Savings (Government Contributions) Bill (First sitting)
(8 years, 2 months ago)
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The Chair
Before we start, I remind everyone that there will be severe sanctions against anybody who uses their mobile phone or who allows their mobile phone to go off in this room. There will also be sanctions against those who drink tea or coffee rather than water. I hope that we will be able to take the Committee through in an orderly and quick fashion.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 10.00 am on Tuesday 25 October) meet—
(a) at 2.00 pm on Tuesday 25 October;
(b) at 11.30 am and 2.00 pm on Thursday 27 October;
(c) at 9.25 am and 2.00 pm on Tuesday 1 November;
(2) the Committee shall hear oral evidence in accordance with the following Table:
Date | Time | Witness |
|---|---|---|
Tuesday 25 October | Until no later than 10.45 am | The Tax Incentivised Savings Association The Association of British Insurers |
Tuesday 25 October | Until no later than 11.25 am | The British Banking Association Hargreaves Lansdown |
Tuesday 25 October | Until no later than 2.30 pm | StepChange Centre for Social Justice |
Tuesday 25 October | Until no later than 3.00 pm | Union Pension Services Limited |
Tuesday 25 October | Until no later than 3.30 pm | Scottish Friendly |
Tuesday 25 October | Until no later than 4.00 pm | MoneySavingExpert.com The Women’s Budget Group |
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clause 1; Schedule 1; Clause 2; Schedule 2; Clauses 3 to 6; new Clauses; new Schedules; remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00 pm on Tuesday 1 November.—(Jane Ellison.)
The Chair
We know that the first deadline for tabling amendments has already passed, but the Chair will consider accepting starred amendments in special cases.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Jane Ellison.)
The Chair
Copies of the written evidence that the Committee receives will be made available in the Committee Room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Jane Ellison.)
The Chair
Good morning, everybody. We will now resume our public sitting and we will hear evidence from the Tax Incentivised Savings Association and the Association of British Insurers.
I remind Members that questions should be limited to matters within the scope of the Bill and that this session of questions cannot go beyond 10.45 am.
Will the witnesses please introduce themselves? Carol Knight first.
Carol Knight: Good morning. I am Carol Knight, the chief operations officer of the Tax Incentivised Savings Association.
The Chair
Can I straight away say that you will have to raise your voice a bit more than that, because the acoustics in this room are notoriously bad?
Yvonne Braun: I am Yvonne Braun. I am director of policy, long-term savings and protection at the ABI.
Peter Dowd (Bootle) (Lab)
Q This is to Ms Knight. In a press release response to the Budget, you welcomed the lifetime individual savings account and said:
“The Lifetime ISA will encourage further tax-exempt saving and a dedicated account to save for a home and save for retirement.”
How do you perceive the marketing of the LISA in relation to traditional pension products?
Carol Knight: We do not really see the lifetime ISA as a direct competitor to pensions. We believe there is a cohort of the public for which the LISA will be an attractive proposition, particularly those who are in low-paid income and who fall outside the bracket for auto-enrolment. Self-employed people have an opportunity with the LISA that is not available with a workplace pension. So we believe there are a number of people who would be attracted by a matching proposition and who do not automatically have the opportunity to benefit necessarily from a pension product.
Peter Dowd
Ms Braun, would you like to comment on that question?
Yvonne Braun: For us, what is most important is that there is no confusion between automatic enrolment and the lifetime ISA, so we see it as a complementary product. What is quite important is how it is communicated to people, particularly employees, because we are very clear that there is no employee who will be better off if they switch out of their automatic enrolment pension into a LISA, because with automatic enrolment in a workplace pension scheme they get the employer contributions. If they decide to switch out of that into a LISA, they would lose quite a lot; in fact, we calculated that they could lose up to a third once they get to the age of 60. We think that is really, really important. Communication will also be very critical by the Government, by the guidance services and through providers themselves.
Peter Dowd
Q You mentioned the potential confusion. How do you think that could be avoided, because there is concern that these things will either meld or send out a confusing message?
Yvonne Braun: I think there are a number of mechanisms, such as what the Government put forward in terms of what the LISA is for, but also using the new guidance service, which will be the successor to the Money Advice Service, the Pensions Advisory Service and so on and so forth in 2018. That could also steer people and help them to make the right decision for their circumstances because, as Carol just said, for some people—the self-employed, people who have already maxed out the employer contributions on their pensions or people who may be fortunate enough already to have used up their annual allowance—it is a very positive thing, but it is important that every person makes a decision based on their own circumstances. For most people, switching out of a pension into a LISA will be a very bad decision.
Peter Dowd
Q To follow up on Carol’s comment earlier, you have expressed disappointment about the early withdrawal charges.
The Chair
Peter, sorry, can you please project your voice? There may be people at the back and at this end who are finding it hard to hear.
Peter Dowd
Okay. In the past you have expressed disappointment about early withdrawal charges. What would you suggest instead?
Carol Knight: We believe that the necessity to pay back a bonus if money is withdrawn outside the allowed circumstances is a great enough disincentive to withdrawal at inappropriate times. We believe that the 5% charge across the whole of a savings account is disproportionately difficult, particularly if we are looking at this as a product for people who are low paid and accessing a savings product that they would not use other products for, because of the 25% bonus.
A person’s life circumstances might mean that suddenly they have a need to take their money out. There are all sorts of events that happen during the course of a life, when someone has an urgent need to get some cash to help them through difficult times—for example, being made redundant. To have a 5% charge seems to us to be an inappropriate and harsh penalty to pay. We understand that it is there to encourage people to keep their money in it. As Yvonne said, we would not want to see the LISA used as an alternative to a pension. We believe that it is a complementary product, so keeping the distinction between the two is important. However, we feel that that can be addressed by means such as having to pay back the bonus, rather than having a 5% charge across the whole account.
Peter Dowd
Q Okay. It has been reported that many financial providers may not want or be able to offer a lifetime ISA by the time of its launch. Some have ruled out participating in it altogether. What is your organisation’s view on that?
Carol Knight: There are some organisations that will be ready in April. There is always the need for a lead-in period for people to get systems in place and get trained. To have clarity on the guidance and regulations at the earliest possible opportunity is critical. We have had a short lead-in period for this particular product and some people will be ready, some will not—unfortunately, that is the nature of the game.
Peter Dowd
Q Do you think that the proposed lead-in time is reasonable?
Carol Knight: We would normally ask for a year, but we have not had that opportunity this time.
Peter Dowd
Q I will come to Ms Braun in a second, but on that point, what is your assessment of the awareness of employees and employers of this particular scheme—the lifetime ISA? It is a short run-in period.
Carol Knight: We do not think it will affect employers. This is a personal individual savings account. We do not see it being marketed as an alternative to auto-enrolment. We do not necessarily see it being offered by employers.
Peter Dowd
Q How about awareness, given that you think the run-in period is pretty tight?
Carol Knight: Yes. The publicity to get the scheme in place is important for the public as well as for the industry. There has been a lot of publicity about it. Getting that clarification for people is really important, but the whole question of advice and guidance needs addressing. There is a lot of work going on in other areas looking at this, but it is really important to put more work into enabling people to get the information they need to make informed decisions. Those need to run hand in hand alongside each other.
Yvonne Braun: If I could come back on the lead-in times you mentioned, this was announced at the last fiscal event in April, to be coming into force next April. As the Tax Incentivised Savings Association has done, we have worked with the Treasury and HMRC officials over the summer, to understand better how the detail will work. We are still waiting for clarity from the Financial Conduct Authority about what the conduct rules are going to be. That inevitably puts pressure on providers who are trying to get this ready for next April. As I have said publicly, there will be quite a few who will not be ready for next April. That does not mean that they do not want to offer it, just that from the perspective of their own lead time and systems build time, they need longer.
Peter Dowd
Q I will ask you both to answer this one, if I may. Would you welcome a deferral for a period of time, beyond the suggested introduction date?
Yvonne Braun: In terms of the monthly bonus contributions from Government, there is an argument to defer it until April 2018.
Carol Knight: At this point in the game, a lot of people have put a lot of work into getting it delivered for April 2017, so a change at this point is going to be detrimental to those firms. I think it is too late in the game to make that change, personally.
Melanie Onn (Great Grimsby) (Lab)
Q I wonder whether I could follow up on the point about some financial providers choosing not to participate in the scheme at all. Do you have any further information on that? Do you have any percentage figures for organisations that are either not going to be ready or are not choosing to participate in the scheme at all?
Yvonne Braun: No, I don’t.
Jeremy Quin (Horsham) (Con)
Q May I pick up on a couple of points made by the witnesses? First, a powerful point was made that, although auto-enrolment has been a success, the self-employed do not have access to it, and this is an option, a vehicle, for the self-employed to improve their long-term savings. Could you expand on that?
Carol Knight: I think that is absolutely true. However, some of the data from the Office for National Statistics indicates that 15% of our workforce are self-employed. But of that 15%, over 50% are over 50 years old, so the lifetime ISA is not a vehicle available to them. To enable those people to benefit from it, there is an opportunity to expand the age at which you can open a lifetime ISA.
Yvonne Braun: I would make exactly that point. A lot of self-employed people do not fit the age restrictions on the product, so for them it is not going to be available. Of course, if they are higher rate taxpayers, the pension tax relief on offer to them looks better than the bonus they would have received under the lifetime ISA. That is also worth saying: for self-employed people, the lifetime ISA is particularly attractive if they are basic rate taxpayers, but not so much if they are higher rate taxpayers.
Jeremy Quin
Q I am grateful—it is 15% and 50%. I am a glass-half-full type of person, but I am sure the points were noted.
The other point I want to tease out is the reference to not everybody being ready, and the potential for delay. Hearing what Carol was saying, in particular, I take it that there is no sign that there will be an insufficient number of people to provide a market. There will be a market, and if people have to catch up they will have to catch up. We are offering a good product at an early stage—would that be fair?
Yvonne Braun: That is absolutely right. Our members very much want to make this work for their customers.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Q A lot has been said about auto-enrolment and those who have been left behind in the process up till now—the self-employed. Given that we know there is going to be a review of auto-enrolment in 2017, is there an argument for postponing this until we deal with auto-enrolment and those who need to be included?
Carol Knight: Not necessarily, no. We need to monitor the effects, without a doubt. We need to look at the take-up of auto-enrolment to see whether there is any discernible drop-out and a corresponding number of people going into the LISA. There are so many unknowns with auto-enrolment that it is difficult to say that we should postpone the LISA because of that.
There are a lot of people who are not going to get caught by auto-enrolment. One of my biggest concerns is about people who earn too little to even fall into that bracket. An increasing number of people have multiple income streams, each of which is too low to get caught. Auto-enrolment is not going to solve the problem for them, but a lifetime ISA could.
Yvonne Braun: I think that question of people with multiple employment will be one that we will have to return to in the automatic enrolment review, because I think that is the very point of the review—to see whether some tweaks need to be made to make it work better for more people.
The point that Carol made about monitoring the outcome is absolutely right. I think the view has been expressed that the risk of higher opt-out rates from automatic enrolment is small, because that has not occurred with the introduction of the help to buy ISA. However, I think it is important to remember that the help to buy ISA is quite a different proposition, because the maximum bonus is much, much lower, and also the bonus is not paid into the actual account, whereas here it actually goes into the individual’s account. So I think the experience with the help to buy ISA should not give us false comfort that the lifetime ISA will not have an impact on automatic enrolment.
It will be really important that we look at what happens from next April, when the lifetime ISA is introduced, and, as I said earlier, it will also be really important that the information and guidance that people receive is very, very clear about the importance of the employer contribution and about not losing that through a switch into a lifetime ISA.
Ian Blackford
Q How concerned would you be on that issue, Yvonne, particularly given what you said previously—that nobody will be better off with an ISA than they would be with investing in a pension scheme? I think that the figures that you gave to the Work and Pensions Committee were quite illuminating, because they demonstrated that someone earning £25,000 a year and putting 4% of their salary in over a 40-year period would be 33% worse off with a LISA. How concerned are you that people may be seduced into investing in a LISA over the opportunities and the benefits of investing in a pension?
Yvonne Braun: I think that is absolutely not the intention of the policy, because the Government have been very clear, from day one, that the LISA was not intended to supplant automatic enrolment but was intended to work as a complement to it. I think that if we can stay with that, and if the communication to people is clear on that point, then that risk is mitigated, although we should still monitor what actually happens on the ground, because it is easy to get confused about the numbers. We are talking about 25% Government bonus, which sounds better than 20% basic rate tax relief but is in fact exactly the same.
So clarity of the message is really important in all of this, and as I said, we think it is important that we use the guidance services for that, and also that the work that is done by the financial advice market review on rules of thumb considers what could be communicated to people about a workplace pension vis-à-vis a lifetime ISA. I think the two should be seen as the lifetime ISA being on top of—in addition to—the workplace pension, rather than there being some sort of binary choice.
Ian Blackford
Q In order to achieve that, how would you architect the guidance and advice that consumers need to get, to make sure that they don’t fall into the trap of investing in an ISA when a pension would be better for them?
Yvonne Braun: I think there needs to be a strong signpost towards the guidance services, and the guidance services need to be clear about the complementary nature of the two products—that it is not an either/or, much like it should not really be an either/or for people whether they save for retirement or for a house deposit.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Q I want to continue along very similar lines to the previous questioner, because I was also very struck by the evidence that the Association of British Insurers submitted to the Work and Pensions Committee. I particularly note that a £25,000-a-year salary would be roughly the average female salary in this country. There has also been quite a lot of talk today about people on lower incomes, and it seems to me quite striking that if you are a person on an average or below-average salary, it is unlikely that you are going to “max out” your employer contributions or your annual allowance in any given year. So it does not seem to me that there are many advantages for a low or average-wage person in the LISA, and it seems that they would be better advised to invest in a pension. Looking at the discrepancy pointed out in the evidence, that could be £53,000 over a lifetime’s saving. Is it really advisable from a financial perspective to encourage anyone to invest in a LISA if they are on a low or average income?
Yvonne Braun: I think what is also important here is that we consider people’s individual choices. As long as people are clear about what they are giving up, we cannot stop them from potentially opting for a lifetime ISA if that makes sense. Ultimately, this is about giving people more options—that is the intention—but I think there has to be a very clear message of, “If you opt for a lifetime ISA over a workplace pension, the downsides look like that.” That is quite important to draw out.
Carol Knight: That is absolutely right. When you are looking at a workplace pension where you have got the employer contribution going in, that definitely changes the dynamic. So I think it would be very hard to justify anyone using a LISA as an alternative to that because of that extra contribution going in. However, for people for whom that is not an option—those people may be comparatively young and not necessarily have any sure view of how their life is going to pan out—the concept of putting money into a pension that is completely locked away might just stop them saving altogether, because their lifestyle is such that they want the option to be able to have access to money at a point at which they need it, and within a pension they cannot do that. The lifetime ISA gives them that flexibility, where they have the opportunity to save money and the opportunity for a 25% bonus that is easy to understand—matching contributions is an easy concept—and, if their lifestyle is such that a crisis arises where they need access to money, they can get to it. The lifetime ISA will give them that, but a pension will not.
Dr Whiteford
Q Would you agree that there is a serious risk of mis-selling in this context?
Carol Knight: There is always that risk. It is down to how it is communicated to people, and I think that clear, simple guidelines are going to be really important for people to help them understand the difference between the two and the benefits of both.
James Cartlidge (South Suffolk) (Con)
Q This is continuing on the same point but looking at it from the other point of view, as someone who has been involved in the housing market a lot. Surely it is not unreasonable that a young person who lives in an area where property is very expensive has an opportunity at last for their savings to be protected, other than in extreme circumstances, from house price inflation, and to be able to play catch-up. The biggest problem in the boom years was that you could save, but prices would be roaring ahead of what you could realistically save. Therefore, quite understandably, someone in that position who is many decades from retirement might think to themselves, “I’m going to put everything into this, because I am desperate to get a home. It is very expensive, but this is an opportunity.” To me, it is surely not unreasonable for someone in that position to make that choice.
Yvonne Braun: As long as they are clear about what is involved—to me that is the key.
Carol Knight: I think a lot of evidence shows that for a lot of young people the focus is their home, without a doubt.
James Cartlidge
Q Obviously if someone gets on the property ladder with a capital repayment mortgage at the age of, say, 25, in theory when they retire they should not have any housing costs—that was the old idea. So we should remember that there is an extra benefit in this. There are many other benefits to home ownership and many aspirations, but I take your point that we have to have the advice in such a way that anyone making the choice knows what the choices are. That, as always, will be the challenge.
Yvonne Braun: I think there is an additional point that it is important not to overlook. We know that the earlier you start retirement saving, the less effort you have to make later. If you start at 20—the rule of thumb always is that it is about half your age when you start saving—it will cost you an awful lot less and it will be an awful lot less painful to save for retirement than if you start at 30 or 40. That has to be in the equation for people. Actually, at the moment opt-out rates are lowest for young people, so automatic enrolment has worked very well for young people especially, and it is important that that success story does not get stopped.
Carol Knight: I think that is absolutely right. When you look at the savings culture in this country, a lot of savings go into cash and a comparatively small percentage go into investment. It is difficult for people to understand the investment cycle, and they are scared of it because it is not easy to understand. In something like auto-enrolment, it is done for you. It is a nice, easy way to enable people to move into that market. If you can inculcate a savings habit at an early age, it gives them a really good building base to go on. Auto-enrolment does provide people with that platform to get into an investment environment that they may be a little wary of going into individually. That is why we think that the lifetime ISA is complementary rather than “instead of”, because you have to choose that actively, whereas auto-enrolment is there for you if you are in that cohort of people who are caught.
Kelvin Hopkins (Luton North) (Lab)
Q I am concerned about the whole idea of persuading people to save when they are young. Is it not the sensible way forward to have a compulsory state scheme for everybody based on income? Young people with either high rent or a mortgage or children are constantly up against it financially—even those with an income better than £23,000 a year, which is a tiny amount for mortgages in particular. Is it not time to say that the Government have got it completely wrong, that all these complicated schemes will not actually benefit the people who really need help—those on low incomes with high expenditures they have to meet—and that replacing all those schemes with a compulsory state scheme with defined contributions and benefits at the end would be much better? If the better-off want to go and invest somewhere else, that is fine, but we are talking about ordinary people on relatively low incomes. Do tell the Government that they have got it completely wrong if you want to—no need to be too polite.
Carol Knight: Would you like that honour, Yvonne?
Yvonne Braun: I think that is the state pension, though. Ultimately the state pension is your safety net. Everybody is going to get the same, and especially for people on lower incomes, the state pension provides quite a good replacement rate.
If we look at some of the projections that the Department for Work and Pensions did, I think, two years ago when it looked at the adequacy problem in the population at different salary ranges, it found that the problem is between £22,000 and £52,000 of annual income. Lower than that, you have a lot of replacement income through the state pension, and higher than that people can usually sort themselves out. So that is where additional savings are more important.
I would say that the Government have not got it wrong. Automatic enrolment is a very good policy, and making it compulsory is also perhaps not terribly British, I suppose. The state pension provides the underpinning that you describe of an income that is there for everybody as a safety net.
Kelvin Hopkins
Q But the state pension is not earnings-related; it is for everyone. I agree with you—a much higher basic state pension would be a good idea as well—but earnings-related income on top of that means that those on better incomes do not suddenly drop down to the basic state pension when they reach retirement. They are compelled to save so that they can have a comfortable retirement.
Yvonne Braun: That is in many ways how automatic enrolment is supposed to work—it is a percentage of salary, so people with higher salaries will contribute more. There is then a question about whether 8%, as it is meant to end up in 2019, is the right percentage. We firmly believe it is not; it should be quite a bit more. That is the subject of the automatic enrolment review that will happen next year.
At this point I would not argue that it needs to be compulsory. Because the opt-out rates are so low, there is a question as to why you would go for a compulsory savings scheme.
Kelvin Hopkins
Q I have just one more question. If it were a compulsory state scheme with defined benefits, it would not be stock market-related; it would be a state fund. It would be extremely efficient, like national insurance is extremely efficient in how it works, and the whole thing would be better for those retiring at the end of their working lives and also provide a wonderful fund for Government investment in infrastructure or whatever, which would have returns. It is not a new idea. Barbara Castle, a great hero of mine, was talking about this sort of thing 40 years ago, and we are still fiddling around with all sorts of complicated schemes that do not actually provide the benefits that they should.
Yvonne Braun: I doubt that the Government would wish to take that on their balance sheet.
Kelvin Hopkins
Q I agree that the Government would not wish to do it for other reasons, but would it not be a sensible idea?
Carol Knight: I think it is a fiscal question more than anything else. It is a hard one to justify, if you could actually cover those costs.
Lucy Frazer (South East Cambridgeshire) (Con)
Q The Bill provides that you can take your savings out to buy your first home. Are there any other circumstances in which you think you ought to be able to take your money out?
Carol Knight: Yes. We ran a survey to get feedback from consumers and the industry. There were two, or maybe three, other areas where the feedback indicated that including additional lifetime events would be beneficial. One was critical illness and the other was redundancy. Those are incidents that are outside people’s control and that place a huge demand on finances. The other one was buying a second home, too. It is not just about your first-time purchase, but when you start a family and want to move on. Those are three additional lifetime events that we believe could be incorporated within the scheme.
Lucy Frazer
Q If you were an independent financial adviser and you were assessing the risk for a client, on a scale of one to 10, where 10 is the most risky and one is the least risky, what would you assess the risk as?
Yvonne Braun: The risk of?
David Rutley (Macclesfield) (Con)
How risky is the investment?
Carol Knight: A lifetime ISA can have anything within it, so the risk would be determined by the assets you choose to put in it. They will go from low to high. There is no restriction on the investments that can go into a lifetime ISA. It depends on what you choose to put in it, really.
Lucy Frazer
Is there anything that you would like to add?
Yvonne Braun: I completely agree that it will depend on the asset mix in the lifetime ISA. I am sure that an adviser would also take into account that 25% will be added, which will help to balance out the risk a bit. We are not sure that, beyond a first home purchase and terminal illness, which are currently in the Bill, additional lifetime events need to be included. If you take redundancy, there are other savings vehicles for that, so I am not necessarily sure that the state needs to step in with a Government contribution to support that. I would probably say the same for buying a second home—I take it that by that you do not mean buying an additional home, but moving the next step up and buying a bigger home.
Carol Knight: Not a holiday home, no.
Yvonne Braun: I think that the main pressure point in terms of housing seems to be for people to get on to the housing ladder in the first place because they are taking so long to get their deposit together. I think that issue is alleviated once people make the second step up.
Huw Merriman (Bexhill and Battle) (Con)
Q I want to pick up on something that Ms Knight said, and I have two questions as a result. First, the complexity of this product has been talked about. If you add the critical illness and redundancy rationales for withdrawal, have you not just made it more complex and are you not turning it more into an assurance or insurance-based product as a result?
Carol Knight: I think it depends on how much you want to support people going through their life, and if it is going to be the fundamental of the lifetime ISA to help fund those important events as people go through them. It is a balancing game, really.
Huw Merriman
Q The second point was with regard to your suggestion to permit the product to be used for second home owners. Is there not a danger that we already have challenges as it is with first-time buyers getting into the housing market? Effectively giving Government subsidies to help second home purchasers would perhaps strike some as a bit much. What is your observation on that comment?
Carol Knight: Housing is a big problem in this country, without a doubt, and I think it needs to be part and parcel of a much bigger picture. People use housing as part of their retirement planning, which is an important factor to throw in. When you talk to people about how they are going to fund their retirement, the value of their house is very often part of that. The whole question of how housing is used as a source of income on retirement is very important.
It is very difficult for people to get a clear view of how much income they can take out of their home at the point of retirement. If they are not in a position where they can gradually build the value of their home during their working life, they will have less available through an equity release product or whatever mechanism is available to them. They will have less available in the way of funds for retirement. It is part and parcel of a much bigger picture. We should be looking at retirement saving as a whole and helping people to put different types of assets towards funding later life.
Ian Blackford
Q I want to come back to the issue of risk. We all know that when you invest in a pension scheme, the trustees will then look at the appreciation of risk that you would expect to take on board. They obviously look at the timeline of when you expect to retire and gear any assets according to that assessment.
If we have a situation here where an individual can invest in an ISA, and can invest up to 100% in equities, they may decide to draw down that pot at any time for a particular type of event. We know that there is always a risk of a downturn in the market. Most actuaries will tell you there is a one in seven year risk of a downturn in the market. Are we not inadvertently exposing consumers to risk? Does it not come back to the point that was raised by my hon. Friend the Member for Banff and Buchan that we are exposing consumers to risk, not just of mis-selling, but of investing in an asset where there could be a risk of a downturn in the market seriously impacting the choices that they then make?
Carol Knight: There is always that risk, but I do not think we are looking at the lifetime ISA as an alternative to a pension. We are looking at it as complementary to a pension. Firstly, the lifetime ISA could go into a cash ISA, but as a long-term savings product it is generally accepted that cash is not necessarily the best way to do that. Again, it points to getting good guidance and information to people to help them make informed decisions as to the type of assets they are going to put into that product.
David Rutley
Q You have talked about some of the issues around signposting and also discussed the pros and cons versus pensions. That is clearly a very big issue. This issue is not quite as big, but do you have any views about the LISA versus the help to buy ISA, and any potential confusion that could cause in the minds of first-time buyers?
Yvonne Braun: As I understand it, the help to buy ISA lapses in 2019. This is the successor vehicle. It is important that the lifetime ISA, from the perspective of a house purchaser, is structured in a much more attractive way, because you actually get the payment of the Government contribution into your account, whereas with the help to buy ISA, the Government contribution goes through your conveyancer or solicitor towards the house purchase. It is a completely different ball game.
This is why I was saying it is difficult to draw comfort from the experience with automatic enrolment and the help to buy ISA, because it is not as attractive as the lifetime ISA. But yes, I see it as a successor vehicle. There is still a question around the transition and transfer of funds that sit in help to buy ISAs into lifetime ISAs, but I am sure that will be resolved.
Carol Knight: The other difference is that the help to buy ISA is just a cash ISA, whereas within a lifetime ISA you can have investments which, in the longer term, are generally considered to be a better option.
The Chair
I am afraid that brings us to the end of the session. On behalf of the Committee, I thank the witnesses for assisting us in the way that they have.
Examination of Witnesses
David Wren and Tom McPhail gave evidence.
The Chair
Good morning and thank you for coming along. Can you please introduce yourselves? First, Mr McPhail.
Tom McPhail: Hello. I am Tom McPhail. I am the head of retirement policy for Hargreaves Lansdown.
The Chair
And Mr Wren.
David Wren: Good morning. I am David Wren from the British Bankers Association, where I look after tax policy.
Peter Dowd
Q Mr McPhail, in the information you provided, you give your views on the Bill, and then you say:
“However, in the longer term we believe that the LISA is a misguided policy, emerging from a fudged review of pension taxation and that its introduction makes the decision making process for investors harder rather than easier and that it will therefore potentially undermine savings behaviour.”
Could you elaborate on that, please?
Tom McPhail: Yes. The context the lifetime ISA came from was a review of pension taxation, which was aborted, to a large extent, in that it did not ultimately change the overall structure of the taxation. It largely left pension taxation unchanged and it introduced a new product as an alternative.
An important point to acknowledge is that all the problems, inconsistencies and illogicalities that exist within pension taxation are still there and still unaddressed. What we have instead is a product that, as we heard from the previous witnesses, will serve purposes for some investors in some circumstances—for a minority of self-employed people, for example, and for people who cannot benefit from an employer contribution into a pension. It will have some benefits but, in the process, it will make the investment landscape more challenging for most investors.
We are in danger of sending ISAs down the same road as pensions, making them more and more complicated. Our business is to make it simple for people to save and invest and do the right thing—to invest responsibly for the future—and when clients ring up now and say, “I’ve got £100 a month I want to save,” we are going to be faced with asking, “Do you have access to a workplace pension? Do you want an individual pension? Do you want a cash ISA, an innovative finance ISA, a stocks and shares ISA or a lifetime ISA? Are you saving for the short term or the medium term? How soon will you need to have access to the money?” It is getting more and more complicated and, frankly, in terms of the big picture in the long term, I think we are going down the wrong road.
Peter Dowd
Q You referred to the fact that there are more challenges for investors, and to the effect that those challenges will have. Can you elaborate on what the effects of the challenges will be?
Tom McPhail: The more complicated you make the decision-making process, the more you put people off doing the right thing. One of the things we have worked very hard at as a business is to make it simple for people to save and invest. Going back 10 or 20 years, a typical pension application for someone who wanted to save for their retirement would run to 20 pages. We have stripped that down to one sheet of A4, and more people are investing in pensions as a consequence. We have 800,000-plus private investor clients—ordinary individuals —and more of them now log into their investment accounts using an app rather than online. We are making it simple for them to save and invest. Every time we have to ask them another question, every time we knock them back by making them think about one more thing, it slows the process down and we lose a few of them. It makes it more complicated. So half of the challenge for all of us here is to make it as simple as possible for people to save and invest for the long term.
Peter Dowd
Q Are you concerned, in the light of the fact that you believe that the area is becoming increasing complex, that there is the capacity out there to give the good information and advice that we seem to be getting told we need? It seems to me that the answer to everything we asked was, “More information, more information, good information, good information,” without it being said exactly what that meant. Would you agree?
Tom McPhail: A lot of the time, the answer is less information. I could send you a 50-page document and you might well not read it. We had that problem with the open market option on pensions: people would get to retirement and we would send them a big stack of papers saying, “You have a right to shop around,” but there was so much paper that people did not shop around, so they bought a poor-value annuity. Actually, the answer is to send them less information but to make sure it is the right information. The Government’s recent work around the financial advice market review was enormously encouraging. It gives us more latitude to give people simple, helpful information that will steer them towards making a good decision.
However, your point is absolutely right: if we do not give them that information and that support to steer them towards the right answers, risks do exist. We heard about workplace pensions earlier and the risks of people opting out of them; that is a good example of where it is really important that we support them with good information, to make sure that they do not do the wrong thing.
Peter Dowd
Q I have a final point and, if I may, Chair, I will ask Mr Wren to make an observation as well. You say that this will potentially undermine savings behaviour, which is exactly the opposite of what anybody wants. Could you tease that out more? It is fine to say that it is complex, but could you put some more meat on the bones? Why will this undermine savings behaviour?
Tom McPhail: We have a lot of people putting long-term money into cash. They are being excessively conservative. The bulk of ISA money sits in cash accounts. Auto-enrolment works from an inertia point of view: it gets people into pensions and it is proving to be a great success. The challenge thereafter is to encourage people to take some responsibility for that pot of money, to take an interest in their long-term savings and, as they move into their 50s and 60s, to think about what they are going to do with that pot of money, whether it is adequate, whether they have been saving enough and how they are going to apply it to draw an income in retirement.
Currently, we have a lot of people just putting money into cash ISAs—short-term money—and sometimes it ends up sitting there for 20 years. That is not a good outcome. It is about striking that balance: making it simple for people, but also drawing them in and getting them increasingly engaged. So the answer to your question is that the more complicated it is, the more we will lose people and the greater the risk that they will just make no decisions at all, as we saw with the open market option on annuities, for example.
Peter Dowd
Mr Wren, have you any observations on that question?
David Wren: Yes, I think a few of the questions that Tom has answered are things we are concerned about. The introduction of the lifetime ISA adds considerable complexity to a market that is not simple anyway. This will be the sixth type of ISA on the market. It directly competes with the help to buy ISA for certain savers with certain aims, and it has an overlap with pensions, savings and various other products. The hybrid nature of the product—between saving for a house and saving long term for retirement—also adds considerable complexity for people who are choosing where to save and what to do. For a single product to try to do both things, which are often competing aims in terms of what someone is saving for, is really challenging.
One of the things Tom spoke about was whether you save in cash or in stocks and shares. Saving for retirement is typically a long-term activity. Stocks and shares are probably a better investment for many people in that context, if not funds and others. Saving for a home was historically a short-term activity. Unfortunately, for many people it is probably becoming a mid-term activity, but the security that cash and similar investments bring is still probably more suitable. Balancing that within a lifetime ISA is going to be very challenging for savers and for organisations that want to offer them to their customers.
Peter Dowd
Q In the information you provided, you say:
“There are concerns that savers may end up with the wrong investments leading to the wrong outcomes as a result of the route through which they enter the market rather than as a result of a conscious investment decision.”
Again, it is important to try to unwrap that. Could you unwrap it a little more for us, please?
David Wren: Absolutely. There were some questions in the previous session about the risks in a lifetime ISA. Ultimately, the lifetime ISA is a wrapper around some assets, and the assets are for you to decide. There will be people who offer only cash lifetime ISAs; they do not offer stocks and shares to any customers, and they will not be offering it for this. There will, presumably, be people who offer only stocks and shares lifetime ISAs. The fact that you have picked up the phone to someone who offers only one particular product may not mean that that is the best product for you. There will hopefully be information out there, and we very much hope the Government will work with us to provide good information to customers on getting the right product.
To answer Tom’s point, to have cash sitting somewhere for 20 years is probably a bad idea, particularly with interest rates as they are at the moment. Similarly, going into stocks and shares for three years is a bad idea—there were questions earlier about the risks that people were exposing themselves to. Helping people get the right access to the right product at the right time is going to be a critical part of making sure that the lifetime ISA is successful.
Maria Caulfield (Lewes) (Con)
Q Tom, I want to go back to your point that this would make the market too complicated and crowded in terms of what products are available. Is it not true that for a long time, many people have been left out of savings altogether—I am particularly thinking of people on low incomes, the self-employed and those with multiple, low-paid occupations? Actually, there is a lack of culture around savings; it is just not the norm for some people. While the auto-enrolment pension will go some way to addressing the pensions issue, as we heard in the previous session, this is in addition to, not instead of, auto-enrolment. Is it not that the product is right, but the key is getting that advice available to people so they can make that decision? This will open up the market to people for whom savings have not been an option before.
Tom McPhail: Given where we are now, six months before the intended launch, our starting point would be to go ahead with this. However, in the longer term we are still of the opinion that it is not going to achieve those aims you have just described.
We also looked at the 2017 auto-enrolment review as an opportunity to adjust some of the thresholds to recognise the changes that have come about as a result of the pensions freedoms and the importance of giving more people more access to retirement savings, to bring some of the lower paid into the pensions system. We have looked at ways to revisit those questions that were not answered around pension tax reliefs and ways to reward people for saving for retirement, but the lifetime ISA is not going to achieve that.
You heard some numbers about the self-employed. Actually, two thirds of the self-employed are already ineligible for the lifetime ISA. So we have a situation where the one group of the population that, more than any other, sets to benefit from the lifetime ISA is ineligible for it. In what way is this a good policy?
You are right about the low-paid: we need to do more for them. We think there are ways we can do that through the pensions system. I am sure you will hear later about Help to Save, which is not an area I want to comment on, but there are other ways to address that. The lifetime ISA is not going to fix those problems.
Maria Caulfield
Q You say that in the short term it might work, but in the long term it is not going to help. Why is that?
Tom McPhail: Just because we keep moving the goalposts. It was really interesting doing some consumer focus groups around the pension freedoms. When we talked to people about all the risks around pension freedoms, we thought they would say they were worried about running out of money or not knowing where to invest, but pretty much everybody we spoke to said that their main worry was that the politicians would move the goalposts again, that they would change the rules again. It happens particularly with pensions, but it happens elsewhere as well. Every time this happens, it undermines people’s confidence and trust in the system.
The recent decision around the secondary annuity market was interesting. We think that was a good decision. We are actually quite glad that the Government made the decision to pull back from the secondary annuity market, but what did we see then? We saw headlines in the Daily Mail saying, “People have been denied pension freedoms—once more the opportunity has been snatched away from them”. Every time we do this, it chips away at people’s confidence. We need to think about how and when we make these decisions and these changes. Our preferred option would be to go ahead with the lifetime ISA, because this is where we are at now, but in the longer term to move towards consolidating all these different ISAs we have been hearing about into one simple super ISA and, separately, to go back and address the questions around pension taxation that we failed to deal with last time around.
Maria Caulfield
Q To push you a bit further on that, a lot of people only have a pension thanks to auto-enrolment. Do you not agree that anything that gets people saving and that encourages them into a culture of saving, whether it be for their first home or for later in life, is a good thing?
Tom McPhail: But it is not a zero-sum. We could give people a 100% top-up on their money, but we cannot afford to do that, so we have to make choices about how we go about doing things.
Maria Caulfield
Q Is it not better that they have a savings scheme rather than not save at all?
Tom McPhail: We need to get them into the auto-enrolment system. That is the way to help them save for the longer term. If we want to address their short-term savings, there are other ways to do that.
Dr Whiteford
Q I can see why lifetime ISAs are a very attractive savings option for the very wealthy, high-earning young people, and those who have maxed out their pensions allowance, but to my mind, the real challenge has been encouraging people on low and middle incomes to save for retirement purposes. From what I have heard in evidence so far, you seem to agree that auto-enrolment is an important step forward. Reflecting back on the questions I asked the earlier panel, would you agree that most people on low and middle incomes would be better advised to invest in pension schemes?
Tom McPhail: The numbers overwhelmingly point to the fact that, if you have any kind of employer contribution, you are almost invariably better off going through the auto-enrolment system at work and saving in a pension than going into a lifetime ISA. Separately, we think that there is more we can do with the incentives to save in a pension that would improve that equation even further. Yes, absolutely, for most people most of the time, for long-term savings, the pension should be, and is, a better answer.
Dr Whiteford
Q Could you say a bit more about the sort of incentives that you think might actually help?
Tom McPhail: There was a lot of work done last year around the idea of a flat-rate incentive—breaking the link between pension incentives and the tax system altogether. There was quite a lot of support across the industry for that concept, with talk of around a 30% top-up as an alternative to tax relief. All contributions would be made out of net income, and when you made a contribution to a pension you would get a flat-rate top-up. I think there was quite a lot of traction for that idea.
I think we can go further, and it would be quite desirable to weight those incentives particularly towards younger savers. You could get the benefit of compounding. If the incentive were progressively reduced the older you got, it would provide a behavioural incentive, because with every year that passed, you would lose out. That is a very powerful message that the industry and the Government could harness: to say to people, “If you wait another year, your incentive will drop a little bit.” We have been working through some ideas on how we could develop that as an alternative incentive. Either way, you are taking it away from the current messy, unfair, lumpy, illogical tax-relief system that continues to operate today.
