will, however, agree with him on this: questions on this matter are a distraction from the main event and the main substance, which is whether Britain is better off inside or outside a reformed European Union. I strongly believe that, thanks to the deal the Prime Minister achieved, we are better off and more secure inside a reformed European Union.

The hon. Gentleman asked some specific questions. First, on the efficacy of the guidance, the guidance is for civil servants to follow. Civil servants do follow guidance of that sort and I have every confidence that they will do so. On what constitutes office hours, I will merely say that office hours means the normal working day. I hope that clears that one up. On the broader question of whether this is necessary, and his point that Ministers need both to run their Departments and be able to differ on this one question, this is why the guidance is very specifically and solely about the in/out question, not other EU business or other business. After all, we have Departments to run.

[Michael Fabricant (Lichfield) (Con)]

My right hon. Friend is hugely able and has shown his ability today to dance on the head of a pin, but will he take it from me that this is a huge blunder? Out there, the general public will think that this decision is petty and vindictive. Moreover, they will say to our Government, and to this party to which I am so proud to belong, that if we are so much stronger in Europe, what is it that we are being so careful to hide?

[Matthew Hancock]

I have a huge amount of respect for my hon. Friend. I will just say this: the reason this is required is the Prime Minister’s decision to allow Ministers to campaign to leave and to differ from the Government position. If that were not the case, the guidance would not be needed. As for the general public, I imagine that what most people will take away from this will be: when can we get on to the real discussion about whether we should be in or out of a reformed European Union?

[Tommy Sheppard (Edinburgh East) (SNP)]

Let me see if I have got this right. The Government’s position is that we should vote to remain in the European Union because, among other reasons, it will be good for jobs and employment. The Government’s problem is that the Secretary of State and the Minister responsible for jobs and employment take a contrary view. The Government are now in a dilemma. Not only do they not want their own Ministers not to support the Government’s position, but they do not want them to actively campaign against it and use their offices to do so. In response, the Government are now putting the obligation on unelected civil servants to censor what Ministers can or cannot see within their area of expertise. This situation is farcical, but it has an undercurrent of something sinister about it too. Any self-respecting Minister should not accept these constraints. There is already a bit of tension in the Minister’s party on this question. How long does he think it will be before it breaks out into all-out civil war?

[Matthew Hancock]

The hon. Gentleman makes a central error in his characterisation of the situation. No Minister is censored—far from it. Ministers are allowed to campaign against the Government position. It is for civil servants, therefore, to follow the Government position. After all, it is required by law that they follow and support the position of the Government of the day.

[Dr Liam Fox (North Somerset) (Con)]

There is a serious constitutional issue here, which goes to the heart of House of Commons accountability. We ask Ministers questions and expect answers that are fully informed. How can those who send us to the House of Commons have faith in the answers we get if those whom we question purposely have information withheld by their own civil servants?

[Matthew Hancock]

I have a huge amount of respect for my right hon. Friend. That is why I will answer his specific point. The question is exactly the reason for prescribing this guidance only in respect of the in/out issue rather than more broadly. That is what the guidance says. This broad approach was set up by the Prime Minister in January, and then discussed and agreed in Cabinet on 20 February as the best way to take forward the position whereby Ministers could disagree with the Government position.

[Mr Speaker]

It is very decent of the Minister to dole out bowls full of respect, but my sense is that, on the whole, although that is enormously important to hon. and right hon. Members here assembled, they are generally more interested in his answers than in his respect.

[Tom Brake (Carshalton and Wallington) (LD)]

I previously asked whether the Prime Minister was going to throw his weight behind the in campaign, and I am very pleased that he has done so, because for the sake of our peace, prosperity, opportunity and security, we need to be in. As for what we are discussing now, I would like some clarity from the Minister. Is it the case that there is a list of Ministers who are in, a list of Ministers who are out and a list of Ministers who are undecided, and what happens if a Minister switches from the in to the out campaign or the out to the in campaign?

[Matthew Hancock]

First of all, Mr Speaker, I have respect for the right hon. Gentleman, and I also have respect for you—but perhaps I will drop all that. When the Cabinet met after the Prime Minister agreed the deal with other members of the European Union, Ministers at that point were asked to state their position—whether they wanted to remain or leave—and I doubt whether any of those positions will change.

[Mr Speaker]

Veritably, my cup runneth over at the generosity and good grace of the Minister, to whom we are indebted.

[Sir William Cash (Stone) (Con)]

The Minister calls on the law. The question of voter trust in this referendum, as I said to both the Prime Minister and the Foreign Secretary on 3 and 25 February, is paramount. For the voters who will decide this question, knowledge is, as we know, power. Does the Minister deny that under sections 6 and 7 of the later and express provisions of the European Union Referendum Act 2015, a legal duty is imposed on the Government to provide referendum information and the voter is entitled to accurate and impartial information, as the Minister for Europe agreed in reply to me when the House debated that Bill, through and from the Government and all Ministers of the Crown equally, and that this therefore being a statutory obligation overrides any prime ministerial prerogative such as the Cabinet Secretary acted upon in the guidance of 23 February? Does the Minister therefore deny that civil servants as Crown servants are legally obliged to provide such information accurately and impartially to all Ministers within their Departments so that the voters are properly informed and empowered to answer the question in the referendum?

[Matthew Hancock]

On the legal details, the 2015 Act also requires the Government to express their view and the Constitutional Reform and Governance Act 2010 requires civil servants to support the position of the Government of the day. On that basis, it is right to follow the procedure that was agreed by the Cabinet. The position of the Government is set out; Ministers may disagree with it, but civil servants must support the Government’s position.

[Mr Dennis Skinner (Bolsover) (Lab)]

Here we are on the day after the Oscars. The family is opposite: threat and counter-threat. It reminds me of “The Godfather”. This could be “The Godfather Part IV”: will there be a horse’s head in the bed or will it be another animal?

[Matthew Hancock]

Well, they say that politics is show business for ugly people, so I will take that as an upgrade.

[Crispin Blunt (Reigate) (Con)]

I find it hard to believe that on 20 February the Cabinet was aware of the implications of what it was doing. The central purpose of the Political Parties, Elections and Referendums Act 2000 was to achieve fairness in elections and in referendums, but now the Government have parked themselves on one side of the argument, dwarfing any influence from either of the campaign groups. Their action also goes against the strategic objective of offering the people a referendum to resolve the question of Britain’s role in the world one way or another. That question will hold only if the process is seen to be fair, but all this runs against that strategic objective.

[Matthew Hancock]

I disagree with my hon. Friend. The Government are required, under the European Union Referendum Act 2015, to take a position. They are also required—or commitments were given during the passage of that Act—to set out certain matters, including the process of leaving the European Union under article 50, which is in a document that we published this morning. During the passage of the referendum Act, there was a debate on how this could best be done, and we are acting on the conclusions that were reached.

[Paul Flynn (Newport West) (Lab)]

Is this not constitutional gibberish, and utterly unworkable? The protestations that we hear from Ministers now would be much more impressive had they joined our Select Committee in condemning the politicisation of the civil service during the Scottish referendum campaign. The difference is that, whereas all Ministers agreed in the case of the Scottish referendum, in this case we have a disagreement, and a Department in which the “inners” can see the papers and the “outers” cannot. Is it not a fact that the only way of making this workable is for Ministers to resign and leave office until after 23 June?

[Matthew Hancock]

It is precisely because we did not want that to happen that we proposed these arrangements. I think that the hon. Gentleman is wholly wrong, and misjudging the position, if he thinks that supporting the Government’s position is anything other than an impartial and proper course for civil servants to take. The alternative is to argue that civil servants should not support the Government’s position, and I think that that would be ridiculous.

[Mr Owen Paterson (North Shropshire) (Con)]

On a daily basis, Ministers in the Department for Environment, Food and Rural Affairs have to make difficult choices between the interpretation of European law and regulation and the delivery of decisions that would benefit United Kingdom citizens. I have dealt with a number of cases in the past which I would like to discuss with the current Minister of State. I shall be meeting him this evening. Will I be able to ask him questions about past cases, so that he can, without fear or favour, have access to a full briefing, all the opinions and all the history of what happened before and after the decision concerned, although the end result might be thoroughly disobliging to the case for remaining in the European Union?

[Matthew Hancock]

My right hon. Friend has made an important point. On European Union issues that do not relate to the single question of in or out, there will be full access to all papers, as normal. That is what is said in the letter from the Cabinet Secretary, and that is how the Government are operating.

[Kelvin Hopkins (Luton North) (Lab)]

During the referendum on Scottish independence, which was mentioned by my hon. Friend the Member for Newport West (Paul Flynn), there was significant controversy over senior civil servants making public and clearly political, and politicised, statements. It is vital for the civil service to retain its private advisory role, and for civil servants not to make blatantly political public comments during the campaign before the EU referendum. Will the Minister confirm that that will be the case?

[Matthew Hancock]

That is the normal course of events. It is for Ministers to make the argument, and for civil servants to support the Government’s position.

[Mr Speaker]

Mr David Davis.

[Mr David Davis (Haltemprice and Howden) (Con)]

I was not standing, Mr Speaker.

[Mr Speaker]

The right hon. Gentleman is a most dextrous parliamentarian, and I am sure that he can recover very quickly. I think the accurate characterisation would be that he had been standing. He did not do so on this occasion, probably because he was chuntering from a sedentary position. He then stood again at my exhortation. He has now had plenty of time in which to formulate his question.

[Mr Davis]

It is all right, Mr Speaker. I was not sure whether it was the other David Davies whom you were calling.

We are fortunate to live in a democracy. We are not guided by Cabinet Secretary guidelines. As far as I know there is no manifesto basis for this, and as far as I know there has been no House of Commons vote for it, so what is the constitutional basis of the Prime Minister’s decision? Is it the royal prerogative?

[Matthew Hancock]

No, the constitutional basis is that, under the European Union Referendum Act 2015, the Government are required to take a position. The Government have taken a position, as I have set out, and it is for civil servants to support that position. It is therefore necessary to set out how civil servants should act with a Minister who does not support the Government position. The guidance is precisely limited to the in/out question, and the reason for publishing it is to ensure that everyone knows what the position is.

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

Sir Nicholas Macpherson, the Treasury’s most senior civil servant, was quoted as saying that he believed that impartiality guidelines did not apply in “extreme” cases such as the Scottish independence referendum. Would the Minister classify the EU referendum as an extreme case, and if so, can we expect normal rules of civil service neutrality to be completely disregarded?

[Matthew Hancock]

Civil servants support the position of the Government of the day, and this Government have a position. I do not know how many times I am going to have to repeat that. That is the case. Civil servants are impartial, but they support the Government of the day. That is the law and it is the situation in this case too.

[Neil Carmichael (Stroud) (Con)]

Does the Paymaster General agree that it would be supremely ironic if this referendum had an impact on the way in which our civil service operated in the future? It is absolutely right that the civil service should support the Government, and the Government have made the decision—the right decision, in my view—that we are safer, stronger and better in the European Union.

[Matthew Hancock]

It is disappointing that the leave campaign seems to want to focus on process issues such as this rather than discussing whether we would be better off inside a reformed European Union, as I believe we would. My hon. Friend raises an important point. If any Members do not think that the rules should operate in the way we published last week, the only other position would be for the civil service to support a position that was not the Government’s position, which would go against everything that it was set up to do.

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

Is not the Prime Minister effectively saying to his own Ministers, “You can exercise your democratic rights as long as you agree with me at the end of the day”? Is this not the latest sordid attempt—there will be more—to rig the referendum to get the result that the Prime Minister wants?

[Matthew Hancock]

No; on the contrary, this is a consequence of allowing Ministers to express their views freely on whether they want to remain in or to leave, as many of them are doing.

[Nick Herbert (Arundel and South Downs) (Con)]

Does the Minister agree that the misunderstanding of the Government’s position has been evidenced by the last question, which suggested that the Prime Minister required Ministers to agree with him? That is not the case. The public will surely agree that fairness is ensured by the fact that Ministers are free to speak out. That is what the Prime Minister is allowing, and that is a generous position. There is no reason why those Ministers should be supported by the civil service or the taxpayer in expressing their view, to which they are entitled in conscience. If they feel that this is unfair, they have the option of not remaining in the Government.

[Matthew Hancock]

Yes.

[Andy Slaughter (Hammersmith) (Lab)]

The Lord Chancellor has an important constitutional job, but he cannot do it under these restrictions. At the weekend, we heard that the so-called British Bill of Rights was going to be postponed again, for at least six months. If the Lord Chancellor wants his lawyers or civil servants to put together well-crafted arguments on parliamentary sovereignty or the powers of the European Court of Justice, should not they be allowed to do that? Otherwise, we shall be getting second-class government, and God forbid that we should have that.

[Matthew Hancock]

Of course the Lord Chancellor can continue to do the work that he is doing in reforming the courts system and in all sorts of areas. Indeed, I visited a prison with him on Friday, as I have mentioned. That shows that the Government are getting on with their work. On top of that, we are having a debate in the country and between Ministers on both sides on the specific question of an in/out referendum.

[Richard Fuller (Bedford) (Con)]

When people in Bedford and Kempston have raised the issue of the European referendum with me over the past week, they have wanted to hear the facts. They hear lots of statistics, but they fear that they are being warped by one side or the other, so they want facts. How will this restriction on access to information enable those people to get the facts?

[Matthew Hancock]

It will not have any implications for facts, because factual briefing and fact-checking is allowed to be done by civil servants.

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

The civil service, the state broadcaster and the central bank were all central players in project fear 1 in Scotland. Is it therefore naive not to expect the use of the same public assets on project fear 2 and the EU referendum?

[Matthew Hancock]

I do not understand the premise of the question, because we are putting forward the positive case for remaining in a reformed European Union.

[Dr Sarah Wollaston (Totnes) (Con)]

Will the Minister set out what the harm would be in allowing full transparency of these data? Surely there would be much greater harm if at the end of the referendum we were left with people feeling that it had been an unfair process.

[Matthew Hancock]

The challenge of taking a position other than the one the Government have taken is that it would require civil servants to do work that was not in support of the Government’s position. The Government have a position, and it is part of the civil service code, and it is put into law in the Constitutional Reform and Governance Act 2010, that civil servants should support the position of the Government. It would put civil servants in a very difficult position if we were to do anything other than that.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I will be campaigning for Britain to remain in the EU, but I see no issue with all Ministers having access to the very strong arguments for Britain to remain in the EU—this is a matter of democracy. Is the Minister really suggesting that we could have a situation where a Secretary of State is denied access to key Government papers but his or her junior Ministers have access to that information?

[Matthew Hancock]

What we are saying is that the Government have a position and the civil service will advise on that position. If Ministers have taken a personal decision to campaign personally, in a personal capacity, against the position of the Government, it is inappropriate to ask civil servants to support that other position, which is not the position of the Government.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

I very much appreciate that the Minister has qualified and caveated some of the guidance that has recently been issued. Does he not agree, however, that there is a danger that without further clarification we could have the ludicrous situation where Freedom of Information Act requests, or requests made by Members of Parliament through parliamentary questions, could get information out of Ministers that those Ministers would have been denied by their own civil servants?

[Matthew Hancock]

I do not know whether that was directed at people on the shadow Front Bench, but the situation is as I have set out. The key point is this: if we were to take any other position, we would have civil servants being asked not to support the position of the Government. We are approaching this in the way these things have been approached in referendums in the past—in 1975 and in the Scottish referendum—which seems perfectly reasonable.

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

Because this is such a divisive issue and because so many people feel so strongly about it, it has been decided that instead of Government taking the decision, the people should take the decision. What does it do for the sense of fairness among the people if the big battalions of the civil service seem to be lined up on one side of the argument and spin doctors in Downing Street do botched letters to the press from generals who have not even signed up to them saying that one side of the argument is right and the other side of it is wrong?

[Matthew Hancock]

The debate over how this would operate took place during the passage of the European Union Referendum Bill, which my right hon. Friend the Minister for Europe took through Parliament. During the passage of that Bill, there was quite a debate, for example, about how purdah should operate, and many concessions were made by the Government in order to ensure that the process is fair. The result of that was an Act that included the requirement for the Government to take a view and then to be able to set out information on various aspects of the referendum, and that is exactly what we are doing.

[Sir Gerald Howarth (Aldershot) (Con)]

I think I heard the Minister say that dissenting Ministers will not be allowed to see papers making the case for Britain to remain in the EU, which suggests that the Government have very little confidence in their own arguments. May I put it to my right hon. Friend that it is a constitutional outrage to deny access to arguments that “may”—as the briefing paper says—have a bearing on the referendum to some key Ministers in the Department for Work and Pensions and the Ministry of Justice who are intimately involved in the central issues of this referendum? The Government really need to think again about that, because otherwise the British people will think that the Government intend to rig the referendum.

[Matthew Hancock]

I would argue the contrary. The constitutional difficulty would arise if civil servants were being asked to support a position that was not the position of the Government. The civil service is there to support the Government. I would argue that this is precisely in order to stick to the constitution, as set out by the Constitutional Reform and Governance Act 2010 but as carried out in practice for decades and decades before that. The job of the civil service is to support the Government, and that is what it should do.

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

The British public could be forgiven for thinking that, if someone such as the Secretary of State for Work and Pensions is not permitted to see all the relevant documents, he may be unable to advise the Government. The Government may then come to a fixed opinion on a particular view such as benefits without having all the facts. A question and answer document from the Cabinet Office says:

“Can dissenting Ministers see Department papers on matters that aren’t directly about the Referendum, but may have a bearing.”

The answer is:

“They can see or commission any papers produced by their Departments in the normal way except those that have a bearing on the referendum question or are intended to be used in support of their position”.

It is not a simple black and white matter; it is a matter of interpretation. Special advisers are being handcuffed and told that they must keep things from the Secretary of State. That is appalling. Are the Government afraid that the facts might change the minds of the public and some Cabinet members?

[Matthew Hancock]

My hon. Friend’s question was focused on what the public think. I believe they will think, “Please can we get on to debating the substance of the question rather than the process of how to make sure that Ministers are allowed, unusually, to depart from the Government position while the constitutional position of the civil service remains in place.”

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

Is it true, as reported in The Times this morning, that without the consent or knowledge of the Secretary of State, officials of the DWP carried out research on the instructions of No. 10 to help support the case for remaining in the EU? If that is the case, will the Minister please explain how the Secretary of State can be expected to be responsible for the work of his own Department?

[Matthew Hancock]

These guidelines are restricted to the issues of the question of in/out. It is perfectly normal —it happens all the time—for there to be communications between Departments and No. 10. That is how the Government operate.

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

Perhaps the solution is for Ministers to submit freedom of information requests to their own Departments to get the answers. A key part of the Prime Minister’s reform package was very complex changes to benefits and indexing of benefits. If, at the next DWP Question Time, I ask the Secretary of State what progress he is making to determine whether those reforms are deliverable by 23 June, will he be able to give me an honest and full answer?

[Matthew Hancock]

Yes, of course he will. On issues that are not about the in/out referendum question, Ministers will be fully informed. That is the position. As to the question of whether this will change people’s minds, the Government have made their position clear, which is that, obviously, we are in favour of remain.

[Sir Edward Leigh (Gainsborough) (Con)]

Say for a moment that I am the fisheries Minister, young, ambitious, good looking and anxious to do the Prime Minister’s bidding, and the Prime Minister tells me that I have to set out my vision of what life outside the EU means for fishing—indeed that is a huge question for our fishing fleets—what do I do? The EU determines everything in my Department. I have no national policy on fishing, but I happen to be in favour of the out campaign. Do I go home for four months? Do I get no advice from Ministers? Is it not so much “Yes, Minister” as just “Go home for four months and we will see you in June”?

[Matthew Hancock]

My hon. Friend makes an incredibly important point, which is that the rules set out last week make it clear that on all issues, including EU issues other than the in/out question, government continues as normal. I am afraid that he cannot have four months off, even in the circumstances he describes. I am sure that he would not miss the next four months for the world.

[Mr Philip Hollobone (Kettering) (Con)]

The Paymaster General is a Minister in the Cabinet Office, which is the Department responsible for the civil service, yet my right hon. Friend has form when it comes to civil service advice. In June 2015, he signed a special declaration overriding civil service advice that further money should not be given to Kids Company, which subsequently disappeared. Would it be open to Ministers of the Crown to use that same special declaration to override this present civil service edict?

[Matthew Hancock]

Making what is called a direction, such as that which I made on Kids Company because I thought that it was worth spending the money to look after those kids—it is right that Ministers should be able democratically to override the advice of civil servants when they choose to, so long as that is published—is about the expenditure of money. The EU debate is not specifically about the expenditure of money, although there are debates about growth, jobs and the economy, and so the question would not arise.

[Bob Stewart (Beckenham) (Con)]

Several of my constituents have contacted me and asked where they can get the facts to decide in their own minds how to vote. It is, after all, the people, not the Government, who will decide this matter, so is it not the duty of the civil service to provide facts to our people to enable them to decide how to vote? In these circumstances, is it not fair to ask the Cabinet Secretary, in his capacity as a neutral observer, to prepare a document for the people who will make this decision?

[Matthew Hancock]

It is absolutely necessary to ensure that information is available on questions about the referendum. For instance, that is why this morning we published a document on the process for leaving the European Union should that be the decision at the referendum. My hon. Friend is right that it is for the people to decide. The Cabinet Secretary is not neutral; he supports the Government position because he is a civil servant, and the whole civil service supports the Government position. If my hon. Friend is responding to his constituents and they really want information, I can always recommend a website called strongerin.co.uk, which has some great information.

[Bob Stewart]

It has to be impartial.

[Matthew Hancock]

There will be a campaign to leave, as well, and I hope that this debate continues so that by 23 June everybody feels fully informed.

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

Will the Minister tell the House how the guidance rules would have affected the advice given to the Prime Minister by Sir Lynton Crosby when he said that the renegotiations were not good enough, that they should be rejected at the European Council and that proper renegotiations should be carried out and the referendum delayed until 2017? Clearly, in that situation, the adviser was not supporting the Government line at all.

[Matthew Hancock]

Sir Lynton Crosby is many things, but he is not a civil servant.

[Mr Stewart Jackson (Peterborough) (Con)]

Would a reasonable and fair-minded person not conclude that having been rebuffed in their attempts last September to alter on a sui generis basis the purdah rules relating to the referendum, the Government have come back and undermined the sovereignty of this House by using the civil service to achieve the very same objective?

[Matthew Hancock]

No, on the contrary. This guidance is a precise consequence of the Prime Minister’s decision to allow Ministers to campaign to leave. If the Prime Minister had not decided to allow Ministers to remain in the Government but to campaign to leave the European Union against the recommendation of the Government, such rules would not be necessary and we would not have had to publish them. This is a direct consequence of the Prime Minister’s decision to allow that debate to take place and to allow Ministers to take one or other side of the debate.

[Andrew Percy (Brigg and Goole) (Con)]

Talking of guidance, my association was this morning issued with guidance from our north of England field director stating:

“The Party is neutral, which means that as an organisation we are not getting involved in any way on an official basis. In practice this means that Associations must not use any resources available to them, including money, data, premises etc. to promote a particular view.”

Given that this is a Conservative Government from the Prime Minister all the way down to us lowly Back Benchers, who are all members of a party that has no official view on the matter, why should civil servants who work for Conservative Ministers take a view on it? That is leading people out there to conclude that there is stitch-up to try and keep us in the wasteful EU.

[Matthew Hancock]

I do not think that is right. This House passed the European Union Referendum Act 2015, which required the Government to take a view and therefore the civil service follows the Government view. The Conservative party, as my hon. Friend says, is neutral on this matter, but the Government are not. That is a matter for how the party machine acts, rather than how the Government act, because as I have said many times, the civil service is duty bound by tradition and by law to follow the position of the Government of the day. That is why the guidance is constructed thus.

Points of Order

Monday 29th February 2016 Commons Chamber

17:01

[Mr Bernard Jenkin (Harwich and North Essex) (Con)]

On a point of order, Mr Speaker. During the exchanges that we have just had, it was noted that the Minister did not refer to the question and answer brief that has been circulated by the Cabinet Office to civil servants, which carries some of the wider interpretation of the letter. I wonder how I can draw the House’s attention to the fact that we will be publishing it on the Public Administration and Constitutional Affairs Committee website later today or tomorrow.

[Mr Speaker]

As I think the hon. Gentleman knows—I say this in response to his spurious point of order—he has achieved his objective. He should consider the matter so advertised.

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

Further to that point of order, Mr Speaker.

[Mr Speaker]

I am not sure there is a “further” to that point of order, but I will hear it first and then come to a view about it.

[Mrs Main]

I read out the self-same question and answer, which uses the words “may have a bearing”. At what point may we have an explanation of what “may have a bearing” means? Who will arbitrate on that?

[Mr Speaker]

That is a matter for the Government. Legendarily, the Minister for the Cabinet Office is always keen to address the House—indeed, in the past he has likened himself to Disraeli, who had a notable enthusiasm for addressing the House. If he wishes to respond to the hon. Lady with that legendary succinctness for which he is renowned, we are happy to hear from him, but he is not under any obligation to do so.

[The Minister for the Cabinet Office and Paymaster General (Matthew Hancock)]

Further to that point of order, Mr Speaker. I think I answered that point. The question is how we make sure that the guidance means that civil servants follow the Government position, including on the in/out question, which is the only question on which Ministers can move from the Government position. So it is a question of whether something is an in/out question or is normal EU business. I think I set that out earlier; I might have said the same.

[Mrs Main]

indicated dissent.

[Mr Speaker]

We are extremely grateful to the Minister. I am not sure, from the head movements of the hon. Member for St Albans (Mrs Main), that he has satisfied her, but I am not sure any Minister would have been able to do so. None the less, the Minister has graciously come to the Dispatch Box.

[Several hon. Members rose—]

[Mr Speaker]

I will come back to Members who are expectant—[Interruption.] Well, expectant of the opportunity to raise points of order, I should perhaps say. But perhaps I may be permitted to take other points of order first. We will come to those illustrious denizens ere long.

[Nia Griffith (Llanelli) (Lab)]

On a point of order, Mr Speaker. This morning the Secretary of State for Wales—I have made his office aware of my intention to raise this point of order—announced major changes to the timetable and content of the proposed Wales Bill; he has decided to jackknife the Bill and skid it to an undignified halt. Instead of coming to the House to inform right hon. and hon. Members and answer their questions about how he will proceed, he choose to make that significant announcement in front of a gathering of journalists in Cardiff, even suggesting on Twitter that hon. Members can wait until Thursday to question him. Did he give you any indication that he would be announcing this major change of policy today, Mr Speaker, and has he indicated that he will be making an oral statement to the House, as per paragraph 9.1 of the ministerial code?

[Mr Speaker]

I am grateful to the hon. Lady for her point of order. The answer is that I have had no advance notice of this matter. It would be only fair for me, from the Chair, to say at this stage that whether it amounts to what she has described as a major change of policy or is merely a temporary pause or tactical judgment, I do not know. Suffice it to say that if there is a change of policy or a significant change in Government intentions for a notable period, the House would expect properly to be informed of that, and there are means by which Ministers can inform the House: either through the device of an answer to a written question or by a written ministerial statement. To my knowledge, neither has thus far been forthcoming. The hon. Lady’s point of order and my response to it will shortly be heard by the Wales Office, and I hope that proper account will be taken of it. If the hon. Lady needs to return to the point, doubtless she will do so.

[Kirsten Oswald (East Renfrewshire) (SNP)]

On a point of order, Mr Speaker. I seek your assistance in relation to a matter that is of some concern to me. In December I asked, by means of a written question, when the Chancellor of the Exchequer had last met the Financial Conduct Authority to discuss certain matters. The response advised me that Treasury Ministers meet a wide variety of organisations and referred me to the Treasury’s transparency reports online, stating that that is where details of such meetings are published. The reports detailed no bilateral meetings between the Treasury and the FCA over a two-year period.

I therefore challenged the Economic Secretary to the Treasury—she is aware that I am raising this matter today—on that point during a Back-Bench business debate on 12 January. She did not address the matter in her response, so I raised it with her again in a Back-Bench business debate on 1 February. To my great surprise, the hon. Lady stated:

“Contrary to what the hon. Member for East Renfrewshire seems to think,”—[Official Report, 1 February 2016; Vol. 605, c. 748.]

she had met the acting chief executive of the FCA, and that she regretted that I had formed a different opinion.

Of course, my opinion was formed on the basis of a written answer, the Treasury’s own transparency reports and exchanges with the Minister in this Chamber, all of which I should have been entitled to rely upon. It is worth noting that a similar issue has arisen in relation to another question, with the Under-Secretary of State for Disabled People referring me to a non-existent or impossible to locate piece of information on the Department for Work and Pensions website.

The record therefore suggests that I have misunderstood or am mistaken, but neither is true. I would be very much obliged for your advice, Mr Speaker, on how to put the record straight on this matter. Finally, I would be most grateful if you could advise me on how best to stop Ministers referring Members to websites that do not contain relevant information.

[Mr Speaker]

I am grateful to the hon. Lady for her point of order, the thrust of which she was kind enough to give me advance notice. I think that I am right in saying that she also gave notice to the Minister concerned.

[Kirsten Oswald]

indicated assent.

[Mr Speaker]

I am grateful to the hon. Lady for that confirmation. The short answer to the hon. Lady—this is for the benefit of the House—is that answers to Members’ questions should be direct, substantive and candid. I have sympathy with the view, which she has expressed, that it is not helpful if Government Departments simply refer right hon. and hon. Members in written answers to websites on which the information requested may be located but cannot easily be found. The much more straightforward process, which I think the public would expect, would be to provide an answer to the question. It is not really all that complicated.

That said, I have to emphasise, of course, that the content of written answers, and indeed of ministerial statements in the House, has to be a matter for the judgment of individual Ministers; it is not for the Chair to determine. However, I am offering an overall sentiment, which I think would be shared across the House. As to how the hon. Lady can put the matter straight, I suggest that, by dint of this point of order, she has begun to do so.

[Dr Liam Fox (North Somerset) (Con)]

On a point of order, Mr Speaker. My point of order relates not to the ministerial code but to the conduct of the House of Commons. When Ministers come to the House of Commons, they are required to give full and informed answers to the questions we ask as Members of Parliament. Having given the matter some thought, can you give us some guidance on how we will know whether Ministers have been fully informed, if we know that there is a process of purposely withholding information from those who may be required to give answers to the House of Commons? How can we then carry out our duty of scrutiny properly?

[Mr Speaker]

I fear that it would be hazardous for me to tread on the terrain of what might be called the “known unknowns” or even the “unknown unknowns”. That would be difficult. The question, though a very good and legitimate one, is, I fear, at this stage hypothetical, but it is a problematic matter. The best I can say to the right hon. Gentleman is that the Chair, of course, will keenly attend to events and to the process of question and answer, and we will have to look at this matter as and when it arises, on a case by case basis. I will not be looking at it proactively, but if Members raise the matter with the Chair, the Chair will do his best to respond.

[Michael Fabricant (Lichfield) (Con)]

On a point of order, Mr Speaker. I have already expressed my admiration for my right hon. Friend the Minister for the Cabinet Office, who is on the Front Bench. I wonder whether there is any mechanism to reward someone who, first, is thrown into the lion’s den and, secondly, has to defend the indefensible.

[Mr Speaker]

I think I will treat that as what it is: not a point of order, but an inventive rhetorical question. At any rate, the hon. Gentleman seems justly satisfied, so I think we will, for now, leave it there. We are deeply grateful to the Minister for coming into the Chamber and responding to our inquiries.

If there are no further points of order, and the appetite has been satisfied, at any rate for today, we now come to the motion on the draft European Union Referendum (Date of Referendum etc.) Regulations 2016. Just before I ask the Minister—my illustrious neighbour, the Member for Aylesbury—to move the motion, I should inform the House that I have now considered the instrument, and I have decided not to certify it under Standing Order No. 83P.

Referendums

Monday 29th February 2016 Commons Chamber

17:02

[The Minister for Europe (Mr David Lidington)]

I beg to move,

That the draft European Union Referendum (Date of Referendum etc.) Regulations 2016, which were laid before this House on 22 February, be approved.

The statutory instrument before us does a simple, but critical job: it puts in place the necessary legislation to enable a referendum to be held on 23 June this year. It is the last piece of legislation that will be debated in this Chamber to make that vote possible. As such, it represents Parliament taking the final steps towards an historic moment when, for the first time in over 40 years, the British people will be given their say on the United Kingdom’s membership of the European Union.

My right hon. Friend the Prime Minister announced a few days ago his intention to hold the referendum on 23 June, and the Government believe that that strikes an appropriate balance, giving plenty of time for a vigorous and comprehensive debate. Ultimately, however, the date is a matter for Parliament to decide, and as set out in the European Union Referendum Act 2015, it is a decision that must be approved both here and in the House of Lords.

[Sir William Cash (Stone) (Con)]

I am fascinated by my right hon. Friend’s reference to vigorous and open debate, because it is quite clear from the preceding urgent question and from many other matters that have come to light recently that the one thing that everybody needs—information—is the one thing that people are going to find themselves deprived of. If the voters do not have balanced, impartial and accurate information, what are they supposed to do?

[Mr Lidington]

My advice to any elector would be to look at what the Government are saying and advising, but also at what the various campaign groups and other organisations in this country are saying. I will come later to the designation of campaign organisations. We need this statutory instrument to be approved, among other things, to make it possible for the Electoral Commission to go ahead and designate the campaign groups on each side of the argument, and give them access to the privileges that come with that status, precisely so that they can go out and present their case and make information and argument available to the people to whom my hon. Friend refers.

[John Redwood (Wokingham) (Con)]

I am very happy to have an early referendum, but did the Government decide not to push back on the absolutely pathetic non-offer we were made because they did not think we were ever going to get anything worth having out of the EU?

[Mr Lidington]

On the contrary, my right hon. Friend the Prime Minister secured a deal that has brought some significant reforms to the European Union. I would advise my right hon. Friend to look at the reaction in many European capitals, in the media across Europe, and in the European Parliament, which has very largely been one of considerable surprise at the degree to which the Prime Minister of the United Kingdom was able to secure reforms. In some cases, that commentary involved a fair measure of criticism of other Government leaders for conceding what was believed to be too much.

[Kate Hoey (Vauxhall) (Lab)]

rose—

[Mr Lidington]

I will give way to the hon. Lady and then I must ask the House to allow me to make some progress.

[Kate Hoey]

I would be very happy to have a referendum as I have wanted one for years, but why did the Prime Minister ignore the views expressed in the letter from the leaders of the three Assemblies and Parliaments in the United Kingdom? Did that not show huge disrespect?

[Mr Lidington]

First, the letter was not ignored, and we certainly took account of the views of the devolved Administrations even though we decided in the end to disagree with their recommendation. I want to come to that point at a later stage in my remarks.

The date is just one element of the order, but clearly the most important, because the remaining elements largely flow from it. I will therefore explain the Government’s thinking on the date and then turn to the rest of the order. There must be enough time for a full, serious and considered debate that allows all the issues to have a full airing, and the campaigners must have enough time to put their case to the British people. On the other hand, although this may grieve some hon. Members, the campaign cannot continue indefinitely. The vote should be timely, while the issues are live and the details fresh—and we should also be wary of testing the public’s patience. Several prominent campaign groups are already active on both sides. Following the Prime Minister’s announcement on the outcome of the renegotiation, the debate on the referendum question will now begin in earnest and is already starting to gather real momentum.

The Government selected 23 June because we needed enough time for a proper airing of the issues, and we thought that any sooner would risk curtailing that debate, but to go any later would test the patience of the British people. School holidays in Scotland begin on 24 June, and from then people will be travelling and enjoying their summer. Later than 23 June would mean, in essence, waiting until after the summer holiday period had concluded in all parts of the United Kingdom and in Gibraltar. Frankly, I think that the British people would have found it very difficult to understand if we had asked them to wait seven or eight months after the conclusion of the renegotiation before they could have their say.

[Philip Davies (Shipley) (Con)]

I have previously raised with my right hon. Friend the fact that a European Council meeting is also scheduled to take place on 23 June. What can we do to ensure that, if the leave campaign looks to be gaining momentum at a late stage, that will not be used to pretend that there are things on the meeting’s agenda to try to change people’s opinions, or that things will not be leaked in advance of that meeting to try to give people the impression that the Government have agreed a better deal than is actually the case?

[Mr Lidington]

I think my hon. Friend needs to study more carefully the words both of the document published at the end of the renegotiation and of a number of other European leaders. They could not have made it clearer, first, that they were not interested in a hypothetical further renegotiation in the event of a vote to leave, and secondly, that the very important safeguards that my right hon. Friend the Prime Minister secured during the renegotiation would lapse automatically in the event of such a vote. That is written into the document itself.

In practical terms, holding the vote on 23 June means 18 weeks between announcing the deal and the vote, and a full 10 weeks’ regulated referendum campaign period, with six weeks for the designation of lead campaigners, thus meeting the Electoral Commission recommendations. We envisage that the designation process will be commenced on 4 March and that the Electoral Commission will have to designate the two umbrella campaign groups by 14 April at the latest. The Electoral Commission supports the Government’s approach to the timing of the referendum. Last week it published its assessment of readiness and said that it was content that the date

“does not pose a significant risk to a well-run referendum”.

It is true, as the hon. Member for Vauxhall (Kate Hoey) has said, that there are still some concerns about the date, particularly among Members of the three devolved Administrations and right hon. and hon. Members in this place who represent those three parts of the United Kingdom. In particular, the right hon. Member for Gordon (Alex Salmond) expressed concern during Foreign Office questions about the possible interaction with the elections in Scotland, Wales and Northern Ireland on 5 May, which is also the date for various local and mayoral elections in different parts of the United Kingdom.

I think that those fears are misplaced, not least because multiple elections are already being held on 5 May. I really do not understand why a referendum that will take place a full seven weeks after the date of the devolved parliamentary and Assembly elections should be regarded as disrespectful. By contrast, I would argue that we are treating voters with respect when we assume that they should be perfectly capable of distinguishing between two different campaigns that will be nearly two months apart.

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

The Minister has just confirmed that the official campaign will launch bang in the middle of the devolved Administrations’ campaigns. It is quite an achievement to get Sinn Féin, the Ulster Unionists, the Scottish National party, Plaid Cymru and the Labour party in Wales to agree on anything. Why is he not taking seriously the concerns expressed by all those parties?

[Mr Lidington]

For the reasons I have given, I think that to have left the referendum until autumn, which was the next window available had we ruled out 23 June, would have tested the patience of the British people for the duration of the campaign. The campaign has already got under way. What will start in the period described by the hon. Gentleman is the regulated campaign period, during which special rules on campaign expenditure apply.

[Tom Brake (Carshalton and Wallington) (LD)]

Will the Minister take some reassurance from the fact that in the canvassing that I have been doing for Caroline Pidgeon, the Liberal Democrat London mayoral candidate, I have found that voters have no difficulty whatsoever in understanding that there will be elections for the London Mayor and the London Assembly, and that the European referendum will take place a few weeks later?

[Mr Lidington]

The right hon. Gentleman puts the case very well. Others have said that June is simply too soon, and I do not agree. Traditionally, in our history, a general election has been held with only six weeks’ notice. Only since the implementation of the Fixed Term Parliaments Act 2011 under the coalition Government have we moved away from that practice. The referendum has had a much longer gestation period. The intention to hold a referendum before the end of 2017 was announced in the Prime Minister’s Bloomberg speech in January 2013, and it was reaffirmed at the general election last May, and again when the European Union Referendum Act received Royal Assent in December 2015. The intended date was announced four months in advance. The referendum has been a long time coming.

[Patrick Grady (Glasgow North) (SNP)]

The Scottish independence referendum was held in September, and, if anything, the campaign benefited from the fact that people could campaign during the warm summer months with extended daylight hours. What advice does the Minister give to the devolved Administrations, who will no sooner have come out of a pre-election purdah period than they will have to go into a pre-referendum purdah period, just as they start implementing the manifestos they were elected on?

[Mr Lidington]

Of course, the purdah rules vary depending on the nature of the election concerned. The purdah rules for devolved elections limit what Government agencies can say and do in respect of devolved matters. We are talking about the question whether the United Kingdom should be in or out of the European Union, and that is, without any doubt whatsoever, a reserved competence in respect of all three devolution settlements.

[Peter Grant (Glenrothes) (SNP)]

The Minister is trying manfully but, dare I say it, completely unsuccessfully to explain what consideration the Government have given to the strong representations they have had from the elected Governments of 75% of the equal partners in this Union. I appreciate that he does not have time to do so now, but will he undertake to make sure that full details of the Government’s consideration of that letter are placed in the Library of the House as soon as possible after the debate?

[Mr Lidington]

We took account of that letter. We also took careful account of the specific request from the official foreign affairs spokesman of the Scottish National party, the right hon. Member for Gordon, during Foreign Office questions on 12 January for an assurance that the date of the referendum would be

“at least six weeks after the date of the Scottish, Welsh and Northern Irish elections”.—[Official Report, 12 January 2016; Vol. 604, c. 683.]

That request made by the right hon. Gentleman—I presume on behalf of his party, for which he was speaking at Foreign Office questions—has been met, and has been met in full.

The Electoral Commission has confirmed that it is content with the Government’s proposals and has said that, in its view, arrangements for a well-run referendum are now well advanced. The statutory instrument has been considered by both the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee. Both have considered the statutory instrument, and neither found any cause for concern.

I turn now to the other aspects of the regulations. They are very much in line with the framework set up by the European Union Referendum Act 2015, so I shall be brief. As well as setting the date, the regulations do three things. First, they set the start date for the designation process. That is the process by which the Electoral Commission appoints lead campaigners on one or both sides. We have followed the Political Parties, Elections and Referendums Act 2000 and allowed a full six weeks. That will give campaigners a four-week window to finalise and submit their applications, after which the Electoral Commission will have up to two weeks to decide which, if any, applicants to designate as the lead for each side. Let me be absolutely clear, to avoid misunderstanding. The regulations do not tell the Electoral Commission how to make its decision. That decision is entirely impartial, and the test the Electoral Commission must apply when making its decision is set out in the Political Parties, Elections and Referendums Act, as modified by the European Union Referendum Act. All the regulations do is set the start of the process as 4 March, while the rest of the timetable, finishing on 14 April at the latest, was set by the 2000 Act.

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

Will the Minister give us some indication of whether the Electoral Commission’s designation process is open to challenge, and if so, of how that challenge would operate?

[Mr Lidington]

Any executive decision by any public authority might be at risk of judicial review, but criteria for the Electoral Commission are set out in PPERA and they will guide the commission in making its assessment. I am sure that the commission will want to explain its verdict when it is published. There would have to be a pretty overwhelming case for a judicial review application for it to succeed, but such an option is available.

The Electoral Commission’s initial guidance for campaigners on this issue was updated on 5 February, so potential applicants have had plenty of notice. The commission has also now published the application form online. I remind the House that the lead campaigners, once designated, will receive a number of benefits, including a higher spending limit of up to £7 million, a free delivery of mailings to every household or every elector and, assuming that campaigners are designated on both sides, access to a grant of up to £600,000 and access to a broadcast.

The second additional element in the regulations is the referendum period—namely, when full financial and campaigning controls apply and, in particular, when spending limits are imposed on campaigners. The referendum period, as set out in the regulations, is a full 10 weeks and will not overlap with the designation process. That was the approach recommended by the Electoral Commission. The referendum period will, under the regulations, start on 15 April.

[Kate Hoey]

The Minister may be coming on to this, but will he clarify very clearly and succinctly how this will affect Government spending? I do not mean the Government, but the Cabinet members who support staying in as opposed to those who do not. How will that work for them?

[Mr Lidington]

The limits on what the Government can do are set out in section 125 of the Political Parties, Elections and Referendums Act 2000. The hon. Lady will recall that that provision was the subject of significant debate when the European Union Referendum Bill was going through its stages in the House. The so-called purdah restrictions remain those set out in the 2000 Act. In addition, in requiring the Government to publish particular items of information, the European Union Referendum Act states that the Government must do so at least 10 weeks before the date of the referendum. Those are the restrictions that she asked me about.

Finally, the regulations set out the periods for reporting donations and loans received by registered campaigners, and set the deadline by which the reports must be submitted to the Electoral Commission. The purpose of those arrangements is to ensure that sources of campaign finance are visible and public before the poll, so ensuring that the campaign is transparent.

The decision before us is a simple one: when should the British people have their say? We believe that 23 June strikes the right balance: it gives time for a substantial campaign, without testing public patience. There is time for campaigners and political parties to make their cases, and for the British people to decide. I commend the regulations to the House.

17:34

[Pat Glass (North West Durham) (Lab)]

We seem to have focused on process for so much of today that I hope this will be the last time we do so.

I want to check some of the details of the statutory instrument with the Minister. It sets the date of the referendum on whether the United Kingdom should remain a member of the European Union. It also prescribes the length of the referendum period, the start of the period for applications to become a designated organisation, and the periods for the reporting of donations or regulated transactions. If would be good if the Minister nodded.

[Mr Lidington]

indicated assent.

[Pat Glass]

The main purpose of the statutory instrument is to set 23 June 2016 as the date of the referendum, which will take place over the whole of the UK and in Gibraltar. It prescribes the referendum period, which will begin on 15 April 2016, and it prescribes 4 March 2016 as the start of the period in which applications can be made to become designated organisations in the referendum. I understand that that poses no problem for the organisations in the remain campaign, but those in the hopelessly splintered out campaign seem to be having a much greater problem. Now is the time for them to get their act together if they are to hit the deadline.

The statutory instrument also sets out periods for the reporting of donations or regulated transactions—for example, loans—by permitted participants who are not registered parties or are minor parties. It sets out the dates on or before which reports must be delivered to the Electoral Commission. Okay so far?

[Mr Lidington]

indicated assent.

[Pat Glass]

Labour has always said that as soon as the Government’s European negotiations are completed, they should get on with the referendum and end the uncertainty, which is bad for British jobs, growth, investment and working people.

[Jonathan Edwards]

The shadow Minister will be aware of the letter written by the First Minister of Wales in conjunction with the First Ministers of Scotland and Northern Ireland. Of course, the First Minister of Wales is a Labour party member. He said:

“We believe that holding a referendum as early as June will mean that a significant part of the referendum campaign will necessarily run in parallel with those elections and risks confusing issues at a moment when clarity is required.”

Will the shadow Minister support his position tonight in the Lobby when there is a vote on this issue? If the Labour party here abstains or votes with the Government, does it not show that we cannot take a word the First Minister says seriously?

[Pat Glass]

I will come on to those issues.

Labour agreed with the Electoral Commission that the referendum date should be separate from that when other polls are taking place, and succeeded in pressuring the Government to amend the European Union Referendum Bill to stop the referendum being held on 5 May 2016 so that it did not clash with the other elections on that day. However, we do not agree with the SNP and others that it is in some way disrespectful to hold the referendum on 23 June.

[Jonathan Edwards]

Will the hon. Lady give way?

[Pat Glass]

Just a second.

We believe that the people of the UK are perfectly capable of making an important decision in early May and another important decision in late June, seven weeks later. It is patronising to suggest otherwise.

This country is safer, stronger and more prosperous in Europe and Labour is campaigning to stay in. Our membership of the EU brings jobs, growth and investment. It protects British workers and consumers, and helps to keep us safe.

[Patrick Grady]

Will the hon. Lady confirm what the shadow Foreign Secretary said the other day, which is that it is the position of the Labour party that if Scotland votes to stay in the European Union and the rest of the UK votes to leave, Labour is quite happy for Scotland to be dragged out of the EU against its will?

[Pat Glass]

The position of the Labour party is that it is for the people of the UK to make a decision on this, because the people of Scotland had a referendum and chose to stay as part of the UK.

[Emma Reynolds (Wolverhampton North East) (Lab)]

Does my hon. Friend agree that if we put the date of the referendum back beyond 23 June, it would slip beyond the summer and into the autumn, because many people in Scotland go on holiday earlier than those in the rest of the UK and we will be on our holidays in August? That would prolong the period of uncertainty and all the risks to business investment that go with it.

[Pat Glass]

I agree entirely. Uncertainty is bad for British jobs and the British economy, and we believe that the longer this goes on, the more damage will be done to our economy and our jobs.

[John Redwood]

What does the hon. Lady think that EU state aid rules, energy prices, energy intervention and procurement rules have done to our steel jobs? What has the common fisheries policy done to our fishing jobs?

[Pat Glass]

People will have to make a decision on those issues, but they are not related to this statutory instrument. We accept that this great country would be able to make its way in the world outside the EU, but leaving would cost us dearly in all kinds of ways including jobs, our competitiveness in business, and the safety of our citizens from terrorism, crime, climate change and war. At a time of Russian expansionism and international terrorism from groups such as ISIS-Daesh, we do not believe that it is right to risk our safety and security as a nation. We want the UK to lead, not leave, Europe. We are the second biggest economy in the EU, and many of our partners such as Denmark, Sweden, the Netherlands and others want to work with us further to reform the EU, and they are looking to the UK to lead on that. Leaving the EU risks future peace in Europe, and Britain’s influence in the world.

In government, Labour passed the Political Parties, Elections and Referendums Act 2000 and we supported the passage of the European Union Referendum Act 2015. We support this statutory instrument, and we will leave it to others to moan about the date of the referendum. We are getting on and putting our energy into winning the referendum and keeping Britain leading in Europe.

17:02

[Sir William Cash (Stone) (Con)]

The date is obviously a crucial moment in the development of this referendum, but I have reservations about 23 June. I have not yet decided, and I want to hear what the Scottish National party has to say about this issue, because that will be interesting and may have some impact on the way I vote. I am interested in the democratic side of this issue.

On 3 February, in my response to the Prime Minister’s statement on the UK-EU renegotiation, I said that this is all about voters’ trust, and I went on to give examples of why I thought that promises and principles had been broken. Above all else, I asked whether this will be a political stitch-up by the European Council because the agreement—such as it is—and any other subsequent legal arrangements must be both legally binding and irreversible.

Information was contained in the White Paper published a few days ago, and I have had quite an interesting weekend, given the remarks that were made about me—I need not elaborate on that, and I assure you, Mr Speaker, that it caused me no concern whatsoever. Whether this agreement will be irreversible is a question of trust, and today we had an extremely important urgent question on information. I put a question to the Minister, and tomorrow my hon. Friend the Member for Harwich and North Essex (Mr Jenkin) will interview the Cabinet Secretary on this matter. The real question is about voter trust. On 23 June, will people have enough proper information, based on a fair arrangement between those on both sides of the debate? The Government first insisted on the purdah arrangements that they wanted to use for the whole of the civil service machinery. We drove them off on that, but then they brought in, through the House of Lords, a legal duty to provide such information —if I may say so, they pretended that that had come from other people in the House of Lords, but it was clearly at least half sponsored by the Government.

When we got to ping-pong, I waited until the last minute before it ended, and I got up and asked the Minister—he knows what is coming—whether he would give me a straight answer, yes or no, about whether the information that is due to be published would be both accurate and impartial. He said, “Of course.” He added that it would be perverse if the Government were to do otherwise.

Well, Mr Speaker, I have to say that I am intrigued. On 23 June, the people may not have impartial and accurate information. I believe the Government are probably, if not certainly, in breach of their duty under sections 6 and 7 of the European Referendum Act 2015. Furthermore, despite what the Minister had to say on this today, the words “the opinion of” in this context will not, I believe, be a sufficient safeguard from the potential concerns that they know must already be in some people’s minds that this is not fair and may well not be legal. This is a very, very important matter.

[Bob Stewart (Beckenham) (Con)]

I am confused. When the Paymaster General answered the question I put to him, he said that the Cabinet Secretary is not neutral. That I accept, when the Cabinet Secretary is working for the Government. In this matter, however, the Cabinet Secretary may well be working for the people, because it is the people who are going to decide this matter. In my view, it is therefore proper that the Cabinet Secretary, or someone of his ilk, should draft or head up a paper that puts the facts for both sides of the argument, so that the people who are going to make the decision—this is the people’s decision—can make a decision that is based on objective facts.

[Sir William Cash]

The sentiments my hon. Friend expresses are very relevant to the question of voter trust. In the debate on 25 February, and when the Foreign Secretary gave evidence to the European Scrutiny Committee, which has considered these matters in great depth, I said that the Government are effectively—in fact, I will go further and say definitely—cheating the voters. This cannot be said to be legally binding and irreversible. In the debate on 25 February, I pointed out that the Council conclusions—I ask that hon. Members look at the Council conclusions—refer to the words “legally binding” and there is a common accord with respect to the international law agreement. What they cannot do is say that it would be irreversible. Furthermore, although Mr Tusk, the Prime Minister and the Foreign Secretary have been saying “irreversible”, they cannot prove that that is the case. I will explain why in one second.

On 23 June, a most momentous and historic decision will be taken by all the people in the United Kingdom who can vote. They have a right to know whether the question they are going to be asked, on whether to remain or to leave, can be answered. It is the basis of my proposition that it is impossible for them to know whether it is going to be irreversible for a simple reason. Under the international agreement where the European Court may or may not take into account the question that has been posed by the White Paper, certainly there is no guarantee of a treaty change and certainly there is no guarantee that the mechanics of the international law decision will produce a definite result that the European Court can decide on. Nobody can say that the European Court will or will not accept any treaty change. As a matter of fact, with respect to the question of referendums, there is no guarantee that there will not be referendums.

There are currently at least four Governments of the 28 in the EU, in the great stitch-up in the political decision-making process I referred to, who barely have control over their government at all. There are massive problems in Portugal and Spain, and now in Ireland as well, and there are massive problems in Greece. There is absolutely no reason why anybody should guarantee either that there will be treaty change or that it will be irreversible.

I happened to take part in the referendums that produced “no” votes in other countries, including France and Denmark. To say as a matter of absolute certainty in this disgraceful White Paper that it is irreversible when it is impossible as a matter of fact, let alone of law, for anyone to say that they know what the European Court will do or indeed that there will not be a referendum and what the outcome of that would be, is simply unacceptable.

[John Redwood]

Is it not also the case that if we read the language of this political agreement after rather difficult negotiations and if we take the example of something crucial such as the protection of our interests against the wishes of the euro, that language says that we can be overridden in certain circumstances, so we will have gained absolutely nothing?

[Sir William Cash]

Absolutely nothing at all. I think that the British people, who are a great people, are waking up to this. As I said in last Thursday’s debate, Churchill said that we should tell the truth to the British people and they will follow, but they are not being told the truth—that is the real truth, and nothing but the truth.

A comprehensive poll was published in the Evening Standard on Friday on the question of whether the voters trust the outcome of this negotiation. The result is simple to describe: 53% said that they did not trust it at all; only 22% said that they did; as for the balance, the pollsters said that half of those who were undecided tended not to trust it. I know that a poll is a poll, but I also say that on the question of trust, the outcome is either to be trusted or not to be trusted. This whole negotiated package, whether it be looked at from a political or a legal point of view, is not to be trusted.

I say that to the House of Commons because this is where the real issues have to be resolved, but we have quite rightly handed this over to the voters—and they do not trust it. I do not think that anything they will have heard today from the Minister for the Cabinet Office and Paymaster General, or anything they will hear tomorrow from the Cabinet Secretary, or indeed any of the matters discussed in relation to the component parts of this package, either in aggregate or individually, will provide any reason for anybody to trust this deal.

The question before us today about the date of 23 June must be weighed against the background of whether that date is appropriate. I want to listen to what SNP Members say, as I have a great interest in that. They are elected to stand up for their own views and for their own part of the United Kingdom. I may disagree with what they say, but I saw what happened with the Scottish referendum, particularly regarding the date and the length of time allowed for debate. We will hear from SNP Members how they were stitched up by the BBC and all the rest of it. What I am saying is that this entire question of the date is dependent on the extent to which proper information is given to the voter. As I said in the urgent question earlier, the crucial issue is what reliance the voters can have on the fact that the information they are being given is transparent and honest, and additionally impartial and accurate, which is what the Minister for Europe told me on the Floor of the House it would be.

[Simon Hoare (North Dorset) (Con)]

I rise with some trepidation in recognition that my hon. Friend is an expert in this field. I do not think he will agree with me, but this is my take. For most people, this will be a vote on the principle of whether to remain or to leave rather than on the minutiae of the detail of the renegotiation. That was always going to be case, in my view, irrespective of when the referendum is held. Given that he has argued so cogently for so long that a referendum should be held on this issue, I am inclined to agree with our Front-Bench team that it should be held as quickly as possible and that a date after the Scottish and Welsh elections seems to be the right time. Otherwise, it falls to the autumn.

[Sir William Cash]

What I would say in reply is very simple. If my hon. Friend were good enough to read the speech and the remarks made by my good right hon. Friend the Foreign Secretary on the question of the whole package, he would realise that our right hon. Friend says that we do not want to look at anything other than the whole package. That is what he says; my hon. Friend should read it for himself. It is very strange that we are going to such lengths, with the Prime Minister roaming around the country making all these speeches, with the putting out of all this information, with all this business about the civil service and the guidance, and with all the rest of matters that I have referred to. Why is so much emphasis being placed on this? Why are the airwaves being dominated on such a scale and why is so much paper being used?

This reminds me of what I said to the late Baroness Thatcher when I was invited to lunch in Downing Street. When I went into the room, most of the Cabinet were sitting around the table. She said, “Bill, you sit next to me.” Then she turned to Geoffrey Howe and said, “I’ve brought Bill in to talk about Europe.” Then she turned to me and said, “What do you feel about Europe, Bill?” I said, while looking at Geoffrey Howe, “Prime Minister, I think your task is more difficult than Churchill’s.” She said, “You will have to explain this, won’t you?” I said, “Prime Minister, Churchill’s task was more difficult than yours for this reason. You are in greater difficulty than he because he was faced with bombs and aircraft, but you are faced with pieces of paper.” It is those pieces of paper that I am worried about, and I think the voters should be as well.

17:57

[Stephen Gethins (North East Fife) (SNP)]

It is a pleasure to follow the hon. Member for Stone (Sir William Cash), and I will address some of the points he raised.

Let me first make it clear—it seems appropriate to do so in this place—that the Scottish National party position has not changed. Our position remains consistent in that we are still against the 23 June referendum date. I say to the hon. Member for North West Durham (Pat Glass) that our position has remained unchanged despite what the Conservatives have said on this issue.

My first point is about the important issue of respect. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) mentioned the Labour First Minister of Wales, who wrote a letter along with the First Ministers of Scotland and Northern Ireland. The right hon. Member for Belfast North (Mr Dodds) and his colleagues also raised the issue of the date. The point was that this campaign period will overlap with the May election campaign, and this was raised not only by the three First Ministers, but by Jenny Watson, the chair of the Electoral Commission, who said:

“Referendum campaign periods overlap with May election campaign periods if the referendum period is held on any date in June”.

My right hon. Friend the Member for Gordon (Alex Salmond) also made this point very clear. If the Minister would like to speak to whoever takes the Prime Minister’s mail, he will find out about a letter of correction from my right hon. Friend who was misrepresented by the Minister for Europe and by a number of the Minister’s colleagues. Many of them signed my early-day motion 1042. It was signed by Members of all parties, including Conservative Members, given the respect agenda on this issue. There is a respect agenda—there is the idea that democracy does not begin and end in this place. We have incredibly important elections coming up in Scotland, Wales, Northern Ireland and English local authorities, which is a point that we have made consistently. It is one of the reasons why we will vote against the motion today.

Before I discuss some of the other issues associated with the date, let me deal with some of the practical questions. Will the Minister tell us what significant changes have been made in the statutory instrument as a result of his consultations with the devolved Administrations, and will he make his correspondence available in the House of Commons Library? That is a very simple question, which was asked earlier by my hon. Friend the Member for Glenrothes (Peter Grant). Perhaps the Minister will make a note of it.

We see problems throughout this instrument. It states that the referendum period begins on 15 April 2016, three weeks before the devolved elections. It also states that the first reporting period ends on 21 April 2016, and the report is supposed to be sent to the Electoral Commission on 28 April, one week before those crucial devolved elections. When the Minister answers our question about what practical changes have been made in the SI as a result of his correspondence, will he also tell us what impact the purdah rules will have on any programme for government that might need to be agreed? Under the Scotland Act, it could be up to 28 days before the appointment of a new First Minister is agreed to, and I think that broadly similar arrangements apply to First Ministers in Wales and Northern Ireland. The referendum campaign eats into that period quite significantly.

I refer the Minister to paragraph 7.11 of the explanatory memorandum, which states:

“It is for the Devolved Administrations to consider any restrictions on their own referendum-related activity”.

Given that the Minister wrote that, can he tell us what correspondence he has had with the devolved Administrations about it, about the formation of new Governments, and about what impact this could have on the publication of a programme for government? As was pointed out by my hon. Friends the Members for Glenrothes and for Glasgow North (Patrick Grady), there are European Union issues that will have a significant impact on that programme, including agriculture and fisheries. Let us not forget that it was the United Kingdom Government who described our fishing industry as expendable, not the European Union. What will happen to those and other issues that are affected by European Union legislation?

[Sir William Cash]

As a veteran of the Scotland Acts, all the way back to when Mr Dewar was Secretary of State at—I believe—the beginning of 1979, may I ask whether the hon. Gentleman recalls the reserve powers? Would they not be an issue?

[Stephen Gethins]

As usual, the hon. Gentleman has made a very good point. European Union legislation has a significant impact on significant powers that sit with the Scottish Parliament, and the same applies to Northern Ireland and Wales. I have mentioned some already, but energy is another example. On renewables, for instance, the Scottish Government are much more in line with our European partners than with the United Kingdom Government.

Let me now address issues that the hon. Member for Stone raised in what was—again, as usual—a very informed speech. I am glad that my right hon. Friend the Member for Gordon has come into the Chamber, because this is a good time to remind the House that he called the independence referendum 545 days before the day on which it took place. I shall give the Minister some leeway by saying that SNP Members are not seeking quite that number of days. However, we need to have the courage of our convictions, and have a proper debate.

The hon. Gentleman and I will not agree on this particular referendum. Indeed, I am not sure that we will agree on many referendums that may be held during my time in the House. One thing on which we will agree, however, is that a proper debate takes a great deal longer than the seven weeks that we have been given, and we want a proper debate that goes to the heart of this issue. As someone who wants Scotland, and the rest of the United Kingdom, to remain part of the European Union, I believe that our case stands up to scrutiny, and that the Conservatives should have the courage of their convictions and subject it to appropriate scrutiny.

[Sir William Cash]

Whether or not we agree on the immigration issue, does the hon. Gentleman agree with what I said on 3 February? As everyone knows from the recent figures, the question of immigration—which is actually about numbers and the effect on social services, including those in Scotland—has now been whittled down to a narrow argument about in-work benefits, on which the Government want to go on harping so that they can distract attention from the really big question, which is “Who governs this country, and are we going to be in the second tier of a two-tier German Europe?”

[Stephen Gethins]

The hon. Gentleman was clearly listening to Nicola Sturgeon, the First Minister of Scotland, when she raised that very point about in-work migrant benefits this morning. I believe that people who are going to live and work in a country, and contribute, have every right to the same benefits, just as 2 million United Kingdom citizens, including 1 million in Spain, benefit from being part of the European Union.

Nicola Sturgeon made what I thought was a very valid point. When we were “whittling down” the debate, as the hon. Gentleman put it, to a discussion of the rather minor issue of in-work migrant benefits at the European Council, time was taken from a discussion of the refugee crisis, in regard to which, incidentally, Ireland was giving way on its opt-out. The hon. Gentleman will not agree with me about this, but I think that that had a great deal more to do with the Minister trying—unsuccessfully, as I can see—to keep his Back Benchers happy than with anything to do with the broader debate on our membership of the European Union.

[Bob Stewart]

I am listening carefully to what the hon. Gentleman is saying. I am intrigued to know when the SNP and the other parties would like the referendum to be held. I assume that it will not be in 543 days.

[Stephen Gethins]

As a number of us have said, mid-September is often a good time for a referendum. It gives us the summer days to campaign and engage, and the longer nights to chap on people’s doors. It is to be hoped that people will also form their own groups in an organic way. Mid-September is probably a good time, but we would certainly not opt for 23 June.

Let us give this a little bit of time. I urge all Members to listen to the social democratic case—as someone described it earlier—that was put by the First Minister this morning not so far from here, at St John’s Smith Square. Let us look at what membership of the European Union does. The United Kingdom could stand on its own two feet and be successful as an independent member state outside the European Union. We absolutely reject the “Project Fear” scare tactics: they do nothing for the case for staying in, and nothing for the case for going out. I hope that we will all bear in mind the 20-point lead that the no campaign squandered in Scotland, not just because of the positive case that we put, but also, to an extent, because of the fear tactics that those campaigners used. I hope that the Conservatives will learn the lessons of that referendum.

[Kate Hoey]

I am sorry; I am not a Minister yet.

I know that the hon. Gentleman and I are on different sides, but I agree with him that this should be a positive campaign. May I return him to the issue of what I consider to be the hugely important letter that was signed by the First Ministers of the three home countries, all of whom had different views on the European Union? Does it not shame the Government that they showed so little respect—for respect is the word—by simply throwing that letter away and implying that it meant absolutely nothing?

[Stephen Gethins]

The hon. Lady and I will find ourselves on different sides, by way of a respectful debate. She has made a very valid point. The issue was raised by three First Ministers, including the Labour First Minister of Wales, and was agreed on by the First Minister and the Deputy First Minister of Northern Ireland, who, as we all know, do not necessarily agree on everything, but managed to come together on this particular issue.

[Jonathan Edwards]

The hon. Gentleman is making a very intelligent speech. He mentioned “Project Fear”. Did he happen to catch “Newsnight” on Friday, when there was an analysis of “Project Fear”? John McTernan, a Labour strategist in Scotland, said that it was all about ramping up the risk. That is exactly the sort of campaign that we do not want to risk. I am afraid that a campaign based on that premise will fail.

[Stephen Gethins]

I hope that, given his track record, Mr McTernan will not be on our side during the European referendum campaign, because otherwise we could be in serious difficulties.

The hon. Gentleman has made a good point about “Project Fear”. Let us hear a positive case about the economic and social benefits, and about the benefits of an arrangement whereby independent member states agree on a common set of rules. I hope that the Minister will give us a few more pointers. I have already set him a few questions. Here is another: will there be a special recess, or, if the Minister thinks that he will lose—we would not advocate this—will the Government abandon Prime Minister’s Question Time at the last minute in order to rush off and campaign?

[Sir William Cash]

In relation to “Project Fear”, which is very real, does the hon. Gentleman agree that the Government should listen to Mervyn King, the former Governor of the Bank of England, who said that it was the euro and Europe that were causing massive unemployment and making Europe so dysfunctional? In fact, the dangers to the UK and to Scotland are also dangers to Europe as a whole. We have only to look at the way in which the Germans treated the Greeks, not to mention opening the doors to immigration, causing dislocation and more barbed wire in Europe today then there was even during the cold war.

[Stephen Gethins]

When we talk about “Project Fear”, we have to acknowledge that it is taking place on both sides of the debate. There has been a positive debate on the environmental benefits of membership; when Germany was experiencing acid rain as a result of UK industry, for example, we had to formulate a common set of rules. Let us also think about the benefits to the economy when people go on holiday. Also, the benefits to Scotland’s small and medium-sized enterprises of exporting to Europe are worth £2,000 to every man, woman and child in Scotland.

I say to the hon. Member for Stone that I want to have a positive debate, including with him, and I am sure that we will do so over the next little while. Let us not mistake the faults of the European Union for the faults of the member states. This is a mistake that we know only too well in Scotland. Let us have a positive debate, but let us have an honest debate as well.

18:02

[John Redwood (Wokingham) (Con)]

I welcome a fairly early date for the referendum. I do not know about you, Mr Speaker, but there is only so much that I can take of all the stories of the pestilence, famine and plague that are going to be visited upon us by the very European Union countries that the Government say we love and work well with. The Government have this strange vision that those countries would suddenly change and become extremely unpleasant were we to want a relationship based on friendship and trade rather than on the current treaties. I personally think that 16 weeks would be quite enough to do the job that I would love the Government to do, which is to win it for the leave campaign by using this highly inappropriate tone and by constantly slanging off our European partners by telling us just how unpleasant they would be. I would have thought that a Government wishing to encourage us to stay in the European Union would want to be rather more obliging about our European partners and to paint a picture of how things might be better were we to stay in, rather than concentrating only on ascribing false futures to the leave campaign.

I am interjecting in this debate because I am worried that 16 weeks might not be long enough for the Government to carry out all the tasks necessary to fulfil the requirements of the legislation. In particular, I have been moved to that view by listening to my hon. Friend the Member for Stone (Sir William Cash), who is often absolutely right about these points and their salience. The Government have an important duty to provide impartial information to the public as part of the task of preparing them for the referendum. Having seen their work so far, I am afraid to say that it fails by all standards. It is not impartial, it is not well researched and it is often exceedingly misleading. I am using parliamentary language, Mr Speaker; I might use richer language were I not inside the House. It seems to me that the Government are going to need a lot more time to work with their ever-willing officials to come up with balanced, mature and sensible information about what the future might look like under either scenario.

One thing that the Government have clearly had no time to prepare so far—this is a particularly worrying lacuna—is information on what the future might look like if we stay in. We have had no response from the Government on how they would respond to “The Five Presidents’ Report: Completing Europe’s Economic and Monetary Union” or on how they would handle demands for capital markets union, banking union, full economic and monetary union and political union. Would such a situation immediately trigger a requirement for us to veto the next treaty, would we seek a comprehensive opt-out from it, or would the Government want to work with their partners and agree to some modest treaty changes that would affect the United Kingdom, in the spirit of “The Five Presidents’ Report”? Any such changes would be triggered after about 2017, so probably within this Parliament. Could we then look forward to a second referendum if we stayed in the European Union? Under the European Union Referendum Act 2015, there would need to be a referendum on any treaty changes made as a consequence of “The Five Presidents’ Report” and the clear desire of our partners to go along the route to political union.

[Sir William Cash]

Has my right hon. Friend had the opportunity to see not only the White Paper that was produced a few days ago but the latest jewel in the crown from the Government, which is entitled “The process for withdrawing from the European Union”? It contains page after page of tendentious remarks, assertions and assumptions that cannot be substantiated. I can see the Minister for Europe wriggling around a bit on the Front Bench, because the bottom line is that he will not be able to answer these questions, but they will be tested before 23 June.

[John Redwood]

That is why, in my amiable way, I was suggesting that the Government might like to rethink their position on the timing of the referendum. Having seen that piece of work, I agree with my hon. Friend. I was frankly ashamed that such a document could come from the United Kingdom Government. It bore no relation to what the leave campaigns are saying about how we would like the Government to handle the British people’s decision if they decided to leave. It did not give any credence to the idea that we would be negotiating with friends and allies who would have as much interest in a successful British exit as we would, should that be the will of the British people.

Ministers never seem to understand that the rest of Europe has far more exports to us at risk than we have to the rest of the European Union, because we are in massive deficit with those countries. I have had personal assurances from representatives of the German Government, for example, that they have no wish to see tariffs or barriers being placed in the way of their extremely profitable and successful trade with the United Kingdom. To issue a document implying that all sorts of obstacles would be put in the way of such trade over a 10-year period simply beggars belief.

[Sir William Cash]

May I give my right hon. Friend an example? These documents contain scarcely any serious objective analysis from bodies such as the Office for National Statistics or the House of Commons Library, and their arguments are tendentious. I am sure he will remember, because this is at the forefront of his mind, that in current account transactions relating to imports, exports, goods and services, we run a deficit with the other 27 member states of about £58 billion a year, and that Germany runs a surplus in those same goods, services, imports and exports. If that is a single market, I’m a Dutchman.

[John Redwood]

I am sure that my hon. Friend is many fine things, but a Dutchman is clearly not one of them. He has, however, revealed an important fact, and it is the kind of fact that we would expect to see in a balanced document setting out the position on trade. I hope that the Minister will leave enough time in his urgent timetable to ensure that those sorts of important facts—

[Sir William Cash]

With references.

[John Redwood]

With references and proper statistical bases. Those important facts should be put before the British people. Indeed, the Minister would be wise to do that from his own point of view—perhaps I should not help him as much as I am apparently trying to do. The Government have been rumbled on this. The press and a lot of the public are saying that they want factual, mature and sensible information setting out the risks of staying in, the risks of leaving and what it would look like in either case, but that is not what we are getting.

We have had another example in the past few days. We have been witnessing a long-term decline of the pound against the dollar for many months, because we are living through a period of dollar strength. In the past few days, when Brexit was in the news, we were told that the pound was going down because of fears about Brexit, whereas that was clearly not the case on other days when the pound had been going down. However, on those same days, the Government bond market had been going up. The prices of bonds had been rising and our creditworthiness was assessed as being better, but I did not hear the Government saying that the idea of Brexit was raising Britain’s credit standing. We could make that case just as easily as we could make the case that the fear of Brexit was leading to a fall in the pound.

That is the kind of tendentious information that I hope the Minister will reconsider if he wishes to keep up the normally high standards of Government documentation and use impartial civil service advice in the right tradition, which we in the House of Commons would like to see. I can see that a few colleagues are not entirely persuaded that those high standards are always met, but I shall give the Government the benefit of the doubt. I have certainly seen many Government documents that achieve higher standards than the ones on this matter.

I again urge the Minister to make sure that he leaves enough time in the action-packed timetable to produce high-quality, balanced information that includes the risks of staying in and the wild ride to political union that others have in mind, as well as what he sees as the risks of leaving. For instance, the Government should point out that if we stop paying the £10 billion of net contributions—money we do not get back—that will immediately improve the balance of payments by one fifth next year. Would that not be a marvellous advantage? I do not see it being pointed out in any of the current material in order to show some kind of balance.

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

My right hon. Friend is making a hugely powerful argument. The answer is quite simple: the Government do not want the facts in there—they do not want the British public to know. The British public will come to that conclusion, and it is not a good conclusion if we are to have a balanced debate on the referendum.

[John Redwood]

I fear that is right, but I also fear I am beginning to give the Government too much help. Obviously, I would like them to lose on this occasion, because I think we will be much better off if that happens. I will therefore vote with the Government, because 16 weeks is quite enough of “Project Fear” and of people misrepresenting a whole lot of things that are going on by saying, “These are the results of the fears of Brexit.” That will do the job I would like the Government to do and help the case I am trying to make, but the Government have a long way to go in the interests of good government and in meeting the legal requirements that they have placed on themselves to provide impartial information. I just trust that in the next few weeks they can lift their game.

18:02

[Tom Brake (Carshalton and Wallington) (LD)]

The Liberal Democrats will support this statutory instrument, which, as the Minister says, puts in place legislation for the referendum on 23 June. He will know that the coalition legislated so that any treaty change would trigger a referendum, but, as we know, his party won the election on the basis of a manifesto commitment to offer a referendum independent of any treaty change, and so we are where we are now.

[Sir William Cash]

Is the right hon. Gentleman thinking that the European Union Act 2011, which many of us opposed for all sorts of reasons, should be severely amended and/or repealed with regard to treaty change?

[Tom Brake]

We have a referendum ahead of us, and I suggest we get on with that before looking at whether to make any changes to that Act.

The Liberal Democrats support the referendum on 23 June. I have been in this House for some time now—longer than some Members but not as long as others—and it seems to me that, in this House and beyond, we have had a very full debate in recent general elections about the EU and whether we should or should not be members of it. As I said in an earlier intervention on the Minister, there is certainly no confusion in the minds of the electors in my constituency between the mayoral and Assembly elections taking place in May, and the EU referendum that will take place, presumably on 23 June. Clearly, it is more difficult for the political parties and the campaigners if one election follows on so relatively quickly after another.

[Jonathan Edwards]

I take the point the right hon. Gentleman is making, but is he aware that Kirsty Williams, the leader of the Liberal Democrats in Wales, has written a letter to the UK Government saying that the vote should be moved from 23 June?

[Tom Brake]

I am aware of that, and I suppose one consequence of devolution is that people in different places adopt different positions. Like many others, I am suspicious of the motives behind the Scottish National party’s position: is it about the need to delay the referendum for the reasons it sets out, or is it about increasing the chances that the UK might vote to come out of the EU, in order to facilitate the SNP’s campaign to hold a second referendum? In relation to splits within parties, there appears to be one within the SNP, as the First Minister of Scotland is clear that this should be a positive campaign, but what we have heard here today from SNP Members has been all about the procedure and not at all about the positive nature of what the EU campaign should be.

[Patrick Grady]

Will the right hon. Gentleman confirm that, like the Labour party, the Liberal Democrats’ position is that if Scotland votes to stay in the EU and the rest of the UK votes to leave, they are happy to see Scotland forced to leave the EU against its will?

[Tom Brake]

The Liberal Democrat position is that those who want to stay in the EU should be united behind the campaign and should start campaigning positively. That includes not only the SNP but the leader of the Labour party, who perhaps needs to spend some time with the leader of the Labour campaign and draw on some of his enthusiasm so that he can put his back into ensuring that we win on 23 June.

[Ms Tasmina Ahmed-Sheikh (Ochil and South Perthshire) (SNP)]

On suspicious intentions, may I remind the right hon. Gentleman that he campaigned with the Conservative party and the Labour party in Scotland, telling the people of Scotland that if they voted no in the Scottish referendum, they would be guaranteed to remain in the EU? What is his position on that point today?

[Tom Brake]

I am confident that if we have a united front from the SNP campaigning positively on the matter, from the Labour party and from the Prime Minister—I am pleased to say that he has, after I requested it, come out forcefully behind the campaign in support of staying in—we will collectively win the campaign. I look forward to doing that.

As I said, we need to get on with the campaign, which is actually about the peace, prosperity, opportunity and security that we derive from being a member of the EU; it is not about “Project Fear” at all. The Conservative party, or those on the Benches immediately in front of me, may refer frequently to “Project Fear”, but I must say that quite a degree of whitewash or “Project Status Quo” is coming from those on the Government Benches.

[Sir William Cash]

I am so glad that the right hon. Gentleman has referred to “Project Status Quo”, because I am sure he will accept that almost nothing has changed, for example, on ever closer union, or in any word of any treaty or law in relation to the EU. Would he therefore be good enough simply to say that he agrees with us that proper, impartial information should be published, and that the current documents simply do not cut the mustard?

[Tom Brake]

What I will agree with the hon. Gentleman on is the fact that there is a “Project Status Quo”, but I think he has misunderstood the point I was making, which was that there are people on his side of the argument who would like us to come out of the EU and who claim repeatedly that the basis on which we would be able to trade with the EU would be unchanged. They say, “There is no change. It will be exactly the same. We will get exactly the same terms whether we are in or out.” That is why I referred to “Project Status Quo”.

[Kelvin Hopkins (Luton North) (Lab)]

I have made the point many times, as have other hon. Members, that we have a gigantic trade deficit with the rest of the EU, and with Germany in particular. Germany is therefore not going to play games with us on trade, because it will only shoot itself in the foot by doing so.

[Tom Brake]

I am pleased that the hon. Gentleman can read forward two, three, four, five, six or seven years to what the arrangement between the UK and the EU would be if the UK were to leave. I cannot do that, but clearly he is clairvoyant.

One serious question I wish to put to the Minister is whether he is confident that the Electoral Commission and the police will have the resources and the tools they need to ensure that the rules on expenditure will be observed in the campaign. He will be aware of a recent exchange in which the hon. Member for Wycombe (Mr Baker)—I warned him I was going to raise this point in the debate—said in an email:

“It is open to the Vote Leave family to create separate legal entities each of which could spend £700k: Vote Leave will be able to spend as much money as is necessary to win the referendum.”

I hope that the Minister will provide some clarification on that. My memory of being a Minister and being involved with the rules of the Political Parties, Elections and Referendums Act 2000 is that it is very clear that if organisations are working in concert—the Vote Leave family suggests that that is exactly what would happen—the total limit would be £700,000, and that to seek to go beyond that by some artificial creation of a number of identities would be a breach of the law. However the campaign is conducted, we need to know that all sides will treat it in a way that observes the law.

18:02

[Peter Grant (Glenrothes) (SNP)]

May I start by referring Members, particularly the last speaker, to the comments made by the First Minister this morning? She made it perfectly clear that it is not her preferred outcome that Scotland should leave the Union simply to prevent ourselves from being dragged out of the European Union. She said that she wants the United Kingdom to deliver a resounding yes vote to the European Union. I cannot see that happening if the UK-based yes campaign continues to behave in this way.

This afternoon, we have seen the reality behind the Government’s respect rhetoric. Despite the promises that we have been given time and again, and as recently as a few weeks ago in this Chamber, the views of the elected Governments of three of the four equal partners in this Union are being ignored and trampled underfoot by the fourth partner. That comes as no surprise to us in Scotland, because the Government made it perfectly clear that, regardless of what the sovereign people of Scotland say about our membership of the European Union, others can overturn that simply by sheer weight of numbers.

One very interesting confession today is that the Labour party shares the Conservative party’s contempt for the sovereign will of the Scottish people. If the Labour branch office leader in Scotland had not conceded defeat in the Holyrood elections last week, I strongly suspect that she would have done so very quickly had she heard the comments of the hon. Member for North West Durham (Pat Glass) just a few moments ago.

The elected national leaders of Scotland, Wales and Northern Ireland have all said that the democratic processes in their three countries are likely to be flawed if this statutory instrument is agreed tonight. In Northern Ireland, we even saw the Sinn Féin Deputy First Minister add his name to a letter from the Democratic Unionist party First Minister. Those are two politicians who, for a number of reasons, do not agree on very many things. How much wider a coalition of opposition to this proposal do the Government need to see before they accept that, in this case, sheer weight of numbers is not enough to crack an argument? They must listen, which is what they promised the devolved Governments that they would do.

[Sir William Cash]

I am most grateful to the hon. Gentleman for giving way, especially as he is a member of the European Scrutiny Committee, of which I have the honour to be chair. Does he agree that a democratic question lies at the heart of this matter? If there is information on which the voter is expected to make his decision, as was the case with the Scottish situation a few years ago, the bottom line is that, without genuine and properly sourced information and proper time, the British people will effectively be cheated?

[Peter Grant]

I do not think that a referendum date of 23 June gives adequate time for the complex issues to be considered. This is the time to be discussing not those issues, but the procedural motion before us so that we can decide on the date. I am up for a positive and, if necessary, heated discussion as to why it is in the interests of all of our nations to remain part of the European Union.

In the interests of time, I will not repeat all the arguments that have been marshalled on the Opposition Benches and, sometimes, on the Government Benches against the proposal deliberately to overlap the referendum campaign with elections in which more than 20 million of our citizens will take part on the first Thursday in May. Let us look quickly at some of the consequences. As has been mentioned, 10 weeks before the referendum—in the middle of April—the Government’s response to the EU negotiations has to be published, including a statement, which we now know will say that the Government believe that people should vote to stay in the European Union. The Scottish Government will be in purdah for a full three weeks after that. Are the UK Government seriously suggesting that it is acceptable for the Prime Minister to issue an official document saying that the United Kingdom should stay in the European Union, while not allowing the Scottish Government to say that they agree because they are in purdah? Saying that they agree will inevitably be seen as seeking to influence the votes in the Scottish parliamentary elections away from the parties that will stand on an anti-European Union ticket—make no mistake about it.

There used to be an agreement that the UK and Scottish Governments would fully respect one another’s purdah arrangements. If this statutory instrument is agreed today, that agreement is gone, and it may well be gone forever. Any attempt to pretend that this Government respect the democratic legitimacy of the Scottish Government will go out the window with it.

People will receive the UK Government’s document on the referendum at the same time, and possibly on exactly the same day, as they receive the polling cards or the postal vote applications for a completely different election. The problem is not just that the elections are held close together—in some ways, administratively, it is simpler if two polls are held on the same day, but it becomes more difficult if the nature of the question is different for those polls. In this case, every single part of the election administration process, which is immensely complicated and which our returning officers and our counting officers cannot afford to get wrong, will be happening twice, a few weeks apart. We will have the ridiculous situation of people being encouraged to register to vote in one election before they have to turn up at the polling station to vote in the other.

The newly elected national Governments will find themselves back in purdah fewer than three weeks after the parliamentary elections. As has been pointed out, it is quite possible that, if there is a very keenly contested election in any of the three nations, the First Minister of one or of all three nations might not be elected until the Government are back in purdah. We then have a newly formed Government who are restricted in their ability to launch their legislative programme in case some of it is affected by the result of the referendum. That is not sheer speculation, but fact. For example, how can a new Scottish Government announce a five-year spending plan if they do not know whether European Union procurement rules will continue for over half of that five-year period? How can a Government put forward a legislative programme on such crucial areas as fisheries, agriculture, public procurement, investment and tourism if they do not know, and are not allowed to speculate on, whether they will still be a part of the European Union a couple of years later. If this is what the Government describe as being respectful, I shudder to think what contempt for the Scottish Government would look like. The Minister claimed that the EU referendum purdah is different from a parliamentary election purdah. Technically, it is, but so many subject matters will be covered by both that in fact, in practice, the elected Governments will be in purdah as regards a significant range of their devolved powers.

The Government are trying to suggest that a referendum in September will not work, but if a major test of the success of any electoral process is public engagement and public participation, I have to remind the House that a September vote produced the most successful test of electoral opinion that any of these nations have ever seen, whether we measure it by the number of people who took part, the number of people who registered or the number of people who voted. I would much rather see 98% of people registering to vote and 85% of people voting than the low numbers we might get in a snap election.

I am ready for the debate to begin. I honestly believe that a date of 23 June makes it more likely that the United Kingdom will vote to stay in. Despite that, I do not want to see the UK voting on a flawed referendum and in a flawed process. I would much rather see a referendum in which everybody participates and for that reason, it cannot be held as soon as 23 June.

Question put.

18:39

Division 201

Ayes: 475

---

Conservative: 282
Labour: 184
Liberal Democrat: 6
UK Independence Party: 1
Independent: 1

Noes: 59

---

Scottish National Party: 47
Labour: 7
Independent: 2
Plaid Cymru: 1
Ulster Unionist Party: 1
Social Democratic & Labour Party: 1
Democratic Unionist Party: 1

Ordered,

That the draft European Union Referendum (Date of Referendum etc.) Regulations 2016, which were laid before this House on 22 February, be approved.

Opposition Day

Monday 29th February 2016 Commons Chamber

[Un-Allotted Half Day]

UK Steel Industry

Monday 29th February 2016 Commons Chamber

[Relevant documents: First Report from the Business, Innovation and Skills Committee, on the UK Steel Industry: Government response to the crisis, HC 546, the Government response, HC 861, and oral evidence taken before the Welsh Affairs Committee on 10 February, on the steel industry in Wales, HC 767.]

18:57

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move,

That this House notes the crisis in the UK steel industry; calls on the Government to support tougher EU action to ensure a level playing field and prevent the dumping of Chinese steel, to support scrapping the lesser duty rule which prevents higher tariffs being imposed that reflect the actual margin of dumping and to examine the implications of granting China Market Economy Status for the EU’s ability to tackle unfair trade; and further calls on the Government to publish a full industrial strategy which includes a procurement policy which commits to using British steel wherever possible for publicly-funded infrastructure projects and which supports industrial supply chains across the UK.

Britain’s steel industry is in crisis, and despite the warning signs flashing red, the Tories have had to be dragged kicking and screaming to come up with any kind of response. So far, it has been far too little and far too late. More than 5,000 UK steel jobs have been lost over the past 12 months. Redcar has been abandoned, the blast furnace and the coke ovens destroyed by this Government’s shameful complacency and inaction. Tata Steel has announced the loss of 1,050 jobs this year alone, and there are worrying signs that the entire industry in the UK is hanging by a thread.

This is a vital foundation industry for the UK which, after all, was the world’s first industrial nation. Our steel communities are looking to Parliament to support them in their hour of need and we must not let them down. Steel production is worth £9.5 billion to our economy, £5 billion of that in exports, at a time when we have a deteriorating trade deficit.

[Mark Pritchard (The Wrekin) (Con)]

The hon. Lady speaks of this time of need. I grew up just a few miles from Port Talbot steelworks and played very poor rugby as a scrum half at a school close by. At this time, is it not better that all parties work together for the good of the British steel industry, rather than making party political points, when it is pretty obvious that the steel industry globally has changed not only in the past year, but over the past two decades?

[Ms Eagle]

I will be the first to work with Government Members, and I hope that by the time we have listened to the Business Secretary’s reply we will have something that we can all cheer.

The British Chambers of Commerce recently found that export growth continued to slow at the end of 2015, with manufacturers struggling in particular. In the words of a former Conservative Trade Minister, the Government’s own export target is “a big stretch”. The Government have obviously been asleep at the wheel. Ahead of the Budget next month, the Government must acknowledge that on their watch domestic structural weaknesses in the UK economy have been allowed to persist and that they are now in danger of holding Britain back.

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

Does my hon. Friend agree that the Government have also been asleep at the wheel when it comes to the crucial issue of procurement? Will she join me in commending the Daily Mirror for its Save Our Steel campaign, which has been shining a light on defence procurement, in particular, and found that Swedish steel is being used in the Navy’s newest warships?

[Ms Eagle]

I certainly agree with my hon. Friend’s observations and share his surprise that Swedish steel is being used in Ministry of Defence contracts in quite that way. I note that it appears to be a Conservative donor company that was doing that work. I join him in commending the Daily Mirror for its fantastic Save Our Steel campaign, which has highlighted the very real effects of the current crisis on steel communities up and down the country. Long may it continue to help us campaign to save this vital industry.

In the light of all that, why has the Government’s response to the steel crisis been so complacent and ineffective to date? Perhaps it is because we have a Business Secretary who is ideologically indisposed to taking any worthwhile action as he does not actually believe in the concept of Government action at all. Perhaps it is because we have a Business Secretary who has read far too much Ayn Rand and thinks that markets should somehow just be left to look after themselves. Perhaps it is because we have a Business Secretary who will not let the phrase “industrial strategy” even pass his lips.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Is my hon. Friend concerned that the Business Secretary will write letters supporting the need to deal with dumping and to increase tariffs, but, when it comes to reality rather than rhetoric, is part of a Government who are one of the ring leaders in the EU Council preventing any increase in tariffs?

[Ms Eagle]

I thank my hon. Friend for that observation. I think that in this debate Opposition Members will want to explore the gap between the Government’s rhetoric and the reality of their actions, because all too often we find that the gap is far too wide.

[Mrs Madeleine Moon (Bridgend) (Lab)]

Today in Defence Questions it was said that British steel companies had not tendered for defence contracts—for example, for the building of frigates. If it is unattractive for British companies to tender, is it not important that the Government explore what is happening in our contracting? There is a problem there—a gap between what is said and reality—that should be explored.

[Ms Eagle]

The Government should certainly be leaving no stone unturned in encouraging UK steel to tender for any contract, especially as they boast about changing the procurement rules—in my experience, one has to do a lot more than that to make a real difference.

[Mark Pritchard]

Will the hon. Lady give way?

[Ms Eagle]

Okay, but just because I am intrigued by the hon. Gentleman’s rugby-playing days.

[Mark Pritchard]

I thank the hon. Lady, who is being generous in giving way—I believe in mixed rugby teams, so she is welcome on the pitch anytime. It so happens that 26 British companies were asked to tender for the offshore patrol vessels to which the hon. Member for Bridgend (Mrs Moon) referred, but only one did, so only 20% of the steel for those vessels will be British. Surely she agrees that it is not for the Government, or indeed for the Opposition, to promote and market individual steel companies, whether British or not; it is for those companies to market themselves, and it is for the Government to set the framework in which they can do the business.

[Ms Eagle]

I am just getting the idea of a mixed rugby team out of my mind so that I can address the hon. Gentleman’s point. I think that it rather makes the point that the Government need to do more than just change technical criteria. They need to take a root-and-branch look at what is actually happening in our steel industry, and an industrial strategy would assist them in doing that. We need to do what we can to ensure that any blockages are removed so that we can give our steel communities the best chance to take maximum advantage of the procurement opportunities available in this country.

[Stephen Doughty]

That is absolutely crucial. Does my hon. Friend agree that there is a pattern of behaviour here? We have seen foreign steel used in the Tide class tankers, in the scout vehicles and in the aircraft carriers, we have no commitments on the frigates, and we have also heard about Swedish steel being used. That pattern of behaviour across all defence procurement needs to be investigated.

[Ms Eagle]

My hon. Friend makes a perfectly fair point. The Government should leave no stone unturned in order to maximise the chances of British steel companies bidding for these contracts successfully.

[Andy McDonald (Middlesbrough) (Lab)]

On investment in steel, does my hon. Friend recognise that there is an opportunity to invest in a catapult centre in my constituency and in that of my hon. Friend the Member for Redcar (Anna Turley)? That would be a major investment that would take steel forward. That opportunity ought to be embraced, but it is being dismissed out of hand—[Interruption.] The Minister for Small Business, Industry and Enterprise says from a sedentary position that it is not, so I am glad that she is embracing the concept.

[Ms Eagle]

My hon. Friend has anticipated a point that I plan to make later in my speech. I certainly hope that there will be some good news on the catapult centre in the Budget, because we would certainly support that.

[John Redwood (Wokingham) (Con)]

I agree with the hon. Lady; we need a streel industry and there needs to be cross-party working to try to find the way forward. What does she think the Government could do to try to get more steel orders? The main problem is that there just is not enough British steel being bought.

[Ms Eagle]

One of the first things we have to do is stop the tsunami of unfairly traded and dumped Chinese steel, which is preventing fair trade and competition in the market at the moment.

The Opposition have had to drag this Government kicking and screaming to the House on no fewer than 12 occasions since 2014 to try to force them to turn their warm, sympathetic words on steel, which we all recognise they use, into effective action. Today, here we are doing so once again. The Opposition motion calls on the Government to stop using the European Union as an excuse for their own inaction. It asks them to support a more effective response to the dumping of Chinese steel, which threatens to decimate UK steel production. It calls on the Government to take tougher action to secure a level playing field for our industry.

[Mark Spencer (Sherwood) (Con)]

I understand the point that the hon. Lady is making, but I hope she will recognise that the Government have to work within the European Union’s state aid rules.

[Ms Eagle]

Far be it from me to suggest that the Government should operate outside EU state aid rules; I simply do not think that they are being sufficiently inventive or creative with the rules as they are at the moment. Had they been more interested, perhaps we would not have had to drag them to the House 14 times to keep the pressure on.

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

I apologise for my voice—I shall have to whisper.

I have been on the doorstep with steelworkers in my constituency, and, in a spirit of working across these Benches, all I want to be able to say to them is that the Minister has been to Brussels and demanded the highest possible tariffs—the sort of tariffs the Americans have. Then I can say that, in line with the proposals being put forward by the Welsh Government, we are doing everything we can to make sure we have a steel industry in this country—this year, in five years, in 10 years and in 50 years. Does my hon. Friend agree that if we do not have those tariffs, we risk losing the steel industry?

[Ms Eagle]

Again, I agree. In this moment, we all have to do the most we can to preserve a future for the UK steel industry.

Our motion calls on the Government to take tougher action to secure a level playing field for our industry by working in partnership with our European neighbours. As part of the largest economic bloc in the world, Britain is in a much stronger position to stand up to those who refuse to play by the rules of the game, damaging our future economic prosperity and putting at risk the jobs and livelihoods of families in our close-knit steel communities. We need a Government who are willing to make that case by standing up to China.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

Does my hon. Friend agree that the issue affects not only the steel industry but ceramics? It will cost more than 2,500 jobs in my constituency, unless we send a clear message, as the Minister has said, that China does not meet the criteria for market economy status?

[Ms Eagle]

I am coming to that later in my remarks, but my hon. Friend is exactly right: all energy-intensive industries are affected, and ceramics is one of them.

If they are accurate, I welcome the media reports from today’s European Union Competitiveness Council, which appears to have agreed that the Commission should accelerate anti-dumping action. I look forward to much more detail from the Secretary of State when he responds to the debate on what that will mean in practice. Until then, we must judge the Government on their actions to date.

Our motion calls on the Government to stop blocking reform of EU trade defence instruments, which would enable defensive tariffs to be imposed much more quickly and at a level that would actually prevent imports of unfairly traded steel products from China. The Government should support the scrapping of the lesser duty rule, which is preventing tariffs from being set at a level that will actually deal with the problem. After months of agitation and a massive increase in Chinese imports, especially to the UK, the European Union has finally set its tariff on a particular product—Chinese rebar—between 9.2% and 13%. Meanwhile, the USA has introduced defensive tariffs of 66%, and they were operating 45 days after the start of its investigation. To work, tariffs have to be high enough to deal with the problem—the EU tariffs are not.

It is important to make it crystal clear that we are objecting to blatant and unfair dumping, not to free trade, which the Opposition support.

[Richard Fuller (Bedford) (Con)]

I am interested in what the hon. Lady is saying, but does she not feel the chill wind of the 1930s, which saw the infringement of free trade as people eagerly moved to impose tariffs? Over the last 10 years, China’s share of world trade in steel has grown from 30% to more than 50%, so whatever the tariff, there will be further calls for higher tariffs, with consequential disadvantages for all.

[Ms Eagle]

I was trying to make it very clear that we are talking about unfair trade—dumping. We are not talking about fair trade.

[Tom Blenkinsop]

My hon. Friend is absolutely right. The point is that this is not an example of free trade. China is in breach of World Trade Organisation rules, and it is exploiting export subsidies to such an extent that the Americans are looking at tariffs of more than 200% on Chinese steel. That is not unprecedented: back in 2004, the Bush Administration brought in similar tariffs of about 25% on European steel.

[Ms Eagle]

My hon. Friend is exactly right: we have to distinguish between free trade, fair trade and unfair trade, and what we face with Chinese steel imports is clearly unfair. Dumping is unfair, and it is threatening the very existence of the UK steel industry. Everyone in the House knows that once steel facilities have gone, they cannot easily be put back. We have to protect our industry’s capacity to exist, and perhaps to do better in future, when world conditions have changed. If we do not bear that in mind, we will lose the lot, and we will regret it.

[Richard Fuller]

The hon. Lady will find that there is a lot of understanding across the House for the point she makes. My point is just that, over the past 20 or 30 years, we have become reliant on China producing many things, and the hon. Member for Stoke-on-Trent North (Ruth Smeeth) mentioned ceramics. My concern—perhaps the hon. Member for Wallasey (Ms Eagle) can address this—is about where we make the distinction in terms of the tariffs we impose. Does she not have the slightest concern that a series of such issues may come up in sector after sector because of the growing reliance over the last few years on Chinese exports?

[Ms Eagle]

We need to have an industrial strategy, and we have to ensure that imports into this country are appropriately priced and fairly traded.

[Nic Dakin (Scunthorpe) (Lab)]

My hon. Friend is setting out her stall very clearly. Does she not agree that it is particularly important that there is fair trade when a strategic foundation industry that is important to manufacturing, defence and other core activities is being challenged in this way?

[Ms Eagle]

My hon. Friend is exactly right. I could not agree more about the strategic importance of foundation industries, of which steel is a key one.

[Mark Tami (Alyn and Deeside) (Lab)]

Shotton steelworks, which produces “galv” and coated products, relies on Port Talbot for its supply of steel. Although Shotton is a profitable plant, if Port Talbot were to go, it would not be easy to find a good-quality supplier of steel at the drop of a hat.

[Ms Eagle]

Exactly. My hon. Friend supports his constituents, and he knows exactly what is at stake if the Government fail to protect the fundamentals of this foundation industry.

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

Will the hon. Lady give way?

[Ms Eagle]

This is the last time, but will hon. Members then please let me get on with my speech?

[Jonathan Edwards]

I am grateful to the hon. Lady, who has been extremely generous in giving way, and I am more than happy to support the motion. Is she aware of the work of the devolved Government of Wallonia in Belgium, who have a strategy to protect their steel industry, encompassing an investment fund, an innovative research plant and clear protective measures for steelworkers? Should the Labour Welsh Government pursue a similar strategy?

[Ms Eagle]

The hon. Gentleman has pointed out that, in some places in Europe, there may exist an industrial strategy, and we could do with one in this country.

Far from fighting for the UK’s interests, as they would have us believe they are doing, the Government are actually a leading part of a group of EU countries that have moved to block reform of the lesser duty rule. Let us look at the record to date. The European Commission proposed strengthening trade defence instruments in April 2013 to protect Europe from Chinese dumping. That was endorsed by the European Parliament in February 2014. It was then blocked in the Trade Council in November 2014. It was the UK Government who successfully assembled a group of 15 other EU countries to oppose that crucial reform. The Government objected primarily to the abolition of the lesser duty rule and to giving the Commission the ability to initiate anti-dumping proceedings on its own. Perhaps the Business Secretary will let us know whether today’s apparent agreement changes that stance? If it did, that would be most welcome, and it would certainly be a departure from the recent past.

When the Business Secretary was asked, in evidence to the Business, Innovation and Skills Committee recently, about the Government’s blocking of reform, he said:

“If duties are applied that are disproportionate, it would have an impact, in Britain and elsewhere”.

However, Chinese dumping is having a devastating impact in Britain now. We do not need disproportionate tariffs; we need tariffs that will be effective and duties that will prevent the damage caused by illegal dumping. The Government should be arguing for such duties, not conniving with 15 other EU countries to block them.

On granting market economy status to China as part of its ongoing acceptance into the World Trade Organisation, the Chinese Government regard this as an automatic thing, but it certainly should not be. In fact, as many in this House will know, this status is granted only when the economic conditions in the country concerned have developed in such a way that it can be shown that prices and costs are genuine and can therefore be used to determine trade defence disputes. China currently meets only one of the five criteria required for this status to be granted, and yet the UK Government support granting market economy status to China as early as the end of this year.

Why is this? We already know that the Chancellor continues to be almost embarrassingly desperate to be China’s new best friend, but he must not pursue his infatuation so far that it excuses its unfair trade practices. Granting market economy status to China in the absence of important safeguards would significantly diminish the capacity of the EU to guard against Chinese dumping, which has the potential to destroy the UK steel industry, so it must not be granted until the criteria are objectively met. Will the Secretary of State tell us more about why the Government appear to have made their mind up already on this important issue in advance of the forthcoming assessment by the EU Commission? Surely they are not so intent on cosying up to China that they have left all judgment behind.

The Opposition motion calls on the Government to publish a full industrial strategy that is designed to support and grow our manufacturing sector, not just stand by as it is threatened by unfair competition. This should include a proactive procurement policy committed to using British steel wherever possible for publicly funded infrastructure projects and supporting industrial supply chains across the UK. Nothing less will do. In the forthcoming Budget, Labour would support the Government doing more on business rates and exempting new industrial equipment. An industrial strategy must be forward-looking and support our wider industrial base and its supply chains. That is why Labour would also support the Government in going further to develop a materials catapult to drive early-stage investment in this crucial area—an idea that has support from industry and business organisations such as the CBI. Labour Members certainly support it, and I hope that come the Budget we will hear from the Government that they support it too.

The Government are always keen on asserting that they have changed the procurement rules as one of the five steel industry asks that the Minister for Small Business, Industry and Enterprise blithely asserted during the recent urgent question on 18 January had all somehow been delivered. However, these new rules do not seem to be having any impact on actual outcomes. There is no sign that these modest technical changes are making any difference to the awarding of Government contracts to help our domestic industry. Perhaps that is because the new guidance merely states that steel requirements should be “openly advertised” to allow UK firms to compete. Britain’s steel industry needs a real champion in Government, but the Minister excuses the omission of British steel in projects like Hinkley Point C by claiming wrongly that UK steel does “not have this capacity”. I am beginning to worry about her connection with reality, especially after her appearance on “Pienaar’s Politics” yesterday when she claimed that there is no Tory infighting over the European Union and denied that the Prime Minister had attacked the Mayor of London in a speech last week. I do not know which planet she is on, but it is clearly not the same one that the rest of us inhabit.

The Conservatives have left our economy insufficiently resilient to global threats and not in a high enough state of readiness to seize on future opportunities. If they are to lay solid foundations for our future prosperity as a nation, they have to support our foundation industries. Decisions taken now will chart our economic fortunes for the decades to come. The UK steel industry does not need warm words from this Government: it needs effective action. Our steel communities need it, our economy needs it, and Labour Members demand it.

19:24

[The Secretary of State for Business, Innovation and Skills and President of the Board of Trade (Sajid Javid)]

There is no doubt that the past few months have been absolutely devastating for Britain’s steel industry and, more importantly, for the skilled, dedicated people who work in it. It is also clear that the global steel industry is facing an unprecedented set of challenges with multiple factors beyond the control of any one national industry or Government.

The facts are familiar, but they bear repeating. Around the world, production of steel is 30% higher than demand. In China alone, excess steel capacity is 25 times the UK’s entire annual production. Demand here in Europe has yet to return to pre-crash levels. As a result, the international price of steel has halved over the past 18 months, and the impact on Britain’s steelworkers has been all too clear. I have travelled to Redcar and to Port Talbot and seen for myself the challenges the situation has created, and the good work being done on the ground to help the communities cope.

Labour Members want us to demand the removal of the lesser duty rule so that the EU can impose tariffs on all Chinese steel. They apparently fail to recognise that the lesser duty rule does not prevent the imposition of tariffs, nor is it a bar to effective action against unfair trading: it simply ensures that duties are set at a level that removes the harm caused by dumping, and no higher.

[Nic Dakin]

When the Secretary of State wrote to the Commission and said that it

“should make full and timely use of the full range of EU trade policy instruments to tackle unfair trade, including anti subsidy measures, to ensure a global level playing field”,

did he mean that he was going to take action on behalf of our steel industry?

[Sajid Javid]

That is exactly what I meant. As I speak further, I hope that will become clearer.

[Alex Cunningham (Stockton North) (Lab)]

On the basis of what the Secretary of State has said, can we expect increased tariffs on Chinese steel in the near future?

[Sajid Javid]

We believe that under the existing rules the EU can go further, and it must.

[Alex Cunningham]

Can we expect it?

[Sajid Javid]

I will come to that in a moment. Under the lesser duty rule, if the dumping margin is 50%, but a duty of 30% is sufficient to remove the harm to industry from that dumping, then the duty is set at 30%. The tariffs recently imposed on Chinese rebar were indeed too low. I am continuing to raise the issue in my regular discussions with Brussels, as I did only last week when I met the EU Trade Commissioner in London.

[Mark Spencer]

Before my right hon. Friend makes any more progress, it is worth putting on the record the £50 million of support that he and the Minister have already put in place. Will he bring us up to speed on where the negotiations with the EU stand and what sort of timescale he is looking at?

[Sajid Javid]

I thank my hon. Friend for reminding us of that. As I progress, I will answer his question.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Will the Minister put on the record whether he supports the lifting of the lesser duty rule?

[Sajid Javid]

No, I do not, because, as I have said, the lesser duty rule is there to create a level trading field. As I have also said, under the existing rule, tariffs can be higher, and in many cases should be higher. However, they were not set too low because of the lesser duty rule. The problem was the time period used by the Commission in its calculation.

[Stephen Doughty]

The Secretary of State specifically mentioned rebar. As he knows, that is a major product produced by Celsa in my constituency. It is a very high-quality product that has been used in Crossrail and many other projects. Does he expect that tariffs on rebar, specifically, will be higher against the unfairly traded Chinese steel—yes or no?

[Sajid Javid]

The hon. Gentleman is right that it is suggested that tariffs should be higher to right the detriment. We agree; that is what our analysis shows. That is exactly what we are pushing with the EU Commission, as I did only last week when I met the Trade Commissioner while she was in London.

[Huw Irranca-Davies]

I apologise for having to whisper again. On rebar and other important products in south Wales, what tariff is the Secretary of State pushing for and when does he want it imposed?

[Sajid Javid]

I hope that the hon. Gentleman respects that it is not for us or any other state to say what the tariff should or should not be. These are European-wide tariffs. Under the existing rules, it is possible to have higher tariffs, and that should certainly be the case if the dumping does not stop.

[Huw Irranca-Davies]

I realise that there will be a negotiation process. As somebody who has been involved in European negotiations in a different sphere, I know that it is perfectly within the Secretary of State’s gift to tell us what the UK’s negotiating position is. What should the tariffs on the different products be, and when is he arguing for them to be imposed?

[Sajid Javid]

When it comes to the steel industry, there are many different types of products and there is no one single tariff that we are looking at. Where appropriate, we are pushing the EU Commission where we think it has not applied the existing rules properly, not just for higher tariffs, but for much speedier action.

[Mark Tami]

Does the Secretary of State not understand that the clock is ticking and the industry does not have long left? Millions of pounds are being lost each day and it is no good him standing there saying, “Well, I’ve said this and that about next week and the week after.” There may not be a week after.

[Sajid Javid]

The hon. Gentleman makes an important point, but he should also accept that if the entire debate on trade and trade protection in the EU becomes about the lesser duty rule, it will take away from the time and effort required to use the existing rules more effectively.

[Anna Turley (Redcar) (Lab/Co-op)]

If Tata Steel, UK Steel—the umbrella body—and the Community union are all calling for the Government to take action on the lesser duty rule, surely the Secretary of State can see that it is in his gift to give that to the steel industry, which is crying out in desperation for his help.

[Sajid Javid]

The hon. Lady will know that that is not in the gift of any single Government in the EU; the issue is EU-wide. As I have explained, it is important to use the existing rules effectively, and we support taking further action where the tariffs are not imposed quickly or if they are not high enough.

[Richard Fuller]

rose—

[Sajid Javid]

Let me say more about tariffs and then I will take some more interventions. Punitive tariffs and sky-high duties always seem like a nice, easy solution, but the truth is that excessive, protectionist trade tariffs simply do not work. Although they provide a short-term boost for the protected sector, they inevitably cause long-term harm to the wider economy. They drive up prices.

[Ms Angela Eagle]

We are not calling for protectionism; we are calling for tariffs that prevent unfair trade. When the right hon. Gentleman talks about protectionism, it is important that he distinguishes between dumped and unfairly traded products—which must have high tariffs so that they can be blocked before they destroy our industry—and fairly traded products. We agree with him. We are not against free and fair trade.

[Sajid Javid]

If the hon. Lady means what she has just said, which is that she wants a level playing field, we are in agreement, but the entire argument she made moments ago was for punitive tariffs, which would drive up prices for businesses and consumers and risk potentially ruinous retaliation from other nations. Artificially over-inflating the price of imported steel would have a hugely damaging effect on British companies further up the manufacturing chain. Of course, I would like to see such companies using British steel rather than cheaper, lower quality imports, and let me take this opportunity to urge them to do so. However, forcing them to buy British steel by making imported steel prohibitively expensive is not the way to make that happen. Higher duties on imports of raw materials eventually mean higher prices paid by manufacturers and consumers alike, putting countless more jobs at risk.

[Stephen Doughty]

This crucial point is at the heart of this debate. Nobody is calling for punitive measures; we are asking for a level playing field. If we do not level the playing field when other countries, such as the US, are willing to put up their tariffs, this country will get a double dose of the dumping. The effect will be increased if we do not take action. We do not want a trade war; this is simply about levelling the playing field for the British industry.

[Sajid Javid]

That is exactly what we are delivering on and what the current framework allows us to do.

[Richard Fuller]

There is undoubtedly anguish in the industries and sectors affected by the impact of change on the steel industry, but does my right hon. Friend agree that, over the past 30 years, global free trade has had the best impact on jobs, wellbeing and living standards, and that he has a responsibility not to indulge in tit for tat retaliatory measures on tariffs in pursuit of a good cause, because of the consequential impacts on other aspects of trade?

[Sajid Javid]

My hon. Friend is absolutely right. That does not mean that it is not possible to have tariffs; of course they are possible when there is unfair trading, and that is exactly what we support. That is what the current set of rules used by the EU allows.

[Andrew Percy (Brigg and Goole) (Con)]

There is nothing more cruel to steelworkers, many thousands of whom I am proud to represent, than suggesting that all of the solutions to this crisis are in the hands of the British Government. For the record again, will the Secretary of State make it absolutely clear whether the British Government can unilaterally impose the tariffs? If not, will he confirm that it is for the European Union to make that decision? On top of that, is he pushing the EU for higher tariffs than those that have been imposed? It is simple—that is what steelworkers want to hear.

[Sajid Javid]

I can confirm all that to my hon. Friend, who makes his point very well. The rules are applied to all members of the European Union. The tariffs are set after an evidence-gathering process by the EU Trade Commissioner. Clearly, we all want them to be based on evidence so that it can be used to create the level playing field that we all want. My hon. Friend is correct to say that no single country can choose to change a tariff; we must work collectively through the EU rules.

Removing the lesser duty rule would have an impact. We want to address the impact of unfair trade without imposing disproportionate costs on the wider economy. We want to create that level playing field rather than a protectionist barrier. As I have already said—I am happy to say it again—where the evidence suggests it, I want to see the highest appropriate duties imposed. On rebar, which the hon. Member for Cardiff South and Penarth (Stephen Doughty) mentioned earlier, the UK industry is asking for tariffs of 20% to 30%. We support that and think that the evidence backs it, but I will never call for any action that could damage British business and hurt British consumers.

The hon. Member for Wallasey (Ms Eagle) called for an examination of the implications of granting market economy status to China. The Commission has not yet published its proposals, but, even if China is granted market economy status, the EU will still be able to take action on unfair trade practices and impose anti-dumping measures. After all, Russia has market economy status, and the EU has taken anti-dumping measures against Russia. Nor would market economy status affect the EU’s ability to tackle Chinese subsidies through anti-subsidy actions. In fact, the Commission has said that it wants to make it easier to tackle subsidies through trade defence measures.

It is clear that the Commission can do more within the existing rules, and I am doing everything I can to make sure it does so. That is why the UK has led the way in calling for more effective action. It was the UK that demanded and secured an extraordinary meeting of the Competitiveness Council to agree a European-wide approach to the crisis. It was also the UK that lobbied for an investigation into rebar dumping. We have been pressing the Commission to speed up its investigations into dumping so that appropriate steps can be taken as soon as possible. We have written to the Commission with specific proposals. We have voted to take action on seamless pipes and tubes, wire rod and cold rolled products. We have supported the Commission’s investigations into hot rolled flat products, and just last week I personally raised the issue with China’s Commerce Minister when he was in the United Kingdom.

[Tom Blenkinsop]

If what the Secretary of State says is true, why does the director general of Eurofer, Axel Eggart, state:

“By blocking the lifting of the Lesser-Duty-Rule, these Member States”—

including the UK—

“deliberately deprive the European steel sector of the chance to receive effective and legitimate remedy against massive dumping”?

Why does the Secretary of State think that the representative of the entire steel industry in the European Union says that?

[Sajid Javid]

I think I have already answered that question. We have been working closely with the industry to deliver as much support as possible. At October’s steel summit, the industry had five asks of the Government. Today, I am pleased to say that we have already delivered on four of them. Let me take this opportunity to thank my colleagues the Minister for the Cabinet Office, the Minister for Small Business, Industry and Enterprise, and the Commercial Secretary to the Treasury for their unstinting work.

[John Redwood]

Will the Secretary of State tell us what he and his colleagues in Government can do to ensure that in big public sector procurement programmes in defence, railway engineering or construction, we get the maximum British content for the steel industry?

[Sajid Javid]

That is an excellent question, and that was the second ask from the industry. Let me address the first ask, and I will come right back to that point.

The first ask was for lower energy bills. We will shortly be paying compensation on renewable energy costs, and we are in the process of securing agreement to exempt energy-intensive industries from such costs. The second ask was for more British steel to be used in public building projects. We have issued updated procurement guidance to all Departments to make it clear that they can now take into account wider socioeconomic considerations, as well as cost, when making purchasing decisions. We are the first member of the European Union to be able to use those new rules. We have also mapped rough estimates of steel that could be used for major projects including High Speed 2, new nuclear and offshore wind. We have shared those estimates with industry and will continue to keep it updated.

[Stephen Doughty]

It is interesting to hear what the Secretary of State is saying about the procurement guidance being given to Departments. The Ministry of Defence has told me in answer to a written question that

“the Ministry of Defence (MOD) does not hold a complete, centralised record of steel procurement for projects and equipment, either in terms of quantity or country of origin”.

Can the Minister explain why that is, and does he think that it is satisfactory? How will we ensure that Departments meet the procurement guidelines that he has set out for them if the MOD is not even keeping records? I am not talking about specific projects, but it needs to keep records; otherwise we cannot tell whether it is doing what he says it should be doing.

[Sajid Javid]

The hon. Gentleman will be pleased to know that we are working with all Departments, including the Ministry of Defence, to make sure that they do whatever needs to be done to make maximum use of the new procurement rules.

The third ask from the industry was greater flexibility on EU emissions legislation. We have successfully negotiated longer lead-in times for the implementation of emissions regulations. The fourth ask was for action on unfair trading practices. As I said a few moments ago, we have led the EU in securing provisional duties on unfair imports of rebar steel and cold rolled flat steel. We have welcomed new investigations into unfair imports of hot rolled flat products, heavy plate and large seamless pipes. We continue to pressure the European Commission for further action against unfair trading, including the use of the registration procedure where appropriate.

[Anna Turley]

I appreciate what the Secretary of State has said about levelling the playing field; that is all the Opposition ask for. I want to take him back to the point about the lesser duty rule. The European Commission states that the dumping margin for rebar is 66%, but the lesser duty rule puts it at 9%. That has a huge impact. The Minister must acknowledge that 66% levels the playing field.

[Sajid Javid]

I know the hon. Lady feels passionately about the matter, but it is important to get the facts right. On rebar, the European Commission has so far come up with tariffs of between 9% and 13%. The industry is asking for 20% to 30%, and we support that. I hope she will also support that.

The fifth and final ask was lower business rates. A Treasury review of those is ongoing, and I hope that it will be concluded ahead of next month’s Budget.

[Richard Graham (Gloucester) (Con)]

Before my right hon. Friend comes to his last point, in answer to the question raised earlier about MOD procurement, my understanding is that on the two Queen Elizabeth class aircraft carriers, 77,000 out of 82,000 tonnes of steel was UK-sourced. Will he confirm that figure?

[Sajid Javid]

I think those numbers are right. Well over 90% of the steel was British, and that is exactly what we want to see. National Rail is using 98% British steel in major infrastructure projects, and more than 95% of the products used in the Crossrail project—the largest infrastructure project in Europe—are British. That is exactly what we all want to see.

[Tom Blenkinsop]

The question of how the tariffs are calculated is intriguing. China is in such breach of the World Trade Organisation rules that the calculation has to be based on Turkey as a model. Whether the tariff is 20% or 30%, the figure of 66% is a guesstimate, and the true number is probably far larger. It would be interesting if the Secretary of State could have dialogue with his European counterparts about that. We are talking about a problem that is far larger than the calculations suggest, and there is no information available because China is in such breach of WTO rules.

[Sajid Javid]

That is why we need to use whatever evidence is available. That means working closely with the industry, listening to it and taking note of its evidence. If the industry is saying that the right level is 20% to 30%, it is worth listening to that.

We have provided support packages worth up to £90 million for communities affected by plant closures in Scunthorpe, Redcar and Rotherham. The help on offer includes retraining, support for local companies that want to take on former steelworkers, and emergency help for workers who find themselves in a financial crisis. Earlier this month, Lord Heseltine announced the creation of an interim body for managing the former SSI site in Redcar, to ensure that it reaches its full potential. Lord Heseltine is also conducting a review of inward investment in the Tees valley, as well as looking at how to enhance education, employment and skills in the area.

As for the plants that are still operating, we continue to work with the Scottish and Welsh Governments and with individual companies on their specific needs. For example, we have repeatedly made it clear that we want the blast furnaces to carry on at Port Talbot, and we are working with Tata and the Welsh Assembly Government to help to make that happen. Although this remains an uncertain time, it is encouraging that Tata Steel Europe has announced that Greybull Capital is its preferred bidder for the purchase of the Tata long products business. That is a positive step. The negotiations are a matter for the companies involved, but we remain in regular contact with Tata about its future plans. If it is successful, the sale is likely to involve some element of state financial support, on commercial terms, for the new owner.

We have set up a joint Government and industry steel council to take remaining actions forward and to work through the conclusions of an independent study into the competitiveness of the UK steel sector. I will co-chair the first meeting of the steel council on Wednesday.

[Andrew Percy]

I hope that my right hon. Friend will take note of the Tata support fund that has been launched in north Lincolnshire for those in the supply chain. On the question of likely state support for the Greybull sale, which we are all behind, will he go into a little more detail about what that might look like and at what level it might be set?

[Sajid Javid]

I fully understand why my hon. Friend has asked about that, but the discussions are commercially sensitive at this point. I am happy to reassure him that we are in deep discussions with Greybull, Tata and others, and that where we are able to help by providing support on commercial terms, we most certainly will do so.

The hon. Member for Wallasey has called for us to offer greater support to manufacturing supply chains across the UK. The Government are absolutely committed to British manufacturing. That is why we are investing in infrastructure across the country, and that is why, for example, we are totally committed to building four Successor submarines for our nuclear deterrent. Building the Trident replacement will secure our nation and secure thousands of skilled manufacturing jobs. Sadly, it was no surprise to see the Leader of the Opposition leading a demonstration against it this Saturday. Senior members of the GMB union called that

“armchair generals playing student politics”.

The crisis facing the British and European steel industry is grave indeed, but the charge that this Government are not doing all we can simply does not stick. We cannot simply increase the global price of steel or reduce the level of production in other countries.

[Mr Christopher Chope (Christchurch) (Con)]

My right hon. Friend does not accept the charge that the Government are not doing all they can, but does he not agree that if we were not in the European Union, the Government would be able to do a heck a lot more?

[Sajid Javid]

Even if that were the case, we would still be bound by WTO rules and it is possible that we would be far more open to retaliation by other countries as well.

[Jonathan Edwards]

rose—

[Sajid Javid]

I will give way a final time, but then I must close.

[Jonathan Edwards]

As the Secretary of State knows, the leader of the Conservative party in the National Assembly has said that he will vote for a Brexit. Would that help or hinder the steel industry in Wales?

[Sajid Javid]

If the Welsh Government had listened to the leader of the Conservative party, they would have been in a far better position to help the steel industry locally.

There are things we simply cannot do—we cannot simply increase the global price of steel or reduce the level of production in other countries—but we have done everything possible and we will continue to do so as long as such action is needed. We will leave no one behind in this one nation.

19:02

[Marion Fellows (Motherwell and Wishaw) (SNP)]

When I was preparing for today’s debate, I wondered how I could speak on this or similar motions without repetition, deviation or hesitation, which are the famous rules of Radio 4’s “Just a Minute” programme. I will break all those rules, because I will use repetition and—not too much—deviation, while the only hesitation will be when I struggle to find words to explain what the Government say they are doing to help save the UK steel industry.

Since I attended the UK steel summit in Rotherham on 16 October, along with many other Members currently in the Chamber, in excess of 6,000 jobs have been lost across the UK. Job losses at Dalzell plate mill in my constituency and at Clydebridge in the constituency of my hon. Friend the Member for Rutherglen and Hamilton West (Margaret Ferrier) are included in that number. I will come on to describe how job losses and effective Government action differ across the UK.

Community the union has called for the UK Government to take action now, and has asked them

“to do everything in their power to safeguard the future of this vital strategic, foundation industry of fundamental importance to UK manufacturing and industrial supply chains.”

Along with UK Steel and Eurofer, Community has challenged the Government to come out positively for scrapping the lesser duty rule, which inhibits the rate of duty that can be imposed on Chinese dumped steel. It is hypocritical in the extreme for this Government to vote for anti-dumping measures on the one hand and to fight to retain the lesser duty rule on the other.

The Government support market economy status for the Chinese. Where is the sense in that? It is another example of doublespeak. Yes, the Prime Minister spoke to the Chinese about the dumping of steel, but it seems to have been a rather one-sided conversation. We have no proof that the Chinese even listened, as there has been no diminution in the problem. It is no secret that the Government need Chinese money to build nuclear power stations. Is that uppermost in their mind? It is time they put UK manufacturing interests first. The Chancellor has already trailed that further austerity is coming down the track, and where did he choose to make that announcement? Shanghai.

When pushed, the Government have pointed to the five asks put forward at the UK steel summit. They have made progress on some of them—they have managed to get agreement from Europe to implement the energy-intensive industries package ahead of April 2016, but that is of very limited help during the current financial year. As far as anti-dumping measures are concerned, I have already explained that the Government are in two minds about that, according to industry leaders. There has been no movement on competitive business rates for larger manufacturers and, given the Chancellor’s announcement about further austerity measures, it is difficult to see how and when that will happen. There has been movement on gold-plating EU regulations, but that has so far had minimal effect. Progress has been made on procurement guidelines, but that will affect future infrastructure projects and is not helping the UK steel industry at present. We are in dire times.

[Alex Cunningham]

I was brought up at Harthill, near Ravenscraig, in Lanarkshire, and I have seen the scars that still exist in those communities 20-odd years after the closure. Does the hon. Lady agree that we need to take specific action if we are to prevent such scars in other communities?

[Marion Fellows]

I absolutely agree. The former Ravenscraig site is in the centre of my constituency, and I go through it almost weekly. It is still scarred, and it is still a monument to what happens when steel businesses close down.

Each time there have been job losses in the steel industry, the Government have moved in to help. The help has been to find people other employment; there have been few timely direct measures to help keep steel plants open. The UK Government have been challenged numerous times to come up with a UK manufacturing strategy and to employ joined-up thinking to help foundation industries, including steel. That is what other European countries do.

The comparison between what the Scottish Government and the UK Government have done is stark. Within days of the announcement of the mothballing of the Scottish plants, the Scottish Government set up a Scottish steel taskforce, with a remit to find a buyer for the plants and to do everything possible to retrain and upskill the workforce to make sure they would be ready when a buyer was found. Skills Development Scotland has created the steel industry advanced manufacturing upskilling programme to provide an incentive to retain key and essential staff. That will enable a knowledgeable and skilled team to be assembled quickly when an alternative operator is found.

[Kevin Foster (Torbay) (Con)]

The hon. Lady is going through the work that the devolved Administrations can do. Does she share my disappointment, however, that from the decks of the 94% British steel-built Queen Elizabeth aircraft carriers can be seen a bridge that the Scottish Government are building with foreign steel?

[Marion Fellows]

May I ask the hon. Gentleman to excuse me if I move on? That old canard has been dealt with in previous debates on steel. The Scottish Government are now moving on. [Interruption.] I will move on with my speech, if the Minister for Small Business, Industry and Enterprise will stop chuntering from a sedentary position—I think I have that wording correct.

The Deputy First Minister and Cabinet Secretary for Finance, Constitution and Economy laid the snappily titled statutory instrument 2016 No. 120, Rating and Valuation, the Non-Domestic Rates (Steel Sites) (Scotland) Regulations 2016, on 24 February, and they will come into force on 1 April and grant rates relief to a new operator taking over Scottish plants.

There have also been discussions with the chief assessor in relation to the 2017 revaluation of rates in Scotland, to look at special measures for steel plants. The Scottish Environment Protection Agency has been in touch with the present owners regarding any work that needs to be done in relation to the sites, and Tata has been working closely with Scottish Enterprise to find schemes and other ways to reduce running costs, which will also help any new owner. At each meeting of the taskforce, there is a positive energy and a commitment to retaining the plants for Scotland’s economic future.

On 15 February, the Scottish Government launched their paper, “A Manufacturing Future for Scotland”, which lays out their vision for the Scottish manufacturing sector. I recommend it; it is a great read. It is a positive, forward-looking document that shows the Scottish Government’s commitment to manufacturing. It states:

“The Action Plan is based on a commitment to raising productivity through increased investment and innovation”.

It is a road map to success for Scottish industry. As part of the action plan, the Scottish Government have established a joint centre of excellence for manufacturing and skills academy.

The Scottish Government have shown what is severely lacking here at Westminster: a strong political will to help the steel sector and other manufacturing industries boost inclusive growth and exports. The UK Government are so busy with their hands-off approach to vital foundation industries that their mantra of the UK being a world player is at serious risk. This is a country that wants to strut the world stage, but if it is not careful, it will lag so far behind in manufacturing that it will not be able to manufacture the necessities its citizens need.

I ask the Government to look seriously at the mixed messages they are sending out, to get behind the scrapping of the lesser duty rule, to steer away from giving China market economy status and to start investing in foundation industries in the UK. We need to spend more on industry and less on bailing out bankers. In closing, may I just say that another Radio 4 comedy programme comes to mind when I think of the Government’s policies on steel and manufacturing? It is my favourite programme.

[Mr Iain Wright (Hartlepool) (Lab)]

“I’m Sorry I Haven’t a Clue”.

[Marion Fellows]

Quite right: “I’m Sorry I Haven’t a Clue”. My favourite game is “One song to the tune of another”. I ask the Government to stop indulging in that. They should come out strongly for manufacturing industries, be unequivocal in the EU, get rid of the lesser duty rule, prevent dumping by China and vote against giving China market economy status, which would truly spell the death knell for UK steel.

[Several hon. Members rose—]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. We will start with a seven-minute limit. If Members stick to that, everybody should get in and have the same amount of time.

20:02

[Huw Merriman (Bexhill and Battle) (Con)]

Thank you, Mr Deputy Speaker, for calling me to speak in this important debate on the UK steel industry.

I would be the first to acknowledge that the constituency of Bexhill and Battle has not, to the best of my knowledge, made a large contribution to the steel industry. However, as my name suggests, my father and those who came before him hailed from south Wales, where the industry has always loomed large. It was because of my background that I put in to speak and, in so doing, I wish to express my support for an industry that the Prime Minister recently referred to as “vital”. It is with sadness that I have watched events unfold in Redcar, Scunthorpe, Scotland and south Wales. In parts of the country that rely on a specific industry, the impact is felt not just by those who are directly employed, but by the many people whose jobs and incomes rely on it indirectly.

[Justin Madders (Ellesmere Port and Neston) (Lab)]

The hon. Gentleman has referred to a number of areas of the country, but as my hon. Friend the Member for Alyn and Deeside (Mark Tami) mentioned, there are also plants in north-west Wales and north-west England that rely on the industry. Does the hon. Gentleman recognise that there is a wider impact, with some 2,000 jobs relying directly or indirectly on the Shotton plant alone, and that it is important to take a holistic view?

[Huw Merriman]

I accept that point. This issue extends to the whole of the UK, including the constituency that I serve.

The steel industry has experienced challenges that are, as the Financial Times put it recently, akin to a perfect storm. First, since 2000, there has been massive growth in the volume of steel that is produced internationally, particularly by China. Secondly, the recent slowing of global growth, particularly in China, has meant that steel production has outstripped consumption. Thirdly, the surplus steel has been exported, again largely from China, which has pushed the price down for British producers. There is a similar theme in other sectors, such as our oil industry. Accordingly, British steel is being sold at a much reduced price, and because British industry has higher overheads, that has hit our steel industry hard.

That leads us to the question of what the Government can do in the face of global market events. I am pleased that they have voiced their support for the industry and are already working on the action requested in the motion in the following ways. First, they are pressing with some success, as we have heard today, for more vigorous anti-dumping and anti-subsidy measures across the EU to prevent Chinese firms from selling steel at sub-market rates across Europe.

Secondly, the Government are taking the lead in public procurement to ensure that, where possible within EU state aid rules, the Government buy British steel. To that end, I was pleased to hear the Secretary of State mention that public procurement contracts can take into consideration not just the specific costs but the wider socioeconomic benefits of buying British steel.

Thirdly, the Government are encouraging British private industry, such as our burgeoning auto trade, to buy British. Fourthly, they are assessing the tax and regulatory costs and what the industry can do to drive up its competitiveness. The Government have taken a lead in doing that with the industry.

Finally, the Government are driving discussions in the European Council on taking similar action at EU level, as the EU is the second largest producer of steel globally, albeit at about 25% of total Chinese production. I hope that those levers, which the Government and industry are pulling, will reach fruition and assist our steel producers and those who work in the industry.

I would like to respond to some of the points that have emanated from the Opposition Benches. I fully understand why they have been made but, being a Government Member, it would be remiss of me not to comment on them. It is not realistic for the Government to step in and effectively underpin the steel price by pumping money into the industry, for two obvious reasons. First, EU state aid rules mean that the UK is largely prohibited from providing financial assistance that could distort prices between producers within the EU.

[Anna Turley]

Will the hon. Gentleman give way?

[Huw Merriman]

I will not, because I am coming to a conclusion.

Secondly, at a time when our health service is having to find £22 billion of efficiencies in addition to the £10 billion that the Government are pumping in, we have difficult choices to make on behalf of the country about where Government spending goes.

I welcome the many initiatives that the Government have launched, which meet many of the requests in the motion. I hope that they will support our steel industry through this time of market turbulence.

20:02

[Mr Iain Wright (Hartlepool) (Lab)]

The UK steel industry should be identified as a significant strategic sector of the British economy to help to secure our manufacturing strength and to retain the capability and capacity within the supply chain for our vital and productive industrial sectors such as aerospace, automotives and construction.

Given the industry’s importance and the crisis in recent months, with one in six jobs lost since the autumn, the Business, Innovation and Skills Committee made this issue the topic of our first report of the Parliament. We found that the Government were not sufficiently alert to the warning bells being sounded by the UK steel industry. Although the Government had identified the sector as vital, Whitehall did not have effective warning systems in place. The loss of job, skills and capacity in this vital industry is nothing short of a national tragedy. That has spanned more than 40 years, but on their watch, this Government should have been much more proactive in considering the retention of the existing steel capability and employment levels, rather than redeploying hard-working and skilled people to alternative jobs that are often less productive and lower earning, and losing forever these key industrial assets.

The Select Committee also found that UK Governments needed to do more at an EU level to prevent the dumping of Chinese steel—an issue that has rightly been mentioned throughout the debate and that is explicitly mentioned in the motion. It is of central importance and I shall return to it later.

At the steel summit in October, industry made five reasonable policy requests on matters such as energy costs, business rates, procurement, anti-dumping measures, and the industrial emissions directive. In the letter to me that accompanied the Government’s response to the Select Committee’s report, the Minister for Small Business, Industry and Enterprise stated:

“We have delivered on four of the five asks of UK steel and on Business rates we await the conclusions of the Chancellor’s review”.

In his opening remarks, the Secretary of State said virtually the same thing. In the body of the Government response to our report, the Government said that it has been

“unceasing in its efforts to deliver”

on those five asks, and pledged to

“continue to do all it can in the coming weeks and months to ensure a healthy and sustainable future for UK steel.”

Those are powerful words and phrases, yet I regret that they are untrue, and it is wrong—disingenuous, even—to say that the Government have delivered on four out of the five asks.

For example, on procurement it is true and very welcome that the Government have changed the guidelines to allow for more local content. However—unless the Minister can correct me—no orders have yet been received in steel plants on the back of that change to the guidelines, and they also fail to include so-called publicly enabled procurement projects. That means that Hinkley Point, one of the largest construction projects that this country has ever seen, which requires more than 200,000 tonnes of steel, more than 600,000 embedment plates, and large quantities of structural steelwork, is not subject to the guidelines; and nor is the massive rolling stock programme. Will the Minister outline any new orders won on the back of those changes? Will she commit to looking at whether publicly enabled procurement projects can be considered within those guidelines?

The biggest issue regarding not only the viability of the UK steel industry but the survival of the entire global steel industry is that of cheap Chinese steel being unleashed on the rest of the world. The Committee’s report acknowledged that the scale of the problem should not be underestimated. We fully accept that even if the Government were able to deliver immediately and in full on all the other asks, the future of the UK steel industry would remain in doubt unless effective action could be taken at an international level to withstand the onslaught of cheap Chinese steel.

China has far too much supply in the face of sharply shrinking domestic demand. Total Chinese steel production is 1.17 billion tonnes, which is more than double that of the four next largest producers—Japan, India, the US and Russia—combined. Chinese surplus capacity in steelmaking is bigger than the entire steel production of the United States, Germany and Japan combined. Despite the rhetoric of Chinese leaders about reducing surplus capacity, Chinese steel production increased last year.

Why would China want to reduce steel output? The closure of local steel mills would throw something like 400,000 steelmakers out of work, putting at risk social order and the ability of the Chinese party apparatus to control matters. Steel mills in China are concerned that they will lose market share and have to spend increased capital to start production again. It is far easier to keep operations going now. Chinese banks are urging mills to keep going so that they do not have to make provision for bad loans. Therefore, when considered in terms of the geopolitical situation and the domestic environment, the risk to the Chinese political, social and banking systems as a result of reducing steel capacity means that it is naive of policymakers in the west to believe that the Chinese will allow it to happen willingly. It is therefore imperative that policymakers in the west undertake a concerted and co-ordinated effort to withstand this illegal Chinese dumping. This is not protectionism. The steel market does not have effective competition, and it is being distorted to the point of destruction by a powerful monopolistic power that is immune to the normal pressures of market forces.

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

Some of us want a proper relationship with the Chinese economy and concede that partnership in some things is very valuable. However, this is about the power of the Chinese economy, and even though my constituency does not depend on British steel, our leading agricultural chemical companies in the world, such as Syngenta, are being taken over—overnight it seems—by a Chinese conglomerate that is really the Chinese Government strategically plotting a course worldwide.

[Mr Wright]

My hon. Friend is right, and that point was mentioned earlier in the debate. This is about commodities in general, not just steel, and the enormous surplus capacity in other things such as phosphates is incredibly important. It is therefore vital that we have tougher EU action to ensure a level playing field, support scrapping the lesser duty rule, and carefully consider China’s market economic status. Given the Government’s rhetoric that they will be “unceasing” in their efforts and will

“continue to do all it can”

to safeguard UK steel, those steps are the very least one could expect.

The Committee’s report acknowledged the Minister’s success in changing the UK’s stance to vote in favour of the extension on wire rod, but lifting the lesser duty rule has been ruled out by the Government. In Committee earlier this month, the Secretary of State will recall that I asked whether he would change the UK Government’s position within the Commission on the lesser duty rule, to safeguard the British steel industry as much as possible. He replied that he would not, and he has repeated that tonight, stating that he needs to consider the “impact overall” on British industry and British jobs, particularly in terms of duties imposed.

Nobody would want a protectionist arms race to escalate throughout the economy, but the Minister and the Secretary of State must surely realise that the British steel industry—alongside many other European steel producers—faces an existential threat that is based on a grossly distorted and failing market. This is not about imposing additional duties or tariffs elsewhere on British manufacturing; it is a request, a plea, for a co-ordinated response. The UK steel industry is on its knees. This proud sector, which should be powering the future of British manufacturing, is pleading with the Government to help and to make sure that we have a sustainable future for the steel industry in this country.

20:02

[Richard Fuller (Bedford) (Con)]

It is a pleasure to follow the Chair of the Business, Innovation and Skills Committee who made a well-informed contribution, and it is a privilege to serve on that Committee with him. I commend the hon. Members for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Llanelli (Nia Griffith), and for Scunthorpe (Nic Dakin), my hon. Friend the Member for Brigg and Goole (Andrew Percy) and many other Members across the House whose employees or constituents are affected directly or indirectly by the tremendous challenges faced by the steel industry. Their constituents can know that their Members of Parliament are doing the best they can to get the best deal for their constituents, and they are doing it in the most effective way in Parliament. They are a tribute to their constituents.

The steel industry is undoubtedly facing massive changes. As my hon. Friend the Member for Bexhill and Battle (Huw Merriman) mentioned, the growth of the Chinese steel industry—initially to serve the international market but over the last decade to serve its own domestic market—has created tremendous challenges for the rest of the world economy at a time of reduced demand both in China and internationally. It is fair to say that mistakes were made by the coalition Government and the preceding Labour Government in preparing the steel industry for those changes.

For example, if Members read about energy prices on page 12 of the Select Committee report, they will see that the big change in energy prices for the United Kingdom relative to our European competitors came under the Labour Government in 2005-06. In retrospect, we concede that that was an unsupportable burden for our energy intensive industries, and the Government were at fault not to assess that. Equally, the coalition Government were at fault in not responding to the pressures placed on them by Members of Parliament to make subsequent changes.

I heard what the Secretary of State said about business rates, but I hope that he and the Chancellor will look again at what can be done with that, not just in the steel sector but more broadly in industry and retail. Business rates seem to me a tax that is very relevant for change.

[Tom Blenkinsop]

The hon. Gentleman mentioned 2006, but in that period Corus was bought by Tata because of the economic signals, and it thought that it was a good purchase. Celsa in south Wales refitted the electric arc. Judging by the indicators, including energy prices, industry at that time thought that Britain was a good investment.

[Richard Fuller]

The hon. Gentleman’s intervention was timely because I am about to talk about industrial strategy. As he pointed out, mistakes can be made, and when the Committee had a vote on whether we should mention the industrial strategy, I was the only member of the Committee to vote against that. Personally, I believe that Governments’ industrial strategies are nonsense, a mirage, a deceit, or, too often, a failure. Governments can take actions, they can spend money and they can show their preferences and priorities. All of that I accept, but an industrial strategy becomes a straitjacket that limits our actions and can set us up for big problems in international trade.

Finally, the core of what we are discussing today are duties. The Secretary of State was absolutely right to point to our responsibilities under the WTO with regard to tariffs, and the fact that that sets a framework for us to respond. He is making those calculations in a careful way. It was interesting and I think welcome to many that he believes further changes on tariffs could be made within those rules. He is also right to say that changes to the lesser duty rule are not appropriate at this time.

As I mentioned in an intervention on the shadow Secretary of State, I am fearful of what the tariff and counter-tariff arguments can do. Many Members have talked about what the United States is doing and that we should therefore do more, but this is where the breakdown of global trade begins: tariff and counter-tariff, competitive devaluation, recession and slump. When we perceive that a change in tariffs is fair and not about trade but about dumping, I would say to hon. Members that just because we may believe that that is the case does not mean that that is how it is perceived by those on whom those tariffs are imposed. The consequence of the Chinese economy having a retaliatory effect on the United Kingdom and other countries is where the breakdown in global trade can begin. Free trade is a global good.