David Wren: I think complexity is definitely the enemy of success in getting people to save. There are lots of subdivisions of pensions and savings. Helping people to find the right place within that for their needs is really challenging. The risk of complexity is not just that people go into the wrong product for them at the start, but that they are put off by the whole experience. To give an analogy, it is very similar to internet sign-up processes: each additional question you add to an internet sign-up process puts off a disproportionate number of people from continuing through that process. Having a dozen different products out there with different features does not necessarily push people to the wrong one; it encourages inertia, where you simply cannot decide and therefore do not invest in any of them.
Huw Merriman
Q You keep touching on the complexity of this product. I have read the blurb in the overview of the Bill and I understand the eligibility criteria—I am too old—and the withdrawal terms. I am inviting you to bamboozle me, as it were. What is so complicated about this product that I am missing?
Tom McPhail: To the credit of the Treasury team that worked on this, they listened to feedback from the industry and were really good at working to create as simple a product as possible. My answer to you is that it is a lot simpler than it might have been.
When you ring us up, we will still have to walk you through the circumstances in which you will be eligible to take the money out without a penalty, and the circumstances in which you will be able to take money out but would have to pay a penalty, so there is still a customer engagement process that will have to be undertaken at the front end. I think I made the point in the brief written submission I sent in ahead of this session that the problem is not the product itself. The product itself is reasonably simple—there are simpler products, such as the cash ISA; that is really simple—but you have dropped a moderately simple product into a complicated landscape, and you have just made it more complicated.
That is exactly what happened when we launched stakeholder pensions getting on for 20 years ago. Stakeholder was simple, but it was dropped into a complicated landscape, and—guess what?—it made life more complicated. This is analogous to that.
David Wren: That is what will really cause the challenge. When someone tries to open one of these products, the first question is going to be, “What are you saving for? Is it a home or a pension?” If it is neither of those, this is probably not the right product for you. If you pick house purchase, you have to decide between the lifetime ISA and, at least in the short term, help to buy. People have said that the lifetime ISA looks better, because you are getting the Government top-up and earning growth on that, but you cannot have the money back without a Government penalty. The help to buy ISA does not have that, so if you need flexibility, help to buy might be better for you. If you go down the pensions route, we need to ask about whether you have maxed out auto-enrolment and taken full advantage of employer contributions, and whether a different pension route might be better for you, again recognising that there are different features as to whether you benefit or not.
It is worth adding that I have been involved in this since it was announced in March—my work has a tax background—and it is not immediately obvious to me whether I would be better off topping up my pension or putting money into a lifetime ISA. The reason for that is that I would need to know what tax rate I would pay on that money when I retire, and I do not know that. It is far from simple in any one of those particular places to work out which is the right thing for you. It requires value judgments about a number of the elements. The risk is that complexity leads to inertia and dissuades people from saving at all. There is not just the risk of going into the wrong product.
Just one final thing, which the previous panel touched on: because of the Government penalty on withdrawals—you lose not only the bonus, but 6.25% of your contributions, because of the way the numbers work—there is no easy exit route from a lifetime ISA. If you make a mistake and a month down the road you say, “Gosh, I’ve made a terrible mistake. I should have gone into a different product,” you will lose some of your money in getting that money back out and into another product. Again, we have real concerns about that and what it will mean for customers.
Huw Merriman
Q I have one more question. This takes me back to my misspent youth, more than 25 years ago, when for four years as a student I worked for Abbey National as a cashier and customer service adviser. We would sell this type of product. We had a whole suite of products that had penalties if, say, you were five years into a bond and withdrew early. This is not rocket science. We could explain that to our customers, and that was without the benefits of the internet. I am still a bit sceptical about why this landscape is so complex to your members; it does not seem that different, and we were easily able to sell things 25 years ago.
David Wren: The landscape has probably changed slightly in 25 years. We very much welcome the Financial Conduct Authority consultation on this, because its view on how we engage with customers and make sure that they get the right protections is really important. Yes, a range of products are available, but as Tom said earlier, a lot of people will now buy online, through a call centre or through an app, so they are not going to see someone face to face. Again, we need to make sure that people are given access to the right information to allow them to make the right decisions. That is absolutely doable, and, as I said earlier, we hope that the Government will work with us on getting the right information to people. It is the landscape that is complex, as opposed to the individual products.
Ian Blackford
Q David, in your submission, you say:
“In particular, there is a concern that cash held in LISAs will only be suitable for those looking to buy a home, whilst stocks and shares will be more suitable for those investing for later life, looking towards retirement.”
Is there not a risk that if an individual invests in stocks and shares and then buys a home at the wrong time because the market has fallen, we inadvertently expose consumers to risk as a consequence of this policy?
David Wren: I think that is exactly right. That is exactly why we need to make sure that people are getting the right support in picking a product, and in the underlying investment for that product. I am sure that Tom is more expert in this than I am, but for pensions, stocks and shares are typically viewed as the right investment. Those ups and downs will average out over the course of your life. I assume that most people are saving for a home in a relatively short time-window—five to 10 years. Stocks and shares are inherently more risky. The point at which you are starting a family and want to buy a home may be the point at which the market is not going through a particularly buoyant phase.
We also need to recognise that for a lot of people—bear in mind that lifetime ISAs are available from 18—buying a house is a medium-term activity. That may well be over a more than 10-year timeframe. That becomes a very challenging time. It is not obvious that cash is the right investment; it is not obvious that stocks and shares are the right investment. That is a very difficult decision for someone to make.
Ian Blackford
Q There was this debate about moving from “exempt, exempt, taxed” to “taxed, exempt, exempt”, which was taken off the table. Was this not really just a back-door way for the previous Chancellor to bring forward this policy?
David Wren: I do not think I could comment on what the previous Chancellor was thinking when he introduced this. This is a “taxed, exempt, exempt” product. When I said earlier that it was difficult for me to work out whether I should open a lifetime ISA or pay into my pension, it is for exactly that reason: it is the difference between the money being exempt when I take it out, hopefully, at 60, versus paying tax on a pension at 60. Having both products in the market is incredibly complicated. Explaining the concept of “taxed, exempt, exempt” or “exempt, exempt, taxed” to someone is challenging. The Institute for Fiscal Studies wrote a very good study earlier in the year, in March-time, in which they talked about how this worked for different investments, but it is a thick document, and it requires a dark room and a lot of peace and quiet to really get into the detail.
Tom McPhail: We did some client research early this year on entry; everybody was under 40 and did not own a house. However, they were all Hargreaves Lansdown customers, so I cannot claim that this is representative of the population as a whole. Having said that, 14% of them said that they would look to use the lifetime ISA to save for a property, and 68% were looking to save for their future, so there was an emphasis on the longer term there.
The majority who expressed a preference did so for stocks and shares investing, rather than looking to cash, so there was a weighting—a sense that people were seeing this as a longer-term savings product, rather than a short-term cash product, in contrast to something like the help to buy ISA. This suggested to us that they were seeing it as being closer to a pension than a help to buy ISA. Clearly, there was a bit of both going on in there in the mix.
On your point about taxation, clearly we have different personnel at the helm now, so perhaps priorities and agendas have changed, but I think that it is worth reiterating that all the reasons why pension taxation was examined in the first place are still there and are unresolved.
James Cartlidge
Q I want to carry on with this point about complexity, because it seems to me that you are using the word “complexity” where others might use the word “flexibility”, dare I say. As we discussed with the previous witnesses, it is surely not unreasonable for a young family to be entirely focused on buying property, particularly if they live in areas that are very expensive. Perhaps they are on a short-hold tenancy with less security, and so on. Therefore, when presented with a savings option, they will want to opt for a deposit.
I take your point about help to buy ISAs, but they are going in two years, we understand. Do you accept that the flexibility that comes from a pseudo-pension product that could be used for a mid-life event—in other words, buying a house—is what makes LISAs unique, unlike auto-enrolment? There is a big market for this, and there are a lot of people who would welcome that choice.
Tom McPhail: We think there are other and better ways of addressing that problem that would be simpler and more sympathetic to investors’ needs. We support the auto-enrolment agenda, and we think it is important to get as many of the people you have just talked about as possible into an arrangement where they are saving for their retirement. Some of them may choose to opt out of a pension and eschew the benefit of an employer contribution, and to save into an ISA instead. For some, that might be a logical, rational and appropriate decision to make. That would, of course, mean that they were not saving for retirement in the most tax-efficient way available to them. In fact, potentially, they would not be saving for retirement at all, if they had opted out of a pension to achieve that goal.
One of the risks is that the lifetime ISA will subvert the pension-saving agenda. It is critical that pension providers and human resources managers—anyone involved in pensions—are communicating effectively around those trade-offs, the risks of giving up the benefits of the employer contribution, and the long-term consequences of that.
The help to buy product gave people taxpayer support in buying a house. There was actually relatively little wrong with it. It was there as a vehicle for saving in the short term, to build up a cash pot specifically to buy a house. The idea of trying to have your cake and eat it—of trying to save up for a house and for retirement within one product—that is where the complexity comes from, and that is where you are trying to do two things with one bag of money. If you use it to buy your house, it is not a savings product anymore.
We have already talked about eligibility for the lifetime ISA, and the fact that most self-employed people—for whom this could be a really good idea—are not eligible because of the age restriction. So I agree with you, but I am not sure that we are going about this in the best way.
David Wren: We really like the help to buy ISA; it is clear and unambiguous. Are you saving for a house? Are you a first-time buyer? Put money in. It is cash, and there is no confusion about whether you are also saving for your pension at the same time, because that is not a feature of the product. It is a really nice, neat product, which says, “Here’s what I do; here’s how I help you; and the Government will provide you with some help to buy your first house.” It is a shame that it will be removed in 2019. It has been very successful, and something like 250,000 were opened in the first six months of the product. That kind of really clear labelling and signposting that others have talked about is something that help to buy really had, and that the lifetime ISA risks not having.
Maria Caulfield
Q From an industry point of view, which product would make you most money from selling it, a lifetime ISA or a pension scheme?
Tom McPhail: We make the same money on all of them.
Maria Caulfield
Even a lifetime ISA?
Tom McPhail: Correct. We have the same platform charge, irrespective of the arrangements you are going into. Where we lose money, or where we potentially end up having to charge the customer more money, is when things get complicated. The more complicated it is, the more it costs us money, and the more, potentially, we have to pass on to the customer in costs, but we will make no more money on any of these products.
David Wren: As a trade body, I do not think that we have access to that kind of information.
Kelvin Hopkins
Q I have listened to you both with interest. I have to say that this scheme will do nothing for a high proportion of our population who are less well off and less sophisticated. Again, all these schemes seem to be designed for the better-off and the more articulate. I have had to ask to have my life insurance schemes explained to me two or three times, but I have not got a clue what those who explained it were talking about—and I am a graduate in economics and mathematics. Half the population are not numerate, and a fifth of the population are not functionally literate. We need a state automatic scheme to help people like that, going beyond auto-enrolment—a defined-benefit scheme, and that can only be done in the state sector.
The Chair
Do you want to comment on that?
Tom McPhail: I am not sure that it was a question, but I think the simpler and more accessible we can make things for investors, the better. It is beyond my remit to talk about the state pension here today.
The Chair
If there are no further questions, may I thank our two witnesses for a very informative session?
Ordered, That further consideration be now adjourned. —(Stephen Barclay.)
Savings (Government Contributions) Bill (Second sitting)
(8 years, 2 months ago)
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The Chair
We will now hear oral evidence from StepChange and the Centre for Social Justice. Would the witnesses please introduce themselves for the record? I call Ed Boyd first.
Ed Boyd: My name is Ed Boyd and I am the managing director of the Centre for Social Justice think-tank.
Joseph Surtees: Joseph Surtees, senior public policy advocate for the StepChange debt charity.
The Chair
Welcome to this afternoon’s hearings. I call Peter Dowd to start the first set of questions.
Peter Dowd (Bootle) (Lab)
Q 4747 The proposal for the lifetime individual savings account followed a wider public consultation about the future of tax relief in pension provision. How do you think the LISA, as proposed, fits into that wider public debate? Mr Surtees first.
Joseph Surtees: I am afraid that, as an organisation, we have no particular views on the LISA. We are very keen on any proposals that the Government can bring forward to boost both short-term and long-term savings, and I think with the LISA we are still going over detail.
Ed Boyd: I am afraid I will not be much more help. Our focus has very much been Help to Save, and that is what we have been doing research on. I can give a personal view, but it probably won’t be too beneficial.
However, the one thing I think it would be worth saying on the LISA side, and it is more of a comment than anything else, is that if you look at the panoply of savings products within LISA and Help to Save, in 2021, only 8% of those funds are budgeted in the impact statement to go towards Help to Save. That falls within an approach that this is about the “just about managing”. Those who are on universal credit—they are kind of in-work, but we would love them to be earning more and trying to progress up the earnings ladder—are the “just about managing”, I think. The majority of the people on universal credit when it is fully rolled out will be in deciles two to five. So it’s just a question about the balance between the two—LISA and Help to Save—but I am afraid I have no detailed comments on the LISA itself.
Peter Dowd
Q Given that response, I will try another angle. Some of the suggestions that we have had about the LISA are that although it might well be a simple product on its own, in the context of a wider market full of God knows how many products it just complicates things. Do you have a view on that?
Joseph Surtees: I suppose that in terms of how it fits into the wider market, the point Ed makes is very interesting, which is that if you refer back to the ISA itself, people earning about £80,000 are twice as likely to have an ISA as people earning the average income, which is £26,000. So the savings crisis, if I can put it like that, is among the very low earners. When products come forward in tandem, like LISA and Help to Save, it is important to ensure that they both have equal weight and an equal offer, and that they both appeal to the right markets.
Peter Dowd
Q Okay. If we’re talking about encouraging people to save in one fashion or another, do you think that Help to Save adds to that in any substantial way? Will people save significantly more as a result of it?
Ed Boyd: So the question is: do we think that it will help? I think the answer is yes. There are always little bits to tweak and improve, I guess, as the Bill goes through, but as a whole—I mean, the idea of Help to Save is a fantastic one. When you look, as the CSJ does, at the root causes of poverty, we very purposefully have as one of the five—alongside worklessness, addiction, family breakdown and things of that ilk—problem debt. The majority of the people who we are talking about, especially when they have just moved into work, are only working 16 hours on the national living wage, which this will apply to, and will often have very little savings.
It is about the unexpected shots, and StepChange’s research on this is brilliant. It shows that every six months or so there might be something, such as a washing machine that breaks down, or something else, and if you have no savings, the effect that can have on you—not just in terms of, “Oh, we have to go to slightly higher-cost credit”, but on your mental health, and how productive and efficient you are at your work because your mind is continually filled with the debt problems that you are trying to carry—is hugely significant. So, anything that can try to create a culture of saving and provide some Government backing to incentivise people to save more is a wonderful thing. It is a great thing to add to the armoury.
Joseph Surtees: I certainly agree. We are very big supporters of Help to Save. The research that we carried out, which Ed is referring to, found that if a family has £1,000 saved, that reduces the chance of them falling into problem debt by 44%—so we think that Help to Save will really help in this area. To agree with Ed again, there are little tweaks that would help to increase its appeal. When it was introduced in the Budget, the potential eligibility for the scheme was 3.5 million, but the impact assessment says that it will probably only reach about 500,000. When looking at the Bill and the way that Help to Save and its features are going to be rolled out, the question is: how do we get that 500,000 closer to the 3.5 million figure?
Peter Dowd
Q Can I just ask, on that basis, how well targeted you think Help to Save is on those with the lowest income? It is all very well to say “Save”, but if you have no money because you are on benefits or have a low income, how well targeted is that particular product?
Joseph Surtees: I think it is almost as well targeted as it could be without putting a huge onus on banks and, in a scenario in this case, running de facto means testing. We could possibly open up the eligibility. I know that the Institute for Fiscal Studies has done some work on this—which I have one or two questions about—but as a basic proposition it is pretty well targeted at the group that needs the savings the most. If you look at the figures, almost half of families with an income below £14,000, a category that a lot of the Help to Save target families fall into, do not have savings. We have one specific issue, which is to do with how it will help people under 25. That is very much to do with the benefits rules, which I can either discuss now or come back to later.
Maria Caulfield (Lewes) (Con)
Q I want to touch on one of the points raised in our previous evidence session, which was that someone can withdraw money from this lifetime ISA if they want to buy a home, but if they want to withdraw money for any other reason—you touched on some examples, such as if their washing machine breaks down or they have an urgent need to get money quickly—they face a penalty of between 5% and 6%. Are there certain criteria you would like to see where there are other options to withdraw money without hitting a penalty?
Ed Boyd: As I said before, the detailed knowledge, in terms of the research that the CSJ has done, is on the Help to Save side rather than the ISA side of things. There is a valuable question about the accessibility and flexibility of accessing savings within Help to Save. I could give a comment on that—perhaps it is applicable across to ISAs. I would need you to be the judge of that.
Maria Caulfield
Q But do you think that there should be an option for those people to withdraw money quickly rather than just having being able to buy property as a penalty-free reason?
Ed Boyd: On ISAs?
Maria Caulfield
Yes, on the lifetime ISA.
Ed Boyd: We have not done the research on the ISA, so we do not have a view. I can probably only help with the Help to Save side of things.
Joseph Surtees: On that point, I would say—and this is applicable to both—that a lot of the behavioural research in this area talks about a process called hyperbolic discounting, which is to do with the fact that the further away something is, the less appealing it will be. So, any mechanisms we can have in any of these products that allow people to access them before two years, in the case of Help to Save, or before much further in the future, in terms of the LISA, will appeal and widen the eligibility a lot more.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Q Some of the evidence we have taken this morning has already been more about long-term savings. In the evidence you presented just now, you emphasised the issue of accessibility and the need for people to be able to access their savings quickly to deal with external shocks. What kind of products do you think would be beneficial for people on low and average incomes for longer-term saving?
Ed Boyd: On the flexibility point in terms of accessibility of savings, there is a question. We produced a short paper on Help to Save off the back of a round table of experts in this area. One of the questions that kept coming up was whether there should be some friction for people taking out the money. For example, if someone starts to save for two years with the best intentions to make sure they get their Government bonus, but has one day of giving up on that plan, it would completely undermine it and they would not get the Government bonus. Potential frictions can be put in such as a 24-hour delay in taking out the money. I think that would be completely reasonable.
Where appropriate, someone could name a third party—a family member, husband, wife, carer or whoever—and when they say, “I want to bring it down in 24 hours”, that person is texted to make sure that there is enough friction to ensure that when the money is drawn down as a rainy-day fund, it is used for rainy-day activities and things that they really need the money for, rather than just for general expenditure. This would encourage people to save and make sure the money is used to help stop them getting into problem debt.
Joseph Surtees: I think there are two interesting points here, one of which is on Help to Save. There is a system in the UK that has proved very good at encouraging low-income people to save over a long period, and that is pensions auto-enrolment. So far, the opt-out rate for that is far lower than anticipated. It is only 10% when it was anticipated to be a quarter. People who are enrolled and have not opted out are those just above the enrolment limits.
That sort of approach is incredibly useful in this area, particularly for low-income people. When you look at products such as Help to Save, such as LISA, perhaps, if you can look at how to incorporate an auto-enrolment element into that—with Help to Save, you can in particular do it through the universal credit system. Universal credit has personal budgeting support which helps you to do that. Those sorts of little behavioural incentives will help to make it appeal and work better for these lower-income individuals.
Huw Merriman (Bexhill and Battle) (Con)
Q I am conscious that half of UK adults have less than £500 set aside for emergencies. Do you believe that the financial services market has done enough to attract and incentivise savers who are perhaps struggling with income? Do you think that the Help to Save initiative will help to plug that gap?
Joseph Surtees: In answer to the first question, I do not think the financial services sector has done enough to attract these customers and offer them a service. I will give two examples.
You may have heard of a product called prize-linked savings, which has proved to be incredibly successful in the United States. I can send you some information later, if that would be useful. It is incredibly successful at appealing to low-income families. For many years, people have talked about introducing such a system into the UK—a sort of slightly better premium bond offered via commercial providers. This was introduced in the UK by a bank, but only for people who already had £5,000 saved. To me that says that they were not really thinking about lower-income consumers.
The second example is Help to Save itself. One of the suggestions was that it would be offered by commercial high-street providers. Without giving anything away, my understanding is that most commercial providers displayed absolutely no interest in offering this product, but did display interest in taking on these customers once they had £2,000 saved at the end of two years.
Ed Boyd: There is a big problem here, which is that people are getting stuck in problem debt. It is a growing problem. I will check my stats on this—30 million people in the UK lack savings to keep up with essential bills for just one month if their income dropped by a quarter. Within the confines of that, rather than saying, “Do I think it is the financial services’ fault that we have not done enough, or the Government’s, or someone else’s?”, there is a real opportunity with products such as Help to Save for everyone to pull together and do what they need to do to help solve the problem together.
There is an opportunity for credit unions and community development financial institutions to play a big role, as well as mainstream financial institutions, not just in helping people to save but in helping to ensure that they are financially included. You have wider debates around issues such as the poverty premium—that is, the fact that people who have insecure incomes end up paying far more because they cannot do direct debits.
I do not think it is as simple as saying, “It’s just the financial services sector that needs to deal with this and help more.” I think there is a contribution needed from Government, from the private sector and from the voluntary sector as well to work together to help increase people’s ability to budget, to increase people’s incentives and ability to save and to ensure that people are financially included as they go on that journey.
Joseph Surtees: On that point, I always think about the famous Morecambe and Wise sketch: all the right notes, but not necessarily in the right order. Actually, out there you have lots of the products and approaches such as Help to Save, LISA and auto-enrolment and there are banks—and especially credit unions—that do very innovative things in these areas, but I think it is important to bring these things together so that people have access at the time they need it and can see the products laid out in front of them and make the right choices.
Huw Merriman
Q Have you made recommendations to Government about how they can link up with benefit payment providers, local authorities and the third sector to ensure that the market we are talking about is signposted adequately to this type of product?
Ed Boyd: Not in the work that we did, but we are really happy to help where we can. For example, we have an alliance of 350 front-line poverty-fighting voluntary organisations and they are a great avenue through which to ensure that things are articulated well to clients who might benefit from products such as this. If we can help in any way, we will be really happy to.
Joseph Surtees: We work very closely with the Money Advice Service on these issues; we worked very well with them on the single financial statement, which includes the savings element, throughout the process of Help to Save. We have also spoken to quite a lot of Treasury officials on this and I think they listened to what we had to say. There is one issue emerging from Help to Save that people and the Treasury may want to look at going forward: a very technical issue about financial advice and how debt advice providers and financial advisers can recommend products and whether they will be able to recommend things like Help to Save.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
Q Have you done any analysis of how many in this target market are currently in the area that would benefit from auto-enrolment? How do you see the interaction between auto-enrolment and Help to Save in that regard? What comments would you make on the incentives there for pension investment against the incentives there for Help to Save?
Ed Boyd: Before I come to that question, there is a point of context. One of the important things we stress in our research briefing is not seeing Help to Save in isolation. We are big fans of auto-enrolment as well. You look at the success with pensions and say, “This is important. Why wouldn’t we use that mechanism here, or at least try to tie that in?”
That brings up a question in our minds looking at things like contributory benefits. Over decades and decades and all kinds of Government, the generosity of them has slightly reduced continually and, actually, if you look at universal credit, the architecture is very different from legacy benefits, ensuring that people have the appropriate support if they fall out of work through their national insurance contributions. It is difficult to see how that ties up. One of the potential answers, and the reason I mention that, is to look at auto-enrolment and rainy-day guarantee funds being set up through employers in the same way you have done with pensions to provide insurance for people against smaller income shocks such as washing machine breakdowns and also for larger ones such as falling out of work.
To consider Help to Save in isolation from that wider debate would be a mistake. There is a great opportunity here to tie together different things that are happening around Government to ensure that you have a very clear, succinct, offer and approach to people who are in work but on low incomes, who we are encouraging to save. Combining those things together through Government thought would be useful.
As an organisation, we are not at a point yet to say, “Here is how we think it could work and here is the big solution,” but we are developing a lot of our agenda on this at the moment. Again, as the Bill is going through we are happy to contribute, but it feels like a really important thing to discuss as the Bill goes on its passage through the House of Lords and the House of Commons.
Joseph Surtees: In terms of the success and appeal of auto-enrolment, I referred earlier to the National Employment Savings Trust figures and auto-enrolment figures that say that there is more success and less opt-out from those with less income than from those with higher income. I would also refer you to a lot of work done in the United States by a couple of academics called Madrian and Shea, who looked at how auto-enrolment increases savings rates in businesses through payroll deduction. They found huge impacts, such as the number of people saving within a company doubling within a very short period of time once auto-enrolment was introduced.
On Help to Save, as I have said, auto-enrolment would really help, especially from the benefits side of things. There are even smaller tweaks that will help get that 500,000 figure closer to 3.5 million. Moving the bonus to getting it every six months would have a huge beneficial impact, as would allowing people to pay in an average of £50 a month rather than a maximum of £50 a month and looking at the issue of under 25-year-olds being excluded from Help to Save by the benefits rules concerning working tax credits. There are small changes you can make now that would have a big impact.
Ian Blackford
Q Thank you for that. Those were interesting answers from both of you. Ed, when you talk about how you see that auto-enrolment can deal with some of the challenges that you have outlined, I wonder whether you would see as an example something like an insurance wrapper that would give the kind of benefits that you are talking about as an advancement of auto-enrolment.
Ed Boyd: Could you say that again? I did not quite get that.
Ian Blackford
Maybe something like an insurance wrapper could give the kind of benefits that you are talking about—people losing their job and benefits and what they could get. There are things you could do perhaps to auto-enrolment that would give the kind of opportunities for people that we are talking about.
Ed Boyd: There is a number of ways you could do it. We have not yet got to the point to say, “This is specifically how you should do it.” We are at the stage of saying that maybe your question implies that there is an opportunity to do insurance wrappers or auto-enrol. There are a few different approaches that you could take. That is definitely one you would look at; I think that is what we would say.
James Cartlidge (South Suffolk) (Con)
Q I just wanted to ask you about the interaction with debt. You are talking about people who will potentially have payday loans or whatever. First, will there be legal protection for the savings that they have in respect of those lenders? On the other hand, it may well be the case that the most sensible thing for them to do with their savings, once they get bonuses et cetera, is to pay off some of their debt, especially if it is at a very high annual percentage rate. I wondered what sort of advice there would be.
You mentioned universal credit, where there is quite an important point. The thing that is really good here is that you are getting people into a habit but this is initially clearly for short-term savings, which I think will actually incentivise them more on the realisation that it can help them. It is a matter of how it interacts with the debt dynamic, because a lot of them will be in that area.
Joseph Surtees: That is a very good point because there is a very specific point here about the risk that these accounts are under if somebody who has one either goes insolvent or does not go insolvent but falls into debt. That will mean they are at risk both of having the money taken during insolvency proceedings or taken by a third-party debt order. In the same way that was done with pensions under the Welfare Reform and Pensions Act 1999, where there was a wraparound of pension savings, it would be useful to have a think about whether the bonus, or even all the money in the account, should be protected if somebody begins to go insolvent, or is threatened by insolvency or their creditors.
On the second point, this is an ongoing conundrum. I know you are seeing Martin Lewis later and he will probably have a slightly different view on this. All of the research and lived experience of organisations such as ours show that, while it is crucial to pay back your debts, people also need some savings or fall-back for sudden shocks. That does not only do their financial position well; it does their mental health position incredibly well. It has been proven by the work of the single financial statement that you can save while paying back debt. Yes, in terms of a purely rational decision, occasionally people saving instead of repaying debt may not be 100% the best thing to do but, in terms of the common-sense best thing to do, I think it should be allowed.
Ed Boyd: Likewise, if someone has a significant level of debt and we say, “We think you should save the full amount because you have just moved into work. You’re working 18 hours at the national living wage on universal credit,” for example—the advice needs to be tailored case by case. That is why I think the training experience of work coaches as they engage with these people is going to be absolutely crucial. You can say, “This is what the advice should be,” but the people who are advising people face to face and saying, “These are your options in terms of savings, paying off debt” are absolutely crucial. It will be really important to get that interface right.
This links with a programme that is being rolled out by the Department for Work and Pensions called universal support, which is the idea that when somebody comes into a jobcentre, they will not just get advice—“This is a job you can go for and we’ll try to push you into that”—but we will try to understand the root causes of why they are out of work. Debt is often one of those causes, so making sure that people have appropriate support for debt is really important.
I do not think I can say this is how it should happen in every situation. Building up savings is important, but you would not encourage someone to save the maximum amount in their scheme they could if they were paying off lots of debs separately. You would encourage them, if they have some spare capacity in terms of income, to use that to pay off the debt as part of the repayment plan. The interface with the work coach becomes very important to make sure that the advice is right.
The Chair
We have four minutes now and three Members who still want to ask questions. Can we bear that in mind?
Melanie Onn (Great Grimsby) (Lab)
Q I have a quick question. I am pleased that the line of questioning has taken us to problem debt. I am slightly worried that the way in which we are viewing this is through a prism where people are in regular work, on reasonable incomes and perhaps where, if they experience debt, it is a one-off emergency. In fact, a lot of families experience debt over an incremental, lengthier period of time, so they are regularly exceeding their income and then find themselves in a difficult position.
When it comes to the lifetime ISA, is it not the case that lots of people on lower incomes and struggling are not going to get the best deal? They will take the cash LISA rather than the investment ISA and will not benefit as much as other people who are in regular work, who are higher earners and already in a much better financial position than people on lower incomes.
Ed Boyd: On the general point, the reason why our focus has been on Help to Save rather than LISAs is that if you look at those who are just about managing, those who are really in need of just building up savings because they could be hit hardest by some of these shocks, the overwhelming majority of people who will be on universal credit when it is fully rolled out are in deciles 2 to 5. If you are thinking about those people who would really benefit from this, this is the avenue through which we should be pouring our support and efforts in order to try and help them. As I said before, we have not looked specifically at LISAs so it is difficult to comment on the cross-over and effect that they will have on that group, but going back to the previous question of targeting, Help to Save targets that group pretty well.
Joseph Surtees: It is an excellent point that most or a lot of saving products, certainly up to now, have not really thought about the best way to appeal to low- income consumers and the best way they can work with their lives. That is certainly a problem with ISAs and should be a slight problem with lifetime ISAs as well. The really good thing about Help to Save is that it has thought about how to appeal to this group and the bonus is the way that it has settled on that. All the evidence shows that that is overwhelmingly a great incentive and a much better incentive for this group, rather than interest rates or tax deductions or tax relief.
Other things could be looked at in future, such as prize-linked savings or even more innovative ideas such as adapting the auto-enrolment pension system, so that it has an accessible savings pot within in. I think that is slightly further down the road.
Lucy Frazer (South East Cambridgeshire) (Con)
Q You have identified that the two different measures, the LISA and Help to Save, are targeted at different people in society. If that is the case, do you see these measures as adding not complexity to the system but more choice?
Joseph Surtees: I would agree that they would both be useful. I emphasise that we are big supporters of Help to Save. It is introducing an option for these low-income families that does not exist at the moment, so it is not more complexity; it is, for many, their only choice.
Ed Boyd: They are both hugely welcome, especially Help to Save.
The Chair
I am sorry—that brings us to the end of the time allocated for the Committee to ask questions. On behalf of the Committee, I thank the witnesses for their evidence.
Examination of Witness
Bryn Davies gave evidence.
The Chair
We will now hear oral evidence from Union Pension Services Limited. Will the witness please introduce himself for the record?
Bryn Davies: My name is Bryn Davies. I am the director and actuary of Union Pension Services, which is a specialist consultancy helping trade unions with a range of issues involving pensions, both state and occupational, and of course saving.
Peter Dowd
Q I wanted a sense in the round of how you think the proposals in the Bill for LISA and Help to Save demonstrate a coherent approach to the Government’s objective of making it easier for everyone to build up savings as they need. How do they fit into that landscape?
Bryn Davies: It has to be recognised that these measures come out of the more fundamental review that was undertaken of taxation and provision for retirement. I do not think it would have come out now and in this form, particularly the LISA, without that preceding process. That process identified that it is difficult—the whole issue of how tax advantages are used to encourage people to provide adequately for their retirement is difficult. There was plenty of speculation in the press that the last Chancellor had made up his mind about some fundamental changes, primarily in pension taxation. He pulled back from that and came up with the three-pronged approach of increasing the ISA limit, introducing the LISA and Help to Save—which, set against that background, are relatively minor and unco-ordinated. I do not think anyone would say that they are a comprehensive approach to making sure that people provide properly for their retirement.
The LISA is functionally equivalent to the proposed pension ISA, which was much debated, though it has a different name. The particulars may not be as was proposed by the arch-proponents of a pension ISA, but functionally it is a pension ISA. Seen globally though, it is a pretty trivial contribution towards the much bigger problem. There is widespread acceptance that pension tax relief is a problem that needs to be dealt with. In that context the LISA is pretty limited, and Help to Save is obviously a very limited proposal that does not really fit within that scope at all. In terms of a comprehensive approach to the problems of making sure people save what they need, it is lacking—and I do not think anyone would be able to pretend otherwise.
This is something that I do not often say, but I very much agree with Richard Graham MP that we need a comprehensive approach. He has spread it a bit wider than I would: he is proposing that there should be a commission on saving. What I have argued for is that there should be a continuation of the Pensions Commission in one form or another to tackle the specific issue of tax relief. The Pensions Commission, which must be regarded in many ways as a great success, pulled back from tax relief—they sort of dodged it—but I think they or some successor should take on that issue and produce a comprehensive review. Set against that, the LISA is too little and too early. Unless you undertake a fundamental review of pension taxation, I do not think that the LISA really makes a lot of sense.
Peter Dowd
Q In that sense, given that there does not appear to be any appetite for any substantial review of the sort that you are talking about, let us take it at face value that that will not happen. Do you get the sense that this is—I will not say a gimmick, but simply the Government feeling that they have got to do something by chucking another product into the market as a smokescreen, or call it what you will?
Bryn Davies: I would not like to use the word “gimmick” but it was a policy in search of a solution rather than the other way round. The proposal for the LISA was seen as something that could be said to have come out of that earlier process, and not coming out with anything would have given the appearance of a significant failure in policy making. In that sense, it was seen as the least that could be done as part of that process.
The problem with it is not just that it does not fit—the argument I am making is that it does not fit within this broader review of how savings for retirement should be tackled—it is also problematic in itself. I watched your sessions this morning and I think the case has been made. There was some evidence in support but also, to my mind, powerful evidence pointing out the problems with the LISA, particularly in the context of the roll-out of automatic enrolment, which is a major concern in the trade union movement.
It is absolutely crucial that whatever comes out of the legislation should not in any way interfere with the completion of the process of automatic enrolment. It is particularly concerning that LISAs will start hitting the streets, as it were, at the same time as automatic enrolment is going to face its biggest test, when the contribution rates go up from their present very low rates to the full joint 8%. That is my major concern.
There will be such mixed messages that a lot of people will make wrong decisions at that time. The two processes should be disentangled. That is the simplest way. I know we are a long way down the road and evidence this morning from the industry was strongly that they just want to get on with the job and get these things delivered, as promised by the Government, from next year, but sufficient concerns have been raised about the interaction with automatic enrolment that it would be worth putting it off, to disentangle those two processes of people starting to sell LISAs at the same time as people start getting these increases in their contributions from the current level, as far as individuals are concerned, of up to 5% gross.
Peter Dowd
Q Can I take this in a slightly different direction? I suppose it is linked, to some extent, to some people’s concern about self-employment. That is perfectly legitimate and okay, but there are many people in effect being forced, de facto, down the self-employment line to take pressure off employers to pay national insurance and so on. Are there concerns that employers will encourage their employees to choose a LISA instead of a workplace pension, in effect reducing their contributions?
Bryn Davies: Of course, there are rules about enticing people away from automatic enrolment, and we want to see those enforced. The implication is that if people were offered a genuine choice, LISA would have to be better than the automatic enrolment offer. I am sure there will be some employers who decide to go down that road.
On the question of the self-employed, it has been identified that automatic enrolment does not really work for them. It is possible that something like a LISA would offer them something that can work alongside automatic enrolment for employees. That is leaving to one side the whole issue of whether this growth in self-employment is genuine self-employment or just a way of evading employment law by forcing people into self-employment when they should be employed—but that is a much broader issue, on which I am not an expert.
Huw Merriman
Q Mr Davies, could you help me a little? I have not come across Union Pension Services Limited before. Is there a formal link to the trade unions or do you represent anyone?
Bryn Davies: No, no—I am just an honest professional working to make my bread, but working just for trade unions. I work as a consultant to individual unions.
Huw Merriman
Q That means my next question is relevant—I wanted to make sure. I would have thought that, for a lot of trade union members who are trying to save up, perhaps for their first home, the LISA would be absolutely tailor-made. Also, for those trade union members on very low wages, Help to Save should be a boost to help them save and get some income in place. Is that welcomed by the trade union movement that you represent?
Bryn Davies: I think my function here this afternoon is to pour on a bit of cold water, on the whole. To be helpful, I should be the doubting voice. You have heard a lot in favour. It is quite clear that many people do welcome the LISA, and I am sure there are many trade unions among them. After all, who would not favour being able to buy £5 notes for £4? It is a no-brainer. Whether that has a proper role within an overall system of providing people’s retirement income is a separate issue. So, if they are there, I am sure they will be popular.
However, I would reiterate that there is a big concern that the introduction of the LISA, in the ways that are perhaps being suggested, interferes with the successful expansion of automatic enrolment to its full extent, to everyone paying the 8%. That would be of major concern. It is universally the view within the trade union movement that the best approach to providing people with retirement income is through collective schemes of one sort or another—perhaps a defined-benefit or defined-contribution scheme under automatic enrolment. There is a tension between those two objectives. There is no objection to a LISA in itself; it is where it fits within the overall landscape of provision for retirement that is the major concern.
On Help to Save, again, it is difficult to attack it. As usual, the House of Commons Library has provided a very useful briefing, which highlights the report from the Institute for Fiscal Studies. It has identified that of the 3.5 million people—I am not sure how the figures match up—more than half already reach the level of rainy-day fund, to put it crudely, that is sought by the policy. It strikes me that it is more than likely that the great majority of people who will go for Help to Save are people who are already in that position.
What the whole Help to Save discussion misses is the sheer difficulty of managing a budget on low and variable incomes and the ability to help people in that situation. The reason they do not save, obviously, is because they are poor, and poor people have to make all sorts of difficult decisions, some of which might not seem all that sensible to those who are more comfortably off. Should you spend your rainy-day money on having a summer holiday? That sort of decision is incredibly difficult and it is difficult to put yourself in the position of people of who have to make it.
It is also worth saying that the £70 million is not to be sniffed at, but in the context of public policy it is an insignificant amount. It could well be that a better way of helping the families that are truly under pressure—who do not have, and will not be attracted to, a rainy-day fund—is to look at the way in which the social fund, if it is still called that, helps families in poverty. To me, that seems a much better way of spending the money, but I have broadened out your question much wider than it started.
Huw Merriman
Q Perhaps I can just ask one more question—maybe it is more of a point. Surely one of the issues is that Help to Save will be targeted at many people who will be on benefits, but what has not been offered is a commercial product that treats them exactly the same as some of the people who may read the adverts in the financial press, who may not require help so much. Again, I would have thought it would play to the sector that you are representing that, all of a sudden, those people are in the game as well and being supported.
Bryn Davies: Yes, I do not want to be too much of a wet blanket. I am sure there are some people out there for whom the Help to Save scheme will be of great assistance. I do not think it will be that many—I do not think it will be a lot of help—and many of them are not the people who do not already have a rainy-day fund. Did I get that the right way round? Most of those it will help already have a rainy-day fund. So how is that money actually being used effectively to provide more people with rainy-day funds? We really do not know, from the evidence that is available.
Ian Blackford
Q I wonder, Mr Davies, whether you would agree that it is unlikely that there could be a scenario where a saver would be better off in a LISA than they would be in a workplace pension scheme. Could you just comment on the fact that we have not got the final architecture of automatic enrolment, in so far as it affects low-paid workers and the self-employed, and there is a danger in the short term, if this were adopted, that workers could be seduced into taking out LISAs when their best interests would be served through a workplace pension?
Bryn Davies: There is no doubt that the LISA is an attractive offer. People will be attracted by it, although whether they are seduced—that suggests it is against their best interests. It is difficult to know exactly how it will work.
One of my main criticisms of the LISA is that it is a sort of bait-and-switch for a change in pension taxation, because its finances are unsustainable. Those of you who are familiar with the jargon will know that the existing occupational pension scheme taxation is known as EET—exempt, exempt, taxed—so the roll up, the accumulation, is tax free and then it is taxed when the money is paid out. That is compared to an ISA, which is taxed on the way in and the roll up and pay out are tax free. You are either taxed at the beginning or taxed at the end. The oddity about the LISA for a standard rate taxpayer is that there is no tax at all—it is actually EEE—and, as such, I do not think it is a sustainable basis. That is why I am saying it should be looked at as an overall view of how people save for retirement.
A system that was entirely based on the pension LISA system for provision for retirement would be economically unsustainable. In that sense, it is a loss leader. It is not sustainable as a long-term policy, because it is so generous. That is the answer to the question. It is very generous and possibly some people in the short term might do well, depending on the expenses that are charged. We do not know how expensive LISAs are going to be. They could offer a financially attractive deal, but if that is at the cost of destroying an adequate pensions system in the long term, the whole of society will be losers.
It is not difficult to sustain a case that everyone will lose out because they choose a LISA rather than an automatically enrolled pension, particularly if employers choose to contribute to the LISA as well. There is nothing to stop them, if they see it as a way of avoiding the legislation.
The Chair
I call James Cartlidge. Four people still want to ask questions and we have nine minutes.
James Cartlidge
Q In respect of Help to Save, it seems to me that there is a real crisis of people who are living week to week, who are often using payday lenders or other forms of debt which are not sustainable for them and who are near the precipice all the time. I take your point that some may not have any spare income at all, but if a savings product such as this, which is so generous, is not going to help them save for those emergency funds that give them greater independence and less reliance on the lenders, which is important, what possibly could?
Bryn Davies: You are right. The work done by StepChange and the Centre for Social Justice very much endorses much of the evidence that you received in the previous session. There is no doubt that it can help people. How targeted it is on people who do not already have a rainy-day fund is unclear. The first point is that many of those people who would take it up already have their rainy-day fund. In that sense, the extra money is not solving that problem.
The other problem is the sheer difficulty of operating on limited budgets. It is not a case of saying, “Let’s give everyone the opportunity to save for a rainy-day fund and that will solve the problem.” I think that underrates the difficulty people face in running their day-to-day budgets and the competing demands that they have. I think that reflects the point that was made here earlier.
Kelvin Hopkins (Luton North) (Lab)
Q We are old colleagues from the TUC, so I have to say that I have great sympathy with everything you have said so far. It has always struck me that these alleged savings schemes—tax-exempt special savings accounts, personal equity plans and ISAs—help at the margin with people who are relatively comfortably off, but do not help those people who cannot save anything at all because they are too poor. Is this another of those schemes, which will help some people but not those in the most desperate need? They will be the people who are slightly better off and can afford to save something. Would it not be better to have some sort of universal state scheme for pensions, for one thing, but also, on the other hand, to have an emergency scheme where you can give more money to poor people one way or another? Raising their incomes is what the problem really is.
Bryn Davies: Yes, absolutely. These people do not save because they are poor. A hyped-up social fund would do much more directly to help people with these crisis problems. As was mentioned, it is the day-to-day grind of being poor that is the problem. It is not just crises—people are not just poor in crises; they are poor all the time. In those circumstances, there are very tough decisions to be made about how people use their money. Saving is sometimes seen by those people themselves as a luxury. They would rather run the risk than go without some relatively innocuous discretionary spending. We should, in a sense, respect their decisions. We may warn them that they are heading to a crisis but, ultimately, we need to trust people to make their decisions.
On the broader issue, you well know my views on state provision. I think that the market does fail and that it fails, in terms of saving and pension provision, for a much larger proportion of the population. There are very few people who could get by with just the new state pension. Everyone needs to save something for retirement but the market is a bad way of saving for a large proportion of the working population. I could speak on that at length.
Maria Caulfield
Q In your professional capacity, do you advise your clients to have pensions or savings or do you advise them to have both?
Bryn Davies: I do not give independent financial advice. I have to be very careful on that. I always promote the advantages of collective schemes and point out the advantages of having occupational schemes, and support unions when they are negotiating the best possible collective provision. I do not advise individuals about how to use their money.
Maria Caulfield
Q I am interested in why industry experts seem so against these schemes to encourage people to save, when we have heard from the experts in social mobility that these are good schemes to start people off on the savings process. Do you have a reason why that difference would be?
Bryn Davies: It is this interaction. There are all these different vehicles for providing it and the way they interact is not entirely clear. That is why we do need some sort of overarching review—a review of saving sounds quite attractive—specifically of pensions tax relief, so that we do not have these one-off initiatives where it is unclear exactly how they fit into the overall approach of encouraging saving. Taken individually, you could well say this is a good idea, but it is how they all work together that is the problem we face. That is why I am saying that, at this crucial stage of automatic enrolment, we should take a bit more time over introducing LISAs.
Jeremy Quin (Horsham) (Con)
Q You mentioned earlier, Mr Davies, that we had to respect the decisions made by people. I am totally with you that pensions are the right way for most people to save for their retirement. You have spoken eloquently about the problems and difficulties faced by the people who most need to save but find it most difficult to do so. Do you really want to deprive them of that ability to get £5 from £4 for another year?
Bryn Davies: No, no. I am not saying that this should not be included in the Bill. I do think probably that it is a bit tokenistic and that stronger measures to deal with poverty and crises caused by poverty within the social security system would be a more effective way of using the money, but I am not saying don’t do it.
Jeremy Quin
You would not stand against the principle of doing this, but you would like to do more things— I hear that.
Jane Ellison (Battersea) (Con)
Q I have just a brief comment. Does Mr Davies have any modelling or research that he has done to support his concerns around the interaction of these products and auto-enrolment? It would be useful if we could have that.
Bryn Davies: The short answer is that I do not and would not pretend that I did. If I were the only person saying this, I would be worried, but there is a broad swathe of opinion, not least including at least one Member in your own party, expressing these fears, so I do think they need to be taken seriously.
The Chair
Order. If there are no further questions, I thank the witness. Will he now make way for the next panel, please? Thanks very much.
Examination of Witness
Calum Bennie gave evidence.
The Chair
We will now take oral evidence from Scottish Friendly. Could the witness introduce himself for the record?
Calum Bennie: Good afternoon. My name is Calum Bennie. I am a communications manager at Scottish Friendly.
Peter Dowd
Q You have indicated in the past that,
“We at Scottish Friendly, while recognising LISA will not garner universal support, are enthusiastic about the initiative. It deals with one of the biggest problems society faces in the UK: trying to get under 40s to engage with planning for their retirement.”
Peter Dowd
Yes, I beg your pardon. When Paul Johnson of the Institute for Fiscal Studies came to address the Treasury Committee, he said he did not think that the lifetime ISA would encourage new savers. There seems to be a difference of opinion, although I am not saying that there is. Why are you so enthusiastic about it?
Calum Bennie: New savers are one issue, but we are supportive of the LISA because what it could do is attract people who are currently put off saving for life after work. They are not enamoured of pensions—they have been put off pensions for whatever reason, be it a bad experience of their own or bad experiences that their families have had. They are not interested in pensions per se. The lifetime ISA could be a way of them putting money aside for their retirement, which otherwise they would not have done. That is where we come from here.
Peter Dowd
Q Following on from that—I was trying to tease this out earlier—I get the sense that this is another product: “This one hasn’t worked, so let’s introduce another one; that one hasn’t worked, so let’s introduce another one,” or, “People aren’t saving for retirement, let’s introduce another one.” It begins to sound as if we are saying, “Let’s just try another thing. None of them work particularly well, but let’s just chuck this into the mix.”
Calum Bennie: I do not think we would disagree with that. As several people have said in the time that I have been in the meeting this afternoon, a more holistic approach to savings and pensions—or saving for life after work, as we would perhaps put it—needs to be looked at. In the meantime, though, we need to do something to get more people putting money aside for that period in their life. As has been raised several times, a key group of people who have not been saving for life after work or have been disadvantaged in doing so is the self-employed. There is a clear benefit from the lifetime ISA, at least for that group. From our point of view, it is quite clear that there is a group of people who are not interested in pensions. They have been put off pensions. This represents a way for them to put money aside for their future.
Peter Dowd
Q I have another quick question. The witness speaking before you was asked about evidence. I would ask you, what is your evidence that this will make people save? What evidence is there? You say that there is a flexibility in the system, but what is the evidence for encouraging this specific product to encourage people to save more? That was clumsy, but you get the gist.
Calum Bennie: When you introduce a product or investment that has clear advantages, as this one does, it will attract people to save. We have got quite a long experience of incentivised investment products for all sections of the community. In particular, our focus is on those with low to modest incomes. As a company with roots as a friendly society, for the last 30 years we have focused, initially, on friendly society tax-exempt savings plans. There was a clear tax advantage with those.
Twenty-five years ago, the minimum investment was £10 a month, and that attracted a substantial proportion of C2 and DE investors to put their money in those plans. In more recent years, the child trust fund was introduced. That is certainly going to help a reasonable group of people when they reach 18 with a reasonable start in life, and that has obviously then translated into the junior ISA. We were also a proponent of the insurance ISA that is no longer here, which attracted a mid-group part of the population that may have been put off by stocks and shares ISAs before.
That is why we are pretty certain that this product will also be taken up. It will not be by everyone, because there are going to be clear wealth warnings against it. If we were to introduce it, we would certainly need to make clear what you would be getting yourself into if you decided to try to access the fund before age 60—if you were saving for that length of time. But, all things being equal, savers do know what they are letting themselves in for. In our experience, a lot of savers like the discipline that they cannot touch the money. We have done focus group after focus group and that constantly comes up. That is why they like some of the products we offer—because they are long-term—and that could be a key incentive for something like this.
James Cartlidge
Q I was very interested in your main point. May I just clarify? Obviously there is this attraction for those who are self-employed, but are you suggesting that, perhaps because of a lack of faith or trust in pensions, even those who might actually be better off focusing on the pension side will simply be attracted to this, as it is something they have more trust and understanding in? Is that your basic point?
Calum Bennie: Yes. There are clearly some people who just do not want to touch pensions for whatever reason. The fact that we are having to force people into pensions is almost an indication that for many people, pensions are broke. We are not saying that pensions are bad and LISA is good; we are just recognising what is out there with people and that some people are very comfortable with ISAs.
We were one of the first friendly societies to introduce several ISAs in 1999 when they came out. More recently, we have moved away from friendly society tax-exempt plans, because they were inflexible, to a much more flexible ISA. We launched that five years ago. That was quite a risk. We did not quite know whether the market that we were aiming at—as I said, that is very much the low to mid-income group of people—would take ISAs, because it is a stocks and shares ISA that we market; it is not a cash ISA, because we are offering people growth potential. So there is a learning experience that people perhaps have got to think about before they invest in this, because it is a stocks and shares ISA, but it has been very successful in terms of the take-up of those ISAs.
In our experience anyway, because we are not focusing on the wealthy and well-advised, people are comfortable with ISAs; not everyone is comfortable with pensions. Therefore, this product, in the short-term perhaps—until a more holistic set of savings plans and investment plans, which perhaps has cross-party support, comes about—could attract lots of people who would otherwise not put money aside for life after work.
James Cartlidge
Q When this measure was originally brought in, the point was made by the previous Chancellor about the lack of consensus for the big, overarching reform, so these sorts of reforms were proposed. I do not think anyone disputes that they are not a complete answer. Of course, another part of it is Help to Save. You talked about many low-income savers. I just wonder what you think the impact will be of Help to Save on those on the really low incomes, who we want to see saving more.
Calum Bennie: We do a quarterly survey called the disposable income index survey and we look at people across the UK, and it is quite clear that particularly the 18 to 25 group are really struggling financially. About a quarter of them are spending more than their income. That is not to say that they are all in debt, because they may have other savings or family support to fall back on. Anything that can be done for them to help with a house purchase, which for young people today is a horrendous situation that they are faced with, compared with what many in this room faced when they were first buying their first house—they need all the help they can get, so Help to Save and the ISA are a boon for them.
Ian Blackford
Q You talk about some issues that people have with investing in pensions. Why do you think that is? You described pensions as “broke”. Can you just expand upon what you mean by that?
Calum Bennie: I said that for many people, pensions are broke. The reasons could be manifold. People I talk to have experienced problems, and their parents have had problems with pensions. They were saving in a pension and whatever has happened to it—maybe the company has gone bust, or something like that—they have not got the pension that they thought they would get. For many, final salary schemes have disappeared. The pension age has gone up. Women have perhaps been affected by the age going up quite recently, which they had not expected. It could be all those issues. Pensions have been tinkered with for quite a long time. The amount you could save and the lifetime limit had gone up, and now it has come down. Tax relief is being looked at. It is for all these reasons that some people feel, “I am just not comfortable with saving in a pension.”
Ian Blackford
Q A lot of these things, of course, are because of a change in Government policy.
Calum Bennie: Yes.
Ian Blackford
Q If you were talking to your clients about the advantages of an auto-enrolment pension, as opposed to looking at a lifetime ISA, how would you explain the different tax incentives?
Calum Bennie: We do not do pensions ourselves, and we do not give advice. We market our products directly to customers and they make their own decision. We do not actually give that advice. They would need to get that advice from a financial adviser.
Ian Blackford
Q So you do not sell pensions, but you would benefit directly from the offering of a LISA?
Calum Bennie: Yes.
David Rutley (Macclesfield) (Con)
Q You talk about the focus groups that you run, and there seems to be real interest in the LISA product.
Calum Bennie: ISAs in general. We have not specifically asked our groups about LISAs. Savings in general and the discipline of savings—that is the kind of thing that we have asked people about.
David Rutley
Q But your business has a keen interest in LISAs and believes that there is an opportunity.
Calum Bennie: In ISAs in general, yes.
David Rutley
Q We are talking about LISAs today. With the lifetime ISA, is your business keen and supportive?
Calum Bennie: In general, yes.
David Rutley
Q As you think about this product, you realise that the inertia out there in the financial services market is sometimes used by financial services companies in an unhelpful way. Clearly, this is an opportunity to help change people’s behaviours for the better. With your own operation, how would you seek to differentiate this product and get behind it to have the best possible success with your potential customers?
Calum Bennie: I think the key thing here is to make sure that people have enough savings before they commit to a LISA. Obviously, if they are investing in an ISA in general, there is always a risk that they could be disadvantaged if they take their money out in the early years. Even a stocks and shares ISA is very much a longer-term investment. You are talking about people being advised to put their money in a stocks and shares ISA for at least, say, seven years, and ideally 10 or more, but at least they are not going to be penalised with 25% coming off.
Any marketing that we would do on the LISA, and I have to clarify that the LISA would not necessarily be a focus of our marketing—our focus would be on our core products, which are our investment ISAs, as the LISA would not be for everyone—would certainly ask people to make sure that they have enough in their ISA to meet their general savings requirements, and any emergency fund requirements too.
Dr Whiteford
Q Good afternoon. One of the key issues we are grappling with today is the potential for the lifetime ISA to derail or undermine auto-enrolment. I have been listening very carefully to your evidence. Am I right to infer that you see the LISA as a viable alternative to pensions, rather than a complement to pensions, for some low to modest income people?
Calum Bennie: Can I just clarify what you are trying to find out from me here? Are you asking whether we would be promoting having a LISA over and above a pension?
Dr Whiteford
Not really. I am asking whether I am hearing you right when you promote the lifetime ISA to people as a product instead of a pension.
Calum Bennie: For those who do not want to go into a pension, it is there and it is complementary. We would certainly not want to take away from pensions. As they stand in the current framework, pensions are right. Auto-enrolment is right and is working for so many people; it is a success and has been more successful than the many detractors perhaps thought it would be. We would certainly not want to denigrate that at all. What we are saying is that there are some people who are just not attracted to pensions. They do not want to be forced into pensions and the LISA represents an alternative for them.
Dr Whiteford
Q Thanks, that is a helpful clarification. I also wanted to come back to something you said earlier about self-employed people. We took evidence earlier today that around two thirds of self-employed people would not actually qualify for a lifetime ISA. I just wondered whether Scottish Friendly had done alternative modelling or had an alternative assessment of the market.
Calum Bennie: No, we have not.
Melanie Onn
Q I will follow up along the lines of what the hon. Member for Banff and Buchan asked. Earlier we heard evidence from the Tax Incentivised Savings Association and the Association of British Insurers and their view was very much that a LISA would be complementary to a pension, not in isolation from a pension. Can you clarify your view that people may not actually have a pension and may exclusively go for a LISA? Do you think that will be a secure route for them, in terms of planning for their long-term older age?
Calum Bennie: In essence, yes. The whole traditional world of retirement is changing and a range of products for people to put money aside for their later years makes total sense. We have done research. With the many customers we have who are saving in ISAs and in other savings plans, when we do the research to find out what they are saving for—financial services companies traditionally market for the holiday of a lifetime, a car, or a home improvement and things like that—our research shows that people are actually saving for retirement. They may have a pension, but they are also saving independently in an investment plan. You cannot just force people to save for their later years in pensions; they are saving in all sorts of vehicles for their later years.
Melanie Onn
Q But it is very much, for you, a complementary product to pensions—
Calum Bennie: Yes.
Kelvin Hopkins
Q I am somewhat sceptical about the myriad private savings schemes and have argued the case for a much more comprehensive compulsory state savings scheme for everyone, on top of which people could save in other ways as well as in stocks and shares. What would be the case against having a universal state earnings-related system with defined contributions and defined benefits, which would be extremely efficient to operate, easy to administrate and which everybody would know they were going to get a good deal from? What would be the argument against that?
Calum Bennie: I don’t think there is an argument against that.
Maria Caulfield
Q I want to get to the bottom of the evidence that we were given earlier, especially from the experts and professionals in this sector, that these schemes—whether it is Help to Save or the LISA—are too complicated for those on a lower income really to grapple with, and therefore won’t be taken up and won’t be of use. What’s your experience? Do you think the way that these schemes are being set up is easily understandable and will encourage those on a low income to save?
Calum Bennie: We certainly don’t see any issue with that. If it’s us who are going to be promoting these schemes, then we will certainly make sure that our communications are clear and that they are researched in the first place. For instance, our ISAs—that is the basis of this product; it’s an ISA, with various add-ons—are as complicated or as non-complicated as you want them to be, and they are understood extremely well by our customers.
Maria Caulfield
Q Can you understand why some professionals in the financial industry sector are so against these measures, and yet those who promote social mobility are quite supportive of them? Can you understand the rationale as to why some people in your sector are not so supportive?
Calum Bennie: Perhaps they haven’t actually had the experience of working with lower to mid-income groups.
The Chair
Would any more Members like to ask questions? If not, I thank the witness for the evidence that he has given. We will now move on to the next panel.
Examination of Witnesses
Martin Lewis OBE and Jonquil Lowe gave evidence.
The Chair
We will now hear oral evidence from MoneySavingExpert.com and the Women’s Budget Group. Could the witnesses please introduce themselves for the record? I start with Martin Lewis.
Martin Lewis: Yes, I am Martin Lewis, founder and executive chair of MoneySavingExpert.com.
Jonquil Lowe: Hi, I’m Jonquil Lowe and I am senior lecturer in economics and personal finance at the Open University, and part of the policy advisory group for the Women’s Budget Group.
Peter Dowd
Q I will make an assertion here: I think the consensus of opinion today is that the pensions landscape is broken. However, in the absence of more structural change to that landscape, any product that helps—even if it is only a little bit and even if it’s for a limited number of people—is welcome. Mr Lewis, you have made this comment about the LISA:
“For retirement savings it works the same way, but whether it beats a pension or not is a much trickier conversation.”
Could you give us a view about that consensus claim that I just made?
Martin Lewis: If we just look at lifetime ISAs as a pension product and ignore the homebuying element, which of course is a substantial element, based on pure numbers—well, actually there isn’t really anybody who should get the lifetime ISA, if you’re contrasting it with a pension. Certainly, if you are employed, you want to be auto-enrolled. If you are not employed and are a higher-rate taxpayer, there is a clear distinction—it is far better to be in a pension than it is to be in a lifetime ISA. If you are a basic rate taxpayer, the numbers are much of a muchness, but you have the two key factors: one, in your inheritance tax planning, the LISA is part of your estate, whereas your pension isn’t; and, two, LISA counts for benefit cap purposes, which could have a massive effect on many people, whereas the pension doesn’t. Those two factors mean that if you really break it down and make this a black-and-white binary decision, don’t put your money in a LISA.
Having said that, there are some people, especially self-employed basic rate taxpayers, for whom the idea of putting money away into one of these schemes is attractive, and therefore I support this as a good concept. Remember, we are only talking about pension saving there; not the other side, where it is a complete, utter no-brainer. Do you want a house? Put your money in a lifetime ISA. There are some arguments about whether Help to Buy is not in those transitional arrangements and I have issues with the help to buy ISA, but overall it is a no brainer.
I think my great concern over the lifetime ISA, though, is the one that goes back to the point about explaining a product that has a level of complexity, although it is not that complex. In my career, I have learned that what people want—I have just told you what it is—is a trusted source. That is enough for most people— a trusted source who says, “Don’t put your money in a lifetime ISA rather than in a pension unless you are a basic rate taxpayer who is self-employed.” There you go. People do not really need to know why. You have put the proofs: you’ve seen it on the website, so you are therefore on it. That is pretty much all you need.
All products are complicated, so we make them simple. You get trusted sources to do that, and it works. My great concern, and I have the same concern with Help to Save, is not the product in itself—I support both of them—but that there are certain dangers in misprioritising your finances. In the lifetime ISA, the danger is in wrongly opting out of auto-enrolment and putting your money into a lifetime ISA. In Help to Save, it is not paying off your expensive debts, and saving when you should be paying off the expensive debts.
I am aware that there is a new guidance system being set up, which is right and I approve of that. The problem with that is that you have to be proactive to go there. I would strongly urge you, when you set these up—it is much easier with the National Savings and Investments product—to ensure that at the point of application, whether that be online, by phone or in branch, the questions are asked, and that people are forced to ask them. So at NS&I, when you are setting up the Help to Save, it asks you, “Do you have debts? Are they expensive?”. If they are, some information is given about the fact that you may be better off paying those down. You do that not in a leaflet, but at the point of application.
With the lifetime ISA, which in many cases will be an online or on-the-phone product, rather than a branch product, I would say at that point in the online form, the question should be asked, “Are you an employee? Does the employer have auto-enrolment? Are you planning to do this instead of a pension?” and at that point, information is given that explains that generally you will not be better off with the lifetime ISA.
There is no problem with the product; there is a problem with how we communicate it and how we stop people making bad decisions. The way that you do that in the world that I work in is you signpost it once, you signpost it again, and then you signpost it a third time, and now you might just be starting to start the process. I will tell them when I talk about it on the telly or on the website; you will have it in a brochure for the product; and you will hear it from the pension guys. Then when you are signing up, you will have a final warning. If we do that, we will probably touch 50% of the people we should, but not all of them. That is my biggest caution to you today: just make sure that people know when it is not right for them. Then we can all be very excited about two new products that are out there, and which should, in general, be beneficial to the people who should be using them and are a good thing.
Peter Dowd
Q Can I pick up that last point on knowledge? That is another issue we have touched on today. In an ideal world, people have complete control of their faculties and decision making, and have capacity and so on, but out there, that does not always happen. The concern that has been expressed today is about that knowledge landscape, and people’s ability to grasp that, without it sounding patronising. Do you think that, out there in the world that this product will be sold in, there is enough information and knowledge for most people to make a reasonable decision?
Martin Lewis: I do not think there is now, because the products are not out there. The truth is that it is mainly people in this room and the industry, and a few nerds like me, who will be interested in them before they launch—why would you be? Once they launch, we need to get it right. For my TV show, next February, I have already got a lifetime ISA special booked in; it will probably be the second or third week of February—half an hour of prime time on ITV—and we will get the message out, because people need to understand how it works. We will get that out, but that communication needs to be right and consistent; the messaging needs to be right.
My concern is about product-provider level, where product providers and different people within businesses have incentives to sell products. Even in wonderful building societies, the savings managers do not ask their customers whether they have debts before they encourage them to save. Will you do it as a blanket? That is not the right way for anybody to go.
As we are starting two new products, we have a very interesting point where you can set up the regulation before we start to make it proactive, which is what I am encouraging. With Help to Save, the message is: “If you save £50 a month, after a couple of years, we will give you 50% on top.” Yes, I know there are complexities about exactly how much you have saved and whether you can take it out, but that is all you really need to know. For the lifetime ISA, it is: “You can save up to £4,000 a year. You have to be under 40 when you start it. Then you can use it towards a house, in which case we will give you the bonus then, or at the age of 60, when we will give you the 25% on top, with a maximum bonus. If you have ifs and buts, do your reading—but do your reading.” Those are all the messages that you need to get people interested in it.
These two products have a very simple advantage: it is called free money. Go and have a look at the green deal. Until the cashback section came in, no one was interested in the green deal. Once you started giving people free money, suddenly it became very popular. Well, you have two free money schemes. Done right, talked about right and communicated right, they will be very popular. Unintended consequences are possible—the lifetime ISA might pump the housing market, which is a concern, and we have already seen it somewhat with Help to Buy—but done right, this is free money for people. As for looking at this at a macroeconomic level—are we skewing it? Are we giving it to the wrong people? Does it have the right political consequences?—that is not necessarily my bag, but I have some concerns over it. However, if you are talking about whether you can communicate these products in such a way that people will take them up, free money does a pretty good job of getting people interested.
Peter Dowd
Q Thanks. I have a question for Ms Lowe. I do not know whether you have a comment on my original statement. If you do, please feel free to give it. Also, a distributional analysis by the Women’s Budget Group shows that by 2020, single female pensioners will experience a whopping drop in living standards. Is there anything in this product, for the sake of argument, that you think will help to deal with, alleviate or mitigate that?
Jonquil Lowe: No, we do not. That is the short answer. Martin touched on this: is the money being given to the right people? Certainly the lifetime ISA is less regressive than the existing system of pension tax reliefs, in that it gives a flat-rate 25% bonus to everybody. However, we still think that this is a very regressive way to use taxpayers’ money. Simply making a product available to everyone does not make it gender-neutral. You also need to take into account people’s opportunity to take up these products.
The lifetime ISA targets people who can already afford to save. There are huge swathes of people, mainly women but some men, who are contributing to the economy in the form of unpaid work, rather than paid work. Their decisions on care—caring for children and adults—mean that they are more likely to be in part-time work and are more likely to have periods out of work. When in work, they are more likely to be in sectors where their earnings are low, which tends to affect them not just at that time but for the rest of their working life. It is much more difficult for women to take advantage of these products, so we do not really see the lifetime ISA as a solution to women’s poverty.
We are also concerned, as Martin said, that the lifetime ISA may be a simple product, but it throws up complex decisions. The worry is that people may well choose to go with the lifetime ISA, rather than a pension, simply because it seems a simple product and they feel that they have more control, but in doing so, they are going to lose the employer’s contribution under automatic enrolment. They will be making decisions that are actually not in their best interests, which is a concern to us.
David Rutley
Q Mr Lewis, you mentioned some concerns about transitional arrangements between help to buy ISAs and LISAs. Could you expand a little on that? I then have a question to both of you. One of the issues with financial service products is getting younger people interested in them. The great thing about the lifetime ISA is that it applies to youngsters at 18. We have some young people in the audience from Macclesfield. How would we seek to get young people more interested in these products early on?
Martin Lewis: First, there is a difference between the two. The help to buy ISA is available at 16, which is one issue. The second issue is that help to buy ISAs are limited to properties worth £250,000, or £450,000 in London, but for the lifetime ISA it is £450,000 across the country, which is a good thing.
Here’s where it gets rather complicated. You can use a help to buy ISA effectively after three months. You need £1,600 in it; that’s £1,200 in the first month, and £200 each month for two months. We have some people who have done it in two months and thirty days. We are allowing people to transfer their help to buy ISA into the lifetime ISA within the first year, which is a good rule, because it allows people to move it across and then they can put more in their lifetime ISA. However, the lifetime ISA has a one-year minimum hold before it can be used on cash, so I could have had a help to buy ISA for three years, transfer it across into the lifetime ISA and then save more money in, and then suddenly discover that I cannot buy the house that I want and have found, even though I have been saving in the help to buy ISA for three years, because I have to have held the lifetime ISA for a year.
A simple arrangement to fix that would be to ensure that the trigger-point, if you transfer a help to buy ISA into a lifetime ISA, is the start-point of the help to buy ISA, not the start-point of the lifetime ISA, so you would have had your year. Those are the types of transitional arrangements I am talking about. They are not big-picture, I think, even at this stage of a Bill Committee, and they are ones that we have had a discussion on the phone about.
The other classic thing that I would be very wary of—I will throw this in while we are talking about this—is that, as I have suggested, both these products will not be perfect. There will be unintended issues, such as the help to buy ISA issue—that it was a mortgage deposit, and some people thought it would exchange. It always was at that point, but it was revealed by the newspapers. I would strongly suggest that with both these products, there is a pre-arranged one-year review, where minor terms can be tweaked to make better products, and where we discover the things that none of the clever people who have given evidence or who are sitting around the table have thought of yet. That’s a sensible way to introduce products such as these, which are so complicated—especially the lifetime ISA—to be honest with you. Those are the types of transitional arrangements I am talking about. Forgive me, what was the second part of your question?
David Rutley
Q With young people, how do you get them interested in these sorts of products early on?
Martin Lewis: Young people are interested in buying a house, but it won’t be their financial priority. For many of the young people who have help to buy ISAs, it is money put in by their parents, and we need to be straight on that. That has a distributional impact too, because the people who are able to do that are people whose parents have the spare money, and you have to question whether that is right or wrong.
With help to buy ISAs, it depends on your definition of young people. It is a great product for 18-to-30s. If that is “young people”, it is a good product, and potentially, once they have started saving in their lifetime ISA, they may then continue it for their retirement savings. I again sound the caution, because of auto-enrolment, that we want it to be a complement, as opposed to an either/or.
There are problems with the help to buy ISA. I cannot put more than £5,000 a year into it, so I then have to have another ISA product. I would not mandate that all providers had to do that, because if you did, we would have lower interest rates on the lifetime ISA than we would have otherwise in the savings version.
As an aside, I have to tell you that when I tweeted and Facebooked that I was coming here today, the big point that everybody made was that I should tell you—I’m sure you know this, but I will tell you anyway—that interest rates are horrendous. People cannot earn money on their savings. You are helping two small blocks at the moment. People feel that our interest rate policy is penalising savers right now. Even with all the tricks in the world that I can play, we have worked out that you can put £35,000 away at 2% interest. That is the best you can get with every single trick in the book played. That is it right now. That is horrendous—a disincentive to save. Of course, a 25%, 55% or 50% bonus is a great encouragement on the back of that, but savings in the United Kingdom at the moment are in a crisis that we have never seen before, and there is a bigger picture here than the two Government-supported saving schemes—I am aware what this Bill Committee is for—that are going on right now.
The honest truth is that this will encourage some, but it will not encourage many. Children’s savings—even Halifax Kids’ Regular Saver, the last bastion of good rates for children at 6%, has now dropped down to 4%. There are big issues in the savings market, and this won’t fix them. This will help some people.
Jonquil Lowe: Perhaps we ought to keep in mind what the whole aim underlying all these schemes is. Certainly, when you are looking at housing, it is affordable, high-quality housing for all. Will the lifetime ISA deliver that? Will it excite young people? I think it will not, because what we are likely to see is that the people who can afford to save can save in it, and the people who have wealthy parents will see their parents transfer money into it. I think it will be very important to evaluate this scheme, to see whether it really does generate new saving that improves people’s financial resilience.
Help to Save is very similar to Saving Gateway. I do not know whether you recall this, but the Institute for Fiscal Studies did some evaluation work on the pilots for Saving Gateway and, in contrast to some of the other evaluation, came to the conclusion that Saving Gateway did not generate new saving. What it did was encourage people who had already built up a stock of saving to transfer that into that scheme, and I fear that we might see that with the lifetime ISA as well. It is just shuffling the money on the balance sheets; it is not actually generating new saving.
I think the lifetime ISA is not necessarily going to help more young people to buy the house that they may aspire to. The money can be drawn out for use not only on new build housing but existing housing stock, so there is a danger that it will just push house prices up. Although it may help some people at the margin to transfer from being renters to being owners, for other people, it is going to put the dream of home ownership even further out of reach.
We also have another concern, which is whether this is just another part of the transition of moving away from the collective risk that society bears to individualising risk. The lifetime ISA legislation allows the Government to consider early withdrawals without penalty for reasons other than house purchase. At the moment, that is not something that they are going to do when the scheme is first introduced, but schedule 1, part 3 allows for that option.
That starts to look very similar to a scheme that was tried in the Netherlands and abandoned in 2012, called the life-course savings scheme. The idea was that employees could build up some savings, tax-free, through deductions from their salary, and that those savings could be withdrawn to pay for periods caring for a frail relative, for example, or for the cost of childcare. Again, that is absolutely fine if you can afford to save, but if you cannot, that form of welfare is not helpful and excludes a lot of people. The evaluation of that Dutch scheme found that, as you might expect, fewer women and part-time workers took part. The amount saved went up dramatically with earnings, and the vast majority of people said that they were doing it because it was tax-free and would allow them to retire early. That scheme did not really address the aims that had been set out and was, again, a very regressive form of welfare.
Martin Lewis: I do not fully agree with this analysis. I think there are certain parts, and on the distribution part, I absolutely accept where you are going. Of course there is an issue of distribution, but we have to be very careful. Certainly there is a feeling out there in the country that it is the people who struggle and push to sort themselves out on their own who get the least help. Some of this does go towards addressing that; it goes towards addressing the fact that those people who have struggled all their lives and would like their children to buy houses will get some help with that within the lifetime ISA.
Where I perhaps disagree most strongly is that I think the help to buy ISA has encouraged people to save for a home; some of them would not have done so anyway, and for some, it would have taken a lot longer and been a rather depressing period of their life with no wellbeing. We already have a problem with disaffected young people who feel that they are not being given a chance out there, and this does go some way towards redressing that. You paint too dark a picture; I agree with some of the analysis, but I think that is too dark a picture.
The help to buy ISA has been a very positive thing that people have liked. There was this glitch over the exchange versus mortgage deposit point, which I think was a communication glitch from some of the product companies. I know it was in our guide from very early on that it could only be used at mortgage deposit. Actually, the lifetime ISA allows you to do both those points. We need to be very careful. If we look at a product in isolation, we see there are certainly distributive problems and there are certainly gender distribution problems. Looking at this product and simply saying not to do it for those reasons, rather than redressing that balance in a more direct manner, is not the right way to go forward.
Yes, I think this will have an impact on house prices, but because it affects only first-time buyers and we are talking about a level of deposit as opposed to the overall price, it would take a far better economist than me to work out how much will trickle down into the system. I do not think that every £1,000 the Government put in as a bonus will increase the need for a deposit by £1,000. I do not think it will work on that basis. I suspect a far, far smaller figure—way below 50% and probably below 20%—will trickle across. I am not sure that is a reason not to do it.
We need to try something to encourage people to save and there is a bigger picture out there. Whenever I talk about saving on the television, I am asked, “Why are you helping all those people who have got money?”, and I get lots of people saying, “Who can afford to save?”. The fact is there are something like five to six times more savings accounts in the UK than debt accounts. Those people are a big part of our population and in many ways they have been relatively the worst done by since 2008 because of interest rates. Our policy is so down on people who have saved hard all their working lives to put money across. I think we must be very careful not to bite off our nose to spite our face.
I think you are right and all the points you make have some semblance of good distributional analysis and good economics, but the bigger picture is that these are not bad products that are trying to do good things. Yes, they will certainly help some people whom we should perhaps not be helping, but they will also help other people whom we should be helping.