[George Kerevan (East Lothian) (SNP)]

Does the hon. Gentleman not accept that we are in exceptional times, and that by suspending the lesser harm rule and presenting the Chinese Government—most Chinese heavy steel plants are state-owned—with a major fait accompli, we might force negotiations on China to restructure its steel industry, whereas if we just proceed piecemeal we will not resolve anything?

[Richard Fuller]

If I may, I would like to address that point directly in a few minutes.

Free trade is a global good. It enriches us. It broadens choice. Free trade, by bringing people of the world together, makes us safer. We have a responsibility, even in these difficult and straitened times, as the hon. Gentleman says, to protect free trade. Those of us here in the United Kingdom have a special responsibility to protect free trade, because we have been one of the major proponents of free trade over the past century and a half. That is something worth protecting and worth bearing in mind at all times.

The hon. Member for East Lothian (George Kerevan) asked whether we should, essentially, toughen up in these special times with China. I think we are seeing indications that China understands it needs to toughen up as well. China has said—I am not an apologist for China; trust me, I like the other china—that it wishes to reduce its productive capacity, with one quarter of its production being taken out of commission. It is planning to reduce employment in this sector by 400,000 jobs. China is taking steps that indicate that it sees a responsibility to satisfy not just its own consumption and demand but its responsibilities in the global economy. Members should bear those thoughts in mind as they come to their conclusions.

[Richard Graham]

My hon. Friend’s defence of free trade is admirable, but he is not suggesting, is he, that the Government are wrong to look at various ways of mitigating the problems that the steel sector is facing, in particular with regard to energy and on procurement?

[Richard Fuller]

My hon. Friend is exactly correct. That was outlined by the Secretary of State in his speech and is, I think, warmly welcomed on both sides of the House.

I commend the shadow Secretary of State for an excellent start to the debate, and for her clarification of her continuing support for free trade. That is an important message to be heard on both sides of the House at this difficult time. She understands, as I think many other hon. Members do, that there is a very special concern for the people affected by the steel industry. I think she also understands that there is a broader responsibility for the community as a whole to uphold free trade. I am sure she would recognise that the task for her opposite number, the actual Secretary of State for Business, is that he has to make those very difficult judgments now. He has to listen to representations from Members of Parliament about the impact on their constituents. He also has a responsibility to ensure that the United Kingdom remains a strong voice for free trade, ensuring that the right penalties are placed on dumping and that the broader interests of the economy of the United Kingdom are upheld. I believe he is doing an excellent job.

20:02

[Paul Flynn (Newport West) (Lab)]

The gulf in understanding between those on the two sides of the House is rarely more obvious than when we talk of heavy industry. It is clear that the Government, with all the good will they may have towards the industry, are in alien territory. The best they have been able to produce today is not a man or a woman of steel, but someone who lived within sight of a steelworks. I speak with a little authority on this, because I started working in the steel industry in 1955 and was still there 30 years later.

There is a feeling of grief about the terrible destruction of the steel industry. People have talked about the scars on the countryside. It is painful to see areas that were once breathing fire and steam—where there was life, prosperity and energy—now wastelands of rubble and brambles. The real suffering is felt by those who worked there. They suddenly find that their often unique skills, the scrap of dignity around which they built their self-regard and their life, have been stripped away. They live the final years of their lives lacking that sense of self-respect, their ability to have the prosperity they expected torn away. I am very proud, with my hon. Friend the Member for Newport East (Jessica Morden), to represent Newport, which relied on the steel industry for 150 years. It has suffered terrible losses.

I want to make a point about different attitudes. It is extraordinary how the Government have been seduced by Chinese communists, and how they are allowing the future of our industry to be colonised by the Chinese. It is unbelievable. We look back with amazement to see what we have done. We have mortgaged the future of our nuclear industry in perpetuity to a Chinese company. So that we can have the Hinkley sprat, we have given them the mackerel of Bradwell and the other power stations of the future. Something has happened with Hinkley Point and it is about time the House woke up to it. A former Secretary of State for Energy has written a book. He said on the “Today” programme this morning that Hinkley Point is a dinosaur. In the past fortnight, articles in the Financial Times and The Economist have said that it does not make sense to proceed. It is a basket case. It is a disaster in the making. All the sensible investors, including Centrica, which invested £200 million, have gone, and all that is left is this cheap, Chinese money and EDF.

Where is EDF? EDF had a debt of £37 billion, and if it were not a nationalised company, it would be bankrupt. It is pulling away because the technology planned for Hinkley Point is a dinosaur—it has never worked anywhere. The EPR reactor in Finland should have been producing electricity seven years ago, but it is not, and there is no sign of it doing anything. It is the same with the Flammanville EPR. It has a major fault; there is a split in the steel in the vessel. The whole thing might never happen. These huge sums are at stake, yet the Government go blindly on in their belief in nuclear power. There is another side to this, too.

[Richard Graham]

rose—

[Paul Flynn]

I would rather not give way; too many people want to speak.

One man has a belief in a different kind of energy. Mr Sanjiv Gupta recently rescued hundreds of jobs in the constituency of my hon. Friend the Member for Newport East. He believes in tidal energy. His company is without any debts and is free to spend its money anywhere. It has already saved jobs and it plans to create at least 1,000 new jobs, and the investment is based on tidal energy, not on the myths of Hinkley Point that will never happen, but on the tide, which flows up and down, washing the walls of Hinkley Point and our constituencies. It is the second highest rise and fall of tide in the world, with massive untapped power. It is clean, British and the source of power is freely available to us. It is entirely predictable and it is virtually eternal: it will go on for all of human time. The power is vast. If it is combined with pump storage schemes, when the tide is producing energy that is not required, it can be used to pump water up to the valleys, so it can become entirely demand responsive.

There are two views on the issue. We know that the problem with the steel industry now and in the future is that it needs prodigious quantities of energy, and until we get entrepreneurs with imagination who believe in the practicalities of life, there will be little chance of progress.

Let me make one final point. I was somewhat provoked to make it when I heard that the farmer Andrew R. T. Davies, who is the Opposition spokesman in the Welsh Assembly, has announced that he wants us to come out of Europe. The only advantage I can see of coming out of Europe is that it would allow us to look at the subsidies that all the farmers get, averaging £220,000 per year per farmer in Wales. If we come out of Europe, the question must be asked how we could possibly go on investing 30% to 40% of the total budget of the European Union in an industry that produces less than 2% of our gross national product—an industry that is in serious trouble, and is not competitive. Yet what is the attitude of the Government? They want to save it, and they will put through any kind of subsidy. It will be unlimited, because this is a party in which farmers are grossly over-represented and from which steelworkers are entirely absent.

20:02

[Kevin Foster (Torbay) (Con)]

How do you follow that? What I would say is that in describing as a “dinosaur” something that would be Britain’s biggest single construction project and would create 25,000 jobs west of Bristol, it comes as no surprise to me that one party is in danger of becoming extinct in the whole of the south-west peninsula.

Why have I, as the MP for Torbay, which has no direct steel links, come along to this debate? It is because the issues raised in this debate impact on us all. I look at some of the firms starting to expand around Torquay, exporting high-tech, high-quality manufactured products, and realise that if China started to move into those markets as it modernises its economy, we could be debating those types of products in a few years’ time and seeing what China might do.

I am interested in the impacts of what we are talking about on the ground. Some concepts can sound rather odd—the idea of a “lesser duty rule”, for example, and the impact it might or might not have in this area. There is a debate to be had about how the European Union can modernise some of its trade defence practices, so that where issues such as this come up, they can be responded to more quickly.

Given the numbers provided by the hon. Member for Hartlepool (Mr Wright), it is clear why it is so important that we work as part of 28 states. In view of the sheer scale of China and what it is doing, if we were trying to operate as 28 separate individual states, we would face the danger of each of us being picked off individually, as happened in the 1930s. That would be most worrying for us. It will therefore come as no great surprise to hear that I am one of the remain voters among Conservative Members, and I view it as absolutely right to bring a united front to this issue. We should bear it in mind, however, that not so long ago the European Union was busy dumping surplus agricultural products into the markets of, for instance, African countries. When we request other countries not to dump into our markets, we must also ensure that we in the European Union practise what we preach, and do not inflict on other countries what we are complaining about in relation to some of our own industries. I accept that the lesser duty rule is not making a direct impact in this instance. I am talking about the principle of how the correct tariffs are created and decided, on the basis of advice from industry.

The Government should also think about the way in which our procurement works. I was interested by the response to my intervention on the speech of the hon. Member for Motherwell and Wishaw (Marion Fellows), but I think it is worth pointing out that from the decks of the Queen Elizabeth aircraft carriers in Rosyth, 94% of which were constructed with British steel, it is possible to see a major construction project that is being built with steel from elsewhere in the world.

[Hannah Bardell (Livingston) (SNP)]

rose—

[Kevin Foster]

Let us hear the defence. I will happily give way to the hon. Lady.

[Hannah Bardell]

At the beginning of the hon. Gentleman’s speech, he asked what he was doing here. Perhaps his purpose was to be the proponent of misinformation. I can confirm to him that during the procurement process to secure fabricated steel for the new Forth crossing, no company from Scotland, or from the United Kingdom as a whole, made a bid for the contract. A further subcontract for steel fabrication was awarded to Cleveland Bridge in Darlington, and raw steel was supplied by Tata in both Scunthorpe and Motherwell. I hope that that clarifies the position, and that the hon. Gentleman now stands corrected.

[Kevin Foster]

It was interesting to hear those comments, which sounded very similar to the comments from the Government that the hon. Lady has been attacking.

[Tom Blenkinsop]

The hon. Gentleman has been making some interesting points. However, I believe that the contract for the bridge was originally given to a Spanish firm, which had to pull out. Cleveland Bridge came back in, and made sure that the contract used Tata steel from Motherwell and Dalzell. Those two plants are on the verge of closure, but they also make the sonar-specific plate that will be used for the renewal of the four Trident submarines. The contract is integral to both sites.

[Kevin Foster]

What the hon. Gentleman has said proves yet again that there is not just a massive security argument in favour of building the four Successor submarines, but a considerable economic justification. In south Devon, I can look at the site in Plymouth where the submarines are being refitted. [Interruption.] It is always lovely to have an accompaniment from the Opposition Benches. I hear it regularly, and I thoroughly enjoy it.

The hon. Gentleman’s intervention has made clear why it is so vital to build those submarines. I look forward to his joining me in the Lobby when we vote on the issue, although we know that the people whose jobs rely on the Trident contract can expect absolutely no support from the Scottish National party.

We can do a great deal more when it comes to procurement. The Hinkley Point project, for instance, will create a huge number of jobs in the south-west. We need to create an infrastructure that will meet the demand. I hope that a significant amount of British steel will also be used in the construction of the Stonehenge road tunnel.

It has been interesting to take part in the debate, and to listen to some of the comments that have been made. I find it particularly interesting to hear demands for unilateral action from those who, like me, argue for us to remain in the European Union. Membership of the EU has many advantages, but unilateral action on tariffs is not one of them. However, 28 of us, working together, can make more of a difference.

I shall not be supporting the Opposition motion, which will probably not come as a huge surprise, given some of the arguments that we have heard. I think it is right that the Government are playing a proactive role in the European Union to prompt action and to modernise their own procurement rules to ensure that we can defend our own industries, but also to ensure that, for our own projects, we buy as much British steel as we possibly can, respecting the fact that our country would not believe in state aid even if we were committed to it under European rules.

[Several hon. Members rose—]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I am afraid that I must now reduce the speaking time limit to six minutes.

20:39

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

There are a lot of issues that we could talk about today, including the Government’s unilateral introduction of the carbon price floor tax on energy intensive industries, but I will not go into that now. I have beaten that drum many times in this House. We could also talk about procurement contracts or business rates, but the two elements that I want to focus on are the lesser duty rule and Chinese market economy status. Those two issues are of primary concern to the UK steel industry.

Today at the Competitiveness Council in Brussels, industry Ministers from across the EU are discussing actions actively to support the European steel industry, to enable the sector to compete on a fair and level playing field within the global market. This meeting follows the extraordinary Council meeting on steel that was held on 9 November last year and the High Level Conference on 15 February this year. Today’s meeting is the last-chance saloon for this Government and our steel industry. Only last week, for example, the chief executive of Tata Europe, Karl Ulrich Köhler, quit the company. We have to bear that in mind and try to determine what it says about Tata’s future in the UK. The tsunami of underpriced, unfairly traded steel, most notably from China, is destroying the steelmaking capacity of the UK and the EU.

This brings me to the primary point at issue. In order to retain virgin steel production in blast furnaces in the UK, we must deal with two immediate threats if our nation’s steel industry is even to stand still. Those threats are the lesser duty rule and Chinese market economy status. Europe currently uses the lesser duty rule to impose the lowest possible duties on unfairly traded products that have been dumped in European markets. That means that duties introduced by Europe are usually way below the actual margin of dumping. The result is that the dumping continues and unfairly traded products are allowed to compete in European markets and depress prices.

The United States does not follow the lesser duty rule, which means that it can implement much tougher sanctions that reflect the actual margin of dumping. For example, the US recently imposed duties of 236% on a particular grade of Chinese steel. Furthermore, the US Government are in the process of introducing new laws that will enable the US to take even tougher action against Chinese dumping. The consequence for Europe, and for the UK in particular, if we do not take action as a European Union and if the Government actively prevent the EU from improving our standing, will be to exacerbate the amount of Chinese dumping in our domestic market and in our own EU market. It will actually affect our own exports, never mind our ability to look after ourselves.

The director-general of Eurofer, Axel Eggert, has stated:

“By blocking the lifting of the lesser duty rule, these member states deliberately deprive the European steel sector of the chance to receive effective and legitimate remedy against massive dumping. It is member states with steel production and jobs that continue blocking an agreement within the EU Council to remove this outdated rule.”

He goes on to state:

“It is most notably the UK”.

[Richard Fuller]

I think that the hon. Gentleman and I have a substantial disagreement on this point. Is he not worried that if the European Union were to follow America in imposing very high tariffs, the United States would impose even higher tariffs? Would we not get into a situation of ever-higher tariffs being imposed by either side, which would reduce global trade?

[Tom Blenkinsop]

In 2004, the Bush Administration imposed tariffs of more than 20% on European steel going into the US market. That level was eroded through negotiation. At this moment, China imposes tariffs on our products—British and European—that are already going into its market. So that tit-for-tat has already started. China already imposes huge tariffs on EU products going into its market. Why we are not protecting our own market and the European market—which, I might add, is the largest in the world—is beyond comprehension. I repeat that this is not about protectionism. It is about levelling the playing field to give British steel a domestic safe place to trade, within the European Union and externally. At this time, however, China is not abiding by World Trade Organisation rules, which must surely affect its future market economy status, which will be debated by the European Union.

This brings me to the point about market economy status. Currency manipulation by China has also acted as a subsidy to its exports to EU member states and other countries, while China reciprocates by taxing EU exports. This, along with direct export subsidies, support policies and the rapid growth of planned investments in leading and pillar industries in China’s five-year development plans, has led to sustained, deliberate overproduction and substantial excess capacity throughout Chinese manufacturing.

Even without MES, China has dramatically increased its exports to Europe by a remarkable 11.1% annual rate over the past 15 years—they rose from €74.6 billion-worth to €359.6 billion-worth in 2015. Put simply, the Government support Chinese MES, whether Britain is within the EU or outside it. I would argue that we may negotiate internally or externally, but we are in a far more difficult position as a population of 70 million than as the largest economic bloc in the world. The forecasts suggest that whether this is done inside or outside the EU, Chinese imports will rocket by between 25% to 50% in the next three to five years if MES is granted. That is devastating for not only steel, but every other industrial manufacturing sector. I come from the Teesside area and we do not just make steel there. We must not write off steel in our area, because we still have the beam mill in Redcar, Skinningrove in my constituency—

[Mr Iain Wright]

And Hartlepool.

[Tom Blenkinsop]

We have Hartlepool tube mill. We have a fantastic story to tell and we want further investment there. By granting MES, we are putting at risk not only steel, but our vast chemical processing industry in the Tees area. Energy-intensives, be they ceramics, chemicals or steel, are at real risk. We cannot afford to be duplicitous on any potential contract, be it a defence, construction or export one, but that requires a Government to make policy that defends their own British steel industry.

20:02

[Alex Cunningham (Stockton North) (Lab)]

I want to concentrate my remarks on three areas: the critical role that steelmaking has in our economy; the considerable burden this energy-intensive industry faces; and the Government’s ongoing response to the crisis on Teesside, where thousands of workers lost their jobs with the demise of SSI and other plants. As others have said, steel is an important foundation industry, supplying materials to multiple strategic construction and manufacturing supply chains. Taken together, these industries represent 20% of those employed in the UK’s manufacturing sector and generate gross value added of £24.6 billion.

UK Steel reports that, despite its problems, the sector makes a £9.5 billion contribution to the UK economy, with an export value of £4.9 billion. It generates £90,000 of added value for every steelworker. It produces hundreds of high-skilled, high-value-added apprentices, vocational trainees and graduates. It is well linked to the UK’s innovation infrastructure, through partnerships with leading universities, participation in catapults and our own research and development investment, and all despite the burden it faces. I just wonder for how much longer that will be the case.

UK business rates are up to 10 times higher than those of many of our European competitors, such as France and Germany. Paul Turner-Mitchell, a business rates expert, says that property taxes in Britain are the highest, as a proportion of gross domestic product and total taxation, of all 36 OECD countries. A Select Committee on Business, Innovation and Skills report in December recommended that the Government reform business rates as they apply to manufacturing at the earliest possible opportunity, with priority being given to the removal of disincentives to invest in plant and machinery. Doing so would not need EU approval and would provide a more even playing field for UK steel producers. Exempting plant and machinery from business rates valuation would symbolise a commitment to rebalancing the economy, enhancing the UK’s attractiveness to inward investment in manufacturing and improving industry’s productivity, efficiency and competitiveness. Business rates are just one of the extra burdens suffered by our steel industry, as is the Government’s inability to act in Europe to halt the dumping of Chinese steel. In fact, our Government have helped to ensure that there is no impediment placed in the way of far east producers. Others have gone into that in detail and also mentioned the British Government’s failure to build British ships with British steel.

I want to focus a little on energy costs and the absence of a level playing field for energy-intensive industries. The damaging effects of energy taxes levied on the business in the UK, leading to UK energy costs being twice as high as those among EU peers, are well understood. This comes on top of regulatory costs charged across the EU, such as the EU emissions trading scheme. British policy measures add 26% to the typical electricity price paid by an energy-intensive consumer in the UK, with steel a major loser. Yet we have still to see the compensation package for energy-intensive industries implemented in full, and the sector is still paying 70% of the policy costs that the full package aims to address.

The EU commission provided state-aid approval for proposals to compensate the industry in relation to the costs of the renewables obligation and feed-in tariffs in December 2015. Although we await the full implementation of the first part of the compensation scheme, there remains a second application that concerns competitors of those receiving compensation. Until that second application is approved, some companies are without access to much-needed compensation and exposed to 70% of climate change policy costs. I hope the Minister can give us an update on what is happening with that second application.

Madam Deputy Speaker, you know of the closure of the SSI plant in Redcar and the loss of other steel jobs in Teesside, many of which are from my constituency. We appreciate the limited action that the Government have taken on Teesside even if the Business, Innovation and Skills Committee report criticised the Government’s initial response, which was focused on compensating those affected rather than saying what could be done to save the plant. I recognise that we need to look to the future, so I ask the Minister what hope there is for steelmaking capacity on Teesside.

I am very aware of the hundreds of millions of pounds it will cost each year just to maintain the SSI site and keep it safe. I am also aware of the proposal from Lord Heseltine to have a mayoral development company in Tees Valley run locally by local politicians and his ambition to have the SSI site invested in that new body. He and the Minister for the northern powerhouse, the hon. Member for Stockton South (James Wharton), appear to be excited by the proposal, and the development organisation is very welcome. Many of us, including some of those same local politicians, are very concerned about what it will mean. Lord Heseltine was at pains to explain to the media, including on television, that the financial buck rests firmly with the Government both for the maintenance and the redevelopment costs of that site. Time and again, he claimed that the Government had to take responsibility. Tonight, I invite the Minister to confirm that not only will there be support for steelmaking in Teesside, but that there may even be the possibility of increased activity in the future, and that the open-ended commitment made by Lord Heseltine on behalf of the Government in relation to the SSI site, and therefore in relation to Teesside, is a commitment that she recognises and will ensure is actually fulfilled.

20:02

[Christina Rees (Neath) (Lab)]

Steel and the steel industry are vital to Wales, particularly to south Wales and my constituency of Neath. The Tata steel plant in Port Talbot is in the neighbouring constituency of my hon. Friend the Member for Aberavon (Stephen Kinnock) and the Trostre plant is roughly half an hour away in the constituency of my hon. Friend the Member for Llanelli (Nia Griffith). Both Aberavon and Llanelli are places where hundreds of my constituents from Neath work every day.

The fact that, this year, 1,050 jobs have been lost in the UK steel industry, 750 of which are in Port Talbot, shows the Government’s complete lack of action in saving the UK steel industry. Time and again, the Government have been dragged to the House by the Opposition to answer urgent questions on their plans to save the steel industry, but all they have offered are warm words, which are of no help to an industry that is in desperate need of action.

Many options are available to the Government, including a large amount of readily available EU funding to shore up the industry. The Government could also take action against the large amount of Chinese steel being dumped on to UK markets.

[Jim Shannon (Strangford) (DUP)]

Does the hon. Lady agree that, although we must express real concern about the job losses and the impact on the UK economy, we must also express concern about the quality of the imports. For instance, when it comes to the defence industry, the plate that comes from China is not of the same quality. How can we leave our defence forces at such a disadvantage when it comes to our submarines and ships?

[Christina Rees]

The hon. Gentleman makes a very good point. Chinese steel is far inferior to UK steel.

The Government could also take action against the large amount of Chinese steel being dumped on to EU markets, yet, again and again, they have left all such options to the side. The statistics speak of the importance of the steel industry in Wales. There are more than 6,300 jobs in Wales, over 4,500 of which are in Port Talbot and Trostre. Of that 4,500, almost a quarter are filled by people who live in my constituency of Neath. At this time, my constituents still do not know who will lose their jobs. For many, the plants in Port Talbot and Trostre are a way of life and have been for generations. Not knowing whether they will have a job in a month or two is absolutely unbearable for them. I know personally of the community that has grown up around the plants. My father worked at the Abbey, which later became the Steel Company of Wales and then Tata. When I was a schoolchild, I played hockey for the steel company. It was the centre of the community; SCOW put food on our plates at home and contributed enormously to our social and sporting lives. The same sense of community applies today to the 4,500 workers and their families that still work at and depend on the plants. The threat of the closure of Trostre and Port Talbot is more than I can contemplate, given the devastating effect that it would have on communities.

The Minister insists that the Government are doing all they can to help the industry, but that requires action rather than the warm words that they are offering. There is so much that the Government can do, especially about the dumping of Chinese steel on the market. The prospective change in dumping calculation methodologies away from the analogue method towards local Chinese prices and costs could result in the direct loss of at least 310,000 jobs in EU industries already badly hit by dumped Chinese exports. That is in addition to the hundreds of thousands of indirect jobs that would be at stake. Surely, rather than the Chancellor moving ever closer to the Chinese, he should not grant market economy status to China until it fulfils all five EU technical criteria and not before a thorough EU-wide impact assessment, including a full public consultation.

It is important to tackle the dumping of steel because our current anti-dumping measures cannot counter the massive blow caused by Chinese steel import surges. Lifting the lesser duty rule would remove the cap on anti-dumping and anti-subsidy levels, simultaneously bringing the EU in line with everybody else, but the Government have chosen to be the main player in blocking those changes. Will the Minister assure the House that the Government are doing all they can, including reversing the decision to impose low-level duties on Chinese rebar and supporting the steel industry by supporting the lifting of the lesser duty rule? Even the former European CEO of Tata agrees. He has said that as long as trade defence protections are not introduced, the dumping of steel below its cost of production will continue.

The UK steel industry had 280,000 jobs in 1970, but now it has only 30,000. That is 250,000 jobs lost in less than 50 years. When will the Government wake up and pay attention? Will they pay attention before it is too late? EU options are also available to us. Why are the Government not moving forward and allowing the modernisation of EU trade defence instruments that would stop it taking a year and a half from complaint to definitive anti-dumping measures?

Many regions in the world are more effective at providing a level playing field for their industries and deploy trade defence tools faster and more effectively. As a consequence, dumped goods find their way on to the European market much more easily. The Government would prefer to argue with themselves over the issue of the EU than to use our membership of it to save the UK’s steel industry and the jobs of my constituents in Neath.

The president of the European Steel Association, Eurofer, has said that if we do not use the trade defence instruments available to us there is a substantial risk we will see more plant closures and job losses. Given the wide number of options available, why are the Government not standing up for UK steel in the EU and arguing for modernisation? Over and over again the Government have missed their chance to save the UK steel industry. The Minister for Small Business, Industry and Enterprise has told the House that the steel industry is vital for the UK, yet the Government are treating it with contempt and playing fast and loose with the livelihoods of the tens of thousands of workers in the industry.

The Welsh Government are doing all they can within their power to help the affected communities in Wales. They are working tirelessly to provide support to the industry, but, as the First Minister has said, the fundamental question facing steel production in Wales goes far beyond the devolved responsibilities of the Welsh Government. He has said that the UK Government must step up and play their part.

20:59

[Stephen Kinnock (Aberavon) (Lab)]

I am grateful that we have been able to secure this debate. Ever since last month’s announcement of 750 job losses at the Port Talbot steelworks, I have been calling for a full and comprehensive debate on the future of British steel. The Tata steelworks in Port Talbot is the beating heart of my Aberavon constituency. These job losses, and those that are sure to follow along the supply chain, are a devastating blow.

The Secretary of State will be aware that following that announcement, Tata has been working on a rescue plan, which will be discussed by the Tata board in Mumbai at a critically important meeting at the end of next month. I implore the Government to give their full support to the rescue plan by, for example, ensuring that there is proper investment support to improve the plant’s premium product capabilities. Such support could help in converting the continuous annealing process line into a galvanising line, thereby better serving the automotive market. Can the Minister confirm that she will urge the Chancellor to give a firm and positive commitment on enhanced capital allowance, to allow the Welsh Government Tata taskforce to move forward in establishing an enterprise zone in Port Talbot?

I will now focus on what the Government should be doing at national and European level. It is well known that this Government operate inside a fog of laissez-faire ideology. Their modus operandi is to pray to the gods of the free market and hope for the best. But it is fascinating to observe that this steel crisis is cutting through that fog, and forcing the Tories to understand a very simple truth—that when the market fails, Government should intervene.

The market economy can function effectively only if it is regulated. Just as a game of football requires the offside rule to ensure fair competition, so the British steel industry requires the right regulatory framework, so that it can be given a fighting chance, on a level playing field. The impact of the market failure, and of the Government’s failure to intervene to fix it, is being felt around the country by the thousands of steelworkers and their families. They are victims of the Government’s laissez-faire doctrine. They are the victims of the Government’s failure to stand up for British steel.

All of us here today will be aware of the five industry asks. The Government like to boast of delivering on four of those five asks, but a cursory glance at the scorecard demonstrates how disingenuous that claim is. Take the compensation package for energy-intensive industries. Five years after the Chancellor accepted the need for it, the money still has not arrived. Perhaps the cheque got lost in the Christmas post. And what about procurement? There is no tangible evidence of any change. If there were, why on earth is the MOD’s latest order for a set of Royal Navy frigates going to be based on Swedish steel? Why would a Government seriously committed to supporting the Welsh steel industry still be flip-flopping on the Swansea Bay tidal lagoon?

Most disingenuous of all is surely the Government’s claim that they are acting against the dumping of anti-competitive subsidised Chinese steel. If anyone doubts the acute impact of Chinese steel dumping, they should just look at rebar. From almost no market share in 2011 today, Chinese rebar accounts for almost half the UK market. That is the cost of five years of Conservative Government, five years in the fog of laissez-faire dogma and inaction, five years of watching the storm clouds gather on the horizon and refusing to strengthen the flood defences, five Tory years of rolling out the red carpet for Beijing, rather than standing up for the men and women who form the backbone of the British economy. May I therefore implore those on the Conservative Benches to resist the temptation to blame Labour? The exponential growth in Chinese market share has taken place since 201l, on their watch. Let us accept that fact and move on.

The growth in Chinese market share is possible only because of Beijing’s subsidies and market distortion—70% of Chinese steelmakers are state owned. In the light of this fact alone, who in all seriousness could possibly see China as a market economy? I’ll tell you who: the British Government. Yes, our very own Government have taken it upon themselves to become some sort of outpost of the Chinese PR machine. UK Steel, Tata and Community have all stated unequivocally that the granting of market economy status to China would probably be the last nail in the coffin for UK steelmaking, yet the Prime Minister and his Government are actively lobbying in Brussels and across Europe, for China to be granted that status. The decision on this will be taken in December. There is still time for the Government to change their mind. There is still time for the Government to be a cheerleader for Britain, rather than a lobbyist for Bejing.

But market economy status is not the only area where the Government are actively undermining the British steel industry. It has become widely recognised in Europe that the lesser duty rule is killing our industry. Indeed, the European Commission proposal that it be scrapped was supported by the European Parliament. Yet the UK continues to be the ringleader in blocking the scrapping of the lesser duty rule. I have grown used to warm words being matched with frozen actions, but this is much worse. On trade defence and the lesser duty rule, this Government have publicly declared their undying commitment to British steel, while behind closed doors they have consciously conspired to undermine the British steel industry. The gaping chasm between their words and their deeds needs to be explained. I hope that they will do so in the near future.

We need a Government who are committed to a long-term industrial strategy and who are more committed to Britain than they are to Beijing, not spinning a line in public while agitating for the opposite behind closed doors. We need a Government who will stand up for British steel.

21:02

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

I would like to thank Labour Members who are responsible for the allocated Opposition debate time being used to bring this issue to the forefront again. It was with an incredibly heavy heart that I learned of the planned closure of the Clydebridge steel treatment mill in my constituency. Although the site employs far fewer people than the rolling mill in the constituency of my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows), or sites represented by other Members in the Chamber today, the closure and the associated jobs losses are just as devastating. The work of the trade unions on the ground in my constituency is to be commended, and I am sure that sentiment will be echoed across the UK.

The human cost is sometimes secondary to the loss of industry in media coverage, and it would serve us all well to remember that thousands of jobs have already been lost and many more are at risk. Each one of those jobs represents mortgage and rent payments, food on the table, electricity and other utility bills, clothing, council tax, and all the other outgoings that steelworkers and their families face. The crisis facing the industry is causing crises in the homes of steelworkers the length and breadth of Britain. Every job loss holds its own unique story and its own heartbreaking strain on families. Every job loss is a hammer blow to local economies and communities, and it puts more jobs at risk along the supply chain.

I have heard Government Ministers say too often that they are taking action to protect jobs, but reality betrays that assertion. The industry is haemorrhaging jobs. It is an industry on life support. I make no apology for saying that the Government have simply not acted swiftly or decisively enough. The Tory manifesto claimed that they are “the party of working people”. Rhetoric is all well and good, but the steelworkers in Clydebridge are some of the hardest-working people I know, and they deserve to be supported properly.

First Minister Nicola Sturgeon moved swiftly to establish the Scottish steel taskforce. As a member, I have been impressed by how much that multi-agency body has achieved. Its approach has resulted in real interest from alternative operators, with the possibility remaining that both mills can be kept operational by a new owner. If that is the case—I hope it is—the new operator will be able to resume production swiftly owing to the Scottish Government’s steelworkers retention plan.

Action has been taken on business rates, in addition to new public procurement guidance on steel. A new action plan, “A Manufacturing Future for Scotland”, specifically singles out the steel industry as a vital strategic asset in the Scottish economy, while acknowledging the particular pressures it faces. It also details further specific measures to help steel and other energy-intensive industries, such as a new expert advice and support service, which will work with operators to develop feasible and cost-effective business plans to implement energy saving opportunities.

The measures taken by the Scottish Government are bold and forward-thinking. We need to see some of that from the UK Government. I welcome the measures taken thus far and appreciate that the Government have listened and taken some action, but they need to keep going, as there is more to be done. The crisis facing the steel industry still exists, and we need to face it down.

It is nothing short of a disgrace that the UK Government are blocking proposals to raise tariffs on Chinese steel. The lesser duty rule must be lifted, and the Government must act to support that. That is the kind of bold action that is needed in order to start levelling the playing field. Excuses for not doing so have been incredibly flimsy and sufficiently lacking in backbone to be classified almost as invertebrate. The scales are currently weighted against us—tipped unfairly by massive amounts of subsidised Chinese product. Unless we force a rebalancing, the situation will not change. I do not see that happening; indeed, the opposite seems to be true, as we move towards a situation where China will gain market economy status, as advocated by our ever willing Chancellor.

In short, an already dire situation looks set to get worse. In years to come, I do not want to be in the position of saying, “I told you so.” I want the UK to act like the superpower whose image the Government are so desperate to project to the rest of the world. We will do that by ensuring that this vital strategic asset is protected, not by making absurd concessions to make friends, and certainly not through utter intransigence.

Who will respect us if we hand our centuries-old industry to our bigger, cheaper rivals? We owe it to our rich history, to our steel towns and cities, and most importantly to our hard-working steelworkers throughout the UK to stand up now and take the bold action that is so desperately needed.

21:10

[Jessica Morden (Newport East) (Lab)]

As I make my contribution, I am mindful of the fact that steelworkers in my constituency will soon find out whether they still have a job, because the consultants doing the job matching will soon finish their work. Up to 750 jobs will be lost in south Wales, with the losses in Llanwern, in my constituency, very much wrapped up in the announcement of the job losses at Port Talbot. Although the Tata press release talked about Port Talbot, it is hugely important to workers and their families in Newport, not to mention in the wider economy, that we remember Llanwern, because the effects are being keenly felt there.

Before the debate, I asked Newport steelworkers what comments they would like me to make to the Minister—I know other hon. Members do that before steel debates—and they said, “Please just keep saying what you said last time: that our industry needs help now. Please remind the Government that we are here.”

Time and time again, we have come to this Chamber asking for real action from the Government for the steel industry, but despite the debates, the questions and the summits, the industry and the unions tell us that not enough tangible progress has been made. That message came out loud and clear from the recent Welsh Affairs Committee hearing on the problems in the steel industry in Wales. In evidence to the Committee, Tata’s director of strip products, Stuart Wilkie, talked about the three things the business needed to survive in Wales and counteract the perfect storm it faces: increased efficiency, reduced costs and Government support.

On efficiencies, Tata has already made major inroads into downsizing the business’s production capacity, and my constituents know only too well the effect that that has had, be that on the pickle line or the mothballed hot mill.

We have seen the reduction in costs over the years in Newport, including job losses, as Llanwern has reduced in size. Only last year there were 97 contractors on site, and now they have gone. We must remember that behind every job loss is an individual and a family.

On the third element—the support the industry gets from the Welsh Government and the UK Government—the Welsh Government taskforce has been well received. It is proactive, and it is welcome that there is a voice for steelworker representatives. The taskforce does what it can with the levers it has at its disposal. From the Welsh Affairs Committee session, I know that Tata and the unions say that the dialogue with the Welsh Government and the assistance from them are exceptionally good.

In the case of Westminster, the industry says that there has been progress, but it has not been speedy enough, and there has been little bottom-line impact so far. We have had to take the job losses and the efficiencies, but we need tangible help to make sure that there is a strong plan to move us through the next two years. I cannot reiterate enough that that really matters for flex plants such as Llanwern.

On energy, companies will not see the money from phase 2 of the energy-intensive industries package until March, and they have waited two years for action. On dumping, the Government say they are doing something, and they are making supportive noises, yet they oppose the scrapping of the lesser duty rule, as we have heard many times today, and they support the granting of market economy status to China.

On procurement, more could be done to bring the Government together with companies to find out what is needed and how it can be supplied. Good work is going on in infrastructure projects in Wales. The Government say they have produced their guidance, but, as my hon. Friend the Member for Wallasey (Ms Eagle) asked: what practical impact has it had so far? The message repeated relentlessly at the Welsh Affairs Committee hearing was the need for more speed and more action, and the need to monitor our industry for the longer term to try to see what is coming—to anticipate and look ahead.

Steelworkers in my constituency have seen major restructuring over the years, and I know of the understandable fear, worry and concern that that breeds. As my hon. Friend said, our steel communities are looking to the Government in this hour of need. The Government need to put their warm, sympathetic words into action, because those working in steel feel that they have been far too slow to act. On behalf of the workers in my constituency, I call on the Government to support the steel industry far more proactively in the Budget.

21:15

[Nic Dakin (Scunthorpe) (Lab)]

It is a pleasure to follow my hon. Friend the Member for Newport East (Jessica Morden), who speaks with great passion about the impact of the steel industry on her constituents. It is very much the same for my constituents, who are currently going through 900 job losses. Coming down here this morning, I found myself on the same train as Ian Smith and Paul McBean, the leaders of the Community union in Scunthorpe. I pay tribute to them for the work that they have done, alongside Martin Foster of Unite and, indeed, all the steelworkers and their families in Scunthorpe, in going through this very difficult time and leading the way forward. It is good that there are ongoing discussions with Greybull Capital about the future of the works. I commend everybody who is supporting those discussions, including those in Government. These are difficult times and we will face a very difficult future, whatever it is, so it is important that those discussions are successful.

I want to give a sort of half-term report on the Government’s progress so far on the industrial asks. The Minister, for whom I have a lot of regard, is fond of saying, “We have delivered, largely, on these asks”, but I think she will recognise, along with me, that it is a job started but still to be finished. First, on business rates, the Minister herself recognises that there has been little progress, but points us with a mischievous twinkle in her eye to the forthcoming Budget. I hope that twinkle bears dividends in the end and we see some movement on business rates.

Secondly, on energy costs, it has taken over three years for us to get delivery on the mitigation for the carbon floor tax, which the Government unilaterally applied. As my hon. Friend said, the money is still not in the coffers of the steel makers. On energy costs, I would appreciate it if the Government looked at the flawed EU emissions trading system proposal to see what can be done about it. It needs to be offset against indirect carbon costs, because otherwise it will do further damage to the UK steel industry through carbon leakage to other parts of the world and will fail to deliver what it is intended to do.

Thirdly, the Government are to be congratulated on bringing forward new procurement guidelines, but frankly, guidelines are not worth the paper they are written on unless they have an impact on how the Government and their contractor base deliver. There are a few tests we can apply. We can look at what is going on in defence; many Members have alluded to the issues there. I was pleased that a Defence Minister said today that there was a desire to push the guidelines down the procurement pipeline, but the Government need to push hard to make the difference that we need. I commend to them the work that Network Rail does, because we have there a pipeline of best practice that needs to be matched in other industries.

On renewables, DONG Energy has just got the contract for developing Hornsea Project One. However, the test will be whether UK taxpayers, through the very generous contract for difference deal, and UK energy bill payers, are financing the delivery of renewable wind farms built with UK steel or with other steel. The Government need to keep their eye on that, because it is a real test of their procurement rules.

The job has begun and it is, in theory, going in the right direction, but unless it has an impact it will be worth nothing. I know that the Minister wants to see impacts, so I will be interested to hear how she is going to ensure that the great expectation she has given us is delivered on.

[Jim McMahon (Oldham West and Royton) (Lab)]

This has been a fascinating debate. Members might ask why an MP from Oldham is present in a debate about steel—we do not have a steel industry to speak of—but I have seen the demise of manufacturing in my community. When we talk about numbers in this place, we have to relate them back to the families affected. Communities are destroyed when industry disappears. We have heard time and again about the interventions that could be made, and my hon. Friend has made a fantastic point about them, but does he have any faith in this Government to deliver on them?

[Nic Dakin]

It is the Government’s duty to deliver, and we have to work with them to make that happen. As my hon. Friend the Member for Wallasey (Ms Eagle) said right at the beginning of the debate, they have been dragged kicking and screaming towards delivery. We need them to deliver faster, because our communities, the steelworkers and their families do not have the time to wait. That is why the Government need to step up to the steel plate and deliver before it is too late.

The fourth issue is dumping by communist Chinese. If I had said 20 years ago that a Government would be in hock to communist China in undermining our manufacturing base, people would have said, “That’s what you’d expect from the Labour party,” but it is a Conservative Government who are doing it, which is remarkable—they are in hock to communist China. We need to take action on the lesser duty rule. The Secretary of State said that the Government can take action in other ways, but we need more details of how they will take action against Chinese dumping, to make sure that there is a fair and level playing field. Nobody wants benefits; all we are asking for, on behalf of our industries, is a fair playing field, and that is what acting on the lesser duty rule will achieve.

Many Members have spoken at great length about market economy status. During Foreign Office questions last week, I was pleased to hear the Foreign Secretary repeat the commitment that market economy status would be determined and seen through the prism of steel. I would be grateful if the Minister could confirm that unless China delivers on steel in the way that it should, it will not get market economy status.

In conclusion, my constituents are very keen on this debate and want the Government to do even more to deliver so that my constituents and my community can have good jobs and a good future.

21:22

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

As always, it is a privilege to speak about an issue that is so important, not only for my constituents but for the future of the whole UK steel industry and manufacturing industry, as my hon. Friend the Member for Oldham West and Royton (Jim McMahon) has said. I pay tribute to the Celsa workforce in my constituency; to those who work for Tata and the rest of the steel industry in south Wales; to the Welsh Labour Government, who are doing so much for the steel industry in Wales; and to trade unions such as Community, whose union reps are standing up and working with the management to try to find solutions and get through these incredibly challenging times for the industry.

I do not want to repeat many of the arguments that have been made. This is the umpteenth debate we have had on this issue, and the Minister is well aware of the wider circumstances and challenges facing the industry, so I just want to zero in on some specific concerns.

The Secretary of State was slightly disingenuous when he tried to present us as protectionists who want to foment trade wars in the world. That is not what we want. I reiterate that this is about levelling the playing field so that we relieve the pressure on the industry that is the result of dumping and unfair production.

I was pleased to hear what the Secretary of State said about rebar. If he moves in that direction, it will be welcome, but the industry will want to know at what level he really thinks the tariffs should be set and when that will happen. We can also discuss why that did not happen earlier, and why he did not fight earlier for those changes in Europe. The Secretary of State for Wales and I met many months ago and discussed those issues, and we were well aware of the concerns. If the Secretary of State for Business, Innovation and Skills is moving in that direction, will he tell us when will it happen and at what level the tariffs will be set? He made a convoluted argument about the lesser duty rule, but that will not wash with the industry. The industry wants to know what action the Government will take and when.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Does my hon. Friend agree that if a decision is made to impose tariffs as an anti-dumping measure, the whole point is that they have to be at a level that makes a significant difference to the price? Otherwise, the danger is that it becomes a token gesture.

[Stephen Doughty]

My right hon. Friend is absolutely right. As I said, if we do not put those tariffs up and other countries do, our industry will end up with double or triple dumping, with all its consequences.

The Minister has talked on many occasions about the compensation package. It has been long in coming, and its announcement was welcome, but the reality is that a lot of that compensation has simply not yet been paid. I have spoken to Celsa, in my constituency, in recent days. Can the Minister tell us how much compensation has been paid out and what difference it is making today? I am not talking about promises for the future; I want to know what difference it is making today.

I want to bring the Minister’s attention back to the charter for British steel, which we have discussed on several occasions. It laid out a clear set of arguments about sustainability, quality in procurement, and the sort of steel that we can produce, which we should be using in our construction and infrastructure projects. BS 6001 certification shows that steel has been manufactured in a sustainable and responsibly sourced manner and that, crucially, it can be traced back to its raw materials. In defence infrastructure projects or projects such as Crossrail—in which Celsa rebar has been used—we want to ensure that we use high-quality British steel that can be traced, and which has high carbon standards and high-quality standards, so that we can be sure it will be there for the long term.

There are some wider questions that I would like the Minister to answer. I turn briefly to procurement, because I think the Government have been somewhat disingenuous in claiming that the whole thing is done and dusted and that action has been taken. There have been welcome statements from the Minister and others about the guidance that is being given. I am concerned, however, about the fact that although we are asking Departments what they are doing, the Ministry of Defence has said that it is not keeping the records. The Secretary of State said earlier that his Department will be helping other Departments. He needs to get in there and ensure that the MOD keeps the records in the first place, as well as driving and advertising opportunities for procurement. Look at the list of projects: the Tide class tankers, the Scouts—now Ajax—and the frigates—[Interruption.] The Minister is absolutely right to say that we do not make the steel for Ajax, but other parts of the programme could be sourced from UK steel. There is still no answer on the customisation of the Tide class tanker, which was made in Korea. Those are the real questions.

The Minister was chuntering earlier about doing down the industry. We can produce that high-quality steel in the UK, and we should get to the bottom of why British companies are not bidding for or securing some of those projects. The Department for Business, Innovation and Skills should do all it can, with other Departments, to facilitate that market—[Interruption.] The Minister says that the Department does so, but the facts do not add up.

Finally, I want to talk about our role in Europe. I am glad that the Minister agrees that our place is in the EU, and it is a pleasure to have her supportive messages on social media about that. I am glad that we agree. I firmly believe that we achieve more for the steel industry working together across Europe than we would alone, but the Government have to be in there, fighting for the UK steel industry. I know that the Minister has done that on several occasions.

The reality is that the Government were warned years and years ago about the pressures facing the industry. A company such as Celsa in my constituency faces 70% higher energy costs than companies in Germany, as well as the dumping that the Government have been warned about so many times. If Ministers do not deal with those concerns, there is no possibility of pan-European co-operation. Why did it take so long for the Secretary of State to get out there and make that case in Brussels? Will she give us the absolute assurance that, during the next crucial months for the industry, she and he be will out there making that case on the duties, procurement and cross-European infrastructure? Only by doing that will we achieve the benefits for the steel industry that all of us across Europe want.

I want to see a future for the steel industry. I am glad that the Government are being pulled, kicking and screaming, on some of the issues. We need action and for it to keep coming, and we must ensure that we have a future for the steel industry in south Wales and across the whole of the UK.

[Several hon. Members rose—]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Sorry, but I have to change the time limit to five minutes.

21:02

[Anna Turley (Redcar) (Lab/Co-op)]

I am very grateful for the opportunity to speak in this debate, but I am afraid that I contribute to debates on steel with a heavy heart and a bitter taste in my mouth. I led such debates back in September to plead with the Government to intervene and to save the steel works in Redcar, but I now stand in the Chamber to represent over 3,000 people who have lost their livelihoods and their identity, and to represent a barren, silent industrial giant of a blast furnace, which still dominates the skyline of Redcar and is a visible daily reminder of this Government’s abandonment. I stand here to represent a community that feels let down, cheated and bereft. It is a tragedy that, despite representing a constituency that forged the steel that built the bridges and skyscrapers of the world in the 20th century, I stand here now, in a debate about British steelmaking, to represent a constituency that no longer makes steel. However, I am here because I owe it to my constituents, and those who fought so hard and with such dignity for our own steelworks.

I and my Labour colleagues will keep battling and fighting for steelworkers throughout the country and for the future of this vital industry. At this point, I want to pay tribute to others who are fighting so hard to save our steel—the steelworkers who have taken their campaigns to Brussels and around this country, and particularly the Community union and the Daily Mirror newspaper for their fantastic campaigns. We have to keep fighting to ensure that Britain is a country that still makes things; to make sure that our homes, our ships, our railways and our submarines are built with British steel; and to make sure that our industrial engineers have jobs and that our young people have a future where they make something more meaningful than a latte or a Subway sandwich.

Steelmaking would be an industry with a future if only it had a Government that believed in it. Steel is integral to the long-term success of our advanced manufacturing, particularly in relation to the automotive, aerospace and rail sectors and to our sovereign capability in the defence and nuclear industries. Steelmaking can be competitive in this country, and we on Teesside can still play a role. We just need the Government to take action. Teesside still has the potential to be a hub for developing new technologies, and to lead the way in the circular economy—re-engineering waste, recycling and energy recovery. Where once we may have produced carbon, now we can capture and store it or even reuse it. Where once we forged steel, we may yet be able to recycle it with electro-arc furnaces. We just need a Government who believe in us.

That is why I will continue to press the Minister—I hope that she will, in turn, press Innovate UK and, ahead of the Budget, the Chancellor—for the establishment of a materials catapult for research and innovation on Teesside, focusing on the early stage of metals development.

[Jim McMahon]

Does my hon. Friend share my concern that the Chancellor seems to spend a disproportionate amount of time speaking to the Chinese about investment to fund the northern powerhouse investment pitch book—of course, to appeal to parts of the UK that other potential Conservative leadership candidates cannot possibly reach—than supporting our own industry? Will she join me in warning Conservative Members that if our industry dies, Britain dies too?

[Anna Turley]

My hon. Friend makes an extremely important point. There is no greater testament to the lack of progress of the northern powerhouse so far than the devastating loss of steelmaking on Teesside. If the northern powerhouse means anything at all, it means jobs, industry and growth on Teesside, and on that count the Government have failed.

With the materials catapult for Teesside—the existing research and development hub, which is the materials processing industry in my constituency—the Government have the perfect opportunity to put right some of their wrongs and to help some kind of steel phoenix to rise from the ashes in Teesside. Teesside can build on its industrial strength and once more play a vital role in driving the UK’s industrial and high-tech economy of the future.

But we need a Government that will support us, a Government that will commit to an industrial strategy and a Government that, dare I say it, will invest. What we do not need are a Government that fail to play their role on the global stage, but that is what we have seen. The Chancellor has been out in China, and I can only imagine how grateful it is to him that his Government have actively blocked our European colleagues’ efforts to increase tariffs on Chinese steel in the EU by scrapping the lesser duty rule. I can only imagine how grateful it is to him that his Government are such cheerleaders for China in seeking market economy status, which would give the green light to Chinese steel flooding in. President Obama has pledged aggressive action through the trade Bill in Congress, and the US recently imposed duties of 236% on a particular grade of Chinese steel.

I, for one, am fed up with the Government and Government Members pretending that membership of the EU is the reason they cannot act. Instead, I want them to work with our European partners to impose tariffs and tackle dumping. I am frankly embarrassed that it is the UK that is leading a small group of nations in opposing higher tariffs on China because of the Tories’ ideological obsession with a market economy that sees jobs, communities and entire industries as a price worth paying for their kind of laissez-faire, unfettered global market.

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

You know that’s not true.

[Anna Turley]

We have heard it from the Government Benches tonight.

We will keep fighting and holding the Government’s feet to the fire. No more job losses, no more closures—we need the Government to act. We want the Government to stand up for Britain. We want the Government to save our steel.

21:02

[Hannah Bardell (Livingston) (SNP)]

It is a pleasure and a privilege to bring up the rear, so to speak, in such an important debate. If I may be light-hearted for a moment, the hon. Member for Wallasey (Ms Eagle) was challenged to a rugby match at the beginning of the debate, so I am pleased to inform her that I took part in the first mixed rugby match recently, representing the MPs and Lords. I even scored a try. [Hon. Members: “Hooray!”]

The number of debates we have had on this issue and the number of times we have returned to it show the strength of feeling not just across this House, but across the nations of the United Kingdom. It is a pleasure to follow my hon. Friends the Members for Rutherglen and Hamilton West (Margaret Ferrier) and for Motherwell and Wishaw (Marion Fellows), who spoke passionately about their constituencies, as did Members from across the House. My colleagues have been involved in the Scottish taskforce and have done extensive work in engaging with their respective local communities on the future of the steel industry in Scotland and in standing up for their rights and interests. As they said, the steel industry has been at the heart of their constituencies for generations. Our thoughts continue to be with the many towns and communities across the UK that are at the mercy of the volatility in the global steel market and the glut of steel production, as well as the UK Government’s lack of commitment and action.

I pay tribute to the work of everyone on the Scottish steel taskforce, including the union representatives. I am particularly pleased that they have been included in the Scottish taskforce, by contrast with the situation at the outset south of the border. They were at the heart of our discussions and engagement from the very beginning.

Fergus Ewing MSP, my colleague in the SNP Government, is the Minister for Business, Energy and Tourism. He faces many challenges, but he and his colleagues in the Scottish Government and Parliament, including Clare Adamson MSP, who is from a steelworking family, continue to work tirelessly to keep the Dalzell and Clydebridge steel plants open. They are committed to finding a buyer for the sites, continuing commercial production and keeping as many jobs as possible onsite and in Scotland.

The strategic importance of the plants to Scotland and the UK cannot be overstated. It is apparent in the specialist skills and knowledge and the innovative approach that are inherent in Clydebridge and Dalzell. According to UK Steel, the Dalzell plant is the only plant in the UK capable of rolling and processing the steel that is used in the Ministry of Defence’s special armour plate and for certain requirements of the offshore oil and gas industry. The Clydebridge plant specialises in producing difficult-to-make high-strength steels that are used in some of the most challenging environments in the world. We truly have a world-class industry that we in Scotland believe is worth fighting for.

However, when the UK Government are faced with an opportunity to fix the issues, they are flat-footed and seem to shy away. A case in point is the issue of tariffs, which has been discussed extensively this evening. It is shameful that the UK Government have actively blocked the proposals to raise tariffs on Chinese steel. The UK Government confirmed in mid-February that they had blocked proposals from EU members to block the dumping of cheap steel products in the EU by China. The Government’s blocking of the proposal came after the Secretary of State signed a joint letter from European Ministers, pledging

“to use every means available and take strong action”

against China and Russia. He has the means at his fingertips, but he chooses not to use them.

The UK Government must work harder with their European partners to address the dumping of cheap steel in European markets, which is, as we all know, undermining UK steel production. Although 2% of UK steel demand was met by Chinese imports in 2011, that figure has been forecast to rise to 8% this year and next. We are all keen to hear from the Minister on that point.

The message is clear: there are vital skills, innovative approaches, and a unique and distinct heritage in Scotland and the UK steel industry, but how far will the Government go to save it? When I was doing research for this debate, I came across an article in the Scunthorpe Telegraph:

“Scunthorpe’s main steel union Community has slammed Business Secretary Sajid Javid for stating the UK steel industry could not expect to be to bailed out in the same way as the banks.”

A spokesman for the Community union said:

“The Prime Minister himself has said that steel making is ‘vital’ to the UK economy, so these are ill-judged remarks from Mr Javid.”

I could not agree more.

The UK Government have the money, political will and determination to bail out the banks, but they cannot find it in their heart, or indeed their pockets, to support an industry that is of vital strategic importance to our economy. I am not, of course, calling for the nationalisation of steel production assets, but I simply suggest that the Government are short on political will and creativity in supporting the steel industry in its time of need.

21:02

[Bill Esterson (Sefton Central) (Lab)]

Again, we are debating the crisis in the steel industry in the context of thousands of job losses, closures of steel plants, and an industry hanging by a thread, with the livelihoods of 20,000 workers, their families and communities under threat, and all that in an industry worth £9.5 billion to the UK economy and which ran a trade surplus in 14 of the last 17 years. The problem we face now is that of the dumping of cheap Chinese steel on the global market. The challenge is how we defend highly skilled British jobs and the future of a vital industry, and safeguard an important source of exports in the face of this crippling and difficult situation. We must support the wider economy by taking a strategic view of what is in the national interest.

We have heard excellent contributions from my hon. Friends the Members for Hartlepool (Mr Wright), for Newport West (Paul Flynn), for Middlesbrough South and East Cleveland (Tom Blenkinsop), for Stockton North (Alex Cunningham), for Neath (Christina Rees), for Aberavon (Stephen Kinnock), for Newport East (Jessica Morden), for Scunthorpe (Nic Dakin), for Cardiff South and Penarth (Stephen Doughty), for Redcar (Anna Turley), for Ellesmere Port and Neston (Justin Madders), for Alyn and Deeside (Mark Tami), for Huddersfield (Mr Sheerman), for Middlesbrough (Andy McDonald), for Ogmore (Huw Irranca-Davies), and for Stoke-on-Trent North (Ruth Smeeth).

The steel industry and the thousands of people that it employs are looking to Parliament and to the Government for support. The industry has come to the Government with five key asks to help to protect jobs and exports. Although there has been some belated progress, the Government’s response overall shows that they are not prepared to take an active role in protecting the steel industry. As my hon. Friend the Member for Hartlepool said when commenting on the excellent BIS Committee report, we must do more at European Union level. The Government claim that four out of five asks have been delivered, but on procurement no orders have been received in steel plants since those changes were made.

My hon. Friend told us that cheap Chinese steel needs effective international action if it is to be tackled. China is responsible for four times the combined production of the next biggest four steel producers, and unless there is co-ordinated, concerted effort internationally to combat illegal dumping, nothing will change. We were told that the British steel industry faces an existential threat through the grossly distorted market, and my hon. Friend’s plea, and that of members of his Committee, was for a co-ordinated approach.

The industry needs swift action on tariffs that protects steel produced in the UK and other EU countries against Chinese dumping, yet our Government have played a role in blocking that. The Prime Minister’s office opposed the idea of fairer tariffs on the grounds that it was protectionism—something confirmed a number of times throughout the Secretary of State’s speech today. Ensuring that we have a level playing field to protect our workers and businesses from a situation that threatens to destroy an entire industry is not protectionism. On the contrary, it is common sense and it is right. As Gareth Stace, the director of UK Steel, said:

“Anti-dumping measures in the EU do not currently have the teeth to halt this tsunami of dumped steel”.

The Government must support the lifting of the lesser duty rule, because otherwise steel manufacturing will be lost in the UK and across Europe. It is a simple ask, and one that is supported by other EU countries, yet the UK Government have failed to stand by their own country’s industries, not just in steel but in ceramics and other energy-intensive industries.

The Government have also shown little action on changing business rates for large manufacturers. I sat in Committee last week with the Minister for Small Business, Industry and Enterprise and heard of her commitment to an overhaul of rates. When it comes to it, however, the review first announced in 2011 is still to start and the industry continues to pay twice when it comes to rates on investment in plant and machinery. The industry was told that helping plant and machinery manufacturers was unaffordable. The Government review rumbles on as we wait to hear what they will do to support investment in plant and machinery. Will they tackle existing competitive disadvantages suffered by UK steel sites on plant and machinery, which account for up to 50% of their business rates?

Serious challenges have coalesced around the steel industry: a glut of global supply, energy costs, high business rates and a strong pound. The industry did not expect the Government to offer a silver bullet. What it rightly expected was for the Government to play their role in what should be a partnership. The most successful economies are characterised by partnership between government, industry and the workforce. For partnership to be effective, the Government have to play their part. Businesses and workers, through the trade unions, have played their part, but what of the Government? The situation demanded that the Government see the long-term strategic value of steel production and act accordingly to protect high-skill jobs and the future of a key strategic industry. The Government, however, failed to intervene to save the Redcar coke ovens. My hon. Friend the Member for Middlesbrough rightly described that lack of support as an act of industrial vandalism.

An industrial strategy is nothing more than a Government’s willingness to enter into a partnership with business and workers: to match their ambitions by looking beyond election cycles and investing in the infrastructure and the training they need to flourish; to see the long-term value of strategic industries; and to take the necessary steps to support and safeguard them. If the Secretary of State and his Ministers want to be a true partner to the steel industry, there are few clearer steps that the Government must take now. [Interruption.] If the Lord Chancellor had been here earlier, he would have heard my hon. Friend the Member for Wallasey (Ms Eagle) saying that.

The Government must block the unfair trading of steel by supporting EU trade defence instruments, allowing the swift implementation of defensive tariffs. The Secretary of State must throw his support behind tariffs and ensure they are set at a level that would protect UK steel. He and his colleagues should support the EU countries that have supported a level of tariffs that will help our industry and our economy. Remember that at one stage it looked as though the Secretary of State accepted the need for change. He signed a letter with counterparts from France, Italy, Germany, Poland, Belgium and Luxembourg demanding that the European Commission use every means available and take strong action in response to unfair trade practices. Sadly, a week later he told the Business, Innovation and Skills Committee that he was opposed to that very action, something he confirmed this evening when he said he was against removing the lesser duty rule. UK Steel director Gareth Stace described the U-turn as “galling” and said that

“government must support the lifting of the lesser duty rule, otherwise steel manufacturing will be lost in the UK and Europe.”

We need to take an active role in tackling Chinese steel dumping and need action on business rates for key industries and capital-intensive firms to level the field for UK steel by pursuing reform of tariffs at EU level. This is what the industry needs. It is what workers and their families need. It is what communities need, and it is what the wider economy needs. Until the Government take these steps, and until the Business Secretary begins to engage with a long-term industrial strategy to defend and promote UK businesses and workers, belated supportive words will be seen as nothing more than empty rhetoric.

21:02

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

I begin by paying tribute to all those who work in our steel industry. As the Prime Minister describes it, it is indeed a vital British industry. Those workers are without doubt hard working, skilled and dedicated. I would like to take this opportunity to congratulate the Community trade union leader, Roy Rickhuss. It is pleasure to do business with him; we do not always agree, but he undoubtedly leads a fine band of men and women. Of course, we also have to remember and recognise all those who have so unfortunately been made redundant in recent times. Our thoughts are indeed with them, their loves ones and their families.

I pay tribute to all hon. Members of all parties who have spoken in the debate. Let me explain the simple truth, which is a harsh fact and reality, as the hon. Member for Redcar (Anna Turley) knows. I was slightly disappointed in her speech, although it has sometimes been a great pleasure to work with her. She well knows that SSI was losing £600 million in just three years, and we all know the huge scale of Tata’s losses. Those are the harsh realities, and no Government can alter the price of steel. In some sectors of steel, prices have halved over a year, while consumption across the world has yet to reach the levels of 2008.

This is not a Government who have stepped back and not done anything. On the contrary, we have seized this nettle and got on with it. We had a steel summit, and the industry made five specific asks of us—and we have delivered on four of those asks. The fifth, which is rates—[Interruption.] As I was saying, on rates, we hope to be able to deliver in the way that I and my right hon. Friend the Secretary of State would like—but we have delivered. It is strange because every time we deliver as we are asked, what do the Opposition do? They just shift the goalposts.

Let us go through the asks and start by looking at procurement. We have changed the rules of procurement, and I was disappointed to hear the hon. Member for Redcar saying that these were only minor and technical changes. Far from it. As my hon. Friend the Member for Torbay (Kevin Foster) said, these are good and valuable changes; they include skills for the supply chain, which are just some of the new factors. Yes, we will evaluate them and make sure that Departments deliver because these are not guidelines—they are mandatory.

The hon. Member for Motherwell and Wishaw (Marion Fellows) says that the Government should do more, but she has not told us whether the SNP in Scotland have changed their procurement rules. We know that they have not. On energy costs, we were asked to take action and we have taken action. We have got compensation and gone further than the ask made of us, and in relation to two of those significant charges, we are going to make sure that these are properly and fully compensated and effectively removed from next year.

Flexibility on the EU emissions directive is another ask on which we have delivered, and then we come to the issue of the dumping of steel by China. It is not just China, if I may say so; it is a number of countries, and that needs to go on the record. I take particular exception to some of the comments made by Labour Members, because in July we voted for the first time for tariffs on wire rod—of some 24% by way of charge. Then we voted again in November.

It is the lesser duty rule that has been so effective. Let me provide an example of the work we have done. On rebar, if we did not have the lesser duty rule, the charge would have been some 66%. In fact, what the industry wanted was a charge of about 20% to 30%. We have worked tirelessly to achieve that. The EU has set the figure at 9% to 13%, and it is this Secretary of State who took that argument and led the charge. We continue to do that with tubes and on cold rolled steel as well. That is the work that this Government have been doing, and I am proud of our record, and we will continue to fight when it comes to tariffs on Chinese and other countries’ steel.

Let me make something clear about the lesser duty rule. What it does is effectively ensure that the right balance is struck so that it is not overly protective, but tariffs are there at the right level to do the right thing by British steel. All that I will say about China and market economy status is that Russia has market economy status, and that has not prevented the European Union from imposing tariffs on it—and rightly so. I suggest that that is another very large red herring tossed in by the Opposition because we have delivered on asks that the industry and the unions have made of us.

What have we done? What has the Secretary of State gone and done? He went to Europe and called an extraordinary meeting of the Competitiveness Council. Far from sitting back in the European Union, we are now taking the lead, and that is why the Competitiveness Council met today. Unfortunately, I have not enough time to go through all the things that have already been achieved because of the action that we have taken in the European Union in order to deliver. For the first time, we are hearing language in the EU that heartens Conservative Members, although I think that Opposition Members simply do not understand it. The statement that was issued today mentions an absolute desire to ensure that competitiveness is at the heart of the future of the steel industry: a desire to reduce regulatory costs, to reduce regulation, and to look at the issues of illegal subsidies and, most important, electricity prices.

Anyone who wants to help out the British steel industry will support Trident, but where was the Leader of the Opposition on Saturday? On a Campaign for Nuclear Disarmament march.

[Dame Rosie Winterton (Doncaster Central) (Lab)]

claimed to move the closure (Standing Order No. 36).

Question put forthwith, That the Question be now put.

Question agreed to.

Main Question accordingly put.

21:57

Division 202

Ayes: 239

---

Labour: 183
Scottish National Party: 46
Independent: 4
Social Democratic & Labour Party: 2
Liberal Democrat: 2
Democratic Unionist Party: 2
Plaid Cymru: 1

Noes: 288

---

Conservative: 287

Commonwealth War Graves Commission: Pension Fund

Monday 29th February 2016 Commons Chamber

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

22:02

[Chris Stephens (Glasgow South West) (SNP)]

I refer to my entry in the Register of Members’ Financial Interests, and my position as chair of the Public and Commercial Services Union parliamentary group. I have secured this debate tonight to bring to the attention of the House the pension fund of employees of the Commonwealth War Graves Commission.

Let me thank the three trade unions that have a membership interest—PCS, Unite the Union and Prospect—for raising these concerns with me and other right hon. and hon. Members, as well as the hon. Member for North Durham (Mr Jones) who serves on the Commission, and the Leader of the House for their helpful information. I must say at this point that I was disappointed with the communication that I received from the War Graves Commission director-general, to which I will return.

The Commonwealth War Graves Commission cares for more than 1,700,000 casualties of the first and second world wars in cemeteries and memorials at more than 23,000 locations in over 150 countries. Indeed, I have two war grave locations in my own constituency. The commission employs more than 1,300 staff worldwide; approximately 250 of whom are on UK-based contracts. Negotiations are also ongoing with the Ministry of Defence to include non-war related graves in the work of the commission.

Staff of the commission take pride in attending to the war graves. It is not just a job, but a way of life and a vocation. Many are from families who have worked for the commission for generations, and many spend their whole working lives in the service of the commission. Jobs at the commission range from gardeners, maintenance and stonemasons to administrators, supervisors, managers, archivists and historians. It is not uncommon for staff to progress through a variety of those roles in the course of their career, re-training and adapting to the needs of the job. There is often a large element of foreign travel and the work can entail working and living abroad for years and even decades; requiring staff to uproot families and learn new languages to adjust. That can have a financial impact too, as spouses have often been unable to have careers. It is disappointing therefore to receive correspondence from the director-general which said that it is hard to argue that our gardeners should enjoy better terms of employment than nurses or members of the armed forces.

Salaries at the commission have also been very modest. A recent Towers Watson global grading and pay review found a need to uprate salaries, leading to most getting an increase of between 1% and 1.5%, or a 1.5% lump sum. Those on the lowest grade were given a minimum £450 increase. Although that is welcome, it nevertheless reflects the fact that salaries over the years have not been commensurate with the job. However, despite some of the sacrifices, staff at the commission remain committed to delivering a high level of service. Most recently, the commemorations of the first world war have required staff to work over and above their normal commitments.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this matter to the House. The number of Members present in the Chamber is an indication of the importance of the subject. In my constituency, we have between 60 and 70 war graves, which are looked after by the War Graves Commission, and they are very important to us in Strangford. What concerns me is the need to have the pensions and the wages correct across the whole of the Commonwealth, not just in the United Kingdom. Does he think that we should look after those graves in the Commonwealth as well as in other parts of the world?

[Chris Stephens]

I thank the hon. Gentleman for his intervention, and I agree with him.

To recognise the special nature of the job, the loyalty of staff and the financial sacrifices staff have made over the years, the commission has held a final salary pension scheme, ensuring financial security for staff who have spent their lives in dedicated service to the commission. The terms of this scheme are good with a low employee contribution, a spouse’s pension, death in service and lump sums based on final salary—40/60ths. That reflects the fact that the pension has traditionally been one of the most important conditions of service, recognising years of dedication and loyalty.

In December 2014, however, the CWGC announced the intention to close the final salary pension scheme in April 2016 and move staff to a far less favourable defined contribution scheme, the Group Pension Plan. The terms of this scheme are much higher employee contribution, lower employer contribution and less of a pension pot at the end. The changes will see a drastic reduction in the pensions of 180 long-serving staff, with some losing more than £6,000 for every year that they draw their pension. The introduction of the new pension will also see a reduction in employer contributions from the current 22.4% of salary to a limit of “up to 15%”. On average, employer contributions will likely be much lower as the 15% rate can be reached only when employees significantly increase their contributions in turn. That came just two years after the Commonwealth War Graves Commission had closed the final salary scheme to new entrants, promising:

“Closure of the scheme to new members does not have a negative impact on the funding of the existing pension scheme…The current pension scheme remains in a relatively strong surplus position when assets and liabilities are calculated on a long term actuarial basis.”

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

My hon. Friend is making a profound speech that chimes with some of the history books that I have read. He is right that the Government will find a lot of money for weapons, but they find less money for the wounded, and it is disappointing and sad that for the dead there is less money still. The facts that my hon. Friend is discussing go contrary to the sweet words that are often said about remembering and honouring the dead in Chambers such as this.

[Chris Stephens]

I thank my hon. Friend for that intervention, and I shall come on to say more about the position of the scheme.

The news of the closure of the final salary scheme has come as a terrible shock to long-serving staff, with more than 50% of those affected within 10 years of normal retirement age, leaving little time to readjust. For some, that has meant completely changing retirement plans as they can no longer afford to retire or as key assumptions such as being able to pay off a mortgage are no longer the case. Staff feel betrayed that what was promised to them for years is suddenly being snatched away.

Let us consider the financial position. In the commission’s statement of accounts of March 2014, the key numbers show a surplus of £1.4 million on income of £67 million, with balance sheet reserves up from £4.3 million to £7.2 million and net current assets up from £1.5 million to £2.2 million. The balance sheet shows an improvement in reserves of £2.9 million, due largely to the improvement of £2.6 million in the pension deficit from £8.3 million to £5.7 million. In its 2015 accounts, the position had changed. The balance sheet showed a deficit of £6.1 million, having been in surplus by £6.7 million in March 2014. The reason was a sharp increase in the deficit shown in the pension scheme, a deterioration of £13 million in the year, taking the deficit to £18.6 million. The background is the effect of the recent three-yearly valuation, which reflected a collapse in the forecast interest rates for the pension fund investments.