Jonquil Lowe: The point is that taxpayers’ money is scarce, so you must be careful how you use it. There isn’t even a great deal of evidence that tax incentives work. After all, we have automatic enrolment because decades and decades of tax incentives did not persuade people to put enough savings into pensions.
Martin Lewis: But the help to buy ISA has been a huge success for a huge number of people.
Ian Blackford
Q Thank you, Mr Wilson. We have talked about the need to save and the success of auto-enrolment. Should we not be targeting those who are being missed out, such as the self-employed and those earning less than £10,000—many women are caught up in that? That is the priority we should address first.
Secondly, when you talk about the exercise people will go through to apply for an ISA and those who can engage in auto-enrolment but choose not to, do you not think there will be an issue of people ending up in a LISA when they would be better off in auto-enrolment?
Jonquil Lowe: Is that for me?
Ian Blackford
Both of you.
Jonquil Lowe: Automatic enrolment, yes, is definitely superior. The employer’s subsidy is very valuable so it would be extremely concerning if people switched to lifetime ISAs. The problem for women with caring responsibilities is that they simply do not have a lot of money to save. It is very nice that they can have a bonus if they can save, but if they cannot save, where does that leave them?
The value of unpaid caring is huge. The Office for National Statistics tries to measure it and reckons the value of unpaid childcare is about £320 billion a year and unpaid adult care about £57 billion a year. The figures are huge—about a fifth of GDP. Countries address the problem in different ways. For example, Finland has a home care allowance that recognises the value of unpaid work and gives some income that can be used to buy childcare to release the woman for work, or perhaps for other matters, which might be setting money aside to save for emergencies or later life. Simply saying, “If you save, here’s a tax bonus,” does not solve the problem of the people who cannot afford to save.
Martin Lewis: It doesn’t, and some people should be paying off their debts, which again is a problem I mentioned earlier, especially with the Help to Save scheme. I would stretch Help to Save a little lower and allow younger people to engage in the scheme as well as people who work fewer hours but do work. If I were in charge, I would bring it lower down the net. I agree with you on that point.
The problem about the people who do not auto-enrol going into lifetime ISAs when they should auto-enrol is that products, once they become commercial—effectively Help to Save is not because it is from NS&I, but the lifetime ISA is—are sold, and they are sold to encourage people to engage. Therefore, you have competing sales messages.
That goes back to my original point of mandating messages at each point in the journey towards getting it to try to block people out. The person in charge of lifetime ISA savings at one of the big banks is incentivised by how many lifetime ISA savings he brings in and his staff, some way down the line, will be incentivised—or at least their jobs will be contingent on it—to get people to bring in lifetime ISA savings. They will not have a vested interest in telling you to put money in your pension instead, so you need to make sure that they cannot avoid doing so.
That is a subtle point, but it is about misprioritising. Every single product we have on the market, from credit cards to savings accounts and bank accounts, misprioritises someone’s finances if used incorrectly. That is not a reason for not doing the product, but this is the joyous point: we are creating a new product in our nice internet and app-based era where it is rather easy to mandate people to give certain messages. That is why I suggest you do so, in a way that you could not when everything was individually sold by incentivised sales staff sitting in a closed-room office of a bank branch, as it was 20 years ago. Now, most of these things can be automated, so make them automated.
Huw Merriman
Q Mr Lewis, this morning we heard from some of the representatives from the financial services industry, who seemed to think that this was a complex product.
Martin Lewis: They are not very bright people.
Huw Merriman
I will leave it to you to say that. My question for you—perhaps I should have asked them—is: do you think there is a danger that, as we advance and these products come on stream that people can follow by using the internet, all of a sudden fees will be lost, as people do not need their investment adviser? Perhaps that is why the industry pooh-poohs products such as this and dresses them up as “too complicated”.
Martin Lewis: One of the problems you will have with the lifetime ISA for pensions is that the vast majority of money will go into savings, not investments, which over a long period is probably not a good move. That is another issue, whereas pension money really goes into investing. I think most people who put money in a lifetime ISA will put it in a cash version and they will not need an investment manager because of that. I think there is an issue going on there.
Are these products complicated? All products are complicated; all products can be explained. I have always been anti the simplicity agenda—all that does is cut down choice and competition and take away flexibility of lifestyle to enable products to be different for different people. These products are no more complicated than those we have out there. It is always said of the state pension that there are only two people who understand it: one of them is dead and the other is still not sure whether he really does get it.
When you contrast these products with the state pension, they are pretty easy products to understand. They have to be explained and they have to be communicated. They will take time. We need to ensure that we use nice, easy and real terminology and not jargon when we do so. Certainly with the lifetime ISA, it is going to take five, six or seven years before it becomes a steady part of what people do. Certainly on the pensions side, the lifetime ISA is easier because it is really the help to buy ISA with some tweaks—that is all it is—and we have already started to do the education process on that.
The argument that they are too complicated is just a complete load of palpable balderdash. It sounds like an industry that is already making a lot of money from one product that does not want to see competition to it. I do not want to see competition to it when it is not right for punters, but when it is right for them and it is a good product, we should be offering it, and we should be slightly careful not to listen to people making bogus excuses because they are rent-seeking.
Dr Whiteford
Q I want to come back to the potential gender differential impacts of the policy and of the LISA in particular, because generally how we ensure that women are able to benefit from public policy decisions is critical. You said that the Women’s Budget Group had concerns that not many women would be able to benefit from it. We also know that, in later life, women are far more likely to be on means-tested benefits because they have smaller pension pots or do not have an occupational pension at all. Has the Women’s Budget Group crunched numbers on that or modelled that in any consistent way?
Jonquil Lowe: No, I do not think we have the detailed number crunching that you are after. It would be a really interesting thing to do, but it is always difficult to have these discussions because you are talking about different cohorts of people. The women who are currently retired and on low pensions did not experience the same set of circumstances as women today. Certainly, the state pension system now has much better protection for people who are caring, which is unlike the private pension system—
The Chair
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions and, indeed, for the sitting. I thank our witnesses on behalf of the Committee for their evidence.
Digital Economy Bill (Seventh sitting)
Tuesday 25th October 2016
(8 years, 2 months ago)
Public Bill CommitteesRead Full debate Digital Economy Act 2017 View all Digital Economy Act 2017 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 October 2016 - (25 Oct 2016)
Kevin Brennan (Cardiff West) (Lab)
I beg to move amendment 92, in clause 26, page 26, line 18, leave out
“, or will expose the owner of the copyright to the risk of loss.”
This amendment and amendment 93 is a probing amendment to explore the impact of Clause 26 on account holders.
The Chair
With this it will be convenient to discuss the following:
Amendment 93, in clause 26, page 26, line 35, leave out
“, or expose the owner of the rights to the risk of loss.”
See amendment 92.
New clause 3—Power to provide for a code of practice related to copyright infringement—
“(1) The Secretary of State may by regulations make provision for a search engine to be required to adopt a code of practice concerning copyright infringement that complies with criteria specified in the regulations.
(2) The regulations may provide that if a search engine fails to adopt such a code of practice, any code of practice that is approved for the purposes of that search engine by the Secretary of State, or by a person designated by the Secretary of State, has effect as a code of practice adopted by the search engine.
(3) The Secretary of State may by regulations make provision—
(a) for the investigation and determination of disputes about a search engine’s compliance with its code of practice,
(b) for the appointment of a regulator to review and report to the Secretary of State on—
(i) the codes of practice adopted by search engines, and
(ii) compliance with the codes of practice;
(c) for the consequences of a failure by a specified search engine to adopt or comply with a code of practice including financial penalties or other sanctions.
(4) Regulations made under this section—
(a) may make provision that applies only in respect of search engines of a particular description, or only in respect of activities of a particular description;
(b) may make incidental, supplementary or consequential provision;
(c) shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.”
This would amend the Bill to present an opportunity for the Government to fulfil its manifesto commitment to reduce copyright infringement and ensure search engines do not link to the worst-offending sites. There is an absence of a specific provision in the Bill to achieve this.
New clause 33—Pre-loaded IPTV boxes—
“(1) The Copyright, Designs and Patents Act 1988 is amended as follows.
(2) In section 107(1)(d)(ii) after “offers” insert “, advertises”.
(3) After section 107(1)(d)(iv) insert—
(v) installs, maintains or replaces, or
(ii) otherwise promotes by means of commercial communications, or”
(4) In section 107(1)(e) after “article” insert “, device, product or component”.
(5) In section 107(1)(e) after “work” insert “or which is, and which he knows or has reason to believe is, primarily designed, produced, adapted or otherwise used in a manner described in this section whether alone or in conjunction with another article, device, product, component, or service supplied by or with the knowledge of the same person for the purpose of enabling or facilitating the infringement of copyright”.”
This new clause allows the Government to fulfil its commitment in the IPO’s Enforcement Strategy to ensure that UK business and rights holders have the necessary legal means to protect their IP. It brings in language to cover the supply of IPTV boxes clearly being marketed or sold for the purpose of enabling or facilitating copyright infringement, recognising that many devices may not, themselves, infringe copyright, but are supplied in conjunction with information which enables users to infringe copyright.
Kevin Brennan
Good morning, Mr Streeter. We now move to part 4 of the Bill. May I say first that it is a pleasure to serve under your chairmanship? I thank you and Mr Stringer for all the work that you have done so far in helping us to get through and scrutinise the Bill.
New clause 33 stands in my name and that of my hon. Friend the Member for Sheffield, Heeley. Although she is not in her place at the moment, I am sure that the rest of the Committee would want to join me in congratulating her on her efforts so far as a first-time Front Bencher. I only hope that I can come close to matching her assiduous scrutiny of—[Hon. Members: “Here she is!”] Right on cue, she makes an entrance so that I can complete my compliments for her efforts so far on our behalf and on behalf of the whole Committee in scrutinising the Bill.
New clause 3 is in the name of the hon. Member for Selby and Ainsty, but we have added our names to it because we think it a very good one. I hope that we can have a substantial debate about it this morning, because there are some real issues that we need to discuss.
This is quite a chunky clause. Amendments 92 and 93 are probing amendments. We just want to explore with the Minister the meaning of clause 26 and to clarify its implications. I should say at the outset that Opposition Members support the principle that there should not be any distinction between physical and digital copyright infringement, and therefore support the proposal in the clause to equalise the penalties for that kind of infringement.
For the benefit of the Committee, I point out that the penalty for digital copyright infringement will be increased, to equalise it with that for the physical world, from a maximum of two years’ imprisonment to a maximum of 10 years. That makes sense if we are to support the principle of there being no distinction between the two, although in supporting that principle we want to ensure that the penalty is used appropriately. Obviously, we want to hear about that from the Minister in his response.
It could be said that elsewhere in the Bill, because of its unevenness, is the implication that there is some kind of binary between the digital and the non-digital world. That, of course, is not true when we get into the real world. My hon. Friend the Member for Sheffield, Heeley, in her excellent scrutiny of the Bill from the Front Bench, has argued that we should have had a properly thought through digital future Bill, given all the issues in play, and that that would have done away with the false division that tends to exist between the digital economy and the general economy.
Instead, we have a bit of a Christmas tree Bill, on which the Government are hanging various vaguely related issues. That is what is in front of us, so that is what we must scrutinise, but the levelling of the law on copyright infringement is, I think, a partial acknowledgement of the point about the false division between the digital and the non-digital worlds. However, in increasing the penalty as the clause proposes, we must be sure that we do not leave a window cracked open for unscrupulous operators to be able to intimidate and take advantage of consumers, whom I do not believe the Government intend to target in the clause. I do not think that the Minister intends to target consumers, but he will tell us that in his response.
The issue is largely a matter of wording. Whenever we scrutinise legislation, however, we have to make sure that no aspect of the law is left unclear by muddled phrasing, so it would be helpful to the Committee—this is the purpose of our probing amendments—if the Minister explained the distinction made in clause 26 between
“the owner of the copyright”,
in line 18 and
“the owner of the right”
in line 35. What do the Government intend by the distinction?
Christian Matheson (City of Chester) (Lab)
Now we’re listening, Mr Streeter. Does my hon. Friend know what that represents in terms of sales?
Kevin Brennan
I shall stick strictly to the amendment, but I think it is mainly in relation to live performances, rather than through physical or online sales.
The impact of copyright infringement is very difficult to quantify precisely because not every copy of a music track that is illegally shared necessarily represents a lost sale. Nonetheless, the scale of illegal downloading and streaming of music remains significant and it continues to undermine the economic health of the UK’s music industry. The Ofcom Media Tracker survey, average retail prices and academic evidence taken together all suggest that the losses from piracy to the UK recorded music industry are between £150 million and £300 million a year. That is a significant loss of value to the UK economy and legitimate music-related businesses.
Christian Matheson
Do not many of the search engines make their money by prioritising businesses and organisations that have chosen to advertise with them? It is therefore easily within their power to change their algorithms at will to meet the requirements that my hon. Friend suggests.
Kevin Brennan
My hon. Friend is absolutely right: it is within search engines’ ability to change the algorithms. I had always thought that the problem might eventually solve itself, because when advertising is placed next to the results of an online search, the companies whose products and services are being advertised appear next to websites that are run in the shadows, often by criminal networks. Surely reputable businesses with statements of corporate social responsibility would not want their advertisements to appear next to a search that turned up an illegal website run by some gangsters somewhere in Russia. However, it turns out that search engines do not solely or even principally make their money from advertising; it is data that are valuable to them. As one of my hon. Friends said earlier, data are the new oil. It is the data acquired on individuals through search engine practices that are so valuable and that enable companies to put product placement in their advertising and search engines to tailor searches to individual consumers online. Embarrassingly, that fact once resulted in a Conservative Member criticising a quote of mine on the Labour party website because the advertising content that appeared next to it was to do with dating a certain type of person. The Member in question subsequently found out that the advert had been placed there not because the Labour party was short of money but because that advert was tailored to his personal search activities. Members should beware when making such criticisms.
My hon. Friend the Member for City of Chester is absolutely right that it is perfectly within search engines’ power to solve this problem. Some efforts have been made by Google, and they worked for a short time, but a search engine search for widely available music by some of the most popular artists in the UK will still return a lot of illegal results. The hon. Member for Selby and Ainsty may wish to cover that point in his remarks, so I will not go into further detail, but BPI research certainly indicates that.
The voluntary approach is not working. We have seen this movie before; we have downloaded it many times, and it always has the same inconclusive ending. New clause 3 would provide it with an ending to match one of the best last lines in the movies, which is “Shut up and deal.” Any offers from Government Members? It is from Billy Wilder’s great film “The Apartment”; Shirley MacLaine says it. The new clause would enable the Government to say to the search engines, “Shut up and deal,” because there is no incentive for search engines to do so at the moment. We are being helpful to the Minister, as is his colleague. We are trying to put a bit of lead in his pencil, and he should welcome this cross-party effort to ensure that progress is made.
One further point: I have a sneaky feeling that the Minister actually agrees with the new clause, although he will not agree with it today, and will want to make this change to the Bill but to do so in the House of Lords. If my prediction is wrong, I will take it back in due course. The only thing that I would say is that it does not do this House’s reputation any good when Governments behave that way. I accept completely that all Governments do it: they know that they want to make a concession on a Bill, but they decide to do it in the House of Lords rather than the Commons. Ultimately, although we hear all the talk about the House of Lords being such a wonderful revising Chamber, the Government should accept once or twice that hon. Members, including those of their own party, come up with amendments that are perfectly sensible and should be incorporated into a Bill. It would help the reputation of this House if the Government were prepared to behave in that manner.
One fundamental aim of the e-commerce directive was to identify clearly which practices fall within and outside safe harbour defences. Part of the legislation— article 16, to be specific—encourages member states and the Commission to draw up a code of conduct at community or national level. However, no such code of conduct has ever been drawn up due to resistance by the search engines. They should not be allowed to avoid parts of legislation at the expense of UK creative industries just because they find it inconvenient. The new clause would end the wasting of Ministers’ time in chairing meetings that go nowhere, the repetitive process of rights holders producing proposals and the practice of search engines consistently refusing to comply to combat piracy, thus ensuring that the digital economy continues to benefit both the UK creative industries and the British public.
New clause 33 is the last amendment in the group. Last month, the Government released their annual intellectual property crime report. Some of the trends are quite startling: they reported 33% more illegal TV programming downloads in March to May 2015 than in the same period in 2013—a rise from 12 million to 16 million. The report highlights as a major concern the proliferation of internet protocol TV, or IPTV as it is known, which offers viewers increasingly easy access to pirated digital content. Technological changes have led to exponential growth in this new form of piracy. Android-based IPTV boxes are being loaded with software linking thousands of streams of infringing entertainment, movie and sport content. The boxes are sold on mainstream marketplaces such as Amazon and eBay, and through Facebook.
The Copyright, Designs and Patents Act 1988 has yet to be updated to reflect the new technology. It offers no effective remedies to copyright owners, who at present can rely only on laws that are not particularly tailored to copyright infringement. The new clause would help prosecute those who pre-load and distribute such devices and make it easier to work with online marketplaces to remove listings by wholesalers of such products.
Nigel Adams (Selby and Ainsty) (Con)
I rise to speak to new clause 3. It is a pleasure to follow the hon. Gentleman, who knows an immense deal about this area, having been a huge recipient of earnings from rights over the past few years. I am not entirely sure whether all that income was derived from him buying presents for his family, but it is great to see that we genuinely do have talented musicians in this place.
The new clause would create a power that allowed the Secretary of State to consider introducing a code of practice between search engines and rights holders on copyright infringement, which we have heard about. This power could be used only in the absence of a voluntary code between the two parties; it would not automatically create new legislation. Instead, as has been said, it acts as a backstop power if all other attempts to get an agreement between the producers of creative content and those who facilitate access to infringing material fail.
According to the latest estimates from the Department for Culture, Media and Sport, the UK creative industries amount to £87.4 billion in gross value added, and have an export value of £19.8 billion. These are incredibly large sums. Industries such as the music sector contribute immensely to those figures. Last year, five of the top 10 biggest selling artists in the world were British. One in six albums sold globally is from a UK artist. Those are staggering figures, and they demonstrate the appetite for UK music content here and abroad. According to “Measuring Music”, a report developed by UK Music, the industry body, the sector grew by 17% over the past four years and is worth £4.1 billion to the UK economy; it generates exports of £2.2 billion.
Although the UK creative industries are much in demand, copyright infringement remains a significant challenge. It not only has negative economic consequences for our businesses and industries by driving consumers to illegal markets, but seriously undermines the respect for, and value placed on, the creativity and effort that go into producing content—music and films in particular. According to the latest Kantar Media copyright infringement tracker, commissioned by the Intellectual Property Office, 78 million music tracks were accessed illegally between March and May 2016. The same research indicated that 20% of internet users participated in some form of illegal music activity online during that short period. These are very worrying figures, and they remind us that despite the growth in access to legal streaming sites, such as Spotify for music and Netflix for films, piracy remains a significant problem that needs to be tackled.
If we are to ensure a prospering commercial market for UK music that benefits rights holders and creators, it is essential that the main method of discovering music and artists directs consumers to legitimate sources. Search engines are one of the key means by which consumers discover music and artists. However, the prevalence of search results linking to infringing content, particularly on the first few pages of a generated search result, as we heard from the hon. Member for Cardiff West, indicates that more needs to be done. Furthermore, search engines incorporate auto-complete functions that can provide access to terms associated with the discovery of illegal content even before an internet user has finished typing their search terms.
For example, I am sure that you, Mr Streeter, are aware of the artist James Arthur, who was at No. 1 with “Say You Won’t Let Go” until he was knocked off the top spot, as I am sure you are aware, by Little Mix, which caused great excitement in the Adams household. When searching on Google, all I need to do is type in “James Arthur say y”, and I am given an option of clicking “James Arthur ‘Say You Won't Let Go’ download”. This takes me to a series of search results, and the only legitimate link allowing me to access that track legally is at the bottom of the page. It is not acceptable that search engines allow such ease of access to infringing content.
Some searches involve wading through several pages of results before getting to the first legal site. That is clearly wrong. The effectiveness of Google making changes to its algorithms—an infringement solution that that particular search engine advocates—remains to be seen. In reply to a written parliamentary question that I tabled on 2 September, the Government admitted on 26 September that it is “not possible to say exactly how” an algorithm change “equates to changes in infringement”. In response to a separate question, they said that it was “not…possible to analyse the…effectiveness” of measures to decrease auto-complete suggestions that provide access to stream ripping and other illegal converter technologies via search results.
In the 12 months up to September 2015, the British Phonographic Industry—the representative body for the recorded music industry, which does much vital work in the pursuit of anti-piracy measures—submitted almost 66.5 million infringing URLs to search engines for removal from search results. The ability of search engines to link to legitimate websites should be straightforward. For example, pro-music.org identifies legal online services. The site identifies that the UK has over 50 legitimate music websites—28 download, 19 subscription and 14 supported through ad services.
Creating a legitimate marketplace increases industry’s capacity for growth and supports overall economic wellbeing. Consumers also stand to benefit from higher-quality search results, clear signposting to legal content, and reduced exposure to malware, viruses, and other types of deceptive advertising. Studies demonstrate that these risks to internet security are sadly prevalent on infringing sites.
Dealing with copyright infringement requires co-operation; the problem can be addressed through positive initiatives. We have seen success in website blocking and, as we have heard from the hon. Member for Cardiff West, from the “Get it Right from a Genuine Site” campaign. UK Music developed an app, aimed at young people, called Music Inc. in partnership with Aardman Animation and the IPO. It raises awareness by simulating the mechanics of the music industry and showing the impact of copyright infringement on business decision making. The app has attracted over 600,000 users since its launch. We have also seen positive results from activities by advertisers and payment providers, and from the work of the police intellectual property crime unit to take advertising and payment services away from illegal sites.
Recognising the challenges, the Government have facilitated a round-table process so that rights holders, industry bodies such as the BPI, and representatives from search engines can discuss the problems of copyright infringement. This process has yet to result in agreement on how infringing content should be tackled. Rights holders are trying to negotiate a voluntary code of practice. We must take this opportunity to ensure that that happens. A code of practice for search engines would result in the reduced prominence of known infringing websites in search results, through demotion and delisting. Search engines already use such practices with regard to a range of illegal activities. The demotion of illegitimate websites would be attractive, in that verified artist websites would benefit in the same way that licensed retail stores do. This is because they will be promoted in the rankings at the expense of infringing sites.
Nigel Huddleston (Mid Worcestershire) (Con)
Is my hon. Friend aware that rankings are vital? For some search terms, up to 90% of clicks can come from the top three results. Certainly more than 90% of people do not look past page 1, so being at the top is vital to clicks and activity.
Nigel Adams
My hon. Friend speaks with great knowledge on the subject. That is absolutely vital. Consumers searching are not necessarily aware of which sites are legal and which sites are not, so being in the top few search results is crucial. Much more needs to be done to ensure that genuine sites are recognised when people use search engines.
A code of practice should recognise that its scope includes legitimate artists’ websites where appropriate. The Bill presents an opportunity for the Government to fulfil their manifesto commitment to reduce copyright infringement and ensure that search engines do not link to the worst offending sites. At this stage, there is no specific provision in the Bill to achieve that. Although it is not my intention to push the new clause to a vote, I am keen to hear the Minister’s response, and his ideas about how to ensure that its intentions are delivered.
The Chair
It may help the Committee to know that we will not reach votes on new clauses today; that will come at the end of our proceedings, in case anyone is getting terribly excited.
Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)
I am sure that the Minister will be glad to hear that I will not be quite as thorough, because everything has been covered already. He was looking somewhat exasperated. I do not know what he was googling; “How to make this Bill go quicker”, perhaps.
Christian Matheson
Does the hon. Gentleman not agree that one way to make the Bill go quicker would have been for the Minister not to have tabled so many Government amendments?
Calum Kerr
That is an excellent point. I think that the ambition is to make the amendment paper longer than the Bill. If the Bill is a Christmas tree, the baubles must be hollow, with a little note inside saying “IOU a lot more detail, or an apology.” It has made my first Bill Committee an interesting experience.
Of course we support clause 26 and the spirit behind it. It is important that copyright be protected. Our creative industries in these isles are a huge success story, and they should be fully supported. The hon. Member for Cardiff West gave a thorough and excellent overview of the issues; I know that my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) was delighted to hear that he was on the Bill Committee, as the subject is close to his heart. I would hazard a guess that he has made more than £10.60 from his past efforts. Before I come to the substance of what the hon. Member for Selby and Ainsty said, I put on record my appreciation and admiration for his contribution last Friday. That day showed the worst and best of democracy in this place, and he was part of the best.
On the new clauses, I have been sitting here messaging my staff asking, “Why didn’t we add my name to these?”. We need to learn how things operate a bit better. We fully support the amendments. New clause 3 is an essential addition. As the hon. Member for Cardiff West said, I am sure that the Government will add something at some point, because that is a logical step to take. As has been outlined in some detail, there are millions of sites flagged to the search engines by the relevant bodies. It is not as though they have to go and find them themselves; it is the process by which the search engines do or do not take the sites down that needs to be brought into sharp focus. Clearly, there are efforts at a voluntary approach, but this is the perfect opportunity to put into legislation something that might drive the right outcome and behaviour without the need for follow-through. Past experience supports that idea. We must see some movement in that area.
We support new clause 33 on IPTV boxes. It is necessary to move with the times. This Christmas tree of a Bill has a lot of aspects to do with the broader digital economy, but people will continue to innovate and find new ways of delivering content, and IPTV is one example. Someone in this place recommended an IPTV box to me for my London flat because it is quite a cheap way of accessing content, but I did not follow that advice because I would not want to access any illegal content. These boxes come pre-loaded, and there should be no pretence about it: they are designed to give people a way of avoiding paying for content that they know they should pay for. There is no excuse for that. New clauses 33 and 3 are essential additions to the Bill, and we are delighted to support them both.
Rishi Sunak (Richmond (Yorks)) (Con)
New clause 3 is about protecting content owners from copyright infringement. Most of the discussion we have heard today has centred on online platforms and their particular abuse of music content. However, has the Minister considered the connected issue of the newspaper industry? Historically, newspapers used revenue from advertising to help support their news-gathering operation, and to provide a vital service, especially in regional and local communities—I am sure that Members on both sides of the Committee will have experienced that service in their constituencies. Today, there is a concern that some online platforms are benefiting from such news-gathering, but are not always paying for it in the most appropriate way. That raises questions about the sustainability of the newspaper industry and the vital service it provides. Has the Minister considered the connected issue of newspapers? Will he share any thoughts with the Committee?
Thangam Debbonaire (Bristol West) (Lab)
I rise to speak in support of these amendments and new clauses, and to add a bit of colour and flavour to some of the arguments that have already been made. We often talk about rights holders, but we need to be aware that behind those rights holders are individual artists, musicians and technical people. It is not just about my hon. Friend the Member for Cardiff West; it is about the technical people involved in any recording, film or e-book. Many people are involved in those processes, and every time we deny their right to be paid, we are denying them the right to continue working in the way that we would want them to work.
Which of us here has not skipped gaily around the Palace of Westminster, at least in our imagination, with a song in our heart or a tune in our head? Maybe that is just me. Most of us have a favourite film, and we have music at special family occasions. A poem will be read at a funeral and a song will be danced to at a wedding, and all the people involved in producing them need to be paid properly for their work.
There should not be this wild west of a shopping mall where people can access whatever they want for free, without proper provision for reimbursing those involved. Unfortunately, search engines in particular, but also other providers, are allowing that illegal shopping mall to exist, and so artists, writers and others involved in the creative industries are not getting their proper deserts. That is important.
The hon. Member for Selby and Ainsty and my hon. Friend the Member for Cardiff West both mentioned economic value. I emphasise that according to the Government’s own website, the creative industries are contributing £9.6 million an hour to the UK economy. Since we sat down to work, the creative industries have contributed £9.6 million. UK music alone contributes £4.1 billion each year, which is something to think about. The creative industries are growing at twice the rate of the UK economy, at 8.9%, and we want them to continue to grow. We do not want to deny them part of their income—admittedly the minority, but it is still significant.
We tabled these amendments because we need to harmonise copyright and ensure that licensing laws work across the online and offline world. We want to help Conservative Members to fulfil their commitment in the Tory party manifesto, and new clause 3 would help
“the Government to fulfil its manifesto commitment to reduce copyright infringement and ensure search engines do not link to the worst-offending sites.”
We seem to have a degree of cross-party unity on the value of that measure. I look forward to hearing what the Minister has to say, because there is otherwise an absence of a specific provision in the Bill to achieve this.
I want us to make sure that the good examples, such as Get it Right from a Genuine Site, are taken up and followed, to avoid the unfortunate misdemeanours of others, such as search engines that can remain nameless—we can all guess who they are and others may have already mentioned them. It is not okay for search engines to drive—wittingly or unwittingly, but they should reasonably have known—towards illegal sites.
Consumers do not want musicians, film makers and others to be robbed of their just deserts. Mostly, we want to be able to be sure that when musicians have made a piece of music we love, they get properly paid for it. It is incumbent on search engines and others to make sure that that happens, and to use the power we know they have to create their algorithms to work properly in this respect. We would not tolerate a shopping mall in which signs and property space were given to illegal shops selling illegal goods. This is the equivalent.
I am absolutely convinced that the Minister would want to honour the commitment in the Tory party manifesto to rectify that. On Second Reading, the former Secretary of State, the right hon. Member for Maldon (Mr Whittingdale) said,
“there may well be a case for including a legal provision encouraging providers to establish a voluntary code.”
He also said:
“we cannot allow Google and other search providers to go on allowing people access to illegal sites.” —[Official Report, 13 September 2007; Vol. 614, c. 785.]
I am convinced that the Minister will want to take up the mantle he has been thrown by the former Secretary of State and I urge him to do so.
The Minister for Digital and Culture (Matt Hancock)
What a pleasure it is finally to stand to respond to the long interventions and speeches from Labour Members. It is a joy to hear that at least some of them understand and believe in property rights. Conservative Members certainly do.
The discussion has turned into a debate not only on amendments 92 and 93 and new clauses 3 and 33 but essentially on clause stand part. I therefore hope that Committee members will understand if I explain the whole clause in my response.
Kevin Brennan
The Minister is seeking to chair the Committee now as well as being the Minister.
Matt Hancock
It is a team effort.
The amendments are to clause 26, which increases the maximum sentence for online copyright infringement from two to 10 years, which is equal to the sentence for physical copyright infringement. The case for this has been made powerfully by Government and Opposition Members and it is an important change. Whether online or offline or a combination of the two, copyright infringement is IP theft and it is right that the maximum sentence is the same.
This sends a clear message that copyright infringement of either kind will not be tolerated and affirms that creators who produce the content that we all enjoy are valued. Furthermore, enforcement agencies will now have proportionate sanctions to tackle this serious criminality, whether offline or online.
We recognise that the maximum sentence of 10 years, even if only for the most serious cases, must be carefully targeted. Consequently, clause 26 also makes changes to the existing offence of online copyright infringement to make it clearer when that offence is committed and who should be considered liable. The amendments speak to some of those points.
The concept of prejudicial effect in the existing legislation will be replaced with a requirement that the infringer intends to make a monetary gain for themselves or knows or has reason to believe their actions will expose the rights holder to a loss or risk of loss in money. I will come to the debate around definition of that in more detail.
The point of this clarification is to act as a safeguard to ensure that the increased maximum penalty is applied only to serious criminals who deserve it and will not apply to those who share material accidently or without knowledge of the consequences.
Turning to the points made by the hon. Member for Cardiff West, or at least the ones that were pertinent—
Kevin Brennan
On a point of order, Mr Streeter. Am I right in saying that as the Chair of the Committee, had I made any points that were not pertinent, you would have ruled me out of order?
The Chair
I can certainly confirm that you were in order all the way through your comprehensive speech.
Matt Hancock
Undoubtedly in order and sometimes very broad ranging. A person who accidentally shares a single file without the appropriate licence, particularly when the copyright owner cannot demonstrate any loss or risk of loss, is not expected to be caught by this offence. I hope that gives the hon. Gentleman assurance on that point. However, of course, criminal infringement will be dealt with on a case-by-case basis and a court must be satisfied beyond reasonable doubt that all elements of the offence have been made out.
Kevin Brennan
We are getting to the crux of the matter: the words the Minister uses are very important. All joking and jibing aside, which he enjoys, there is a serious reason for laying these matters firmly on the record in Committee—that is our serious purpose here and our constitutional role. He said, “is not expected to be caught by this offence”. I fear that that is not really strong enough in response to my points. We need to understand whether it is possible for individual consumers to be captured by it. If so, the Minister should tell the Committee.
Matt Hancock
As I said, it is for the courts to decide about criminal infringement on a case-by-case basis, but I am making clear that that is unlikely and not the expected outcome in the case of a person who accidentally shares a single file without the appropriate licence. The reason I do not go further and make it absolute is to ensure that the court can make a fair judgment on this, rather than be bound. I want to go further, because there is another important point here about the impact of this on activities that are currently lawful. We do not expect things that are currently lawful to be caught by this change. This is a change in the scope of the sentence rather than in the definition of the offence. I want to make that very clear.
On the second point that the hon. Member for Cardiff West made about the legal distinction between “owners of copyright” and “owners of the rights”, “owners of copyright” relates to the offence of communicating to the public, whereas “owners of the rights” relates to the performer’s right of making available. This is a legal distinction: they are two separate offences but there is no substantive difference in the meaning of the two. The reason has to do with the legal drafting of the offence rather than the lay understanding of the meaning of the two.
The hon. Gentleman also raised the issue of trolls. I want to be clear that while we understand that some people may receive threatening letters from so-called trolls, we are not aware of any successful court case by these so-called trolls in this area. We do not endorse such aggressive tactics and we understand that this tactic is not widespread, but we will keep it under review.
Going more broadly into the debate that we have just enjoyed, since 2002, when the maximum custodial sentence for copyright infringement was changed, this has clearly been wrong. I am glad that there is all-party agreement on the change to 10 years, but in addition to increasing the maximum sentence, we have recast the relevant offences to include an additional element to the offences, which must be proved before an offence is made out, namely that the infringer intends to make a monetary gain for themselves or another person, or knows or has reason to believe that their actions will cause loss to the rights holder or a risk of loss in money. Amendments 92 and 93 would remove this additional element, but there are several reasons why it should be retained. We should remember that serious incidents of online copyright infringement or infringement of a performer’s making available right already fall within the scope of criminal law, as I mentioned.
It is right that the courts should be able to apply serious sanctions where they are warranted and apply the equivalent sanction to that available for physical copyright infringement, but it is our view that it is important to include the words, “risk of loss” to capture cases where the loss has not yet materialised. We believe that these same scenarios would fall within the current drafting of the offences, which relies on the prejudicial effect, but we have tightened the notion of prejudicial effect following consultation, to be more precise and targeted in the wording being examined today. I hope that satisfies the understandable request by the hon. Member for Cardiff West for clarity to be put on the record as to the intent of clause 26.
I now wish to turn to new clause 3 on search engines. We had a serious debate on the impact of search engines. We come from a position of being strong believers in the protection of property rights, and we want to ensure that the UK retains one of the best IP regimes in the world. Without content, there is no IP to protect, so I pay tribute to the BPI’s work: to support take-downs and to make the eloquent case for stronger IP protection. I also pay tribute to Get it Right from a Genuine Site, which does important work in making sure that culturally it is unreasonable—and seen as unreasonable—to take IP without paying for it.
I turn to my hon. Friend the Member for Richmond (Yorks) who made an important point on newspaper articles that appear in search engines. We support fair remuneration and we encourage content providers and online platforms to work together on this. This is an issue that has been raised with me directly, and it is pertinent to the debate. We want to encourage investment in new content, and we support returns for investigative journalism and other kinds of journalism, and I hope we come to a resolution on fair remuneration between content providers and online platforms, in the first instance. However, my hon. Friend’s intervention is noted.
In relation to clause 3, as the Committee knows from the discussion, the Minister for Intellectual Property, Baroness Neville-Rolfe, has been working closely with search engines and representatives of the creative industries. We are fulfilling our manifesto commitment to ensure that there is a fair return, and the group is currently considering a voluntary code of practice. I agree with the thrust of the arguments made by my hon. Friend the Member for Selby and Ainsty, who put the case strongly. Our intention is for the voluntary negotiations and the voluntary code of practice to come to a successful fruition, and the people involved in those negotiations will doubtless have heard the argument and understood the strength of feeling on this Committee. Given this ongoing work and the existing remedies for removing or blocking infringement content, I hope that hon. Members will agree that now is not the right time for a broad reserve power.
Kevin Brennan
Surely now, when we have a legislative vehicle in front of us that could not have been better designed for this very purpose, is exactly the right time. Committee members would have a right to be annoyed if, in making this broad assertion that now is not the right time, the Minister were subsequently to concede on this point at a later stage in the Bill’s progress, in another place and in an unelected House. Will he tell us truthfully what the Government’s intentions are on this point?
Matt Hancock
I care about the substance of getting this Bill through right. There are, of course, important parts of parliamentary process both here and in the other place. Given that the round-table discussions are ongoing, including a meeting next week, now is not the right time for the broad reserve power.
New clause 33 seeks to expand the criminal liability to include the supply of IPTV boxes for criminal infringement. As hon. Members will understand from the tone of my remarks, as a strong believer in property right protection, I understand the concern. The hon. Member for Cardiff West referred to the Copyright, Designs and Patents Act 1988 and the fact that the Minister for Intellectual Property had committed to making sure that we looked at this, and we have done so. This activity is already covered by criminal law under the Fraud Act 2006 and the Serious Crime Act 2015. The City of London police force is investigating cases. It seized over 500 set-top boxes earlier this year and arrested a man for fraud and IP offences.
There is a danger in the digital world of legislating for a specific technology as opposed to legislating for the offence in a technology-neutral way. I strongly prefer the latter. As the law is already in existence in the two Acts that I mentioned, the best thing to do is to prosecute under the existing Acts, rather than try to chase a particular technology, which may well be out of date. Our strategy for tackling IP crime includes a specific commitment to developing an understanding of the challenges posed by IPTV. We now need an approach that tackles the problem, rather than just current IPTV set top-box technology, which will no doubt be superseded in due course by future technologies. The existing criminal offences provide a legislative framework that is broad enough to protect our creative industries. However, I will of course keep this area under review.
I hope Members have been reassured of the work we are doing to make sure we apply the existing criminal law and make sure that intellectual property is protected. I concur with all the remarks made by Committee members about the importance of the creative industries, the importance of supporting content providers and the importance of intellectual property. I hope that with these explanations, the hon. Member for Cardiff West will feel able to withdraw the amendment.
The Chair
Before I call Mr Brennan, it may help the Committee to know that it is not my intention to allow a wider debate on clause 26. We have had a good old canter around the course.
Kevin Brennan
Thank you, Mr Streeter, for letting us know your decision—not influenced at all, I am sure, by the efforts of the Minister to chair the Committee as well as leading for the Government. I will take into account in my response that you are including clause stand part in this part of our debate.
I made it clear at the outset that amendments 92 and 93 were probing amendments and I am very grateful for Minister’s explanation of the meaning and intention of the wording. As I have made clear, it is not our intention to push the amendments to a Division, but I think we need to cogitate a little further before Report and the latter stages of the Bill and perform a more careful exegesis of what the Minister said when he used the phrase “not expected”.
Matt Hancock
I can go yet further on that. The reason this is rightly done on a case-by-case basis is that we are talking about an existing offence. It is important to remember that. We are not making something illegitimate which is currently legitimate; we are adding to what is required to make out an offence. We are not making something that is currently legitimate now illegitimate. That is why it is reasonable to proceed on that basis, with the language that I used.
Kevin Brennan
I am grateful for the further clarification and for the Minister engaging in the discussion. We will think further about what he has said. I think it has been a very helpful exploration of the issue. I am not sure that he is right when he receives advice that the trolling issue is not widespread, which was the phrase he used. Obviously we can dig into that a bit further as we progress with scrutinising the Bill, but I welcome the fact that he said he would keep that under review. This is a very real issue and the fact that there may not be many prosecutions around it is often related to the fact that such activity is not necessarily illegal—the point I made in my contribution. Nevertheless, it can bring great distress to vulnerable individuals. We all know that the issue of vulnerable individuals being targeted by unscrupulous individuals, organisations and networks online is growing.
Matt Hancock
The challenge, though, is to ensure that reasonable protection of intellectual property is not ruled out by stopping any such speculative activity. There is a genuine policy challenge in how to support the protection of intellectual property. We are not aware of any successful legal cases by the trolls. People should therefore be reassured.
Kevin Brennan
Quite the opposite, actually. The fact that there have not been any successful legal cases indicates that people are being very successfully scammed out of money because they are too afraid to resist the trolls who come to them saying, “You have infringed copyright.” The fact that there have not been legal cases should be a cause for concern, not complacency. The Minister might like to give that further consideration.
As we have made clear, our intention with the amendments is absolutely to support the protection of those whose intellectual property has been infringed. That is our aim, but as ever there is a balance to be struck. We want to ensure that the most vulnerable in society are not easily targeted by unscrupulous people using the fact that members of serious criminal networks engaged in copyright infringement can go to prison for 10 years under clause 26 to frighten them. Those vulnerable people may not always completely understand the law around intellectual property when they are online, and they could get a notice that could scare them into parting with some of their money. Such cases are a real problem across society in general, and this is just one area of these activities. We should be aware of the problem and be concerned about it. We should not be complacent.
As I have outlined, it is extremely unlikely that any such cases will come to court, because the people claiming that copyright infringement may have taken place are not interested in taking anyone to court. They are only interested in sending out enough notices to get a small number of people to respond and hand over their cash.
It is the same as when scammers send out millions of text messages and phone calls saying that a relative is stranded in some other country and asking for money to be sent immediately. They may say, “We have a wonderful investment that you should participate in,” or, “You as an elderly person should put your money into something, because then you can provide for your children and grandchildren. It’s a sure thing.” All those sorts of activities have become much more prevalent because of the internet, and this issue around copyright infringement is just one area of that. That is the point we are making.
I urge the Minister to go away with his officials, to think a bit more about this issue and to consider how we might be able to reduce the possibility of it becoming an even bigger problem in the future, with the 10-year sentence being used to frighten people even more than they are already being frightened by these scammers and so-called trolls.
Obviously we will not be voting on new clause 3 at this point, because that always happens at the end of Committee proceedings, as you rightly reminded us, Mr Streeter. The hon. Member for Selby and Ainsty made it clear that it is not his intention to divide the Committee on his new clause when we reach that stage, but I say to the Minister that saying simply that it is not the right time for such a measure is not good enough as a response to the range of serious issues raised by Members of all parties.
Thangam Debbonaire
I wish to ask the Minister whether he will give us some idea of the criteria by which he will assess when the right time is. I have no way of knowing for sure when that will be without an understanding of his reasoning and the reasons there might be for changing his mind in future.
Kevin Brennan
Obviously I cannot speak for the Minister, but he is free to say something after I have sat down. He is free to intervene now if he wants to clarify that point for my hon. Friend. It would be helpful if he did so, because I think this is exactly the right time for the measure. That is the purpose of new clause 3 and the thinking behind it. The talks have been going nowhere. As I have said, we have seen the movie several times before, and we know how it ends.
Christian Matheson
My hon. Friend makes a good point: talks are going nowhere. Would an indication from the Minister that there is an intention to bring the proposals forward into legislation perhaps aid those talks in going somewhere?
Kevin Brennan
In a nutshell, that is the reason for new clause 3, and I am sure that was exactly the thinking of the hon. Member for Selby and Ainsty when he tabled it.
It might help if the Minister indicated when he expects the talks to conclude. He says he hopes there will be a positive outcome to them and that this is not the right time for new clause 3. He likes to talk softly; if new clause 3 were incorporated into the Bill, he could carry a big stick while talking softly about this matter. If he is not prepared to amend the Bill, perhaps he could tell the Committee when he believes the talks should conclude, as that would help to focus minds a bit. Perhaps he could put it on record that he is not happy to allow the talks to drift on and on inconclusively, as they have for many years.
We are not satisfied with the Minister’s response on new clause 3, and I repeat that it is my belief that at some point during the progress of the Bill the Government will concede on that point. It would be a terrible shame if they did not concede to the hon. Member for Selby and Ainsty—one of their own elected Members here in the Commons, who has tabled a sensible amendment—but did so in another place, giving the credit, yet again, to the unelected House for being a wonderful House in revising legislation. There is plenty of expertise right here in the Committee and in this House, among elected Members who know about the subject and know that this is the right thing to do. I urge the Minister to change his mind about new clause 3, if not now, perhaps on Report, when we will no doubt return to the issue.
Finally, I hope it is helpful to you, Mr Streeter, to be aware that it is not my intention to divide the Committee on new clause 33. As for the Minister’s response, I think I referred to the shortcomings of the current offence. I did not say we did not think that people could currently be prosecuted, under the Fraud Act 2006 or the Serious Crime Act 2015; in fact, I specifically mentioned those Acts—it might have been while the Minister was searching for something online. I also mentioned why the Acts were inadequate, and the Minister did not respond. First, they require a great deal of expertise in the area on the part of the police, which is not necessarily a resource that is sufficient to meet the growing size of the problem. Secondly, by amending the Copyright, Designs and Patents Act 1988, my new clause would have not just allowed but compelled trading standards to get involved and would have allowed the body to take action.
It would be useful to hear from the Minister why he does not think it a good idea that trading standards should be brought into play in that way, rather than simply relying on a police force that is under pressure and has many things to investigate—an ever-growing problem. Is it the Government’s position that is it wrong that trading standards would be the right body to involve? It would be extremely useful if the Minister felt able to clarify that. He said that he would keep the matter under review. I welcome that, and I hope he will be able to tell us more about the issue at a later stage, but if he told us at this stage why trading standards is not the right body to involve, that would be helpful.
We have had a fairly comprehensive debate. I do not think I need to add much on clause stand part, apart from that the latest data, published by the IPO, demonstrate the need for Government action. The research found that 15% of internet users—6.7 million people—still access copyright-infringing content, so it is absolutely right that the Government should act. I hope that the Minister feels able to add a bit more, in light of what I have said.
Matt Hancock
Very briefly, I mentioned that one of the meetings in the negotiations with search engines is next week. We expect the meetings to conclude over the next few weeks, and that is why the timing is appropriate.
Kevin Brennan
Perhaps I am speaking against what I said earlier, but if the Government do not give way on that point and the talks conclude unsatisfactorily before Christmas, while the Bill is still before Parliament, will they consider amending the Bill at a later stage?
Matt Hancock
I do not want to get into answering conditionals that are dependent on some future action. I have made the case for why now is not the right time and I have given the hon. Gentleman the timeframe over which discussions are taking place.
The hon. Gentleman made the case against new clause 33 very well. These are criminal activities, and it is the police’s role to police them. There are increased resources for the police in this area and I look forward to their taking it on. Our principle is not to legislate for specific offences based on an individual technology when offences already exist that can be used to prosecute the illegal activity.
For instance, many IP TV boxes are sold without any software on them; some have it inbuilt and some do not, and the ones that do not can be used for legitimate and illegitimate purposes. It is far better to have an in principle criminal measure on the statute book and to prosecute with that. Everybody can see the united strength of purpose to ensure that such IP theft does not go unpunished.
Calum Kerr
I thank the Minister for his explanation. I know that he and the Government are not fans of amendments that would oblige them to do a report to see how they are doing in the area. However, is there a way of looking at it on an ongoing basis, so that progress can be monitored and we can see how many prosecutions are actually occurring under the current legislation?
Matt Hancock
That would be an excellent idea, if the Culture, Media and Sport Committee chose to take it up. That is what Select Committees are for; I know the hon. Gentleman does not like them, but I think they are excellent at scrutinising the Government and everything that is going on. With that response, I ask the hon. Member for Cardiff West to withdraw his amendment.
Kevin Brennan
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 26 ordered to stand part of the Bill.
Clause 27
Registered designs: infringement: marking product with internet link
Question proposed, That the clause stand part of the Bill.
Kevin Brennan
I hope that we can dispose of clause 27 more briefly than clause 26; I am sure we will, because it does not contain such controversial matters. By including an internet link in the ways in which a designer can indicate to consumers that their design is registered, clause 27 will remove the excuse that a potential or actual infringer did not know that a design had been registered. Like clause 26, it will do away with the false binary in law between online and offline by offering a digital means of checking design right protection. As I understand it, in addition to or instead of including the design registration number on the product itself or on the product packaging, the designer may include details of or a specific link to a website, with the important caveat that that website must be available at no cost to the visitor and must clearly associate the product with the number of the design. That ought to make it easier for designers to update and communicate design registration and other information about the rights associated with products without constantly having to change their packaging or their products. That will, in turn, make registering design cheaper for the designer.
Matt Hancock
First, that was an extremely good and unusually succinct description of the clause. The hon. Gentleman asked about costs; we think that it will reduce costs to business. In terms of the current problems, physically changing the required registration details on products imposes a cost. For instance, some businesses produce labels that must be applied to every single product. Such costs are unnecessary if a single label or web address can be built into the design and the update can then be done digitally rather than physically. It is, after all, illegal to claim that a product is registered when it is not. Therefore, the changes are required by law, and it is far cheaper for everybody if they are made on a website that is referenced on the physical product, rather than on labels, or sometimes labels stuck over labels. I am glad that there is cross-party understanding of and agreement on the clause, and I commend it to the Committee.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Copyright etc where broadcast retransmitted by cable
Nigel Adams
I beg to move amendment 63, in clause 28, page 27, line 31, leave out subsections (3) to (5).
This amendment, together with Amendment 64, are probing amendments to identify a timeframe for the repeal of section 73 of the Copyright, Design and Patents Act 1988 as it is not clear when the repeal will come into force. The amendments would mean that repeal of section 73 of the CPDA would come into force as soon as the Bill receives Royal Assent.
The Chair
With this it will be convenient to discuss the following: amendment 189, in clause 28, page 27, line 36, at end insert—
‘(6) The Secretary of State shall—
(a) produce a report on the implication of the repeal of section 73 of the Copyright, Designs and Patent Act 1988, and
(b) undertake a comprehensive consultation on the future of television content distribution and public service broadcasters.”
Amendment 64, in clause 82, page 80, line 2, at end insert—
“(a) section 28;”
This amendment, together with Amendment 63, are probing amendments to identify a timeframe for the repeal of section 73 of the Copyright, Design and Patents Act 1988 as it is not clear when the repeal will come into force. The amendments would mean that repeal of section 73 of the CPDA would come into force as soon as the Bill receives Royal Assent.
Amendment 94, in clause 82, page 80, line 14, at end insert—
“(h) section 28.”
This amendment would mean that repeal of section 73 of the Copyright Designs and Patents Act of 1988 would come into force two months after the Royal Assent of the Bill.
Nigel Adams
These are probing amendments to clauses 82 and 28 in order to establish a timeframe for enacting the provisions in clause 28, which repeals section 73 of the Copyright, Designs and Patents Act 1988. I warmly welcome those provisions, but from the clause as it stands, it is not quite clear when we can expect this important measure to come into force. The amendments would mean, instead, that repeal of section 73 of the 1988 Act would come into force as soon as Royal Assent is granted. That would involve consequential amendments to clause 28 to delete subsections (3) to (5), as Royal Assent would remove the need for them. Otherwise, in the Bill as drafted and as stipulated in clause 82, clause 28 would come into force on whatever day the Secretary of State appoints in regulations made by statutory instrument, which could mean further delay.
As I pointed out on Second Reading, online service providers such as TVCatchup use section 73 to make money from public service broadcaster channels by re-transmitting their content while selling their own advertising around it. That undermines the public service broadcasters’ own online streaming services and on-demand catch-up services, affecting the audience, advertising and sponsorship revenue of commercial PSBs. Furthermore, none of that money is being paid to the public service broadcasters, the underlying talents and the rights holders, and none is flowing back into original UK content production.
I have an important film studio in my constituency, so I take this issue very seriously. We want to see more great productions, such as “Victoria”, which was filmed largely at Church Fenton in my patch. The UK television sector is at the heart of the UK creative industries. It is a vibrant and dynamic sector, providing outstanding world-class content that is the envy of the world. Such programmes are also hugely popular internationally, and the UK is the second-largest exporter of TV in the world as a result. It is therefore vital that we do all we can to help protect investment in the programmes that viewers around the world love. For those reasons, it is important that the provisions in clause 28 to repeal section 73 of the 1988 Act are enacted as soon as possible.
The PSBs first wrote to the Intellectual Property Office asking for a repeal of section 73 eight years ago; since then they have spent a lot of time and money in litigation. Meanwhile, TVCatchup has made millions on the back of the PSB content. The only reliable way to stop that exploitation and ensure that people who make and own the programmes that viewers love gain a return on their investment is to repeal section 73. The public service broadcasters have been in litigation with TVCatchup for many years, and until section 73 is repealed those parasitic websites will be able to profit from the PSB content without any of the payment going back to the public service broadcasters.
Section 73 also allows cable platforms to profit from PSBs that invest in content, which means that the PSBs are effectively subsidising global cable giants. It prevents the commercial PSBs from negotiating with cable platforms for their PSB channels. In a normal situation, they would be able to negotiate freely, as they do for their digital channels such as ITV2 and E4, but section 73 currently prevents that.
Cable platforms make money out of PSB content while still benefiting from a regulatory regime designed for a different era, under which no payments go back to the PSB or any other holders of rights to the content.
Christian Matheson
The hon. Gentleman talks about a different era. Does he think that it was right to introduce section 73 at the time, because it allowed cable platforms to develop, but that things have moved on quite a bit since then?
Nigel Adams
The hon. Gentleman is yet again spot on. It clearly is of its time. The idea was to try to help a nascent cable industry, and the legislation has done that; we have a healthy TV industry across all broadcast platforms, including cable and satellite. That legislation has done its job.
On pay TV platforms, such as Virgin and Sky, up to 50% of some of our most valuable content, such as drama, is viewed via subscription personal video recorder, from which the pay TV platforms derive substantial benefit. That undermines the commercial PSBs’ ability to secure a return from advertising, because much of their advertising is skipped, and materially reduces as critical opportunities to generate secondary revenue—for instance, from on-demand services or box sets—because libraries of valuable drama content can be built up for free on the PVR. I therefore urge the Government to ensure that repeal of section 73 is delivered at the earliest opportunity. That would mean that those who wish to re-transmit or otherwise use PSB services in the future will have to negotiate to do so, which seems only fair. They should be able to negotiate within the must-offer regime in the Communications Act 2003. That would enable those who create the content to make a return on their investment and continue to make the programmes that viewers love, which are the envy of the world.
There has been extensive consultation on the issue so there is no need for further delay. I will therefore be very grateful if my right hon. Friend the Minister can provide more detail on the timeframe for the repeal of section 73 of the 1988 Act, as included in clause 28.
Kevin Brennan
I rise to speak to our amendments 189 and 94. I note the well-informed and cogent points made by the hon. Member for Selby and Ainsty, and I understand why the Government want to repeal section 73 of the Copyright, Designs and Patents Act 1988, as he laid out. Clearly apps such as TVCatchup cannot be allowed to profit from public service broadcasting content without making any sort of contribution to its creation, either by paying for it or in some other way; without agreeing some kind of licence for its use; and without abiding by public service broadcasting standards for its distribution. It is entirely logical to repeal the section and we support the intention to prevent TVCatchup from doing what it does, but the Government need to explain the knock-on effects on the market.
Calum Kerr
The SNP also supports and welcomes the repeal of the section 73 of the 1988 Act. I agree with supporting original drama, but I wonder about how Virgin in particular is affected, because Virgin is also rolling out broadband and helping the Government in their other targets. Perhaps the Minister can assure us that that has been considered and that pricing will not prohibit meeting other Government objectives.
Kevin Brennan
I am sure the Minister has heard what the hon. Gentleman said and will want to address it in his response. The hon. Gentleman is quite right to point out that Virgin in particular will be affected.
The Government’s reform is well meaning, but they need to explain how it will not put further pressure on the public service broadcasting compact. They need to answer questions about their long-term plans for television distribution and how this part of the Bill affects that. Public service broadcasters exist for a reason, as an intervention in the market and as part of public policy. We need to ensure that they do not accidentally drift out of existence or into insignificance, and we need to know the Government’s intentions.
In their response to the consultation on the repeal of section 73, the Government said that they do not expect or want to see charges from public service broadcasters to cable operators for their main channel content. If that is so, I ask the Minister in a genuine spirit of inquiry whether there is an argument for the Government to make it clear in legislation that they do not want to see such charges, because at least some of the public service broadcasters do not share that view. None of us believes that a dispute between a major public service broadcaster such as ITV and a major TV platform such as Virgin is in the viewer’s interest.
The amendments are intended to explore whether the Government are sure that they are not risking those viewers ultimately having to pay more than they should for what should be a free public service broadcast. What is the Government’s view on the risk that those viewers could lose that service, at least for a period of time, if a major dispute of that kind arose as a result of the repeal?
Digital Economy Bill (Eighth sitting)
Tuesday 25th October 2016
(8 years, 2 months ago)
Public Bill CommitteesRead Full debate Digital Economy Act 2017 View all Digital Economy Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 October 2016 - (25 Oct 2016)
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 189, in clause 28, page 27, line 36, at end insert—
‘(6) The Secretary of State shall—
(a) produce a report on the implication of the repeal of section 73 of the Copyright, Designs and Patent Act 1988, and
(b) undertake a comprehensive consultation on the future of television content distribution and public service broadcasters.”
Amendment 64, in clause 82, page 80, line 2, at end insert—
“(a) section 28;”
This amendment, together with Amendment 63, are probing amendments to identify a timeframe for the repeal of section 73 of the Copyright, Design and Patents Act 1988 as it is not clear when the repeal will come into force. The amendments would mean that repeal of section 73 of the CPDA would come into force as soon as the Bill receives Royal Assent.
Amendment 94, in clause 82, page 80, line 14, at end insert—
“(h) section 28.”
This amendment would mean that repeal of section 73 of the Copyright Designs and Patents Act of 1988 would come into force two months after the Royal Assent of the Bill.
Kevin Brennan (Cardiff West) (Lab)
I thank the Minister for his warm acclamation of support for my continuing. As he will be aware, any huffing and puffing may influence how long I speak, but perhaps not in the way he hopes. It is a great pleasure to see you back chairing our proceedings this afternoon, Mr Streeter, having done so ably this morning without needing to heed any of the unsolicited advice from the Minister on how to chair a Committee. You did an absolutely superb job, and everyone on the Committee thanks you for that.
When stumps were pulled this morning, we were discussing amendment 189. To remind the Committee, that amendment calls on the Secretary of State to
“produce a report on the implication of the repeal of section 73 of the Copyright, Designs and Patent Act 1988, and…undertake a comprehensive consultation on the future of television content distribution and public service broadcasters.”
We feel that the repeal of section 73 has big potential implications, and we need to know what the Government’s strategic thinking amounts to on those issues. I was talking about how things were 30 years ago with public service broadcasters. They were reserved access to valuable spectrum and given prominence on that spectrum. That created a valuable and well-funded monopoly, whether that was advertising revenue for ITV or money from the licence fee for the BBC. We were going to discuss how every aspect of that original deal is undergoing rapid change, and that is why our amendment is important.
Spectrum is more valuable than ever. In 2015, Ofcom acknowledged that if the spectrum that public service broadcasters use was priced commercially, it would be out of reach for PSBs. Then again, other distribution methods are evolving rapidly. It is perfectly possible to imagine a day when spectrum is not used for direct TV broadcast at all, and that day might not be as far in the future as we might think.
We know that the prominence of public service broadcasters is coming under enormous pressure. Recent moves by Sky have made it very hard to find live TV or public service broadcast content at all, and that is potentially a serious assault on the public service broadcasting compact. Prominence enables scale, and scale has been the commercial and policy basis of our public service broadcasters from the start. It makes them economic and makes the notion of public service broadcasters tangible, so that they are not just widely available, but widely watched. We will return to that topic in our consideration of the next group of amendments, but it is relevant to any report that might be produced through the amendment.
Public service broadcasters are no longer the cash cow monopolies that they arguably once were. We have been in a multi-channel world for a long time, but on-demand viewing is accelerating that change even further. Public service broadcasters are not just competing for viewers with commercial channels, but with different offers from such organisations as Netflix, Amazon and YouTube and from other options, such as gaming. Netflix now outspends the BBC on original content development. It is a significant player in the original content market.
To be clear, I am not necessarily echoing what the Prime Minister said in her speech to the Conservative party conference. She seemed to be trying to channel Sam Cooke by saying, “Change is coming”, many times during her speech, but plenty already has changed, and the pace of that change is accelerating. The Government need to face up to this, and that is why we are suggesting that they should hold a proper review of the interconnected issues of distribution, carriage, content creation, prominence and funding before developing and pursuing a clear and fair strategy for television distribution in general, and public service broadcasting distribution specifically. That is what this amendment seeks to achieve. Without that proper vision for how our public sector service broadcasters will operate in a fast-changing, multi-distribution, multi-channel, globalising world, we worry that not only will they not thrive as public service broadcasters, but that ultimately they may not survive. As I said earlier, we should not allow that to happen, and we certainly should not allow it to happen by accident.
The Minister must make it clear that he wants public service broadcasters to survive. I believe that he does, but he also has to make the Government’s strategy clear in the light of this rapidly changing, complex world. It is to be hoped that he can partly do that in response to the amendments, as well as laying out his views on our suggestion of producing a comprehensive report on the subject.
We are also discussing amendment 94, which is a probing amendment that is intended to tease out a timeline for the repeal of section 73. It relates a little to the amendment that the hon. Member for Selby and Ainsty moved earlier in that it has a similar purpose. We just want to find out what the Government’s thinking is. Our amendment differs from his in that it states that the repeal should come into effect two months after Royal Assent, whereas his amendment states that it should come in immediately after Royal Assent. We will not press amendment 94 to a vote, but we want to hear the Minister’s thoughts and plans in relation to it.
Nigel Adams (Selby and Ainsty) (Con)
The hon. Gentleman may well cover this in his further remarks, but I would be delighted to hear his view on why there should be a two-month delay after Royal Assent.
Kevin Brennan
The hon. Gentleman is right to probe me on that. The truth of the matter is that there is a convenient clause to which we could add our amendments, which starts things two months after Royal Assent. As I said, amendment 94 is a probing amendment and I am sure the Minister will tell us all the reasons why it is technically defective. I will not push it to a vote so I am prepared to hear that, but we want to use it as a method of finding out the Government’s position.
Section 73 was originally introduced to encourage the roll-out of cable and to help a fledgling platform compete against terrestrial television by ensuring that cable platforms had access to public service broadcasting content. The Government have agreed that this policy objective was met some time ago, and in July reported that they were
“satisfied that the objective of ensuring that PSB services (as well as other TV services) are available throughout the UK has been met, and therefore section 73 is no longer required to achieve that objective.”
Subsection (3) states:
“The Secretary of State may by regulations make transitional, transitory or saving provision in connection with the coming into force of this section.”
Inasmuch as this generally means that the state will repeal section 73 when it sees fit, there are concerns among some public service broadcasters about understanding more clearly the Government’s intentions in relation to the timetable for that repeal. It would not be such a pressing issue were section 73 merely a harmless hangover and simply moribund. However, as we have heard, it is more than a legal anachronism. It is a loophole through which taxpayers’ money is effectively funnelled into private businesses.
As we have heard, section 73 allows companies, such as TVCatchup and FilmOn, to live stream the content of public service broadcasters and other channels online without permission. In other words, the money the public pay through their licence fee pays for content that is then, in effect, given away for free to companies other than public service broadcasters. Those companies then monetise that public service broadcasting content by placing their own advertising around it.
Public service broadcasters are granted public funding and the other advantages we have talked about on the understanding that, in exchange, they are obliged to air content that works for the public’s benefit, rather than solely for the benefit of commercial interests. Section 73, in effect, allows TVCatchup and FilmOn to benefit from that same public funding, but those companies are clearly not held to the same standards. That amounts not only to the taxpayer unwittingly subsidising those businesses, it effectively directs funds away from PSBs and impacts on their ability to generate legitimate commercial revenues and to reinvest in the wider creative economy. Those live-streaming sites increase public service broadcaster reliance on public money and can fuel a vicious cycle of under-funding.
There is cross-party agreement that that is wrong and has to be put right, which is what the Government are seeking to do, but why do we have to rely on the Secretary of State to
“make transitional, transitory or saving provisions”
for repealing section 73? Is it not the case that broadcasters and the public deserve a more explicit timeframe, for the reasons I have laid out, so that this does not persist for any more time than is absolutely necessary? Not only is that fair, but it would provide more certainty for public service broadcasters and ensure that their investment in UK content is protected. Amendments 63 and 64, which the hon. Member for Selby and Ainsty tabled, would mean the repeal of section 73 immediately after Royal Assent, which offers one way forward. Our probing amendments offer another alternative if the Government need more time.
Public service broadcasters first wrote to the Intellectual Property Office to ask for the repeal of section 73 in 2008. In the meantime, TVCatchup has obviously made millions on the back of PSB content and the European Commission has launched infraction proceedings against the UK Government, on the basis that section 73 denies public service broadcasters their intellectual property rights for their content, which is guaranteed under the 2001 copyright directive. It would also be helpful to know from the Minister how he believes that infraction proceeding plays into our discussion on the amendment, the repeal of section 73, and what role it has to play if the Bill indeed repeals section 73. In short, will the Minister explain why he is not offering a clear timetable for repeal in the Bill?
Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)
I feel that I should thank you for your chairmanship, Mr Streeter; I feel a bit left out, given that the Opposition spokesperson did it. Thank you so much for your chairmanship. It is nice to see a smile at the top table.
I will add a couple of brief points. I am surprised the hon. Member for Cardiff West earned only £10.60. I thought he displayed some creativity. I have never heard so many song lyrics or titles; I do not know if he is on commission for that. Hopefully, journalists across the country are googling—that is appropriate, given what we are discussing today—for what content he has earned £10.60, so that number may go up.
The Minister for Digital and Culture (Matt Hancock)
Other search engines are available.
Calum Kerr
Indeed—I thank the Minister. There is an interesting point here about the importance of parity across channels. The Scottish National party is clear in supporting the repeal of section 73. The hon. Member for Cardiff West made a point about the many different ways in which people can access content, which he articulated well, and the importance of being consciously competent across all areas when making legislative change. I am interested in hearing the Minister’s remarks on that.
We noted earlier the concerns specifically in relation to Virgin as a large cable company, but I want to put on the record very clearly that we absolutely support the Government in repealing section 73. As these models change and people access content in different ways, the ability for them to earn revenue from the content they produce becomes all the more important, because they cannot necessarily rely on its being consumed in a way that ensures that advertising revenues naturally flow. I emphasise that we support this, we welcome the Government’s bringing it forward but we would like a bit more clarity from the Minister around the broader picture.
Matt Hancock
I am delighted to respond to these points. I take this opportunity to commend the Opposition Front Benchers and, in particular, the hon. Member for Sheffield, Heeley, for how she proved, earlier in Committee, how it is possible to put points with great clarity and precision, such that on Thursday we rose early—somehow that seems unlikely today.
Matt Hancock
No. The Government are committed to repealing section 73 of the Copyright, Designs and Patents Act 1988, following public consultation which ended this year and concluded that section 73 is no longer relevant. Amendments 63, 64 and 94 seek to ensure that the repeal will be brought into force rapidly following Royal Assent and amendment 189 would provide for the Government to produce a report on the implications and a consultation on the future of television content distribution and public service broadcasters. I should say that after today’s Committee session I think that my hon. Friend the Member for Selby and Ainsty will be known as “the IP king”. He has been the most ardent defender of intellectual property and its protection and he made very strong arguments.
On the case for a report and a consultation, Opposition Front Benchers asked the Government to face up to the challenges of new technology and its impact on public sector broadcasting and more broadly, and it is absolutely true that there is a huge impact of technology, both in distribution methods and in software, in terms of how we are watching content. Indeed, I understand that in China more films are watched on a hand-held than on a fixed device, and the trend is in the same direction here. This is clearly a very big issue and I am glad that all members of the Committee are alive to it.
I would say, though, that in response to amendment 189, we did just hold a public consultation precisely on the balance of payments between television platforms and the public sector broadcasters which considered the regulatory framework. It considered these questions and came forward with the proposal to repeal section 73. So I gently say to Opposition Front Benchers that, although I can see the point of the amendment, the report that they seek and the consultation that they are asking for by way of what I accept is a probing amendment is what we delivered through that consultation earlier in the year. The changes that we are seeking to make in legislation are a conclusion of exactly the sort of consultation that they have been looking for. The consultation was published on 5 July. I am glad that its conclusions have cross-party support.
We strongly support public service broadcasting in the UK. We believe that it has a long, vital and sustainable future and we will ensure that it does. I cannot give a clearer commitment to public service broadcasting. Even through these changes in technology, the evidence on viewer habits shows that public service broadcasting remains valued and valuable, and we support it.
I turn to some of the detailed questions. I was asked about the TPS regulatory regime. That was also considered as part of the consultation. We decided that different regulatory regimes are still appropriate, given the differing technical requirements of different TV platforms. There is a big change: an amalgamation of different delivery platforms for broadcasting from the old cable, terrestrial and satellite, and increasingly things are moving to broadband and fibre.
Following our discussion last week, I note that today TalkTalk has announced a full roll-out of full fibre to the whole of York, so there is progress in the full fibre drive that we are looking for in this country. However, there remain different technologies, so we think that it is still appropriate to have different regulatory regimes for them, although clearly the interoperability between them is important. I hope that that explanation addresses the point.
Kevin Brennan
Does the Minister have any concerns, or did the review reveal any concerns, about the point that I made about the opaqueness of the kind of deal now done under the TPS regime? That makes it impossible to judge whether it is truly fairer to public service broadcasters.
Matt Hancock
I will come to that and answer it alongside the question about the impact of removing section 73 where there are must-offer obligations. In truth, there are a huge number of commercial deals between the public service broadcasters and those that carry the PSB content to a wider distribution network. Whether it is through the TPS regime or the regime that we are discussing, many PSB broadcasters have contractual arrangements for their non-PSB content. That happens perfectly reasonably, whether it is through that regulatory regime or through a non-PSB deal delivered using non-satellite transmission.
We do not expect PSB content to be withdrawn because of the existence of contractual arrangements for PSB content replacing section 73. Indeed, there are contractual arrangements for lots of non-PSB content, so I do not see why those contracts cannot be entered into, but the issue does lead to the question whether there should be a transitional regime to ensure that there is no interregnum.
In the event of a PSB and a platform failing to agree terms for the carriage of a service, it is for Ofcom to consider whether the proposal of the PSB was compliant with the must-offer obligations in its licence. Were Ofcom to conclude that it was not, it would expect the PSB to submit a revised offer to the platform. Until now, Ofcom has not had to intervene, because no disputes have arisen presenting any real risk of refusal to supply by PSBs or to carry by platform operators.
The timing question was raised by my hon. Friend the Member for Selby and Ainsty and by the Opposition. The consultation report included an assessment of the implications of repealing section 73, and there was recognition of the potential impacts on the underlying rights market, meaning that the Government have decided that a further technical consultation should be run by the Intellectual Property Office.
I assure the Committee that the Government have every intention of bringing into force the repeal of section 73 rapidly; we plan to do it before the start of summer recess 2017. Repealing section 73 immediately could impact rights that have previously been exempt from remuneration in relation to the underlying copyright content in cable retransmissions, such as those held by scriptwriters or musicians whose intellectual property forms part of the relevant broadcast content. Our approach is to ensure an orderly transition.
Some respondents to the original consultation said that there could be disputes between the cable platform and the underlying rights holders when trying to agree terms and that a transitional period may be helpful. The Intellectual Property Office is currently running a brief technical consultation, as has been mentioned, to examine the extent of those issues and to assess whether any transitional measures are required.
I do not want to prejudice the outcome of the consultation, but in terms of whether a transitional period would be required, the IPO’s consultation seeks views on options ranging from no transitional period to a transitional period of up to two years following Royal Assent. Even if the full transitional period is decided on as a result of that consultation, and assuming that the Bill receives Royal Assent in spring 2017, we expect the repeal of section 73 to come fully into force by spring 2019 at the latest.
Kevin Brennan
The Minister talked about bringing the repeal into force rapidly before the summer recess in 2017, and then issued further caveats and talked about 2019. Will he clarify that for the Committee?
Matt Hancock
Yes. We will bring the repeal into force before the start of the summer recess in 2017. There may then be a transitional period, depending on the current IPO consultation, but the maximum transitional period, should there be one, will be two years. I added two years on to the summer recess of 2017 to get to what the Government call spring 2019—it will probably be the warmer end of spring.
Nigel Adams
Will the Minister give some indication of the potential timescale of the IPO’s technical consultation?
Matt Hancock
It is a four-week consultation and it started yesterday, so it has three weeks and six days to run, if my maths are right.
Kevin Brennan
I am grateful to the Minister for clarifying that timetable as he envisages it. In addition to that, during the course of my remarks I talked about the possibility of a dispute arising between a public service broadcaster and a platform following the repeal of section 73. What is the Minister’s view on how that sort of dispute could be resolved without consumers being affected?
Matt Hancock
That could easily be resolved by a contractual agreement, as the two parties in such cases have in many other examples. For example, Channel 4 has a PSB element and non-PSB channels. The non-PSB channels are not covered by section 73, so the PSB element of Channel 4’s broadcasting will be in a similar position to its non-PSB element in future. Since those contractual arrangements exist between the parties covered by section 73, I see no reason why they cannot pretty quickly put in place similar contractual arrangements, not least because the decision to repeal section 73 was taken some months ago and the companies have had some time to prepare.
The final point raised was about the impact of the repeal on Virgin Media’s broadband roll-out. I see absolutely no link between the two. I am delighted that Virgin Media is looking at a broader, full-fibre roll-out, in the same way that TalkTalk has announced further progress today. Nobody at Virgin Media has raised this link with me, and given that Virgin Media is owned by one of the most well-capitalised companies in the world, I cannot see any crossover between the two—and I think it is disingenuous to suggest there is. With that, I hope hon. Members will withdraw the amendments so we can proceed.
Kevin Brennan
As I made clear, it is not our intention to put our amendments to a vote at this stage. The debate was extremely interesting, important and useful, despite the Minister’s seeming resentment of having debates that go into the detail of the Bill and despite his remarks about rising early. He should be careful about making such remarks, given that he was late for the first sitting of the Committee.
There is an important issue at stake here: in our proceedings, the Government get their way because they have a majority, but the Opposition have their say. That is the constitutional principle on which we are all here and it is the role that we play. The Minister’s continual grumpiness about that is not helping his cause. I thought it was a useful debate that has revealed and drawn out more clearly some of the Government’s thinking on the timetabling of the repeal of section 73. We are not going to put our amendments to a vote at this stage, but these are matters we might revisit later.
Nigel Adams
I very much enjoyed all the contributions, which were incredibly complete, informed and eloquent.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
With this it will be convenient to discuss the following:
New clause 14—Digital broadcasting and protection of listed sporting events—
‘Within 12 months of this Act coming into force, the Secretary of State shall commission an evaluation of the impact of developments in digital broadcasting on the protection of listed sporting events for public service broadcasters, and shall lay the report of the evaluation before each House of Parliament.’
New clause 17—PSB prominence—
‘(1) The Communications Act 2003 is amended as follows.
(2) At the end of section 310(1) add “that satisfy the qualification criteria to be set by OFCOM in the code.”
(3) In section 310(2) leave out “OFCOM consider appropriate” and insert “required by OFCOM”.
(4) In section 310(4)(a) after “programmes” insert “, including on-demand programme services,”.
(5) In section 310(5)(a) after “service” insert “, including on-demand programme service,”.
(6) In section 310(8)(a) after “services” insert “, including on-demand programme services,”.
(7) In section 310(8)(b) after “services” insert “, including on-demand programme services.’
This new clause would modernise the PSB prominence regime – as recommended by Ofcom in its 2015 PSB Review. Provisions in the Communications Act 2003 currently only apply to traditional public service TV channels on traditional TV channel menus (‘EPGs’). This proposal would extend the law to on-demand services such as catch-up TV and to the connected TV on-demand menus where such services are found.