My first question to the Minister is: what investments resulted in this change from 2014 to 2015? Despite the commission announcing its intention to close the pension scheme in December 2014, formal consultation with the three trade unions representing staff at the commission—PCS, Prospect and Unite—did not start until June 2015. During the consultation period, the trade unions took a reasoned and helpful approach, proposing numerous alternatives in an attempt to find a solution that both recognised the financial position of the commission and mitigated the most detrimental effects on staff. However, the commission rejected all the proposals, remaining resolute on closing the final salary scheme and moving to a defined contribution scheme.

Proposals were numerous and wide reaching and included increasing member contributions to enable the scheme to stay open. The initial proposal put forward by the trade union side, a proposal that directly addressed the commission’s concerns about the pension scheme deficit and about future risk in the scheme, was as follows. First, it proposed a cap on pensionable earnings for future service with effect from 1 April 2016, which would immediately address the pension scheme deficit by enabling a downward revision of the actuarial costs of the scheme. Secondly, it proposed to increase member contributions from 1.5% to 5%, phased in over the next two years. Thirdly, it suggested that the decision on the closure of the scheme should be postponed for three years, linked to a further valuation of the scheme during 2018. That would enable a considered and measured review of the scheme’s funding, taking account of the previous two proposed measures, both of which would have a positive impact on past service deficit and future service costs. These proposals were rejected almost immediately, with no costing done by the commission, leading the trade unions to believe that the consultation was hollow and the commission was intent on closing the final salary scheme regardless.

The final proposal from the trade unions was the option of CWGC UK-based staff transferring to the civil service Alpha pension scheme, as provided for under the Cabinet Office’s new fair deal. We are aware that many scheduled bodies including English Heritage, the Churches Conservation Trust, the Royal Botanic Gardens, the Imperial War Museum and the British Council have been permitted to join the new civil service pension scheme.

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

I declare an interest as a member of the Commonwealth War Graves Commission. I congratulate the hon. Gentleman on securing the Adjournment debate tonight and I hear what he says, but what he has just suggested was considered. It was not possible, and if people had been transferred to the civil service scheme, the terms offered to them would have been worse.

[Chris Stephens]

I thank the hon. Gentleman for that intervention. He has spoken to me about that privately and I have asked questions about it. His comments are surprising because of the aggregate accrual rates in the Alpha scheme. One of the problems is that there has been no discussion of the actuarial variations between the trade unions and those representing the commission in the talks. I hope the hon. Gentleman will use his good offices to put that right.

The commission’s response was to assert that CWGC staff are not civil servants, making them ineligible to join the Alpha scheme. However, the Office for National Statistics details the CWGC as part of the MOD accounts, and Her Majesty’s Revenue and Customs also lists CWGC staff as civil servants. In fact, the CWGC tends to pick and choose when the civil service hat fits. For example, the 1% pay cap in the public sector is often cited in pay talks as a reason to keep down pay rises.

The trade unions believe that they were never given a satisfactory reason why the CWGC did not apply for admittance as a scheduled body under the Government’s new fair deal policy. Instead of putting forward a case for staff to join Alpha, the commission seemed to decide in advance that they were ineligible to join and then sought confirmation of this from the MOD. The commission’s unwillingness to engage and seek alternatives that would mitigate the financial impact on staff was demonstrated throughout the consultation.

Trade unions repeatedly asked for more information to inform the consultation and aid the consideration of alternatives. However, the commission declined to offer that information, and the trade unions had to conduct much of the consultation without key information. For example, they requested an anonymised breakdown of how the new scheme would financially affect each member of staff, crucial information that would allow unions to see the impact of the proposals and help them put forward alternatives. That request was declined, leaving the unions no option but to ask members to send in their individual statements and to piece them together to form an overall picture.

Staff representatives were denied access to key decision making meetings at which they had requested the opportunity to put forward the case to keep the scheme open. The unions wrote to the commission asking to attend the meeting on 9 December 2015 when the commission put forward its case for closing the scheme to the board of commissioners. The commission wrote back to say that the unions’ attendance would be “inappropriate”.

Despite the trade unions raising numerous concerns and offering reasonable alternatives, the decision to close the final salary scheme appears to have been a fait accompli. The commission made the final decision in December 2015 to go ahead and close the scheme in April 2016. As staff have mentioned, the pension scheme has always been a way of attracting and retaining staff in the commission, and it has featured strongly as part of the overall benefits package that staff have signed up to when joining. To take it away after years of service, when staff are so painfully near retirement, is just unfair. Long-serving staff have put up with great disturbance and sacrifice to their family lives, such as moving to foreign countries. Spouses and partners have often been unable to have careers as a result, and the pension that commission staff accrue should recognise that

Approximately 60% of those affected by the changes are 50 years old or more, so they could be retiring within the next 10 years. Staff within a few years of retirement now have little time to re-adjust their financial planning for retirement, as the alternative Group Pension Plan will not deliver anything like the benefits of the final salary scheme. When changes were made to the civil service pension schemes, protection was given to staff nearing retirement, in recognition of the fact that they would have made financial plans based on the assumption of their existing pension entitlement. That protection has not been offered to staff at the commission.

Closure of the scheme from 1 April 2016 will have a significant detrimental effect on the future pensions of UK-based staff and will cause considerable unrest among employees at a time when they are working hard to further enhance the reputation of the commission with the work on the 1914 to 1918 centenary commemorations. The changes also come at the exact time when workers currently contracted out of the state second pension, as staff in the commission are, will see national insurance contribution increases of 1.4%. From April 2016, staff transferring to the GPP scheme will therefore have the dual disadvantage of paying national insurance increases and pension contribution increases of up to 5% for the new scheme. Closing the final salary pension scheme will create financial difficulty for the commission’s longest-serving, loyal staff, who have sacrificed much for the commission over the years.

The trade unions believe that they have adopted a constructive approach to finding alternatives. However, the commission has refused to make any meaningful changes to its initial position to mitigate the financial impact on staff.

[Mr Kevan Jones]

I do not want to get into a dialogue about this, but I have to say that that is not true. The final scheme was changed, including to help lower-paid staff over the next three years, so changes have been made. I also have to say that I do not recognise the hon. Gentleman’s description of the negotiations, because the trade unions did meet the vice-chair and the secretary-general.

[Chris Stephens]

I thank the hon. Gentleman for that intervention. I am sure that is a discussion he and I can continue to have.

I have a number of questions for the Minister. First, has the decision to close the scheme already been made or is it the case that, in the words of the Leader of the House in a letter to me on 24 February 2016:

“The Commission has undertaken a consultation and is now considering in detail the range of responses received but no decision has yet been taken”?

Secondly, what is the current deficit of the scheme, as of today’s date? Lastly, given what I have outlined in relation to industrial and employee relations, does he not agree that we should ensure that talks begin between the commission and the trade unions—hopefully with ministerial involvement—to share information and actuarial evidence properly and to reach a solution that could be agreed by both sides?

22:02

[The Parliamentary Under-Secretary of State for Defence (Mark Lancaster)]

I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate. I must confess that I find myself in a slightly difficult position, because I have no direct responsibility for this issue, for reasons that I will explain. However, I am determined, as ever, to help in any way I can. Although the hon. Gentleman has asked a number of detailed questions, some of which I hope to be able to address this evening, I will of course write to him in due course about any that I am unable to answer, having approached the Commonwealth War Graves Commission on his behalf.

[Mr Keith Simpson (Broadland) (Con)]

I declare an interest as a parliamentary commissioner on the Commonwealth War Graves Commission. I congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing the debate, which of course was based, quite naturally, largely on submissions from the trade unions. Does my hon. Friend the Minister agree that it is very difficult for him to respond to this debate, because the Commonwealth War Graves Commission is independent and its funding comes not only from Britain but from half a dozen other Commonwealth countries? I have to say that my impression, through my fellow commissioner, the hon. Member for North Durham (Mr Jones), who has been involved in the negotiations, is that the commission has bent over backwards, and in very difficult financial circumstances.

[Mark Lancaster]

Indeed. That is what I was trying very gently to say. None the less, I am keen to help. In fact, the two parliamentary commissioners, sitting on either side of the House, are in many respects much closer to the issue than I am.

The pension arrangements of the commission’s employees are ultimately a matter for the commission’s senior management and for trustees of the scheme. The concerns of the hon. Member for Glasgow South West should, in the first instance, rightly be directed to the commission, which, it must be emphasised, is not even a UK-run organisation, as my right hon. Friend the Member for Broadland (Mr Simpson) said. None the less, I welcome the opportunity to contribute to the debate, not least so that I can pay tribute to the commission for its work before I get on to the issue of pensions.

I am sure that, like me, many hon. Members will have visited one or more of the cemeteries and memorials that are so well cared for by the commission. It is certainly true to say that the commission provides the gold standard in care and that the sites under its care, wherever they may be, are always as well and as lovingly cared for as possible.

[Kirsten Oswald (East Renfrewshire) (SNP)]

Will the Minister give way?

[Mark Lancaster]

I am not going to give way, because I am going to run out of time. The hon. Lady will have to forgive me.

I have been privileged to visit several sites in recent years, including in northern France and on Ascension Island. I have also visited Stanley cemetery in the Falklands, with the hon. Member for North Durham (Mr Jones), and Stanley cemetery in Hong Kong, which is without doubt one of the most striking cemeteries in the world, with its views over Stanley harbour. I often sat there to reflect during my service in Hong Kong.

It would be beneficial to remind ourselves of the origins of the commission. As hon. Members might be aware, it was established by royal charter on 21 May 1917. The provisions were then extended by a supplemental charter on 8 June 1964. In accordance with its royal charter, the commission has the task of commemorating the Commonwealth war dead of the two world wars by making fit provision in perpetuity for their graves and memorials, and of maintaining records of the dead.

The commission ensures that 1.7 million people who died in the two world wars will never be forgotten, and it cares for cemeteries and memorials at 23,000 locations in 154 countries. It is worth pointing out that, within the United Kingdom, it helps us to commemorate more than 300,000 Commonwealth servicemen and women, with their graves numbering 170,000 in more than 13,000 locations across the country.

I would like to take this opportunity to point hon. Members to the commission’s website, which, among other things, details the locations of the more than 140,000 graves that it tends in the UK. People tend to think of the commission in terms of precise ranks of graves in cemeteries on the western front, but there is hardly a town anywhere in the country, let alone a constituency, that does not contain at least one grave tended by the commission.

In this year, when we commemorate the 100th anniversary of the battle of the Somme, it is particularly poignant to remember that those graves and memorials allow us to connect with not just the conflicts of the past, but the people caught up in those conflicts. That reminds us of the cost of such conflicts and of the individuals who paid the ultimate price, and it gives us a very human connection with history.

As I mentioned at the start of my speech, the commission is not a UK-run organisation. Its cost is shared by the member Governments, consisting of Australia, Canada, India, New Zealand, South Africa and the United Kingdom, in proportions based on the number of their graves. That results in the UK contributing almost 80% of the total funding, which was in excess of £47 million in 2015. In addition, the Ministry of Defence provides £1.3 million to the commission for the cost of maintaining 20,000 Boer war graves in South Africa and a further 21,000 non-world war graves around the world.

The commission’s day-to-day operations are overseen by the vice-chairman, Air Chief Marshal Sir Joe French; the high commissioners of member Governments; and eight commissioners drawn from the armed forces, the two largest UK political parties—currently those two commissioners are the hon. Member for North Durham and my right hon. Friend the Member for Broadland—and individuals who bring particular knowledge and experience.

Turning to the issue at hand—the pension fund of employees of the Commonwealth War Graves Commission —I need to be clear that, as an independent Commonwealth body established by royal charter, the commission has no requirement on it to consult Her Majesty’s Government on day-to-day operational matters, including the terms and conditions of its UK workforce. However, as a key stakeholder in the commission, the MOD was consulted on the issue and agreed with the decision to consult about the closure of the scheme.

Formal consultation on commission pensions commenced on 8 June 2015. The commission met the trade unions representing UK employees on five occasions and wrote on a further three occasions, providing detailed responses to alternative proposals that were put forward. I can confirm that all the trade union proposals were costed by the commission’s actuarial advisers, so they were certainly not dismissed out of hand.

The consultation period was extended by two weeks at the request of the trade unions to accommodate annual leave commitments. It closed on 14 September 2015 without agreement being reached. Subsequent to the consultation period, further meetings with the trade unions took place on 23 November and 4 December 2015. Following the consultation, the commission has agreed to the closure of the superannuation scheme with effect from 31 March 2016, and has agreed that members will be automatically enrolled into the commission’s alternative group personal pension scheme with a period of enhanced contributions.

[Chris Stephens]

Will the Minister give way?

[Mark Lancaster]

Of course, but I am running out of time.

[Chris Stephens]

What the Minister says seems to be in direct contradiction with the letter I have from the Leader of the House, which says that no final decision has been made. Can he comment on that?

[Mark Lancaster]

I am happy to clarify that. The members of the scheme will have been notified of the closure, as have the trades unions and trustees. Crucially, I understand that the decision was taken against the background of a 60% increase in the cost of the scheme since 2005, a growing scheme deficit, and a further increase in funding stemming from the 2014 statutory valuation of the scheme. The commission has made it clear that it is unable to meet the additional costs of approximately £1 million a year without a detrimental impact on its core task of commemoration. It is clear that the only way to make such savings would be to place many jobs at risk, as the vast majority of its budget is spent on horticultural labour. As the commission is an organisation funded by six Commonwealth nations, its UK employees represent less than a quarter of its workforce of 1,250. The closure of the superannuation scheme has an impact on approximately 180 of those employees, whose terms and conditions of employment are ultimately a matter for the commission, not the Government.

The Commonwealth War Graves Commission’s funding has been maintained over many years, and this Government have recognised in the House its important and sacred mission. I am sure that hon. Members will join me in commending the commission for its outstanding and vital work. However, I must reiterate that the issue of pensions for the commission’s employees is one for the commission and its trustees rather than the Government. I understand the concerns that have been raised in this debate, and a couple of outstanding questions need to be answered. I am happy to engage with the Commonwealth War Graves Commission on behalf of the hon. Gentleman, and I will write to him in due course.

Question put and agreed to.

22:36

House adjourned.

draft Employment Allowance (Excluded Companies) regulations 2016 Employment Allowance (Increase of Maximum Amount) Regulations 2016 draft social security (Contributions) (Limits and Thresholds amendments and national insurance funds payments) regulations 2016

Monday 29th February 2016 General Committees

The Committee consisted of the following Members:

Chair: Phil Wilson

† Bradshaw, Mr Ben (Exeter) (Lab)

† Burns, Conor (Bournemouth West) (Con)

Cooper, Yvette (Normanton, Pontefract and Castleford) (Lab)

† Davies, Byron (Gower) (Con)

† Gauke, Mr David (Financial Secretary to the Treasury)

† Glen, John (Salisbury) (Con)

† McGinn, Conor (St Helens North) (Lab)

† Marris, Rob (Wolverhampton South West) (Lab)

† Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP)

† Norman, Jesse (Hereford and South Herefordshire) (Con)

† Reynolds, Emma (Wolverhampton North East) (Lab)

† Scully, Paul (Sutton and Cheam) (Con)

Shah, Naz (Bradford West) (Lab)

† Soames, Sir Nicholas (Mid Sussex) (Con)

† Stephens, Chris (Glasgow South West) (SNP)

† Stride, Mel (Lord Commissioner of Her Majesty's Treasury)

† Tracey, Craig (North Warwickshire) (Con)

† Williams, Craig (Cardiff North) (Con)

Fergus Reid, Committee Clerk

† attended the Committee

First Delegated Legislation Committee

Monday 29 February 2016

[Phil Wilson in the Chair]

Draft Employment Allowance (Excluded Companies) Regulations 2016

16:02

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

I beg to move,

That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.

[The Chair]

With this it will be convenient to consider the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63) and the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.

[Mr Gauke]

It is a great pleasure to serve under your chairmanship for, I believe, the first time, Mr Wilson.

All three sets of regulations before the Committee deal with national insurance contributions and it seems sensible to debate them together, so I am grateful that the Committee has agreed to that. As a matter of course, I can confirm that all the regulations are compatible with the European convention on human rights.

The substance of the two employment allowance statutory instruments was announced in the Chancellor’s summer Budget on 8 July last year, while the NICs rates and thresholds for the 2016-17 tax year were announced as part of the autumn statement on 25 November.

I will begin with the Employment Allowance (Increase of Maximum Amount) Regulations 2016. The Government are committed to supporting businesses that want to expand their workforce. To that end, the employment allowance was first announced in the Budget in 2013 as a reduction of up to £2,000 a year for eligible businesses and charities on their employer NICs bill. In the year 2015-16 the allowance has benefited almost 1.2 million employers, helping to cut the cost of employment in the United Kingdom.

The regulations increase the employment allowance to £3,000 from 6 April 2016, further supporting businesses and charities to enable them to grow. As a result, 90,000 more employers will be taken out of employer national insurance contributions altogether. Also, firms will be able to employ four workers full-time on the new national living wage next year without paying any employer national insurance contributions.

The draft Employment Allowance (Excluded Companies) Regulations 2016 focus the employment allowance on companies that support employment. Under these regulations, as was announced in the summer 2015 Budget, from April 2016 limited companies where the director is the sole paid employee will no longer be able to claim the allowance. That ensures that the allowance is focused where it should be, on its original objective of helping businesses with the costs of employment. The draft regulations have been subject to public consultation with interested parties, and that finished in January. Her Majesty’s Revenue and Customs anticipates, taking this measure into account, that about 1 million employers will benefit from the employment allowance in the next tax year.

Finally, as hon. Members may be aware, the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016 contain some technical detail, so I hope that they will bear with me while I explain. The consumer price index rate of inflation is the basis of indexation for most of the national insurance contribution limits and thresholds. The CPI rate of inflation was minus 0.1% in the year to September 2015. As a result, not all the national insurance contribution limits and thresholds will need to be changed in the 2016-17 tax year. The exceptions to this are the upper earnings limit, the upper secondary threshold, the upper profits limit and the new apprentice upper secondary threshold.

The upper earnings limit is the level of earnings at which employees begin to pay class 1 national insurance contributions at the additional percentage rate. It is aligned with the point at which higher rate tax is paid. The upper earnings limit will be increased from £815 to £827 per week from 6 April 2016 to maintain this alignment. The upper secondary threshold is the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of employees under the age of 21. Since its introduction in April 2015, the zero-rate earnings band for employees under the age of 21 has supported the jobs of more than 1.5 million young people. The UST will continue to be aligned with the upper earnings limit and will also be set at £827 a week from 6 April 2016.

From April 2016, employers will also be entitled to a reduction in secondary class 1 national insurance contributions on the earnings of eligible apprentices under the age of 25, which will reduce the cost to employers of providing apprenticeships for young people. The new apprentice upper secondary threshold will be the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of relevant apprentices. Like the UST, it will be aligned with the upper earnings limit, so it will also be set at £827 a week from 6 April 2016.

In relation to the self-employed, the regulations also set the upper profits limit for class 4 contribution liability. The UPL is the level of profits below which the self-employed pay the main class 4 percentage rate of national insurance contributions on profits above the lower profits limit. The UPL will also rise to maintain alignment with the level at which the higher rate of income tax is payable, to £43,000 for the 2016-17 tax year. The regulations also set the prescribed equivalents of the thresholds and limits that I have mentioned for employees paid monthly or annually.

In the 2016-17 tax year, employers will continue to pay contributions at 13.8% on earnings above the secondary threshold. Employees will continue to pay 12% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above that. This is in line with the Government’s commitment in the National Insurance Contributions (Rate Ceilings) Act 2015 to provide certainty for businesses and employees by locking the main rate of class 1 NICs for the duration of this Parliament.

I need to ensure that the national insurance fund can maintain a working balance throughout the coming year, which the Government Actuary recommends should be one sixth of benefit expenditure for the year. The regulations provide for a Treasury grant of up to 5% of benefit expenditure to be made available to the fund in the 2016-17 tax year. A similar provision will also be made in respect of the Northern Ireland national insurance fund.

I commend the regulations to the Committee.

16:37

[Rob Marris (Wolverhampton South West) (Lab)]

It is a pleasure to appear before you again, Mr Wilson. You seem to be getting a taste for matters financial. Looking around the room, the under-representation of women on this Committee is rather disappointing. In the Opposition’s defence, two of our Back Benchers who were not able to come are women, but there is a bit of a problem on the Government Benches.

When the employment allowance was introduced in 2014, the Chancellor of the Exchequer said in a letter to small and medium-sized enterprises:

“Small businesses are the lifeblood of the economy and I want to make it easier for you to succeed and grow.”

Labour totally supports that. We may not always support the instruments employed by the Chancellor of the Exchequer, but we certainly support that goal. In the same letter, the Chancellor of the Exchequer estimated:

“The Employment Allowance will benefit 1.25 million employers next year”—

—he was referring to 2015. Today, the Financial Secretary says that, after the enactment of the regulations on excluded companies, he estimates the figure will be about 1 million. The figures are similar—a lot of businesses gaining a lot of benefit—but there are some problems with how it has been working out.

In May 2015, Her Majesty’s Revenue and Customs itself published a kind of impact assessment: “Awareness and impact of the Employment Allowance— Research with small employers”, HMRC research report 368. One of the key findings, listed on page 4 of the report, is that

“(69%) eligible businesses with fewer than 50 employees had claimed Employment Allowance at the time of this research (November 2014).”

November 2014 was fairly shortly after this came up, but take-up was not great then. The research also found that

“Non-claimants were more likely to be micro businesses (<5 employees).”

Again, that is a bit of a problem, because we hope to nurture microbusinesses and boost employment by encouraging them, through tax reliefs and other measures, to take on an additional employee or part-time employee.

On the credit side, the findings of the November 2014 impact document included a statement that

“Awareness of Employment Allowance is high amongst both claimants and non-claimants.”

I find it slightly strange that awareness was high among non-claimants, but the report delineates some reasons for that. Furthermore, take-up appears to have gone up: HMRC statistics for April to October 2014 show a 68% take-up rate.

In paragraph 7.1 of the explanatory memorandum for the regulations before us, the take-up rate is estimated to be 89%, which is a considerable improvement in a year and a half. However, one has to look also at the efficacy of the measure, or the lack thereof. No one is quite sure of the number, but there seem to be about 1,200 tax reliefs, and a National Audit Office report found that HMRC was keeping tabs on the efficacy or otherwise of fewer than 300 of them. Regarding the efficacy of the employment allowance in increasing employment, laudable though the goal is, there are some question marks over whether it has altered behaviour as much as its proponents and we would have wished.

On page 28 of the impact report is a table showing the behaviour of employers—the claimants—with regard to investment that would have happened without employment allowance: 20% of employers would have engaged in it anyway, whether or not the allowance existed; 2% would have done some of what they did, but had been able to do more, which is encouraging; and 6% would not have engaged in the activity but for the availability of employment allowance. In terms of taking on additional staff, however, according to table 6.3 on page 29 of the report, the net effect on investment in staff as a percentage of claimants was 6%, but 3% of respondents who were claimants had taken on additional members of staff because of the measure. There are questions to be answered, and the report concludes:

“While take up has been successful and awareness of the scheme is high, it has had relatively little impact on employment.”

As I am sure the Minister remembers vividly, he himself said when the measure was debated in the Public Bill Committee that

“there is a particular problem with including the new clause—assessing how many jobs are created as a result of the allowance, because of the inherent complexity in that matter.”––[Official Report, National Insurance Contributions Public Bill Committee, 21 November 2013; c. 58.]

That was before the measures that we are amending today came into effect. Even then assessment was difficult, but two and a half years later there is still a huge problem measuring whether this tax measure has much of the intended effect on behaviour.

The measure is expensive. The Office for Budget Responsibility certified the figures in a table on the summer Budget 2015 indicating that for the current tax year the employment allowance tax relief would cost the Government £630 million of forgone revenue. That figure stays in the £600 millions through to 2020 in those projections. That is quite a lot of money, even for the Revenue, which deals with very big sums.

Perhaps the Minister can reassure me on this, but employment allowance seems to be a bit of a blunt instrument, because while it has a disproportionate effect—or one hopes it does—on microbusinesses, it will remain available to all businesses of whatever size, unless they are the ones excluded under the regulations I am about to discuss.

I understand that HMRC carried out a technical consultation on director-only companies and the excluded companies regulations before us that ran from 26 November 2015 to 3 January 2016. The Minister may correct me, but I am not aware that HMRC has published a summary of responses to that consultation. I hope he can tell me that I am wrong and that such a summary has been published. There is reference to that consultation in paragraph 8.1 of the explanatory memorandum to the regulations:

“Some stakeholders raised concerns that the measure may be vulnerable to avoidance behaviour”.

I may be misreading this, and the Minister can reassure me if that is the case, but looking at the measure it seems as if a self-employed person who is a company, as it were—the regulations are to do with businesses that are director-only and have one employee—could easily drive a coach and horses through the regulations and avoid their effect by signing up a spouse as a director. That is not uncommon for, say, a plumber who wants to have her husband on the books and maybe even claim the personal allowance, which has now gone up a lot, so there is quite an attraction to do so. We would then have two directors—two employees—off to the races and claiming employment allowance. I may be wrong, but it seems that a spouse—it would not have to be a spouse, obviously—could be on the books as a director or a nominal employee, which would be a body swerve right around the regulations. If those companies were technically limited liability companies, they would no longer be excluded from receiving employment allowance. I seek some reassurance from the Minister on that.

Finally, I turn to the social security measures. I understand the annual uprating and so on, but perhaps the Minister can reassure me. There appears at the bottom of the scale to be some fiscal drag, as I think it is called. While the top end has been uprated in line with the CPI—although in the period concerned, I believe the CPI was in fact negative—the bottom end has not, so the value of money has changed but those paying more would be affected.

I hope the Minister can explain this technical point to me, because I may be misunderstanding it. When taken together, paragraphs 7.6 and 7.7 of the explanatory memorandum—I appreciate it is not the same as the regulations themselves, but many of us find explanatory memorandums helpful—appear to me to indicate that an employer who employs an apprentice will not have to pay employers’ national insurance contributions whatever the apprentice’s earnings level, provided the apprentice is under 25. That is no bad thing, as long as one has an adequate definition within HMRC rules of an apprentice. I think we already do, because of the minimum wage legislation and so on, but perhaps the Minister could, for my benefit, clarify whether the regulations will let employers off the hook, so to speak, for NICs for employees under 25 who are apprentices.

16:02

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Wilson, and to see Members who have been on many Committees with me in my short career here. I commend the hon. Member for Wolverhampton South West for his detailed scrutiny of the regulations.

The Scottish National party’s perspective is that the regulations faithfully enact what the Government announced in both the Budget and the autumn statement. In that regard, I do not see anything technically troublesome about the implementation of the regulations. We might disagree about the policy backdrop and we might think that more could be done to encourage the employment of apprentices. In Scotland, for example, an apprenticeship applies only to a full-time job, so we would want more done to enable that to occur. However, in broad terms, given the answers to the hon. Member for Wolverhampton South West, we are content with the proposals.

16:02

[Mr Gauke]

I am grateful for hon. Members’ remarks on the regulations. I will pick up some of the points raised, particularly by the hon. Member for Wolverhampton South West. On the broader issues to do with the efficacy of the employment allowance, the hon. Gentleman talked about take-up. The most recent take-up statistics released in October last year show 1.17 million employers benefiting from the allowance. Around 680,000 employers—48% of all employers—have been lifted out of employer national insurance contributions altogether since the employment allowance was introduced in 2014-15. A further 90,000 employers are expected to be taken out of NICs when the employment allowance rises to £3,000 as a consequence of one of the regulations before us. It is worth pointing out that over 90% of the benefit of the allowance goes to small businesses with fewer than 50 employees.

In terms of what employers do with the employment allowance, that is a matter for them. The hon. Gentleman was right to refer to the debate that those of us who were around at the time had in respect of the primary legislation. The Government were careful not to put a specific number on this, because it depends on how people make use of the sums involved. Ultimately, it is up to employers as to how they use the allowance. We have not set targets for the number of jobs that we expect to be created. According to research by the Federation of Small Businesses, 29% of small businesses will use the employment allowance to boost staff wages; 28% will employ additional staff; and 24% will invest in resources. This is not attributable to one policy, but we are in the position where we have record levels of employment in this country. A measure that reduces the tax liability for businesses, particularly smaller business, plays a role in ensuring that we have a climate in which job creation is encouraged, and it has helped contribute to record levels of employment.

On the cost of the employment allowance, it is forecast to cost the Government approximately £1.4 billion in 2015-16 in tax revenue forgone, and 98% of that tax revenue is to the benefit of small and medium-sized businesses or employers employing fewer than 250 people. On the value for money assessment, the Government will internally review the employment allowance on various criteria, such as take-up levels, to determine the overall value for money of the policy. As a part of this process, we will speak to interested parties to gauge their views of the allowance and to ascertain ways in which their members are using it. However, at this point, we are encouraged by the wide take-up of the employment allowance; it is helping feed through into an environment that is good for employment and good for our constituents. I am sure it is not the intention of the hon. Member for Wolverhampton South West, but I hope that no one who reads his contributions would jump to the conclusion that the official Opposition are looking to abandon the employment allowance in order to save funds to use for other purposes, because that would be damaging for the many smaller businesses in this country that have done so much to ensure that we have such high levels of employment.

[Rob Marris]

I started my remarks with a quote from the Chancellor of the Exchequer, with which I agree, on support for small business. However, when dealing with revenue and revenue forgone, we must bear in mind the question of opportunity cost. In round terms, the figures that I have show that it is costing £560 million a year; the Minister talked about £1.4 billion. Either way, it is a lot of money. One has to consider whether such revenue support to encourage businesses to grow, a concept that we support, could be better spent by the Revenue in other ways. For that, one needs to measure. It is a question of how one allocates that money, not of support for business.

[Mr Gauke]

I note the hon. Gentleman’s remarks, which will no doubt be studied closely, probably by someone in Conservative Campaign Headquarters.

The hon. Gentleman and others have raised concern that the single director provisions could be avoided. We do not accept that avoidance behaviour will be as widespread as has sometimes been suggested. There are anti-avoidance provisions in the original legislation, and the proposed measures strike the right balance between maximising yield for HMRC, on the one hand, and ensuring that tax changes do not affect genuine businesses and charities that create employment, on the other hand. The anti-avoidance provision in the National Insurance Contributions Act 2014 provides that employers who would qualify for the employment allowance only by virtue of avoidance arrangements are disqualified. To be entitled to the allowance, companies with a single director cannot simply pay a second employee £10 to requalify. Rather, the regulations will mean that they must pay the second employee enough to accrue a secondary class 1 national insurance contributions liability, which is currently more than £156 a week.

The relief for apprentices under the age of 25 will be simple for employers to claim by inputting information in their payroll software. HMRC published guidance on 2 February 2016 on gov.uk to let employers know how to apply the relief and which evidence they are required to hold to ensure that it has been properly applied. That will include a record of the framework or standard being followed, which has also been publicised via HMRC’s employer bulletin. Ahead of the next tax year, HMRC will work with the Department for Business, Innovation and Skills to circulate the guidance further.

The purpose of the measure in relation to apprentices under the age of 25 is to provide support to businesses, which is helpful in improving the skills of the workforce in the UK. It is right that we use the national insurance contributions system to encourage employers that are undertaking expenditure in that area. The measure will be welcomed by employers, and it will help to achieve very ambitious targets in ensuring that far more people undertake apprenticeships in this country than in the past. We have seen dramatic progress in recent years, and we wish that to continue. The measure on apprentices under the age of 25 is part of that process.

I hope those points are helpful, and I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.

Employment Allowance (Increase of Maximum Amount) Regulations 2016

Resolved,

That the Committee has considered the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63).—(Mr Gauke.)

draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016

Resolved,

That the Committee has considered the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.—(Mr Gauke.)

17:01

Committee rose.

The Committee consisted of the following Members:

Chair: Phil Wilson

† Bradshaw, Mr Ben (Exeter) (Lab)

† Burns, Conor (Bournemouth West) (Con)

Cooper, Yvette (Normanton, Pontefract and Castleford) (Lab)

† Davies, Byron (Gower) (Con)

† Gauke, Mr David (Financial Secretary to the Treasury)

† Glen, John (Salisbury) (Con)

† McGinn, Conor (St Helens North) (Lab)

† Marris, Rob (Wolverhampton South West) (Lab)

† Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP)

† Norman, Jesse (Hereford and South Herefordshire) (Con)

† Reynolds, Emma (Wolverhampton North East) (Lab)

† Scully, Paul (Sutton and Cheam) (Con)

Shah, Naz (Bradford West) (Lab)

† Soames, Sir Nicholas (Mid Sussex) (Con)

† Stephens, Chris (Glasgow South West) (SNP)

† Stride, Mel (Lord Commissioner of Her Majesty's Treasury)

† Tracey, Craig (North Warwickshire) (Con)

† Williams, Craig (Cardiff North) (Con)

Fergus Reid, Committee Clerk

† attended the Committee

First Delegated Legislation Committee

Monday 29 February 2016

[Phil Wilson in the Chair]

Draft Employment Allowance (Excluded Companies) Regulations 2016

16:30

I beg to move,

That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.

With this it will be convenient to consider the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63) and the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.

It is a great pleasure to serve under your chairmanship for, I believe, the first time, Mr Wilson.

All three sets of regulations before the Committee deal with national insurance contributions and it seems sensible to debate them together, so I am grateful that the Committee has agreed to that. As a matter of course, I can confirm that all the regulations are compatible with the European convention on human rights.

The substance of the two employment allowance statutory instruments was announced in the Chancellor’s summer Budget on 8 July last year, while the NICs rates and thresholds for the 2016-17 tax year were announced as part of the autumn statement on 25 November.

I will begin with the Employment Allowance (Increase of Maximum Amount) Regulations 2016. The Government are committed to supporting businesses that want to expand their workforce. To that end, the employment allowance was first announced in the Budget in 2013 as a reduction of up to £2,000 a year for eligible businesses and charities on their employer NICs bill. In the year 2015-16 the allowance has benefited almost 1.2 million employers, helping to cut the cost of employment in the United Kingdom.

The regulations increase the employment allowance to £3,000 from 6 April 2016, further supporting businesses and charities to enable them to grow. As a result, 90,000 more employers will be taken out of employer national insurance contributions altogether. Also, firms will be able to employ four workers full-time on the new national living wage next year without paying any employer national insurance contributions.

The draft Employment Allowance (Excluded Companies) Regulations 2016 focus the employment allowance on companies that support employment. Under these regulations, as was announced in the summer 2015 Budget, from April 2016 limited companies where the director is the sole paid employee will no longer be able to claim the allowance. That ensures that the allowance is focused where it should be, on its original objective of helping businesses with the costs of employment. The draft regulations have been subject to public consultation with interested parties, and that finished in January. Her Majesty’s Revenue and Customs anticipates, taking this measure into account, that about 1 million employers will benefit from the employment allowance in the next tax year.

Finally, as hon. Members may be aware, the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016 contain some technical detail, so I hope that they will bear with me while I explain. The consumer price index rate of inflation is the basis of indexation for most of the national insurance contribution limits and thresholds. The CPI rate of inflation was minus 0.1% in the year to September 2015. As a result, not all the national insurance contribution limits and thresholds will need to be changed in the 2016-17 tax year. The exceptions to this are the upper earnings limit, the upper secondary threshold, the upper profits limit and the new apprentice upper secondary threshold.

The upper earnings limit is the level of earnings at which employees begin to pay class 1 national insurance contributions at the additional percentage rate. It is aligned with the point at which higher rate tax is paid. The upper earnings limit will be increased from £815 to £827 per week from 6 April 2016 to maintain this alignment. The upper secondary threshold is the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of employees under the age of 21. Since its introduction in April 2015, the zero-rate earnings band for employees under the age of 21 has supported the jobs of more than 1.5 million young people. The UST will continue to be aligned with the upper earnings limit and will also be set at £827 a week from 6 April 2016.

From April 2016, employers will also be entitled to a reduction in secondary class 1 national insurance contributions on the earnings of eligible apprentices under the age of 25, which will reduce the cost to employers of providing apprenticeships for young people. The new apprentice upper secondary threshold will be the level below which employers are entitled to a 0% rate of national insurance contributions on the earnings of relevant apprentices. Like the UST, it will be aligned with the upper earnings limit, so it will also be set at £827 a week from 6 April 2016.

In relation to the self-employed, the regulations also set the upper profits limit for class 4 contribution liability. The UPL is the level of profits below which the self-employed pay the main class 4 percentage rate of national insurance contributions on profits above the lower profits limit. The UPL will also rise to maintain alignment with the level at which the higher rate of income tax is payable, to £43,000 for the 2016-17 tax year. The regulations also set the prescribed equivalents of the thresholds and limits that I have mentioned for employees paid monthly or annually.

In the 2016-17 tax year, employers will continue to pay contributions at 13.8% on earnings above the secondary threshold. Employees will continue to pay 12% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above that. This is in line with the Government’s commitment in the National Insurance Contributions (Rate Ceilings) Act 2015 to provide certainty for businesses and employees by locking the main rate of class 1 NICs for the duration of this Parliament.

I need to ensure that the national insurance fund can maintain a working balance throughout the coming year, which the Government Actuary recommends should be one sixth of benefit expenditure for the year. The regulations provide for a Treasury grant of up to 5% of benefit expenditure to be made available to the fund in the 2016-17 tax year. A similar provision will also be made in respect of the Northern Ireland national insurance fund.

I commend the regulations to the Committee.

16:37

It is a pleasure to appear before you again, Mr Wilson. You seem to be getting a taste for matters financial. Looking around the room, the under-representation of women on this Committee is rather disappointing. In the Opposition’s defence, two of our Back Benchers who were not able to come are women, but there is a bit of a problem on the Government Benches.

When the employment allowance was introduced in 2014, the Chancellor of the Exchequer said in a letter to small and medium-sized enterprises:

“Small businesses are the lifeblood of the economy and I want to make it easier for you to succeed and grow.”

Labour totally supports that. We may not always support the instruments employed by the Chancellor of the Exchequer, but we certainly support that goal. In the same letter, the Chancellor of the Exchequer estimated:

“The Employment Allowance will benefit 1.25 million employers next year”—

—he was referring to 2015. Today, the Financial Secretary says that, after the enactment of the regulations on excluded companies, he estimates the figure will be about 1 million. The figures are similar—a lot of businesses gaining a lot of benefit—but there are some problems with how it has been working out.

In May 2015, Her Majesty’s Revenue and Customs itself published a kind of impact assessment: “Awareness and impact of the Employment Allowance— Research with small employers”, HMRC research report 368. One of the key findings, listed on page 4 of the report, is that

“(69%) eligible businesses with fewer than 50 employees had claimed Employment Allowance at the time of this research (November 2014).”

November 2014 was fairly shortly after this came up, but take-up was not great then. The research also found that

“Non-claimants were more likely to be micro businesses (<5 employees).”

Again, that is a bit of a problem, because we hope to nurture microbusinesses and boost employment by encouraging them, through tax reliefs and other measures, to take on an additional employee or part-time employee.

On the credit side, the findings of the November 2014 impact document included a statement that

“Awareness of Employment Allowance is high amongst both claimants and non-claimants.”

I find it slightly strange that awareness was high among non-claimants, but the report delineates some reasons for that. Furthermore, take-up appears to have gone up: HMRC statistics for April to October 2014 show a 68% take-up rate.

In paragraph 7.1 of the explanatory memorandum for the regulations before us, the take-up rate is estimated to be 89%, which is a considerable improvement in a year and a half. However, one has to look also at the efficacy of the measure, or the lack thereof. No one is quite sure of the number, but there seem to be about 1,200 tax reliefs, and a National Audit Office report found that HMRC was keeping tabs on the efficacy or otherwise of fewer than 300 of them. Regarding the efficacy of the employment allowance in increasing employment, laudable though the goal is, there are some question marks over whether it has altered behaviour as much as its proponents and we would have wished.

On page 28 of the impact report is a table showing the behaviour of employers—the claimants—with regard to investment that would have happened without employment allowance: 20% of employers would have engaged in it anyway, whether or not the allowance existed; 2% would have done some of what they did, but had been able to do more, which is encouraging; and 6% would not have engaged in the activity but for the availability of employment allowance. In terms of taking on additional staff, however, according to table 6.3 on page 29 of the report, the net effect on investment in staff as a percentage of claimants was 6%, but 3% of respondents who were claimants had taken on additional members of staff because of the measure. There are questions to be answered, and the report concludes:

“While take up has been successful and awareness of the scheme is high, it has had relatively little impact on employment.”

As I am sure the Minister remembers vividly, he himself said when the measure was debated in the Public Bill Committee that

“there is a particular problem with including the new clause—assessing how many jobs are created as a result of the allowance, because of the inherent complexity in that matter.”––[Official Report, National Insurance Contributions Public Bill Committee, 21 November 2013; c. 58.]

That was before the measures that we are amending today came into effect. Even then assessment was difficult, but two and a half years later there is still a huge problem measuring whether this tax measure has much of the intended effect on behaviour.

The measure is expensive. The Office for Budget Responsibility certified the figures in a table on the summer Budget 2015 indicating that for the current tax year the employment allowance tax relief would cost the Government £630 million of forgone revenue. That figure stays in the £600 millions through to 2020 in those projections. That is quite a lot of money, even for the Revenue, which deals with very big sums.

Perhaps the Minister can reassure me on this, but employment allowance seems to be a bit of a blunt instrument, because while it has a disproportionate effect—or one hopes it does—on microbusinesses, it will remain available to all businesses of whatever size, unless they are the ones excluded under the regulations I am about to discuss.

I understand that HMRC carried out a technical consultation on director-only companies and the excluded companies regulations before us that ran from 26 November 2015 to 3 January 2016. The Minister may correct me, but I am not aware that HMRC has published a summary of responses to that consultation. I hope he can tell me that I am wrong and that such a summary has been published. There is reference to that consultation in paragraph 8.1 of the explanatory memorandum to the regulations:

“Some stakeholders raised concerns that the measure may be vulnerable to avoidance behaviour”.

I may be misreading this, and the Minister can reassure me if that is the case, but looking at the measure it seems as if a self-employed person who is a company, as it were—the regulations are to do with businesses that are director-only and have one employee—could easily drive a coach and horses through the regulations and avoid their effect by signing up a spouse as a director. That is not uncommon for, say, a plumber who wants to have her husband on the books and maybe even claim the personal allowance, which has now gone up a lot, so there is quite an attraction to do so. We would then have two directors—two employees—off to the races and claiming employment allowance. I may be wrong, but it seems that a spouse—it would not have to be a spouse, obviously—could be on the books as a director or a nominal employee, which would be a body swerve right around the regulations. If those companies were technically limited liability companies, they would no longer be excluded from receiving employment allowance. I seek some reassurance from the Minister on that.

Finally, I turn to the social security measures. I understand the annual uprating and so on, but perhaps the Minister can reassure me. There appears at the bottom of the scale to be some fiscal drag, as I think it is called. While the top end has been uprated in line with the CPI—although in the period concerned, I believe the CPI was in fact negative—the bottom end has not, so the value of money has changed but those paying more would be affected.

I hope the Minister can explain this technical point to me, because I may be misunderstanding it. When taken together, paragraphs 7.6 and 7.7 of the explanatory memorandum—I appreciate it is not the same as the regulations themselves, but many of us find explanatory memorandums helpful—appear to me to indicate that an employer who employs an apprentice will not have to pay employers’ national insurance contributions whatever the apprentice’s earnings level, provided the apprentice is under 25. That is no bad thing, as long as one has an adequate definition within HMRC rules of an apprentice. I think we already do, because of the minimum wage legislation and so on, but perhaps the Minister could, for my benefit, clarify whether the regulations will let employers off the hook, so to speak, for NICs for employees under 25 who are apprentices.

16:49

It is a pleasure to serve under your chairmanship, Mr Wilson, and to see Members who have been on many Committees with me in my short career here. I commend the hon. Member for Wolverhampton South West for his detailed scrutiny of the regulations.

The Scottish National party’s perspective is that the regulations faithfully enact what the Government announced in both the Budget and the autumn statement. In that regard, I do not see anything technically troublesome about the implementation of the regulations. We might disagree about the policy backdrop and we might think that more could be done to encourage the employment of apprentices. In Scotland, for example, an apprenticeship applies only to a full-time job, so we would want more done to enable that to occur. However, in broad terms, given the answers to the hon. Member for Wolverhampton South West, we are content with the proposals.

16:50

I am grateful for hon. Members’ remarks on the regulations. I will pick up some of the points raised, particularly by the hon. Member for Wolverhampton South West. On the broader issues to do with the efficacy of the employment allowance, the hon. Gentleman talked about take-up. The most recent take-up statistics released in October last year show 1.17 million employers benefiting from the allowance. Around 680,000 employers—48% of all employers—have been lifted out of employer national insurance contributions altogether since the employment allowance was introduced in 2014-15. A further 90,000 employers are expected to be taken out of NICs when the employment allowance rises to £3,000 as a consequence of one of the regulations before us. It is worth pointing out that over 90% of the benefit of the allowance goes to small businesses with fewer than 50 employees.

In terms of what employers do with the employment allowance, that is a matter for them. The hon. Gentleman was right to refer to the debate that those of us who were around at the time had in respect of the primary legislation. The Government were careful not to put a specific number on this, because it depends on how people make use of the sums involved. Ultimately, it is up to employers as to how they use the allowance. We have not set targets for the number of jobs that we expect to be created. According to research by the Federation of Small Businesses, 29% of small businesses will use the employment allowance to boost staff wages; 28% will employ additional staff; and 24% will invest in resources. This is not attributable to one policy, but we are in the position where we have record levels of employment in this country. A measure that reduces the tax liability for businesses, particularly smaller business, plays a role in ensuring that we have a climate in which job creation is encouraged, and it has helped contribute to record levels of employment.

On the cost of the employment allowance, it is forecast to cost the Government approximately £1.4 billion in 2015-16 in tax revenue forgone, and 98% of that tax revenue is to the benefit of small and medium-sized businesses or employers employing fewer than 250 people. On the value for money assessment, the Government will internally review the employment allowance on various criteria, such as take-up levels, to determine the overall value for money of the policy. As a part of this process, we will speak to interested parties to gauge their views of the allowance and to ascertain ways in which their members are using it. However, at this point, we are encouraged by the wide take-up of the employment allowance; it is helping feed through into an environment that is good for employment and good for our constituents. I am sure it is not the intention of the hon. Member for Wolverhampton South West, but I hope that no one who reads his contributions would jump to the conclusion that the official Opposition are looking to abandon the employment allowance in order to save funds to use for other purposes, because that would be damaging for the many smaller businesses in this country that have done so much to ensure that we have such high levels of employment.

I started my remarks with a quote from the Chancellor of the Exchequer, with which I agree, on support for small business. However, when dealing with revenue and revenue forgone, we must bear in mind the question of opportunity cost. In round terms, the figures that I have show that it is costing £560 million a year; the Minister talked about £1.4 billion. Either way, it is a lot of money. One has to consider whether such revenue support to encourage businesses to grow, a concept that we support, could be better spent by the Revenue in other ways. For that, one needs to measure. It is a question of how one allocates that money, not of support for business.

I note the hon. Gentleman’s remarks, which will no doubt be studied closely, probably by someone in Conservative Campaign Headquarters.

The hon. Gentleman and others have raised concern that the single director provisions could be avoided. We do not accept that avoidance behaviour will be as widespread as has sometimes been suggested. There are anti-avoidance provisions in the original legislation, and the proposed measures strike the right balance between maximising yield for HMRC, on the one hand, and ensuring that tax changes do not affect genuine businesses and charities that create employment, on the other hand. The anti-avoidance provision in the National Insurance Contributions Act 2014 provides that employers who would qualify for the employment allowance only by virtue of avoidance arrangements are disqualified. To be entitled to the allowance, companies with a single director cannot simply pay a second employee £10 to requalify. Rather, the regulations will mean that they must pay the second employee enough to accrue a secondary class 1 national insurance contributions liability, which is currently more than £156 a week.

The relief for apprentices under the age of 25 will be simple for employers to claim by inputting information in their payroll software. HMRC published guidance on 2 February 2016 on gov.uk to let employers know how to apply the relief and which evidence they are required to hold to ensure that it has been properly applied. That will include a record of the framework or standard being followed, which has also been publicised via HMRC’s employer bulletin. Ahead of the next tax year, HMRC will work with the Department for Business, Innovation and Skills to circulate the guidance further.

The purpose of the measure in relation to apprentices under the age of 25 is to provide support to businesses, which is helpful in improving the skills of the workforce in the UK. It is right that we use the national insurance contributions system to encourage employers that are undertaking expenditure in that area. The measure will be welcomed by employers, and it will help to achieve very ambitious targets in ensuring that far more people undertake apprenticeships in this country than in the past. We have seen dramatic progress in recent years, and we wish that to continue. The measure on apprentices under the age of 25 is part of that process.

I hope those points are helpful, and I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Employment Allowance (Excluded Companies) Regulations 2016.

Employment Allowance (Increase of Maximum Amount) Regulations 2016

Resolved,

That the Committee has considered the Employment Allowance (Increase of Maximum Amount) Regulations 2016 (S.I., 2016, No. 63).—(Mr Gauke.)

draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016

Resolved,

That the Committee has considered the draft Social Security (Contributions) (Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2016.—(Mr Gauke.)

17:01

Committee rose.

Draft Immigration (Health Charge) (Amendment) Order 2016

Monday 29th February 2016 General Committees

The Committee consisted of the following Members:

Chair: Mr Adrian Bailey

† Arkless, Richard (Dumfries and Galloway) (SNP)

† Brokenshire, James (Minister for Immigration)

† Creasy, Stella (Walthamstow) (Lab/Co-op)

† Elphicke, Charlie (Lord Commissioner of Her Majesty's Treasury)

Fox, Dr Liam (North Somerset) (Con)

Harris, Carolyn (Swansea East) (Lab)

† Hayman, Sue (Workington) (Lab)

† Jenkyns, Andrea (Morley and Outwood) (Con)

Johnson, Alan (Kingston upon Hull West and Hessle) (Lab)

† McLaughlin, Anne (Glasgow North East) (SNP)

† Merriman, Huw (Bexhill and Battle) (Con)

† Mills, Nigel (Amber Valley) (Con)

† Pickles, Sir Eric (Brentwood and Ongar) (Con)

† Robinson, Mary (Cheadle) (Con)

† Starmer, Keir (Holborn and St Pancras) (Lab)

† Stuart, Ms Gisela (Birmingham, Edgbaston) (Lab)

† Sturdy, Julian (York Outer) (Con)

† Whittaker, Craig (Calder Valley) (Con)

Joanna Welham, Committee Clerk

† attended the Committee

Third Delegated Legislation Committee

Monday 29 February 2016

[Mr Adrian Bailey in the Chair]

Draft Immigration (Health Charge) (Amendment) Order 2016

16:02

[The Minister for Immigration (James Brokenshire)]

I beg to move,

That the Committee has considered the draft Immigration (Health Charge) (Amendment) Order 2016.

The immigration health charge was introduced in April last year by the Immigration (Health Charge) Order 2015 and is paid by non-European economic area temporary migrants who apply for a visa for more than six months or who apply to extend their stay in the UK. The charge, which is set at the rate of £200 per annum per migrant and at a discounted rate of £150 per annum for students, ensures that migrants, unless they are subject to an exemption, contribute to the national health service in a manner in line with their immigration status.

The full amount of the charge, covering the entire period of stay, is collected by the Home Office up-front as part of the immigration application process. If an application is refused, rejected or withdrawn, the charge is refunded. Those who pay the charge receive NHS care in the same way as a permanent resident, subject to the same clinical need and waiting times, for as long as their leave remains still valid. That means that they only pay charges that a UK resident would also pay, such as dentistry charges and prescription charges in England.

In the first six months since its introduction, the immigration health charge collected more than £100 million in income for the NHS. The Government estimate that the charge could raise as much as £1.7 billion at present value over 10 years. That represents an important source of new income for the NHS—income that is shared between the NHS in England, Scotland, Wales and Northern Ireland using the formula devised by Lord Barnett, and spent as they see fit. Exemptions from the requirement to pay the charge are listed in schedule 2 of the Immigration (Health Charge) Order 2015. Those include exemptions for visitors, certain vulnerable groups and nationals of Australia and New Zealand.

That leads us to the purpose of today’s debate. This order amends the 2015 order by removing the exemption from paying the charge that applies to Australian and New Zealand nationals, by reducing the amount of the charge payable by youth mobility scheme migrants from £200 to £150 per annum and by making a minor and technical change to update the references in the 2015 order to the part of the immigration rules that relates to visitors.

The UK, Australia and New Zealand all face the challenges of increasing healthcare costs and the management of migration flows. We regularly discuss these challenges with Australia and New Zealand and have held consultations with them on the health charge since 2013. In December, the Secretary of State for Health confirmed with his Australian and New Zealand counterparts our intention to apply the health charge to nationals of these two countries.

We greatly value our close relationship with Australia and New Zealand and remain committed to strengthening the relationship between our countries. For that reason, we are retaining our reciprocal healthcare agreements with Australia and New Zealand. These agreements provide that short-term visitors to the UK from Australia and New Zealand are entitled to some NHS treatment free of charge. In turn, that is reciprocated when our citizens visit there.

The health charge is compatible with the terms of these agreements, as the agreements do not apply to the longer-term, temporary migrants from these countries who fall within the surcharge’s scope. It is also important to emphasise that the terms on which Australian and New Zealand nationals may use the NHS remain generous. The health charge is set well below the average per capita cost to the NHS of treating temporary migrants and below the rate that migrants might expect to pay for health insurance in competitive countries.

Visitors, such as tourists, from Australia and New Zealand will not pay the health charge and will continue to benefit from the reciprocal health agreements that we hold with those countries. In 2014, nearly 70% of the total number of Australian and New Zealand nationals who came to the UK did so as visitors. This group will continue to receive free-of-charge NHS care for health conditions that arise during their stay and which require immediate or prompt attention.

In addition to healthcare provided under the terms of our reciprocal healthcare agreements, we do not charge Australian and New Zealand nationals, or indeed any migrant, for the use of NHS primary care services, such as GP or nurse consultations, or for treatment in an accident and emergency department. The NHS also provides free-of-charge care to those with certain infectious diseases and, in England, to victims of certain types of violence.

During discussions with the Australian and New Zealand Governments, it was agreed to reduce the health charge that applies to the tier 5 youth mobility scheme from £200 to £150, in recognition of the close and important links between our countries. The scheme is a cultural exchange programme that allows young people aged 18 to 30 from participating countries and territories to experience life in the UK for up to two years, during which time they can work and study.

Australians and New Zealanders have benefited from a one-year exemption from the immigration health charge, while all other temporary non-EEA nationals have had to pay it since April 2015. It is now right and fair that those nationals also contribute to the extensive and high quality range of NHS services available to them during their stay, in line with their temporary immigration status. We estimate that by applying the health charge to Australian and New Zealand nationals—taking into account the lower charge for youth mobility scheme applicants—an additional £41 million could be raised for the NHS in present value over five years in 2016-17 prices. The Governments of Australia and New Zealand were fully consulted on the introduction of the charge.

16:02

[Keir Starmer (Holborn and St Pancras) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bailey.

As the Minister outlined, this order amends the 2015 order. The Opposition did not oppose the 2015 order and we do not oppose this amendment to it, but I would like to raise a number of issues. First, the Minister has given us the anticipated revenue figure of £41 million. Will he update us on how much has been raised so far from the changes made under the 2015 order? Last year he said he would publish the revenue details after the first year of implementation. Is that still the intention?

Secondly, the Minister outlined how the short-term arrangements with Australia and New Zealand will work, but the amendment obviously affects the long-term arrangements. Is there any possibility of reciprocal charges being levied by the Australian and New Zealand Governments on UK citizens living there and, if so, what will those arrangements be?

Finally, the per annum cost to the NHS of non-EU citizens is said to be £950 million, which I think is what drove the original order and what drives, to some extent, this amendment. The aim of the policy is to ensure that people make a fair contribution to the costs—we agree with that in principle—but many of these people come here to work and thus pay tax and national insurance. Does the Minister know the proportion of people paying the levy who are, in fact, in work and are therefore making the contribution to the NHS through their taxes? Can he tell the Committee what the net cost is, once taxes are taken into account, of those people’s use of the NHS? I appreciate that he might want to get back to me on that in detail.

16:02

[Anne McLaughlin (Glasgow North East) (SNP)]

I am struggling to understand what the benefit of the order is and what its justification is, and I want to raise a few points. I understand from what the Minister said that perhaps things have changed slightly since I read up on the matter. The idea that this is a cost-cutting measure is interesting, because we do not know what it costs us for Australians and New Zealanders to use our national health service, notwithstanding the fact that most of them are young and therefore less likely to use the NHS in the first place. The NHS has only recently started to collect data based on the nationalities of those using it, and I would like to hear more about that.

The reciprocal arrangements we have traditionally had with Australia and New Zealand work only if we do actually reciprocate. The Minister said something that I did not hear completely. Will he clarify what he said about how we still have a reciprocal arrangement between Australia and the United Kingdom? I am not content that, as the hon. and learned Member for Holborn and St Pancras said, people have come over here and are paying national insurance and income tax, and they are also paying a surcharge for health, whereas we do not do that when we go over there.

Also, my understanding is that there is a lot of— [Interruption.] The Government Whip is shaking his head, so perhaps he can answer me and tell me where I have got it wrong. I know that they are not happy in Australia and New Zealand: they are saying, “Well, we’ll make it a reciprocal arrangement. We’ll reciprocate and we’ll impose a charge”. There are calls for that to be done, and those who would suffer most from that are UK nationals, because we outnumber the number of people coming to this country. For example, there are 63,000 New Zealanders living in the UK—which apparently makes up 0.09% of the population—whereas there are 265,500 UK nationals in New Zealand. In that respect, we have had the better end of the deal. The figures are slightly different when it comes to Australia, but my understanding is that we still outnumber the number of Australians who have come here.

I would be grateful for any clarification. If the Government Whip was shaking his head because I had misunderstood something, I would be very grateful to hear that.

16:41

[Richard Arkless (Dumfries and Galloway) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Bailey.

As we have heard, this amendment removes the exemption that benefits citizens from Australia and New Zealand when they come to our country by allowing them not to pay an up-front contribution to use our NHS. Until now, residents from both countries were exempt from the surcharge, due to reciprocal arrangements between them and the UK, which has allowed citizens of one country to use healthcare services in the other country for free. Exemptions are made for services with a fee, such as dental treatment and prescription medicine.

In principle, the Scottish Government welcome overseas visitors and migrants who are in the country for legitimate purposes—not only to contribute to our workforce and economy, but to contribute to our diversity and our vibrancy as a nation. We oppose this amendment on that and many other bases. We also think it impinges on Scottish Government competencies over health, although the Government have been very clear that they see this measure as an immigration statutory instrument.

We see the UK Government rationale as flawed in that respect, in dealing with expected costs for treating migrants in the UK’s NHS. However, the Government have only recent begun collecting data on how different nationalities use the NHS, and we are not really aware at the moment of the costs that we are trying to save, as my hon. Friend the Member for Glasgow North East said.

The UK Government have been trying to reduce net migration. Despite that, however, it has risen to more than 100,000 a year under this Prime Minister, and further plans to increase work visa thresholds to £35,000 will put another seemingly immovable impediment in front of people trying to visit this country for legitimate reasons.

We in the SNP and Scottish Government say that the overall net contribution of migrants outweighs the transfers made to them during their stay here. We think there is not a cost to be legitimately saved. We say that the people who come here and benefit from the exemption from the surcharge are contributing more than they are taking out of the system. On that basis, and in particular because I am informed that the Scottish Government only found out about this statutory instrument by chance, we want to make our objections very clear and oppose the amendment.

16:44

[James Brokenshire]

As I indicated in my opening comments, in the first six months since its introduction, the immigration health surcharge raised more than £100 million in income for the NHS in England, Scotland, Wales and Northern Ireland. It is important to make that point, and we will report on the first year’s income, as the hon. and learned Member for Holborn and St Pancras asked me to do.

I also want highlight the fact that a comprehensive study of migrant use of the NHS in England commissioned by the Department of Health found that the total cost of visitors and temporary visitors accessing NHS services in England alone was estimated to be up to £2 billion a year, with around £950 million spent on temporary migrants, such as students and workers, from whom no charge had been recoverable previously.

[Anne McLaughlin]

Am I not right in thinking that that is the Prederi report, which states that those are the best estimates, but that accuracy is by no means assured because of uncertainty about the numbers of people and their behaviour?

[James Brokenshire]

These are always estimates, but we judge that to be a reasonable estimate on which to base our policy. That was the basis on which the House legislated for the creation of both the immigration health surcharge and the previous order. In our analysis, non-EEA temporary migrants—workers and families—here for longer than 12 months had a weighted average cost to the NHS of a little more than £800 a head and a total estimated gross cost of more than £500 million a year. The figures for non-EEA students, for any length of stay, were just over £700 and about £430 million respectively.

The Government believe that those subject to immigration control should have a form of access to public services that reflects their immigration status. The previous order brought migrant access to the NHS into line with existing policy on access to benefits and social housing. It is a migrant’s immigration status, not their tax contributions, that governs their access to those services. We believe that the levy is appropriate and reasonable, and recognises the contribution that temporary migrants make to the wider economy.

Questions were asked about reciprocity, and in particular the reciprocal healthcare agreements with Australia and New Zealand. There is no intention to discontinue those agreements. They are more than 30 years old, however, and all three Governments concur that the time is right to review them and ensure that they are appropriate to the contemporary needs of our travelling citizens. The Department of Health has therefore entered into discussion with Australia and New Zealand on the scope of the agreements. The Government have no intention of discontinuing the agreements, but Ministers and officials in the Department of Health are looking at them.

Reciprocal healthcare agreements provide for a national of one country on a short, temporary stay in another country to receive free treatment. The agreement with Australia provides for a resident of one country who is visiting temporarily in the other, without becoming an ordinary resident, to be provided with free immediate medical treatment. However, all our Governments highly recommend the possession of adequate travel insurance because the agreements do not cover all treatment needs. In particular, they do not cover the costs of a medical evacuation.

What happens to our citizens going to Australia or New Zealand is a matter for consideration. Australia already levies a health charge for certain categories of visa applicant, including older migrants applying to become permanent residents and those with existing healthcare needs. In addition, students are required to have health insurance. In New Zealand, there is a consultation fee for anyone accessing GP care, and all foreign fee-paying students applying to study there are required to hold acceptable medical and travel insurance. Most visa applicants to the two countries are also required to meet minimum health standards, and in some cases they must undergo a medical examination. A visa may be refused if a migrant has a health condition that is likely to result in significant healthcare and community service costs.

It might be considered that this measure makes it harder for Australians and New Zealanders to come here, but I have already indicated that visitors would remain unaffected as a consequence of the reciprocal arrangements. Some 97% of Australian and New Zealand nationals who apply for a UK visa are successful. We continue to place great value on our links with both countries and remain committed to strengthening our relationship with them. However, we operate in a wider context, which includes the challenges of healthcare costs and managing migration flows. I find it interesting that the Scottish National party appears to be turning its face against additional funding for the NHS in Scotland. That is obviously the SNP’s prerogative, but we judge that this measure is appropriate, and I commend it to the Committee.

Question put.

Division 1

Ayes: 9

---

Conservative: 7

Noes: 2

---

Scottish National Party: 2

Resolved,

That the Committee has considered the draft Immigration (Health Charge) (Amendment) Order 2016.

16:51

Committee rose.

The Committee consisted of the following Members:

Chair: Mr Adrian Bailey

† Arkless, Richard (Dumfries and Galloway) (SNP)

† Brokenshire, James (Minister for Immigration)

† Creasy, Stella (Walthamstow) (Lab/Co-op)

† Elphicke, Charlie (Lord Commissioner of Her Majesty's Treasury)

Fox, Dr Liam (North Somerset) (Con)

Harris, Carolyn (Swansea East) (Lab)

† Hayman, Sue (Workington) (Lab)

† Jenkyns, Andrea (Morley and Outwood) (Con)

Johnson, Alan (Kingston upon Hull West and Hessle) (Lab)

† McLaughlin, Anne (Glasgow North East) (SNP)

† Merriman, Huw (Bexhill and Battle) (Con)

† Mills, Nigel (Amber Valley) (Con)

† Pickles, Sir Eric (Brentwood and Ongar) (Con)

† Robinson, Mary (Cheadle) (Con)

† Starmer, Keir (Holborn and St Pancras) (Lab)

† Stuart, Ms Gisela (Birmingham, Edgbaston) (Lab)

† Sturdy, Julian (York Outer) (Con)

† Whittaker, Craig (Calder Valley) (Con)

Joanna Welham, Committee Clerk

† attended the Committee

Third Delegated Legislation Committee

Monday 29 February 2016

[Mr Adrian Bailey in the Chair]

Draft Immigration (Health Charge) (Amendment) Order 2016

16:30

I beg to move,

That the Committee has considered the draft Immigration (Health Charge) (Amendment) Order 2016.

The immigration health charge was introduced in April last year by the Immigration (Health Charge) Order 2015 and is paid by non-European economic area temporary migrants who apply for a visa for more than six months or who apply to extend their stay in the UK. The charge, which is set at the rate of £200 per annum per migrant and at a discounted rate of £150 per annum for students, ensures that migrants, unless they are subject to an exemption, contribute to the national health service in a manner in line with their immigration status.

The full amount of the charge, covering the entire period of stay, is collected by the Home Office up-front as part of the immigration application process. If an application is refused, rejected or withdrawn, the charge is refunded. Those who pay the charge receive NHS care in the same way as a permanent resident, subject to the same clinical need and waiting times, for as long as their leave remains still valid. That means that they only pay charges that a UK resident would also pay, such as dentistry charges and prescription charges in England.

In the first six months since its introduction, the immigration health charge collected more than £100 million in income for the NHS. The Government estimate that the charge could raise as much as £1.7 billion at present value over 10 years. That represents an important source of new income for the NHS—income that is shared between the NHS in England, Scotland, Wales and Northern Ireland using the formula devised by Lord Barnett, and spent as they see fit. Exemptions from the requirement to pay the charge are listed in schedule 2 of the Immigration (Health Charge) Order 2015. Those include exemptions for visitors, certain vulnerable groups and nationals of Australia and New Zealand.

That leads us to the purpose of today’s debate. This order amends the 2015 order by removing the exemption from paying the charge that applies to Australian and New Zealand nationals, by reducing the amount of the charge payable by youth mobility scheme migrants from £200 to £150 per annum and by making a minor and technical change to update the references in the 2015 order to the part of the immigration rules that relates to visitors.

The UK, Australia and New Zealand all face the challenges of increasing healthcare costs and the management of migration flows. We regularly discuss these challenges with Australia and New Zealand and have held consultations with them on the health charge since 2013. In December, the Secretary of State for Health confirmed with his Australian and New Zealand counterparts our intention to apply the health charge to nationals of these two countries.

We greatly value our close relationship with Australia and New Zealand and remain committed to strengthening the relationship between our countries. For that reason, we are retaining our reciprocal healthcare agreements with Australia and New Zealand. These agreements provide that short-term visitors to the UK from Australia and New Zealand are entitled to some NHS treatment free of charge. In turn, that is reciprocated when our citizens visit there.

The health charge is compatible with the terms of these agreements, as the agreements do not apply to the longer-term, temporary migrants from these countries who fall within the surcharge’s scope. It is also important to emphasise that the terms on which Australian and New Zealand nationals may use the NHS remain generous. The health charge is set well below the average per capita cost to the NHS of treating temporary migrants and below the rate that migrants might expect to pay for health insurance in competitive countries.

Visitors, such as tourists, from Australia and New Zealand will not pay the health charge and will continue to benefit from the reciprocal health agreements that we hold with those countries. In 2014, nearly 70% of the total number of Australian and New Zealand nationals who came to the UK did so as visitors. This group will continue to receive free-of-charge NHS care for health conditions that arise during their stay and which require immediate or prompt attention.

In addition to healthcare provided under the terms of our reciprocal healthcare agreements, we do not charge Australian and New Zealand nationals, or indeed any migrant, for the use of NHS primary care services, such as GP or nurse consultations, or for treatment in an accident and emergency department. The NHS also provides free-of-charge care to those with certain infectious diseases and, in England, to victims of certain types of violence.

During discussions with the Australian and New Zealand Governments, it was agreed to reduce the health charge that applies to the tier 5 youth mobility scheme from £200 to £150, in recognition of the close and important links between our countries. The scheme is a cultural exchange programme that allows young people aged 18 to 30 from participating countries and territories to experience life in the UK for up to two years, during which time they can work and study.

Australians and New Zealanders have benefited from a one-year exemption from the immigration health charge, while all other temporary non-EEA nationals have had to pay it since April 2015. It is now right and fair that those nationals also contribute to the extensive and high quality range of NHS services available to them during their stay, in line with their temporary immigration status. We estimate that by applying the health charge to Australian and New Zealand nationals—taking into account the lower charge for youth mobility scheme applicants—an additional £41 million could be raised for the NHS in present value over five years in 2016-17 prices. The Governments of Australia and New Zealand were fully consulted on the introduction of the charge.

16:36

It is a pleasure to serve under your chairmanship, Mr Bailey.

As the Minister outlined, this order amends the 2015 order. The Opposition did not oppose the 2015 order and we do not oppose this amendment to it, but I would like to raise a number of issues. First, the Minister has given us the anticipated revenue figure of £41 million. Will he update us on how much has been raised so far from the changes made under the 2015 order? Last year he said he would publish the revenue details after the first year of implementation. Is that still the intention?

Secondly, the Minister outlined how the short-term arrangements with Australia and New Zealand will work, but the amendment obviously affects the long-term arrangements. Is there any possibility of reciprocal charges being levied by the Australian and New Zealand Governments on UK citizens living there and, if so, what will those arrangements be?

Finally, the per annum cost to the NHS of non-EU citizens is said to be £950 million, which I think is what drove the original order and what drives, to some extent, this amendment. The aim of the policy is to ensure that people make a fair contribution to the costs—we agree with that in principle—but many of these people come here to work and thus pay tax and national insurance. Does the Minister know the proportion of people paying the levy who are, in fact, in work and are therefore making the contribution to the NHS through their taxes? Can he tell the Committee what the net cost is, once taxes are taken into account, of those people’s use of the NHS? I appreciate that he might want to get back to me on that in detail.

16:38

I am struggling to understand what the benefit of the order is and what its justification is, and I want to raise a few points. I understand from what the Minister said that perhaps things have changed slightly since I read up on the matter. The idea that this is a cost-cutting measure is interesting, because we do not know what it costs us for Australians and New Zealanders to use our national health service, notwithstanding the fact that most of them are young and therefore less likely to use the NHS in the first place. The NHS has only recently started to collect data based on the nationalities of those using it, and I would like to hear more about that.

The reciprocal arrangements we have traditionally had with Australia and New Zealand work only if we do actually reciprocate. The Minister said something that I did not hear completely. Will he clarify what he said about how we still have a reciprocal arrangement between Australia and the United Kingdom? I am not content that, as the hon. and learned Member for Holborn and St Pancras said, people have come over here and are paying national insurance and income tax, and they are also paying a surcharge for health, whereas we do not do that when we go over there.

Also, my understanding is that there is a lot of— [Interruption.] The Government Whip is shaking his head, so perhaps he can answer me and tell me where I have got it wrong. I know that they are not happy in Australia and New Zealand: they are saying, “Well, we’ll make it a reciprocal arrangement. We’ll reciprocate and we’ll impose a charge”. There are calls for that to be done, and those who would suffer most from that are UK nationals, because we outnumber the number of people coming to this country. For example, there are 63,000 New Zealanders living in the UK—which apparently makes up 0.09% of the population—whereas there are 265,500 UK nationals in New Zealand. In that respect, we have had the better end of the deal. The figures are slightly different when it comes to Australia, but my understanding is that we still outnumber the number of Australians who have come here.

I would be grateful for any clarification. If the Government Whip was shaking his head because I had misunderstood something, I would be very grateful to hear that.

16:41

It is a pleasure to serve under your chairmanship, Mr Bailey.

As we have heard, this amendment removes the exemption that benefits citizens from Australia and New Zealand when they come to our country by allowing them not to pay an up-front contribution to use our NHS. Until now, residents from both countries were exempt from the surcharge, due to reciprocal arrangements between them and the UK, which has allowed citizens of one country to use healthcare services in the other country for free. Exemptions are made for services with a fee, such as dental treatment and prescription medicine.

In principle, the Scottish Government welcome overseas visitors and migrants who are in the country for legitimate purposes—not only to contribute to our workforce and economy, but to contribute to our diversity and our vibrancy as a nation. We oppose this amendment on that and many other bases. We also think it impinges on Scottish Government competencies over health, although the Government have been very clear that they see this measure as an immigration statutory instrument.

We see the UK Government rationale as flawed in that respect, in dealing with expected costs for treating migrants in the UK’s NHS. However, the Government have only recent begun collecting data on how different nationalities use the NHS, and we are not really aware at the moment of the costs that we are trying to save, as my hon. Friend the Member for Glasgow North East said.

The UK Government have been trying to reduce net migration. Despite that, however, it has risen to more than 100,000 a year under this Prime Minister, and further plans to increase work visa thresholds to £35,000 will put another seemingly immovable impediment in front of people trying to visit this country for legitimate reasons.

We in the SNP and Scottish Government say that the overall net contribution of migrants outweighs the transfers made to them during their stay here. We think there is not a cost to be legitimately saved. We say that the people who come here and benefit from the exemption from the surcharge are contributing more than they are taking out of the system. On that basis, and in particular because I am informed that the Scottish Government only found out about this statutory instrument by chance, we want to make our objections very clear and oppose the amendment.

16:44

As I indicated in my opening comments, in the first six months since its introduction, the immigration health surcharge raised more than £100 million in income for the NHS in England, Scotland, Wales and Northern Ireland. It is important to make that point, and we will report on the first year’s income, as the hon. and learned Member for Holborn and St Pancras asked me to do.

I also want highlight the fact that a comprehensive study of migrant use of the NHS in England commissioned by the Department of Health found that the total cost of visitors and temporary visitors accessing NHS services in England alone was estimated to be up to £2 billion a year, with around £950 million spent on temporary migrants, such as students and workers, from whom no charge had been recoverable previously.

Am I not right in thinking that that is the Prederi report, which states that those are the best estimates, but that accuracy is by no means assured because of uncertainty about the numbers of people and their behaviour?

These are always estimates, but we judge that to be a reasonable estimate on which to base our policy. That was the basis on which the House legislated for the creation of both the immigration health surcharge and the previous order. In our analysis, non-EEA temporary migrants—workers and families—here for longer than 12 months had a weighted average cost to the NHS of a little more than £800 a head and a total estimated gross cost of more than £500 million a year. The figures for non-EEA students, for any length of stay, were just over £700 and about £430 million respectively.

The Government believe that those subject to immigration control should have a form of access to public services that reflects their immigration status. The previous order brought migrant access to the NHS into line with existing policy on access to benefits and social housing. It is a migrant’s immigration status, not their tax contributions, that governs their access to those services. We believe that the levy is appropriate and reasonable, and recognises the contribution that temporary migrants make to the wider economy.

Questions were asked about reciprocity, and in particular the reciprocal healthcare agreements with Australia and New Zealand. There is no intention to discontinue those agreements. They are more than 30 years old, however, and all three Governments concur that the time is right to review them and ensure that they are appropriate to the contemporary needs of our travelling citizens. The Department of Health has therefore entered into discussion with Australia and New Zealand on the scope of the agreements. The Government have no intention of discontinuing the agreements, but Ministers and officials in the Department of Health are looking at them.

Reciprocal healthcare agreements provide for a national of one country on a short, temporary stay in another country to receive free treatment. The agreement with Australia provides for a resident of one country who is visiting temporarily in the other, without becoming an ordinary resident, to be provided with free immediate medical treatment. However, all our Governments highly recommend the possession of adequate travel insurance because the agreements do not cover all treatment needs. In particular, they do not cover the costs of a medical evacuation.

What happens to our citizens going to Australia or New Zealand is a matter for consideration. Australia already levies a health charge for certain categories of visa applicant, including older migrants applying to become permanent residents and those with existing healthcare needs. In addition, students are required to have health insurance. In New Zealand, there is a consultation fee for anyone accessing GP care, and all foreign fee-paying students applying to study there are required to hold acceptable medical and travel insurance. Most visa applicants to the two countries are also required to meet minimum health standards, and in some cases they must undergo a medical examination. A visa may be refused if a migrant has a health condition that is likely to result in significant healthcare and community service costs.

It might be considered that this measure makes it harder for Australians and New Zealanders to come here, but I have already indicated that visitors would remain unaffected as a consequence of the reciprocal arrangements. Some 97% of Australian and New Zealand nationals who apply for a UK visa are successful. We continue to place great value on our links with both countries and remain committed to strengthening our relationship with them. However, we operate in a wider context, which includes the challenges of healthcare costs and managing migration flows. I find it interesting that the Scottish National party appears to be turning its face against additional funding for the NHS in Scotland. That is obviously the SNP’s prerogative, but we judge that this measure is appropriate, and I commend it to the Committee.

Question put.

Division 1

Ayes: 9

---

Conservative: 7

Noes: 2

---

Scottish National Party: 2

Resolved,

That the Committee has considered the draft Immigration (Health Charge) (Amendment) Order 2016.

16:51

Committee rose.

DRAFT Grants to the Churches Conservation Trust ORDER 2016

Monday 29th February 2016 General Committees

The Committee consisted of the following Members:

Chair: Sir Roger Gale

† Beckett, Margaret (Derby South) (Lab)

Blackwood, Nicola (Oxford West and Abingdon) (Con)

Cartlidge, James (South Suffolk) (Con)

† Cruddas, Jon (Dagenham and Rainham) (Lab)

† Efford, Clive (Eltham) (Lab)

† Evennett, Mr David (Parliamentary Under-Secretary of State for Culture, Media and Sport)

† Fabricant, Michael (Lichfield) (Con)

† Green, Chris (Bolton West) (Con)

† Kirby, Simon (Brighton, Kemptown) (Con)

Mullin, Roger (Kirkcaldy and Cowdenbeath) (SNP)

† Murray, Mrs Sheryll (South East Cornwall) (Con)

† Siddiq, Tulip (Hampstead and Kilburn) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Spelman, Mrs Caroline (Meriden) (Con)

Thomas, Mr Gareth (Harrow West) (Lab/Co-op)

† Tomlinson, Michael (Mid Dorset and North Poole) (Con)

† Tugendhat, Tom (Tonbridge and Malling) (Con)

Jonathan Whiffing, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 29 February 2016

[Sir Roger Gale in the Chair]

Draft Grants to the Churches Conservation Trust Order 2016

16:02

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Mr David Evennett)]

I beg to move,

That the Committee has considered the draft Grants to the Churches Conservation Trust Order 2016.

It is a great pleasure and privilege to serve under your chairmanship, Sir Roger, in my first Committee as the acting Minister for heritage. I am delighted to be here.

The order is required so that the Government can continue to provide funding for the Churches Conservation Trust. The trust takes care of some of our finest churches—mostly they are grade I and grade II* listed—that are no longer required for regular worship. The CCT cares for almost 350 churches, encompassing 1,000 years of English history, architecture and archaeology. They include churches large and small that range from isolated gems to urban Victorian buildings in rural and urban areas across England.

The CCT is a charity. It was established by ecclesiastical legislation in 1969 as the Redundant Churches Fund. It is a successful partnership between the Church, the Government and the community sector, aimed at protecting an important part of this country’s heritage. The Government provide 66% of the trust’s statutory funding, and the Church Commissioners match that with a 34% contribution.

The CCT has increasingly made use of its statutory grant to raise new income from donations, legacies and grant-giving foundations. That independent income now makes up 50% of its expenditure, and it has shown great initiative in developing activities and bringing its buildings back to life at a time of pressure on public funding.

There are many interesting examples of that work, such as “champing”. Champing is an entirely new word for a “back to the local” experience of spending a night in beautiful historical churches in amazing rural locations. In the inaugural champing season last year, which ran from May to September, almost 300 people champed overnight in four CCT churches in the south-east. Guests came from all over the world, generating additional revenue of £15,000 for the charity. There are now 10 champing churches across south-east England available for bookings between May and September this year.

The Discover Churches project is supported by a special Department for Culture, Media and Sport capital grant. The CCT is significantly upgrading facilities and the visitor experience at nine of its town centre churches to attract new audiences, to set a new standard in church heritage visiting and to raise new income for its wider work from hire, small shops and cafés. There are also new membership schemes for those wanting to play a greater part in and to learn more about the CCT’s work, which includes the highly successful historic church tours. That programme has been expanded every year for the past four years.

Historical places of worship are a valuable and vital part of our nation’s heritage. Some 45% of all grade I listed buildings are Church of England churches or cathedrals. They represent some of the finest historic buildings and are showpieces of the most accomplished design and workmanship. As iconic buildings, they help to define our cities, towns and villages. They can be magnets for tourists, but they are also vital and highly valued in their communities as they may be the only community space left in a locality.

[Michael Fabricant (Lichfield) (Con)]

Will my right hon. Friend pay tribute to Staffordshire County Council, which plans to relocate the public library to the decommissioned church of St Mary’s in the centre of Lichfield? That will bring greater footfall into the area and into St Mary’s church, which also hosts an exhibition of the history of the great city of Lichfield.

[Mr Evennett]

My hon. Friend is a great exponent for his community and area. We welcome the usage proposed if it brings a valuable historical building back to life for community use.

[Mrs Caroline Spelman (Meriden) (Con)]

Early in his remarks my right hon. Friend the Minister mentioned the fact that a few of the churches are isolated, with no natural community around them. Does he agree that the Churches Conservation Trust provides a wider benefit to the local rural community by creating jobs that bring people in to repair and maintain these precious buildings?

[Mr Evennett]

I thank my right hon. Friend for her question. Before I answer it, I congratulate her on her superb work as a Church Commissioner. She is always hard at work on such matters. I totally agree with her: we want to bring new life into our rural communities, and if we can use churches to do that, we should. I mentioned earlier the innovative champing initiative. In a rural area that might be just what is needed. I welcome my right hon. Friend’s comments. We would warmly welcome and encourage any developments that bring tourism, jobs and opportunities to rural areas.

In the past year the trust has saved for the nation three additional churches of exceptional merit, all of which are grade I listed. It will cost an average of £300,000 each to bring recent or upcoming acquisitions into a suitable condition so that they can be safely opened to the public and equipped for community use.

The trust’s primary objective, and the greatest call on its funds, is the conservation of its churches, particularly upon vesting, when buildings might have been out of use for a number of years. The trust has an excellent reputation for the quality of its conservation work. In 2015, it won the European Union prize for cultural heritage, the Europa Nostra award, in recognition of its role in promoting the architectural significance of historical places of worship and their essential function as centres of community life. The work and expense do not end there. With an estate of 347 buildings that could and should be serving communities, there is a rolling programme of repair needs, and new facilities are needed where consents can be granted.

In autumn 2014, the trust opened a new flagship urban project that saw the rescue and adaptation of All Souls church in Bolton for modern community use. With the support of the Heritage Lottery Fund, the £4 million project has conserved the grade II* listed church in a disadvantaged area of the north-west in which the majority of the residents are from an ethnic minority background and put it back into the hands of the community. Hi-tech internal pods provide space and amenities for the whole local community, small business and arts use, while the historical fabric has been beautifully restored. The building is now being run by a newly constituted community group, its facilities are fully booked and it will be self-sustaining in the long term.

[Tom Tugendhat (Tonbridge and Malling) (Con)]

As the Minister mentioned the Heritage Lottery Fund, it would be remiss of me not to commend the work it does alongside the CCT. The fund has done some impressive work in Tonbridge and Malling and I am very much looking forward to announcing a new project it will be doing for us shortly.

[Mr Evennett]

I thank my hon. Friend for those comments, which I endorse.

This year, the CCT will complete the £6 million regeneration of the grade I St Mary-at-the-Quay in Ipswich. With HLF support and a partnership with Suffolk Mind, the church has been fully conserved and, once new facilities are complete, will open as a wellbeing centre in the autumn. The church will be available for a wide range of community uses and will provide a range of therapeutic services, as well as a new model for accessible mental health provision.

In the year to April 2015, 1.9 million people visited CCT churches—an increase of 5% on the previous year. The trust’s churches are run by a growing army of regular volunteers, to whom I offer my praise and thanks. Without them, events as diverse as fashion shows, concerts, flower festivals, and farmers’ markets would not be able to take place. The CCT is busy increasing the number of volunteer helpers, of whom there are currently around 1,800 throughout the country, that it relies on to open churches to the public and make them welcome. The CCT offers its volunteers support and new skills through networking and training. It has shown that it is excellent at partnership working and is at the forefront of saving buildings by looking beyond the traditional heritage solutions.

The CCT has also been applying its expertise in community solutions for churches that are still in use, when they would otherwise, if closed, be significant enough to come to the trust. Benington All Saints in Lincolnshire is one example of where a non-CCT, grade I church, which was in a sad state of repair, has been rescued by the community, with significant CCT help, and was this year endorsed by the award of a major Heritage Lottery Fund grant.

Church buildings can again be the centre for community activities, which is good news. I hope that the Committee shares my enthusiasm for the work of the trust and will approve the draft order.

16:40

[Clive Efford (Eltham) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Roger. I welcome the right hon. Member for Bexleyheath and Crayford (Mr Evennett), the acting Minister with responsibility for heritage, sport, gambling and tourism. I congratulate his colleague, the Under-Secretary of State for Culture, Media and Sport, the hon. Member for Chatham and Aylesford (Tracey Crouch), on the birth of her child Freddie. We wish her, Freddie and the whole family well.

The Minister clearly received the same briefing as me, because I was sat here crossing things off in my notes as he was going through his speech, which was more or less the same as mine.

[Mr Evennett]

Bipartisan.

[Clive Efford]

Exactly. In that spirit, I will cut my speech short. Farmers’ markets, fashion shows—tick, tick—I have all the same points here.

The Churches Conservation Trust carries out some important work. Churches are an important part of our heritage and contain many examples of fine architecture dating back to the middle ages. Some of the finest examples of architecture are protected in our churches. Many of us who are interested in history will find that researching our ancestry or a particular period in history will invariably take us to a church. It is not a CCT church, but I was recently at Sherborne abbey, which is a fascinating building that dates back to the eighth century. I do not know whether many people will know this, but two Saxon kings, older brothers of Alfred the Great, are buried there. When looking to find out about history, where does someone turn? They go to a church to find out some facts.

Local war memorials are the focus of attention every year, but particularly at this time when we commemorate the centenary of the first world war, in which the CCT is playing an important role. The trust’s “First World War: Memorials of Life and Death” programme is recognising the role that our churches have played in commemoration over the past century. In my constituency, Henry Hall, chaplain of one of the regiments that served in Gallipoli, came back to be a local parish vicar. He landed with the troops during the invasion, taking communion with the soldiers while under enemy fire, and decided, based on his experiences, to set up a chapel in the church for the commemoration of the Gallipoli campaign, so we have a permanent memorial that has played an important part in our commemorations in recent times. Churches continue to play an important part in commemorating significant parts of our history and allow us to continue to learn lessons from it.

The Minister spoke about the number of people who visit churches. He is the Tourism Minister at the moment and I am the shadow Minister for that industry, for which churches play an important part. The CCT’s work to protect many older churches attracts a lot of people to rural communities where tourism can be vital for creating jobs and sustaining tourism. Similarly, the trust’s work to restore churches is vital and supports many specialist craftsmen whose role is to restore and protect those churches. Again, that brings employment and important investment—more than £5 million of investment from the trust—to the communities in which those churches are located.

The trust’s forerunner was set up by the Labour Government in 1969 so we welcome the work of the CCT, but I have a couple of questions about its ongoing work. The draft order covers a four-year period and provides £10.6 million, which roughly equates to £2.7 million each year. However, the order that was passed last year was for £3.2 million. Now, I understand that a specific grant was made within that £3.2 million, which is why it was significantly higher than the annual amount for this period. Is that correct? Was a specific grant included within the £3.2 million and is that why the figure is significantly higher than the annual figure cited in the draft order? Has that work been completed, or is money still earmarked for it? Is there some other specific grant money in the current allocation?

The Minister spoke about the requirement on the trust to raise money from independent sources. He mentioned champing, and I saw some confused expressions on the faces of his colleagues. Church camping, which the CCT has been encouraging in some locations, has become known as champing. People pitch up on the site of a former church, and that generates income and helps the work on that site to become more sustainable. It is described on the trust’s website as a “slow tourism escape”—I suspect that nothing could be slower than staying on the site of a former church. The Government are making assumptions about the income the trust can make from such activities. Has that been taken into account in the Government’s estimates of how much the trust needs to carry out work and how much can be generated from those activities?

The trust’s core funding was cut by 20% over a four-year period from 2010-11. Has the Department been monitoring the impact of that cut on the trust’s work? We welcome the fact that this is a four-year settlement, which offers the hope of some stability for the CCT. With that, we wish the trust every success and look forward to hearing the Minister’s answers.

16:49

[Mr Evennett]

I am grateful for the support of my south-east London neighbour, the hon. Member for Eltham—we stick together as much as we can—and, in particular, his support for the trust’s work. It is vital that we have a bipartisan approach. A four-year settlement is obviously good because it allows any organisation to take the opportunity to plan. The CCT should be looking at innovative ideas. We talked about camping and champing or whatever and I am sure that my hon. Friend the Member for Lichfield, who certainly is an innovative individual, will see what he can do to support that in Lichfield. It is important that churches try to maximise revenue, because we live in difficult times and savings have to be made and the trust has taken its share of that.

However, we have been able to find additional funding. We found £100,000 in 2014 following the extraordinary flooding and in 2015 there were two capital grant aids: £65,000 in support of the CCT’s piloting of a new product brand, Discover Churches, an income-generating project; and £600,000 to upgrade eight churches to be Discover Churches. That included: café and retail fit-out; visitor information and welcome points; interpretation; exhibitions; upgrades to ambient lighting; and a suite of signage.

At the spending review in 2015 we were successful in maintaining the CCT’s grant in aid at the current level for the next four years. As the hon. Member for Eltham will be aware, these are difficult economic and financial circumstances, but a four-year settlement at the current level will help the trust to plan and develop. At the same time, we are looking for innovative ideas on how churches can raise more money so that, with their usage, they can plough more money back into the project.

I think the CCT had a good settlement and, yes, a huge amount has been done and we can all be proud of what has been achieved, but the CCT must use the opportunity to consider more innovative measures to see what can be done. When I was down in Bristol I saw an innovative project that was being run in a church. That church, which is still consecrated, can be used for services, but it is also being used as a theatre and for training for circus activities and so forth, which brings in an awful lot of money. Other churches are doing that as well. The more that can be brought in to churches, the more that can be done and that provides more opportunities.

The trust has a good package. We would all like more money for whatever we like to do, but I am afraid that economic circumstances mean that we must be realistic.

Question put and agreed to.

16:52

Committee rose.

Written Statements

Monday 29th February 2016 Written Statements

Monday 29 February 2016

“Better use of Data in Government”

Monday 29th February 2016 Written Statements

[The Minister for the Cabinet Office and Paymaster General (Matthew Hancock)]

Today I have announced the launch of the consultation paper “Better use of data,” which sets out proposals to improve the way in which Government makes use of data on behalf of citizens.

I have placed a copy in the Library of the House.

The paper recognises the enormous potential that better use of data can have in improving the lives of citizens, our economy and society. Proportionate and secure sharing of information between public authorities can improve the lives of citizens, support decisions on the economy which allow our businesses to flourish, and improve the efficiency and effectiveness of the public sector.

We have developed these proposals over two years including significant collaboration with civil society groups, who have participated, challenged and improved our thinking over that time. Now we are seeking to take the proposals forward for further consultation.

The consultation document, including details on how to respond, is available from https://www.gov.uk/government/consultations/better-use-of-data-in-government and the consultation period ends on 22 April 2016.

[HCWS558]

European Union

Monday 29th February 2016 Written Statements

[The Minister for Europe (Mr David Lidington)]

During the debate on the European Union Referendum Bill in the House of Lords, my right hon. Friend the Minister of State, Baroness Anelay of St Johns, said that the Government would, in due course, provide information about the application of Article 50 of the Treaty of the European Union (Official Report, col 475, 23 November 2015). To fulfil this commitment my right hon. Friend the Secretary of State for Foreign Affairs has today laid in both Houses copies of a Command Paper The process for withdrawing from the European Union (Cm 9216).

This paper is also available on the www.gov.uk website.

[HCWS557]

House of Lords

Monday 29th February 2016 Lords Chamber

Monday, 29 February 2016

14:30

Prayers—read by the Lord Bishop of Durham.

Sudan

Monday 29th February 2016 Lords Chamber

Question

14:36

Asked by

[Baroness Cox]

To ask Her Majesty’s Government what assessment they have made of continuing military offensives against civilians in Blue Nile and Southern Kordofan by the Government of Sudan.

[The Parliamentary Under-Secretary of State, Department for International Development (Baroness Verma) (Con)]

My Lords, the UK has provided life-saving assistance to conflict-affected populations in Sudan through our £36.5 million contribution to the UN’s response, making us the third largest humanitarian donor to Sudan in 2015. Conflict reduced in the Two Areas following the temporary ceasefires last autumn, but the humanitarian situation and recent fighting in Blue Nile remain of deep concern. The UK is continuing to press for agreement in the upcoming African Union-mediated peace talks.

[Baroness Cox (CB)]

My Lords, I thank the Minister for her sympathetic reply. Is she aware that last month I was in the Nuba mountains in Southern Kordofan, where women and children are forced to live in snake-infested caves by the Government of Sudan’s aerial bombardment of civilians in what is a de facto genocide? There is now an IPC emergency level for food shortages in both Southern Kordofan and Blue Nile states. Will Her Majesty’s Government use their influence in the UN to recommend extending and strengthening sanctions against the Government of Sudan while they continue to kill civilians with impunity in these areas, particularly in the light of the recently renewed mandate of the panel of experts monitoring sanctions in Darfur?

[Baroness Verma]

My Lords, although we welcome the role that UN sanctions can play in the right circumstances and support the recent renewal of the sanctions around Darfur, each situation is different. We judge that at present the best way to promote moves towards lasting peace in the Two Areas is to support the peace process negotiations being led by former President Mbeki and his AU High-level Implementation Panel.

[Lord Chidgey (LD)]

My Lords, in January Sudanese armed forces destroyed more than 20 villages in Jebel Marra during a major offensive, leaving literally thousands of people in hiding without food, shelter or assistance. Will the Government condemn these atrocities and challenge President al-Bashir’s claims to have ended the rebellion, as he calls it, in early February while his warplanes continue to bomb and murder helpless civilians in Darfur on a daily basis?

[Baroness Verma]

My Lords, the recent fighting in the Jebel Marra region of Darfur is a setback, and reports of barrel bombs and other military action are very disturbing. We continue to urge all the parties to stop fighting and allow full humanitarian access, as well as for Abdul Wahid to cease provocative actions so that we engage in proper talks.

[Baroness Kinnock of Holyhead (Lab)]

My Lords, does the Minister agree that there can be no military solution to Sudan’s internal conflicts, and will she join with the United States which has recently called on the Government of Sudan and the Sudan Revolutionary Front to de-escalate the violence and work with others to agree a comprehensive end to the terrible hostilities which have been described?

[Baroness Verma]

My Lords, US financial sanctions are a matter for the US Government. We continue to support efforts to improve the effectiveness of UN-targeted sanctions in Darfur and the EU arms embargo that remains in place across Sudan.

[Lord Alton of Liverpool (CB)]

My Lords, given that the Human Rights Watch organisation has said that in the Two Areas of Blue Nile and South Kordofan, civilians, including children, were,

“burned alive or blown to pieces after bombs or shells landed on their homes”,

and given what has already been said about Darfur, where between 200,000 and 300,000 people have been killed and 2 million displaced, will the noble Baroness tell us why the International Criminal Court has failed so miserably to bring to justice Omar al-Bashir and others charged with the crime of genocide?

[Baroness Verma]

My Lords, the UK continues to raise a range of human rights issues with the Government of Sudan, including the issues raised by the noble Lord. We are a big supporter of the International Criminal Court and will continue to make clear to the Government of Sudan and the international community that we expect compliance with the arrest warrant for President Bashir.

[The Lord Bishop of Durham]

My Lords, in noting that my friends the right reverend Prelates the Bishop of Leeds and the Bishop of Salisbury have particular links with Sudan, is the Minister aware of the key role played by the Anglican Episcopal Church in Sudan in peacemaking, maintaining ministry and pastoral support on the ground in these areas? Will the Government pressurise the Sudanese Government to cease the illegal confiscation of church properties and the oppression of Christian people, especially those who are trapped in the Blue Mountains and South Kordofan?

[Baroness Verma]

My Lords, the right reverend Prelate is of course right to raise the important role that faith communities play, and we continue to ensure that part of the conversations we have with the Sudanese Government is about enabling people to live freely to practise the religions that they wish to practise. These are difficult and challenging situations but the Government continue to press hard to make sure that the concerns raised in your Lordships’ Chamber are raised there.

[Baroness Symons of Vernham Dean (Lab)]

My Lords, the noble Baroness has described the terrible situation described by the noble Baroness, Lady Cox, as merely disturbing. We then listened to what the noble Lord, Lord Alton, told us about the horrific atrocities being committed, and the noble Baroness said that these matters were a setback. Surely Her Majesty’s Government can produce a more robust response to these terrible descriptions than calling them a setback or disturbing.

[Baroness Verma]

My Lords, the noble Baroness knows that these are very difficult situations and we have to be mindful of the language used if we are to continue to have dialogue with the Government of Sudan. They are of course horrific atrocities and we as the UK Government take our role very seriously in raising those horrific atrocities. At the same time, we are working both with the Sudanese Government and others to ensure that we are able to access those who need our assistance the most. They tend to be the ones who are hardest to reach.

[Lord Lexden (Con)]

Further to the last question, are there any signs of progress in this most unfortunate country for which Britain, in condominium with Egypt, once had responsibility?

[Baroness Verma]

My Lords, my noble friend is right in raising that. It is a very difficult situation. Sudan is one of the world’s most underdeveloped countries and has suffered from cycles of conflict over many years. A devastating impact of that falls directly on the lives of ordinary people. Our aid, and the UK Government’s assistance, is therefore not just to channel money but to try to work with others for a long-lasting peace settlement. This will be done through the UN and African Union agencies.

[Lord Collins of Highbury (Lab)]

My Lords, as my noble friend Lady Kinnock said, obviously support for the peace process, which is very complex, is vital. Because of the economic conditions, many families are forcing young sons into the proliferation of militias, so has the department thought of ways of breaking this cycle? It is now a cycle; every time the rainy seasons ends, there is another round of violence. Can the department look at this issue more fully?

[Baroness Verma]

My Lords, the noble Lord is absolutely right that we must do much more. We continue to work with partners to ensure that we are doing as much as we can so that on the ground those young people are engaged in a much more meaningful way and do not get attracted to join the militia and others. As the noble Lord said, this will be a very long-term process. We need to work with and support the UN agencies and the African Union, and also get our other donor partners to step up so that their support on the ground is much more prevalent and we can make real progress.

Migration

Monday 29th February 2016 Lords Chamber

Question

14:45

Asked by

[Lord Green of Deddington]

To ask Her Majesty’s Government what is their assessment of the most recent quarterly migration statistics.

[The Minister of State, Home Office (Lord Bates) (Con)]

My Lords, immigration remains too high and we are committed to bringing it down to sustainable levels. Our reforms have cut abuse and raised standards. The Prime Minister renegotiated the UK’s position within the EU to exert greater control by closing the backdoor routes into the UK and tackling the artificial pull factors, but there is still more work to do.

[Lord Green of Deddington (CB)]

My Lords, does the Minister agree with me that there are important benefits to be gained from controlled immigration? However, is he aware that net migration at its current level is well above the high migration scenario of the official population projections? Does he recognise that that implies an increase in our population of half a million every year, of which 75% will be due to future immigration? Does he appreciate that this increase is equivalent to a city the size of Newcastle, Edinburgh or Bristol, and that that increase will continue until such time as there is a significant reduction in net migration?

[Lord Bates]

The noble Lord is absolutely right, as we all are, to preface our remarks in this area by talking about the immense benefits that controlled migration brings to this country. He is also correct in saying that if you use the statistical data available to forecast, you arrive at roughly the numbers he referred to. Of course, that assumes that no action is taken. That is the reason the Prime Minister, the Home Secretary and others have been working hard through the Immigration Bill and the renegotiation with our European partners to ensure that we address some of the pull factors which cause people to come here in greater numbers, and to increase the discomfort for those who are in this country illegally. I believe that that will have some effect and ensure that the situation projected will not turn out to be so.

[Lord Pearson of Rannoch (UKIP)]

My Lords, what difference do the Government estimate that the Prime Minister’s so-called EU reforms will make to the figures that the noble Lord, Lord Green, just gave?

[Lord Bates]

Of course, we must see what effect they will have, going forward. The important thing is that those changes have not yet come into force. Some changes have come into force: we changed the rules on jobseeker’s allowance so that people who come to this country cannot claim it for the first three months and then, if they have not found a job after three months on jobseeker’s allowance, they must leave. I believe that that is having an effect on the numbers. If that were extended further so that there was a restriction on in-work benefits for up to four years for those arriving in the UK, that would have an even greater effect.

[Baroness McIntosh of Pickering (Con)]

My Lords, I declare an interest in that I was a migrant worker on more than one occasion, although I did not consider myself as such at the time. Should not the House applaud the fact that numbers migrating into Britain from the EU are declining? Will my noble friend the Minister explain the position as regards Commonwealth citizens born before 1983? Do they still have the right to come in, abide in the UK and bring all their family members with them, or will we revisit that?

[Lord Bates]

We changed the rules on that in legislation. We said that we wanted to attract the brightest and best. We want people to apply on a points-based system so that those with qualifications and people who could add something to the British economy through expertise and skills are able to come here, but other people are not. There would be restrictions on their families as well.

[Lord Tomlinson (Lab)]

Does the Minister accept that there has not only been a change in the rules, but a change in some of the language? Today, he did not reaffirm the commitment of the Prime Minister to reduce net migration to tens of thousands rather than hundreds of thousands. Today, his words were “to sustainable levels”. Are sustainable levels the level that the Prime Minister promised?

[Lord Bates]

Yes, they are. That is what we set out in our manifesto. We believe that we can get the numbers down but some extraordinary circumstances are occurring at the moment. The principal driving force is the imbalance in growth across the European economy in terms of employment. This has been picked up and identified as a principal factor by the Migration Advisory Committee, the independent group of labour economists. We would like to see greater growth and reform within the eurozone economy so that jobs would be created in those communities and people would not have to travel, but these things are not totally within our control.

[The Earl of Listowel (CB)]

My Lords, does the Minister agree that among the most important forces are the push factors caused by the dreadful situations such as those we have just debated and those in Darfur, the Horn of Africa and Syria? Is it not much to the Government’s credit that they are leading the world in investing in international development as a proportion of gross domestic product, and therefore setting an example of intervening to stabilise fragile states and prevent these things happening?

[Lord Bates]

That is absolutely right; the noble Earl is correct about the amount of money that is being given. It is one thing to address issues when people arrive in Calais or at a port in the UK, but it is far better for the individuals concerned if we address matters in the relevant countries. It may interest the noble Earl to know that the three top countries for UK asylum applications are Sudan, Eritrea and Iraq.

Health: Black and Minority Ethnic Psychiatric Patients

Monday 29th February 2016 Lords Chamber

Question

14:51

Asked by

[Baroness Lawrence of Clarendon]

To ask Her Majesty’s Government what steps they are taking to reassure black and minority ethnic patients, carers and users of mental health services that they are not being prescribed higher levels of psychiatric medication than those from other community groups.

[The Parliamentary Under-Secretary of State, Department of Health (Lord Prior of Brampton) (Con)]

My Lords, improving the experience, access and outcomes of mental health services for people from black and minority ethnic communities is a government priority. The Five Year Forward View of mental health services recommended the appointment of a new equalities champion. The Government have accepted the recommendations for the NHS and agree with the task force’s vision for the future.

[Baroness Lawrence of Clarendon (Lab)]

I thank the Minister for his reply. In the last month there has been a government announcement on mental health. There is always a broad-brush approach to this subject. What we need to remember is that no two people are the same and that there are different cultures. People from the black and minority ethnic communities are treated differently when it comes to treatment and institutions where they are placed. That is a fact. There are more treatment options becoming relevant for people with severe, enduring mental health problems and it is not clear whether BME patients are getting access to these—for example, talking therapy. BME patients are more likely to be given higher doses of psychiatric medication. My question to the Minister is: what are the Government doing to ensure that BME patients are offered the same access to treatment options as their white counterparts, and not just psychiatric medication?

[Lord Prior of Brampton]

My Lords, although there is evidence that gender and ethnicity affect the efficacy and tolerability of some medicines, there is no evidence that people from black and minority ethnic backgrounds are prescribed a higher dose of antipsychotics. On the other hand, there is considerable evidence that many people from BME backgrounds are detained more, spend more time in in-patient psychiatric facilities and suffer greater seclusion, and that other aspects of mental health treatment for black and minority ethnic people are entirely unsatisfactory.

[Baroness Hussein-Ece (LD)]

My Lords, I welcome the Minister’s comment that this is a priority for the Government, but is it not the case that this whole issue about the overrepresentation of black and minority ethnic people in the mental health services has been going on for decades and is a scandal? For example, Sarah Reed, a black woman who was incarcerated in Holloway when she was well known to the mental health services, was found dead in her cell in January. She was failed by the Prison Service, mental health services and the criminal justice system. Why are black and minority ethnic people far more likely to be locked up in prison instead of getting proper treatment?

[Lord Prior of Brampton]

The noble Baroness makes a very important point and that is why the Prime Minister has asked David Lammy to conduct an inquiry into this precise issue. In his recent report, the noble Lord, Lord Crisp, recommended that there should be a patients and carers race equality standard. The Five Year Forward View for Mental Health, produced recently by Paul Farmer, recommended an equalities champion. I hope that we will be able to do both those things in the near future.

[Baroness Berridge (Con)]

My Lords, the Minister of State, Alistair Burt, said earlier this month that he would be meeting a wide range of stakeholders to look at BME groups and their unequal access to mental health services. Will the Minister confirm that those stakeholders will include faith community leaders? Black and minority ethnic people are also disproportionately members of faith communities. If those leaders could be trained in recognising the early signs of mental illness, perhaps more people would be referred earlier to the mental health services that they need.

[Lord Prior of Brampton]

My Lords, I will certainly have a word with Alistair Burt, the Minister of State for Health, who is having the meeting to which the noble Baroness referred. I will bring her comments to his attention.

[Lord Patel of Bradford (Lab)]

My Lords, the Minister was chairman of the CQC so he will be well aware that the Care Quality Commission has a responsibility to lay before Parliament an annual report on the monitoring of the Mental Health Act, which it took over from the Mental Health Act Commission when it was abolished. The Mental Health Act Commission used to produce a biannual report with a very significant chapter on the details that the Minister just talked about—the disproportionate number of BME detained patients, the disproportionate use of antipsychotic drugs, and their use at levels above BNF recommendations. Why does the CQC not present that level of data and evidence any more on a yearly basis? Without the evidence and data, how can it take steps to tackle this important area?

[Lord Prior of Brampton]

The noble Lord raises an interesting point. I do not have an answer to his question except the straightforward, “I do not know”. I hope that when the WRES data on staff come through, they can be extended to patients and carers as well—as suggested in the recent report by the noble Lord, Lord Crisp. That information and evidence should then be made available.

[Lord Watts (Lab)]

My Lords, the Government seem to be setting great store by the fact that they are waiting for a review. It is well known that mental health services are massively under-resourced. Would it not be a good start to put some resources into those services?

[Lord Prior of Brampton]

My Lords, the Government are committed to putting more resources into mental health. There is a recognition, across all parties in this House, that mental health has been a Cinderella service for ever. We are all committed to parity of esteem between mental and physical health and more resources are now going into mental health.

[Lord Hunt of Kings Heath (Lab)]

My Lords, in his Answer, the Minister mentioned the Mental Health Taskforce report. It points out that, while there is a workforce race equality standard, there is no equivalent standard for access to services. He said that the Government will appoint a champion, but why not agree to set a standard and appoint a national director to make sure that it is implemented?

[Lord Prior of Brampton]

My Lords, there are two separate things there. We are committed to the recommendation of appointing an equalities champion. Extending the workforce race equality standard to carers and patients was recommended by the noble Lord, Lord Crisp, and welcomed by Paul Farmer in his report. I hope that we will adopt that recommendation, but I cannot promise it.

Railways: New Lines

Monday 29th February 2016 Lords Chamber

Question

14:58

Asked by

[Lord Berkeley]

To ask Her Majesty’s Government what steps they are taking to encourage new or reopened rail lines to be cost-effective.

[The Parliamentary Under-Secretary of State, Department for Transport and Home Office (Lord Ahmad of Wimbledon) (Con)]

My Lords, the Government are taking many steps to ensure that all rail enhancement projects, including those working towards opening or reopening rail lines, follow government appraisal guidelines and create business cases which test options ensuring best value for the taxpayer. Local authorities and private sector beneficiaries are encouraged to contribute to the overall costs of the preparation and delivery of such projects to decrease the burden on the public purse.

[Lord Berkeley (Lab)]

I am grateful to the Minister for that Answer but does he agree that part of the problem is the very high costs that come out of some of these calculations which indicate that there is not really good value for money? Does he not agree that the answer is actually to have a set of standards appropriate to branch lines or lower-speed and cheaper track, and to cheaper trains—possibly not even signalling, more like a bus—which would be very good for local services but of course totally inappropriate for a main line? Will he encourage the development of some standards that might reduce such costs?

[Lord Ahmad of Wimbledon]

As I am sure the noble Lord is aware, the concept of community rail partnerships sets down specific guidelines as to what qualifies as a community railway. Currently about 40 routes do so in that regard. As for his point about trains looking like buses, I am reminded that we are decommissioning Pacers in certain parts of the country.

[Lord Spicer (Con)]

Is my noble friend aware that when the Cotswold line was nationalised, it was a virtual basket case? It was always under threat of being closed. Since privatisation, it has now become a victim of its own success and people are actually standing between the carriages, let alone within the carriages. Will he therefore do everything he can to encourage private companies to invest private capital in this railway line, as well as others?

[Lord Ahmad of Wimbledon]

My noble friend is quite right. We have seen very encouraging signs from opening up the rail market to the private sector. Underlining that, the Government are also committed to ensuring that they play their full part, and that is why they have committed to a further £38 billion of investment in the rail network over the next five years.

[Baroness Randerson (LD)]

My Lords, there has been a vigorous campaign to reinstate the rail link between Uckfield and Lewes, which would provide better access to employment in Brighton from the Weald and an additional, badly needed route between the Sussex coast and London. The coalition funded some studies into this but the current Government have not given any firm commitment. Can the Minister tell us whether the Government have plans for action on this and does he accept that the regeneration is needed now, not some time in the future, as indicated, possibly 2030 and beyond?

[Lord Ahmad of Wimbledon]

The Government are committed to ensuring the regeneration of all railways. I will write to the noble Baroness on the details of that particular line. I reiterate that we are looking at ensuring that there is effective and resilient investment in our railways to ensure that they meet the needs of the 21st century.

[Lord Faulkner of Worcester (Lab)]

My Lords, the Minister is absolutely right to draw attention to the success of the community rail partnerships. They have contributed to growth well above the growth on regional railways generally and have attracted some 3,200 volunteers to help improve stations and to work generally on the railway alongside full-time railway staff. This is a great success story and it is important that the Northern Rail franchise embraces that. But does the Minister not agree that for that strategy to succeed, it will be necessary for Network Rail to look realistically at cost levels and get them down where it can, because those have been a bar to opening lines until now? I declare an interest as chairman of the Great Western Railway advisory board and, indeed, the author of a book which deals extensively with this subject.

[Lord Ahmad of Wimbledon]

I am sure noble Lords will be lining up outside the Chamber for a signed copy. Of course the noble Lord is quite right to point out the need to ensure best value and efficiency on our railways. That is why, as the noble Lord will know, the Secretary of State has appointed Sir Peter Hendy to look at the delivery of the investment in the railways across the board.

[Lord Young of Cookham (Con)]

My Lords, further to my noble friend’s question, will the Minister consider that when an existing franchise falls due for renewal, bidders are invited to look at reopening some of the disused railway lines when they put in their tenders?

[Lord Ahmad of Wimbledon]

My noble friend is correct and that is why the Government are ensuring that that provision is part and parcel of all new franchise proposals.

[Lord Lexden (Con)]

Is it the case that Dr Beeching wielded his axe too well and too many lines were closed 50 years ago?

[Lord Ahmad of Wimbledon]

History is history and this Government are looking to the future and that is why we are committed to the investment we are making in the railways.

[Lord Rosser (Lab)]

I want to pursue the points made by my noble friends Lord Berkeley and Lord Faulkner of Worcester. The Minister keeps referring to surveys on value and efficiency but in looking at low-cost community rail opportunities, what work have the Government actually done on reopening closed lines on the basis of them being light rail systems, rather than their reopening being costed on an assumption that there will be a much heavier axle load and a complete rebuild of substructure and bridges, which in a great many cases immediately drives up the cost to unaffordable levels? If such work has been done on operating new or reopened community rail partnership lines more like a light rail system than a railway as we normally know it, by how much has it shown that the cost of reopening and operating closed lines or building new lines serving local communities can be reduced?

[Lord Ahmad of Wimbledon]

As I have already indicated, when it comes to any railways, the new franchises will ensure that community rail is part and parcel of them. The noble Lord talked about surveys but they are not surveys. I have referred to a report and to Sir Peter Hendy. As the noble Lord is fully aware, Sir Peter is carrying out a quite stringent review of all aspects of Network Rail spending to ensure best value for money and best value for the taxpayer.

[Lord Grocott (Lab)]

The Minister said in response to the question from the noble Lord, Lord Lexden, that history is history, but should we not be learning at least one lesson of history? The period of the Beeching closures resulted in widespread destruction of priceless railway infrastructure in many areas which have since seen growths in population that would have benefited from the railways still existing. Should not one clear lesson be that, should lines be closed or mothballed in the future, at the very least the track bed should be protected so that should reinstatement be necessary it would be easy to do so? I should also declare an interest as the honorary president of the Telford Steam Railway.

[Lord Ahmad of Wimbledon]

I am again in awe of the great historical perspective and wisdom within your Lordships’ House, and of course I take the noble Lord’s comments on board.

Armed Forces Bill

Monday 29th February 2016 Lords Chamber

Order of Consideration Motion

15:06

Moved by

[Earl Howe]

That it be an instruction to the Grand Committee to which the Armed Forces Bill has been committed that they consider the Bill in the following order:

Clauses 1 to 13, Schedule, Clauses 14 to 22, Title.

Motion agreed.

Welfare Reform and Work Bill

Monday 29th February 2016 Lords Chamber

Commons Reasons and Amendment

15:07

Motion A

Moved by

[Lord Freud]

That this House do not insist on its Amendment 1 to which the Commons have disagreed for their Reason 1A, but do propose Amendments 1B, 1C and 1D in lieu—

1: Before Clause 4, insert the following new Clause—
“Child poverty
Child poverty: reporting obligation
(1) The Secretary of State must lay before each House of Parliament an annual report on child poverty.
(2) The report must include information on the percentage of children living in households where—
(a) equivalised net income for the financial year is less than 60% of median equivalised net household income for the most recent financial year;
(b) equivalised net income for the financial year is less than 70% of median equivalised net household income for the most recent financial year, and which experience material deprivation;
(c) equivalised net income for the financial year is less than 60% of median equivalised net household income for the financial year beginning 1 April 2010, adjusted in a prescribed manner to take account of changes in the value of money since that year; and
(d) equivalised net income has been less than 60% of median equivalised net household income in at least 3 of the survey years.
(3) For the purposes of subsection (2)(d), the survey years are the calendar year that ends in the financial year addressed in subsection (2)(a) and (b), and the 3 preceding calendar years.”

Commons Disagreement

The Commons disagree to Lords Amendment No. 1 for the following reason—

1A: Because it is more appropriate to report on the matters listed in clause 4 and because low- income statistics are already published annually.

1B: Insert the following new Clause—
“Children living in low-income households
Publication of data on children living in low-income households
(1) Before the end of the financial year beginning with 1 April 2016 and each subsequent financial year the Secretary of State must publish data on the percentage of children in the United Kingdom—
(a) who live in households whose equivalised net income for the relevant financial year is less than 60% of median equivalised net household income for that financial year;
(b) who live in households whose equivalised net income for the relevant financial year is less than 70% of median equivalised net household income for that financial year, and who experience material deprivation;
(c) who live in households whose equivalised net income for the relevant financial year is less than 60% of median equivalised net household income for the financial year beginning 1 April 2010, adjusted to take account of changes in the value of money since that financial year;
(d) who live in households whose equivalised net income has been less than 60% of median equivalised net household income in at least 3 of the last 4 survey periods.
(2) The published data must be accompanied by information on how the Secretary of State has approached the following for the purpose of the data—
(a) the meaning of “child”;
(b) the meaning of “household”;
(c) when a child is or is not living in a household;
(d) what is the income of a household for a financial year;
(e) what deductions are made in calculating the net income of a household;
(f) how net household income is equivalised;
(g) when a child experiences material deprivation;
(h) how household income is adjusted to take account of changes in the value of money since the financial year beginning 1 April 2010;
(i) the meaning of “survey period”.
(3) The published data may be accompanied by information as to how and when the references in subsections (1) and (2) to the financial year beginning 1 April 2010 are to be read as references to a later financial year.
(4) In this section—
“equivalised”, in relation to household income, means adjusted to take account of variations in household size and composition;
“financial year” means the 12 months ending with 31 March;
“relevant financial year”, in relation to a financial year in which data is to be published, means the most recent financial year for which the data is available.”

1C: Clause 30, page 26, line 38, after “sections” insert “(Publication of data on children living in low-income households)”

1D: Clause 31, page 27, line 30, after “sections” insert “(Publication of data on children living in low income households)”

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, the other House has now considered Lords Amendment 1, which was proposed by the right reverend Prelate the Bishop of Durham, the noble Baroness, Lady Sherlock, and the noble Earl, Lord Listowel. The intention behind that amendment was to insert a new clause into the Bill, which would have increased the measures on which the Secretary of State was required to report annually to include income-based measures. As I have said previously, that amendment has technical faults and would require redrafting to make it work as noble Lords intend but, moving quickly beyond the technical defects in that amendment, I have repeatedly tried to shine a light on the fundamental flaws of the income-based measure.

The “poverty plus a pound” approach that results from measures of this kind led to billions of pounds being invested under the previous Government, with little or no transformational impetus in the life chances of young people. It is widely recognised that the low-income measures can give a misleading picture. For example, in a recession, when average income falls, poverty can appear to be falling too even if living standards have not improved for those at the bottom.

I stress again that low-income measures drive the wrong action, as I have sought to explain throughout the passage of the Bill through this House. Such measures simply focus on treating the symptoms of child poverty, whereas the Government are intent on tackling the root causes such as worklessness and educational failure. It is in these areas where we believe that the right action can make the biggest difference to the lives of disadvantaged children, both now and in the future.

Moving on, it is clear that substantial concerns remain that publication of the statistics on children in low-income families through the Department for Work and Pensions annual HBAI—households below average income—may not continue. This is despite the very clear commitments that the Government have given in both Houses and the protections already in place to safeguard HBAI as a national statistics product.

As I have said previously, I believe that the only difference on this issue between us is the word “statutory”. Given the doubts and concerns that remain about the continued publication of this low-income data, I am able to say that we have listened, we have heard and we are willing to provide further guarantees. Three of the four income measures—including relative low income, combined low income and material deprivation, and absolute low income—are already routinely published in the HBAI publication.

Through the government amendment we are putting forward today, we propose to place a statutory duty on the Secretary of State to publish this information annually. This provision will give the data the additional statutory protection that noble Lords sought. The amendment also places a statutory duty on the Secretary of State to publish new data on children living in persistent low-income households annually. The information will be based on a new data source, and the first figures will be published before the end of the 2016-17 financial year.

However, let me be clear that although we have given full statutory guarantees that this data will be published annually, we will not commit ourselves to laying a report before Parliament on it. This amendment is about providing a further guarantee that information on low income is made available for all to see, every year. Reporting to Parliament on income measures would incentivise government to take the wrong action and would simply continue to incentivise actions, such as direct income transfers, that will not tackle underlying factors.

We need to move on from this unhelpful approach. Resources are finite and it is crucial that the Government prioritise the actions that will make the biggest difference to children. The evidence is clear that this means tackling worklessness and low educational attainment, as set out clearly in our life-chances measures and approach. Any move to report on these low-income measures would divide government’s efforts and undermine this new life-chances strategy. I firmly believe it would not help to bring about the transformative change that we all wish to see.

It is worth talking briefly on one technical point in our amendment. Subsection (3) provides for the absolute low-income measure to be rebased in the data publication. This is vital because over time an absolute low-income measure using a 2010-11 baseline, such as that proposed in Lords Amendment 1, would be likely to become increasingly meaningless due to growth in the economy. As a national statistics product, the data publication already has significant statutory protections, guaranteeing that any rebaselining would be carried out by statisticians following best practice and free of any political influence. I reassure colleagues on this point.

I hope that these proposals will be welcomed in this Chamber. I urge noble Lords not to insist on their amendment and beg to move the Motion on the government amendments in lieu.

15:15

[The Lord Bishop of Durham]

My Lords, throughout our debates on the Bill, we have all consistently expressed our desire to see child poverty in our nation reduced and, ultimately, eradicated. We have different views about how this might best be achieved, and about the impact the Bill will have. I continue to have deep concerns about its impact. I fear that it will lead to more children and families being poor.

Having said that, I fully agree that, in most cases, the best way out of poverty is through work, and work that is better paid. I remain unconvinced that the measures in the Bill will have the complete effect suggested. Among the many concerns that a wide range of noble Lords and those outside the House have expressed has been the matter of the publication of the information and statistics on financial poverty. The Government have consistently noted that to work simply on financial targets in relation to child poverty is inadequate, and I have consistently agreed.

I meet children from very affluent backgrounds who are poor. They are poor because they lack being loved. Sometimes, their parents are working so many hours to maintain a wealthy lifestyle that they give no time to their child. Such children in homes where money is plentiful have been emotionally starved and, generally, spiritually malnourished. Theirs is a different kind of poverty.

I meet children from very poor backgrounds, in terms of financial income, who are rich in being loved and cared for by their parents or parent. They are emotionally strong, doing well at school and have a wealth of spiritual life. In many cases, they have a parent, or sometimes two, in work but on low wages and working only part-time, the latter often because the parent prioritises—rightly, in my view—time with their child over time away from them simply to earn more cash. They are not poor in very many ways.

It is right to look properly at life chances, therefore, because issues of educational achievement, work, housing and the like have a serious impact on children’s lives now and their long-term life chances.

There is also a danger that, with only financial modelling of poverty, the very poorest are not properly helped. Strategies can be worked that just lift people above a specific target, rather than supporting those who are persistently and consistently the very poorest in financial terms. However, along with the almost unanimous view of academics and practitioners from the areas of healthcare, social care, education, economics and other disciplines, I share the conviction that lack of finance is one of the factors that places children in poverty, and that this affects their life chances. The evidence is clear that income poverty impacts cognitive development, school achievement, social and emotional development and health.

Absolutely, that is compounded significantly when other factors are also considered, and they too must be tackled, but not to take seriously the reality of financial poverty would be a major mistake. As the wise proverbialist Agur, from the book of Proverbs, said:

“give me neither poverty nor riches; feed me with the food that is needful for me, lest I be full and deny you

and say, ‘Who is the Lord?’ or lest I be poor and steal and profane the name of my God”.

The four indicators that have been used since 2003 work well together. It is how they are worked together that matters: any one standing alone and being used alone is inadequate. So I am delighted that the Government have decided to listen to the arguments and agreed to make a statutory provision for the continued publication of those figures. I think that a persistent poverty figure could well be a very useful addition, although how it is arrived at will need to be as robustly worked through as have been the existing, well-tested measures. It will be important, if it is to be a valuable addition, that it be as rigorously tested as they are.

In conclusion, I thank the Minister, and his team, for the time that he has given us and for how they have listened and worked with us to reach the conclusion that stands before us today in relation to publishing financial child poverty figures. These last weeks have been an interesting journey for myself and my colleagues on this Bench. We are pleased to have been able to serve those whom it is most important we serve well, the children in our nation who are living in poverty—a poverty which all of us must keep striving to end, and which I believe the publication of these figures will assist.

[Baroness Manzoor (LD)]

My Lords, I am grateful to the Minister for bringing forward his amendment, and I am pleased that the Government have seen sense on the need to publish these important measures. They will help policymakers and others better to understand the issues affecting child poverty and the levers that may be used to help to lift children out of poverty. The argument with the Government was never really about their life chances measures, which it is clear will provide an important point of reference for policy interventions in the incredibly complex and multifaceted problem of child poverty. It was about understanding that, while child attainment and parental worklessness are important to understanding the problem, the money in a parent’s pocket is still important to understand when seeking to help to lift children out of poverty.

I understand the Minister’s concerns that focusing entirely on income risks the “poverty plus a pound” approach to policy. However, I equally understand that, for example, an intervention in the cost of transport may help to boost attainment, because you can understand that the cost of the bus for extra classes costs more than most of the families that you are trying to help can actually afford. That means that you must have access to data on income; that is important. These four additional measures will help, and not hinder, the Government’s attempt to take a more active approach to this issue. I am particularly pleased with the inclusion of the long-term poverty measure in subsection (1)(d), and I suspect that there may even be policy officials within DWP itself who will find that measure helpful in developing interventions.

This is a good compromise and I am pleased that the Minister has been able to achieve it. Thank you.

[Baroness Lister of Burtersett (Lab)]

My Lords, I warmly welcome Amendments 1B to 1D, and I offer my thanks to various people, at the risk of sounding a bit like an Oscar winner, which I am not. First, I thank the right reverend Prelate the Bishop of Durham, who spearheaded the original amendment and made such a powerful speech on Report and again today. I thank the Minister for listening, hearing and bringing forward what I agree is a pretty fair compromise at this stage. As he said, it gives legal status to the commitment to continue publishing the very important HBAI statistics. Also, there was a letter to the Times last week from nearly 180 academics, including those at the forefront of child poverty measurement, including Professor Sir Michael Marmot—I declare an interest as one of the signatories in my academic capacity. Despite what the Minister said, I think that they will see this as recognition of what was said in that letter: income and material deprivation should be at the heart of child poverty measurement, because such indicators are vital to our ability to track the impact of economic and policy change. I thank Dr Kitty Stewart of the LSE, who organised that letter, and all those who signed it, along with the voluntary organisations that have worked tirelessly to achieve something like this outcome.

Last, but by no means least, I thank Rebecca, a mother of two who, off her own bat but with the help of CPAG, launched a petition to keep the measures and collected 50,000 signatures in less than a month. Writing in the latest edition of CPAG’s journal Poverty, she said that she had been very moved as she read through many of the words written by people explaining why they were supporting the petition. She concluded that we should make sure that all children who are living in poverty are counted in the measures so that we can really see if things are getting better for them. She wrote:

“Children in poverty already feel poor and disadvantaged, why should they also be unnoticed?”.

Amen to that.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I have been studying these figures for as long as anyone. I start by acknowledging that I do not think the change would have happened without the direct personal intervention of the noble Lord, Lord Freud. I am very grateful to him, as the whole House should be, because he has the weight to be able to do these things and has the knowledge and understanding of what it means to people.

This gives me a lot more confidence that policymakers within the Conservative Government are not running away from the extent of this problem. I never really believed that that was the case, but this change means that they are not giving the impression that they do not want to see any of these figures published. Individually, these figures—they are relative, and there are well-recognised problems about relative measures—establish trends over time. That is important. Sixty per cent of national median income is perfectly well understood. It is a bellwether figure which we must all bear at the front of our minds as these policies unfold in future.

I remind colleagues that in the last figures the HBAI produced, in 2013-14, something like 17% of British children were in poverty. That is a ballpark figure of 2.3 million in all. That is a serious situation. If that is not difficult enough looking back, looking forward, the best estimate that I can find—the most accurate, up-to-date figure—is the projection that that figure might rise from 2.3 million to 3.8 million by 2020. That is the biggest increase in my generation and an issue of some concern. Obviously there are very difficult financial circumstances, and austerity has to be factored into the policy mix, but it struck fear in my heart when, speaking from Hong Kong, the Chancellor of the Exchequer said that he is looking for further savings in public expenditure. Looking forward to 2020, I think the pupil premium will help a lot in England, and the educational attainment and childcare provisions will help, but I do not think that the Government’s life chances strategy, as currently set out and planned, will deal with the projected increase in child poverty. That is serious and it is what we should be spending time on.

Having said that, reassurance will be provided by the Government accepting these figures and adding persistent poverty, which is a particularly important indicator, although it should be rebased, and I understand the technical need for that. This is a good and welcome step but, more than anything else, I want to acknowledge that it would not have happened without the intervention of the noble Lord, Lord Freud.

[The Earl of Listowel (CB)]

I thank the Minister for bringing forward these amendments. I was delighted to see them tabled. I agree with him that employment and education are the most important ways out of poverty. I am also delighted to keep reading the employment figures and seeing that we have the highest records of employment on record, I believe.

I thank the Child Poverty Action Group, which has briefed me on this and introduced me to the First Love Foundation, a bank providing food to hungry families in east London, and, through it, to Lorna, a mother of three boys—two, I think, with disabilities—who was working 16 hours a week. Two-thirds of children in poverty live in working families. It was so helpful for me to meet her and hear about her experience and that of her family, and the difficulties she faced living on such a low income.

I am also very grateful to my Cross-Bench colleagues, who listened very carefully to the debate on Report. I am most grateful for their attention to this matter. I thank the Minister again.

15:30

[The Lord Bishop of Portsmouth]

My Lords, I, too, am grateful for the Government’s decision to publish under obligation the three HBAI low-income measures, along with the further measure of children in persistent poverty. In welcoming this response to the clear wish of the House, I will not detain the House with my commentary on the tortuous routes to this wise and welcome decision, tempting though that is; we are in Lent and bidden not to succumb to temptation. As we have so powerfully and carefully considered in this House the plight particularly of children in poverty, I recall that the Minister said that he expected the Government to come under further pressure—I paraphrase—and I do not want to disappoint him.

Can he confirm that he retains an understanding of the special circumstances of children where there is bereavement or domestic violence? Widowed parents are not like other lone parents, and I hope that, as we look forward, there can be some recognition of that.

I reiterate the point that I made as I withdrew another amendment to this Bill: no society should tolerate violence. The Government recognise that in exempting victims of rape from the two-child limit. In the present proposals, those who suffer domestic violence are still encouraged to stick it out and put up with it or be penalised. If violence is wrong and to be deplored, then it is always wrong—rape, yes, but also the brutality, cruelty and horror of all violence. It is a thin line that divides rape and domestic violence, and it does no credit to a Government or a society that seeks to maintain such a marginal distinction. In welcoming these amendments, I wonder if the Minister can indicate that there can be still further consideration of the matters that I raise.

[Baroness Sherlock (Lab)]

My Lords, I welcome this change of heart from the Government, and I thank the Minister for bringing forward his amendment. It is good to know that we can guarantee that in future robust data will continue to be published about the incomes of poor children so that we can see what is happening to child poverty in Britain. I congratulate the right reverend Prelate the Bishop of Durham on his leadership on this issue and, like all other noble Lords, I thank the Child Poverty Action Group and the End Child Poverty coalition for their work. I thank noble Lords who have supported us on this issue through their words and their votes as the Bill has moved through this House.

I regret that we could not persuade the Minister to carry on reporting on child poverty, but I reassure anyone listening outside this House that we will continue to use these data as they are published to hold the Government to account for the consequences of their policies, particularly should those policies contrive to increase the number of poor children in Britain. I fear that I share the view of the right reverend Prelate the Bishop of Durham that it is most likely that that will take place.

I was not going to get into the area of poverty measurement but I have been tempted. I say to the right reverend Prelate the Bishop of Portsmouth that while I have given up sugar for Lent I am not going to give up politics as well, so I hope that he will bear with me for just one moment. Since the Minister took the opportunity of saying why the Government do not want to be in the business of counting the incomes of poor children, I should say that no one has ever felt that it was just about money—but it is not not about money. I am still proud that the last Labour Government lifted 1 million children out of poverty. The Minister may not think that income transfers make that much difference but they really do to the families involved. Labour tried very hard not to focus on tipping people over some imaginary poverty line. Instead it invested child tax credits for all families; it put in place the New Deal to help parents into work; it created tax credits so they could afford to take their jobs; it gave them childcare so that women could afford to go out to work; and it created Sure Start to ensure that the children developed. Therefore I fully support his agenda to look at poverty across the piece. The right reverend Prelate the Bishop of Durham did a nice job of explaining the different kinds of poverty and wealth. However, in the end, if you cannot afford to feed your kids, money matters. I apologise to the right reverend Prelate but now I am back on track.

The particularly important thing about these data coming out is that there is very strong evidence of the scarring effects of living for a period of time on low income in childhood and what that does to children’s life chances. Therefore I hope that as the Government publish the data, because the data will then be available to them they will also influence policy-making. However, given all of that, the House of Lords has done itself proud; I am grateful to have been part of a process during the passage of the Bill where the House of Lords has been able to scrutinise the evidence and the Minister has been willing to listen. I thank all noble Lords and I thank him. I am grateful for this concession, which is important, and we are pleased to support the Motion.

[Lord Freud]

My Lords, I thank noble Lords for their contributions and thank the right reverend Prelate the Bishop of Durham, who led in this area. I will make just one or two short points. In response to the noble Lord, Lord Kirkwood, I remind him that the forecasts of what happens to this measure of relative income are notoriously difficult to get right. I have been in this House on several occasions when there have been dire warnings that child poverty is about to go up over the next two years, but when you get to the figures two years later, it has not happened. I therefore hate having to defend myself against things that do not happen—it is bad enough having to defend myself against things that happen.

We have had a very useful debate on this area in this House. The point is that the debate succeeded in unpicking the concerns that noble Lords had, which is why we were able to find common ground. We are not in agreement in this area in our approach but we have found common ground here, and I hope both sides will be able to live with this amendment. However, I want to give some reassurance. One of the reasons we have brought forward this amendment is because we wanted to reassure the House and other people around the country that we take this whole issue seriously—that we have an agenda and we want to do something about this. We did not want to leave this issue with the impression that we were not taking it seriously. I can agree with the noble Baroness, Lady Sherlock, that I am convinced, as she is, that the publication of the HBAI will not go by without comment by someone on each occasion.

I will pick up on the point made by the right reverend Prelate the Bishop of Portsmouth, although I need to give him a two-handed answer. As I said when we went through this, we have separate arrangements—a specific set of payments—for bereavement. However, on domestic violence, which we dealt with specifically when we discussed it earlier, the right reverend Prelate has made reasoned arguments; I repeat my acknowledgement that this will remain an area of interest, at least for them, and anticipate the natural corollary of that. With those few words, I urge noble Lords to agree to the Motion.

Motion A agreed.

Motion B

[Lord Freud]

Moved by

That this House do not insist on its Amendment 8, to which the Commons have disagreed for their Reason 8A.

8: Clause 13, leave out Clause 13

Commons Disagreement

The Commons disagree to Lords Amendment No. 8 for the following reason—

8A: Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Lord Freud]

My Lords, I will also cover Motion C and we will be able to take the issue in the round rather than have separate debates.

Since we last met, the other place has of course considered the amendments passed in this place to remove the changes to the ESA work-related activity component and the universal credit limited capability for work element. In both cases, there was a clear vote to reinstate the clauses. In addition, the Speaker in the other place ruled that these changes attract financial privilege.

However, a lot of specific, useful points were made by noble Lords during our debate and I would like to provide an assurance that I have listened to their concerns. I aim to address some of the unintended consequences of these measures and to announce how we propose to address some of the specific issues that noble Lords raised. I touched on some of them in a letter that I sent to the noble Lords who spoke during the debate but I will go through them in greater detail now.

The noble Lord, Lord Low, among others, spoke eloquently about the effect that these changes might have on people’s ability to engage in work-related activity, citing the extra costs that can arise from activities such as attending interviews and training courses, and accessing the internet to look for and apply for jobs. We are responding to that concern. We announced in the summer Budget a sum of £60 million per year rising to £100 million per year for practical employment support, but I can announce today that we plan to provide additional funding of £15 million in the first year, 2017-18, directed at the local jobcentre flexible support fund. This money will increase the fund by 22% and it will be set aside specifically for those with limited capability for work. The flexible support fund is used by district managers and work coaches to provide the local support that our claimants may need to return to work, and it has proved to be very effective.

We will also provide guidance to ensure that jobcentres target this additional money at claimants with limited capability for work. The fund will be used to help those affected by the changes to the ESA WRAC and the UC limited capability for work element to attend training courses on gaining practical skills, access mental health support, attend community projects or take part in motivational courses.

The noble Baroness, Lady Meacher, raised the possible impact of these changes on people with progressive conditions. Indeed, several noble Lords expressed real concern on this issue. I have had a very close look at this. I assure noble Lords that we are committed to ensuring that all claimants receiving ESA or UC due to a health condition are subject to appropriate conditionality, based on the way that their condition limits their ability to function. For some people with progressive conditions, this will be the WRAG; for others, it will be the support group.

While the department already offers reassessments to claimants who feel that their condition has deteriorated, I am aware that we can and should do more to make claimants aware of this. To this end, I am committing to improving the awareness of this option to claimants with progressive diseases, as well as the guidance for claimants and disability charities on reassessments. We will also provide training for jobcentre staff to ensure that they are aware that they may need to talk to claimants with deteriorating conditions about requesting a reassessment. This is not an easy area. It is an operational area, and I have told noble Lords who are interested in it that we will work with them and other stakeholders to make sure that we get the guidance and processes absolutely right.

15:45

The third area is work incentives, which many noble Lords, including the noble Baroness, Lady Meacher, talked about at length. Clearly, this Government have a strong focus on the importance of work incentives. Indeed, the very structure of universal credit provides a strong incentive to find a job and will continue to do so. It is estimated that 300,000 more households will be in work once the impact of universal credit is fully realised. We intend to build on the success of universal credit and will be releasing a White Paper this year to improve support for claimants with health conditions and disabilities.

I want to act now to improve the work incentives for those continuing to get ESA—in other words, before they move on to UC—by removing the 52-week limit that applies to permitted work for those in the ESA WRAG. ESA WRAG claimants can currently work up to 16 hours and earn up to £107.50 per week under the permitted work rules, and keep their benefit. But the existing position is that, after undertaking permitted work for 52 weeks, ESA claimants in the WRAG have to stop work altogether, reduce their earnings to £20 per week, or lose their benefit. We will amend the regulations to remove the 52-week limit and allow claimants to continue to undertake 16 hours of part-time paid work and earn up to £107.50 per week, gaining skills and experience and building their confidence while still receiving benefit over a longer period.

As many noble Lords will be aware, we have set up a task force to advise us on the use of the £60 million, rising to £100 million, of employment support funding that was announced as part of this change. This task force included disability charities and disabled people’s user-led organisations, employers, representatives of the employment services industry, and policy think tanks. The charities include Scope, Leonard Cheshire, RNIB, the National Autistic Society and the Disability Action Alliance. I would like to report that we have had excellent discussions over three meetings, and task force members have also contributed case studies and views individually.

A wide range of views has been presented and we are working with the group to distil and agree its advice on key principles and priority areas to address. This will then inform development of the employment support package in the context of a wider reform agenda that we will set out in the forthcoming work and health White Paper. Alongside the task force recommendations for the summer Budget money, we will be investing £43 million over the next three years in trialling ways to provide specialist support for people with common mental health conditions—a point I have touched on in the past.

I turn now to the amendment tabled by the noble Lord, Lord Low. This is the third time this amendment has been tabled—once in the other place and for a second time in this House. It seeks to do two things. The first is to require the Secretary of State to publish a report before the changes relating to the ESA work-related activity component and UC limited capability for work element comes into force. That report covers the impacts that the provisions would have on those affected by the changes, in particular the impacts on the person’s health, finances and ability to return to work. We debated this amendment in Committee, when it was laid by the noble Lord, Lord Patel, and a similar amendment was laid and debated in the other place.

As I have said before on such amendments, it is clear that what is proposed in the majority of the amendment will be impossible to provide through our analysis. This is because the data that are currently available do not allow us to make a meaningful estimate. We would therefore need to undertake a large-scale trial over several years which would substantially delay implementation. A trial starting, perhaps, in April 2017 with 15,000 claimants would not yield results before 2019-20. Therefore, the earliest that we would be able to roll out the change would be 2020-21. This delay would not only impact on the savings associated with the change but would hinder the Government’s commitment to providing the right incentives and support for people with health conditions and disabilities to allow them to improve their life chances and fulfil their potential.

The impact on the savings associated with these changes, some of which we plan to recycle into employment support, is significant and would cost the Government more than £1 billion over the four years of this spending review period plus at least a further £1 million in research and analysis costs. What it is possible for the Government to provide—namely, the estimated financial effect of the reforms—has already been provided, along with other impacts, in the impact assessment that was published on 20 July last year.

Those who may be affected by this change are people who claim ESA or UC due to a health condition from April 2017 who might otherwise have been found eligible for the work-related activity component in ESA or the limited capability for work element in UC. How the changes affect individuals will depend on their circumstances, including the nature of their illness, which can vary considerably. There is a large body of evidence that shows that work is generally good for physical and mental well-being. Combine this with the growing awareness that long-term worklessness is harmful to both physical and mental health and it becomes clear why it is so important that, where health conditions permit, sick and disabled people are encouraged and supported to remain in or to re-enter work as soon as possible.