Kevin Brennan
We are dealing with this group in a slightly novel way. I will discuss new clauses 14 and 17 and then move on to my clause stand part remarks.
New clause 14 calls on the Government to produce a report exploring the options available for future-proofing the at-risk listed events regime, which helps ensure that sporting events such as the Olympic games remain universally and freely available. The listed events regime has been enormously successful and is popular with the public, but it is undoubtedly currently at risk and could become obsolete unless the Government take action to make sure that that does not occur.
I ask the Minister to consider revising the qualifying criteria to deliver a listed events regime fit for the digital era, which we are discussing in this Bill. Since the 1980s, successive Governments have sought to ensure that TV coverage of certain major sports events remains available to everybody, irrespective of their ability to pay. The UK has an A list, which is designed to preserve live coverage of certain major events on free-to-air television—for example, the Olympic games, the football World Cup, the Grand National and the rugby World Cup final. There is also a B list that does the same for TV highlights—for example, the Six Nations rugby tournament and the Commonwealth games.
The listed events regime helps ensure that events such as the Olympics, the recent European football championships—in which Wales reached the semi-final—and Wimbledon all reach the widest possible audience, delivering enjoyment to millions, inspiring the next generation to get active, creating role models and helping make sport aspirational. In total, 45 million people in the UK watched Rio 2016 and the Euros this summer and more than 10 million people watched Laura Trott and Jason Kenny on BBC television both secure gold medals on the same day at Rio 2016.
The listed events regime strikes a balance between ensuring the public can gain free access to major events and the understandable desire of pay TV operators and sports federations to try and maximise their commercial revenues. Importantly, the regime does not prevent pay TV from acquiring TV rights to listed events; it simply ensures that qualifying services can acquire the free-to-air rights on fair and reasonable terms.
Under the current rules, the benefits of the listed events regime are restricted by statute to channels that are first, free, and secondly, received by at least 95% of the UK population. Those criteria are becoming increasingly outdated as the number of homes giving up their TVs for other media devices begins to rise; the 95% criterion will probably not be met by any TV channel at some stage in the course of this Parliament. It would be interesting to know whether the Minister recognises that that is the case and whether Ministers are thinking about it.
As a result, regulators would have no clear legal basis for discriminating between channels, which would likely lead to listed events being ultimately far less widely available and watched. That shows quite clearly that the qualifying criteria need updating, and there are options for doing that. We are trying to explore those options with our new clause in Committee this afternoon—performing our proper constitutional role, much to the resentment of the Minister.
The BBC prefers the option in which the 95% reception criterion could be updated and replaced with a measure testing whether the channel is widely watched. That would require a qualifying service to have reached at least 90% of the public in the last calendar year. That would ensure that the public continued to have access to these sporting events on channels that are easy for audiences to find and that we know they actually watch in large numbers; that is obviously the intention of the current regime. That measure would be a proxy for factors including free-to-air continuous availability, popularity and audience awareness. The proposed test would be consistent with the spirit of the regime and aligned with wider public benefits such as offering moments of national celebration and inspiring physical activity, as well as being simple to implement and more stable than the current reception test.
Furthermore, such a test would be open to any service that was free at the point of use, committed to maximising access and not tied to any one distribution platform, so it would be more able to incorporate broadband streaming, for example, as counting towards the reach of a service as and when the infrastructure allowed. That would prevent the regime from being manipulated by organisations whose purpose was to maximise the attractiveness and availability of pay TV services by providing nominally free coverage on channels that may meet an availability threshold but of which there is very low awareness.
There are alternatives. It has been suggested that the qualifying criteria might be interpreted differently—I am talking about adding broadband availability towards the 95%. However, some feel that that may involve major risks. The combined coverage of the UK’s commercial digital terrestrial TV multiplex and broadband may well allow services distributed via those means to qualify, yet their geographic coverage would exclude large rural areas. That would particularly be an issue—I say this as a Member representing a constituency in Wales; I am sure that the hon. Member for Berwickshire, Roxburgh and Selkirk, who speaks on behalf of the Scottish National party, will be aware of this—in the nations, where there is often greater difficulty with coverage in large rural areas, but it also applies to parts of rural England and, indeed, Northern Ireland.
Furthermore, broadband will not be able consistently to deliver a guaranteed quality of live streaming to mass audiences for some time to come. The BBC, in particular, feels that including broadband in the criteria implementation would be hard to measure and to implement.
The report proposed in our new clause would be an opportunity to fully explore concerns and the different options available for modernising the listed events regime. As I said, those events are very much valued by, and seem very much to be of benefit to, the public. Four in five people say that listed events are important to society. One in four said that the BBC’s 2012 Olympic coverage inspired them to take part in sport. Wide exposure of free-to-air sport can inspire, create role models and make sport aspirational. Indeed, it can bring the country, and the nations within the UK, together. Public service broadcasters likewise understand the importance of listed events and are committed to making sport freely available to all. Even though public service broadcasters are responsible for only 5% of sports output in the UK, they are responsible for 60% of sports viewing. That is something we would not wish to lose as a country, almost by accident, because of the technological changes that we have been discussing.
The UK has a mixed ecology that balances the public’s free access to major events with the potential for pay TV operators and sports federations to generate commercial revenues. The threat to listed events may radically tilt that balance. Rather than risk the abolition of listed events by the back door, Parliament and the Government should urgently consider revising the qualifying criteria to deliver a regime fit for the digital era. With this amendment, the Digital Economy Bill could be the vehicle to ensure that this happens. I shall be extremely interested in what the Minister has to say about this, and in the Government’s view of this important and much cherished feature of our sports broadcasting ecology. The Minister can feel free to dilate at length when he responds.
New clause 17 stands in my name and that of my hon. Friend the Member for Sheffield, Heeley. It proposes modernising the public service broadcasting prominence regime, as recommended by Ofcom, by extending the law to on-demand services and the menus, where they are found. Since PSB prominence was legislated for in the Communications Act 2003, many gaps have emerged. The Act was designed in a markedly different TV landscape, even 13 years ago. It was four years before the introduction of the BBC iPlayer, for example. It was eight years before the digital TV switchover took place, and seven years before the introduction of the iPad. It created public service broadcasting prominence principles for broadcast TV sets, but not for connected TV sets, public service broadcaster channels, or PSB catch-up services, such as BBC iPlayer.
The regime has not kept up well, even with the multichannel world. For example, as I am sure hon. Members with young children will be aware, CBeebies and CBBC are behind 12 US cartoon network channels in the channel listings of the UK’s leading pay platform, Sky. As someone who was brought up on public service children’s television broadcasting—God knows what I would have been like if I had not been—and as a parent, I think that that is a shame, and that the Government should have a view on it.
Kevin Brennan
I am not going to respond; I shall focus on my remarks. My hon. Friend may wish to regale us later with his favourite children’s TV programmes or public service broadcasters.
PSBs now face a far bigger transition to online delivery of TV programmes, and the regulatory regime lags far behind, so we should not miss any opportunity presented by the Bill to do something about this ever-changing situation. A growing number of existing and future services are being left out of scope, from BBC iPlayer to the now online-only youth service BBC 3, and from the new BBC iPlayer Kids, offering access to the best BBC kids’ content, to the upcoming iPlay, which will be a front door to the best British children’s content from any provider. Equally out of scope in the current regime are growing numbers of major gateways to accessing public service broadcaster content. The number of connected television sets in the UK is expected to nearly triple over the course of this Parliament, from 11 million to 29 million.
Calum Kerr
Oh, the curse of a word of praise from the Minister! I thank him none the less.
I support these two excellent new clauses tabled by Labour Members. I was delighted to hear the Minister say in response to the debate on the last clause, “We strongly support public service broadcasting.” Hot on the heels of that, the Opposition have provided him with an opportunity to put his money where his mouth is and show that he truly does. I think—at least, I hope—that we all support public service broadcasting, but there has been a lot of chat in this place about the PSB funding settlement and about it not encroaching on competition. Let us push beyond that to consider how to support public service broadcasters. Let us find a way to ensure that they maintain their place in an adapting world.
I will touch briefly on both clauses. New clause 14, on the review of listed events, is close to my heart. I note that the football World cup is one of them; I do not know whether we can table an amendment to ensure that Scotland has a chance of getting there—
Calum Kerr
I thought so. At least when we eventually get there, we will not expect to win it, unlike others.
Calum Kerr
“We’re on the march with Ally’s Army. We’re going to win the World cup.”
Calum Kerr
I will keep to the subject with a bit of brevity and levity.
I support the Labour move to review this whole area to ensure that we have a set of listed events that is fit for purpose and, more importantly, to ensure that the protection will continue. Likewise, we fully support new clause 17 on prominence. The Committee has spent a lot of time talking about the changing digital landscape. There is no doubt that if we do not introduce measures to protect listings, the public service broadcasters will disappear, slide down the pecking order and be harder to find. We will then be on the slow road to an argument that says that public service broadcasting is not as popular as it once was, but the reality will be that it is just difficult to find.
I conclude by thanking the Labour party for beating me to it with both amendments, to which I should have added my name and which I fully endorse.
Graham Jones
It is a pleasure to serve under your chairmanship for the first time, Mr Streeter. My hon. Friend the Member for Cardiff West encouraged me to talk about children’s programmes—I was thinking about “Play Away”—and I apologise for not being here earlier. I was observing a NATO training exercise as part of the armed forces parliamentary scheme.
I rise to talk about retransmission charges, and I will do so briefly because I am conscious of the time. We obviously have a listening Minister who is deeply concerned about these matters, and I hope he will go away and give due consideration to some of the points that have been raised, perhaps coming back with some thoughts of his own and some changes that could improve the Bill. On retransmission charges, repealing section 73 of the Copyright, Designs and Patents Act 1988—the intellectual property rights element—is important and welcome. It will put Virgin on an equal footing with the public service broadcasters in the marketplace of buying and selling channels.
I will return to that second issue and the financial impact in a moment, but I will first highlight an anomaly. Unless there has been a change in the last few days, the Bill does not include satellite channels, which fall under the Communications Act 2003. The Sky platform is exempt from the Bill and will not be liable for retransmission charges, which seems to be a market anomaly—I stand to be corrected by the Minister. We should have a level playing field for everyone. Sky benefits significantly not only from the five public service broadcast channels but from some of the other channels—my hon. Friend the Member for Cardiff West has just mentioned S4C and Alba, among others—and the radio stations. Sky has a huge commercial advantage in not paying for receiving something that is very complementary to its platform. We are applying a principle to Virgin, and the Bill should treat Sky equally.
We demand a lot from public service broadcasters, particularly the BBC, for which we pay a licence fee, and it is only right that the BBC should be able to recover some of that money for the licence fee payer in the commercial marketplace, rather than the service being literally given away to some platform providers. There is obviously a commercial benefit to the Sky platform or, for that matter, any satellite platform that automatically has to deliver PSBs under the 2003 Act. There ought to be something that provides clarity and a level playing field, because without it, Sky has another advantage among the many it already has.
Graham Jones
Okay. If the Minister has any proposals, can he provide some clarity? There does not appear to be any and there are many people out there raising questions about this.
The guidance seems to suggest there will be no material change to the relationship between Virgin and public sector broadcasters, despite the repeal of section 73 of the 1988 Act, so I look to the Minister for some advice on where we are with that. The Government expect the relationship to be neutral, with no cost transfer. Will the Minister clarify that and confirm that he is not giving with one hand and taking away with another, but is in fact allowing public service broadcasters, such as the BBC licence fee payer, to receive payments for programmes produced by the BBC and the other public service broadcasters?
I want to pick up on the comments made by my hon. Friend the Member for Cardiff West about new clause 17 and perhaps add my own thoughts. The Government have taken their eye off the electronic programme guide. I would ask them to cast their eye back over it, as my hon. Friend suggested. Eleven clicks to S4C is just ridiculous, but we all see now—when people are reminded and it is pointed out to them, they say, “Oh yes, that is true.” Sky has put the electronic programme guide on the second tier, where there is Sky Box Office, Sky products and Sky everything else. We are seeing a diminution of the electronic programme guide and Ofcom unable to act in the public interest.
This is important because we are talking about a huge commercial space and, very quietly, Sky has clearly adapted that space for the benefit of the Sky platform. Other people are going to come along and we will see that contested. Companies such as Netflix in particular, which wants to enter the market in an assertive manner, want a big presence and are willing to spend a lot of money. Only in the last week, we have seen the amount of money that it has been suggested that Amazon is spending on Jeremy Clarkson’s latest foray into high-speed petrol-head motoring. Is it £160 million? There is a considerable amount of money in the marketplace from these other organisations and broadcast providers, and we are going to start to see the electronic programme guide being contested. In fact, it is already being contested, as Sky has already snatched the front page of the EPG on its platform.
I raise the following points with the Minister: Ofcom currently seems to be behind the curve on this issue and the guidance needs to be updated. We do not want to see public service broadcasters relegated in any way, shape or form. We do not want to see the design or architecture of the EPG manipulated so that maybe the BBC is number one but somehow Netflix catches people’s eye more prominently, with small letters for the first five and big graphics for some of the more commercial providers, such as Amazon. It is not just about having slots one to five; Ofcom should be mindful of the actual graphic presentation.
We do not want to see adverts creeping into the EPG either, so Ofcom needs to be absolutely clear in the regulations and guidelines about the type of space that the EPG is. The Government should be mindful not only of platform providers such as Sky, but of TV manufacturers, which will come over the hill and see the space. Someone will turn on their television and, after “LG—Life’s Good”, the first thing they will see is Netflix in the top corner, before they even click on an EPG. Technology is moving fast and the presentation of available services must have some framework and clearer guidance from Ofcom, because it is important that we do not end up in a world where public service broadcasters are relegated several clicks away from primacy—ITV needs the commercial return and Channel 4 also has a commercial element and needs the returns on advertising. That scenario should not be allowed, as it would affect the broadcasters as a business, along with their funding model and audience figures and therefore their advertisers and advertising revenue. We absolutely must be clear about what the graphical interface and its parameters should be—no adverts—and also about which broader platforms might seek to enter the market, such as TV manufacturers.
I welcome new clause 17. The Government have a lot of work to do on EPG guidance, because this legislation will go down for the next 10 years and in that time we will see incredible technological advancements, with companies wanting to capture that prime retail space. It is incumbent on the Government to step in, not just to make the situation better and more consistent for the viewer but to protect the public service broadcasters, as not only the licence fee payer but the advertiser on the commercial channels is affected. We have a national interest, therefore, in protecting that space. It is important that the Government revisit the EPG guidelines.
I am interested in hearing the Minister’s comments on my questions, particularly his clarification regarding Sky and the 2003 Act—I cannot find anything on that in the documentation—and also some reassurance on the EPG.
Matt Hancock
Terrific! I am delighted to respond. As we know, clause 28 will repeal section 73 of the Copyright, Designs and Patent Act 1988, which currently provides that copyright in a broadcast of public service broadcasting services, and any work in the broadcast, that is retransmitted by cable is not infringed when the broadcast is receivable in the area of the retransmission. In effect, that means that cable TV platforms are not required to provide copyright fees in relation to core public service broadcasting channels. The provision was brought in at the onset of the cable industry in the UK to provide for the industry to compete with terrestrial by providing PSB content. However, that was a long time ago and technology, as everyone has noticed, has moved on a long way.
Last year we consulted on the repeal of section 73, and I am glad that there is cross-party agreement on it. The conclusion that the Government reached, and which has been agreed to by the Committee, is that the section is no longer relevant. There are a wide variety of platforms that ensure that virtually everyone in the UK is able to receive public service broadcasts and, following the completion of the digital switchover in 2012, digital TV services are now available to more than 99% of customers, whether through terrestrial, satellite, cable or fibre platforms. The cable market has moved from a large number of local providers in the 1980s, when section 73 was introduced, to one big one, and it has also gone up massively in scale, from hundreds of thousands to more than 4 million subscribers.
We are satisfied that the objective of ensuring that PSB services are available throughout the UK has been met. Therefore, section 73 is no longer required. Moreover, as my hon. Friend the Member for Selby and Ainsty pointed out earlier, this also closes a loophole, because live streaming services based on the internet are broadcasting TV programmes and relying on section 73 to exploit PSB content by retransmitting channels and selling advertising around the service without any of the benefit flowing to the PSBs. I think we all agree that is wrong, so I am glad there is cross-party support for the change.
Let me respond to some of the questions that were put, looking first at new clause 14. I am a strong believer in the listed events system. Major events such as the Olympic games and the FA cup final draw huge audiences. The listed events regime has worked well. The status of these events, as listed events, boosts them and their broadcast to the nation brings us together. I am delighted that the SNP supports the listed events regime as well. I fear I am going to have to resist the SNP’s suggestion that we should use the listed events regime to ensure that Scotland is always in the World cup finals, in the same way that we cannot legislate for the tide never to come in or the sun never to set, but it is very important and it is close to people’s hearts.
The right to broadcast listed events must be offered to qualifying channels, defined as those that are received without payment by at least 95% of the UK population. Ofcom is responsible for publishing the list of channels that satisfy those criteria. We have no evidence to suggest that recent developments, with more online viewing, will put the BBC or other PSBs at immediate risk of failing to meet these qualifying criteria. I know that concern has been raised, but I have discussed it with the BBC and Ofcom, I have gone into the details, and I am not convinced there is a risk in the near term at all.
Kevin Brennan
I did say that, because of the criteria’s increasingly outdated nature, the 95% threshold will probably not be met by any TV channel at some stage during this Parliament. Is the Minister telling the Committee that that is categorically wrong?
Matt Hancock
Yes; I disagree with that analysis. Were that to become the problem, then we would need to act, because we support the listed events regime. However, we do not agree with the analysis that the hon. Gentleman has put forward, not only because of the measurement on the existing, most restrictive definition of the 95%, but because the definition of qualifying channels are those that are received without payment. There are many ways to receive a channel without payment, including online, so viewers moving from terrestrial TV to online does not necessarily—and in my view does not—remove them from that 95%.
Kevin Brennan
The Minister has made the point, and I thank him for making it categorically: he believes that that will not happen during this Parliament. However, he also said that if it were to happen, the Government would have to act. Is that not the very reason why he should support the new clause? It would give legislative backing to the Government to produce a report to examine what ought to be done in those circumstances.
Matt Hancock
No, because I do not think that is going to happen. The hon. Gentleman also raised the question of what we should do if the legislative underpinning of the regime were to collapse. He came up with a specific proposal. I think that the proposal is itself flawed because it was to switch the measure from channels received without payment to those that are viewed, and that changes its nature significantly: from channels that are received, so can be viewed by somebody, to those channels that are viewed, which would be far more restrictive in terms of the channels that could then provide listed events. It is not a surprise to me that it is incumbents who want to make that argument because they are the ones that are watched, as opposed to those that can be watched.
Kevin Brennan
The Minister alluded at the end to the fact that we are not making that proposal in our new clause. We were rehearsing that argument during discussion of the new clause. Obviously he does not agree with it, but it is important to put on the record that that particular proposal is not in the new clause. It asks for a report.
Matt Hancock
I am grateful for that clarification. We will obviously keep the matter under review. It is important that the listed events scheme continues to operate. I could not be clearer in our assessment of the definition of qualifying channels based on the existing statute. A specific review within 12 months of the legislation’s coming into force is in my view not necessary, but we will keep the situation under close review.
New clause 17 would amend the public service broadcaster prominence review. The hon. Member for Hyndburn made a powerful and eloquent speech with some incredibly good points in it. The new clause would extend the prominence provisions to on-demand services such as catch-up TV and connected TV on-demand menus. The matter was considered in the balance of payments consultation. We have very strong support for S4C and some of the other channels mentioned in the debate, but our conclusion was that we have not seen compelling evidence of harm to PSBs to date, so we decided not to extend the EPG prominence regime at this stage.
In a way, the debate has brought out the challenges in this area. The hon. Gentleman started talking about the description of the graphical representation on an EPG, and the discussion can easily get into acute micromanagement of an EPG when the increasing integration of TV and internet services makes that more rather than less redundant. I therefore caution against an attempt at extreme micromanagement of the interface.
Graham Jones
The Minister flags up a cautionary point, but I again ask him a question I asked earlier: if he had a graphical interface with tiny letters that fulfilled its obligations, but at the bottom it said, “Amazon” and “Netflix”—it effectively had some commercial advertising —would he be happy to see that? Would that satisfy his current position? Alternatively, would he reflect and think, “That is not quite right”?
Matt Hancock
The hon. Gentleman is a great man who is worried about my happiness, but this is not about my happiness; it is about what is best for public service broadcasting and the PSB compact. My response is that it is for Ofcom to issue guidance on ensuring that the EPG works. It is better done that way, so that it can be proportionate, flexible as technology changes over time and not micromanaging things. The guidelines do that and pull that off. That is why when we considered the proposal as part of the consultation, we decided not to go there.
Graham Jones
I welcome the opportunity to engage in the issue, but when the Minister looks at Sky taking over the splash screen and relegating the EPG to the second tier—obviously Ofcom cannot act in that case, or it would have done already—is he happy?
Matt Hancock
Again, my happiness is secondary really, but my problem with the proposition being put forward is that trying to define sub-menus and user interfaces in regulation, especially statutory regulation, is incredibly hard. The technological landscape is shifting quickly. It is best left to the Ofcom guidance to answer such questions. We looked into the matter in some detail in the consultation, so I hope that the hon. Gentleman will withdraw his support for the new clause.
Kevin Brennan
The Minister is saying that it is up to Ofcom to decide, but is not the point that what we are trying to do here is exactly what Ofcom is proposing?
Matt Hancock
No, because it is for Ofcom to issue guidance on linear EPGs. Ofcom is required as a duty to make the system work. Rather than going further down this route, having considered it, we do not want to be over-prescriptive, given the technological changes that are happening. With that, I hope that hon. Members will withdraw their amendment and then vote that clause 28 stand part of the Bill.
The Chair
We will, of course, be voting on any new clauses not today but later in our proceedings. Does Mr Brennan have any remarks to make?
Kevin Brennan
Yes, briefly. As you say, Mr Streeter, we will come to the new clauses later in the Bill. I do not think that it will necessarily be our intention at this point—we will cogitate further—to push them to a vote, but there are issues here to which we might want to refer on Report. One of my colleagues has pointed out that the Minister did not answer a question about Sky. Rather than making another speech, does he want to intervene during my brief remarks?
Matt Hancock
As I said in the discussion of the previous set of amendments, Sky is subject to a different regulatory regime. There are conditional access charges for satellite within that regime, which must be fair, reasonable and non-discriminatory for all channels. We considered that as part of the balance of payments consultation and came to the conclusion that it did not need to be changed, because of the requirement set out in the DPS code.
Kevin Brennan
I am grateful to the Minister for saving us time with that helpful intervention.
Graham Jones
This is an opportunity to ask my hon. Friend a question. There seems to be some doubt about the relationship between Sky’s retransmission charges and public service broadcasters. Does he know whether Sky pays for public service broadcasters? I understand that Sky pays for ITV commercial channels, but as I understand it, it does not pay anything for public service broadcasting.
Kevin Brennan
We discussed this issue, and the nature of that regime, earlier today. My observation was that the situation was extremely opaque, which is why we proposed earlier amendments to the Bill to suggest that the whole area should be reviewed—for that very reason. My hon. Friend makes an extremely pertinent point. It will be worth reading his remarks, and those made earlier today by Government and Opposition Committee members, on that point.
When we discussed new clause 14, which deals with listed sporting events, I worried that there is a degree of complacency in the Government. People will have heard what the Minister said about the issue, and we will be interested to hear what others have to say about his response. We should lay down a marker to say that we do not think that the Government are really listening or hearing what we are saying about this subject, and they are not sufficiently attuned to the dangers to listed sporting events. I know that the Minister is a keen and successful sportsman in his jockeying activities, on which I congratulate him. I am sure that he would want to see—
Kevin Brennan
He is a flat racing jockey—and, from what I have seen, a very good one—but he should be concerned about the possible future of events such as the Grand National, which, as he rightly said, bring the country together and are meaningful and important cultural events as well as sporting ones.
On new clause 17 and PSB prominence, again, the Minister says that he has not seen compelling evidence of harm, but I think that we supplied him with plenty of compelling evidence of the potential for harm, which is what the Bill is about. It should be about the digital future, as we have said. I take his point about extreme micromanagement—that is valid—but we are not talking about that; we are talking about setting clear parameters to ensure that public service broadcasting prominence remains across all platforms. Although we are unlikely to press the new clause to a vote later, we reserve the right to return to these issues.
Question put and agreed to.
Clause 28 accordingly ordered to stand part of the Bill.
The Chair
We are catapulted into part 5 of the Bill.
Clause 29
Disclosure of information to improve public service delivery
Louise Haigh (Sheffield, Heeley) (Lab)
I beg to move amendment 98, in clause 29, page 28, line 25, leave out “had regard to” and insert “complied with”.
This amendment provides stronger compliance with the code of practice on the disclosure of information.
The Chair
With this it will be convenient to discuss the following:
Amendment 100, in clause 30, page 29, line 33, leave out “had regard to” and insert “complied with”.
This amendment provides stronger compliance with the code of practice on the disclosure of information.
Amendment 99, in clause 32, page 30, line 13, at end insert—
‘(1A) In determining whether to make regulations under section 29, 30 or 31 the appropriate national authority must ensure that—
(a) the sharing of information authorised by the regulations is minimised to what is strictly necessary,
(b) the conduct authorised by the regulations to achieve the “specified objective” is proportionate to what is sought to be achieved by that conduct,
(c) a Privacy Impact Assessment compliant with the relevant code of practice of the Information Commissioner’s Office has taken place and been made publicly available,
(d) the proposed measures have been subject to public consultation for a minimum of 12 weeks, and responses have been given conscientious consideration.
(1B) As soon as is reasonably practicable after the end of three years beginning with the day on which the regulations come into force, the relevant Minister must review its operation for the purposes of deciding whether these should be amended or repealed.
(1C) Before carrying out the review the relevant Minister must publish the criteria by reference to which that determination will be made.
(1D) In carrying out the review the relevant Minister must consult—
(a) the Information Commissioner, and
(b) open the review to public consultation for a minimum of 12 weeks, and demonstrate that responses have been given conscientious consideration.”
This amendment seeks to reduce the risk of successful legal challenges. Challenges are often made on grounds of privacy and this would amend that to increase privacy safeguards.
Amendment 96, in clause 32, page 30, line 33, at end insert—
‘(3A) A particular person identified in personal information disclosed under sections 29, 30 or 31 is able to request to a specified person under subsection 29(1) that the personal information is modified and corrected if necessary.”
Amendment 95, in clause 32, page 30, line 34, leave out
“(including a body corporate)”
and insert
“, a group of persons, a private company or a publicly traded company irrespective of their size and revenue, but”.
Amendment 105, in clause 35, page 32, line 31, leave out “have regard to” and insert “comply with”.
Louise Haigh
I am very grateful to my hon. Friend the Member for Cardiff West for giving me some much-needed time off. I do not wish to disappoint the Minister by not being as brief as we were earlier, but I am not sorry, because part 5 really does require some further scrutiny. I think the Government know that it was not ready for Committee, not least because they have tabled several dozen amendments to it, but also because the codes of practice were not in good enough shape last week, according to the Information Commissioner, but were published just a few days later—some civil servants were clearly working overtime in the intervening period.
Clause 29 allows specified persons to share data for a specified objective. All national authorities will be enabled to lay regulations through secondary legislation for exactly what those data-sharing arrangements will be and what they will be for. In doing so, this clause lays out that they will be required to ensure the secure handling of information and to have regard to the codes of practice. Our amendments seek to strengthen this and to ensure that anyone involved in the sharing of data under these new powers is in full compliance with the codes of practice that were published last week.
I want to be very clear here: the Opposition do not oppose the Government’s sharing data among themselves to improve policy making and public services, but we must get this absolutely right and we are still a long way away from that, given the state of the current proposals. This is a key point: the public support the sharing of data to better enable the Government to provide services and to better enable the public to make use of those services, but public trust is fragile and has been rocked in recent years by varying degrees of incompetence in managing those data. Before Government Members point out that previous Labour Administrations were just as guilty, I should say that I fully accept that. This is not a political but rather an administrative point, which is why such proposals need to proceed with the utmost caution.
The Information Commissioner produced a very instructive report on this very point, which is extremely important to this part of the Bill, because it demonstrates the circumstances in which the public are happy for their data to be shared. The commonly recurring themes of what the public want regarding data could not be clearer: they want control over their data; they want to know what organisations are doing with those data; and they want to understand the different purposes and benefits of sharing their data. In that context, 63% of people agreed that they had lost control over the way in which their data are being used. This demonstrates that if there is to be sharing of data, which we support, there must be very clearly defined safeguards based on consent and transparency.
This part of the Bill gives considerable powers to Government to share data, but there are essentially no safeguards built in to ensure privacy, data protection, proportionality and a whole host of other principles that should sit alongside data sharing. It is vital that these reforms go ahead and we are completely in favour of effective data sharing across Government to achieve public sector efficiencies, value for money, improved public sector services, take-up of benefits for the most vulnerable, such as the warm home discount or free school meals, and, most importantly, an improved experience for those who use public services.
The Minister for Digital and Culture claimed in an evidence session that the safeguards are in the Bill, but that is simply not the case. I would be grateful if the Parliamentary Secretary, Cabinet Office outlined what safeguards he thinks there are. As I, a relatively amateur observer, as well as those who are much more expert in the matter read it, the safeguards are to be added at a later date, written up by the Government and consulted on with people whom the Government deem fit to consult. Furthermore, there is absolutely nothing the public sector does that is not covered by the clause. I would be grateful, therefore, if the Minister gave give us a single example that that—I quote from the clause—for the purposes of
“the improvement of the well-being of individuals or households”,
or of improving
“the contribution made by them to society”,
would not deliver.
Calum Kerr
It is good to see the shadow Minister back in her place. She is making an excellent start to this section of the debate, pulling out many of the key issues. I am afraid that the ministerial team might not like the scrutiny that the process is supposed to provide—and essentially does. The point about transparency is critical and there is a confidential submission that points out that transparency does not prevent people from doing anything; it simply requires them to be accountable for what they do. We have recently seen the case of HMRC outsourcing to Concentrix the ability to collect tax credits. Data from another source were used, and we all know the damage that can be done when that is not done well.
Louise Haigh
I am grateful for that intervention. I am very aware of the Concentrix case and will come on to it shortly.
On the inclusion of non-public sector authorities and the Government’s intention to strictly define the circumstances and purposes under which data sharing with such organisations will be allowed, their statement of intent was clear. However, only one paragraph in the 101-page draft code mentions non-public sector organisations. That paragraph says that an assessment should be made of any conflicts of interest that the non-public authority may have but it does not give any examples of what those conflicts of interest might look like, so perhaps the Minister will elaborate on that when he responds. It states that a data-sharing agreement should identify whether any unintended risks are involved in disclosing data to the organisation—the risk regarding Concentrix was just highlighted—but the code of practice does not list any examples or set out how specified persons might go about ascertaining those. It also states that non-public authorities can only participate in a data-sharing agreement once their sponsoring public authority has assessed their systems and procedures to be appropriate for the secure handling of data, but it does not give any sense of what conditions they will be measured against or how officials should assess them.
That is not the kind of reassurance that was provided in the Government’s consultation response. Given that these are draft codes, I hope the Minister will take what I have said away and improve them, not least because of the recent scandal relating to the US multinational company, Concentrix, which was contracted by HMRC to investigate tax credit error and fraud. Concentrix sent letters to individuals—mostly working single mothers across the country receiving tax credits—in what was essentially a large-scale phishing exercise. Not only did it get things catastrophically wrong by cancelling benefits that it should not have cancelled and leaving working mothers destitute over many weeks and months in some cases, but it performed serious data breaches in sending multiple letters to the wrong individuals and disclosing personal information.
We have made it very clear that the Bill could have done with considerably more work before it was brought before the House. I understand that the civil servant who wrote part 5 has now left, or is in the verge of leaving, the employ of the civil service, so there is even more reason for us to work cross party and with expert organisations on improving the proposals.
As I have said, public trust in Government handling of data is not strong. Unfortunately, the public have not been given any reason to put their concerns to rest. The recent National Audit Office report, “Protecting information across government”, revealed the prevalence of weak controls on the protection and management of personal information in Government. Any continuation of the existing poor information management identified by the NAO, or the further weakening of cyber-security and data protection implied by part 5, is likely to have negative economic and social impacts.
As the Information Commissioner’s Office commented:
“It is important that any provisions that may increase data sharing inspire confidence in those who will be affected. Our research shows that the public are concerned about who their data is shared with and reflects concerns that they have lost control over how their information is used. Even apparently well-meaning sharing of data such as GP patient records for research purposes can arouse strong opinions.”
This is an important time to strengthen cyber-security and the minimisation and protection of data, which is why it is so important to get this part of the Bill right. A huge prize is on offer, but this has the potential of going the way of the care.data scandal. Frankly, it is astonishing that neither Ministers nor civil servants have learnt their lessons from that very regrettable episode, because there was absolutely nothing wrong with the principle of care.data either; it attempted to achieve exactly the kind of aims as the Bill’s reforms.
The idea was to create a database of medical records showing how individuals have been cared for across the GP and hospital sectors. Researchers believed that the information would be vital in helping them to develop new treatments as well as assessing the performance of NHS services. The records would be pseudo-anonymised, meaning that the identifiable data would be taken out. Indeed, they would just contain the patient’s age range, gender and the area they lived in. However, researchers could apply for the safeguards to be lifted in exceptional circumstances, such as during an epidemic. That would have needed the Health Secretary’s permission.
The concept had the backing of almost the entire medical community, many charities and some of the most influential patient groups. The UK’s leading doctors told us how access to so many NHS records would help them to understand the causes of disease, quickly spot the side effects of new drugs and detect outbreaks of infectious diseases.
The problem with care.data was that the advantages and the principles upon which the data would be shared were simply not communicated by the Government or by NHS England, and so it attracted the criticism of bodies as disparate as the British Medical Association, the privacy campaign group Big Brother Watch and the Association of Medical Research Charities. Such was the botched handling of the publicity surrounding care.data that, by April 2014, the launch was aborted. However, it emerged the following June that nearly 1 million people who had opted out of the database were still having their confidential medical data shared with third parties, because the Health and Social Care Information Centre had not processed their requests.
A review by the National Data Guardian, Dame Fiona Caldicott, found that care.data had caused the NHS to lose the trust of patients, and recommended a rethink. That prompted the then Life Sciences Minister, the hon. Member for Mid Norfolk (George Freeman), to announce that the scheme was being scrapped altogether, even though £7.5 million had already been spent on constructing a database, printing leaflets, setting up a patient information helpline and researching public attitudes to data sharing.
The Caldicott review established a set of Caldicott principles, with the primary one being that the public as well as the professionals should be involved in data-sharing arrangements. Dame Fiona Caldicott proposed a simple model that gives people the option to opt out of any of their information being used for purposes beyond care. She said:
“We made it slightly more complicated by saying it was worth putting to the public the choice of having two separate groups of information to opt out of – [those being] research and information used for running the health service. If you put all of the possible uses of data currently in the system together and asked people to opt in or out of that, it’s actually asking them to make a choice about a very big collection of information. [People] may want to have the possibility of saying, ‘Yes, I’d like my data to be used for the possibility of research, but I don’t want it to be used for running the health service’.”
She also made it very clear that the benefits of data sharing and what it means need to be communicated clearly to the public, as there is a lot of confusion around how the data are shared.
Absolutely nothing has changed since that disaster and the subsequent review, so it is concerning not to see those basic principles included in the Bill. I am interested to hear the Minister’s response to those principles laid out by the National Data Guardian. The public need to be able to trust organisations that handle their data and they need to retain control over those data. Both those things are essential to build confidence and encourage participation in the digital economy. The principles have been debated over the past several years at the European level, and we should be told here and now—today—whether the Government intend to implement the EU’s General Data Protection Regulation. If they are, why is the Bill not compliant with it?
The new EU GDPR and the law enforcement directive were adopted in May and will take effect from May 2018. The GDPR includes stronger provisions on: processing only the minimum data needed; consent; requirements on clear privacy notices; explicit requirements for data protection by design and by default; and on carrying out data protection impact assessments.
Although the Government’s arrangements for exiting the European Union have yet to be decided, it seems likely that the GDPR will take effect before the UK leaves, so the Government will have to introduce national level derogations prior to its implementation. If that is the case, there will have to be a thorough consideration of the impact of the new legal framework on all aspects of the Bill affecting data sharing, including implementation arrangements. Indeed, as the Information Commissioner said when giving evidence to the Committee two weeks ago:
“There may be some challenges between the provisions and the GDPR… There would ?be a need to carefully review the provisions of this Bill against the GDPR to ensure that individuals could have the right to be forgotten, for example, so that they could ask for the deletion of certain types of data, as long as that was not integral to a service.”––[Official Report, Digital Economy Public Bill Committee, 13 October 2016; c. 112-13, Q256.]
The GDPR states that data are lawfully processed only if consent has been given by the individual, which is completely lacking in this section of the Bill. It also gives data subjects that right to withdraw consent at any time:
“It shall be as easy to withdraw as to give consent.”
Controllers must inform data subjects of the right to withdraw before consent is given. Once consent is withdrawn, data subjects have the right to have their personal data erased or no longer used for processing.
The Chair
Order. May I gently assist the hon. Lady by saying that I am not sure she has referred to her amendments much yet? She is making an excellent clause stand part speech. This will certainly now be the clause stand part debate, but it might help the Committee if she came on to her amendments as soon as possible.
Louise Haigh
Of course. Thank you very much, Mr Streeter.
Our amendments would ensure that the codes of practice, which have been vastly improved over the past week, are statutory. It is important that the principles and safeguards outlined so far are included and are statutory. That is what I have been alluding to so far in my speech. It seems pointless for civil servants to have put all this work into the codes for them merely to be regarded, rather than statutorily complied with. The codes must be improved further, and we hope that Ministers and officials will work with the industry and organisations to do just that, but we want to see them referenced properly in the legislation and properly complied with. Anything less means that the powers enabled in the clause dwarf any safeguards or checks included in the codes.