The second part of these amendments is a most unusual idea. It seeks to require that the commencement regulations be made under the affirmative resolution procedure. The changes to the ESA, WRAG and UC limited capability for work element—and, indeed, this specific amendment—have been debated extensively throughout the passage of the Bill with both Houses having ample opportunity to vote to express their view. That is why, in line with the usual process, the commencement regulations are not subject to any parliamentary process. Indeed, I have not been able to find any previous example of affirmative DWP commencement regulations. I would have thought that this House would agree that the time to take decisions of substance on these measures is now, during the passage of the Bill following extensive debate and scrutiny by both Houses, rather than postponing it to the commencement regulations.

In fact, this could appear to be a mechanism that sails perilously close to the wind in terms of trying to overturn normal parliamentary process, and I am sure that I am not alone in having concerns that this appears to be an attempt to block primary legislation through the back door. I cannot agree that requiring further debates in both Houses on the commencement regulations is either necessary or an appropriate use of parliamentary time. Furthermore, noble Lords are fully aware that we have committed to publishing a White Paper which will provide considerable opportunity for further debate on issues relating to support for people with health conditions and disabilities. In the light of the convincing vote in the other place, the application of financial privilege and the additional support I have outlined today, I am disappointed that the noble Lord, Lord Low, has felt it necessary to table his Motion. At best, as currently drafted, it is a delaying tactic that undermines conventional parliamentary process, but in practice, and I am sure unintentionally, it acts as a wrecking amendment. I therefore urge the noble Lord to withdraw the amendments and hope that noble Lords will feel able to support the Government. I beg to move.

Motion B1 (as an amendment to Motion B)

Moved by

[Lord Low of Dalston]

At end insert “but do propose Amendments 8B and 8C in lieu—

8B: Clause 13, page 14, line 24, at end insert—
“(8) Subsections (2) and (3) shall not come into force until the Secretary of State has laid before both Houses of Parliament a report giving his or her estimate of the impact of the provisions in those subsections on the—
(a) physical and mental health,
(b) financial situation, and
(c) ability to return to work,
of persons who would otherwise be entitled to start claiming the work-related activity component of employment and support allowance.
(9) Regulations bringing subsections (2) and (3) into force shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

8C: Clause 13, page 28, line 2, at end insert “, subject to section 13(8) and (9)””

[Lord Low of Dalston (CB)]

My Lords, I beg to move Motion B1 as an amendment to Motion B. I shall speak also to Motion C1. The proposed amendments set out in Motion B1 provide that cuts to ESA should not come into force until the Secretary of State has laid a report before Parliament, while the amendments set out in Motion C1 make similar provision in relation to the limited capability for work component, the equivalent component in the new universal credit which will replace ESA and a number of other benefits. My remarks will mainly be directed to Motion B1 but they should be taken also to apply to Motion C1 mutatis mutandis.

When the matter was debated during consideration of Lords amendments in the other place last week, Jeremy Lefroy said from the Conservative Benches that he hoped that the House of Lords would have taken up the idea which he moved as an amendment on Report that the Government should carry out an assessment of its impact before implementing a cut of £30 a week for those in the work-related activity group of ESA. These amendments in lieu are what Mr Lefroy was looking for. The case for removing Clause 13 and the £30 cut from the Bill remains as strong as when we did that on Report on 27 January, but the amendment in lieu, drafted in the same terms as the amendment moved by the noble Lord, Lord Patel, in Committee, recognises that the Commons have reasserted their commitment to Clauses 13 and 14 by reinstating them and attempts to find a compromise by simply providing that the cut should not come into force until the Secretary of State has laid before both Houses of Parliament a report giving an estimate of the impact on the,

“physical and mental health … financial situation, and … ability to return to work, of persons who would otherwise be entitled to start claiming the work-related activity component of employment and support allowance”.

The Government have brought forward no more evidence for their central contention that reducing benefit support incentivises people back to work. In the debate in the other place last week, Dr Eilidh Whiteford MP said:

“If someone is seriously sick or disabled, reducing their income will not make them better quicker. There is not a shred of evidence to support that ill-founded fantasy, but there is plenty of evidence that financial worries and the stress associated with work capability and PIP assessments have a negative impact on people’s health. A large and growing body of evidence suggests that hardship and stress slow down recovery and push people further away from the labour market”.—[Official Report, Commons, 23/2/16; col. 236.]

Indeed, several of those who spoke in the debate made the point, supported by the Institute for Fiscal Studies, that abolishing the WRAG component of ESA could strengthen the incentive for claimants to try to get into the ESA support group. Taking the disincentive thesis head on, Paul Scully MP said that,

“61% of people in WRAG want to go back to work. The majority of people who are out of work want to go back to work”.—[Official Report, Commons, 23/2/16; col. 226.]

Stephen McPartland said:

“I do not accept that £30 a week is an incentive for somebody not to go to work. Most Conservatives do not accept that. Most Conservatives consider it to be their proud duty to look after the disabled. Ideologically, we have no issue about providing a welfare system that is a safety net for those who need support when they fall on hard times, to help people back into work”.—[Official Report, Commons, 23/2/16; col. 232]

16:00

Heidi Allen MP made the case positively for retaining the ESA WRAG component. She said:

“I do not believe mentoring and support alone will heat the home of someone recovering from chemotherapy or help the man with Parkinson’s who needs a little bit of extra help. I remain unconvinced that these people do not also have financial needs. The DWP states that many people stay stuck in the WRAG for too long—up to two years—but I would question its conclusion that they are financially incentivised to stay in that group. For me, the fact that they are stuck in that group says more about the failure of DWP processes than about claimants’ active choices”.—[Official Report, Commons, 23/2/16; col. 214.]

The Minister argued that the WRAG was not working. She said:

“While one in every five JSA claimants moves off benefit each month, this is true of just one in 100 ESA claimants in the work-related activity group”.—[Official Report, Commons, 23/2/16; col. 195.]

However, Dr Philippa Whitford pointed out that,

“people in the ESA WRAG have been classed as not fit for work, unlike those on jobseeker’s allowance, so one would not expect the same success rate”.—[Official Report, Commons, 23/2/16; col. 229.]

Dr Eilidh Whiteford said:

“In contrast to ESA, jobseeker’s allowance is for the most part a short-term benefit. Depending on the state of the economy, the vast majority of jobseekers move off JSA in a few weeks or months, but those with long-term health conditions and disabilities are far more likely to face long-term unemployment”.—[Official Report, Commons, 23/2/16; col. 236.]

Finally, the Minister made reference to the White Paper that the Government are working on that will set out plans to improve support for people with health conditions and disabilities to further reduce the disability employment gap and promote integration across health and employment. Neil Gray, from the SNP, spoke for several in the debate when he asked whether the Minister was,

“not approaching the matter the wrong way round? Should she not introduce the White Paper first and then look at making changes to ESA?”.—[Official Report, Commons, 23/2/16; col. 195.]

Heidi Allen acknowledged,

“that a taskforce drawn from the Department and charities will be set up, but that should have happened before decisions were made to reduce financial support. I am uncomfortable about agreeing to the cuts until I know what the new world will look like for such people”.—[Official Report, Commons, 23/2/16; col. 214.]

That surely brings us to the nub of the matter, and why it is right to be bringing this moderate amendment in lieu. It does not seek confrontation with the House of Commons.

Just before the debate, I was handed a letter from the chief executive of the EHRC to Roger Godsiff MP. She writes: “We consider that the Government’s impact assessments make very little attempt to set out comprehensively how the three aims of the equality duty have been considered. On 16 September 2015, the commission wrote to the Secretary of State for Work and Pensions to set out our concerns about the impact assessments for the Welfare Reform and Work Bill. We believe the assessments would benefit from a more detailed consideration of the likely impact of the proposals on people with different protected characteristics. They contain very little in the way of evidence, and this limits the accompanying analysis and the scope for parliamentary scrutiny and informed decision-making on the proposed legislative changes. In relation to the impact assessment covering the proposed changes to ESA and the WRAG group, the analysis is very limited. There is, for example, no attempt to break the limited data down to understand how the proposals will affect people with different forms of disability. This makes it difficult to understand whether the changes will affect, for example, people with some types of physical disability more or less than people with particular types of poor mental health or who experience bouts of ill health and may therefore be in and out of work. It is also unclear whether applying the changes to new claimants will mean they have a more significant impact on younger disabled people or new migrant workers. These are the kinds of matters that we might have expected a more thorough analysis to have considered. Without this level of evidence, the assessment does not, in our opinion, sufficiently support consideration of alternative options which might have less of an impact on people with particular protected characteristics”.

In the face of such a devastating critique, your Lordships may consider that my humble amendment in lieu is moderate indeed.

The Commons disagreed with the amendment we passed on Report on grounds of financial privilege. I do not think that my amendment falls foul of the rules on that. We are not seeking just to send the same amendment back. Rather, we have brought an amendment in lieu with which the Government should be able to comply in the time before implementation without adding to costs. The Minister said it would be an expensive and time-consuming matter to provide the information my amendment calls for, but I would say that if the Government do not already have this kind of information they should not seek to implement such a drastic cut to ESA in the first place. I react to the Minister’s blood-curdling predictions a bit like those who want to leave the European Union and say that the scare stories put out by those in favour of remaining in are simply that—just scare tactics, and not to be taken seriously.

Before I conclude, I pay tribute to the Minister for the way that he has conducted this discussion. In keeping with his usual style, he followed an extremely open process. He has given most generously of his time to meet several groups of your Lordships to discuss the matter. Most to the point, he clearly listened and laboured valiantly within government, as we heard, to find concessions or commitments he could make to blunt the force of a cut to ESA. So it is no disrespect to the Minister when I say that his concessions are just not enough. I genuinely thank him for his efforts, but the concessions are really just at the margins. Against a reduction in the incomes of disabled people of some £640 million by the end of this Parliament, I estimate that the Minister’s concessions would return only about £25 million or £30 million to the pockets of disabled people. I am afraid that that is just not enough. From the passages I quoted from the debate in the House of Commons last week, it is clear that the Government may have had the votes but they clearly lost the argument. That is why it is right for us to make the argument again today.

[Baroness Campbell of Surbiton (CB)]

I support the amendments of my noble friend Lord Low. I, too, am extremely disappointed that the other place rejected the amendments passed by this House. Like my noble friend, I thank the Minister for his genuine attempts to find some concessions to alleviate the effect of the outcome of the cut. He generously met us, took great pains to explain how far he could go, and listened very hard to our concerns and worries that this may not be enough. However, I am afraid that the concessions—I studied them very hard over the weekend—do little to address the real reasons why the disability employment gap remains at a constant 30%.

I remind the House why disabled people placed in the work-related activity group of employment and support allowance receive £30 a week more than those on jobseeker’s allowance. This group of disabled people faces multiple costly barriers in finding work and in just living from day to day. First, they have to manage very severe conditions, whether complex, progressive conditions or long-term illnesses, which may or may not be associated with severe fluctuating pain. It is important to remember that when they are awarded ESA WRAG, they are judged to be unable to work. Almost 40% of them are not expected to improve for at least a year. The majority of this group also struggle with mental health challenges or learning disabilities, and that is just for starters.

The next barriers are the problems of getting to work and staying in work. You have a hostile built environment with inaccessible transport, offices and information systems. Then, when you are finally through the door, you face your biggest challenge ever—the attitude of employers. Trust me, it is comparable to doing an SAS assault course before you even get to do your day’s work. The concessions will do little to address these barriers that have nothing to do with sorting out the individual but have everything to do with sorting out society. This is borne out by the fact that almost 60% of people on JSA move off the benefit within six months, while almost 60% of disabled people in the WRAG need this support for nearly two years. Until now the ESA WRAG component has recognised that disabled people are seeking work for far longer than their non-disabled counterparts. If one looks at the Minister’s concessions, they are focused solely on supporting the individual. This is good but it is only a very small part of the problem. It ignores the major reasons behind disability unemployment, which are the countless external barriers. To suggest that this cut will incentivise disabled people to work is deeply flawed and, frankly, quite offensive.

The Government say that there is evidence of a correlation between employment rates and the level of disability benefit, but this is found only in countries where the level of disability benefit is significantly higher than in the UK. The think tank Reform produced a report last year citing Norway, where the equivalent benefit to the WRAG rate is 66% of the average wage; Sweden, where it is 80%; and France, where it is 50%. By contrast, the ESA WRAG rate is only 20% of the average wage. Believe me, this is not sufficient to provide a financial incentive to remain out of work. In addition, the OECD data show that, since the mid-1990s, in every country where there has been a reduction in the proportion of people receiving disability benefits, unemployment among disabled people has gone up.

16:15

I am pleased that the Minister will bring forward a White Paper in the coming months, setting out how the Government intend to close the disability employment gap. I hope this will address all the barriers that disabled people face getting into and staying in work. For instance, I am currently a member of the Lords post-legislative scrutiny Select Committee which is examining how effectively the Equality Act is addressing the discrimination faced by disabled people in the UK. The evidence we received, which was pretty tough going, overwhelmingly suggests that legislative remedies and awareness need attention if disabled people are to be treated equally in society. That, of course, includes disabled people trying to get a job and stay in work.

The recommendations made in the committee’s forthcoming report need to be addressed in the White Paper because these are the real barriers preventing disabled people joining the workforce. They are incentivised, but the barriers stop them. Will the Minister assure the House that his department will include in the White Paper a detailed consideration of those recommendations? I think he will see that therein lies the problem.

It is nonsense to make such drastic changes to the financial support received by disabled people in the WRAG before the House knows what a reformed employment and support system will look like in the future. The Government are asking us today to take a massive leap of faith in their future policy intentions. This is a huge gamble with people’s lives and survival, and I am not prepared to take it. I urge the Minister to accept the amendments proposed by the noble Lord, Lord Low. They make total sense and are very realistic. They would ensure that the up-and-coming reforms are coherently structured to support the Government’s commitment to halving the disability employment gap. What we do not want is a policy that drives the most severely disabled in our society further into a life of poverty and further away from any hope of employment.

[Baroness Manzoor (LD)]

I start by thanking the noble Lord, Lord Low, for his leadership and commitment to this issue, and other noble Lords who have also given their wholehearted commitment. This is a fundamental and important issue, not only to Members of this House, but to the most vulnerable in our society. I thank the Minister for the three concessions he has offered. These are real, substantive changes to the operation of ESA, and the wider system of support for disabled people, which will have a positive impact on the lives of some sick or disabled people. I am particularly pleased by the decision to end the 52-week rule, allowing those who are able to do so to stay close to the job market by working part-time. This is really important. This is a positive change to bring things in line with the system that will be in place under universal credit, and it is to be strongly welcomed.

I am also pleased by the decision to increase funding for the flexible support fund by £15 million to help those who are struggling to stay in work while managing a sickness or disability with whatever will make that task a little easier for them. However, I hope the Minister can look at ensuring that those who may benefit from the fund are aware of it. As we all know, with many of these kinds of funds the difference between availability and awareness can be significant in their success.

Finally, the commitment to ensure that those with degenerative conditions are able to move quickly into the support group if and when their condition worsens is important, although I hope the Minister will be able to give the House some details now of how this may operate. I also hope that he will commit to providing further updates to the House as details of this mechanism become clearer so that we may help to ensure that it operates in a way that is most beneficial to those who may need to call upon it.

It is to his credit that the Minister, despite not needing to do so, has fought for further concessions and I applaud him for it. These concessions will and could benefit many sick and disabled people, regardless of the cut to ESA being imposed by the Bill. But, as he well knows, no matter how hard fought, the concessions he has secured are merely tinkering around the edges. I do not believe for a minute that the Minister really thinks that the cut to ESA WRAG is a sensible measure or that it will somehow, as the Government have claimed, incentivise people to get better and into work more quickly. Some 50% of those likely to be affected by this cut suffer from mental health conditions. These are people living with depression and other conditions that make it hard for them to get through the day. The idea that pushing them closer to financial hardship, making it harder for them to afford their rent or feed their children, is going to help them in any way is, frankly, ridiculous. The fact is that for some, the risks of this added pressure could be severe.

If I could, I would seek to strike these measures out of the Bill again but, as we know, the Commons has spoken and the constraints of financial privilege have been put upon us. So we are left with the amendment to the Motion in the name of the noble Lord, Lord Low. This is a good amendment. It is not aiming to wreck the Bill, it is simply asking the Government to do one simple thing: to prove their case. The Government have said that this cut will help incentivise people to return to work. If that is the case, they should prove it. The Government say that this will have a limited impact on people’s physical and mental health. If they truly believe that, the noble Lord’s amendment gives them the chance to prove it. The Government say that sick and disabled people do not need that £30 extra a week. If that is the case, they should prove it.

When experts and NGOs from across the spectrum are saying the case is flawed, the least the Government can do is to present their evidence to prove their case before they implement the changes. That is what the noble Lord’s amendment does and that is why I and my Lib Dem colleagues strongly support it. Surely that is the bare minimum needed in the interests of good lawmaking.

The reason this cut has to happen is because of the need to meet an arbitrary spending target to completely abolish public sector borrowing set down by the Chancellor. The job of balancing the books can be done without this or other welfare cuts. These cuts are a choice, not an obligation. People deserve to know that they are happening because the Chancellor has made the calculation that it is better to look tough on spending and welfare by hitting those who are the most vulnerable than to accept, perhaps, that he has made a misjudgement about the economy.

I support the amendment of the noble Lord, Lord Low, not just because I believe that it is vital in ensuring that these cuts to ESA will proceed only if the claims by the Government about their impact can be proven but because those affected deserve some transparency—some honesty—from the Government. The Treasury must not hide behind good and honourable Ministers such as the noble Lord, Lord Freud, while doing immeasurable damage to some of the most vulnerable in our society.

[Lord Young of Cookham (Con)]

My Lords, perhaps I may respond briefly to the points that we have heard in the last three speeches, which I listened to with great interest and respect. The points fall into two categories: one is on the substantive issues about the benefit changes; the other is the argument about the procedural changes mentioned in the amendment.

On the substantive changes about whether ESA claimants in the WRAG should have their benefits realigned with those on JSA, with comparable changes to those on universal credit, the reality is that these changes have been debated extensively by both Houses. They were debated most recently last Tuesday in the other place, where after a three-hour debate the House of Commons insisted with a majority of 27—above the Government’s national majority—that the changes which we made should be resisted. The time has come to recognise, as I think the noble Baroness has just indicated, that we should respect the view of the Commons on this.

The noble Lord, Lord Low, said that the Government lost the argument but won the vote. Whether one has won the argument is a subjective decision and I happen to take a different view. Whether one won the vote is not a subjective decision, and that is the basis on which we should proceed. I hope that those who have expressed anxieties have been reassured by what my noble friend Lord Freud said in introducing this debate. There is the increase of £15 million for the flexible support fund, aimed at those with limited capabilities for work and enabling them to attend job interviews and training courses. I hope that that reassurance and the extra resources will allay some of the concerns that have been expressed.

Amendments 8B and 9B seem, briefly, to be going in exactly the opposite direction to that in which the House wanted to go in the context of the debate on my noble friend Lord Strathclyde’s report where, by and large, we wanted more done in primary legislation and less in statutory instruments. In that debate, I urged the Government to set the tone for constructive discussion by not using SIs where primary legislation is more appropriate. These amendments go in precisely the opposite direction to what I think the majority of the House wanted by putting the substantive change not in the primary legislation but in the statutory instrument. That would deny the opportunity for a conversation, which the House has always preferred, because the SI would not allow that. In effect, the amendment would give the House of Lords a veto over this part of the legislation, which the House of Commons has approved, and we would be back in the same territory as we were last October. I, for one, do not want to be back in that debate again and I hope, for those reasons, that the amendment will be resisted.

[Baroness Lister of Burtersett (Lab)]

My Lords, I strongly support the amendment in the name of the noble Lord, Lord Low of Dalston. He has made a strong case today, as he and other colleagues have made consistently, yet the Government continue simply to repeat that the original clauses will improve work incentives and somehow provide more support for disabled people moving into work, without any convincing evidence. Indeed, in the Commons the Minister fell back on the assertion that the Government strongly believe that this is the right thing to do. However, she did not even convince all her own Back-Benchers. As the noble Lord, Lord Low, said, a number of them had grave reservations about steaming ahead without the kind of evidence that is being sought, never mind the reservations and concerns of the wider constituency of disabled people and disability organisations.

However, the main point I want to make is the one that I and the noble Baronesses, Lady Grey-Thompson and Lady Thomas of Winchester, made on Report, which was brought to our attention by Sue Royston. Because the limited capacity for work element acts, in effect, as a gateway to the extra £30 in universal credit to cover the additional cost for disabled people in work, abolition means significant future losses for the very group the Government say they want to support. When the three of us made the point on Report, the Minister did not provide any substantive response. I did not receive the letter until just now, so it is possible that I have not read it properly. I have a horrible feeling that it might be languishing in my junk email folder, because a number of previous letters from the Minister finally turned up in that folder—I do not know what my email knows.

16:30

At the time, I said that I could not believe that this was an intended consequence. The Minister talked earlier about unintended consequences, and I apologise if he has actually dealt with this, but on a very quick reading of the letter, I do not think that he has. It appears that the Government are happy to countenance this as an unintended consequence, so that in the name of improving work incentives for disabled people, it will worsen the situation of those in work and in receipt of universal credit in the future. Whatever one thinks of the underlying premise that the measure is necessary to improve work incentives—I and others have made it clear that we do not believe that the evidence supports this premise—this cannot make sense. It is therefore essential that there is a proper review of the full impact of the original clauses before they are implemented, to address this issue if nothing else.

Despite the welcome concessions that the Minister has made, I hope that noble Lords will feel able to support the noble Lord, Lord Low of Dalston, who has worked so hard to protect disabled people from the worst effects of this Bill.

[Baroness Meacher (CB)]

My Lords, I rise to support briefly but most strongly the amendment to the Motion tabled by my noble friend Lord Low. I thank the Minister very sincerely for meeting us last week, and more particularly for his very real attempt to respond to the concerns expressed by noble Lords on Report. However, it is perfectly clear from the very restricted nature of the amendments that the Minister has been working within the tightest possible straitjacket. I accept that the Minister has done his very best, but I hope that he will understand that those sick and disabled people who genuinely cannot find an employer willing to take them on—which in my view is the very big problem they face—will face the most incredible hardship if Clauses 13 and 14 are implemented.

I shall address my next remarks directly to the Chancellor of the Exchequer. Mr Osborne, when it was our greedy and unscrupulous bankers, not disabled people, who generated the budget deficit, is it not immoral to reduce the meagre incomes of sick and disabled people by £1,500 a year to raise some half a billion pounds to deal with the deficit? Most bankers would regard £1,500 a year as literally peanuts—they would hardly notice it—but for these people, that sum is very considerable indeed. For me, the purpose of pressing this amendment today is to provide another chance for MPs in the other place to challenge the Chancellor directly about the scandal of such a policy.

The Minister said that the amendment would delay implementation until 2020-21. I am sure that he is right, but if I am right, Clauses 13 and 14 will not incentivise sick and disabled people to get into work—quite the opposite. They will find it ever more difficult to do so. So what are three or four years to find that out and prevent the hardship that these clauses will cause?

The Minister has agreed that if people with a lifelong progressive illness suffer a step down in their condition, it should be made easier for them to be assessed quickly. I thank him profusely for that concession, but it is very difficult to have confidence in the process. Even if DWP staff are able to deliver that commitment, the assessment process itself is deeply flawed—we all know that—and often very distressing indeed.

I should be really grateful if the Minister could assure the House that, whatever happens to the amendment moved by the noble Lord, Lord Low, today, for these groups— people with terminal, progressive, lifelong illnesses—the assessment process will be very straightforward and paper-based, simply involving a letter from the doctor to confirm that the individual indeed has a lifelong progressive health issue, has suffered a downward step and is unlikely ever to work again. It should be unnecessary—and, in my view, it would be cruel—to demand anything more than that.

My only other point is that the Minister’s concessions will do little or nothing for the 50% or so of ESA WRAG claimants who have mental health problems. Yes, as others have said, until universal credit is introduced the 52-week rule will end—and again I am grateful to the Minister for that. But there are two main problems for these groups. First, the chances of being referred to high-quality therapy services and receiving those services remain small. I know that cross-departmental work is always extremely difficult, but we can go to the moon, so I expect we can do this, too. We need from the DWP some way for these people to get the therapy that they need, just as somebody with a broken leg gets something done about it.

The second major issue is that it is extremely difficult for these people even to get an interview, let alone to find an employer willing to take them on and keep them. So the loss of income for these people is simply a punishment for something that is no fault of their own. That is my problem with all this. The Minister’s concessions, I am afraid, do very little to set right this injustice. It is despite my respect for and thanks to the Minister that I will vote for the amendment of the noble Lord, Lord Low, today. My vote will signify my disbelief that disabled and sick people are being asked to pay the price for the bankers’ greed and appalling behaviour—which, according to a former Governor of the Bank of England, continues pretty much unchecked today.

[Lord Lansley (Con)]

My Lords, I shall contribute briefly to this debate. As noble Lords have already said, we have had substantive, detailed debates both in Committee and on Report in this place and in another place, and I do not want to repeat at length arguments made then.

We should not underestimate the value and importance of the further enhancements that my noble friend has announced to the House. They respond directly to many of the points made in the debate. From my point of view, there is specialist support for those with mental health issues, to which the noble Baroness, Lady Meacher, rightly referred. With the noble Lord, Lord Layard, in his place, I think we can look forward to strong cross-departmental working between DWP and the Department of Health, with the therapists required being recruited to support the rollout of the access to psychological therapies programme to be completed by 2017-18. That gives us, for the first time, a realistic hope that those who are out of work with mental health problems—largely depression and anxiety—can have access to psychological therapies sufficiently quickly that they can be supported back into work before their condition deteriorates. It is one of the abiding characteristics of the failure of the work-related activity group that people have not had the support they needed both into work and for the treatment of their condition at the earliest possible stage.

These are important enhancements. As my noble friend Lord Young said, the flexible support fund responds to the points made. For those who are in the existing work-related activity group who are not to be cash losers, the enhancement of removing the 52-week rule will put them in a good position to be incentivised and supported into work, and encouraged to do so.

In response to the points made not least by some of our friends in another place, and on the point about improving the assessment, particularly for those with chronic or progressive conditions, the work capability assessment is really important. For example, it responds to the points made by the noble Lord, Lord Low, when he talked about Jeremy Lefroy’s speech, which was all about improving the work capability assessment. That responds directly to that.

The noble Lord, Lord Low, quoted extensively from the debate in the other place, but did not quote those who were in the majority. I am not going to have a corresponding series of quotations, but I regret that he did not get to the nub of the matter. The nub was that not only was the vote won but the argument was won. The nub of the matter was expressed by Paul Maynard, Member of Parliament for Blackpool North and Cleveleys, who in the course of commenting on a number of government policies to support those with disabilities—he was talking of the Government’s support for the Disability Confident campaign—in one phrase encapsulated the reason why the majority in another place supported the Government’s proposal and rejected this House’s amendment. He said:

“We all accept that the status quo is inadequate, and it would be the worst of all worlds to lock in a failed policy for the work-related activity group. That would benefit no one at all”.—[Official Report, Commons, 23/2/16; col. 207.]

I hope that your Lordships accept that the Government’s policy should be implemented. I am afraid that it would be continuing in exactly the same vein that was criticised in the other place if they tried to delay the implementation and remain with the status quo; that will be the inevitable consequence of passing the amendment in lieu proposed by the noble Lord, Lord Low. If we are to move to a better system to help and support people into work, we need to do it now, rather than remain with a failed status quo.

[Baroness Thomas of Winchester (LD)]

My Lords, I hope that I will not be considered to be lowering the tone of this debate if I ask the Minister a few practical questions about the concessions that he is offering and to say where I stand.

The Minister says that the funding within a flexible support fund will increase by £15 million a year to ensure that JCP targets the money at claimants with a health condition or disability. That is, of course, welcome—but which particular person within JCP will be doing this? Is it the decision-maker or the disability employment adviser? We know that there are not nearly enough DEAs to go around, so I am struggling to picture who will engage with the claimant to help them. There are also work coaches—will it be the work coaches and, if so, are there enough to go round, one to every Jobcentre Plus office? Will that person offer help to the claimant, or will they wait for it to be requested? If they wait, it will not happen, because how will claimants know about it? I do not suppose that they read Hansard.

The Minister says that the money might be used to pay for an internet connection at the claimant’s home, but who will teach them how to use this internet connection, particularly if their health condition poses problems? He may think that I sound sceptical, but I am afraid that is because, from long experience, I know that what Ministers say at the Dispatch Box and what actually happens on the ground are two very different things.

Furthermore, the Minister’s offer that the reassessment can be requested if a person with a long-term condition feels that they have got worse is just a restatement of the existing position. How long would people have to wait for a reassessment?

I welcome unreservedly the abolition of the 52-week limit for the permitted work rule, which I always thought was absolutely daft.

Finally, I agree with all those people who say that the Government have got things the wrong way round. Let us have a White Paper first and then see what needs to be done in this whole area, in the light of the proposals. I shall be voting for the amendment.

16:45

[Baroness Grey-Thompson (CB)]

My Lords, I, too, thank the Minister for meeting a number of Peers last week and listening to our views. Unfortunately, that has not alleviated my concerns about the impact the Bill will have on a significant number of people. Many people are already close to crisis point. They feel so beaten up by the changes that they are finding it hard to articulate. It is not that they do not care. They just do not have the energy left and are just trying to survive.

I welcome the changes in the permitted work rules, and congratulate the Government, as they have been needed for a long time. They could perhaps have been made before, but I am really glad that they have been fixed. I listened with interest to the noble Lord, Lord Young, on what it is technically right for us in this Chamber to do. We have to think about the effect the Bill will have on people outside this Chamber. I have received many emails on this subject from individuals worried about how these changes will push people further away from where we all want them to be.

My noble friend Lady Campbell of Surbiton made a compelling argument about the lack of proof about the incentive to get into work and about the contents of the White Paper. I should congratulate the DWP on our knowing so little about what is going to be in it, but it worries me greatly that we do not know what will be in it. As the noble Baroness, Lady Thomas, said, we are doing this the wrong way round. I understand that there is a need for us to save money, but I believe we can do it in a better way.

I have previously said in your Lordships’ House, and I will reiterate, that this change will affect disabled people in work as well as disabled people out of work. Disabled people in work will get less under universal credit. I thank the Minister for his letter, but perhaps we will disagree on the numbers that come out of it. To push these measures through, the Government are relying on the report by Reform, which is an ideological statement of the Government’s intent. I believe there are a number of flaws, especially around the erroneous contention that only 1% of claimants in the WRAG group end their ESA claims, as was raised many times in another place last week. The reality is that a simple check of the Government’s figures shows that more than 250,000 claimants in that group have ended their claims.

One of the many reasons that so few people ended up in work was that half the claimants were ex-incapacity benefit claimants and were too unwell for work. They have been through that assessment process. There is a great deal of difference between someone who is categorised as sick and will get better, say someone with a broken leg, and somebody who is categorised as sick with, say, Parkinson’s, where we do not know how quickly that condition will affect them. It almost feels as if we are putting the blame on disabled people, trying to fix them and not understanding the barriers that they face getting into work. Reducing the gap between those who are economically inactive through sickness and those who are unemployed throws away all recognition of those who are facing hardship through sickness and through no fault of their own.

I am sure the Minister will tell me that the answer is in the additional discretionary fund delivered through jobcentres. That sounds positive and it might be helpful to disabled people who are able to look for work, but we should remember that we are talking about an additional £15 million given to jobcentres to be used at their discretion with a range of clients, not just disabled people. Furthermore, this pales into insignificance when we think that the Government’s cut to ESA is taking £640 million out of disabled peoples’ pockets. It further introduces an additional round of bureaucracy, as claimants, many with mental health problems, will have to grapple with increasingly inaccessible local support networks, which will become a postcode lottery. It is thus likely to lead to claimants simply not applying for whatever help they may need because they just do not know that it exists.

I want to know what the support looks like. I was told by a special careers adviser that the best job I could ever get would be answering telephones and that I should not aim too high. That might have been 25 or 30 years ago, but right now disabled people are being told similar things. An adviser who works in a citizens advice centre told me that job coaches are telling people who are correctly in WRAG that they need to reapply when they do not have to. They are putting their support at risk, getting removed from WRAG, going to appeal and getting put back on WRAG. This is costing a huge amount of money and undermining everything that we are trying to achieve.

If job coaches right now do not understand the system, how are they going to be able to administer the discretionary fund? Reformers also claim that there is a financial advantage to being on sickness benefit. That suggests to me that they have no experience of what living on that amount of money if you are sick and/or disabled is actually like.

Universal credit is today a benefit that promises much but has yet to get off the starting blocks. No analysis at all has been provided showing how the lives of claimants with limited capability for work, or limited for work-related activity, will be enhanced by universal credit. It is hard for me to see how the Government taking £1,500 a year away from people who are profoundly limited in their capability for work will leave them better off under universal credit.

If you look at what others have said about universal credit, you see it reported that it is behind schedule, dogged by computer processing errors, poor communication with claimants and delays in fixing simple administrative problems. That is how it exists now. Noble Lords should remember that many of those people who are going to be affected will not be able to apply for PIP because of tightened criteria and will not be able to get support anywhere else. The decisions that we are taking today need to be clearly understood for the impact they are going to have on disabled people.

I agree that there is a lot of money wasted in the system through assessments and reassessments, and I have discussed that in the legal aid Bill. The appeals for ESA work capability assessment logged at HMRC have reached record levels; they are currently at 1.1 million, the highest for all benefits. We need to look at the system—that is essential—but right now disabled people are bearing the brunt of wastage in the system.

The amendment tabled by my noble friend is highly sensible. I urge the Minister to keep listening and think about the consequences that this will have on a significant number of people. I strongly support my noble friend in his endeavours.

[Lord Kirkwood of Kirkhope]

My Lords, I would like to add a couple of broad points to this important debate on this significant subject. As far as I am concerned, the noble Lord, Lord Low, has done the House a great service in tabling his amendment. I take the point made by the noble Lord, Lord Young of Cookham, as a former Chief Whip; the amendment may well be defective, and I certainly do not want to go back into the territory covered by the report of the noble Lord, Lord Strathclyde. However, the noble Lord, Lord Low, is saying that the House of Commons has asserted its rights in the process of ping-pong but this is merely a Motion to ask for some extra time.

As one or two other colleagues have said in the debate, I would want that extra time, if for no other reason than—a point made by the noble Baroness, Lady Thomas—to look at the White Paper. The White Paper that is coming will be significant and I am looking forward to it; it is an opportunity to have a look at this whole important policy area again. Taking this decision this evening would be a retrograde step and might make it more difficult for us to take the proper opportunity that the White Paper represents. If this change were not to be introduced until May 2017, that would be a sensible pause. I take the Minister’s point about the difficulty and technicality of meeting the test set out in the amendment, but it would be perfectly possible to have a sensible stab at estimating the impact on this particularly vulnerable group of our fellow citizens—the DWP has hundreds of researchers who do this work all the time.

I want to draw a broader point from that: we would not need to be here if we had had a proper impact assessment in the first place. To make an even broader point, it is now deemed to be old-fashioned and not sensible to have White Papers, Green Papers and a pre-legislative process for our legislation because it all has to be done for the greater glorification of Chancellors at Budget time so that they can make ex cathedra statements and get plaudits in the Sun newspaper the next day, only for us to find a fortnight later that all is not as it seemed. There is a plea here and a lesson to be learned: we should be more deliberative about the consultation process in these specialist areas of policy in order to get this kind of thing done right in the first place.

I make a point in passing about universal credit that a number of colleagues have made: this strips out some of the many advantages that universal credit will have in future, and that is regrettable. I also make the point that the £640 million saving has to be measured against the £100 million. I accept that again the influence of the noble Lord, Lord Freud, on this has been entirely beneficial. No other Minister could have had the success he has had in refining in important but second and third-order ways when considered against the fact that we are spending a sixth of the savings we are making in support for people who are in the work-related activity group. That is not enough. If it had been 50:50 and the Government came forward to the House with the savings bill—and it is correct to bear in mind that we are facing austerity as you cannot ignore that either, but to put one-sixth of the saving into the support services that are necessary for people in the WRAG group is not a proper balance or the right judgment—the House would have been a bit more willing to listen if the balance had been a bit more even.

The other thing is that the personal independence payment provisions we have introduced will not survive the test of time. The assistance we give people who are in the support group is nearly absent, and we need to do far more to provide help for people in that group to find work in the longer term. Therefore the Government would be well advised to think again. The noble Lord, Lord Low, has brought forward an important amendment; if he presses it to a Division I shall certainly support him, and I hope that other Members of the House will do the same.

[Lord McKenzie of Luton (Lab)]

My Lords, as others have said, we should be grateful to the noble Lord, Lord Freud, for his focus on a number of initiatives that seek to ameliorate the problems created by withdrawal of the WRAG component for new claims after March 2017, whether those were intended or unintended. However, I will be clear up front: we do not consider that the Government’s package of proposals adequately deals with the consequences of that withdrawal.

I will start by addressing the specific points raised by the Minister. First is the commitment to increase the funding in 2017-18 for the flexible support fund with guidance to jobcentres to ensure that the additional funding is targeted specifically at those with limited capability for work. The sum of £15 million has been mentioned. Obviously, this is to be welcomed so far as it goes and it could be used to help with extra costs of expenditure on attending interviews, training courses, accessing the internet, and so on. The focus on those in the WRAG is important because at present, as the 57 pages—would you believe it?—of guidance to district managers makes clear, the fund can be used to support all Jobcentre Plus customers, including 16 and 17 year-olds. Does the Minister have any indication of the current annual application of the fund to those in the WRAG, and how many claimants in the WRAG is the new money expected to help? With half a million people in the WRAG, £15 million amounts to 50p a week on average.

As for those with progressive deteriorating conditions, increasing awareness of the right to seek reassessment is fine but is this not just what the system should deliver anyway? Perhaps the Minister can say a little more about how it works at present, what data there are on the numbers currently seeking reassessment from the WRAG, and what information there is on the timescales within which these assessment are delivered. If it is envisaged that this awareness-raising would lead to greater numbers of individuals being reassessed, what additional resource is being made available to cope with it all?

On permitted work, the proposition is that someone on ESA will in the future be able to undertake work for more than 52 weeks, which, as we have heard, is the current limit, as long as it is for fewer than 16 hours a week and earnings do not exceed £107.50. It is understood that such earnings would not be taken into account for benefit purposes, including housing benefit. Perhaps the Minister can confirm that. Can he also say what the position will be in relation to council tax support schemes?

17:00

This proposal does not seem to add anything to the current arrangements for supported permitted work, where there is no 52-week limit at present, nor for permitted work for those in the support group. Of course, there are no permitted work provisions in universal credit, although the briefing note refers to the non-time-limited work allowance arrangements. We can see the similarity but there does not seem to be any direct read-across on the amounts. We can see the merits of removing the time limit for permitted work and the encouragement that this would bring, particularly to those closest to the labour markets, but it raises a couple of questions. What in fact would bring it to an end, and what would be the position of somebody on JSA and somebody on ESA, each working, say, 15 hours a week at the same rate of pay? What would be the consequences for somebody on ESA of having undertaken permitted work when it came to reassessment? As we know, the DWP has to be notified if somebody undertakes permitted work. Perhaps the Minister can say whether this would trigger any process for early reassessment. As a matter of fact, how many notifications does the DWP have in any one year?

All in all, these government proposals might be said to be helpful but they are a long way from being transformational or addressing the real damage being done by the removal of £30 a week from those in the WRAG. That is why we will support the amendments in the name of the noble Lord, Lord Low.

We have previously debated this matter at length and have rejected the clauses that abolish the WRAG component in ESA and the equivalent component in universal credit. We share the concerns of those who challenge the assertion that the removal of this component would be a work incentive and that it would assist in closing the disability employment gap. In particular, we agree that the analysis has not properly understood the barriers to accessing work faced by many disabled people—the noble Baroness, Lady Campbell, spelled those out in some detail—nor the poverty that they face, which will be made worse by implementing these provisions. Nor indeed has the analysis properly understood the adverse impact that there will be on the health of many disabled people. Widespread evidence has been presented to us on these matters, and we have had the Halving the Gap? review, led by the noble Lord, Lord Low.

In those circumstances, the call to hold back on the legislation until there has been a fuller impact assessment of its effects on the physical and mental health, the financial situation and the ability to return to work of those affected seems “modest”—I think that that was the word used. The Government have in part recognised that there is a serious issue and, as we have heard, they have promised a White Paper, although the timing and scope of this is unclear. It is hoped that it will in part make amends for a wholly inadequate impact assessment, but is it not at least a recognition that more is to be done and that legislating in this Bill in this way is premature? It is the wrong way round.

The Minister has told us that the data requested by the amendment are not currently available. Is that not a rather flimsy basis on which to legislate? It seems to us unacceptable—indeed, reckless—to legislate without those data and without that analysis, and it is playing havoc with the lives of many disabled people.

[Lord Freud]

I start by thanking noble Lords for their contributions. Clearly, many of them feel very strongly on this issue and they have expressed that.

I was struck by the noble Lord, Lord Kirkwood, saying that this was merely an amendment to ask for extra time. However, the point that I tried to make was that the time being asked for was very substantial—as the noble Baroness, Lady Meacher, accepted, we are talking about the way this is constructed—pushing this measure out to 2021. The noble Lord, Lord Low, rather gave it away when he said that the concessions—the practical concessions I am trying to deliver to the House, and to the people who need them to help with their particular circumstances—were not enough, and that he would therefore bring forward this amendment to drive at the whole structure of the Government’s proposal. The noble Lord said that this amendment is a compromise, but in practice it is not, because it would mean that these measures could not go forward. Research has to happen, which we could not therefore do to any reasonable timescale.

There may be compromises—I have found three—but this is not a compromise. Although I am sure that this is not the noble Lord’s intention, his amendments effectively wreck this policy, for those reasons. I argue that that is not something this House is here to do, given the very clear message that was sent. This House sent this measure back to the other place, and it has come back with financial privilege. If the noble Lord’s amendment is carried, we will be sending this measure back with just as many costs—I gave an illustration of those—as were involved the first time. I know that a lot of noble Lords will feel pretty uncomfortable with that process. I accept that many noble Lords do not like this measure, but we are beyond that position now: we are into the question of the appropriate position of this House, in the context of a very substantial vote for the measure’s coming back.

Let me deal with some of the points that noble Lords have made. I point out to the noble Baroness, Lady Manzoor, that there is evidence that financial incentives do work in this area, and I have quoted those in the past.

[Baroness Meacher]

My understanding is that the evidence is all about able-bodied people, not disabled people, and that is a crucial difference. Disabled people are a different issue.

[Lord Freud]

Disability benefits was dealt with in a paper by Barr et al, published by the Journal of Epidemiology & Community Health in 2010, and there are some others.

People in the WRAG are not incapable of working: they have limited capability to work. That is the distinction—the tier down—from those in the support group. The noble Baronesses, Lady Campbell, and Lady Grey-Thompson, made the point about the barriers that exist. I accept that people face barriers to work in this category. One of the things we are focusing on in the White Paper, and which we will spend a lot of time on in future, is dealing with these barriers, because this Government are committed to halving the gap.

Meanwhile, the flexible support fund is designed to go to the work coaches. However, to pick up on the questions of the noble Baroness, Lady Thomas, this depends on whether it is in relation to ESA or UC. Within UC the work coach maintains the relationship right the way through regardless of the health status or employment status of the person. That is where we will focus our attention and, clearly, because there is a relationship with a work coach, the money will be available directly to support such people.

As to the point made by the noble Baroness, Lady Manzoor, on progressive conditions and reassessment, I thought that this was a legislative issue and I was considering how to sort it out. However, it is not a legislative issue but a communications and operational issue. That is why the approach I have taken is to work with some Members of this House and stakeholders to get the system working. It is important. Sometimes people who have Parkinson’s are fine at the beginning and go about their lives, but then it gets worse. So being labelled with a particular illness does not mean that you should be at the top rate but, if you take a downward move, it is vital that you are straight in. We need to look at the processes for that and I have committed to doing so.

As to mental health conditions, which many people have talked about, the most frightening single statistic about our system of welfare support is that 42%, I think the figure is—I am speaking without a note—of people go into ESA with mental health reasons as the primary indicator. Once they have been on ESA for a year, that figure has moved up to 68%. We have turned the system round. Work is part of the solution. Leaving people sitting at home is the worst possible thing we can do for them. The whole of our welfare system has been wrongly directed at that kind of projection and we are moving the system round to stop that—

[Noble Lords]

Oh.

[Lord Freud]

It is true. We will debate it elsewhere.

The noble Baroness, Lady Thomas, asked who will do all this. We are developing a system we call universal support under which we join with local authorities to support people with particular barriers. We have never had this kind of system before. We have had systems where individual problems are addressed but no one has tried to sort out people’s problems in their entirety. We have now found a way of doing this. Through district partnerships with local authorities we are trying to make sure that people’s problems are addressed. We have a relatively narrow position at the moment—we are considering budget and digital issues—but it is a potent position and it is likely that we will pursue it.

The noble Baroness, Lady Campbell, referred to the Select Committee’s recommendations on barriers. We have already announced that we will replace both the work choice and the work programmes with the work and health programme.

The noble Lord, Lord McKenzie, showed his usual mathematical skills, but he got the wrong denominator. That is because £15 million is quite a lot of money in a flow measure in the first year, and I can assure him that he need not multiply it by everyone in the group because we are looking only at the flow. There is no impact on the work capability assessment of doing permitted work; it is a functional assessment.

Perhaps I may recap the commitments we have given and which noble Lords have generously pointed to. We have put an extra £15 million into the jobcentre flexible support fund, a rise of 22% that will go straight to the right people. We have removed the 52-week limit on permitted work in ESA. We have set in train a way of protecting people with progressive conditions to make sure that they have a rapid route into the support group when they need it. We have also made a number of commitments and changes to the Bill as it has gone through, and I thank noble Lords for their help in focusing on where those changes were needed. We have taken on the DPRRC recommendations. We have amendments to bring in exemptions to the benefit cap for people in receipt of carer’s allowance and guardian’s allowance. We have exemptions to the measures limiting support to two children in child tax credit and universal credit for kinship carers and sibling group adoptions. We have agreed a year-long exception for all supported accommodation from the rent reduction measures and we have placed a statutory duty on the Secretary of State to publish income measures annually. We have really gone through the Bill with the help of Peers around the House to get it right.

I shall return to the amendments at hand. I hope that the Government have made a strong case not to accept them because they do not work as intended. We have already had the original amendments returned with a ruling of financial privilege. I hope that the House takes the relationship between this House and the other place seriously and gets its judgment right.

17:15

[Lord Low of Dalston]

My Lords, I thank the Minister and all noble Lords who have spoken. We have had 10 speeches in this substantial debate on my Motion which in my estimation break down to eight to two in favour of the amendment, so the opponents are gaining. We also had 10 speeches on Report, but they broke down to nine to one in favour of the amendment. Eight to two still gives us a substantial lead. Frivolity apart, I thank all noble Lords who have contributed to the debate and for the support which has been signified right across the House. I am also grateful to the Minister for the way he has engaged with this.

I wish to pick out four points from the debate to allude to. The noble Lord, Lord Young of Cookham, is very knowledgeable about the dynamics of these matters and I am sure we all respect his views, but I am afraid that we will just have to disagree about who won the argument in the Commons. Yes, it is a subjective question, but in support of my interpretation of the debate I would simply argue that, as I said when moving the amendment, the Government have not really brought forth any more evidence in support of their case. What they have said is based largely on assertion, and in the circumstances I believe that it would be wrong for your Lordships not to draw attention to the weakness of the case.

Secondly, we would be failing disabled people, who will suffer dramatically if these changes to ESA go through, if we did not at least move an amendment like this and, it is hoped, carry it. I have long thought that a particular strength of this place is its openness to pleas for support from constituencies of the vulnerable outside this House. I am strengthened by the independent mindedness of noble Lords and the comparative independence of the Whips. That makes this place more open and accessible to the concerns of vulnerable communities, and I do not think that we should clam up against them at this point. The House should be true to its traditions and true to the spirit that it showed in carrying Amendments 41 and 44 on 27 January on Report.

If we are to keep faith with disabled people, the only way in which to do that is by calling for a report to be brought forward under secondary legislation. That is why the amendment seeks to use secondary legislation rather than primary legislation; it is the only course open to us.

Thirdly, the amendment is extremely appropriate given the EHRC’s strictures on the impact assessment that the Government have come up with. Fourthly, it is a question of delay. I do not think that the amendment will be delaying because the Government have 14 months to comply with what it is calling for. To the extent that it is delaying, it is appropriate that the changes to the benefits system for claimants of ESA should be finalised in the context of the White Paper. That point has been strongly made by a number of noble Lords.

The Minister made the point that it is impracticable for the DWP to carry out the sort of assessment that the amendment is asking for. I cannot remember who it was—it may have been the noble Lord, Lord Kirkwood—who said that surely the DWP, with its hundreds of researchers, can at least have a stab at it. We are not seeking the last word in methodological rigour, but within the time available it should not be impossible for the department to have a better stab at an impact assessment than what we have seen so far.

I do not think it is a wrecking amendment. It is more than possible for the Government to come up with a passable show of what we are asking for. However this goes today, I undertake to the Minister that we will continue to work with him to get the best outcomes for disabled people, which I know is what he wants, too. For now I hope he will not mind if I seek to test the opinion of the House.

17:23

Division 1

Ayes: 289

---

Labour: 154
Liberal Democrat: 82
Crossbench: 32
Independent: 9
Democratic Unionist Party: 1
Bishops: 1
Green Party: 1
Plaid Cymru: 1

Noes: 219

---

Conservative: 188
Crossbench: 29
Independent: 1
Ulster Unionist Party: 1

Motion B, as amended, agreed.

17:40

Motion C

Moved by

[Lord Freud]

That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.

9: Clause 14, leave out clause 14

Commons Disagreement

The Commons disagree to Lords Amendment No. 9 for the following reason—

9A: Because it would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion C1 (as an amendment to Motion C)

Moved by

[Lord Low of Dalston]

At end insert “but do propose Amendments 9B and 9C in lieu—

9B: Clause 14, page 14, line 27, at end insert—
“(2) This section shall not come into force until the Secretary of State has laid before both Houses of Parliament a report giving his or her estimate of the impact of the provision in this section on the—
(a) physical and mental health,
(b) financial situation, and
(c) ability to return to work,
of persons who would otherwise be entitled to start claiming the limited capability for work element of universal credit.
(3) Regulations bringing this section into force shall not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

9C: Clause 31, page 28, line 2, at end insert “and subject to section 14(2) and (3)””

Motion C1 (as an amendment to Motion C) agreed.

Motion C, as amended, agreed.

Motion D

Moved by

[Lord Freud]

That this House do not insist on its Amendment 34 and do agree with the Commons in their Amendment 34A in lieu.

34: Clause 28, page 26, line 18, leave out from beginning to “does” in line 21 and insert—
“(a) in a case where the maximum amount applying under regulations under section 26 or Part 1 of Schedule 2 is determined on a basis that treats an amount, or a description of an amount, payable by way of service charge as part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge,
(b) in a case where section 21 applies after regulations under section 26 have, or Part 1 of Schedule 2 has, applied a maximum amount determined on a basis that treats an amount, or a description of an amount, payable by way of service charge as part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge,
(c) in a case not falling within paragraph (a) or (b) where, under the terms of the lease or agreement, an amount, or a description of an amount, payable by way of service charge is part of the rent payable, includes a reference to an amount, or an amount of that description, payable by way of service charge, and
(d) in any other case,”

Commons Disagreement and Amendment in lieu

The Commons disagree to Lords Amendment No. 34 and propose Amendment No. 34A in lieu.

34A: Clause 28, page 26, line 16, leave out subsection (5) and insert—
“(4A) Regulations made by the Secretary of State may specify cases in which a reference in the social housing rent provisions to an amount of rent payable to a registered provider includes, or does not include, a reference to—
(a) an amount payable by way of service charge, or
(b) an amount payable by way of service charge that is of a description specified in the regulations.
(4B) Regulations under subsection (4A) may, in particular, make provision by reference to—
(a) guidance with respect to the principles upon which levels of rent should be determined issued by the Housing Corporation under section 36 of the Housing Act 1996;
(b) a standard set under section 193(1) of the Housing and Regeneration Act 2008 that includes provision under section 193(2)(c) (rules about levels of rent);
(c) a standard set under section 194(2A) of the Housing and Regeneration Act 2008 (the power of the regulator to set standards relating to levels of rent) that was published by the regulator before 8 July 2015;
(d) guidance relating to levels of rent issued by the regulator before 8 July 2015 (including guidance issued before 1 April 2012);
(e) guidance relating to levels of rent for social housing issued by the Secretary of State before 8 July 2015.
(4C) Regulations under this section must be made by statutory instrument.
(4D) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament.”

[Lord Freud]

My Lords, at Third Reading earlier this month, I informed the House that we had received representations from providers and the regulator for social housing about an unintended consequence of one of the government amendments we brought forward on Report. That amendment sought to enable continuation of existing policy on affordable rents and service charges which we had intended to be helpful. I said at the time that we would seek to address this issue by tabling an amendment in lieu when the Bill returned to the other place, and this Motion is the result of doing that.

In speaking to the Motion, I find myself reminded of Alexander Pope’s popular quotation, “To err is human”, but that would give noble Lords the chance to be divine in their forgiveness, which is clearly unacceptable. Perhaps it is more appropriate to quote William Hickson, the proprietor of the Westminster Review, who is credited with popularising the proverb:

“’Tis a lesson you should heed:

Try, try, try again.

If at first you don’t succeed,

Try, try, try again”.

I hope that I have now removed the opportunity for noble Lords to make jokes at my expense, but I doubt it.

I will outline briefly why the change is needed. The providers have told us that the drafting of the original amendment would inadvertently bring service charges within rent reduction measures for some standard social rent housing. This is because, although providers are entitled, under existing guidance, to charge service charges on top of formula rent, this has been implemented by providers in different ways. For example, some landlords of formula social rented housing reserve service charges as part of rent for purposes of enforcement in relation to non-payment of service charge. As a result, the service charge, even if it is separately itemised—and it is not always—forms part of gross rent and is captured by the provision. In such cases, service charge is part of rent and the entirety of the sum would be captured. This would result in a larger reduction in revenue for the providers than expected. We understand that these practices, while not general, are sufficiently widespread to be a problem for the sector. This was not our intention and we thank providers and the regulator for drawing it to our attention.

Given that this is a complex area, the amendment sets out a new regulation-making power instead, rather than setting the position out in the Bill itself. This will allow flexibility for further adjustments if they are ever needed. Regulations made under these powers would do two things. First, they would identify the cases where the social rent reduction limits being imposed by the Bill would limit both the amount of rent and the amount of service charge payable by tenants. This would apply to most affordable rented housing, where the rent is set using a percentage of market rent principle. Secondly, they would identify the cases where only rent is to be limited by the 1% per annum reduction policy. These are cases where rent is determined by a formula social rent approach. This is all standard social rented housing and that minority of affordable rented housing where rents are set by reference to the formula social rent model.

I regret the need for this late amendment. I am grateful to the housing sector for bringing this issue to light. I hope, with the explanation I have given and on the basis that the new provision will help providers, your Lordships will feel able to support the Motion. I beg to move.

[Lord McKenzie of Luton]

My Lords, as the Minister has anticipated, we have a sense of déjà vu on this drafting. We have lost count of the number of amendments and changes the Government have made to their own legislation. Again, the Commons are disagreeing with an amendment that the Government themselves laid in your Lordships’ House and replacing it with an alternative. So confident are they now that they will get it right on this occasion that they have decided to address the point at hand in regulations.

However, the substantive point is serious and it is important that the legislation is right. It is understood that the issue is to properly identify those cases where the 1% per annum reduction will apply to only the rent and to where it will apply to rents and the amount of the service charge. The former will apply to rents determined by a formula social rent approach; the latter to what is known as affordable rents, which are determined on a percentage of market value. It is understood that the sector is content with this differentiation—the Minister has confirmed that—and so are we. We look forward to the regulations in due course. There will, doubtless, be various iterations of them.

[Lord Freud]

I thank the noble Lord, Lord McKenzie, for being merciful in his remarks. As I said at the start of this brief debate, this Motion has been tabled as a result of representations made by the providers—I confirm that again—and the regulator. We welcome their input, as the noble Lord does. I urge noble Lords to support this Motion.

Motion D agreed.

Calais: Child Refugees

Monday 29th February 2016 Lords Chamber

Statement

17:47

[The Minister of State, Home Office (Lord Bates) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend James Brokenshire to an Urgent Question in another place on child refugees in Calais. The Statement is as follows:

“Mr Speaker, last Thursday a judge in France ruled that the authorities in Calais could proceed with clearing the tents and makeshift accommodation from the southern section of the migrant camp. Over the weeks the authorities, working with NGOs, have ensured that the migrants affected by the clearances—which have begun today—were aware of the alternative accommodation that the French state had made available. For women and children, this means the specialist accommodation for around 400 people in and around the Jules Ferry centre, or the protected accommodation elsewhere in the region. For others, this means the recently erected heated containers which can house 1,500 people.

The French Government have also, with the support of UK funding, established over 100 welcome centres elsewhere in France, where migrants in Calais can find a bed, meals and information about their options. To be clear, no individual needs to remain in the camps in Calais or Dunkirk. The decision to clear part of the camp in Calais is, of course, a matter for the French Government. The joint declaration signed in August last year committed the UK and France to a package of work to improve physical security at the ports, to co-ordinate the law enforcement response, to tackle the criminal gangs involved in people smuggling and to reduce the number of migrants in Calais.

Both Governments retain a strong focus on protecting those vulnerable to trafficking and exploitation, and have put in place a programme to identify and help potential victims in the camps around Calais. The UK is playing a leading role in tackling people smuggling, increasing joint intelligence work with the French to target the callous gangs that exploit human beings for their own gain. The UK shares the French Government’s objective of increasing the number of individuals who take up the offer of safe and fully equipped accommodation away from Calais so that they can engage with the French immigration system, including lodging an asylum claim. It is important to stress that anyone who does not want to live in a makeshift camp in Calais has the option of engaging with the French authorities, which will provide accommodation and support.

This is particularly important with regard to unaccompanied children. Where an asylum claim is lodged by a child with close family connections in the UK, both Governments are committed to ensuring that such a case is prioritised. But it is vital that the child engages with the French authorities as quickly as possible. This is the best way to ensure that these vulnerable children receive the protection and support they need and is the quickest way to reunite them with close family members in the UK.

The UK is committed to safeguarding the welfare of unaccompanied children and we take our responsibilities seriously. No one should live in the conditions we have seen in the camps around Calais. The French Government have made huge efforts to provide suitable alternative accommodation for all those who need it, and have made it clear that migrants in Calais in need of protection should claim asylum in France”.

17:50

[Lord Rosser (Lab)]

I thank the Minister for repeating the reply to the Urgent Question. The thrust of part of it is that the Government are working with the French authorities and others to ensure that the claims of refugees, including the estimated 150 unaccompanied children in Calais and Dunkirk, of the right to be in this country under the Dublin regulations are processed quickly. What is the evidence that that is actually happening, as opposed to the Government claiming that it is happening?

Since the Government do not allow such children to come to the UK immediately to be in the care of their family while they make their applications, as the UK tribunal ruled they should be, and the reality, as opposed to what was in the Statement, is that cases from France take up to nine months, are the Government considering allowing those children who have a claim to be in the UK to come to the UK to make that application? What specific provisions are in place to ensure that the reality, as opposed to the Government’s belief, is that such children who are currently being moved out of the camps in Calais and Dunkirk are properly safeguarded and rehoused in suitable accommodation for children, and not left vulnerable to child traffickers, to join the thousands in Europe who have already disappeared?

Finally, the UNHCR has offered to set up a system to expedite the claims of those children in Calais and Dunkirk with close family in the UK with whom they could be reunited under the Dublin regulations. Have we accepted that offer from the UNHCR, and if not, why not?

[Lord Bates]

I am grateful to the noble Lord for his questions. Dealing first with the time that it takes to process such applications, I say that nine months is clearly too long. That is one reason why we have announced that a senior Border Force officer is going to be embedded in the interior ministry in France to ensure that particularly the Dublin family reunion cases are processed as quickly as possible. We hope that that situation will improve.

The noble Lord asked what we are doing to ensure that children do not fall prey to the trafficking gangs. The evidence from Europol is that 90% of those who come to Europe have paid a criminal gang to do so. We know that those gangs are a serious threat and are operating in that area. One reason we are putting so much emphasis on the hotspots is that we want especially children but all asylum seekers to be processed as soon as they come into the EU. There are five hotspots in Greece and another seven in Italy. The Home Secretary has asked Kevin Hyland, the Independent Anti-slavery Commissioner, to go out to those areas with a child protection officer to see what more can be done for children.

In relation to the UNHCR, of course that has a wider remit around the world for those who are seeking asylum under the refugee convention. We are working very closely with it, particularly on the initiative announced by the Prime Minister in relation to the 3,000 identified by Save the Children as to what more can be done with them. The UNHCR is looking at a solution to that and we are expecting an answer from it in the next couple of weeks.

[Lord Paddick (LD)]

My Lords, I understand what the Minister says about unaccompanied children but what action are the UK Government taking to identify unaccompanied children with family in the UK who are legally eligible for asylum here, not only in Calais but in Grand-Synthe near Dunkirk and numerous other camps in northern France? Surely there are settled families in the UK who know that there are unaccompanied children related to them in these camps in northern France. Surely it cannot be left simply to the French Government and the children to apply for asylum. They are just children, after all.

[Lord Bates]

That is right. In the Written Statement on 28 January, we announced that we were devoting £10 million to the protection of children across Europe. We have provided additional support, particularly in the camps, to make sure that people get the advice they need. As the noble Lord rightly says, we are talking about children here and I well understand that they need an adult on their side who can work with them, helping and guiding them through the process. We have said that the best route for that is in the first instance that they claim asylum in France and then they can enter that system and get the protection they need. Then when their family are identified in the UK they can be safely transferred to the UK to be reunited with them.

[Lord Hylton (CB)]

My Lords, I apologise for not having heard what the Minister repeated. He was too quick for me. However, as I was in Calais just over a month ago, perhaps I could ask: does he agree that getting information to the relevant people, whether children or adults, is crucial to those who already have close relatives in Britain? Does he also agree that that kind of information would be best conveyed not by officials but by people who are already in this country, who can explain their situation and how to go about family reunion? I hope the Minister will look sympathetically on my amendment about family reunion when we come to Report on the Immigration Bill.

[Lord Bates]

On the point about family reunion, the French Government are supporting some NGOs that are operating in that area and doing important work in the camps, ensuring that people get access to the type of advice they need. We will make sure that that work continues. The NGOs want to do the right thing. The Government want to do the right thing, both here in the UK and in France. That is why the relationship is so important and why we are working so closely together to ensure that children and families are reunited as soon as possible.

[Lord Cormack (Con)]

My Lords, how many of these children are under the age of 16 and do we have satisfactory reception facilities of a temporary nature before they are reunited with any family members?

[Lord Bates]

I am grateful to my noble friend for that question. I can tell him that 62% of unaccompanied asylum-seeking children were 16 or 17; 26% were 14 or 15; and 8% were under 14. Of course, in this country the obligations under the Children Act mean that anyone aged under 18 will be taken into local authority care as a result of those duties.

[Lord Dubs (Lab)]

Not long ago four children were discovered in Calais who had parental links here. It took a long time to find those children. Surely we have to make sure that we do not let time pass in the way it did then. Could the Government not publicise very loudly and clearly to the people in Calais and Dunkirk that if there are young people there with family members here they should announce themselves because that is a quick way of getting in here?

[Lord Bates]

The noble Lord is absolutely right. Without going into the details of a particular case, it was simply a question of process to say that if they had claimed asylum in France, that whole system could have been organised and expedited very quickly indeed. That is the message that we need to get out to people: the way to be reunited with your family in the UK is to claim asylum in France and rely on the Dublin regulations to ensure that that happens as soon as possible.

[The Lord Bishop of Durham]

My Lords, can the Minister confirm how tight or loose are the parameters on family relationships under Dublin being used in this? That is one of the concerns of those working on this in the NGOs—how tight or how loose the family ties can be defined as.

[Lord Bates]

The family ties are tightly defined; I suppose that they are there to avoid any potential risk of wider, extended family being brought in under humanitarian protection. They are defined as siblings or a parent and it is preferable that the children are reunited with the parent, wherever that parent is. That is one argument where the UNHCR has certainly made a strong case for ensuring that children are reunited—and stay—with their families in the region, rather than undertaking the perilous journeys which bring them to Calais.

[Lord Roberts of Llandudno (LD)]

My Lords, does the Minister realise exactly how urgent the situation is? In a census last week, there were 5,497 residents in Calais, of whom 651 were children and 423 were unaccompanied children. France has of course started to clear the southern section of the camp of its 3,455 residents and will then begin on the north section, which has 2,042. What is to happen to these children when the French have cleared it? Will there be any humanitarian extension by the United Kingdom Government? The Minister might listen to just one suggestion. The Government have promised to bring in 20,000 refugees over four years. We will be coming to the end of the first year in May, which means that we should have accepted 5,000 refugees by then. Can he please tell me exactly how many have been accepted?

[Lord Bates]

Under the Syrian vulnerable persons’ resettlement scheme, we set out to say that there would be 1,000 before Christmas. That figure is now 1,200. I am sure it will also be of interest—in particular to the noble Lord, who has always spoken up about the protection of children and will welcome this fact—that half of those 1,200 are children.

Scotland Bill

Monday 29th February 2016 Lords Chamber

Report (2nd Day)

18:01

Clause 42: Policing of railways and railway property

Adjourned debate on Amendment 41.

[Lord Faulkner of Worcester (Lab)]

My Lords, on Wednesday night we had an hour-long debate on the role of the British Transport Police in Scotland. A number of issues remain unresolved and may be the subject of further amendments at Third Reading but meanwhile, as far as this afternoon is concerned, I beg leave to withdraw the amendment.

Amendment 41 withdrawn.

Amendment 42 not moved.

Clause 43: British Transport Police: cross-border public authorities

Amendment 43 not moved.

Amendment 44

Tabled by

[Lord Empey]

44: After Clause 43, insert the following new Clause—
“Oversight arrangements for the British Transport Police in Scotland
(1) The Chief Constable of the British Transport Police (“the Chief Constable”) shall appear before the Scottish Police Authority Board on request (including at urgent meetings, with reasonable notice).
(2) The Chief Constable shall appear before the Justice Committee of the Scottish Parliament (or any successor Committee fulfilling the functions of that Committee) on request (including at urgent meetings, with reasonable notice).
(3) The Chief Constable shall appear before the Cabinet Secretary for Justice in the Scottish Government on request, with reasonable notice.
(4) The Chief Constable shall present a report on the work of the British Transport Police in Scotland to the Scottish Ministers at least annually.
(5) The Chief Constable shall present a plan for the work of the British Transport Police in Scotland to the Scottish Police Authority Board at least annually, and a report on the work of the British Transport Police in Scotland to the Scottish Police Authority Board at least annually.
(6) The Chief Constable shall ensure that British Transport Police personnel exercising functions in Scotland have undertaken training on the Code of Ethics for policing in Scotland, and on the disciplinary policy procedures and operational procedures in place for Police Scotland, and the Chief Constable shall take that Code and those procedures into account when exercising his or her functions.”

[Lord Empey (UUP)]

My Lords, this amendment was debated last week and I hope the Minister will reflect on the significant debate that we had then. I hope he will take on board the fact that this amendment does no injustice or prejudice to the clauses in the Bill. He agreed to reflect on matters, and I reserve the right to look at this again at Third Reading. In those circumstances, I shall not move the amendment.

Amendment 44 not moved.

Clause 45: Onshore petroleum: consequential amendments

Amendment 45

Moved by

[Lord Dunlop]

45: Clause 45, page 47, line 17, leave out subsection (5)

[The Parliamentary Under-Secretary of State, Scotland Office (Lord Dunlop) (Con)]

My Lords, Clause 44 devolves power to the Scottish Parliament for regulation of licences to search and bore for petroleum in the Scottish onshore area. Clause 45 transfers the functions of the Secretary of State to the Scottish Ministers. However, as consideration payable for such licences is to remain reserved to Westminster, Clause 45(8) retains the power of the Secretary of State to make model clauses on the consideration payable for a licence granted by the Scottish Ministers, and on matters related to the keeping of accounts and the measurement of petroleum.

Amendment 46 would revise Clause 45(8) to ensure that the Secretary of State’s enforcement ability in relation to such reserved matters is preserved for licences in onshore Scotland. This will be achieved by maintaining the Secretary of State’s current power to cancel licences in onshore Scotland, applicable only for infringements in relation to consideration payable for a licence, the keeping of accounts and the measurement of petroleum related to consideration and taxation. Nothing in this amendment changes the powers being devolved to the Scottish Parliament. A definition of “appropriate Minister” under Clause 45(5) is removed, as this is redundant in light of Clause 45(17). I therefore beg to move Amendment 45.

[Lord Wallace of Tankerness (LD)]

My Lords, I shall speak to Amendment 47 and others in this group which are in the name of my noble friend Lord Stephen and myself. Amendment 47 would in effect devolve legislative competence for consents for electricity generating stations and overhead lines to the Scottish Parliament. The position at the moment is that the Scottish Government have executive power to grant development consent for generating stations of 50 megawatts capacity or more and overhead lines of 20 kilovolts nominal voltage or greater. However, the Scottish Parliament does not have legislative power to reform the law in relation to such development consents. This is the only type of development that the Scottish Parliament does not have legislative power to regulate.

As I have indicated, such consents are governed by Sections 36 and 37 of the Electricity Act. This legislation, which goes back to 1989, is outdated. In fact, it is sufficiently outdated that, in the mean time, in England and Wales, it has been changed so that applications for development consent are dealt with under the Planning Act 2008, a much more suitable system. In Scotland, it has been described as effectively a legislative orphan. The Scottish Parliament has no power to reform it, and when the United Kingdom Parliament reformed it in respect of England and Wales, the opportunity was not taken to reform it in Scotland. Moreover, it is my understanding that the draft Wales Bill is devolving power to the Welsh Parliament, as it will be known, to legislate on consents for almost all energy development there. The aim of this amendment is therefore to devolve to the Scottish Parliament legislative power to reform the system of development consenting for energy infrastructure. The generation, transmission and distribution of supply of electricity is presently reserved although, as I said, the actual power to grant consents has been devolved.