Amendment 99, in my name and that of my hon. Friend the Member for Cardiff West, would help to build trust in the Government’s data-sharing provisions—trust that has been rocked over a number of years. That trust is absolutely essential if this extension of the Government’s data-sharing powers is to be effective. It is worth noting again that the draft regulations allow a significant extension of data-sharing powers with a significant number of Departments. That extension is rightly set within defined and strict criteria, but some of the definitions contained within those criteria are at best vague.
Subsection (8) of clause 29 allows for the sharing of data if it is of defined “benefit” to the individual or households. Subsection (9) allows for the sharing of data if it
“has as its purpose the improvement of the well-being of individuals or households.”
While the extension is ostensibly for tightly defined reasons, those reasons are in fact so broad that they could refer to anything at all.
We again come back to the point about public trust. The public want to know why their data are being shared and that it is strictly necessary. Amendment 99 would help build that trust by ensuring that, under clauses 29, 30 and 31,
“the sharing of information authorised by the regulations is minimised to what is strictly necessary…the conduct authorised by the regulations to achieve the “specified objective” is proportionate…”
and that
“a Privacy Impact Assessment…has taken place”.
The amendment would require the Minister to establish a review that consults the Information Commissioner and the public on the effectiveness of the measures. The amendment would require the Minister, after a three-year period, to review the operation of these provisions to decide whether they should be amended or repealed.
A similar measure is included in the Bill in the provisions relating to data sharing for the purposes of the collection of public debt, so it is puzzling that it is not included in this part, too, as these provisions are so much broader and just as risky, if not riskier. Individuals are right to be anxious about their sensitive data being shared. The amendment would allow for the public to be reassured that their data are being handled within the strictest confines.
Amendment 96 would give individuals a right to access and correct their own data. Empowering citizens to have access to and control over their own personal data and how they are used would clearly help improve data quality. Citizens could see, correct and maintain their own records. Data need to work for people and society. Citizens need to be actively engaged in how their data are secured, accessed and used. Again, that needs to be put on the face of the Bill.
Part 5 does not make clear how proposals to data share comply with the Government policy of citizens’ data being under their own control, as set out in paragraph 3 of the UK Government’s technology code of practice. Indeed, the proposals appear to weaken citizens’ control over their personal data in order for public bodies and other organisations to share their data. Weakening controls on the protection of their data is likely to undermine trust in the Government and make citizens less willing to share their data, challenging the move towards digital government and eroding the data insights needed to better inform policy making and related statistical analysis. That type of organisation-centred, rather than citizen-centred, approach characterised the failure of the top-down imposition of care.data in the NHS. That is why we tabled these amendments.
The Parliamentary Secretary, Cabinet Office (Chris Skidmore)
It is an honour to serve under your chairmanship, Mr Streeter, and to be standing here making my Committee debut. The hon. Member for Sheffield, Heeley is obviously new to the business as well, and I hope to follow her example. She has been gracious and proportionate in holding the Government to account. I hope we can have a full and frank exchange—hopefully, a rapid one—as we move through part 5.
The Government share information every day. Like every organisation, we rely on information to deliver the support and services that everybody relies on. These proposals will not do anything radical. They are simple measures designed to provide legal clarity in uncontroversial areas. The hon. Lady said that the Bill’s objectives are too broad, but I am afraid I disagree. We have made available draft regulations that set out three clear objectives, which are constrained and meet the criteria. I believe it is possible to strike a balance between the regulations and the evidence to set out specific objectives on identifying individuals and households that have multiple disadvantages, improving fuel poverty schemes and helping citizens retune their televisions when the broadcasting frequency is changed in a couple of years’ time.
The hon. Lady mentioned some specific examples. I want to turn to the fuel poverty schemes. When we look at those several years down the line, I genuinely believe that we will be proud to have sat here and legislated in a Committee that introduced data-sharing measures that enable, for instance, a significant number of vulnerable people to benefit from the warm home discount scheme. At the moment, about 15% of warm home discount scheme recipients are classed as fuel poor, according to the Government’s definition. By utilising Government-held data on property characteristics to benefit the recipients, we estimate that that figure could be at least tripled. That could mean that an additional 750,000 fuel poor households receive a £140 rebate off their electricity bill each year.
We know that some vulnerable households miss out on the warm home discount because they need to apply and they either do not know the scheme exists or, for one reason or another, are unable to complete an application. Our proposed changes could result in the majority of the 2.1 million recipients receiving the rebate automatically. It will come straight off their energy bills without the need to apply. That is simply an extension of the data-sharing measures that already exist in the Pensions Act 2014 for pension credit. It is evolution, not revolution.
That example clearly sets out how we will require data to be shared among Government organisations and for there to be a flag to suppliers of eligible customers. In that instance, we will require the suppliers to use data only to support customers. Each objective will require a business case setting out the purpose and participants, which will be approved by Ministers and subject to parliamentary scrutiny.
I note that we are debating clause 29 stand part as well as the amendments, so after talking generally about part 5, let me move on to the clause. I believe that these powers do not erode citizens’ privacy rights. They will operate within the existing data protection framework. The new powers explicitly provide that information cannot be disclosed if it contravenes the Data Protection Act 1998 or part 1 of the Regulation of Investigatory Powers Act 2000. Further, they are carefully constrained to allow information to be shared only for specified purposes and in accordance with the 1998 Act’s privacy principles.
The new codes of practice, which the hon. Lady mentioned—I have been assured that they are on the parliamentary website—have been developed to provide guidance to officials in sharing information under the new powers in respect to public service delivery, fraud and debt, civil registration, research and statistics. The codes are consistent with the Information Commissioner’s data sharing code of practice. Transparency and fairness are at the heart of the guidance. Privacy impact assessments will need to be published, and privacy notices issued, to ensure that citizens’ data are held transparently. I was delighted that the Information Commissioner wrote to the Committee on 19 October saying:
“Transparency is key to building people’s trust and confidence in the government’s use of their data. I am pleased to see that further safeguards such as references in some of the codes to the mandatory implementation and publication of privacy impact assessments (PIAs), and reference to my privacy notices code of practice, have been highlighted in the Bill’s codes of practice.”
Louise Haigh
The Information Commissioner also said that she wanted the privacy impact notices to be included in the Bill, and the codes to be explicitly subordinate to her code on data-sharing practices. Will the Minister confirm that those codes are indeed subordinate? Will he also explain why the codes are not included in the Bill if they are so central to the process?
Chris Skidmore
I will come to the second point later. On the Information Commissioner’s desire to include privacy impact assessments, it is clear to me from her letter that she is now content with the situation as it stands:
“I am content that the codes all now reference and better align with the guidance on sharing personal data set out in our statutory code and include effective safeguards to protect people’s information.”
Louise Haigh
The Information Commissioner was referring to the codes being improved since she gave evidence to the Committee. Later in that letter, which I think the Minister has in his hand, she goes on to say that she stands by the other evidence, both the oral evidence that she gave the Committee and her written evidence, which included her view that privacy impact notices should be in the Bill.
Chris Skidmore
The Information Commissioner also mentions that, on privacy impact assessments and with reference to her privacy notices code of practice:
“This will build in transparency at two levels:—”
in the current situation—
“greater accountability through the publication of PIAs and timely and clear information for individuals so they can understand what is going to happen to their data.”
The Government remain committed to working with the Information Commissioner’s Office. When it came to the evidence sessions, I was aware of the fact that we had a long process discussion around the codes of practice and when their publication dates were due. It was very important for me, as a Minister, to ensure that we had the confidence of the ICO going forward and that we could publish those draft codes. We will continue those conversations.
When looking at putting the codes or privacy impact assessments in the Bill, it comes back to the key point of being able to continue that conversation when it comes to a transformational technology that we may not even know exists at the moment and that may radically change our ability to look at how we data share. At the moment we are looking at specified portals through which we will data share for the benefit of the most vulnerable in society, but there may be a new technology that allows the Government to expand our scope. If that new technology comes into being and we write the codes and privacy impact assessments into the Bill, we will have the chilling effect of ossifying the practice; it will impact on our ability to adapt and to be able to look at new technology, to move fast and to realise the opportunities that we may have to data share for the benefit of the most vulnerable in society.
Louise Haigh
I completely agree that we should not tie ourselves down in the Bill, particularly to technology. It came through loud and clear from the evidence sessions that part 5 seems to tie us to a very outdated approach to data sharing. It does not talk about data access; we heard that an awful lot in the evidence sessions. The Bill goes against the Minister’s own guidance on that. We should look not at bulk sharing, which takes us back to when we had filing cabinets or were sending across spreadsheets and databases on USB sticks, but at using application programming interfaces and canonical datasets, on which the Cabinet Office is leading the way. I would appreciate it if the Minister commented on that.
Chris Skidmore
The hon. Lady highlights the argument I am trying to make, which is that the data-sharing measures in the Bill are proportionate, constrained and there to ensure that we can bring public confidence with us, which she mentioned. That is why we have highlighted specific portals through which we will be able to share Government information across Departments. In future, there will be secondary legislation powers to review and expand that, but there will be a whole process for which we need scrutiny.
That is why the Bill is so important: by highlighting how we can help those most in need and how, when it comes to data and consent, some people are in circumstances, by virtue of being in deprived communities or particularly vulnerable, of not knowing that they can benefit from their data being shared. It is the Government’s responsibility to act in this particular area to ensure that data are shared for the benefit of the most vulnerable. That is why the Bill is designed as it is. We have the secondary regulations in place, limited as they are at the moment, going through impact assessments and everything that we need to ensure that we have a proportionate response to sharing data.
I fully appreciate what the hon. Lady said but I hope that she will accept that the Government have pulled out all the stops to ensure that we can take public confidence with us. That is why, for instance, under clause 33, new criminal sanctions have been developed to protect information shared under the new powers in respect of public service delivery, fraud, debt and research, so those convicted of offences could face a maximum penalty of up to two years imprisonment for illegal data sharing, a heavy fine or both.
No statutory restrictions that currently exist on sharing of data, such as in the Adoption and Children Act 2002, will be affected by these data measures. When it comes to audits, which the hon. Lady mentioned, data-sharing agreements entered into under the power will set out a governance structure of how audits will take place. This structure will oversee the arrangement and what participating bodies are required to do under data sharing. The Information Commissioner’s Office also has a general power to conduct audits, including compulsory audits of Departments and organisations to check that they are complying with the law in relation to the handling of personal information. All bodies are required to comply with the ICO’s request for assistance so that it can determine whether data have been processed lawfully in data-sharing arrangements. The ICO can pursue criminal proceedings where necessary.
Louise Haigh
Will the Minister confirm that every Department that undergoes a data-sharing arrangement will complete a full audit of all data-sharing arrangements in that Department? Will that be available under the Freedom of Information Act?
Chris Skidmore
On the individual point of audit, I will have to write to the hon. Lady. I will further consider her amendments and speak about them when we discuss three-year reviews. I want to ensure that bodies sharing information under the public service delivery power, for instance, strictly observe and follow codes of practice. Although I welcome the intention of the amendments, I think they are unnecessary. The Bill sets out the key conditions for disclosing and using information, including what can be shared by whom and for what purposes. We followed the common approach taken by the Government to set out details of how data are shared in the code of practice.
I want to return to the hon. Lady’s question of whether we use “have regard to” or “comply with”. The wording, “have regard to” already follows common practice in legislation, as illustrated in section 25 of the Immigration Act 2016 and section 77 of the Children and Families Act 2014. As the power covers a range of public authorities and devolved territories we want the flexibility that I mentioned about how the powers are to be operated, so that we can learn what works and adapt the code as necessary. To put it into the Bill, as I mentioned, would hamper that ability to adapt for future purposes. If bodies fail to adhere to the code, the Minister will make regulations that remove their ability to share information under that power, as is indicated, indeed, in part 11 of the code of practice, which states:
“Government departments will expect public authorities wishing to participate in a data sharing arrangement to agree to adhere to the code before data is shared. Failure to have regard to the Code may result in your public authority or organisation being removed from the relevant regulations and losing the ability to disclose, receive and use information under the powers”.
Amendment 106 requires the Minister to run a public consultation for a minimum of 12 weeks before issuing or reissuing a code of practice. The code of practice is essentially a technical document that sets out procedures and best practice with guidance produced by the ICO and Her Majesty’s Government. Clause 35 requires the Minister to consult the Information Commissioner and other persons, as the Minister thinks appropriate. I think that that strikes a good balance. Indeed, as I mentioned, we have been working closely with the ICO to ensure that there is confidence in the codes and the Information Commissioner states:
“I am pleased to report that significant progress has been made since my evidence session and I am content that my main concerns about the codes have now been addressed”.
I think it is very important to put that on record.
Calum Kerr
I welcome the Minister to his place. He comes across, to me, as rather bullish now, despite the damning evidence we heard over a very condensed couple of days. Does he think that he has cracked it now, that these codes of practice are all fit for purpose and that we should be sufficiently reassured?
Chris Skidmore
The codes of practice remain in draft form and obviously we are in Committee having a discussion around the nature of what is in the codes of practice. We had criticisms last week of, “Where are the codes of practice?” We were still in the process of a conversation about the codes of practice with the Information Commissioner’s Office to ensure that the Information Commissioner was content. If she is content with the codes of practice as they currently stand, I am not one to go against the ICO. I am not saying that that is a form of complacency, although maybe the hon. Gentleman is, but I trust the ICO’s decision and am confident in its ability to deliver on the codes as they currently stand.
Calum Kerr
I thank the Minister for that mildly reassuring answer that the codes of practice are a work in progress. We welcome that, but in the spirit of helping improve them, I hope that he will consider some of the feedback from Big Brother Watch, which I thought gave the Committee excellent advice. Although Big Brother Watch recognises that the draft codes published by the UK Statistics Authority on research and statistics are detailed and comprehensive, it says that the draft codes published by the Cabinet Office and the Home Office are the polar opposite, offering very little detail or clarity.
Chris Skidmore
The codes are quite extensive in terms of being able to provide the material information that is there. They have gone through an extensive process. Although we had evidence from certain critical witnesses drawn by Opposition Members, there was also significant support for data-sharing measures and the ability to have flexibility through the codes.
As for considering how to go forward, the codes are now published—the hon. Gentleman can read them for himself—and the ICO is now content with the codes. That is a great position from which the Government intend to move forward. In terms of whether the codes are comprehensive, it is set out that the Government have a duty to consult the ICO and territorial Ministers. That is important, and we are following a process and a journey over which the Bill has been developed for a number of years. We are content that we are on track.
I welcome the intention of amendment 99 that only the minimum and necessary information is shared under the power to achieve the objective. The principles are set out in the Data Protection Act 1998. The public service delivery power will need to operate in compliance with the 1998 Act. The principle of data minimisation is also strongly embedded in the code of practice, to which specified persons who use the power must have regard.
In addition, the public service delivery power is intended to act as a more conventional gateway to allow public authorities to share information without the need for central oversight by Whitehall. It is important to reflect on that. Rather than having the dead hand of Whitehall overlooking a measure that should allow for local flexibility and local freedom, we expect a large number of local authorities to use the power to deliver their troubled families programmes. A central monitoring power could impose significant resourcing burdens, which we felt were unnecessary given the intended positive outcomes for citizens. On that basis, we feel that the amendment is unnecessary.
Amendment 95 intends to modify the definition of “personal information”. The definition in the Bill is consistent with section 39 of the Statistics and Registration Service Act 2007, which relates to the confidentiality of personal information. It has been drafted with that consistency in mind. The amendment proposes a definition that includes a vague group of persons. We believe it unsuitable because of its vagueness, and it risks causing confusion.
Amendment 96 requires that data subjects be allowed to request and correct as necessary personal information relating to them that is disclosed under the public service delivery powers. The amendment is unnecessary because the data subject already has those rights under the Data Protection Act 1998. In addition, the impact of such an amendment on public authorities would be significant. An assessment would need to be made of how many requests could be made to public authorities, and of the resulting resourcing requirements in terms of staff and any supporting technical infrastructure. Work would also need to be carried out to ensure that we can verify the identity of individuals requesting access to data and assess the risk of corrections and modifications to data held being made for the purposes of committing fraud.
I understand the intention of the amendments, and I hope that the hon. Member for Sheffield, Heeley will understand that the Government believe that progress has been made, as well as provision for ensuring that the sharing of data is proportionate. The regard for individuals’ privacy is central to the Bill and is set out in the code of practice, and the Government have put in place measures to work with the ICO and other civil society groups on that. I urge her to withdraw the amendment.
Graham Jones
I want to make a small point about part 5, chapter 1, clause 29. There is one small glaring omission that the Government ought to look at and which has been raised by my local authorities. In Hyndburn, we have what the Minister will understand as a two-tier authority. We have a district council and a shire council as opposed to, in metropolitan areas, a unitary council. The Minister is probably wondering where this is going: when light is thrown on an example, some of the problems begin to be seen.
My shire authority wanted to increase the uptake of free school meals but a lot of the data on constituents in the borough of Rossendale and the borough of Hyndburn, which I represent, are held by the local district authority. That includes data on council tax benefit, housing benefit and numerous other small interventions carried out by the district council. A unitary council does not have that problem. It can share data and resolve such problems. It can identify people and send out public information to potential recipients—beneficiaries—of free school meals, who trigger the pupil premium.
I will give an example of how that problem is inflated. We currently have free school meals for everyone aged between four and seven, so parents see no reason to come forward and register their children for the meals, which then does not trigger the pupil premium. In a unitary authority, relevant information in other council departments would be readily available, but in my two-tier authority, the chief executive of Lancashire county council says to me, “We want to increase the uptake of free school meals, particularly for four to seven-year-olds, because we want to trigger the pupil premium, but we can’t find potential recipients. We have some data on people who may use some of our services and may be entitled and some people who we could disseminate public information to, but there is a whole tranche of people we can’t see—we are blind to them, they are just not on our radar. There is no scope for us to see who they are.” That is because, of course, it is Hyndburn borough council and Rossendale borough council that have an interface with those people—they come into their offices regarding a plethora of issues—and those people may well benefit from free school meals. In this case, however, they will not benefit if their children are aged between four and seven so, again, they are not likely to see the connection.
My upper-tier authority, Lancashire county council, cannot access the relevant information that my local authority, Hyndburn borough council has, but a unitary authority does not face that issue. That is not fair or reasonable. It is not conducive to public policy. It is not reaching the target audiences that the Government themselves want to reach. This Government brought in the pupil premium and they want to push that policy, yet the absence of data sharing between upper and lower-tier authorities prevents Government policy from being pursued and creates an unfair situation.
So I left my chief executive’s office at Lancashire county council and travelled the distance to meet the chief executive of my local district council, who fully understood the problem, and we were able, in some way, to get that public information out to the relevant people. There was no direct contact, however, and those issues are problematic when they should not be. I believe that the Government should look at the clause, and look at that inequity. It is not right. It is not good for the delivery of public policy. Clearly, it creates barriers to reaching some people while others can be reached. The Government ought to come back with something that exempts local authorities, because without a shadow of a doubt there should be parity between unitary authorities and two-tier shire and upper county council districts.
I hope the Government come back and create that level playing field—that parity of opportunity—for the Government to be able to pursue their own policies through local government mechanisms without this barrier impinging on those very same Government policies, which are probably not reaching the people they ought to reach because of this inequity and this element that is missing from the Bill.
I ask the Minister to take a deep look at this issue, to create parity and to bring forward something that will bring my two local authorities together and not create a barrier between the two, and certainly not create this iniquitous situation whereby unitary authorities are able to deliver these public services but my two chief executives cannot deliver them to the very people who ought to be receiving them.
Chris Skidmore
To respond to the hon. Gentleman on his specific point, we will update the lists of bodies able to share information of the public service delivery power, and the PSD power allows for new objectives to be added by regulations if they meet the conditions specified in primary legislation. So the issue of the pupil premium, which he mentioned, may be one of the many worthy purposes for which new objectives could be created.
I would like also to draw the hon. Gentleman’s attention to the disclosure of information in the draft regulations, which I hope will reassure him. Paragraphs 21 and 22 of schedule 1 to the Bill refer to the organisations that will be sharing data, or that will be permitted to do so once they have applied to do so, including the county councils of England, the district councils in England and even the council of the Isles of Scilly. We recognise that there is that local government fracture that he mentioned and we hope that when it comes to data-sharing measures we will be able to heal that.
Louise Haigh
It was disappointing not to hear the Minister mention the General Data Protection Regulation and explain why this legislation has not been written in compliance with it, or my points about non-public sector authorities. I hope that he can return to those issues later in his remarks.
On the point about the Information Commissioner, in her evidence she supported statutory codes of practice. She also recommended that Parliament should review all aspects of data-sharing, and not just the clauses relating to fraud, after an appropriate time, which is what informed our amendment.
As our amendment says, we would also like the codes to make it clear that good cyber-security practice should not be about data sharing and that it should be about leaving the data with their original owner. I hope that the Minister will return to those issues when he comments on later stages of the Bill.
With that in mind, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 29 ordered to stand part of the Bill.
Clause 30
Disclosure of information to gas and electricity suppliers
Chris Skidmore
I beg to move Government amendment 108, in clause 30, page 29, line 21, at end insert “, or
() the making of grants (by any person) under section 15 of the Social Security Act 1990 in accordance with regulations under that section made by the Scottish Ministers or the Welsh Ministers.”
This amendment enables information to be disclosed by a specified person to a licensed gas or electricity supplier for the purposes of a scheme in Scotland or Wales for the payments of grants to improve energy efficiency under section 15 of the Social Security Act 1990.
This clause enables the person specified in regulations to disclose information to gas and electricity suppliers. The disclosure must be for the purpose of reducing energy costs, or improving energy efficiency or the health or financial wellbeing of those living in fuel poverty, and it must be disclosed for use in connection with one of the fuel poverty support schemes listed in the clause.
The schemes referenced are the warm home discount scheme and the energy company obligation. Although the territorial extent of both these schemes is GB-wide, fuel poverty itself is a devolved matter. Officials in the devolved Administrations, including Labour-run Wales, have asked for Scottish and Welsh fuel poverty schemes to be included in the provisions of the clause. That is because there are grant schemes that fall under section 15 of the Social Security Act 1990 that address fuel poverty in Scotland and Wales. Those schemes would also benefit from the ability to share information between public authorities, and with gas and electricity suppliers, for the provision of assistance to fuel-poor households. The schemes are Nest and Arbed in Wales, and Scotland’s home energy efficiency programme. They help to reduce energy costs, or to improve energy efficiency or the health and financial wellbeing of people living in fuel poverty. The same safeguards will be in place as for all data disclosed under the clause—that is, data can only be disclosed by persons specified in regulations and for the specific purposes identified in the clause. All persons involved in a data-share must have regard to the code of practice.
The inclusion of these grant schemes will strengthen the ability to deliver better targeted, cost-effective fuel poverty schemes in Wales and Scotland.
Amendment 108 agreed to.
Question proposed, That the clause stand part of the Bill.
Louise Haigh
May I welcome the Minister to his position? It was remiss of me not to do so earlier; he is the model of a patient Minister and very polite with it, too.
As with clause 29, we very much support the objective behind the proposals in clause 30—to identify the individuals most in need of warm home funding and any other grant or benefit that will alleviate fuel poverty. As we heard from Citizens Advice, energy firms have found it difficult to establish whether people are entitled to funding, so people who should get the help do not get it. Sharing the data should smooth that process. We know that fuel poverty is a significant contributor to debt. StepChange said that about 10% of its clients would be within the old definition of fuel poverty—they spend more than 10% of their income on fuel—and it has seen the number of people in gas and electricity arrears rise sharply from where things were in 2010.
However, there are concerns about disclosing personal data to gas and electricity suppliers, again with no detail on what personal information might be disclosed or how. There is none of the legal or technical detail essential to ensure data security, the ethical use of data and the necessary trust framework essential to protect the rights, privacy and security of citizens. The same problems plague the rest of part 5, not least that the general data protection regulation explicitly bans the use of data to monitor the behaviour of people in a way that could be seen as profiling, so we would appreciate the Minister’s comments on that point.
As we have seen, the warm home discount can work well, but it must be set within strict safeguards. The initial legislation was introduced to allow data sharing to be carried out, and we know that the Department of Energy and Climate Change was extremely careful with the idea, and concerned about public perceptions about trust and private sector companies’ use of data. There was a great deal of anxiety about the public view when the proposal was put as a theoretical proposition. The public are not convinced about the sharing of data with private companies—let alone between Departments—and particularly with private providers such as energy companies who have a potential commercial stake in the data.
That is why the warm home scheme currently works through data from the DWP and energy suppliers going to a third party, which crunches the data to identify the matches. The energy suppliers are then sent onward a list of their eligible customers and the data are deleted from the third party’s computers. The data are not held on any computers; that provides an appropriate safeguard for all individuals concerned. That is critical to alleviating concerns about the sharing of personal information.
At present, therefore, companies with no public accountability learn nothing of any commercial value to their activities, which is a crucial point. The sharing of data cannot be done if there is a company with a potential conflict of interest. However, clause 30 allows for the disclosure of information to gas and electricity suppliers to help people living in fuel poverty and within other tightly defined criteria. Although the clause is clear that data may be used only for the purposes intended, unease will remain about why, in this instance, the Government have allowed personal information to be shared with electricity suppliers rather than with a third-party trusted provider.
There will be a serious concern that electricity and gas suppliers are being passed information whose content could present a potential conflict of interest. Nobody is suggesting that the electricity or gas suppliers would do anything in breach of their obligations, but the risk is certainly there. That was the basis behind the creation of a third-party supplier in relation to the warm home scheme.
We therefore welcome the creation of an offence for passing on any of this information and we welcome the maximum sentence of two years. It provides a clear steer from Government on the sensitivity of the data, yet clearly we would prefer that the disclosure would not happen directly at all.
Chris Skidmore
Clause 31 will enable specified public authorities to share information with gas and electricity suppliers or other persons specified in regulations. The disclosure must be for the purpose of reducing energy costs, or improving energy efficiency or the health or financial well-being of people living in fuel poverty, and it must be disclosed for use in connection with an energy supplier obligation scheme. The energy supplier obligation schemes referenced are the warm home discount scheme and the energy company obligation.
The warm home discount scheme provides a £140 energy bill rebate to certain vulnerable households during the winter months, helping those households to heat their homes. Some pensioner households already receive the rebate automatically, but that is possible only if the Government are able to inform the energy supplier, through a data match, which of their customers should receive it. It is important to recognise that that is not a new process. Rebates have been provided automatically to pensioner households in that way since 2011, and the process is considered to be working well. Not only has it helped to ensure that those entitled to support receive it, but it has significantly lower administrative costs—evidence suggests automatic payments cost under £1 per customer to deliver, compared to costs of up to £30 per customer for the non-automated method.
The hon. Member for Sheffield, Heeley mentioned the issue of trust and whether energy suppliers can be trusted with those data. She asked for an assurance from the Government on the continuity of the current scheme and whether similar security measures would be put in place. I can give her that reassurance. The sharing arrangements with third parties will remain exactly the same. Under current data-sharing arrangements for the warm home discount, suppliers are given a simple “yes”, “no” or “unknown” answer as to whether their customers were in receipt of state pension credit and so eligible for the core group rebate under the scheme. We would simply look to expand those disaggregated data. If wider data-sharing arrangements are put in place for fuel poverty schemes, we would expect only Government data to be shared with suppliers under those arrangements, which would have a similar yes or no answer as to whether the customer was eligible for support. The existing warm home discount core group of pensioners already receive automatic support through data sharing. It is a popular scheme and serves as proof that this model works and is safe.
The warm home discount scheme and the energy company obligation represent around £1 billion of investment per year. Although substantial, that is still a finite resource that needs to be targeted as effectively as possible on those who need it most. The data sharing enabled by this clause will significantly strengthen the ability to deliver better targeted, cost-effective fuel poverty support to households who need it the most.
Question put and agreed to.
Clause 30 accordingly ordered to stand part of the Bill.
Clause 31 ordered to stand part of the Bill.
Clause 32
Further provisions about disclosures under section 29, 30 or 31
Chris Skidmore
I beg to move amendment 109, in clause 32, page 30, line 18, at end insert—
“(ba) for the prevention or detection of crime or the prevention of anti-social behaviour,”
This amendment and amendment 112 create a further exception to the bar on using information disclosed under Chapter 1 of Part 5 of the Bill for a purpose other than that for which it was disclosed. The amendments allow use for the prevention or detection of crime or the prevention of anti-social behaviour.
The Chair
With this it will be convenient to discuss Government amendments 110 to 117, 120 to 128, 131 to 139 and 154 to 158.
Chris Skidmore
These Government amendments concern sanctions for unlawful disclosure and the disclosure and use of data to prevent and detect crime or prevent antisocial behaviour. A person receiving personal information under the public service delivery, debt, fraud and research powers cannot disclose that personal information unless it is for one of the exceptional reasons listed in the Bill, such as preventing loss of life or for national security. Technical amendments will ensure that it is clear that the list of exceptional reasons includes the prevention or detection of crime, or the prevention of antisocial behaviour.
The Bill provides that any person who contravenes the prohibition on further disclosure is guilty of an offence, which carries a penalty of imprisonment, a fine, or both. The introduction of criminal sanctions shows how seriously we take our responsibility to protect personal information, and we consider that it represents a key safeguard to accompany the new powers. It is imperative that individuals handling personal information under the powers take great care in handling that information.
We do not think that mistakes when handling personal data are acceptable, but we do not want to criminalise honest mistakes. The current drafting is slightly overzealous, so amendments 117, 128, 139 and 158 ensure that criminal liability arises only where there has been intent to disclose information. In circumstances involving disclosures made in error, we consider that other sanctions would be more appropriate, such as those set out in the Data Protection Act 1998 or internal disciplinary action.
The remaining amendments are minor technical amendments to ensure that information received under the powers can be shared to assist legal proceedings or criminal investigations outside the United Kingdom where necessary, while maintaining consistency across our clauses and aligning with other similar provisions in other legislation.
Louise Haigh
These Government amendments are technical and seem absolutely fine, apart from the provision to prevent antisocial behaviour. It is not clear to me why the disclosure would be necessary for the purposes of antisocial behaviour as defined under Anti-social Behaviour, Crime and Policing Act 2014. Can the Minister provide a clearer explanation of why any data that are ostensibly there to be shared for the purposes of alleviating fuel poverty and managing public sector debts would be used to prevent antisocial behaviour? Does that point to the concern I expressed earlier about the provisions leading to a broader scope for the use of information?
Chris Skidmore
The exemption has been included to ensure that if information received under the powers points to possible antisocial behaviour, it can be shared. That is intended to avoid any risk that by failing to refer explicitly to antisocial behaviour we cause ambiguity about whether certain information on antisocial behaviour can be shared. That ambiguity would have a chilling effect on multi-agency responses to antisocial behaviour, thereby undermining one of the key purposes of the 2014 Act.
Louise Haigh
Can the Minister give an example of how data relating to fuel poverty shared between a Government agency and a gas and electricity company could possibly relate to antisocial behaviour?
Chris Skidmore
We are talking about public service delivery powers, which do not just cover the warm home discount, attractive though that is. I know that all members of the Committee will be grateful, when this legislation goes through, to go back to their constituents and talk about being on this Bill Committee and how they delivered savings for millions of pensioners, but there are other key aspects of the Bill in relation to the troubled families programme and those living in communities blighted by antisocial behaviour. Data sharing around those programmes could create data matches that point to antisocial behaviour taking place or flag that up. We have a public duty to ensure that we have that power so that we can protect those vulnerable people whose lives are blighted in communities affected by particular types of antisocial behaviour.
Amendment 109 agreed to.
Amendments made: 110, in clause 32, page 30, line 19, leave out
“(whether or not in the United Kingdom)”.
This amendment removes the provision stating that a criminal investigation for the purposes of clause 32(2) may be within or outside the United Kingdom. This is for consistency and on the basis that a reference to a criminal investigation covers an investigation overseas in any event.
Amendment 111, in clause 32, page 30, line 21, leave out
“and whether or not in the United Kingdom”.
This amendment removes the provision stating that legal proceedings for the purposes of clause 32(2) may be within or outside the United Kingdom. This is for consistency and on the basis that a reference to legal proceedings covers proceedings overseas in any event.
Amendment 112, in clause 32, page 30, line 28, at end insert—
“( ) In subsection (2)(ba) “anti-social behaviour” has the same meaning as in Part 1 of the Anti-social Behaviour, Crime and Policing Act 2014 (see section 2 of that Act).”—(Chris Skidmore.)
See the explanatory statement for amendment 109.
Clause 32, as amended, ordered to stand part of the Bill.
Clause 33
Confidentiality of personal information
Louise Haigh
I beg to move amendment 101, in clause 33, page 31, line 19, leave out “or permitted”.
The Chair
With this it will be convenient to discuss the following:
Amendment 102, in clause 33, page 31, line 25, leave out “made” and insert “necessary”.
This amendment and amendments 103 and 104 seek to place a stricter requirement to reduce the risk of non-compliance with data protection.
Amendment 103, in clause 33, page 31, line 27, leave out “made” and insert “necessary”.
See the explanatory statement for amendment 102.
Amendment 104, in clause 33, page 31, line 30, leave out “made” and insert “necessary”.
See the explanatory statement for amendment 103.
Louise Haigh
The amendments would restrict the onward disclosure of data. As we know, the public value their data, and the amendments would place a higher test on onward disclosure.
It is important that data disclosures of information as sensitive as we have been discussing are appropriately considered; they must not simply be nodded through. Introducing a principle of necessity would mean that organisations have to make a case, rather than merely tick a box. Crucially, that would help to make the Bill more consistent with existing data protection. As the Information Commissioner’s data sharing code of practice clearly states:
“You should employ ‘need to know’ principles, meaning that other organisations should only have access to your data if they need it, and that only relevant staff within those organisations should have access to the data. This should also address any necessary restrictions on onward sharing of data with third parties.”
The ICO’s data sharing code of practice could not be any clearer. It is designed to protect an individual’s data and to prevent any onward disclosure to the organisations that have access to those data.
The Data Protection Act is also framed in terms of necessity. The ICO’s code of practice states:
“The processing is necessary because of a legal obligation that applies to you (except an obligation imposed by a contract)…The processing is necessary to protect the individual’s “vital interests”. This condition only applies in cases of life or death, such as where an individual’s medical history is disclosed to a hospital’s A&E department treating them after a serious road accident…The processing is necessary for administering justice, or for exercising statutory, governmental, or other public functions.”
The amendments, which would insert the word “necessary”, ask a simple question: why are the exemptions in the Data Protection Act set aside when there is disclosure of confidential personal data for certain public interest purposes? That is already clearly well established. For example, in the context of policing, section 29(3) of the Data Protection Act states that:
“Personal data are exempt from the non-disclosure provisions in any case in which”
the disclosure is for any of the purposes of a criminal investigation, and failure to disclose
“would be likely to prejudice”
that investigation. One element of the application of that exemption from the non-disclosure provisions has the effect of excluding the lawfulness of the disclosure. It therefore protects the disclosing body from action for breach of confidence.
To disclose under the Data Protection Act, there has to be prejudice to an investigation before a disclosure of personal data can occur. Clause 33(2)(e) refers to disclosures
“made for the purposes of a criminal investigation”,
with no test of prejudice. The advantage of the amendments is that they would bring in the word “necessary”. That minor shift would at least ensure that the disclosure of personal data is proportionate.
Similarly, section 35(2) of the Data Protection Act permits disclosure of personal data for legal proceedings without risk of the disclosing party being subject to an action for breach of confidence if the disclosure of personal data
“is necessary… for the purpose of, or in connection with, any legal proceeding”.
In contrast, clause 33(2)(f) does not include the word “necessary” and reduces the threshold of disclosure to one that could facilitate speculative disclosures that could not be made under the Data Protection Act. We would be grateful if the Minister explained why the necessity is removed and why the DPA provisions are not sufficient when personal data are disclosed, but only when it is necessary in connection with any legal proceedings. The amendments would align disclosure with the provisions of the DPA.
The changes to clause 33(2)(h)(i) to (iv) are proposed to make it clear why the DPA is insufficient. Schedule 2(4) permits disclosure of personal data if it
“is necessary in order to protect the vital interests of the data subject.”
Schedule 2(5)(b) allows disclosure that is necessary
“for the exercise of any functions conferred on any person by or under any enactment”.
Can the Minister describe what disclosures of personal data do not fall within those two provisions? The amendments insert the word “necessary” and simply align the disclosure with the Data Protection Act.
Chris Skidmore
Amendment 101 looks at tightening the restrictions around the onward disclosure of personal information in clause 33. Its effect would be to restrict the onward disclosure by public authorities to only those purposes required by existing legislation, rather than those permitted by existing legislation. Amendments 102, 103 and 104 would restrict the ability of public authorities to onwardly disclose personal information under this power for matters of great importance to all of us. The Government believe the amendments would have the effect of restricting our ability to share information for matters such as saving lives, investigating criminal activities and safeguarding vulnerable adults and children, unless it can be determined “necessary”.
Unfortunately, amendment 101 would considerably reduce the scope of public authorities to share data under that power. We are looking to provide legal clarity. Many existing legislative gateways for information sharing by public authorities tend to be permissive, rather than mandatory. Given that the purpose of the power is to provide legal clarity around data sharing to better target public services, the Government believe the amendment would, at best, introduce a degree of uncertainty as to whether a proposed data share is legal and, at worst, place a bar on existing permissive information sharing gateways for a range of important purposes.
Amendments 102, 103 and 104 could, in practice, inhibit public authorities from disclosing information, or delay them from disclosing it until they were content it was “necessary” to do so. The consequence of the amendments would therefore be to create an uncertainty where we are trying to provide legal clarity.
I welcome the intention behind the amendments—to ensure that personal information is disclosed—yet we believe they would create uncertainty. Furthermore, they are unnecessary as the powers are to be used in a way that is consistent with the DPA, and tough penalties under the new criminal offence will help ensure public officials handle the information lawfully. I invite the hon. Lady to withdraw the amendment.
Louise Haigh
I am concerned about why the Minister thinks the amendments will provide confusion; they will actually bring the clause into alignment with the Data Protection Act 1998—currently, large swathes of the Bill are not. Personal information is not defined as in the Data Protection Act, and nor are other clauses in this part. With your leave, Mr Streeter, I will test the will of the Committee.