This issue has some practical consequences in the context of the Energy Bill, which is currently in the other place. I was advised last week that a development in the south of Scotland, which I think is of about 65 megawatts, is therefore subject to the present regime under Section 36. However, if the same development had been just several miles further south in Northumbria, it would have been the responsibility of the local authority. If the local authority had refused it in England and Ministers had called it in, the grace period that the Government proposed for onshore wind farm consents would have kicked in. However, that does not cover the situation in Scotland given that it is already subject to ministerial fiat there, so there is a mismatch in practical terms. I apologise that this gap was drawn to my attention after Committee but I have certainly made the noble Lord, Lord Dunlop, aware of these concerns. He has had some notice and I hope that he may be able to give an encouraging reply.

The other amendments, to some extent, go over the ground that we covered in Committee. I appreciate that the Minister has met me since then and we have discussed these amendments. The Government argue that there is already adequate statutory provision for consultation, and the Minister asked why the industry was not satisfied and agreed to meet the industry to find out. My understanding is that, in the event, negotiations on the fiscal framework took over. That is perfectly understandable—there is no criticism there. However, his officials did meet the industry.

The current position is in spite of the fact that a commitment followed a request in the Smith commission for further consultation. Indeed, in the initial response to the Smith commission, the Government’s Command Paper stated:

“The UK Government will work with the Scottish Parliament and Scottish Government to devise a proportionate and workable method of consulting the Scottish Parliament on the strategic priorities set out in the Energy Strategy and Policy statement”.

However, the Government’s position now is that this is not necessary and that there is already a statutory regime there under the Energy Act 2013.

The fact that the industry remains unsatisfied is of some concern. Notwithstanding new Section 90C(4), which states,

“a ‘renewable electricity incentive scheme’ means any scheme, whether statutory or otherwise”,

people in the renewables industry have formed the impression that any consultation with Scottish Ministers is likely to be triggered only by legislative changes. It would therefore be helpful if, in responding to this debate, the Minister could indicate the overarching legal basis for the contract for difference regime being set out in primary legislation, while the main detail as to how it will operate is contained in statutory instruments and any changes to these statutory instruments would trigger the consultation in terms of this Bill and the Energy Act.

The experience of the accelerated closure of the renewables obligation for onshore wind, which went ahead with, I think, minimal consultation with Scottish Ministers, has given rise to the concerns within the industry. It would be useful if the Minister could indicate whether the position with regard to any order to remove specific technologies from the contract for different regime is something about which Scottish Ministers would be consulted. There is no obligation on the Secretary of State to consult on the budget notice issued in advance of each allocation round. However, there is a need to consult Scottish Ministers on other aspects of the contract for difference mechanisms, for example on setting the new administrative strike prices, and it would be helpful if the Minister could perhaps give some clarity on how he sees that operating in the future.

Officials seem content that the issue addressed by Amendment 55 is dealt with adequately under existing provisions, but the view is that the improved consultation mechanism would have been better if a Scottish member could have been appointed to the Gas and Electricity Markets Authority. Again, this is a matter that the Smith commission flagged up. The Bill does a similar thing for Ofcom, and perhaps the Minister could indicate how he intends to improve the consultation and whether there is any further mechanism through the GEMA board which would meet the industry’s concerns.

Finally, one of the amendments gives Ministers the power to bring forward a scheme which effectively would devolve contracts for difference to Scottish Ministers. I stress it is a scheme which UK Ministers could devolve, so the concerns that this could lead to a bigger levy on consumers across the United Kingdom would not necessarily come through. The specific point here is that there is concern in the industry that, under the next tranche or round of contracts for difference, onshore wind may not be included under the technologies, notwithstanding that onshore wind has been at £82.50 per megawatt hour for 15 years, index linked, while offshore wind has been at £114.40 per megawatt hour for 15 years and nuclear is index linked for 35 years at £92.50. There is a very strong argument that Scotland has a considerable abundance of resource in onshore wind and that it could be developed there. This is not in the Smith commission, but had it been known that the Government were going to change the rules on the renewables obligation for onshore wind when the commission was sitting, it may well have made such a recommendation, because it would have been entirely consistent.

I simply remind the Minister that in the Scotland analysis paper for energy, the then Government said:

“The UK Government is now introducing the Contracts for Difference scheme, which will provide long term support for all forms of low-carbon electricity generation. These contracts provide industry with the long-term framework to make further large scale energy investments at least cost to the consumer”.

I stress the words “all forms”, which includes onshore wind. I am sure the Minister would like to take the opportunity to say that the present Administration will stand by the commitment that the previous coalition Government presented to the Scottish people in the run-up to the referendum. I hope the Minister will be able to give us some reassurances when he comes to reply.

18:15

[Lord Dunlop]

My Lords, the noble and learned Lord, Lord Wallace, spoke to a number of these provisions when we considered this matter in Committee. He made some observations about the clauses and I have met him to discuss his thoughts on these areas, as he said. I am also grateful to him for withdrawing the amendments he tabled regarding heat. Again, we spoke about that issue and I was glad I was able to reassure him on the position.

In Committee, we discussed consultation on renewable heat incentive schemes, Ofgem’s Strategy and Policy Statement, and transferring executive powers related to contracts for difference and feed-in-tariffs, which the noble and learned Lord advocates. Similarly, on Ofgem’s energy strategy and policy statement, statutory arrangements are already in place. That remains my position. However, although I do not agree with the amendments, I am grateful that the noble and learned Lord has brought them before the House. As he mentioned, I know that Scottish Renewables have a particular interest in how Ofgem’s statement is produced, and therefore it is helpful to remind the House that these arrangements exist. I was due to meet Scottish Renewables recently but had to postpone the meeting. I very much hope to meet it in the near future and I commit to continuing the dialogue to see how we can improve all aspects of consultation. If the noble and learned Lord will allow me, I will write to him further following those discussions, to see what improvements can be made.

Turning to Amendment 56, I have outlined to the noble and learned Lord why I do not agree with his proposals in relation to contracts for difference and feed-in tariffs. That is not just because they go beyond the Smith agreement but because both CFDs and FITs are GB-wide schemes and do not operate in a regionally specific way. We have a GB-wide, integrated energy system. The costs of both CFDs and FITs are spread across all GB consumers, which helps to keep down the cost ultimately borne by bill payers. If the Scottish Minister were to set separate rates, or directly award CFD contracts, this would create distortions in the market as well as being a duplication of effort. That could also result in decisions taken in Scotland imposing costs on electricity consumers across Britain.

The Scottish Government have the power to set different renewables obligation bands for specific technologies, but the CFD scheme generally awards contracts through a competitive auction open to GB-wide generation. This ensures that for each particular technology grouping only the most cost-effective projects receive support. Moving to a regional allocation would be likely not only to increase the overall costs of meeting our renewables and decarbonisation targets but to lead to an increase in supplier costs being passed on to consumers across GB. I understand that the noble and learned Lord may not accept this argument, but I do not agree that this is a sensible change to make.

I hope I can be more encouraging on Amendment 47, which would introduce a new clause on “Consents for electricity generating stations and overhead lines”. I am grateful to the noble and learned Lord, Lord Wallace, for the clearly thoughtful consideration he has given to this. He expressed the issue very cogently in his remarks, but I am afraid at this stage I am not able to accept it as an amendment to the Bill. However, I commit to him that I am prepared to consider this matter further, outside of the Bill. I am sympathetic to the point he raises and therefore would like the opportunity to consider it further, including the planning points that he raised and the existing balance between executive and legislative competence in this area. Officials in the Department of Energy and Climate Change have already raised the issue with the Scottish Government. Energy consenting is a complicated area and one where any change merits detailed consideration to ensure that any agreed policy is delivered. Far be it from me to prejudge that consideration but, if the proposal were found to have serious merit, there are legislative avenues by which we can take it forward, such as a Section 30 order under the Scotland Act 1998.

Therefore, I hope that the noble and learned Lord will allow me to consider the matter further outside the Bill. I will of course be happy to update him on further discussions. On that basis, I urge him not to press his amendment.

Amendment 45 agreed.

Amendment 46

Moved by

[Viscount Younger of Leckie]

46: Clause 45, page 47, leave out lines 24 to 33 and insert—
“(1A) The Scottish Ministers may not make regulations under subsection (1)(e) prescribing model clauses that may be prescribed under subsection (1B).
(1B) The Secretary of State may make regulations prescribing model clauses on the consideration payable for a licence granted by the Scottish Ministers, and the following so far as they relate to such consideration—
(a) the measurement of petroleum obtained from the licenced area (including the facilitation of such measurement);(b) the keeping of accounts;(c) cancellation of a licence by the Secretary of State if there has been a failure to pay consideration or to comply with a clause on a matter falling within paragraph (a) or (b).(1C) Model clauses prescribed under subsection (1B) shall, unless the Secretary of State thinks fit to modify or exclude them in any particular case, be incorporated in any licence granted by the Scottish Ministers.”

Amendment 46 agreed.

Amendment 47

Tabled by

[Lord Wallace of Tankerness]

47: After Clause 50, insert the following new Clause—
“Consents for electricity generating stations and overhead lines
(1) Section D1 in Part 2 of Schedule 5 to the Scotland Act 1998 (electricity) is amended as follows.
(2) For the heading “Exception” substitute—
“ExceptionsConsent for the construction, extension or operation of electricity generating stations.
Consent to install or keep installed overhead lines.
The grant of any ancillary consent or right including—
(a) regulation of public rights of navigation in respect of offshore installations for electricity generation and transmission;(b) establishment of a safety zone in respect of offshore installations for electricity generation and transmission;(c) decommissioning of offshore installations for electricity generation and transmission;(d) compulsory acquisition of land by holders of licences under Part 1 of the Electricity Act 1989;(e) acquisition of wayleaves by holders of licences under Part 1 of the Electricity Act 1989.””

[Lord Wallace of Tankerness]

My Lords, in light of what the Minister said and his willingness to continue to engage and look at this further, I hope that we can get to a sensible outcome, so I do not wish to move the amendment.

Amendment 47 not moved.

Amendments 48 to 54 had been withdrawn from the Marshalled List.

Clause 58: Renewable electricity incentive schemes: consultation

Amendment 54A not moved.

Amendments 55 and 56 not moved.

Amendment 56ZA

Moved by

[Lord Forsyth of Drumlean]

56ZA: Before Clause 13, insert the following new Clause—
“Approval of the fiscal framework
Nothing in this Part shall have effect until each House of Parliament has passed a motion expressing its approval of the agreement between the Scottish Government and the United Kingdom Government on the Scottish Government’s fiscal framework.”

[Lord Forsyth of Drumlean (Con)]

My Lords, I shall speak also to Amendments 57AB, 57AC, 68, 68A and 68B standing in my name. Amendment 56ZA is a probing amendment giving us an opportunity, for the first time, at 20 past six at night, in the final stages of the Bill, to discuss the fiscal framework. This will be the first opportunity for either House of Parliament to discuss this important measure. The amendment simply states that the proposals for giving the Scottish Parliament income tax powers should not have effect until each House of Parliament has had an opportunity to discuss the fiscal framework.

Amendment 57AB provides for the same matter in respect of the welfare provisions in the Bill. Amendment 57AC provides that a statement should be published on what exactly the Scottish Government have spent the £200 million on which, under the fiscal framework, is being provided to them as a one-off payment to implement the powers, and the £66 million per year being given to them to support the additional powers being provided to them. Amendment 68, on which, in the absence of an indication from the Minister that he is prepared to accept it, I intend to test the opinion of the House, simply states:

“None of sections 1 to 68 may come into force until … the Secretary of State has laid before each House of Parliament a fiscal framework setting out the arrangements and institutions underpinning the tax and spending powers included”,

and that,

“the framework has been approved by resolution of each House of Parliament”.

First, I thank my noble friend for the courteous and helpful way in which he has supported us in trying to do our job in this place, which is to scrutinise the fiscal framework. I know of the difficulties that have been caused by the lack of agreement between the Government and the Scottish Government on these matters, but I have to say that this is fundamental to the Bill, and it seems to me that the fiscal framework should be approved by both Houses of Parliament.

I found myself spluttering over my WheetyBangs when I was having breakfast yesterday reading the Sunday Times—it was probably only in the Scottish edition. Mr Jim Gallagher was a very distinguished Scottish Office civil servant indeed. I think I am right in saying that he was private secretary to my noble friend Lord Lang and, previously, Sir Malcolm Rifkind, and went on to be in charge of the Constitution Unit in the Scottish Office, and he is held in high regard by people on all sides of this House. I was very surprised to read his verdict in the Sunday Times, which I shall share with the House. He said:

“The compromise the Scottish government made is that the deal is not eternal. It will be subject to review. The compromise the Treasury made is that they handed over the money … The Treasury gave the Scottish government a deal it couldn’t turn down. How it will explain this to English MPs I have no idea, but that is George Osborne’s problem. From a purely Scottish perspective, you have all the advantages of tax devolution and very few of the risks”.

In the same article, the Sunday Times reported that, “According to well-placed Westminster sources, the deal between the Scottish and UK Ministers was struck amid Tory fears that sticking with the Treasury offer that could have left Scotland £3 billion worse off over a decade would have hurt David Cameron’s chances of winning the June EU referendum”. It strikes me as extraordinary that something as important as the future financing arrangements for the whole of the United Kingdom should be decided in this way and, indeed, that the agreement that has been struck is so unfair to other parts of the United Kingdom. We are talking in the Scotland Bill about trying to provide a permanent and stable arrangement for the future governance and funding of the United Kingdom.

If I may be permitted to make one political point, it is extraordinary, is it not, that in less than a month, had the Scottish people not voted by an overwhelming majority to reject independence, we would be experiencing Scottish independence day, which was set by the former first Minister, Alex Salmond, as 24 March 2016 What a mess we would be in with the oil price of $31. There would be a hole of billions of pounds in the Scottish Budget arising from the loss of oil revenues and other disastrous consequences. Fortunately, we in Scotland are part of the United Kingdom and have the security of the United Kingdom around us.

Therefore, I find it quite extraordinary that in the fiscal framework, the Government have agreed to give the Scottish Government £200 million in a one-off payment to meet the administrative costs of the additional powers contained in the Bill before us. Two hundred million pounds was what the First Minister was telling us throughout the independence campaign for the referendum would be the entire costs of setting up an independent Scotland. It is exactly the same figure: £200 million. Yet they are getting £200 million for taking on responsibility for the powers included in the Bill. I have no idea how that figure was arrived at, but as a taxpayer, I would like to know how it is spent, and one of my amendments refers to the fact that there should be an account for that.

In addition, under the fiscal framework, they are being given an extra £65 million every year, on a continuing basis, to administer the new powers. Again, one wonders why that is necessary, how the figure was reached and whether there will be any accountability for spending it. As I indicated at the time of the Statement, the First Minister appears to have been bought and sold for English gold. Those who remember their Burns will know that it refers to a parcel of rogues in the nation, and the SNP is a parcel of rogues in the nation. They told the country that there would be a one-off referendum and that it could all be done for £200 million, but now in secret they have been passing the begging bowl to my noble friend and requiring huge sums of extra money on the basis that it is needed to survive in the union. Thank goodness they did not get their way, break up the United Kingdom and leave Scotland exposed to the financial difficulties—now apparent even to them—that would have resulted.

This fiscal framework makes a fundamental error. I served with my noble friend Lord Lang and others on the committee established by the late Lord Barnett to deal with what he regarded as a great embarrassment—that his name was associated with a formula that he believed was unfair to the rest of the United Kingdom, and to Wales in particular. We looked at the Barnett formula and concluded unanimously, in a report that stands the test of time, that we should have a system that treated all parts of the United Kingdom fairly, was based on needs and had transitional arrangements for the implementation of the changes for losers and winners. That has been ignored by Governments for political reasons—I understand that—by Governments on my own side and on the other side. I understand the political reasons why it has been ignored, but I cannot understand why, in this fiscal framework, it has been agreed that the Scottish Government will have a veto on any change to the Barnett formula in future.

18:30

The arrangements under the fiscal framework say that, after five years of this deal, there will be an independent review. We are not told how independent it will be, how the review will be established or what its terms of reference are—and perhaps my noble friend could explain that in responding to these amendments. Then the recommendations will be subject to the agreement of both Governments. That is Whitehall-speak for saying that the Scottish Government will have a veto. So there is no ability, if the agreement is carried forward, to get rid of the Barnett formula and have a formula that is fair to all parts of the United Kingdom, because the Scottish Government will have a veto. As the Barnett formula is so generous to Scotland, I would be very surprised indeed if the Scottish Government are keen on moving away from Barnett, for that reason.

For those who have not had an opportunity to study the fiscal framework as it was set out, I got my copy at nine o’clock on Friday from the Vote Office. I was most grateful to the officials from the Treasury who gave me a briefing on Friday morning and to the officials and my right honourable friend Greg Hands, who gave a briefing today at lunchtime to take us through the fiscal framework. I have to say that the Statement, which we had on Wednesday, seemed to consist of, “Haven’t we all done terribly well? We’ll tell you what the details are shortly”. The document that has been circulated leaves a whole range of unanswered questions. On how the mechanism will operate, the relevant paragraph is this—and I shall read it to noble Lords so that they are all absolutely clear how this funding is going to work. Paragraph 17 says:

“For a transitional period covering the next Scottish Parliament, the Governments have agreed that the block grant adjustment for tax should be effected by using the Comparable Model (Scotland’s share), whilst achieving the outcome delivered by the Indexed Per Capita (IPC) method for tax and welfare. This will ensure that the Scottish Government’s overall level of funding will be unaffected if Scotland’s population grows differently from the rest of the UK”.

That is very clear, is it not—easily understood? It means that, had those arrangements been in place since 1999, when the Scottish Parliament was established, Scotland would have got the Barnett consequences, 20% more per head relative to England, plus an additional £6 billion. It is more generous in its impact on Scotland—or would have been, looking back.

Secondly, if I go back to Second Reading in the House of Commons and listen to the reasons put forward for this whole adventure, I hear that it was important that the Scottish Parliament should be responsible for raising the funds that it spent. That was the argument—and with that would come accountability. But what we have in this fiscal framework is a bit of an adjustment, because the Scottish Government will be protected from population changes, so if the population falls relative to that of England—and the additional amount under Barnett is population-related—they will be protected and the English taxpayer will bail them out.

Throughout the Statement and the Government’s comments publicly on this matter, they have talked about having a system of funding that is fair to all taxpayers, in England, Wales and Northern Ireland as well as Scotland. But they must know that fairness is compromised by this arrangement, first, because the income tax yield in Scotland, as the document makes clear in paragraph 18, is less, at 87.7%. So the agreement compensates Scotland for having a lower tax capacity than the rest of the United Kingdom. While they will effect increases under the Barnett formula, because the rest of the UK revenue is going up, the reductions in the block grant will result from lower tax revenues. It is estimated that that will provide Scotland with an extra £350 million in 2020-21. The adjustments to the population are likely to remain an additional benefit.

None of us has had any time to consider this matter properly. I am most grateful to Professor David Bell from the University of Stirling, who is the adviser to the Economic Affairs Committee, which did the report on the fiscal framework. Many noble Lords will know of him; as far as I know, his politics are pretty neutral and he is very distinguished. This is what he has to say about the fiscal framework:

“Scotland’s block grant will be calculated using the ‘Comparable Model’ … This was proposed by Greg Hands in his letter to the Scottish Affairs Committee of February 12, 2016 … The logic behind it is that Scotland’s BGA is increased by its population share of tax increases in”,

the rest of the UK,

“adjusted for Scotland’s lower per capita income tax revenues. (Income tax revenue per person in Scotland is 87.7% of that in the UK as a whole). The adjustment for Scotland’s lower tax capacity implies that the ‘taxpayer fairness’ criterion will not be met by the agreement. There will continue to be a net transfer from”,

the rest of the UK,

“to Scotland when an increase in rUK tax revenues is allocated to increased spending on ‘comparable programs’ with Barnett consequentials for Scotland. This is because Scotland will receive a payment through the Barnett formula that ultimately depends on rUK’s higher per capita tax revenues, but the reduction in its block grant will result from Scotland’s lower per capita tax revenues”.

I could go on—the advice is contained on the website of the Economic Affairs Committee, and I urge everyone who is interested in this to look at it. Basically, what is happening here is a deal has been struck that is not fair to the whole of the United Kingdom; it has been done in secret, and there has been no opportunity for both Houses to discuss it—and there are some anomalies. For example, paragraph 16 says:

“For welfare, and all other spending unless stated otherwise in this agreement, the chosen method will be the Barnett formula”.

If we look at the welfare budget as determined by the Barnett formula—just to show that I am being even-handed—if that had applied from 1997 to 2014, welfare spending in Scotland would be £147 million less. But paragraph 17, which I read earlier, refers to,

“the outcome delivered by the Indexed Per Capita … method for tax and welfare”,

which contradicts what it says in paragraph 16. How is welfare going to be funded? Will it be through the Barnett consequences, or will it be adjusted upwards—and, if it is the Barnett consequences, what happens to the gap that would otherwise appear?

I am conscious that time is getting on and that I have been speaking for 18 minutes on these amendments, but there are a number of other issues in this fiscal framework which remain something of a puzzle. Throughout the conduct of this Bill, I have repeatedly asked Ministers, the noble Lord, Lord Smith, and anyone else who might have an opinion how the second no-detriment principle will work. Paragraph 45 states:

“Specifically, where either government makes a policy decision that affects the tax receipts or expenditure of the other, the decision-making government will either reimburse the other if there is an additional cost, or receive a transfer from the other if there is a saving”.

I read that as meaning that if the Government in Scotland cut the airport tax on Edinburgh Airport and Glasgow Airport, as they currently plan to do, and people no longer travel from Manchester Airport, Newcastle Airport or wherever, the Scottish Government should send a cheque to compensate people south of the border for the loss they have incurred.

[A Noble Lord]

Some hope.

[Lord Forsyth of Drumlean]

I tend to agree. I want to know how this will be calculated, how it will be enforced and what are the powers to do so.

Then the agreement goes on to make a change from the Smith proposals. Paragraph 46 states:

“These financial consequences of policy decisions have been termed policy spillover effects”.

“No detriment” has now become “policy spillover effects”. Paragraph 47 states:

“The main categories of these can be divided into … Direct effects—these are the financial effects that will directly and mechanically exist as a result of the policy change (before any associated change in behaviours); and … Behavioural effects—these are the financial effects that result from people changing behaviour following a policy change”.

I asked the Chief Secretary to the Treasury about this today. The example the noble and learned Lord, Lord Wallace of Tankerness, has used and I have used is from when I was in government. We decided in Scotland not to privatise water, but in England it was privatised and we lost the Barnett consequences of that. Does that mean that under the new arrangement of no detriment, where the Government south of the border decided to have a policy of funding water privately, not through the taxpayer, as a result, a cheque would have to be sent north of the border to compensate them for this policy under the no detriment or policy spillover effect that arose? “Spillover” is actually quite good in the context of water privatisation. Does it mean that? The Chief Secretary looked slightly puzzled and said, “No, of course it doesn’t”. Why does it not? Where does it say that? How is this defined? Nowhere is it defined.

Here we are, at the 11th hour, discussing the fiscal framework. Everyone is rather confused about how it is going to operate. Everyone is wondering how on earth the veto which has been given to the Scottish Government will operate. As I am sure at least one party will come to its senses at some stage and decide that we need a fair system for funding the United Kingdom, what happens if a party is elected on a manifesto which provides for replacing the Barnett formula with one based on needs or some other system and the Scottish Government say, “Hang on a second. We have an agreement that you cannot change it without our consent”? Then where are we? I have no doubt that the Minister will say that he believes that people will be guided by the results of an independent review. If he says that, I will say to him that he has not seen how the Scottish Government operate or how the Scottish nationalists operate. That is not their way of doing things, as I am sure many Members of this House would agree.

My simple request to the Minister is that he accepts the sunrise amendment which gives an undertaking that this House and, more importantly, the elected House—the House of Commons—have an opportunity to discuss this fiscal framework and to consider the impact on Northern Ireland, Wales, the north of England and elsewhere. It is far reaching and fundamental, and it is not acceptable that this should be agreed in secret and given out in dribs and drabs with little time for the House to consider it or for people outside to consider it and advise Members of both Houses on the way forward. I beg to move.

18:45

[The Deputy Speaker (Lord Haskel) (Lab)]

My Lords, I have briefly to interrupt to give the following correction. The result of Division No. 1 on the Welfare Reform and Work Bill was announced incorrectly as Contents 289, Not Contents 219. The correct figures were Contents 286, Not Contents 219.

[Lord Wallace of Tankerness]

My Lords, I shall speak to the amendment in this group in the name of my noble friend Lord Stephen and myself. I am sure the House is grateful to the noble Lord, Lord Forsyth, for raising this important debate on the fiscal framework. It is long awaited. Although we had a very good debate in Committee, it was a bit like “Hamlet” without the Prince of Denmark; it was about the fiscal framework without the actual fiscal framework agreement. At least we can now have a debate on this important part of the architecture of Scottish governance following the Smith commission’s proposals in the light of the agreement which was published at the end of last week.

The amendment which my noble friend and I have tabled is to address the mechanism for the review of the fiscal framework. The Smith commission said that it was important that there was a review, and in Committee we moved an amendment to establish a review. We have tried to revise that amendment in the light of the agreement as we now see it.

When the Minister replies, it would be helpful if he could give us some indication of how the Government understand the review and the mechanisms. The Chief Secretary to the Treasury, Mr Greg Hands, was right to point out that there is a distinction between the review and dispute resolution. I am rather intrigued by the fact that in the agreement the review is referred to in paragraphs 20 to 23 and again in paragraphs 111 to 113, some of which appears repetitious and almost as if there is something uncertain about it. It is as if the more often you say it, it might just happen. Perhaps the Minister will tell us if there is anything we should read into the fact that it was felt necessary to repeat some of the proposals with regard to the review at a later stage.

The First Minister of Scotland in her Statement to the Scottish Parliament last week seemed to indicate—I sat and listened to it—that there could be a veto over the Scottish Government accepting anything which was not to their advantage following the review. Indeed, paragraph 112 states:

“It will be open to either government to propose changes to the fiscal framework from”,

the point of the review or the end of 2021, and:

“The fiscal framework does not include or assume the method for adjusting the block grant beyond the transitional period”.

The Chief Secretary seemed to say today that it was “our model”, which I assume to mean Her Majesty’s Treasury’s model, whereas the transition period was the Scottish Government’s transition period. So—this is a question which the noble Lord, Lord McConnell of Glenscorrodale, asked last week when the noble Lord repeated the Statement—what is the default position? Is the default position the Treasury model, or is there in fact a veto? What happens if there is not agreement following a review? One was left with the impression that it is a bit, “it’ll be all right on the night”. Those of us who have seen the negotiations with the Scottish Government know that it will not necessarily be all right on the night. They may well take things up to the brink.

Under Section 64 of the Scotland Act 1998, the Scottish Consolidated Fund is established, and subsection (2) states that the Secretary of State shall pay sums into the Consolidated Fund, but the sums are not predicated by any agreement or formula, and certainly are not predicated by the statute. I imagine that if all else failed, the ball would be at the feet of the Secretary of State, who has to pay money into the Scottish Consolidated Fund. Perhaps the Minister could indicate how, in the event of impasse and of no agreement being reached, the UK Government, particularly Her Majesty’s Treasury, see that sum to be paid into the Scottish Consolidated Fund being arrived at, given that it is actually the Secretary of State’s decision and, according to statute, is not in any way fettered. It is important that we get some clarity about what should happen.

[Lord Forsyth of Drumlean]

Is it not clear throughout? Paragraph 52, regarding a dispute over the no-detriment principle, says:

“Without a joint agreement, no transfer or decision will be made”,

while paragraph 103, on dispute resolution, says:

“If no agreement can be reached”,

between the Governments,

“then the dispute falls—there would be no specific outcome from the dispute and so no fiscal transfer between the Governments”.

[Lord Wallace of Tankerness]

My Lords, I noted earlier, with regard to paragraph 103, that it surely cannot be conceivable that the funding would dry up. The House is therefore owed an explanation as to precisely what lies behind paragraphs 52 and 103 of this agreement.

The proposal that my noble friend and I have tabled is that there should be a review, which should be informed by a commission. The commission should be three persons from the Office for Budget Responsibility advisory panel, to be appointed by the OBR’s chairman, therefore taking it even more than arm’s length away from the Government, and there also should be membership of a Scottish professional body—it could be the Institute of Chartered Accountants of Scotland or CIPFA—to be agreed by Her Majesty’s Treasury and Scottish Ministers, whose members should be appointed by the senior office-bearer of that body. Again, that is an attempt to put it at one remove from the Scottish Government. It would be a genuinely independent body that would inform the review about how the fiscal framework had worked.

We go further than that by saying that no person appointed to the commission should have been a member of any political party for five years prior to accepting membership. Consistent with the fiscal framework, the report should be laid no later than 30 November 2021 and submitted to both Houses of this Parliament, the Scottish Parliament, the Chancellor of the Exchequer and Scottish Ministers.

All that we find out in the fiscal framework agreement is that the arrangements for review, including how independent they will be, should be left to the Joint Exchequer Committee. We may feel that in order to be reassured, it is not unreasonable for Parliament to set some parameters for how the independence of that review body will be established. The amendment is therefore intended to probe just what Ministers have in mind with regard to the working out of that review, and indeed to answer some of the questions about what happens in the event of a failure to reach agreement on the review. There are important questions to be answered, and I look forward to the response of the Minister.

I am sorry, is the noble and learned Lord, Lord Hope, waiting to intervene or to ask a question?

[Lord Hope of Craighead (CB)]

I was hoping to follow the noble and learned Lord.

[Lord Wallace of Tankerness]

That is fine. I hope that the Minister will be able to fill in the gaps when he comes to reply to this important debate.

[Lord Hope of Craighead]

My Lords, I would like to pursue the points made by the noble Lord, Lord Forsyth, and the noble and learned Lord, Lord Wallace of Tankerness, about dispute resolution. As a lawyer, one tends to look to the dispute resolution bits, because they are the things that matter to us, to see that there is actually an effective mechanism for that, rather than at the fiscal parts, which I am content to leave to others.

Would the Minister care to look at paragraph 46, which the noble Lord, Lord Forsyth, identified? It contains the definition of “policy spillover effects”, which is where either Government make a policy decision that affects the tax receipts or expenditure of the other. If that happens then there is a spillover and a spillover effect. In paragraph 98 we enter the dispute resolution system, which applies to, among other things,

“All disputes arising from the consideration of direct and behavioural spillover effects, including both gains and losses”.

So this particular group of paragraphs deals with the resolution of the dispute. We can see how it works: first, if it cannot be settled at working level then it becomes a disagreement and is referred to senior officers at director level or above, including consideration at Joint Exchequer Committee official level too. If that does not work, the matter becomes not a disagreement but a formal dispute. It is then referred to Ministers to be raised and discussed at a meeting of the JEC.

We then move to paragraph 100, and so far we are working down the line of complete impasse:

“If … there is a dispute that cannot be resolved between Ministers, there is an automatic pause placed on the disputed finances, i.e. no decisions … can be taken by either government in relation to the disputed amount until the dispute is resolved”.

That seems a strange system, given that revenues either way are crucial to the running of the country. To have a dispute simply frozen in that way is very strange. The formula goes on a little further, because if that happens then the Governments are to draw up a statement of fact on the dispute, and technical input may be sought to ensure that the facts are correctly stated. It will then be considered by both Governments, who commit to using their best endeavours to resolve the dispute.

However, the agreement says in paragraph 103:

“If no agreement can be reached then the dispute”,

fails—or rather “falls”—and, as the noble Lord, Lord Forsyth, pointed out,

“there would be no specific outcome from the dispute and so no fiscal transfer between the Governments”.

What puzzles me further is paragraph 104, and maybe the Minister can help here:

“If either Government wishes to pursue the dispute further”—

let us imagine that the UK Government are anxious to do that—

“it can be referred to the ‘Protocol on the Resolution and Avoidance of Disputes’ attached to the Memorandum of Understanding between the UK government and the devolved administrations”.

I do not know where the memorandum is—it is not in the Printed Paper Office, as far as I know—and it is also said to be subject to review. So there is a cloud of uncertainty over exactly what paragraph 104 means and how fixed it is as a system for resolving these disputes.

If one is entering an area like this where it is plain that there will be political arguments on either side that may lead to a complete impasse, it is crucial that there should be a system for the resolution of disputes; otherwise one is left with a situation where no transfer takes place although one side is calling for it and the other is not. How can the system be left in that situation, hanging in the air without anyone to decide it? Can the Minister inform the House about that? It has a direct bearing on the amendment by the noble Lord, Lord Forsyth.

[Lord Lang of Monkton (Con)]

My Lords, we all slightly feeling our way in the dark in this debate, and that is very unfortunate because the fiscal framework is crucial to the future not just of the Government of Scotland but of the Government of the United Kingdom, and indeed to the stability of the UK and holding it together in the face of the assault coming from the Scottish nationalist Government in Scotland.

One would not have thought that we were feeling our way in the dark, though, from the absolutely masterly exposition by my noble friend Lord Forsyth of Drumlean, who laid out the issues with great clarity and considerable force and raised a number of very important points to which we have not yet had an answer. I share his view on almost everything that he said, and he has helped me to share it more clearly than I did before.

I shall focus on one fairly simple issue as I understand it—although here, too, we are in the dark—namely, the way in which the implementation of the financial assistance that is to be given to the Scottish Government over the next five years on the population issue will be put into force. I should start by saying that, yes, I welcome the fact that a deal has been done because it is a political situation that we also have to consider, as well as the proprieties, the economics and the constitutionality. Having a deal done means that the Bill can come into force and the Scottish Government can be put in the position of becoming accountable to a greater degree for their actions, possibly exposing themselves to the shortcomings of their policies and attitudes.

As I look at it, in the context of the Scottish block and the Barnett formula, there seems to have been a finesse of a somewhat insidious nature and we need to try to get to the bottom of it. I am perhaps thought pedantic because I do not like to hear the whole financial settlement in Scotland referred to as “Barnett”. Barnett is a very small part of it which simply deals with the annual increases that are added to the very substantial Scottish block, and the effect it has on those increases is, by an infinitesimal and unreliable amount, to reduce what comes to Scotland from what it otherwise would have been under the old Goschen formula, when the Barnett formula did not exist. I will not bore the House with the reasons why; I could do so but it has never had much impact on people before so I will ask your Lordships to take my word for it.

19:00

However, I am concerned about the Scottish block, which is not a very creditable basis for funding any country either. It is the sedimentary accumulation of more than a century of separate financial settlements, year after year, plus a lot of in-year adjustments, where Secretaries of State or other pressure groups have secured extra funding for Scotland because of its special circumstances—and there were indeed very special circumstances at certain times in the past. However, once everything has accumulated on to that Scottish block it stays there for ever, and the new baseline embodies all those increases that have accumulated over the years. That is how the 20% overspend has come about, so that Scotland now gets about 20% more per head than England.

The one redeeming feature of the Scottish block is that from the very outset it was population-based. We got a per capita percentage that was the same as the percentage granted in England. Barnett changed that, converting the percentage to a cash figure when it came to Scotland because a percentage on a higher baseline—here I am explaining how it works after all—would deliver a higher cash figure in Scotland than the same percentage would deliver in England. Clearly that was unfair, and Lord Barnett, as the chief secretary under pressure, managed to secure a deal that gave Scotland slightly less than it would have had otherwise although he still gave it a credible figure because it was directly comparable in cash terms with what was being given to England.

However, that simple and straightforward population formula has been destroyed or very severely damaged by the deal that has taken place. The one buttress of the integrity of the block is abandoned in favour of a deal to compensate Scotland for imaginary, non-existent people, which is very curious. We recently passed an Act of Parliament concerning individual electoral registration, the purpose of which was to find phantom people and delete them from the registers. Now we seem to be doing that in reverse. Can my noble friend explain to me how that is justified?

I understand that if the UK Government take a decision that affects the revenue stream in Scotland, the doctrine of no detriment will kick in, but populations are not political decisions—they are facts. The population is known, the decline or increases are roughly predictable, and there is no case for a subsidy for demographic risks, which do not flow from government actions. However, since it will bring extra billions of pounds to Scotland over the next five years, that must be a detrimental event for the rest of the United Kingdom. It may be described as “per capita indexation” but in reality it can be justified only as a political bung.

My noble friend the Secretary of State said in another place last week that,

“the sum being delivered to the Scottish Government is exactly the same as would have been delivered under the Barnett formula”.—[Official Report, Commons, 24/2/16; col. 306.]

Setting aside where I differ on the definition of what the Barnett formula does, I simply do not understand how that can happen. If money is being brought to Scotland that would not otherwise have been justified because the population is not what it is pretended to be, how can the rest of the United Kingdom not be disadvantaged by the equivalent of that sum? Anyway, if nothing else, it is at least interesting to note the sudden conversion that this represents of the Scottish National Party to the principle of pooling and sharing. It is a little unfortunate that it did not realise the value of it earlier and in other fields. However, kicking the can down the road, as this deal does, is not a solution to the problem of weaning the Scottish Government off separation.

The Bill was intended to introduce accountability for spending, and this measure undermines that. It was intended to remove the grievance culture but this measure will revive it when the Scottish Government try to enshrine it permanently five years hence—I agree with the noble and learned Lord, Lord Wallace of Tankerness, that there is a lot of vagueness about how that will be handled, and it cannot possibly be to the advantage of good government or democratic accountability. The Bill also perpetuates the dependency culture that constant protection from the consequences of their own actions has enshrined over the years in the devolved Parliament. It may secure the implementation of the Bill, which is desirable, but it does not secure very much else.

[Lord Empey]

My Lords, I said earlier that I considered the terms of the Smith commission to be effectively a treaty. Nothing I have heard last week or this week has changed my mind on that.

Can the Minister clarify a couple of things? A borrowing power for revenue shortfall is included in the framework. Certainly in Northern Ireland, if we had money left over, we used to be able to roll it over, but that was severely restricted, down to one year. On the point that the noble Lord, Lord Forsyth of Drumlean, made, about the spillovers and the behavioural changes, is that borrowing power designed to deal with the unintended, and perhaps unforeseeable, consequences of behavioural change; for instance, on welfare, which may not have been anticipated—some of it could have been weather-related or there could have been other sorts of issues—and is that borrowing power designed effectively to operate as an insurance policy to keep the wheels going until a review can take place, or are the spillover arrangements effectively an insurance policy against mistakes that are made so that the Scottish Government will not run out of money? What will the borrowing limit be, both for revenue and capital expenditure? Will it be tolerable for capital moneys to be converted and used for revenue? All these things are important, because it has already happened. I understood that there used to be a complete ban on that happening but it has happened, and I wonder where this process is going.

I understand that all the devolved Administrations are now able to borrow from the Treasury through the loans fund. Are there limits on this? The borrowing that occurs in Northern Ireland is becoming very substantial. By the end of the next financial year or maybe the year after it could go up to £3 billion, and £700 million of that is to pay off 20,000 workers because they did not take any precautions and start four years ago to gradually run down the number of civil servants that they knew they did not have money for. Their budgets were provided for them by the Treasury in 2010 and they knew about it four years in advance. Now they are borrowing £700 million to make 20,000 people redundant. I understood that the Treasury was very protective of the national cash limits, but it seems to have lost the plot and is now permitting devolved Administrations to borrow, and there do not seem to be any limits.

[Lord Forsyth of Drumlean]

My understanding is that it is proposed that the Scottish Government will be able to borrow money on the money markets and issue bonds, and will thus have more expensive borrowing than is available to the UK Government, which is another thing that is difficult to understand.

[Lord Empey]

I can say to the noble Lord that we raised several times with the Treasury the question of issuing bonds for capital projects. Some people in America who wanted to be helpful said that they would be interested in providing resources. However, the Treasury blocked that on the basis that it would have to go on to the national debt because, unless it was ultimately guaranteed by the Treasury, there would be less likelihood of investors coming forward to take over the bonds. Therefore, the national Government would be required to guarantee the debt. I do not know whether the Treasury is no longer concerned about things going on to the national debt but that used to be the big thing that it wanted to ensure was adhered to. Is the situation here that the Scottish Government’s decisions are effectively being insured? If so, I assure the Minister that there will be others knocking on the door for that insurance policy.

[Lord MacGregor of Pulham Market (Con)]

My Lords, I can speak fairly briefly on this occasion because my noble friend Lord Forsyth put the whole case brilliantly and compulsively. I have sympathy with my noble friend the Minister because he has been put in the almost impossible position of having to defend what is, frankly, the indefensible. That is not his fault. I also understand why it has taken so long to reach an agreement on the fiscal framework. It was obviously comprised of many difficult matters, which is precisely why we ought to look at it in much greater detail than we are going to be able to do.

The framework covers a whole range of important matters, which both Houses should be able to look at in detail, yet the other place was not able to do so and we are having the most minimal consideration of it, which is fairly disgraceful. We are not going to be able to go into any detail tonight because we have only just seen the fiscal framework. We were told that we would be able to have a briefing on Friday, but it was postponed until today. We had a briefing at lunchtime today on a whole range of matters, with a lot of criticism and concern being expressed, and those concerns ought to be looked at in both Houses. I stress that, as others have said, this will affect not only Scotland; there are huge implications for the rest of the United Kingdom, which I shall mention briefly in a moment.

One point that I want to take up is the Barnett formula. I know that there is a slight difference between my noble friend Lord Lang and me on that but I think that we have come to the same conclusion in the consideration of this Bill, as he explained very clearly. I have always been very unhappy about the Barnett formula. I was on the Finance Bill Committee in the House of Commons when the Barnett formula was first created. I remember it well. It was at the time when the then Chancellor of the Exchequer, Denis Healey, made a sudden departure one lunchtime to beg for loans from the IMF. Poor Lord Barnett had to deal with all that as well as a very long and difficult Finance Bill, which included various things such as the capital transfer tax. In sheer desperation he invented the Barnett formula to get himself out of some real difficulties.

We all know that the late Lord Barnett felt that the formula should have gone long ago. It should have been replaced by a formula based on need, as Select Committees from both Houses have recommended in the past, and that seems to be the fair way to go. I heard what my noble friend said but, whichever way you try to demonstrate that the Barnett formula is based on need, it is not, yet it remains an integral part of the fiscal framework and, as I said, it has substantial implications for the rest of the UK—so obviously the north-east of England but many other parts, as well as Wales. It has implications for East Anglia, where I was an MP for 27 years. I remember that there was considerable concern about some of the implications of the Barnett formula for East Anglia. Many MPs now will have very serious concerns about the way in which the framework has been drawn up and how it affects them.

The concerns over the fiscal framework relate not only to the Barnett formula. I was very grateful to my noble friend and the Chief Secretary, who offered a briefing on the fiscal framework today, but the result of that was that many of us had even more concerns and misgivings than we had had when we went into the room. The borrowing powers aspect of the framework has to be debated in this House, and there are many other examples that we could give.

I understand why the Government want to get the Bill on to the statute book before the Scottish election, and my noble friend Lord Lang referred to some of the political aspects, but it is not our fault that this key part of the Bill has come so late in the proceedings. From my long experience in both Houses—as Leader of the House in the Commons, I was responsible for the legislative programme at one stage—I cannot recall any occasion when one of the most critical parts of a Bill has received only the most cursory examination in this House and none in the other place. I support Amendment 56ZA because I think that it would enable us to carry out that examination.

19:15

[Lord Higgins (Con)]

My Lords, along with Burke, I have always believed fundamentally in representative parliamentary democracy, and therefore I have always had severe doubts about referendums. Nothing in the debates that we have had this evening has convinced me otherwise. Indeed, that may turn out to be so in the context of the European Union as well.

The way in which this matter has been handled seems deeply disturbing. A deal is being put forward that is clearly grossly unfair, and I do not think that it would be right for any English Members of Parliament to go along with it. What is absolutely certain is that they ought to have a chance to debate the matter and vote on it, because then they could be held to account for the consequences of the deal which has now been done as a result of statements made during the referendum campaign and as a result of what I can only describe as the “morning after the night before” speech by the Prime Minister.

We have been pushed into a situation where things are being rushed through. There has been no discussion in the other place about the central feature of the deal. We are discussing it only now, on Report, with the dispensation that we can speak more than once and adopt a system of debate close to the Committee stage system, but without having the opportunity for a stand part debate, for example. The whole thing is being rushed through highly unsatisfactorily.

The House should be grateful to my noble friend Lord Forsyth, who has set out the arguments with extraordinary clarity. It ought to be obligatory reading for everyone in the House of Commons, and it is absolutely essential that they should have an opportunity to debate this matter, even at this late stage, so that they can be held accountable for the decision that is reached. I agree with every word that my noble friend said and with all the doubts expressed by every other speaker in this debate, and I very much hope that my noble friend will press his amendment to a Division. If need be, we may have to revert to other aspects of the matter at Third Reading.

We must take this opportunity to give the House of Commons a chance to debate something which is far more important than almost any other issue and of lasting importance, as my noble friend spelled out, in terms of the deal containing a veto relating to reconsideration of the issue in a few years’ time. We really must make sure that the House of Commons has a chance to debate this matter.

[Lord Cormack (Con)]

My Lords, following my noble friend Lord Higgins, I add my support for my noble friend Lord Forsyth. We are in danger of forgetting that this is, as the noble Lord, Lord Empey, said, a treaty between the sovereign Government of the United Kingdom and the Government of Scotland, who, we must recognise, are composed of a party whose sole raison d’être is the destruction of the United Kingdom. That is a perfectly legitimate view to hold, but that is the view it holds. We have here a document that, as my noble friend Lord Higgins has just said, is of enormous, far-reaching significance, and it has to be debated in Parliament in some detail.

In another context, a few weeks ago some of us remarked that Governments are accountable to Parliament and not Parliament to Governments. Here, the Government have come to an agreement and are expecting us to more or less put it through on the nod. It has very far-reaching implications. My noble friends Lord Lang and Lord MacGregor of Pulham Market have both made powerful, brief speeches indicating how vital it is that this matter be properly discussed.

It is the fault of no one in this Chamber that we have had to wait so late for this document. We have not had the chance properly to analyse it. It is full of extraordinarily vague statements and, at the end of the day, a review which will be entirely at the whim of the Government of Scotland, rather than the Government of the United Kingdom. I believe passionately in the United Kingdom, and equally passionately in parliamentary democracy. Neither is being served by debating this far-reaching document in such an unsatisfactory manner. I very much hope that, even at this late stage, my noble friend the Minister will acknowledge that each House of Parliament should have the opportunity to debate this document at some length. At the end of the day, it will probably be endorsed. But then, as my noble friend Lord MacGregor said, it will have been endorsed by Parliament and we will have a degree of responsibility for it.

This is a mess. It is a wholly unsatisfactory situation. We are deeply indebted to my noble friend Lord Forsyth for the calm and analytical way in which he spoke in moving his amendment, which deserves considerable sympathy and support.

[Lord McCluskey (CB)]

My Amendment 67A is in a different group but, with respect, because it deals with the Barnett formula it ought to be considered at this stage. It raises the general question of the formula, as did its predecessor, which contained a reference to the Government’s obligation to publish the Scottish fiscal framework.

The Barnett formula runs through the whole document—rather like dry rot in a south Edinburgh house I used to live in. It cost an awful lot to put that right, and I dare say it will cost an awful lot to get this right.

The noble Lord, Lord Forsyth, referred to getting the briefing. I saw the document on Friday, and I came to today’s very useful briefing with, like President Wilson, 14 points. However, I did not dare raise the 14 points because many people were anxious to speak and we had very limited time. I do not propose to raise them all now, and I am happy to note that many have been dealt with by others, but there remains one rather important one.

This Scottish fiscal framework is recognised by everyone as being fundamental to the whole Bill. The entire Bill rests upon the Smith agreement, which was reached in nine weeks. It took nine months to frame the fiscal framework. The Smith agreement was reached by 10 elected Scottish politicians—Members of the Scottish Parliament. They included representatives of the Labour Party, the Liberal party and the Greens, none of whom, as far as I can see, have been consulted at all about the Scottish fiscal framework, and certainly not in the formal consultations. It is a very odd situation. This document has been produced between the two Governments, after nine months, and it contains things that are simply not in the Smith agreement.

For example, we talk about “no detriment”. I never knew what it meant, and I am happy to say that I was not alone in my failure to understand. The committee of the House of Lords that looked at it could not understand the second detriment, and even the noble Lord, Lord Forsyth, for whom one has the highest regard, was not able to understand it. He asked in vain if anybody would explain it to him, and we are still waiting for an explanation. Now, the paper has come up with something that was not considered by the Labour Party, the Liberals or the Greens: division of detriment into direct detriment and behavioural detriment. Last week, we were told about not behavioural detriment, but indirect detriment. All those concepts have come up to fill out the notion of no detriment, which no one has yet been able to explain.

I want to pick up one or two of the points that have been made, just to show my support for the approach of the noble Lord, Lord Forsyth. Paragraph 7 of the document states that,

“the … block grant will continue to be determined via the operation of the Barnett Formula”.

That seems to fly in the face of what the noble Lord, Lord Lang, said, but that is what the document says. House of Lords paper No. 55, A Fracturing Union?, states:

“The Formula contains no mechanism to correct any unintended consequences being built permanently into the baseline”.

That surely means that Scotland continues to get the benefit of built-in unintended consequences for at least five years, and perhaps in perpetuity, given the remarks made by others about the arrangements at the end of the five years.

The document continues:

“For welfare … and … other spending”—

nothing to do with the Barnett formula, at the moment—

“the chosen method will be the Barnett formula”.

Does that mean that, in respect of the devolution of welfare payments, the block grant will be adjusted to give Scotland the benefit of the unintended consequences of the operation of the Barnett formula?

We talk about the unintended consequences, but it is entirely foreseeable—

[Lord Higgins]

It is intended.

[Lord McCluskey]

Forgive me—yes. The document that talks about the unintended consequences is the House of Lords document.

One thing is foreseeable: that the Scottish population will decline in relation to the UK population because, as the noble Lord, Lord McFall, pointed out, that has been the position for hundreds of years. In law, or certain branches of it, if you can foresee the consequences of your actions, you are deemed to intend them.

I do not want to go through all my 14 points, but I have the greatest difficulty in understanding paragraphs 15 to 19. I do not understand what is meant by “Income tax, 87.7%”—per cent of what? These things are rather difficult, and they are not explained. Not being an accountant, I am unable to follow entirely what is going on.

I repeat the point that was made a little earlier: if Scotland’s population declines in relation to that of the rest of the UK, the funding will not go down under this document. Funding per capita is bound to rise; that is just inevitable. So I do not see how we can have “no detriment” to Scotland without causing detriment to other taxpayers throughout the United Kingdom.

On a point of detail that I hope will be echoed by my noble and learned friend Lord Hope of Craighead, the courts and tribunals are dealt with in paragraph 28. There is no agreement, apparently, as to who is to pay for the Supreme Court. I am not sure whether it is regarded as a court in Scotland or a court in the United Kingdom. That is a small detail.

I have little more to say. However, I do not understand how the £200 million figure and others related to it can possibly be justified. They are certainly not justified within the document.

My other amendment relating to this issue concerned the independent scrutiny of these matters in Scotland. However, this is now going to be dealt with by a government amendment and I give notice that I will not seek to move Amendment 67.

19:30

[Lord Hope of Craighead]

My Lords, in view of the difficulties to which the noble and learned Lord has drawn our attention, does he agree that clarity and dispute resolution is absolutely crucial? This issue is ripe with areas that will give rise to dispute of various kinds and it cannot be left in a position where there is no mechanism for deciding them.

[Lord McCluskey]

My Lords, that was my 14th point. My notes state that the arrangements for resolution of these disputes read like the draft of a script for a BBC drama that would put “War and Peace” to shame.

[Lord Campbell of Pittenweem (LD)]

My Lords, I have been provoked to make a contribution arising out of the nature of the debate. I hope it is not a question of piling Pelion upon Ossa for yet another lawyer to offer what may be an obstacle. The right of judicial review may apply in circumstances where either of the two institutions makes a decision that does not pass the test of reasonableness. If there were such an application for judicial review in relation either to the conclusions or to the implementation of the conclusions of this agreement, that would certainly bring the validity of the agreement under considerable scrutiny.

Others have referred to the imperfect nature of dispute resolution. In the worst case the Supreme Court, which has just been referred to, could find itself engaged in these matters. That is more akin, of course, to a Supreme Court in the United States rather than the one we consider here. Therefore, there might be fundamental constitutional implications and unintended consequences from what is proposed.

[The Earl of Kinnoull (CB)]

My Lords, I want to come in on a similar theme and echo the earlier words of the noble and learned Lord, Lord Hope of Craighead. At roughly one o’clock last Monday my email system received a helpful letter from the noble Lord, Lord Dunlop. I thank both Ministers, who have been unfailingly courteous and very helpful in these extraordinary circumstances. That was said earlier and I wish to say it as well. The letter I received at one o’clock on 22 February was extremely complimentary about the negotiating position of the Government. It enclosed a letter to Pete Wishart. Paragraph 3 of that letter said:

“The UK government agrees with the Committee that the Indexed Per Capita … model would ‘breach the second no detriment principle, that of taxpayer fairness’. This model would see Scotland benefitting from an ever-increasing share of income tax from the rest of UK, irrespective of the Scottish Government’s policy decisions or relative economic performance”.

That is clear.

The following day—less than 24 hours later—we were told that the fiscal framework had been agreed. Paragraph 17 of that states:

“For a transitional period covering the next Scottish Parliament, the Governments have agreed that the block grant adjustment for tax should be effected by using the Comparable Model (Scotland’s share)”—

that sounds okay—

“whilst achieving the outcome delivered by the Indexed Per Capita … method for tax and welfare. This will ensure that the Scottish Government’s overall level of funding will be unaffected if Scotland’s population grows differently from the rest of the UK”.

I know this point has already been put to the Minister but I put it forcefully again and ask whether those two paragraphs can be reconciled clearly for the House so that we can understand what happened. I suspect that, quite simply, the white flag was run up to conclude negotiations for political expediency.

I now turn to the review clause and to the point made by the noble and learned Lord, Lord Hope. Paragraph 23 states:

“The two governments will jointly agree the method as part of the review. The method adopted will deliver results consistent with the Smith commission’s recommendations, including the principles of no detriment, taxpayer fairness and economic responsibility”.

That means essentially that all one has managed to do is to kick the hand grenade six years down the line. It will blow up and there will be a terrible constitutional crisis in Britain. I agree with the noble Lord, Lord Campbell of Pittenweem, and other noble Lords that we need to head this off at the pass. I urge the Minister and the Government to do something about this issue before the Bill goes on to the statute book.

[Lord Kerr of Kinlochard (CB)]

My Lords, I, too, am very concerned about the review provisions. The noble Lord, Lord MacGregor, was absolutely right in what he said about the Barnett formula and I agree with every word. Of course it should be needs based. However, I fear that that pass is sold. It was sold in the vow; it was sold before Smith even started. It is a great mistake and very damaging but we are where we are.

I am struck by the same point that the noble Earl addressed on paragraph 17. We are saying there that in the fiscal framework talks both parties have agreed that the right block grant annual indexation mechanism should be the comparable model, but they have agreed that it will not be used up to 2021; the wrong one will be used. Then comes the review, with no terms of reference set out, and the decision-making machinery in the review is that both Governments have to agree. As the French say, rien ne dure plus que le provisoire—nothing lasts longer than the temporary. I am afraid that the can is being kicked down the road not only until 2021 but as far as the eye can see. That is a serious mistake.

I agree with the noble and learned Lord, Lord Hope, on the dispute settlement mechanism, which, on the face of it, simply does not make sense—ending up with, “if they do not agree there will be no fiscal transfer”. What is that? Is it a nuclear weapon in the hands of the Government so that the whole thing stops? Is it a plausible nuclear weapon? Is it a credible deterrent? I do not think so.

However, we are where we are. I greatly sympathise with the noble Lord, Lord Dunlop, who handles these matters very well, but what are we expecting him to do? Are we expecting him to tell us tonight, “Okay, we will change the fiscal framework because the House of Lords does not like it”? I do not think he can quite do that, though his skills are legendary. However, the noble Lord, Lord Forsyth, may have the answer in Amendment 68—not the amendment to which the noble Lord, Lord Higgins, drew attention—which suggests that it would be a good idea that both Houses of Parliament should have a chance to have a serious discussion about the fiscal framework.

As a Scotsman, I admit that I am torn. When Mr Hogg passed the ball successfully in the last minute against the Italians and the Scots finally won a game, I was very pleased. It looks as if Mr Swinney is the Hogg of this particular match. There are consequences for the United Kingdom, for Northern Ireland, for Wales and for the north of England, so the UK Parliament should address the fiscal framework before the Scotland Bill goes on to the statute book. If the noble Lord, Lord Forsyth, were to press Amendment 68, I would be inclined to go with it.

[The Earl of Caithness (Con)]

My Lords, we are in a mess. It is a very sad occasion when you get a situation like this where the pass has been sold. What is most interesting about the debate is the number of Scots who are questioning this because it affects adversely the rest of the United Kingdom, and I add my name to that list. I have never before attended a debate in this House, in the many years that I have been here, which has involved so many Scots who are all on the same side against an agreement that is beneficial to Scotland. Let us make it absolutely clear: Scotland had a very good deal before the present devolution agreement and it now has an even better deal. It will rank as one of the great victories that the Scots have achieved over the English Government. It is the UK Government in this case, but as far as the Scots are concerned, it is the English Government.

At the meeting this afternoon my noble friend Lord Dunlop said that this is a significant agreement which provides the opportunity to end the blame game. Actually, nothing could be further from the truth. This will not end the blame game—the blame game will continue. All of us who have been brought up in Scotland know full well that whatever the UK Government concede to the Scots Government, particularly the Scots nationalist Government, it will never be enough. The blame will continue.

We have an interim agreement but a permanent agreement. The interim agreement has handed over the grenade, as the noble Earl, Lord Kinnoull, said, to go off five years or five and a half years down the road. No one is going to want to handle that grenade, and as the noble Lord, Lord Kerr of Kinlochard, said, it will be passed on again. So we have a false but permanent agreement which is of huge detriment to the rest of the United Kingdom.

[Lord McCluskey]

Perhaps the noble Earl will permit me to ask him a brief question arising out of what he has said. If those of us who reside in Scotland are going to benefit so much, as we all think we are, should we be declaring an interest in speaking in this debate?

[The Earl of Caithness]

My Lords, having recently moved from Scotland to London, I will leave that to the noble and learned Lord, but I would certainly declare an interest—not that the Scottish Government in Edinburgh are remotely concerned with what happens in Caithness; they are much more concerned with the central belt. I do not think that Caithness is going to benefit very much.

I raised at the meeting hosted by my noble friend this afternoon the question of the tangential consequences of the no-detriment principle. It was quite clear that the Chief Secretary thought that this was a grey area. Let us take the example mentioned earlier by my noble friend Lord Forsyth and myself, of air passenger duty and the Edinburgh-Glasgow axis against the Manchester-Newcastle axis. If consequences flow from that, they are going to be very hard to prove, and, quite frankly, as far as I could determine, the Chief Secretary was not terribly interested in them. But if they can be proved by one side, we then get into the question of the resolution mechanism. The lawyers in this House have clearly shredded the mechanism that is before us, so we are now in an even worse situation in that we have a mechanism that is not going to work satisfactorily from the legal point of view; that will be difficult to implement in the first place; and that could be highly prejudicial to the north of England and other areas in the rest of the United Kingdom.

I have some sympathy with my noble friend on the Front Bench. I have been in his position when the whole House was against me and the only people on my side were those who were sitting to my right and to my left. That is the situation today. However, I would ask him to take this away and try to implement something of what my noble friend Lord Forsyth has requested. Of course this has to be a political deal in the end, but it is one that the United Kingdom Government have lost and the Scottish Government have won.

19:45

[Baroness McIntosh of Pickering (Con)]

My Lords, I have a great deal of sympathy with the arguments put forward by my noble friend Lord Forsyth, as I do for those put by my noble friend Lord Caithness as regards the cross-border implications. As a Scot by birth and resident in the north of England for the past 18 to 20 years, the air passenger duty alone has enormous implications; those points have been well made.

The noble Lord, Lord Kerr, asked: what can we ask the Ministers on the Front Bench to do? They have been immensely helpful and have been bending over backwards to answer many of our queries. But to have a Statement and a debate last Wednesday on a document that was available only on the Thursday certainly posed great difficulties for those of us who have legitimate questions to ask. We had a briefing earlier today on the question of fiscal scrutiny. I am a newcomer to the Chamber, but I believe that the main thing that your Lordships’ House does extremely well is to scrutinise the legislation that comes before us. I believe that it would be hugely remiss of this Chamber not to scrutinise the fiscal framework, which as I say has been put before the House only in the past week.

We are being asked to take it on trust that the Scottish Government will table an amendment that will allow the Office for Budget Responsibility to have some force in this process in the Scottish Parliament. But what if that amendment is not forthcoming? The present complexion of the Scottish Parliament and the Select Committees that would normally perform the scrutiny of this and other parts of the Scotland Act, as it will then be, is by and large SNP; they are populated by a large majority of Members of the Government from that party. I cannot believe that the scrutiny will actually take place in the Scottish Parliament to the extent that we would wish to see.

I have some sympathy with Amendment 56ZA for the simple reason that we would be failing in our duties if we did not subject the fiscal framework and other parts of the Bill to scrutiny by your Lordships’ House. The noble Lord, Lord Kerr, asked what we are asking Ministers to do. I do not think that we wish to delay. It would not be in the interests of your Lordships’ House or of Parliament to delay the adoption of this Bill, but we owe it to the people of Scotland and the people of the United Kingdom to scrutinise the fiscal framework and those remaining parts of the Bill of which we have not previously had sight.

[Lord Turnbull (CB)]

My Lords, after long negotiations we have arrived at an outcome that was pretty predictable. Scotland has taken the approach of “What we have we hold” and has very largely succeeded in that. The UK Government have followed the philosophy of Mr Wilfred Pickles: “Give ‘em the money, Mabel”. It all takes as the starting point the Barnett formula with all its faults. Reference has been made to the fact that there is no provision for needs. Scotland has a substantially greater GDP per head than Wales and, indeed, all the regions of England except London and the south-east, but its public spending per head is substantially higher. All efforts since 2009 to tackle the concept of needs have foundered.

The other flaw, as described by the noble Lord, Lord Lang, is that this is incremental rather than based on levels. At the end of each spending round there is a calculation of the increase in spending in English departments and a population share is applied to Scotland. The population of Scotland has for many years been growing more slowly, so that share, within the Barnett formula, should gradually decline over time. The problem is that it is adjusted, I believe, with a considerable lag, resulting in Scotland always being overpaid as the population is calculated as being higher than it is. Is a bit like the old payrolls of the print unions before reform.

It is a bit like PAYE. If you get a tax code from your inspector, and then it turns out at the end of the year that you have not paid enough tax, he does not one but two things: he adjusts the tax code to capture what he thinks will be the right amount of expenditure for the coming year, but he also adds a bit more or takes a bit more off the tax code, to ensure that the past excess was recovered. Of course, in the Barnett formula, that second adjustment never takes place.

I am getting to the important area of lack of clarity. We are told that, on the one hand, there has always been in its 30-odd years an element of applying a population share. The Barnett formula accepted that that would decline over time. Then there is the sentence about protecting Scotland against population risk. There are two interpretations of this, which have very different outcomes. The first is that you do the Barnett formula in the normal way, including the calculation of a population share. Then you come to the BGA—the block grant adjustment—which is on the basis of a per capita change in tax. In other words, a population element that is frozen applies only to the block grant. If it means that the adjustment on the expenditure side has also been frozen, it is not simply perpetuating the Barnett formula as we have known it, it is making it more generous. We need to know which it is. One is what we would always expect to be the outcome of these negotiations, and the other is an outrage. That ought to be explained to us.

One feature of this is that the balance of risks between Scotland and the rest of the United Kingdom has been changed to some degree. Scotland has been set a challenge. If it is to maintain the block grant at the rate that it would have grown had the Barnett formula never been changed, it now has to increase tax per head at least as fast as in the rest of the United Kingdom. That is taking the population out of that bit of it. That is quite a considerable challenge. What I think is happening here is that we are entrenching an existing privilege. It is preserving the unfairness to the other devolved Administrations and the English regions. Maybe we have the prospect that it will not get any worse, but that all depends on the answer to the question about whether the population share on the expenditure side is also being frozen.

A point was made about borrowing. I think the answer is that under an amendment that was originally tabled by my noble friend Lord Kerr, but has now been effectively adopted by the Government, limits will be set. It is recognised that the borrowing of Scotland is part of the borrowing of the United Kingdom. Whether the Government explicitly say it is guaranteed, effectively it is.

My conclusion is that we have been blackmailed by threats of a second referendum if the Smith commission was not implemented in full. We need to lose our fear of the second referendum because it is now apparent that, having been sold a prospectus that Scotland could afford to go it alone with no great detriment to its economic prospects, with oil at $110 per barrel, it cannot do it with oil at $33 a barrel. In effect, it would be voting for bankruptcy. I suspect that a lot of this stuff is bluff and in future negotiations we should not be intimidated by it.

[Lord Hollick (Lab)]

My Lords, we have arrived at a rather unsatisfactory situation. We were given the fiscal framework at the end of last week. We have seen no worked examples and have had no opportunities to scrutinise the framework in any detail. The Economic Affairs Committee spent some months evaluating all the aspects of the fiscal framework and, in particular, the various methods that could be used to adjust the block grant. None of them was perfect. Indeed, it was extremely difficult and we concluded that to meet both the requirement for fairness with reconciling the Barnett formula and the various elements of the fiscal framework, somebody would lose out.

The provisional conclusion is that the rest of the United Kingdom will lose out. Our specialist adviser, Professor Bell, spent the weekend trying to unpick and understand the fiscal framework. He concluded, based on the fact that although the Government agreed that the comparable method to calculate the annual block grant should be used, that will in fact not be used. Instead, as we have heard from a number of speakers, the per capita method, which ties the reduction in Scotland’s block grant to the rate of growth of per capita tax revenues in the rest of the UK will be used, but it will be adjusted for the rate of population growth in Scotland.

What does that all mean? It means that, either way, Scotland wins. That seems to me to undercut the whole principle of further devolution whereby you have taxes and take responsibility for how they are spent and how the economy grows. Scotland is essentially having its cake and eating it. As far as the impact of choosing not one but two different methods, which can sometimes contradict one another, to settle the block grant, we have a position of great confusion. That position of confusion will apparently last for five years. Our specialist adviser, Professor Bell, calculates that assuming that tax revenue per capita grows at 4% per annum in both Scotland and the rest of the UK over this five-year period, the Scottish block grant will be £280 million per annum larger by 2021, due to the application of the per capita rather than the comparable method. Further, the comparable method will cost the rest of the UK taxpayers £350 million more in 2020-21 than the levels deduction, which is another method of calculating this, would.

In other words, more than £600 million appears to have moved across the table from the rest of the UK to Scotland, so this is a triumph of negotiation by Scotland and congratulations to them. However, the political consequences are grave for those parts of the UK which, under the Barnett formula, already receive less than they would certainly be entitled to on a needs basis. This creates, quite naturally, for the north-east, south-west, East Anglia, and other parts of the UK a very unsatisfactory position and a very strong case for a complete review of how funding is allocated, particularly in England, which we are seeing is now going for much greater devolution.

The devolution train has left the station for Scotland and is leaving the station for other parts of the UK, but the funding formula to cope with that is frankly broken. It needs to be looked at. Naturally, as I think I inferred from the comments of the noble Lord, Lord Empey, other nations will look carefully at the settlement to see whether there is something in it for them.

It is a mess. I will leave it to the noble Lord, Lord Dunlop, to decide how we will get out of it, but frankly I believe that the tactics that have been used by the SNP to force this—I can understand the politics and the desire to have this all settled before the elections—have left us in a very unsatisfactory position.

Just one more thing: earlier speeches referred to paragraph 17 of the framework agreement, which says that,

“the block grant adjustment for tax should be effected by using the Comparable Model (Scotland’s share), whilst achieving the outcome delivered by the Indexed Per Capita”.

I interpret this as being an annual discussion of what the arrangements are. We are kidding ourselves slightly if we think that this will go on for five years and we are in a stable state. This will have to be reviewed each year, year in, year out. Passing a fundamentally important piece of constitutional legislation in the absence of proper scrutiny and debate in both Houses makes this a very black day.

20:00

[Lord McFall of Alcluith (Lab)]

My Lords, even if one were dozing during this debate, there would be no doubt how the House felt on the issue. I note the comment of the noble Lord, Lord Kerr, that the debate on the Barnett formula is lost. We must realise that situation. I shared a flat near Joel Barnett for many years. Joel never tired of telling me that the Barnett formula was introduced in 1978 to settle a relatively minor dispute in devolution so that he would get “them” off his back. He used a profane word that I will not use in this House. However, since 1978 that formula has stuck.

When I was in the other place, the noble Lord, Lord MacGregor, manfully defended the Treasury but still was very generous with the Barnett formula. The noble Lords, Lord Lang and Lord Forsyth, as Secretaries of State for Scotland, skilfully manoeuvred the Barnett formula in Scotland. I had to sit on the Opposition Benches and admire their chutzpah on that particular issue. That is the politics of the situation now. Sadly, in many ways the political bandwagon has moved on but the analytical one is behind it.

At the end of last week, the First Minister said that there was not a penny of detriment to Scotland. She spat that out but every Scottish party in the Scottish Parliament agreed with her. The noble Lord, Lord Forsyth, mentioned in adulatory terms Professor Jim Gallagher. I looked at Jim Gallagher’s blog at the weekend. I mentioned that every Scottish party was involved but he said that, in the event, with the fiscal framework,

“the politicians have come to a compromise: one suggested first, publicly at least, by the Scottish Conservative leader Ruth Davidson”.

She proposed this, and then the Chancellor, George Osborne, intervened and offered the Scottish Government a safety net for the first five years. That effectively delivers what the SNP Ministers asked for: namely, protection for their tax income in the event that Scottish population declines. That is the reality, so perhaps I am not being ungenerous in saying that maybe the right hand of the Conservative Party does not know what the left hand of the Conservative Party is doing.

[Lord Forsyth of Drumlean]

Speaking very much for the right hand of the Conservative Party, I think that perhaps the noble Lord did not hear the quote from Jim Gallagher. He said that the compromise the Treasury gave is that it handed over the money. That is what we are talking about: it is not a compromise.

[Lord McFall of Alcluith]

My Lords, the noble Lord tells us nothing new. I looked at that issue as well. I think I made the point in the last debate here that the two no-detriment principles are irreconcilable. We must try to work out the politics of that at a later date but there is absolutely no doubt of that. Professor David Bell in his submission and the work he did for the Economic Affairs Committee illustrated that very much. In fact, I sat for about three hours looking at that report from the IMF with David Bell and I thought I was back at university. After those three hours, I understood maybe 15% of the whole issue. It is hugely complex—we all agree on that.

I mentioned the issue of the safety net. This is a good deal from Her Majesty’s Treasury but after the five years there will be the review. What will the Treasury do at that time? That will depend on how the population looks then and what other political and economic factors are going on. I agree with individuals who say that this is a five-year or six-year proposal. At the end of the day, negotiations must start again. One thing I am interested in here is to see that we develop a narrative as a result of this fiscal framework which will ensure that the grievance mentality is abandoned. Some would say it will not be but there is a possibility of that happening. I will mention that later on in my speech.

For clarity’s sake, we see that the Scottish Parliament is supported by, as we said, shared UK resources from Barnett, its own tax revenues levied in Scotland, and a cash supplement from UK resources. That could possibly force all the parties in Scotland to go into what they are offering the Scottish electorate in terms of tax and spend. We have seen it already; today I read it in the Scotsman as I was coming down in the plane. For the first time, in many ways, we are getting on to the reality of devolution and have moved on from the process. Sadly, the Labour Party was very much involved there because it was mentioned that devolution was a process rather than an event. That got it wrong. As my old friend Tam Dalyell said, it was like a motorway without exits. Let us try to build the exits as a result of this fiscal framework.

We can go on indefinitely in asking who won the fiscal framework battle. Yes, the Treasury model is being used. We call it levels reduction. Yes, the UK is reimbursing Scotland for any money it would have received under the indexed per capita deduction in place. In effect, one side is happy saying, “The Treasury model is being used”. The other side is happy saying, “Yes, it is being used but we ain’t going to be disadvantaged because at the end of the day the per capita will be involved”. How far has that taken us? It has taken us five years down the road in terms of politics. We will have to come back and see how far it takes us down the road in terms of finance.

There is a big picture here as well, which nobody has mentioned. This will be the biggest ever transfer of powers to the Scottish Parliament. In fact, it will have as much autonomy as it had in 1707. It has demanded both good will and compromise to reach that position.

On that particular point, I commend the Government for their work in this area. However, in terms of the reporting of the fiscal framework, it could be helpful if the Government teased this issue out. The fiscal framework states that the Government will be required to produce reports on the implementation and operation of new powers in line with those produced under the Scotland Act 2010. Will this be done on an annual basis? If not, when will such reports be published? If we are to have an independent review, it should be set up very quickly and should not wait until the last minute, as we had to do with the fiscal framework now, where eight weeks of Smith translated itself into a secret cabal deciding it and then presenting it to us. We should have that transparency so that that independent commission can report to Parliament on an annual basis. By doing so, there will be transparency and individuals can look at it from the two no-detriment principles—particularly the second, of fairness to UK taxpayers.

This is a solution. Is it a neat solution? We can argue about that until the end of the day but there is a political momentum on this issue with the political parties in Scotland. The Government have responded to that. We wish them well in the negotiations.

[Lord Higgins]

I am most grateful to the noble Lord for giving way. We have had an extremely interesting debate on various aspects of the fiscal framework, but that is not actually what the amendment is crucially about: it is whether or not each House of Parliament should have an opportunity to approve it. That is what we are voting on. Despite all the technical discussion and so on which has been admirably set out and considered, the crucial issue is that the other place must have an opportunity to debate this. It would be absurd if the whole thing goes through without the House of Commons having debated it at all.

[Lord McFall of Alcluith]

My Lords, I take the noble Lord’s point on that but right at the beginning of my speech I made reference to all political parties in Scotland and to the leader of the Conservative Party in Scotland, whose idea this was, which was adopted by the Chancellor of the Exchequer, according to Professor Jim Gallagher. Some people are waiting to say that the unelected House of Lords is stopping a Bill which is in Scotland’s interests. So do we go with the intellectual case, which always appeals to me, or do we understand the politics in Scotland at this time? If we have a gap in this fiscal framework where this House can understand what is happening on a year-by-year basis, we should give the Government the benefit of the doubt on that issue because the political force is with all political parties in Scotland. I commend my speech on that point.

[Lord Dunlop]

My Lords, it is fair to say that this has been a very wide-ranging debate and I thank all those who have taken part. I recall that at Second Reading my noble friend Lord Forsyth said that he looked forward to giving me a Glasgow handshake. As the House knows, he always makes good on his promises.

Before I address the substance of the amendments, I will try to address as many of the points that have been raised as possible, although there have been so many that I cannot guarantee to cover absolutely all of them. My noble friend mentioned Professor Jim Gallagher. Professor Gallagher, who is well known to many of us, also wrote a long article in the Daily Record, in which he described the Government’s comparable model as an ingenious compromise solution. While it is certainly the case that for a transitional period the UK Government are bearing population risk, I confirm to the noble Lord, Lord Turnbull, that, on the spending side, the population share will not be frozen at the point of devolution. However, this is a transitional period. Even my noble friend Lord Forsyth would prefer to move from the Barnett formula to a needs-based formula. Even in his thinking there is provision for transitional arrangements. Even in the transitional period that is part of this agreement, the Scottish Government bear economic risks. That means that if Scotland’s tax per head grows more slowly than in the UK as a whole, that is a risk the Scottish Government will have to manage even within the transitional period.

20:15

How much the Scottish Government will have to pay going forward with this substantial act of fiscal devolution will depend ultimately on the decisions that are taken by them and how well the powers that they will get are used. So if there are fewer people in employment or productivity grows more slowly, or the composition of Scotland’s population changes and there is a higher proportion of retired people, those are all risks that the Scottish Government will have to manage.

My noble friend referred to a premise that has been mentioned that, had the comparable model been in operation since 1999, it would have delivered additional funding to Scotland. That is true because Scotland’s relative economic performance during that period was strong. Tax per head was rising faster than in the UK as a whole. I ask the House to consider that, if we had not reached an agreement, I am sure I would have been hauled over the coals and the consequences of that would have been crawled over in great detail by this House. What is the counterfactual here? If we had not obtained an agreement, the financial outcome for the rest of the UK would have been no better than under the deal that we have negotiated. A figure of £350 million has been mentioned. It is not a figure that the Government recognise. Therefore, we would not have obtained an agreement that was financially better for the rest of the UK but we would have lost something quite significant—the transfer of these powers and the greater fiscal responsibility sent to the Scottish Parliament. One can only imagine what would happen after the Holyrood election. The whole debate about more powers would be reopened. That would not be in the interests of the UK as a whole or of the stability of the union.

There has been much mention of the Barnett formula and the need to replace it with a needs-based formula.

[Lord Forsyth of Drumlean]

I entirely accept the Minister’s argument that if we were to move to a needs base, or whatever, there would have to be transitional arrangements. However, what about the point that this fiscal framework has given the Scottish Government a veto on any new settlement, which means that the transitional arrangements would become permanent?

[Lord Dunlop]

I am coming to that point. The idea that it would be easy or straightforward to replace the Barnett formula with a needs-based one—or seek to do so—does not stand up to scrutiny. I have read, with great interest, the report of the House of Lords committee on the Barnett formula, published in 2009. John Swinney, now Deputy First Minister of Scotland, gave evidence to that committee’s review and made it absolutely clear that he did not support the move to a needs-based formula. There has been lots of talk about a veto. Another way of putting that is that if you do not have a veto then the UK Government unilaterally imposes something on Scotland. In that situation, we would have to proceed as we have done in this fiscal framework agreement—by negotiation and agreement.

The no-detriment principles have been raised several times in this debate. I have talked directly to people who sat on the Smith commission including the noble Lord, Lord Smith, himself. The commission recognised that these were high-level principles. It was always accepted that the two Governments would have to sit down and decide how those principles were applied in practice. It is not surprising that there is a greater level of detail and a lot of talk about the direct effects, which we want to capture mechanically in the agreement. However, the indirect, spillover effects are very difficult to capture, because of the causality. It is the direct effects which we are seeking to capture in this agreement. Although there is a backstop power to deal with the spillover effects, it will be used rarely. One needs to draw a distinction between the review, where we need to proceed and get an agreement, and the dispute resolution mechanism, which is very much attached to specific issues regarding how spillover effects actually work.

I turn to the review itself. It is obvious and self-evident that this is five years away. The details of the review have still to be determined. I am not going to stand here today and say otherwise, because noble Lords would not accept it. The Government would positively welcome the House of Lords Economic Affairs Committee feeding in its views about how the review should be structured. That would inform the deliberations we will have with the Scottish Government about constructing that review.

[Lord McFall of Alcluith]

Will the Minister take up the point I made earlier about an annual report on this issue to both Houses, and the Scottish Parliament, so that we get transparency and accountability?

[Lord Dunlop]

I am very happy to make that commitment. The Government intend to make an annual report to Parliament that will cover how the powers under the Smith agreement are being implemented in practice. That is fundamental to our approach. Regarding the review, I can confirm what has already been confirmed: there is no default position for it. All the evidence that will be built up over the succeeding five years will be on the basis of the Government’s comparable model.

I turn to the prospects of reaching an agreement. This review will be informed by an independent report. We will have had five years of experience of how these powers operate. Instead of seeking to negotiate in the months leading up to an election, this will be a negotiation after an election. Those conditions lead me to believe that an agreement can be reached.

[Lord Wallace of Tankerness]

The noble Lord has indicated—and the agreement says—that the report has to be received by the end of 2021. What will happen if we are approaching the financial year 2022-23 and there is no agreement? While he is right to say that there is not an election to focus minds, one imagines—although one does not know—that there will not be the passage of a Scotland Bill to concentrate the mind either. Given how close we are to the start of the next financial year, when there is actually a Bill that we hope to pass before the Easter Recess, what happens if that imperative does not exist? What will the position be then? Will it be the transitional arrangements or will it be the Treasury model?

[Lord Dunlop]

I am not sure I will be able to satisfy the noble and learned Lord on that point because I have learned not to deal in hypotheticals or to speculate about what might happen in five years’ time. As I say, I think the conditions that pertain then will be favourable to reaching an agreement and I am confident that we will reach an agreement at that time.

On the amendments relating to the fiscal framework being approved by Parliament, the Government do not believe it would be appropriate to subject the framework as a whole to approval by both Houses. Many aspects of the fiscal framework are administrative, not legislative, and the need to update these aspects requires a degree of flexibility. There is also no precedent for these non-legislative aspects to require parliamentary approval; for example, the block grant adjustment mechanism arising from the power to devolve under the Scotland Act 2012 was not subject to separate parliamentary approval.

[Lord Higgins]

This is a matter of enormous importance. Would it not be absurd if the central part—the heart—of the Bill were to go forward with the House of Commons not having had any opportunity at all to debate it? It is inconceivable that that should be right. It is really important that the other place should have a chance to express a view.

[Lord Dunlop]

My noble friend is of course quite right that the fiscal framework should receive detailed scrutiny from this Parliament. I know that this House will play a full part and I anticipate that the House of Commons will do the same. What the House is being asked to do today is to scrutinise and approve one of the most significant aspects of the framework: the capital and resource borrowing powers. The noble Lord, Lord Empey, raised this issue and we will have an opportunity to debate it in detail in the next group of amendments. Dr Angus Armstrong of NIESR told the Lords Economic Affairs Committee that the question of borrowing is,

“the most important question in the whole debate”.

In due course, this Parliament will also be asked to approve changes to tax legislation as a result of the fiscal framework and the Smith commission. That legislation will be scrutinised by Parliament in the usual way. Likewise, the legislation required in Westminster to establish the Scottish Fiscal Commission on a permanent footing by means of an order under the Scotland Act will receive scrutiny in both Houses before it is approved. As I said to the noble Lord, Lord McFall, the Government have committed to report annually to Parliament on the operation of the framework. I know that these reports will receive full scrutiny.

At the end of the day, the fiscal framework has been agreed between the two Governments. To introduce a further process at this stage would not only delay the transfer of powers, it would mean that the UK Government—

[Lord Wallace of Tankerness]

I understood the Minister to say that the establishment of the Scottish Fiscal Commission will require an order of the United Kingdom Parliament. I understood it to be a Bill that was going through the Scottish Parliament to establish the Scottish Fiscal Commission and put it on a statutory basis. Can he elaborate? What would be the content of an order in relation to the Scottish Fiscal Commission that would have to be passed by both Houses of the United Kingdom Parliament?

[Lord Dunlop]

I think I am right in saying that it does require this Parliament to establish the Scottish Fiscal Commission as a statutory body but I am happy to clarify that in more detail, perhaps in succeeding debates that will deal with this issue. That is certainly my understanding.

[Lord Forsyth of Drumlean]

Presumably my noble friend is anticipating using the Henry VIII clause for that purpose. Can he just explain to me how it can be right that the Scottish Parliament—in my view, quite rightly—and the Scottish Government have insisted that the fiscal framework should be available to the Scottish Parliament before it gives approval to this legislation but he is maintaining that that should not apply to the House of Commons?

[Lord Dunlop]

I am not sure that is what I am maintaining. The fiscal framework is available to this House and to Parliament and we are having a debate about it now.

[Lord Cormack]

My noble friend’s answer to the noble Lord, Lord Forsyth of Drumlean, beggars belief. The House of Commons has dealt with this Bill. The only part of this Bill that would go back to the House of Commons would be any amendment passed by your Lordships’ House. That is unlikely, for all sorts of reasons. Surely this most important, central element of the Bill, which the other place has not had a chance to look at, should be sent to it so that it can look at it?

[Lord Dunlop]

My Lords, perhaps I can deal with the point that in some way the Scottish Parliament and the UK Parliament are being treated differently. As the House knows, if the Bill is to reach the statute book before the Holyrood elections, the Scottish Parliament needs time to consider and pass a legislative consent Motion. But to be clear, this is not consent for the fiscal framework itself but consent for the Bill, having seen what the fiscal framework is. This Parliament is in exactly the same position: it is being asked to approve this Bill informed by the publication of the fiscal framework, which we have now done.

20:30

[Baroness McIntosh of Pickering]

Did I understand my noble friend to say that this House and the other place will be able to debate the annual reports on the fiscal framework, which will have been adopted by the Scottish Parliament, but will not be allowed to debate the fiscal framework itself now? That seems rather bizarre.

[Lord Dunlop]

I think that we are debating the fiscal framework at this moment. As to whether there will be debates on the annual reports, it will up to each House to decide what debates it wants to have on them and what scrutiny it wants to give. Given the interest in the subject, I anticipate that there will be detailed scrutiny.

[Lord Forsyth of Drumlean]

I am sorry, but my point to my noble friend is this. The Scottish Parliament will decide whether it is going to give legislative consent to this Bill, which will have the effect of making the Bill reach the statute book. It has the opportunity of discussing the fiscal framework because we now have one.

[Lord Higgins]

And of approving it.

[Lord Forsyth of Drumlean]

Yes, it has the opportunity of approving it, whereas the House of Commons has not had the opportunity to do that. What possible justification can there be for not giving the elected Members of the House of Commons the opportunity to consider the fiscal framework, which has implications for the whole of the United Kingdom, when the Scottish Government have quite rightly insisted that they would not give legislative consent without the Members of the Scottish Parliament having an opportunity to consider it? I honestly think that my noble friend has to concede that there has to be an opportunity for the House of Commons to be treated in exactly the same way as the Scottish Parliament.

[Lord Dunlop]

That is a matter for the House of Commons; it is not a matter for the House of Lords. The House of Commons has decided to pass the Bill through its stages, in full knowledge of what the state of play was on the fiscal framework.

[Lord Higgins]

It had absolutely no knowledge of what the state of play was on the fiscal framework and it ought to have an opportunity to debate it.

[Lord Dunlop]

That really is a matter for the House of Commons, and not for this House of Lords. That House has to decide how it wants to deal with these matters and has done so.

[Lord Forsyth of Drumlean]

Will my noble friend allow me one more time?

[Lord Dunlop]

I will give way one more time but throughout the passage of the Bill, I think that I have taken every intervention and I really need to make progress.

[Lord Forsyth of Drumlean]

We are all extremely grateful to my noble friend and very sympathetic to the position in which he finds himself. However, he says that it is a matter for the House of Commons. If we were to pass my amendment then it would go back to the House of Commons, so it is a matter for the House of Lords whether the House of Commons will get the chance to consider it.

[Lord Dunlop]

For the reasons that I have explained, the Scottish Parliament is giving its legislative consent to the Bill and this House is being asked to approve the provisions of the Bill, so we are absolutely on the same footing.

Turning to the review of the fiscal framework, this is an agreement between Governments and it will be operated by Governments. Ultimately, therefore, the formal review should be conducted by Governments. However, as I have said, there is plenty of room for independent contributions. We have built an independent report into the review process for the first time for Scotland’s fiscal framework and, as I have said, I hope that the House of Lords Economic Affairs Committee will contribute its views on how this report should be structured. In addition, there is nothing to prevent other independent voices giving their views to either Government at any stage.

Let me reassure the House on one final aspect of Amendment 57AA. It is already our stated intention to have an independent report for the end of 2021. My expectation is that report will be published, although it will be for the Government of the day to determine that.

Finally, I turn to Amendment 57AC, tabled by my noble friend Lord Forsyth. I fully support the principle behind this amendment, as Governments should be accountable for all the public money that is spent, in whatever context. However, the Scottish Parliament already has an important scrutiny role over more than £30 billion-worth of spending. I therefore think it is primarily for the Scottish Parliament to monitor how the Scottish Government use the funds they will have to implement devolution following the Smith commission. I hope and expect that it will fulfil this role vigorously.

To reassure the House, I point to the scrutiny afforded to implementation of the Scottish rate of income tax following the Scotland Act 2012. The Scottish Parliament has taken on a significant role here, holding the Scottish Government to account. However, this does not mean that the UK Government and this Parliament are without a role. As I have said, we have committed to report annually to Parliament on the operation of the framework. I know those reports will receive full scrutiny. I therefore ask my noble friend to withdraw his amendment.

[Lord Forsyth of Drumlean]

My Lords, we have had a lengthy debate in which we have covered a lot of ground. However, a number of questions remain unanswered, which makes the case for both Houses to have an opportunity to consider the fiscal framework. I am extremely grateful to the many eminent and distinguished Members of the House who took part in the debate. I will not list them all as we need to get on, but I find it difficult to resist making one point to the noble Lord, Lord McFall. He said that the Scottish Parliament will be in the same position in terms of its powers as it was in 1707, and I will leave the House to speculate on who is playing the role of Queen Anne in that respect. It is, I might gently suggest, a slightly ridiculous position, although the big difference with 1707 is that it was not then dominated by one political party.

When I used to go to European Council meetings, I would always take the advice of the noble Lord, Lord Kerr, when he was in charge of UKRep. I am tempted to take his advice and withdraw Amendment 56ZA, but give notice that I will divide the House on Amendment 68.

[Lord Higgins]

I entirely take the point which is made about the later amendment, but I merely suggest to my noble friend that the vote will become detached from the debate which we have had now. We could go over the whole process again on the other amendment but that does not seem a very sensible way of proceeding. I would have thought, given the debate, we are much better really taking a decision now.

[Lord Forsyth of Drumlean]

I always listen very carefully to my noble friend. I therefore beg leave to test the opinion of the House.

20:38

Division 2

Ayes: 29

---

Conservative: 15
Crossbench: 9
Labour: 3
Ulster Unionist Party: 2

Noes: 145

---

Conservative: 103
Labour: 22
Liberal Democrat: 13
Crossbench: 4
Independent: 1

20:50

Clause 13: Power of Scottish Parliament to set rates of income tax

Amendment 56A

Moved by

[Lord Dunlop]

56A: Clause 13, page 16, line 14, at end insert—
“(17) Regulations under this section must be made by statutory instrument.”

[Lord Dunlop]

My Lords, I shall speak also to Amendments 56K, 56L, 71AB and 71AC which are tabled in my name. Amendments 71B and 71C have been replaced by Amendments 71AB and 71AC.

Amendments 56K and 71AB set out clearly, consistent with the existing legal framework, new borrowing powers for the Scottish Government. In line with the Smith agreement, the fiscal framework sets out agreement to change the powers available to the Scottish Government for both resource and capital borrowing.

For resource borrowing, a new power will be granted in this amendment to enable the Scottish Government to borrow should their tax revenues decline as a result of an economic shock which adversely or solely affects Scotland. The Scottish Government will be able to borrow up to £600 million per year. To ensure sustainable public finances, the total aggregate amount of resource borrowing debt will be set at £1.75 billion. In addition, the administrative limit on borrowing for forecast error will be increased to £300 million to reflect the volatility of the taxes as well as the welfare responsibilities that are being devolved.

For capital borrowing, we have agreed an increase in the maximum capital borrowing that Scottish Ministers can make. The limit will be increased to £3 billion. Additionally, the annual limit will also be increased. Scottish Ministers will be able to borrow up to 15% of the maximum limit—that is, £450 million a year.

Taken together, the borrowing powers that are increased by this amendment will boost the capacity of the Scottish Government to manage the additional risks to their budget from devolution and to expand their capacity to invest in Scotland.

Amendments 56L and 71AC address independent fiscal scrutiny in Scotland and the UK. Section 96 of the Scotland Act 1998 requires Scottish Ministers to provide information to the Treasury on the forecast when requested. However, since 2010, the OBR produces the UK’s official economic and fiscal forecasts. To produce comprehensive and detailed economic and fiscal forecasts for the UK, the OBR needs to produce forecasts for the taxes and spending measures devolved to Scotland. Access to Scottish government information is necessary to produce the Scottish forecasts that feed into the wider UK forecasts.

To date, the OBR has worked closely with the Scotland Office and the Scottish Fiscal Commission to ensure that all relevant information is brought to bear in producing its forecasts for devolved taxes. However, the OECD recommends that independent fiscal institutions have a legislative guarantee that they will be able to access all government information relevant to their forecasts. Adhering to this principle contributes to the institution being able to remain fully independent from Governments.

The recent Ramsden review of the OBR responded to this by recommending that the Government should use opportunities to amend relevant devolving legislation to ensure that the OBR has appropriate access to information, explanation and assistance to carry out its functions. The passage of the Scotland Bill provides an excellent opportunity to amend the Scotland Act 1998 and secure in statute the mutually beneficial information-sharing relationship between the Scottish Government, public bodies and the OBR.

Clause 13 contains the provisions extending further income tax powers to the Scottish Parliament and those relating to the manner and timing of the commencement of those powers. As currently drafted, the Bill allows for the commencement of the powers by way of a Treasury order but does not, as would be usual and was the case in the 2012 Act, stipulate that the order itself must be made by way of a statutory instrument. Amendment 56A adds the stipulation that the order be made by way of a statutory instrument. Making the order by way of such an instrument ensures that the order is a public document, numbered, printed and published by the Treasury Solicitor’s Department and laid before Parliament in a manner that facilitates anyone who is interested being able to find it relatively easily.

It was never the Government’s intention that the order be made other than by way of a statutory instrument. The Government have tried wherever possible to use the 2012 Act as a template for the current Bill. The clause draws on the wording of the 2012 Act income tax clause. However, while the 2012 Act included a general provision stipulating that all orders be made by way of a statutory instrument, the current Bill does not, so it has been identified that this specific provision is required. The oversight was brought to parliamentary counsel’s attention by the House of Lords Delegated Powers Committee, and the committee’s report and our response to it set that out in more detail. Both are available to noble Lords. I beg to move.

[Lord Sanderson of Bowden (Con)]

My Lords, I strongly support Amendment 56L, produced by my noble friend. I consider the work of an independent fiscal commission to be vital for the future not just of the Scottish Parliament but of the whole United Kingdom in this new arrangement where so many powers are being devolved. I said at Second Reading that I believed the OBR was a great initiative of the coalition Government, and it was. I am pleased to see in Amendment 56L that, if the amendment is passed, the OBR will have access to the sort of information that it needs to help the Scottish Fiscal Commission come to the right conclusions. I am still smarting from the reports that came out from the SNP just before the referendum that oil was going to be $112 a barrel. If a Government in Scotland are to do their own forecasting and that is the sort of answer that we will receive, no one, but no one, will believe them.

The amendment moves the OBR and the Scottish Fiscal Commission closer together. I have seen a very useful letter from the Chief Secretary to the Treasury to, I think, the committee in the other place. This is what he said about what the committee had said:

“There is a clear consensus”—

that is, a consensus in the Scottish Parliament—

“that forecasting should be done by a body independent of government. We agree with the conclusions of the Finance Committee of the Scottish Parliament and recommend that an enhanced Scottish Fiscal Commission be made responsible for forecasting in Scotland”.

My question for the Minister is: how far has the Scottish Parliament gone in legislating in this matter? May I have an assurance that those words will come true and we will have a proper Scottish Fiscal Commission? A commission, of course, is only as good as its membership. Let us hope that its membership is very understanding and knowledgeable, because I believe this to be crucial to the future success of the new arrangements.

[Lord McCluskey (CB)]

My Lords, I am sorry that the Government were unable to adopt something more along the lines of my Amendment 67. The purpose of that amendment was to ensure that there was an independent Scottish Fiscal Commission, and the provisions in it were designed to achieve exactly that. However, I recognise that I could not possibly win a vote if I sought to move that amendment and divide the House.

The other point is that in substance, Amendment 56L does the job as well as one could reasonably expect it to. I am happy to support it in the circumstances and I will not move Amendment 67, but I have one modest question. The point is that subsection (1) of the new clause says:

“The Office for Budget Responsibility has a right of access at any reasonable time”.

Note the word “reasonable”. The next line says that it is entitled to ask for information,

“which it may reasonably require”.

New subsection (2) says,

“which the Office reasonably thinks necessary for that purpose”.

I am not sure how that operates, because it was well understood in law that the word “reasonable” was so elastic that it was not precise enough—for example, to found a conviction for not doing the reasonable thing if that is what the statute required you to do. Therefore I am not sure how this is to be policed. If the Office for Budget Responsibility asks for information in the way that is qualified by the word “reasonably” in this new clause, and if the Scottish Government do not agree with its assessment of reasonableness, how is that dispute to be resolved?

21:00

[Lord Higgins]

My Lords, I have added my name to my noble friend’s Amendment 56A. It would simply insert, at the end of page 16, line 14, the words:

“must be made by statutory instrument”.

That amendment and the other amendments which stand in my name all arise from the 15th report of the Delegated Powers and Regulatory Reform Committee. I will quote as briefly as possible from the report, but the committee said:

“The Scotland Office have provided a delegated powers memorandum. We were disappointed with the quality of this document. In a number of cases, the explanation given in the memorandum failed to deal adequately with important aspects of the power, and most of the matters to which we are drawing attention in this Report arise from the fact that the explanation of the power in the memorandum is inadequate”.

I will not go on quoting from the Select Committee, but that is the general tone of what it said. In particular, it made a number of detailed criticisms which I have sought to cover by the additional amendments that I have tabled. I would be grateful if my noble friend would be kind enough to say whether he supports the other amendments, all of which seek to implement what was said in the committee’s report.

The committee goes on to deal in a little more detail with the subject matter of Amendment 56A. It said:

“To our surprise, there is nothing on the face of the Bill requiring the regulations to be made by statutory instrument. Since it is the invariable practice … we assume this is a mistake”.

I therefore seek in these amendments to cover the various points that the Delegated Powers and Regulatory Reform Committee made in its extremely helpful analysis. It would be helpful to know if my noble friend will accept the other amendments as well as Amendment 56A, which appears in both his name and my own.

On Thursday, the committee produced a further report that included remarks it received from the Government, including an apology for the inadequate way in which the proposal was first presented. We could go through each of the amendments in detail but perhaps my noble friend will simply indicate whether he agrees that we need to make the changes that I have put down on the Marshalled List and which implement the committee’s report.

[Lord Kerr of Kinlochard]

I welcome Amendment 56K, which covers borrowing, on which I have tabled Amendment 57. I think that Amendment 56K is a great deal better than my amendment and I congratulate the Government on producing it. For me, it was important that we had on the statute book a clear indication that there would be additional borrowing powers—that seems to be a necessary concomitant of tax devolution—that all borrowing would be in accordance with Treasury rules and that it would be subject to ceilings. All three elements are well met in the Government’s amendment.

It seems clear that the UK will be standing behind borrowing in the markets by the Scottish Government—that is, borrowing in line with the statutory requirements of being within the limits and in accordance with the Treasury rules. That has to be clear, otherwise borrowing in the markets will be more expensive for the Scottish Government and therefore for all of us, since it will be part of the UK borrowing programme. I would be grateful if the noble Lord could confirm that my reading of that is correct.

The borrowing section of the fiscal framework document all seems to make sense and the increased limits seem appropriate, except possibly the biggest single increase. There are two elements that cause me a little bit of concern and I would be grateful for the Minister’s views. One is the annual limit of £600 million for borrowing in response to a Scotland-specific economic shock. Paragraph 66 of the framework document says:

“A Scotland-specific economic shock is triggered when onshore Scottish GDP”—

I think that it means GDP growth—

“is below 1% in absolute terms on a rolling 4 quarter basis, and 1 percentage point below UK GDP growth over the same period”.

I pause on the word “onshore”. I am not quite clear when the added value of the North Sea comes into GDP. Is it when it comes onshore? Can the noble Lord elucidate? Would an oil price shock, such as the one that we have just seen, be regarded as a Scotland-specific shock? If not, I see a possibility of debate and dissent down the line.

Secondly, the document tells us that when a Scotland-specific shock is triggered, it may be triggered from outturn data or from forecasts. It says:

“In the event that forecast data shows an economic shock but outturn data does not, no retrospective revisions will be applied to borrowing powers”.

I agree with that sentence.

I slightly worry about this. It is odd to define a Scotland-specific shock by its effect on GDP rather than by its own characteristics. If you do that, given that GDP is always subject to revision for a number of years—a point made by the noble Lord, Lord Darling, in our Committee stage debate on borrowing—it seems that, again, you have the possibility of some debate. That is dealt with in a way by using a rolling four-quarter basis for calculating whether Scottish GDP is growing at less than 1% in absolute terms and 1% below UK GDP. Even so, is the Minister quite sure that the best way of defining a Scotland-specific shock is by its subsequent observed effect on GDP rather than by some intrinsic characteristic?

[The Earl of Kinnoull]

My Lords, I rise to speak to Amendment 57ZA, which is purely a probing amendment that would have appeared in Committee if we had had the fiscal framework. It is designed to allow a bit more discussion about one or two issues.

The borrowing framework within the fiscal framework will of course be precedential and will be a template, no doubt, for other deals with other devolved bits of the United Kingdom. I put it to the Minister that there are great prizes here to be had for clarity and for going into quite exhaustive detail in what can be a difficult area. I should say that before I drafted my wording, which is purely indicative, I had of course not read Amendments 56K and 56L. I echo the words of the noble Lord, Lord Kerr, in that regard. I had to read the fiscal framework on a mobile phone, which is not ideal, at Bristol airport.

I want to discuss two points, the first of which is, can we go into a bit more detail, and where is the extra detail contained? Is it in a memorandum of understanding; has it yet to be decided upon? Such details cannot be simply brushed aside; otherwise, you simply store up arguments and problems for later on.

One issue that occurs to me is how you tot up the level of outstandings. In the capital markets, it is quite normal that the issue price of something is quite different from the principal amount. For a zero-coupon bond, it will be a heck of a lot less. What would one record in those circumstances against the limits, and where is that recorded? I have referred to the multicurrency issue. There is some help on multicurrency review— I did not pick that up on my mobile phone in Bristol airport—but it would be helpful to understand what the deal is on multicurrencies.

I have to say that I found some things a bit confusing. This issue is not dealt with in my amendment, but I refer the Minister to paragraph 68 of the document, which states, rather teasingly:

“The Governments agreed that the Scottish Government should have the option of refinancing, on the same terms, any debt due to be repaid in a year of a Scotland-specific economic shock”.

It seems to me that refinancing should be on similar terms, having regard to whatever interest rates are. I would love to have some help there, because almost certainly, the terms would not be the same when it comes to refinancing.

Also, paragraph 70 states:

“On request from the Scottish Government, the resource borrowing limits may be temporarily increased”.

There is no real help on the quantum of such an increase, on what “temporarily” means, or on whether the UK Government have a veto over that. It would be very helpful if the Minister commented on those issues.

The big issue, for me, is whether or not the UK is guaranteeing Scottish debt. With a 300-plus year record of repaying every one of its obligations in full and on time, the UK, as a united kingdom, has a unique opportunity to access capital markets at very favourable rates. I do not think that that would apply to an independent Scotland—certainly not in the early years. I would have thought it would be very helpful to Scotland if there was an express guarantee of some sort from the UK; I expressed it in the American format of “full faith and credit”. That would help Scotland. It is a free gift of the UK, given that the rating agencies will count Scottish debt straight into their view of how much indebtedness we have. I would very much like to hear from the Minister on that issue.

21:15

[Lord McAvoy (Lab)]

I shall speak to Amendment 57A which seeks to create a new clause to ensure that the process leading to the annual settlement between the Treasury and Scottish Ministers of the block grant to the Scottish Consolidated Fund is both transparent and accountable. It could have related to some of the earlier amendments which sought more transparency.

After eight months of negotiations behind closed doors of the Joint Exchequer Committee, the Scottish and UK Governments have now reached agreement on the revised fiscal framework. We gave the Scottish Government our full support in their efforts to get a fair deal for Scotland and we are glad that an agreement has been reached, albeit belatedly. It may not be perfect and the timing may not be perfect but it is essential that this Bill meets the requirements of the Scottish Parliament in terms of consideration, in terms of the calling of the election and in terms of leaving this House. We wanted an agreement on the fiscal framework and both the UK and Scottish Governments have done their best to achieve one.

However, we now need clarity on when the new powers will be available and what the SNP Government and the other major parties in Scotland plan to do with them. The Secretary of State for Scotland has said that the new powers over income tax will be available by April 2017. We want as many new powers as possible, including those over airport duty, 50% of VAT revenues and social security, to be available by the same date in time for the first budget of the new Scottish Parliament.

The Labour Party moved this amendment in the House of Commons and since that time it has continued to advocate that a more open and transparent means of communication should have taken place. Documents have not been disclosed because we were told that this would constitute providing a running commentary. We understand that of necessity the process had to be carried out to achieve success, but it was marred on some occasions by negotiating positions being leaked to the press.

The amendment has taken on new significance since the publication of the fiscal framework, which suggests that the calculation of the block grant adjustment will take place on a transitional basis over the next five years and that at the end of the transitional period an independent review will take place. We believe in the discipline of transparency. Making the discussions and results of meetings transparent will help the Scottish and UK Governments. There is nothing like the discipline of public opinion and it will help both Governments to come to satisfactory conclusions.

[Lord Dunlop]

My Lords, again a number of points have been raised and I shall try to address each in turn. If I do not address them now I will be happy to write to noble Lords.

The noble Lord, Lord Kerr, said that his amendment sought to include annual limits on the borrowing and debt that can be undertaken by the Scottish Government. As he acknowledged, the Governments have now agreed the fiscal framework and, as a result, the Government are now bringing forward amendments to the Bill which will put the new borrowing arrangements into effect. I am grateful to the noble Lord for his view that the Government’s amendment addresses the intent of his own amendment. The noble Lord also raised a number of specific questions, and if I may I will write to him about them.

The amendments spoken to by the noble Earl, Lord Kinnoull, raise a number of specific points that I shall seek to address. On the need for separate limits for capital and resource borrowing, the agreement already sets separate limits and the UK Government are therefore proposing to amend the Scotland Bill accordingly. As is clear, the Scottish Government’s aggregate borrowing limit for capital spending is being increased from £2.2 billion to £3 billion, while the aggregate borrowing limit for resource spending is being increased from £500 million to £1.75 billion, reflecting the additional risks that the Scottish Government will take on. On the definition of how these limits are calculated, I can confirm that they are based on the principal, with interest payments not included.

On the issue of currency, the amendments proposed to the Scotland Bill by the Government require the Scottish Government to borrow in sterling to fund additional capital spending. As the Scottish Government can only borrow from the National Loans Fund for current spending, this will also therefore be in sterling.

On the issue of responsibility, I reiterate that the Scottish Government are responsible for all of their borrowing. But while the UK Government do not explicitly stand behind Scottish Government borrowing, the borrowing limits have been set at a level that the Scottish Government should be able to manage. I would like to remind the House of what the Chancellor of the Exchequer said when giving evidence to the Treasury Select Committee last Session:

“the UK stands behind its citizens wherever they live. The fiscal credibility of the UK is one of our most precious assets and we have had lots of debates in this Parliament about how we preserve that credibility. Of course we would not allow Scotland to go bust, but in order for that situation not to arise we will have to agree fiscal rules, independently verified, that make sure that that does not happen, so that we never reach that situation where the sovereign backstop has to be deployed”.

Again the noble Earl raised a number of specific points on which I will write to him.

The noble and learned Lord, Lord McCluskey, did not move his amendment but a number of points were raised. My noble friend Lord Sanderson asked about independent forecasts. I can confirm that as part of the fiscal framework agreement, amendments will be made to the Scottish Fiscal Commission Bill that is currently going through the Scottish Parliament, and there is no reason to think that the Scottish Government will not act with anything other than good faith in that regard. The noble and learned Lord, Lord McCluskey, also raised a specific point about the OBR’s right of access and asked whether there is any uncertainty in that. I think that there is a good understanding between the Governments about the information exchange that is required and I do not anticipate this being an area of great dispute between the two Governments. The provisions in this Bill will be underpinned by a memorandum of understanding as to how in operational terms this will work in practice.

I turn now to the amendments tabled by my noble friend Lord Higgins. Smith set out that extensive new tax powers should be devolved to the Scottish Parliament and Part 2 of this Bill does exactly that. Amendment 56B deals with whether we need two consequential powers in the Bill with regard to the income tax clauses. As has been referred to, this was covered in the Government’s response to the Delegated Powers Committee report which is now available online.

Perhaps I may explain the Government’s approach in this regard. The powers are separate and different, and both are required. Clause 15(8) allows the Treasury to make consequential amendments that arise in connection with changes made to the Scotland Act 1998 and the Income Tax Act 2007 by Clauses 13 and 14. The power in Clause 13, amending Section 80G of the Scotland Act 2012, allows the Treasury to make consequential amendments that are needed in consequence of or in connection with the exercise of the new income tax powers by the Scottish Parliament through a Scottish rate resolution. Income tax powers within this Bill are more extensive than those in the 2012 Act, so it is entirely natural that the changes made by Clauses 13 and 14 to the structure and terminology of the Income Tax Act 2007 that facilitate this devolution may give rise to the need for consequential amendments elsewhere in the taxes Acts.

I now turn to Amendments 56D, 56E, 56H and 56J, which deal with whether all SIs should be via the affirmative procedure. This is not an issue unique to the Scotland Bill; the approach is common across legislation. The Government agree that substantial changes to primary legislation should be made using the affirmative procedure. However, non-textual and minor technical changes should be possible under the negative resolution procedure. This minimises the burden on the House and also on government resources.

On Amendments 56C and 56G, which would deny the Treasury the power to amend by order the Scotland Bill, or Act itself, there will be a length of time between the Bill receiving Royal Assent and the Scottish Parliament exercising the new powers conferred by this Bill for the first time. The gap will be longer in some cases than in others. Income tax will be the shortest. We expect this to come into effect in 2017, then APD in 2018 and finally the aggregates levy. In the case of the aggregates levy, the length of time is uncertain as it will depend on resolution of the levy’s legal challenges.

There may be circumstances where changes are made to the UK structure of those taxes in the intervening period which would require amendment to the Bill in the period between Royal Assent and the commencement of devolved powers. For example, given the outstanding litigation on the aggregates levy, we must have flexibility to respond to future judgments to ensure the levy and the powers that we are devolving remain fully lawful. Similarly, there may be future enactments relating to the taxes which would need amendment. Any amendments to an enactment will be subject to the affirmative resolution procedure. On that basis, the Government cannot accept the amendments tabled by my noble friend.

Turning to the amendment moved by the noble Lord, Lord McAvoy, the Government have listened very carefully to concerns, such as those raised in the context of Amendment 57A, on the transparency of how we operate the Barnett formula. In our response to the Lords Economic Affairs Committee’s valuable report on this Bill, the Government committed to look into what more we could do. We are currently doing that and I hope to be able to report progress to the House in due course. This is not an issue just for Scotland; it impacts across the UK, so we have not tied this work to the Scotland Bill alone.

In the mean time, I reassure noble Lords that the Government have already set out changes to the devolved Administrations’ Barnett-calculated block grant allocations at every spending review, as well as twice a year—at Budgets and Autumn Statements, as required. In November, at the spending review and Autumn Statement, tables were included setting out the overall impact on the block grant of that important event. Alongside this, the Treasury has also recently published an updated version of its Statement of Funding Policy, copies of which have been placed in the House Library. This document outlines the principles underlying the calculation of the block grant. On that basis, I ask noble Lords not to press their amendments.

Amendment 56A agreed.

Clause 15: Consequential amendments: income tax

Amendments 56B to 56E not moved.

Amendment 56F

Moved by

[Lord McAvoy]

56F: After Schedule 1, insert the following new Schedule—
“ScheduleThe Joint Committee on Welfare DevolutionMembership1 The Joint Committee on Welfare Devolution shall comprise the Secretary of State, who is to be the chair of the Committee, and the following other members—
(a) the Scottish Minister who is responsible to the Scottish Parliament for welfare policy and payments, who is to be the deputy chair of the Committee;(b) the Member of the House of Commons who is for the time being the Chair of the Work and Pensions Select Committee of the House of Commons;(c) the Member of the Scottish Parliament who is for the time being the Chair of the Welfare Reform Committee of the Scottish Parliament;(d) two Members of Parliament who are not Ministers of the Crown;(e) two Members of the Scottish Parliament who are not Scottish Ministers; and(f) two persons representing local government in Scotland.2 The members of the Joint Committee on Welfare Devolution mentioned in paragraph 1(d) are to be appointed by the Speaker of the House of Commons and the Lord Speaker of the House of Lords.
3 The members of the Joint Committee on Welfare Devolution mentioned in paragraph 1(e) are to be appointed by the Presiding Officer of the Scottish Parliament.
4 The members of the Joint Committee on Welfare Devolution mentioned in paragraph 1(f) are to be appointed by Scottish Ministers after consultation with the Convention of Scottish Local Authorities.
5 In this Schedule, references to the Work and Pensions Select Committee of the House of Commons are—
(a) if the name of that Committee is changed, to be taken (subject to paragraph (b)) to be references to the Committee by its new name;(b) if the functions of that Committee with respect to welfare policy and payments (or functions substantially corresponding thereto) become functions of a different committee of the House of Commons, to be taken to be references to the committee by whom the functions are for the time being exercisable.6 In this Schedule, references to the Welfare Reform Committee of the Scottish Parliament are—
(a) if the name of that Committee is changed, to be taken (subject to paragraph (b)) to be references to the Committee by its new name;(b) if the functions of that Committee at the passing of this Act with respect to welfare policy and payments (or functions substantially corresponding thereto) become functions of a different committee of the Scottish Parliament, to be taken to be references to the committee by whom the functions are for the time being exercisable.Term of office of Committee members7 A member may resign from the Committee at any time by giving notice to the Secretary of State.
8 A member may be re-appointed (or further re-appointed) to membership of the Committee.
Committee proceedings9 The Joint Committee on Welfare Reform may determine its own procedure.
10 The validity of any proceedings of the Joint Committee on Welfare Reform is not affected by—
(a) any vacancy among, or(b) any defect in the appointment of any of, the members of the Committee.11 The Joint Committee on Welfare Reform may appoint a member of the Committee to act at any meeting of the Committee in the absence of both the Secretary of State and the Scottish Minister who is deputy chair of the Committee.
Advisory Panel12 The Secretary of State and Scottish Ministers acting jointly may make regulations appointing a panel to advise the Joint Committee on Welfare Reform on the transfer, implementation and operation of the powers devolved to the Scottish Parliament by Part 3 of this Act, comprising academics, representatives of the third sector and voluntary organisations, and other relevant stakeholders.
13 The Joint Committee on Welfare Reform must consult any advisory panel appointed under paragraph 12.”

[Lord McAvoy]

This proposed new schedule on the joint committee on welfare devolution provides for an across-Parliament committee to oversee the transition and implementation of welfare powers transferred under this Bill. The committee would include Members from both Parliaments and would be required to report frequently in the transition phase, and therefore annually. We hope there will be some kind of progress on that, similar to the statement made by the Minister a few minutes ago about listening and implementing ideas. That is always welcome.

21:30

This joint committee on welfare devolution that we propose would comprise the Secretary of State as the chair of the committee, and a list of other members as well. I will not read them all out. The members of the joint committee would be appointed by the Speaker of the House of Commons and the Lord Speaker of the House of Lords, and by various bodies given in the proposed new schedule. There might be some technical things regarding the name of the committee and what sort of rules would govern its procedures, but the main thrust of this is to examine the transfer, implementation and operation of the powers devolved to the Scottish Parliament by Part 3 of the Bill.

Welfare and the payments within it are too important to just be left to hang, so we hope that some sort of committee—something similar to this—or some implementation of transparency would help. Again, public exposure, scrutiny and transparency all help. We propose that the joint committee publish a report on the transfer and implementation of the powers devolved at least once every three months for the first three years from the date on which this Bill is passed, and on the operation of the powers devolved to the Scottish Parliament at least once in each calendar year starting three years from the date on which this Bill is passed. Welfare is too complicated and important compared to other powers. It is essential that there be some monitoring and transparency on that. We hope the Minister can respond as positively as he did to the last amendment. I beg to move.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I have three amendments in my name in this group. I am pleased to follow the noble Lord, Lord McAvoy. Social security is a very important subject and Part 3 is a very important part of the Bill.

I can dispose of my amendments briefly. At one point during Committee, I considered running a series of amendments that would have sought to take on employability. That is an important part within social protection but separate from social security. I welcome the fact that Clause 29 devolves a certain amount of power in terms of the Work Programme and related contractor-driven service provisions north of the border to Scotland. That is entirely sensible.

My original idea, which I think there is still a case for, is that employability as a subject could have been taken much further than the Smith commission suggested. I have for some time come to the conclusion that the whole of Jobcentre Plus services could be more efficiently and better served from a Scottish base run by the Scottish Government through the Scottish skills department, in a way that could improve on what we have at the moment. I decided against doing that because it was not in the Smith commission. There is a stateable case for doing it but I do not think that this Bill is the right way.

Instead, I decided to try to encourage Ministers to look more flexibly at the powers within Clause 29. Amendment 58 looks at some of the restrictions in claiming reserve benefits. Amendment 59 would try to give more flexibility and power to the Scottish devolved powers in Clause 29 to make them easier to tailor to individual Scottish circumstances.

I should declare an interest. Colleagues probably know that I am a non-executive, non-remunerated director of the Wise Group in Glasgow. I have been in that position for a while. As a result of that experience, I am pretty persuaded that the Scottish conditions, the shorter lines of communications and the set-up north of the border are of a different order to what happens throughout the rest of the United Kingdom and could be better developed in a way that would provide a better service if a maximum amount of flexibility was given. The providers who run the programmes already have a lot of discretion about the services that they deploy. It is all done on the basis of payment by results and the outcomes are all very carefully monitored, so I do not think that we would be giving very much away by encouraging the Clause 29 powers to be developed in as flexible a way as possible.

I suspect that the Minister will be advised that Amendments 58 and 59 would run counter to some of the legislative provisions that set up the Work Programme. I am prepared to accept that, if that is the case, but I think there is at least a series of questions to be asked about what are very important programmes delivering services to low-income households and jobseekers in Scotland in a way that I think could be improved. In parenthesis, I think that worklessness will be less of a problem in Scotland in the future and that low-income working households will have difficulties with poverty which will need to be addressed in a different way, because work incentives are not just about getting people into work but about getting them to progress through work. That is important, too. If the Minister does not mind, it is worth spending just a moment trying to give me a rationale on why we should not increase the flexibility available to work providers north of the border once Clause 29 powers are delivered to Scotland.

I do not think there are as many lawyers present in the House now as there were earlier this evening; otherwise, I might be tempted to press Amendment 60 to a Division because any self-respecting lawyer who looked at the complexity that now exists within this Bill compared with the parent Act of 1998—we are dealing with exceptions, reservations and exempted, as well as accepted, powers—would consider that a consolidation measure was easily justified. I hope that the Minister will note that I have made it easy for him in the amendment by saying that I would settle even for a draft, because trying to do what that amendment seeks to do in six months would be quite a tall order. However, it is a serious point. It would be of considerable assistance to all of us to have such a measure as this body of law develops. I hope rather than fear that it will develop; that is, I am fearful of that from a complexity point of view but hope for it from a political point of view.

On the previous group of amendments, the Minister rightly said that it was important to try to keep the template of the various sister Acts in some kind of cohesive shape. But in order to do that and to assist that process, a draft consolidation measure would be much appreciated by everybody in future. As I say, if there were enough lawyers in the House, I might even think about pressing this to a Division. I make the point facetiously but I hope that the Minister takes it seriously and gives us some comfort that he will go back to the department and explain how difficult it is for us—never mind members of the public—to understand the complexities of the interrelationships of the Acts that flow as a sequence from the parent 1998 Scotland Act.

[Lord Hope of Craighead]

My Lords, I support what the noble Lord, Lord Kirkwood, has said. Even with the advantage of the websites, it is very difficult to get an accurate and up-to-date version of amended legislation. If you go to the official website, you usually find that mention is made of amendments which have not yet been incorporated into the legislation as shown on the website. That time lag makes it very difficult for ordinary people to see exactly what the content of the legislation is. I think I am right in saying that when the Law Commissions were set up they had a function to keep an eye on the need for consolidation. If the Minister is not inclined to accept the amendment proposed by the noble Lord, Lord Kirkwood, perhaps he might, through his offices, encourage the Scottish Law Commission to get to work on consolidating these measures in a way that would be useful for anybody working in the Scottish Parliament or who was trying to understand what the current legislation really is.

[Lord Forsyth of Drumlean]

My Lords, I will speak briefly in support of Amendment 60, tabled by the noble Lord, Lord Kirkwood of Kirkhope. I am sure the Minister will be advised that it is not necessary to include this in the Bill but it would be excellent if he were to give an undertaking at least to produce a draft Bill. I am not a lawyer, but I have certainly found it extremely difficult to cope with the piecemeal changes that have been made over the years and to follow the cross-references back to the 1998 Act. The noble Lord has made probably the most sensible suggestion of the evening.

I presume the noble Lord, Lord McAvoy, will not press his amendment to a Division or anything of that kind. The Labour Party is in its debating society mode at present. When the Minister responds to the amendment, which is about setting up this welfare monitoring joint committee, will he answer a question I asked earlier, arising from the fiscal framework? Paragraphs 16 and 17 appear to contradict each other. Paragraph 16 says:

“For welfare, and all other spending unless stated otherwise in this agreement, the chosen method will be the Barnett formula”.

However, paragraph 17 says that,

“whilst achieving the outcome delivered by the Indexed Per Capita (IPC) method for tax and welfare”.

This is very important, because it makes a considerable difference to the amount of money that is available for welfare purposes in Scotland. Will the Minister indicate which I am to believe: paragraph 16, which would involve a substantial cut in the current budget, or paragraph 17, which appears to contradict it?

[Lord Dunlop]

My Lords, I thank the noble Lords, Lord McAvoy and Lord Kirkwood, for their amendments. I turn to Amendments 56F and 57B, moved and spoken to, respectively, by the noble Lord, Lord McAvoy. We had a good debate in Committee on similar amendments and I hope I was able to provide much detail on the joint working and scrutiny that will govern the transition and implementation of the new welfare powers. The Government are clearly sympathetic to the intent behind the amendments and the importance of a seamless transition that makes sure that the ultimate clients for welfare services are not in any way disadvantaged.

At the heart of the UK and Scottish Government scrutiny and implementation of these welfare powers is the Joint Ministerial Working Group on Welfare, which, as I said in Committee, has met four times since February 2015 and will meet again soon after the Scottish parliamentary elections. I have also given the assurance that I will explore how we can make the work of the Joint Ministerial Working Group on Welfare more visible in this place. I am already acting on that promise. Scottish and UK government officials will discuss the issue tomorrow at the next meeting of the joint senior officials group before it is then raised at the next joint ministerial group, which will take place after the Scottish parliamentary elections.

Beyond the range of work I have already outlined, there are other committees, both in the UK and the Scottish Parliament, which will have a role in the scrutiny of the new powers being devolved. For example, the Minister for Employment will be appearing in front of the UK Parliament’s Scottish Affairs Committee on 9 March to give evidence on the welfare and employment powers that are being devolved through the Bill. Ministers also often appear before committees in the Scottish Parliament to aid the scrutiny of Scottish Government proposals. Most recently, the Secretary of State for Scotland appeared before the Scottish Parliament’s Devolution (Further Powers) Committee just seven days ago to discuss issues such as the fiscal framework and the role of the Joint Ministerial Committee on welfare.

21:45

Noble Lords might also like to know that the Department for Work and Pensions established an implementation programme team in April 2015 which is specifically responsible for working with the Scottish Government on the transition and implementation of these powers. The team employs around 20 people and will expand substantially as the plans of the Scottish Government become clear. This will create clear lines of accountability and further reporting within the UK Government.

One issue that the noble Lord, Lord McAvoy, raised in Committee was the engagement with local groups and organisations in Scotland and whether this was, as he said, “perhaps a bit perfunctory”. I will respond directly to this point. Through the development and passage of the Bill, colleagues from the Department for Work and Pensions have worked closely with a range of different organisations in Scotland which represent a wide range of people with different needs, to listen to their concerns and discuss the intent of the welfare and employment provisions. This work has certainly informed some of the amendments to the Bill that were tabled in the other place; for example, the changes to the carer’s benefit powers.

[Lord McAvoy]

Just in the interests of having all the information, is the Minister in a position to name some of the organisations?

[Lord Dunlop]

For example, we have worked to build a strong relationship with the Convention of Scottish Local Authorities to ensure that universal credit is implemented and delivered in a way that best reflects the views of Scottish local authorities. Citizens Advice Scotland is another organisation that we have engaged with. This has been a genuinely joint approach to improve delivery in Scotland and is just one example of many.

As I said in Committee, I am sympathetic to the noble Lord’s intention in what his amendment proposes to achieve but we believe that robust, strong and effective mechanisms are already in place. We will absolutely put the customer at the heart of any change and will work with the Scottish Government to ensure that the transition and implementation of powers is simple, clear and effective. This will protect the delivery of existing benefits and customer interests, and ensure a great future for all the people in the UK, including those in Scotland.

Turning to Amendments 58 and 59, spoken to by the noble Lord, Lord Kirkwood, Clause 29 gives the Scottish Parliament legislative competence to establish employment programmes to support disabled people and those at risk of long-term unemployment. It devolves power over support for unemployed people through employment programmes currently centrally contracted by the DWP; this is mainly but not exclusively the Work Programme and Work Choice. These two programmes represent virtually all funding across these contracted employment programmes and therefore, in our view, provide the Scottish Government with a significant policy space within which to operate.

The powers are very broad in scope and concurrent with the UK Government’s powers. Any claimant on a reserved benefit at risk of long-term unemployment can be addressed in this way, so the Scottish Government have the ability to create schemes, programmes or grants in this space as the UK Government can. It gives the Scottish Government the ability to better align with the employment support they already provide through the devolved skills system. That is a very substantial package of powers which the Scottish Government can already use. I think the estimated annual spend in this area is some £600 million.

Support for those at risk of long-term unemployment must last for at least a year. The three restrictions seek to define the space which Smith said that the Scottish Government should have in designing new programmes. This creates clear lines of accountability between what the Scottish Government are able to do and what Jobcentre Plus is required to do. It is also important for there to be a clear handover point, so that Jobcentre Plus and Scottish Government programmes do not try to deliver different support to the same claimant at the same time. Jobcentre Plus will continue to deliver smaller-scale support, with the Scottish Government delivering more significant interventions.

The amendment of the noble Lord, Lord Kirkwood, would remove the limitations that assistance should be for persons claiming reserved benefits and be for at least a year. These limitations are necessary safeguards to ensure that those who need support over and above that provided by the enhanced Jobcentre Plus offer receive assistance for an intense period. Smith was clear that Jobcentre Plus and the conditionality regime “will remain reserved”. As I have said, there needs to be a clear handover point so that Jobcentre Plus and the Scottish Government’s programmes are not overlapping in that sense.

It is vital that the Jobcentre Plus work coaches have the right tools to support claimants into work and smaller-scale employment programmes at their disposal, such as mandatory work activity or locally commissioned support via the flexible support fund. If responsibility is split, the result could be people spending longer on benefits and employment support, and if we remove these restrictions, it will in the Government’s view create a confused, muddled system of support which claimants and third sector organisations would struggle to understand or navigate. That would be a much worse system and have unintended consequences. We have sought to strike the right balance: enabling the Scottish Government to provide employment support for people who are at risk of long-term unemployment, and giving the Scottish Government the opportunity to take clear responsibility over a substantial portion of the claimant journey.

Finally, I turn to Amendment 60, which concerns “Consolidation of the Scotland Act 1998”. We addressed points in Committee about the scope of the powers in the Bill related to welfare. Once the Bill is passed, it will be available on legislation.gov.uk, alongside the Scotland Act 1998 and the Scotland Act 2012. In the Government’s view, it would not be a good use of Parliament’s time to bring forward another Bill simply to repeat what is included in previous Scotland Acts. The dynamic nature of the devolution settlement means that the two Governments work together on Section 30 orders, which adjust the terms of Schedule 5 from time to time, so any consolidated version would quickly be out of date. That is no bad thing; it is testimony to the devolution settlement working responsively.

However, the points made by the noble Lord, Lord Kirkwood, raise an interesting question about knowledge of the devolution settlement more generally. I think that the noble Lord, Lord Smith, referred to it in his personal recommendations. The Government very much support the objective and have taken steps to improve the knowledge in UK government departments and beyond. For example, in March 2015 the UK Government published a leaflet explaining the changes to devolution in Scotland. The Secretary of State has also undertaken visits to local authorities and is keen to ensure that they know what powers are coming to the Scottish Parliament. The Scotland Office communications directorate’s work will also seek to make clear the Scottish Government’s existing powers—powers coming into force from the Scotland Act 2012 and those being delivered by the Scotland Bill. Its work raises awareness not just of the debate on what powers may or may not be devolved in future but on where the existing powers are today. With that, I ask the noble Lord to withdraw his amendment.

[Lord Forsyth of Drumlean]

Before my noble friend sits down, could he possibly answer the question I asked him about the welfare funding and the two paragraphs in the fiscal framework? If he does not have that information now, perhaps he could write to me.

[Lord Dunlop]

We have agreed that welfare will be funded through the Barnett formula and that tax deductions will be calculated through the comparable model. However, during the transition period, we will reconcile both to index per capita.

[Lord Forsyth of Drumlean]

Perhaps my noble friend could help me. Does that mean that if the Barnett formula model resulted in a shortfall in the resources available in Scotland for welfare, it would be topped up?

[Lord Dunlop]

It means that if you look across the total Scottish budget, it would deliver the outcome that we discussed earlier. It is up to the Scottish Government to decide how to use the resources within that: it is not ring-fenced within that total figure.

[Lord McAvoy]

We welcome the further response about involving the principles that we have included in previous Bills around transparency, involving people and all the rest of it. We are reasonably happy with that and I beg leave to withdraw the amendment.

Amendment 56F withdrawn.

Clause 19: Devolved taxes: further provision

Amendments 56G to 56J not moved.

Amendments 56K and 56L

Moved by

[Lord Dunlop]

56K: After Clause 19, insert the following new Clause—
“Borrowing
(1) The Scotland Act 1998 is amended as follows.
(2) Section 66(1) (borrowing by the Scottish Ministers from the Secretary of State) is amended as follows.
(3) At the end of paragraph (b) omit “and”.
(4) In paragraph (c)—
(a) after “devolved taxes,” omit “or”;(b) after “Scottish rate resolution,” insert “or from amounts payable under section 64A,”.(5) After paragraph (c) insert—
“(d) any sums which in accordance with rules determined by the Treasury are required by them to meet current expenditure because of an excess of welfare payments over forecast welfare payments, and(e) any sums which in accordance with rules made by the Treasury are required by them to meet current expenditure because of a Scotland-specific negative economic shock.”(6) After that subsection insert—
“(1ZA) In subsection (1)(d) “welfare payments” means—
(a) payments under any provision relating to matters within exceptions 1 to 10 in Section F1 of Part 2 of Schedule 5 or exception 1 in Section H3 of that Part, and(b) payments attributable to regulations made by the Scottish Ministers by virtue of section 27 or 28 of the Scotland Act 2016 (powers in relation to universal credit).”(7) In section 67(2) and (3A) (lending under section 66(1)) for “£500 million” substitute “£1.75 billion”.
(8) In section 67A (lending for capital expenditure) in subsections (1) and (3) for “£2.2 billion” substitute “£3 billion”.
(9) The Treasury may by regulations make transitional or saving provision in connection with the coming into force of the amendments made by this section.
(10) Regulations under subsection (9) must be made by statutory instrument.
(11) A statutory instrument containing regulations under subsection (9), if made without a draft having been approved by a resolution of the House of Commons, is subject to annulment in pursuance of a resolution of the House of Commons.”

56L: After Clause 19, insert the following new Clause—
“Provision of information to the Office for Budget Responsibility
(1) The Scotland Act 1998 is amended as follows.
(2) After section 96 (provision of information to the Treasury) insert—
“96A Provision of information to the Office for Budget Responsibility
(1) The Office for Budget Responsibility has a right of access at any reasonable time to all Scottish public finances information which it may reasonably require for the purpose of the performance of its duty under section 4 of the Budget Responsibility and National Audit Act 2011 (duty to examine and report on the sustainability of the public finances).
(2) The Office is entitled to require from any person holding or accountable for any Scottish public finances information any assistance or explanation which the Office reasonably thinks necessary for that purpose.
(3) “Scottish public finances information” means information held by the Scottish Ministers or by any Scottish public authority specified in regulations made by the Secretary of State.
(4) This section is subject to any enactment or rule of law which operates to prohibit or restrict the disclosure of information or the giving of any assistance or explanation.”
(3) In Schedule 7 (procedure for subordinate legislation), in paragraph 1(2) insert at the appropriate place—

“Section 96A

Type C”.”

Amendments 56K and 56L agreed.

Amendments 57 to 57B not moved.

Clause 29: Employment support

Amendments 58 and 59 not moved.

Amendment 60 not moved.

Clause 68: Power to make consequential, transitional and saving provision

Amendment 61

Moved by

[Lord Hope of Craighead]

61: Clause 68, page 74, line 32, leave out “1, 3, 4, 5 or 6” and insert “3”

[Lord Hope of Craighead]

My Lords, I have Amendments 61, 62, 63, 64 and 65 in this group. I tabled these amendments in Committee and renewed them for Report just to preserve my position in case amendments were not forthcoming from the Government. Clause 68 deals with the, “Power to make consequential, transitional and saving provision” and is of the type commonly referred a Henry VIII clause.

I made a number of criticisms of this clause in Committee, which I do not need to repeat. Having now studied the amendments which the Government have brought forward in this group, I am satisfied that the majority of the points that I raised have been met. I do not therefore propose to insist on any of the amendments which are in my name in this group. I wait to hear the explanation from the Government for the amendments they are putting forward, but my impression is that they are a commendable reaction to the points made by the Delegated Powers and Regulatory Reform Committee.

It is a pity that the clause was drafted in the very loose form in which it was. Perhaps there is a lesson here that, in future, such clauses should be more precisely related to the requirements of the particular Bill, not put forward in the general form in which they were when this Bill was introduced. Having said that, I do not propose to insist on the amendment, or the other amendments in my name in this group.

22:00

[Lord Stephen (LD)]

My Lords, this is all complex, although perhaps not as overwhelmingly complex as the fiscal framework itself. However, I am very pleased that the Government have brought forward amendments to respond to the views of the Delegated Powers and Regulatory Reform Committee. At this late hour, I do not intend going into all the detail, but it is interesting to note that, instead of—as the noble and learned Lord, Lord Hope, my noble and learned friend Lord Wallace of Tankerness and I proposed—deleting words and cutting back on these very wide and open powers to Ministers to change primary and secondary legislation here, in Northern Ireland and in other parts of the UK, the Government have introduced extra words to try to restrict those very wide powers. The restrictions are welcome; I would still have preferred such wide powers for Ministers—given inadvertently, I think—to be removed.

Doubtless, however, due to the political imperative, at this hour we will all accept the Government’s approach and amendments. I close by thanking the noble and learned Lord, Lord Hope, for raising the issue and the Law Society of Scotland for the hard work that it has done on the detailed wording that it provided to us in presenting our amendments. I hope that, through constructive opposition to the Government, we have a set of measures brought forward by them that respond to the correct concerns voiced about the nature of the Bill as drafted. I look forward to the Minister’s explanation, so that we can make sure that all the points of concern have been covered.

[Lord Forsyth of Drumlean]

My Lords, I wanted to delete this clause entirely in Committee, and was persuaded that the approach being taken by the noble and learned Lord, Lord Hope, was perhaps more forensic and justified. I agree with the noble Lord, Lord Stephen, that half a loaf is better than no loaf. This is a very useful example, both in the original draft and the slightly grudging response from the Government, which we can discuss when we come to debate the Strathclyde review and the Government’s attitude towards the use of secondary legislation.

Our previous debate, when we spent 10 minutes arguing whether the House of Commons ought to be able to discuss the fiscal framework, to my mind underlined an Executive who are increasingly treating Parliament as the ornamental part of the constitution. That is very regrettable.

I thank my noble friend for at least moving as far as he has, but I would not want him to think that the Bill as it stands is in any way acceptable. I hope that on a future occasion we will have more opportunity to discuss the increasing use of secondary legislation. If it is not a Henry VIII clause, perhaps it is now a Queen Anne clause, in deference to the noble Lord, Lord McAvoy, who thinks that this is putting the Scottish Parliament in the same position as it was in 1707.

[Lord McFall of Alcluith]

Yet again, the noble Lord has got it wrong—it was me who said that. However, let us finish on a positive note tonight. First, I would like to thank the Delegated Powers Committee for its report, because it was very clear at the beginning that the Scotland Office provided a delegated powers memorandum, the explanation of which was inadequate. As a result of that, I thank the noble and learned Lord, Lord Hope, for tabling these amendments, and the noble Lord, Lord Norton of Louth, who made an excellent speech last time on the Henry VIII powers.

The Law Society of Scotland was mentioned, and Michael Clancy has been sitting in the box for many weeks, although he is not there tonight. He has been helping us—and I well remember taking over the shadow Home Affairs responsibility in the 1990s for the Labour Party, when Michael was helping one and all political parties. So I thank him, too.

As the noble Lord, Lord Forsyth, said, it is better to have half a loaf than none. It is important to say that the Government have not outlined totally why the consequential powers are required in Parts 1, 4, 5 and 6, in every other respect. Perhaps the Minister will at this stage give your Lordships’ House some indication of the type of saving powers that the Government expect to propose. As the noble and learned Lord, Lord Hope, said in Committee, if we are going to keep faith with what we are trying to achieve, the Government have to go that step further. With those comments, I commend the work that noble Lords have done and the response that the Government have given to the suggestions.

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

I am obliged to your Lordships and particularly grateful to the noble and learned Lord, Lord Hope of Craighead, for his contributions on this matter. As will be appreciated, the powers in question can be used only in consequence of provisions in the Bill. The power to make consequential, transitional and saving provisions of this type are not exceptional or unusual in primary legislation of this ilk. Indeed, Section 105, together with Section 113, of the Scotland Act 1998 provided a similar power. The Scotland Act 2012 also contained consequential powers.

When consequential amendments were identified as necessary during the course of preparation of the Bill, they have been included in the Bill. For instance, Clause 10 makes provision in consequence of the clauses relating to elections. However, given the nature of the Bill, involving significant devolution of legislative and executive powers, it is difficult to anticipate the full extent of the consequential changes required when the provisions are commenced to put them on the face of the Bill. Therefore, it is possible that, following Royal Assent, legislation may be needed to amend and deal with the consequent provisions of the Act. In those circumstances, the Government considered it both necessary and appropriate to include this provision in the Bill.

However, following the views of the Regulatory Reform and Delegated Powers Committee, and those expressed in this House in Committee, we have brought forward an amendment to Clause 68. The effect of the amendment is that the power to amend future enactments, future prerogative instruments, any other future instruments or documents and Welsh and Northern Irish legislation, whenever made, will apply only to Part 3 of the Bill, the only part of the Bill dealing with welfare provisions. Amendments 62A, 62C, 65A and 65B limit the scope of the consequential, transitional and saving power as it applies to Parts 1, 4, 5 and 6 of the Bill. I hope that reassures noble Lords on the proper scope of these provisions.

Amendment 71A provides that Clauses 3 to 12 do not commence automatically two months after Royal Assent, but instead come into force on such a day as the Secretary of State may appoint by regulations. We have identified some consequential and savings provisions that may be required, and they require careful co-ordination with commencement of Clauses 3 to 12. They are largely concerned with electoral law. Commencement by regulations will facilitate such co-ordination. We do not expect to delay commencement for too long after the Scottish parliamentary elections have taken place in May 2016. In these circumstances, I invite noble Lords not to move their amendments and to accept the Government’s amendments.

Amendment 61 withdrawn.

Amendments 61A and 62 not moved.

Amendment 62A

Moved by

[Lord Dunlop]

62A: Clause 68, page 74, line 37, leave out “(whenever passed or made)”

Amendment 62A agreed.

Amendment 62B not moved.

Amendment 62C

Moved by

[Lord Dunlop]

62C: Clause 68, page 74, line 40, at end insert—
“( ) For the purposes of making provision in connection with, or with the coming into force of, a provision of Part 3, subsection (2) applies to an enactment, instrument or document whenever passed or made.
“( ) Otherwise, subsection (2) applies to—
(a) an Act of Parliament passed before or in the same session as this Act;(b) an Act of the Scottish Parliament passed, or an instrument or document made, before the end of the session in which this Act is passed.”

Amendment 62C agreed.

Amendments 62D to 65 not moved.

Amendments 65A and 65B

Moved by

[Lord Dunlop]

65A: Clause 68, page 75, line 14, after ““enactment”” insert “— (a)”

65B: Clause 68, page 75, line 14, after “Parliament,” insert “and
(b) for the purposes of making provision in connection with, or with the coming into force of, a provision of Part 3, also includes”

Amendments 65A and 65B agreed.

Amendments 65C and 65D not moved.

Amendment 66 had been withdrawn from the Marshalled List.

Amendments 67 and 67A not moved.

Clause 69: Commencement

Amendments 68 to 68B not moved.

Amendments 69 to 71 had been withdrawn from the Marshalled List.

Amendment 71A

Moved by

[Lord Dunlop]

71A: Clause 69, page 75, line 37, at end insert—
“( ) sections 3 to 12;”

Amendment 71A agreed.

Amendment 71AA not moved.

Amendments 71B and 71C had been retabled as manuscript Amendments 71AB and 71AC.

Amendments 71AB and 71AC

Moved by

[Lord Dunlop]

71AB: Clause 69, page 75, line 43, at beginning insert “Section (Borrowing) and”

71AC: Page 75, line 43, at beginning insert “Section (Provision of information to the Office for Budget Responsibility) and”

Amendments 71AB and 71AC agreed.

Amendment 72 had been withdrawn from the Marshalled List.

House adjourned at 10.14 pm.