Question put, That the amendment be made.
Chris Skidmore
I beg to move amendment 118, in clause 35, page 32, line 30, at end insert—
“( ) The code of practice must be consistent with the code of practice issued under section 52B (data-sharing code) of the Data Protection Act 1998 (as altered or replaced from time to time).”
This amendment requires a code of practice issued under clause 35 by the relevant Minister and relating to the disclosure of information under clause 29, 30 or 31 to be consistent with the data-sharing code of practice issued by the Information Commissioner under the Data Protection Act 1998.
The Chair
With this it will be convenient to discuss Government amendments 119, 129, 140, 161 and 188.
Chris Skidmore
These are minor and technical amendments to clauses on the code of practice and statements of principles that will be issued under part 5 of the Bill. The amendments will require that the code of practice be consistent with the data sharing code of practice issued by the Information Commissioner under the Data Protection Act 1998, ensuring greater clarity for practitioners and increased transparency for citizens about the relationship between the provisions in the Bill and the DPA. The amendments have been tabled with our conversations with the ICO in mind; we have the Information Commissioner’s confidence that the codes are right. I commend the amendments to the Committee.
Amendment 118 agreed to.
Louise Haigh
I beg to move amendment 106, in clause 35, page 32, line 42, at end insert—
“(ea) the public for a minimum of 12 weeks, and the relevant Minister, must demonstrate that responses have been given conscientious consideration, and”.
The amendment relates simply to the fact that the Opposition would like a full public consultation on the draft codes of practice. A much better version has been put before the Committee, and I understand that it is now on the parliamentary website, but we would like a proper consultation period, not just a consultation with whomever the Government see fit to consult.
Chris Skidmore
Amendment 106 would introduce a requirement for the Minister to publicly consult for a minimum of 12 weeks before issuing or reissuing the code of practice under clause 35.
Many details of the code of practice are drawn from the ICO data sharing code of practice. Others were drawn from two years of open policy making with civil society and other groups. We have just discussed a Government amendment intended to ensure that our codes will be consistent with the ICO’s data sharing code of practice. On that basis, we see no need for a compulsory public consultation before issuing the code, and even less need to make it a requirement in respect of any reissue. Some future changes to the code may be minor. We do not see a need to run a public consultation in those instances—indeed, to do so would be disproportionate in a great number of such cases.
Clause 35 requires that the Minister consult the Information Commissioner and other persons as the Minister thinks appropriate. Those other persons will include civil society groups and experts from the data and technology areas. We will run a full public consultation when a significant revision is expected, such as before the EU data protection regulation comes into effect, which I believe will be in May 2018. The clause as drafted provides the flexibility required. On that basis, the amendment is unnecessary and I invite the hon. Lady to withdraw it.
Louise Haigh
I am pleased to hear that the Government intend to consult on major revisions, and I hope that the draft codes, although much improved, will improve further in Committee, particularly in the areas outlined earlier relating to non-public authorities. As the Government have not listened to many of the recommendations made in their own consultation earlier this year, perhaps it is a futile amendment. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Louise Haigh
I will just lay some further concerns about the draft codes. Clause 35 requires specified authorities and specified persons to have regard to the code of practice. We have conducted our own mini-consultation. One member of the Government’s own open policy group described the codes of practice as “discursive and poorly constructed”, another as “empty waffle”. Agreement was widespread that they still require significant legal and technical improvements, and that safeguards should be included in the Bill itself.
Part 5’s provisions for personal data sharing enable officials to decide unilaterally when they may access and share citizens’ personal data without consent and for purposes other than that for which it was provided. It raises serious concerns about how the UK will be able to host any EU citizens’ personal data post-Brexit. If UK officials are able to access and use their data without consent, it is highly unlikely that the EU will regard that as approaching anything like “adequacy” with respect to the general data protection regulation.
It is an incredibly worrying aspect of the Bill and the accompanying codes of practice that nowhere do they refer to the EU’s GDPR, which will not come into effect until 2018, as the Minister said, although the Information Commissioner’s Office has stated that organisations must comply with the GDPR if they wish to continue to do business across the EU or with EU citizens’ data. Although we are referring to Government agencies and Departments, there is every likelihood that they will process EU citizens’ data.
Where consent is to be overridden by officials, the approach is not well defined. There is no consideration of or support for alternative approaches, such as empowering citizens to be helped by letting them nominate someone other than officials to act on their behalf, rather than officials doing so. There is inadequate attention to transparency and accountability. We have many lessons to learn from the Estonian Government, as we heard in evidence sessions.
Furthermore, the personal data-sharing code perpetuates errors from the two-year consultation. For example, when the code refers to application programming interfaces, it incorrectly implies that they are a new thing. They are not, with modern web APIs generally recognised as having been in existence since around 2002—hardly state of the art. The code also displays no apparent awareness of, for example, zero knowledge proof, a method by which one party can prove to another that a given statement is true without conveying any information apart from the fact that the statement is true.
For that reason, both technical and legal safeguards must be within the Bill, not the lengthy and vaguely drafted codes of practice relating to personal data. Quite simply, none of the codes contains the safeguards alluded to earlier in the consultation and Bill process. In the interests of time, I simply say to the Minister that we will revisit concerns about the codes of practice. We have serious concerns about the lack of transparency still built into the codes of practice, let alone on the face of the Bill, and we would like some updated technological references in those codes.
Question put and agreed to.
Clause 35, as amended, accordingly ordered to stand part of the Bill.
Clauses 36 and 37 ordered to stand part of the Bill.
Clause 38
Disclosure of information by civil registration officials
Louise Haigh
I beg to move amendment 97, in clause 38, page 36, line 15, at end insert—
‘(2A) An authority or civil registration official requiring the information must specify the reasons for requiring the information to be disclosed.
(2AA) Information disclosed under this section shall not be shared with any other public or private body beyond those specified in subsection (1).”
The Chair
With this it will be convenient to discuss amendment 107, in clause 38, page 36, line 12, leave out from “that” to end of subsection and insert—
“(a) the authority or civil registration official to whom it is disclosed (the “recipient”) requires the information to enable the recipient to exercise one or more of the recipient’s functions and,
(b) the data subjects whose information is being disclosed have given valid consent under data protection legislation.”
This amendment would remove bulk sharing while allowing certificates to be shared to support electronic government services.
Louise Haigh
These provisions, more than any others in relation to civil registration officials, have surprised and confused those involved in the data-sharing proposals and the open data policy-making process, as they were never mentioned in the more than two years of discussion about data sharing in that open policy-making group. In the Government’s consultation response, they said that
“a large number of individual respondents and representatives from civil society stated strong opposition to the proposed power providing the ability for the bulk sharing of data, believing that the power would effectively create an identity database and enable personal data to be shared between public authorities even where there is no public benefit to do so.”
The amendments would address exactly that.
The publicly stated policy intent of the clause is to allow a citizen interacting with the Department to allow that Department to confirm their civil registration information electronically. That could undeniably enable better informed decision making, allocation of resources and service delivery, and would support the modernisation of public services. However, as drafted, the legislation also allows the entire civil registration database to be copied over to arbitrary locations for arbitrary purposes. That is not the same thing as a citizen allowing access when using digital services.
There are further concerns about the clause’s lack of compliance with the Data Protection Act 1998. Civil registration documents will be shared in bulk to improve service delivery where there is a clear and compelling need, according to the Bill. However, “clear and compelling” remains a lower test than the Data Protection Act’s “necessary and proportionate”, and is likely to be challenged. The use of bulk data runs counter to the Centre for the Protection of National Infrastructure guidance, which warns of the risks associated with bulk data, particularly from hostile foreign intelligence services.
The example given by Government that would require the sharing of civil registration data is around child reference numbers, which become national insurance numbers. National insurance numbers used to be attached to child benefit. It worked on the assumption that every parent would claim child benefit for their child and, when that child reached 15 and a half years of age, their national insurance number would be dispatched.
When the Government changed their policy on child benefit and effectively restricted it to parents who earned less than £50,000 per year, that created a potential problem for the assigning of national insurance numbers. The proposals will presumably address the problem by using birth-certificate data to inform who should be issued with NI numbers and when. That seems a perfectly reasonable and sensible method to correct an unintended consequence of the changes to child benefit policy, but can the Minister give us any other examples of when and why such bulk data sharing would ever be necessary or proportionate? The example I have just run through is incredibly specific and I hope that it would not be and is not repeated across Government.
The Chair
I sense that the Government Whip is trying to catch my eye.
Ordered, That the debate be now adjourned.—(Graham Stuart.)
Neighbourhood Planning Bill (Fifth sitting)
Tuesday 25th October 2016
(8 years, 2 months ago)
Public Bill CommitteesRead Full debate Neighbourhood Planning Act 2017 View all Neighbourhood Planning Act 2017 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 October 2016 - (25 Oct 2016)
Dr Roberta Blackman-Woods (City of Durham) (Lab)
I beg to move amendment 12, in clause 6, page 5, line 27, at end insert
“in cases where the local authorities’ statement of community involvement was regarded as inadequate.”
This amendment allows the Secretary of State only to require planning authorities to review their statement of community involvement if they have failed to produce one.
It is a pleasure to serve under your chairmanship, Mr Bone. Clause 6 will enable the Secretary of State to make regulations to prescribe how and when a statement of community involvement is reviewed by a local authority. Amendment 12 would mean that the regulations only apply where there is some evidence that what a local authority is currently doing with regard to its statement of community involvement is inadequate. We want to do that for two reasons.
First, we are not sure what problem the Government are trying to fix with the clause. It would be helpful if the Minister outlined whether there is widespread evidence of local authorities not doing a statement of community involvement or not doing it properly. Secondly, and perhaps more importantly, we have some concerns about the Bill being a continuation of previous Bills on housing and planning that contain lots of centralising measures, giving the Secretary of State lots more power to get directly involved in what local authorities are doing. Of course, if I wanted to, I could say that this is part of what is actually an anti-localist strategy, not a localist one.
This might seem an innocuous little clause, but it sanctions a major interference from the Secretary of State in the everyday affairs of local authorities. However, if there is good reason for that—for example, if local authorities simply are not doing the job properly—we would want to look at it. We would need to look at why local authorities are not producing their statements of community involvement or why those statements are in some way inadequate.
From our discussions in this Committee and the evidence we have taken, we know that local authority planning departments are incredibly under-resourced. The British Property Federation’s annual planning survey last year had 300 responses from planning departments. Some 86% of local planning authority respondents believed that under-resourcing of their departments was their most significant challenge and was really impeding them achieving the aims they had set themselves.
I will outline a scenario for the Minister. A local authority might have great ambitions in its statement of community involvement to be as inclusive as possible and to ensure that there is a regular review process in which local people feel they can be directly involved. However, if the local authority does not have the resources within its planning budget to achieve those aims and that great vision of local community involvement in planning, what is the statement there to do? These are the really stark choices that a lot of local authorities are having to face. Do they take money from the social care budget? Do they take money from their gritting budget, as we are about to go into winter? Where are they to get the additional resources from in order to have an up-to-date statement of community involvement and to make it really inclusive?
I am sure that is what the Minister wants the clause to achieve. He may correct me if I am wrong, but my reading of it is that rather than just having a statement of community involvement that sits there on the shelf with a tick box, as he will know, on the local plan documents—“We have done our statement of community involvement and been out there and talked to some community groups; that is done and we do not need to revisit it until we are doing some major revision to the plan or a new plan”—I am sure that the Minister wants this to be a much more living document with direct involvement from local people, and that he wants people to know how they can get directly involved and what the timetable is for reviewing it. That is the sort of engagement and involvement that we all want from our planning system, but that will not be achieved simply by putting a clause in the Bill. In particular, that will not be achieved by putting a clause in the Bill that simply puts more burdens on local authority planning departments, without ensuring that there is adequate resourcing for whatever the additional burden is.
It would also be helpful to hear whether the Minister has any idea what the Secretary of State is likely to prescribe in terms of the statement of community involvement and the timings of when it has to be subject to review. We have not yet heard from the Minister on this point and it would be useful to know how much of a burden is being placed on local authorities. I say “a burden” because at the moment I cannot see any way that they will be able to fund this.
That is not to suggest for a minute that Opposition members of the Committee do not think statements of community involvement are important. I am sure the Minister heard me say on Thursday that in drawing up a local plan, local authorities should start with the neighbourhood. They should start with the community and find out what people want. My experience is that, generally speaking, people are very good at knowing what their communities should look like for 20 or 25 years going forward, and if they are included in some of the Planning for Real exercises, or with Planning Aid, that can be a very helpful exercise for the local authority.
It is really important that communities are directly involved in drawing up their local plans. In fact, the Opposition are arguing that that should really be where local planning starts. We want local authorities to be able to have a very strong community involvement plan, but we also want to ensure that they have the resources to do a really good piece of work and for it to be very meaningful, not only for the community but for the local authority as well. I look forward to hearing what the Minister has to say.
The Minister for Housing and Planning (Gavin Barwell)
Mr Bone, it is a pleasure to serve under your chairmanship again. If this meets with your approval, I would be happy to talk to both the amendment and clause stand part.
Gavin Barwell
The clause will ensure that no community can be left in any doubt about the ways in which they can participate in wider plan-making in their area. It will do that in two ways. First, it will introduce a requirement for local planning authorities to set out, in their statements of community involvement, their policies for involving communities and other interested parties in the exercise of their functions. Secondly, it will enable the Secretary of State to require authorities to review those statements. It will then be at an authority’s discretion as to whether it is necessary to update it; if an authority is content that its statement does not need updating, it will need to publicise its reasons for not doing so.
Let me now try to address the points that the hon. Member for City of Durham raised about amendment 12. I hope we can all agree that in order for statements of community involvement to be effective, it is essential that they are reviewed and kept up to date. The hon. Lady asked for evidence that there is a problem, which is a perfectly reasonable question. During the summer, my Department undertook a review of local planning authorities’ statements of community involvement, and found that a third were last updated before 2012—shortly after the introduction of the Localism Act 2011 and neighbourhood planning—and that 10% were 10 or more years old.
Clearly, a number of councils have not reviewed the statements since the entire world of neighbourhood planning came into being. I hope we can all agree on the importance of the communities that we have the privilege to represent having up-to-date information on how their local planning authority will support their ambitions. That is why it is necessary to legislate in this way.
The Bill will enable the Secretary of State to introduce regulations that require local planning authorities to review their statements at prescribed times. On 7 September, we issued a consultation in which we proposed that statements be updated every five years. We chose that figure because, as members of the Committee are aware, that is the existing expectation for local plans. Therefore, it makes sense to align those two things. The consultation closed on 19 October. It also sought views on proposals for an initial deadline of 12 months following Royal Assent for an initial review. The consultation provided an opportunity for authorities to comment on the implications for resourcing. I hope that reassures the hon. Lady in that regard.
There is consensus in the Committee that the issue needs to be addressed, but I felt that the hon. Lady overdid the case a little bit. I entirely accept that there is pressure on local authority planning departments and I went a long way to try to show what the Government’s thinking might be on that. However—this goes to the point I made to the hon. Member for Bassetlaw in the previous sitting—despite the difficult period that local government has gone through over the past five or six years, local authority planning departments have generally done an amazing job in raising their performance in updating local plans and dealing with major applications on time. Perhaps I have more confidence than the hon. Member for City of Durham in local authority planning departments’ ability to review a statement of community involvement in their existing budgets.
Dr Blackman-Woods
I would not want anyone to get the impression that we think that local planning authorities are not doing a very good job with limited resources. Nevertheless, my point was that statements of community involvement put particular expectations into the community because they see what involvement they are supposed to have. In some instances, that has a huge resourcing implication. Does the Minister accept that?
Gavin Barwell
I do accept that in so far as our constituents’ heavy involvement in the planning system—in the preparation of local plans and the consideration of planning applications—can, in instances, create more work for planning officers dealing with particular situations. However, it might also save money in the long run because if a local plan enjoys broad support among a local community, a lot of the contention that can creep into our planning system down the line should be removed. I certainly regard—as I hope all Members of the House do—putting an effort into engaging our constituents in how the planning process works as a worthwhile investment that will pay dividends in the long run.
Let me explain one concern I have about the amendment. Whereas the Bill currently says that the statements should be reviewed—potentially on a five-yearly basis, if we proceed with what we have set out in the consultation—and does not seek to make judgments about the quality or otherwise of the plans, the amendment would ask the Government to make a judgment on whether they are happy with the plans put forward by an authority. That seems to be a more centralist measure than the Government’s one. The Government are merely saying, “Councils can come up with their own statements. All we ask is that they are updated regularly.” However, the amendment would ask us to make a judgment on the quality or otherwise of the statements.
In response to other points made by the hon. Lady, if I may say so—I do not want to start the proceedings on an off note after Thursday’s consensual sitting—I thought it was something of an exaggeration to suggest that the power is a major interference in local government. It is simply asking councils to check that this important statement of how communities can get involved in the planning system is kept up to date. I do not think most people would regard that as a draconian, centralist measure.
I thought we had reached a consensus on this. We have a new shadow housing Minister and I have spent time reading some of the things he has said in recent months and years. One thing that really interested me in an interview he gave was that he acknowledged that the planning system had become far too centralised under the previous Labour Government, and he recognised that as a mistake. That may even be seen as welcoming the move towards the more locally, plan-driven system that we have seen under this Government.
Those who know me will know that my natural inclination is not to seek division. I quite like the fact that on several of the statutory instruments we have discussed, the Opposition have supported some of the things that the Government are doing. It is good if we can build consensus around these things.
Let me reassure the Committee that my starting point is that we should have a planning system that is locally driven through the development of neighbourhood and local plans. I see my role as purely intervening on occasion to ensure that things are kept up to date or compliant with the overall strategic national policy.
Dr Blackman-Woods
I have not had the opportunity to see the responses to the consultation paper, so it is not clear to us why 10% of councils have not updated their statement of community involvement for such a long time. That is a fairly low percentage but it would be useful to know what reasons were given in the responses to the consultation and when we might see the responses.
Gavin Barwell
I confess that I have not had the chance to read every single one of the consultation responses yet, either. I will certainly ensure that we publish a summary of those consultation responses as quickly as possible. The intention regarding the regulations is certainly to make them available as the Bill goes through its parliamentary process, so there will be plenty of opportunity for Parliament to scrutinise those regulations.
The hon. Lady focused on the 10% that are significantly out of date. I will check, but I think I said about a third since 2012. That is when the provisions from the Localism Act began to come into force. It is quite a substantial minority whose statements are not sufficiently up to date.
Jim McMahon (Oldham West and Royton) (Lab)
I do not think it is right for us to assume the reason that those could be delayed, because planning authorities may have their own reasons for that. It is probably more likely that this is just a very pragmatic sequencing decision that has been made, where land supply and local plan reviews are taking place. It would be reasonable for a local authority to say in that context that neighbourhood plans would be sequenced in order to meet that timetable. It is far less likely that they just decided it was not important.
Gavin Barwell
I do not make any assumptions. I am sure it is not deliberate malice, if the hon. Gentleman would like that reassurance. None the less, given that there appears to be a strong consensus across the House that neighbourhood planning is a good thing, I hope we can all agree that it is disappointing if there is a significant minority of councils whose statements of community involvement do not explain to residents how they go about setting up a neighbourhood plan.
The hon. Member for City of Durham asked for evidence as to why we might want to require people to update regularly: that is the evidence. Whether the hon. Gentleman finds that compelling is up to him.
I will make one final point, very gently tweaking the hon. Lady’s hair. She talked of the need not to put pressure on local authorities’ resources and all those issues. I remind her of an amendment we considered earlier, where the Opposition sought to put more specific detail into the statements of community involvement, saying exactly how to set up a parish council.
To a degree, the two amendments point in different directions. On Thursday, the argument was that we should be more prescriptive about what goes into these statements. I think I said there was a strong case that such information should be covered but I was not convinced that we should include it in statute. Today it is argued, in support of an amendment, that it is a terrible major centralising measure that they should be reviewed every five years.
I would gently say to the hon. Lady that there is good evidence that these statements have not all been kept up to date, and that it is reasonable to require them to be reviewed, ideally every five years. However, as a national Government we should not get into the business of prescribing exactly what is in them or assessing whether we think they are good or bad statements. We should simply ask councils to keep them up to date. For that reason, I urge the hon. Lady to withdraw the amendment.
The Chair
Order. To be clear, we are now debating not only the amendment but clause stand part—we are doing both at the same time. I also remind Members that they are not restricted to speaking once; they may speak as many times as they like, if they catch my eye.
Dr Blackman-Woods
Thank you, Mr Bone.
The Minister made a point about consistency. The amendments that were tabled on Thursday—along with, indeed, amendment 12, although perhaps not so much the latter—are clearly probing amendments. It is the Opposition’s job in Committee to test the Government’s thinking. It is not what we are doing that is the subject of the Committee’s scrutiny, but what the Minister is doing. Our amendments are merely about trying to get on the record further information from the Minister about what underpins some of the clauses in the Bill.
I was going to say that our discussion of clause 6 had been very helpful in getting on to the public record the Minister’s thinking and the limits of the Secretary of State’s involvement. I am sure that once the Minister has the chance to catch sight of the responses to the consultation, he will want to shape the regulations that will underpin the clause in the light of what has been said throughout the consultation process. Again, that was a useful exchange to have and it gave us a useful bit of information.
The Minister is welcome to go on discussing whether every single amendment we table in the Committee is mutually consistent, but I remind him that that is not the point of the amendments. Their point is to elicit from him further information. Because of the extra information I got from him this morning, I—along with, I am sure, my Opposition colleagues—would like to look at the outcome of the consultation and see whether the Government’s response is indeed proportionate to the problem. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 ordered to stand part of the Bill.
Clause 7
Restrictions on power to impose planning conditions
Dr Blackman-Woods
I beg to move amendment 15, in clause 7, page 6, line 7, at end insert—
“(1A) Regulations made under subsection (1) must make provisions for local planning authorities to make exceptions to conditions relating to matters set out in paragraphs (a), (b) and (c) of subsection (1).”
This amendment would ensure that there is a local voice and judgement taking into account local circumstances and impact.
The Chair
With this it will be convenient to discuss the following:
Amendment 18, in clause 7, page 6, line 12, leave out subsection (2)(a).
This amendment would ensure that “acceptable in planning terms” does not mean that conditions can be overlooked because they are unacceptable for other reasons.
Amendment 16, in clause 7, page 6, line 20, at end insert
“which must include consultation with local authorities.”
This amendment would ensure that local authorities are consulted on the draft regulations.
Dr Blackman-Woods
Amendment 15 speaks for itself, and relates to the conditions set by the Secretary of State under proposed section 100ZA(1), which states that,
“(a) conditions of a prescribed description may not be imposed in any circumstances on a grant of planning permission for the development of land in England,
(b) conditions of a prescribed description may be imposed on any such grant only in circumstances of a prescribed description, or
(c) no conditions may be imposed on any such grant in circumstances of a prescribed description.”
Those powers are given to the Secretary of State so that he or she will be able to add or take away conditions that are set by a local authority for a specific planning application.
I stress at the outset that this is very much a probing amendment. It seeks to elicit from the Minister whether there are any circumstances in which it might be necessary for local authorities to have an exception from a direction made by the Secretary of State requiring them to add or remove a particular condition. It would give councils flexibility to apply conditions that have been restricted by the Secretary of State, where they deem that necessary to address local circumstances.
The Local Government Association and councils have raised concerns that the imposition of certain conditions by the Secretary of State could reduce the ability of local planning authorities to include conditions necessary to address issues specific to a local area or an individual development that might not be clear to the Secretary of State.
Friends of the Earth has said that the provisions in subsection (1)(a), (b) and (c) of proposed section 100ZA are probably a step too far. It comes back to the point raised in amendment 12: the provisions give the Secretary of State substantial additional powers to interfere directly in conditions that might be set or deemed appropriate by the local authority.
I hope that the Minister can take us through some examples, because the Opposition are struggling to come up with a set of circumstances in which a Secretary of State would want to interfere in such a way, and to take the risk of something going badly wrong with the development because a condition that the local authority thought was important, but that the Secretary of State did not, turns out to have been very much necessary. I will discuss a couple of examples to see whether the Minister has thought about whether any exceptions should be made.
Let us imagine that a local authority wants a flood mitigation scheme in an area that traditionally has not flooded. Due to other developments elsewhere in the area, the local authority thinks that such a scheme might be needed for the longer term benefit of the site and its occupants. There might not be a good evidence base for such a scheme but, because the other developments are about to take place, there could be an impact on the site in future. The local authority might therefore take a cautious approach because it does not want future occupants to be flooded, or even to be at a higher risk of flooding. However, because there is no evidence base, that need might not be immediately apparent to the Secretary of State, who might water down or diminish the local authority’s ambitions.
The Chair
Order. I am sorry to interrupt the hon. Lady in mid flow. Minister, you well know that you are not supposed to pass documents to officials.
Dr Blackman-Woods
Similarly, there might not be a particularly strong evidence base for additional traffic management works, but they might need to be undertaken if there are a number of developments in the area. Again, I suspect that would have to be carefully explained to the Secretary of State so that he did not remove a condition that developers could reasonably argue is not entirely relevant to their site, because it would be relevant when the other sites are added. The amendment probes whether there might be exceptions, because the clause does not specify.
I am also curious—the Minister will need to enlighten me on this—because we know that local authorities must set their conditions in line with what is already in the national planning policy framework. I am sure that the Minister will be pleased to know that I have looked at every clause in the NPPF that mentions conditions, whether planning conditions or other sorts of conditions. Actually, the provisions in clause 7(2) are already clearly outlined in the NPPF, and tight guidance is given to local authorities—we might look at this later—on the evidence they need in order to adhere to planning guidance. The NPPF tells local authorities clearly what they have to do in terms of planning conditions, and the planning guidance gives even more information, very helpful, on what they should do, but somehow the Secretary of State will decide whether they are abiding by the guidance—if that is the process he or she will go through—or abiding by the NPPF.
I am just not completely confident that by giving the Secretary of State the exact same guidance and policy, somehow everything will become okay with the application of conditions, particularly because local authorities work within a local context, whereas the Secretary of State does not. What reassurances can the Minister give us that that will work in practice? I think he will agree that this time significant additional powers are going to the Secretary of State. When will they be triggered and in what way?
I ask that because in our evidence sessions I asked both the Home Builders Federation and the British Property Federation what evidence they had that conditions were being applied in an unnecessary and whimsical fashion, or that local authorities were routinely setting conditions, particularly pre-commencement conditions. I have to say that they did not break it down into pre-commencement conditions and conditions that relate to the ongoing development itself. Nevertheless, let us look at what they said and assume that it was at least partly about pre-commencement conditions. They said that they had evidence that builders were experiencing problems with pre-commencement conditions but could not give any examples. That is what I find worrying about the premise underpinning the clause, particularly the additional powers given to the Secretary of State in proposed section 100ZA(1).
Kevin Hollinrake (Thirsk and Malton) (Con)
Has the hon. Lady spoken to some of the small developers in her constituency? I have certainly spoken to some in mine, and they, too, cite pre-commencement conditions as critical to their ability to get a speedy resolution to planning applications.
Dr Blackman-Woods
I was just about to come to the Federation of Master Builders, which looks after smaller builders; I was dealing with the HBF first because it tends to deal with the volume builders. We heard in oral evidence the opinion of some of the volume house builders, although we did not get from the HBF any examples of what types of conditions were proving problematic.
Dr Blackman-Woods
May I finish responding to the previous intervention? To answer the hon. Gentleman’s second point, I talk to the small home builders—in fact, builders generally—in my constituency a lot. When we are looking at evidence, we have to look at it really carefully. Builders will often say to me, “We have to do a bat survey”—it is usually a bat survey, but occasionally a newt survey. Sometimes I ask them how long it takes and they say, “Well, it depends on the time of year, so it can be a bit problematic.” Generally, though, something has been done locally that they can tap into. Bats are usually the worst, but if we can find a way to deal with that without it being too onerous, perhaps such a drastic clause would not be necessary.
Kevin Hollinrake
The hon. Lady mentions bat surveys. In September, one of my constituents was required to carry out a bat survey on a building that was due to be demolished. When it came to granting planning permission in December, the planning officer decided that there were no bats around in September so they would have to wait until May to do the survey again. Having carried it out once, they had to wait until the bats came back to see whether any bats were there in the first place. The hon. Lady asked for specific examples. A small developer was asked for a landscaping scheme before he was allowed to start building the houses, and that was not in a conservation area. These things clearly are an issue. We cannot just reject out of hand the fact that they are causing problems.
Dr Blackman-Woods
I would like to reassure the hon. Gentleman that we are not dismissing those examples out of hand. My first point is that we are struggling to find examples. My second point is that, when we find examples, we have to decide whether they should be dealt with under a particular clause, such as clause 7, or whether we should find some other way of minimising the impact on the conditions set by the local authority.
The only example that the FMB was able to give us was of landscaping. However, landscaping is often what makes what might be a non-acceptable development acceptable to the local community. Communities want to know at the outset what a development will look like in the end, as the hon. Member for Thirsk and Malton must know from his constituents—I know it from mine. If a building has an unsightly façade or a high wall, or if there is something that people are unhappy with, they will ask at the earliest stage, “What sort of screening will there be so that we don’t have to look at that ugly edifice?” Far from landscaping being a good example for the hon. Gentleman, it actually helps our case. He and builders might think that pre-commencement conditions are unnecessary, but our constituents think that they are really important.
Gavin Barwell
It is undoubtedly the case that our constituents are interested in what schemes will look like. Does the hon. Lady at least accept that requiring a developer to set out all that detail before a single shovel goes into the ground slows down house building? She might think that that is a price worth paying, but does she accept that point?
Dr Blackman-Woods
The Minister will have to bring forward evidence to show that it will slow down house building. If landscaping makes acceptable to a local community a development that it would otherwise find unacceptable, it might no longer object to an application, in which case the condition could speed up development, rather than slowing it down.
Jim McMahon
I refer the Committee to my entry in the Register of Members’ Financial Interests—I should have mentioned earlier that I am a member of Oldham Council.
I struggle with the idea that asking developers to produce a landscaping plan is onerous. We are not talking about amateurs. When developers employ an architect to design a scheme, it is not that difficult to overlay it with a landscaping plan. The point has been made that, for a lot of people, that plan is the difference between whether a development is acceptable or not. That is not just because it can provide good screening but, importantly, because it forms part of the character of the locality.
We should all be trying to promote good development and good design in good context. Removing the conditions would not really help towards that. I can think of loads of planning schemes where really good landscaping design has added value. It has been good for the community, for the developer—which was able to get a premium on those properties—and for the people who live in the development, and it does not actually take that much time.
I struggle because—I wonder whether my hon. Friend agrees with me—we are just talking about planning. If developers are professionals, they will get their ducks lined up—or their bats—and ensure that they have the surveys in place. If they are refurbishing an old barn or building, they know that those things are needed and should just crack on and get them done.
Dr Blackman-Woods
My hon. Friend makes an excellent point that is pertinent to our discussion.
Chris Philp (Croydon South) (Con)
The hon. Lady is very kind to give way, and it is a pleasure to serve under your chairmanship, Mr Bone. In response to the suggestion made by the hon. Member for Oldham West and Royton, if one requires developers to do all the surveys before the application, and the application is then declined by the local authority, the developer will incur significant costs to no purpose. That may prove prohibitive, particularly for smaller developers. What is her view on that?
Dr Blackman-Woods
I am sure the hon. Gentleman knows that local authorities approve nine out of 10 planning applications. It would be a rare event for such a detailed plan to come forward to a local authority without the developer knowing that it was breaching local planning policy. That is what must be happening if the application is rejected. That is not a very usual occurrence these days.
If the hon. Member for Thirsk and Malton and the Minister are serious about speeding up development, they might want to look at the outcome of the FMB’s house builders survey 2016. One would assume, from reading the Bill, that the major problem in bringing forward development was pre-commencement planning conditions. However, when the small house builders were asked what was the biggest problem, they said it was the lack of available and viable land. That was the most commonly cited barrier to increasing output. We have to look right at the back of the survey, to a few specific questions on planning, to find any mention of planning conditions, and even then they were not the biggest problem; the biggest problem was the inadequate resourcing of planning departments. I hate to say that again and reinforce the message, but we are not the ones saying it; it is the small house builders.
Land is the biggest problem by far, and pre-commencement conditions do not come anywhere near that. Within planning itself, the biggest problem is the resourcing of planning departments—and that comment came only after prompting. They do not mention the setting of planning conditions at all; what they mention is sign-off of planning conditions. That seems to be a very different issue that they are raising. They are not raising an issue about the nature of pre-commencement planning conditions, or whether those conditions are appropriate. What they say in the text is that they could be signed off more quickly and that might help. Why are they not signed off more quickly? It is because of a lack of resourcing for local authority planning departments.
That was the only survey brought to our attention. I searched and found no other evidence, apart from the opinions of some of the larger volume builders. Giving such additional powers to the Secretary of State with no solid evidence base does not seem a very sensible way forward.
Some clauses in the Bill do not have the worrying aspects attached to them that this one does. If the effect of clause 7 is to restrict conditions that are set on developers, that could have a real impact on the community—not only on those who will ultimately occupy that development but on the neighbourhood. That is why we are so concerned about clause 7. We do not think it is necessary; we have not seen the evidence base. If the Bill is to contain such drastic measures, which could have real impacts on the areas that we all serve and represent, we need to hear something from the Minister.
Amendment 18 seeks to amend clause 7 so that if a condition cannot be enforced by the Secretary of State to make the development acceptable in planning terms, it makes the development unacceptable in other ways. Proposed section 100ZA(2) states:
“Regulations under subsection (1) may make provision only if (and in so far as) the Secretary of State is satisfied that the provision is appropriate for the purposes of ensuring that any condition imposed on a grant of planning permission for the development of land in England is...necessary to make the development acceptable in planning terms”.
Gavin Barwell
Many of the things that might be covered by social, economic or environmental concerns are absolutely central to the planning system. I want to check that the hon. Lady is not suggesting that councils should be able to consider things that are not material planning considerations when dealing with planning applications.
Dr Blackman-Woods
I am happy to answer the Minister’s question, but I am trying to find out what the Minister thinks about this particular subsection. Has he thought through a set of circumstances in which adding or removing a restriction or adding or removing a condition would make something acceptable in planning terms, but might have unforeseen consequences somewhere else? I am just giving the Minister an example because there could be environmental concerns. I suppose there are a lot of examples when we think about it. The removal of trees might be allowed under this clause, because that would be acceptable in planning terms, although I am not sure why it would be acceptable. There might be ongoing environmental or even social issues arising from that.
If we come back to the traffic measures, there is the issue of the roundabout. Traffic measures could be applied to make a development acceptable, and there could be absolutely dreadful issues for the local community in terms of air quality because of the requirement to make the development acceptable in planning terms. So the amendment is very much probing like amendment 15. We are trying to find out what this is all about in actuality. How will it work in practice? What sort of conditions might be set or removed by the Secretary of State? What is the impact of the decisions made by the Secretary of State and how will proposed section 100ZA(2)(a), (b) and (c) work in practice?
I will now move on to discuss amendment 16, which is innocuous and quite helpful. It simply asks for some consultation with local authorities when regulations are being drawn up. I actually thought this might be a helpful amendment for the Minister because, as we have already explained, we clearly have some difficulty understanding and finding an evidence base to support what is in clause 7.
If these regulations are to do the job that the Government want them to do—transfer powers to the Secretary of State, so that he or she can apply conditions or take conditions away—presumably they want the regulations to work in practice. These regulations really impact on the work of local authority planning departments, and local authority planning officers will be the people to know whether this clause is going to produce anything helpful or not in practice. It seems entirely reasonable that there would be a particular role for local authorities to contribute to the drawing up of the regulations, so that they are proportionate, and that the way in which the Secretary of State can interfere should be proportionate to the problem that the Government have identified.
I say that because nobody else seems to have identified pre-commencement conditions as a problem, but clearly the Minister thinks they are and some of his colleagues seem to think they are. All that we ask is that a very sensible approach is taken to local authorities, and that rather than simply having a set of regulations imposed upon them, which may or may not work in practice, they are involved in the process. Then, hopefully, we will get something commensurate to the problem and not a whole-scale transference of powers to the Secretary of State. I look forward to hearing what the Minister has to say.
Helen Hayes (Dulwich and West Norwood) (Lab)
It is a pleasure to serve under your chairmanship, Mr Bone. I have listened to evidence from both the development industry and local authorities both as a member of this Committee and as a member of the Communities and Local Government Committee. Although there are some examples, which have been much quoted, of the excessive use of pre-commencement planning conditions, the evidence is really not very strong. There are many reasons why the measures proposed in clause 7 are, in fact, an attempt to treat the symptom of a problem rather than the cause of that problem itself.
When asked, and when I have questioned them, all the witnesses—pretty much without exception—who have spoken about pre-commencement planning conditions have acknowledged, and in some cases spoken extensively about, the constraints on local authority planning departments. As we know, planning is the second most cut area of local authority services since 2010. It is an area that has, for good reason, lost out in the competition for local authority resources between it and statutory services such as children and adult social services, which affect some of the most vulnerable in our communities. To my mind, that is because the funding of planning, and in particular development management, is not on an appropriate footing.
I was very disappointed and frustrated that the previous Housing and Planning Minister simply ignored this issue during the debate on the Housing and Planning Act 2016, and did not acknowledge that we needed well-functioning, properly resourced planning departments to facilitate the building of the new homes that we need. It is absolutely not right that planning should be competing with services that are needed by the most vulnerable in our communities, and therefore we need a different way of funding planning departments.
Kevin Hollinrake
How will extensive pre-commencement conditions that are difficult to discharge help with that process? Local authorities will choose where to resource their departments. The pre-commencement conditions simply increase the burden on planning officers.
Helen Hayes
If the hon. Gentleman bears with me, I will explain exactly how that part of the argument hangs together.
There is evidence that officers are currently using pre-commencement conditions because they are simply unable to resolve every aspect of the planning application before the deadline for making a decision. In some cases, they are unable to look in detail at all the documents submitted as part of a planning application. In some cases, they are unable to spend the time negotiating and discussing with the applicant the type of detail that might be necessary. There is no question but that that is clearly not acceptable practice. Some have referred to that as lazy conditioning, but I would argue that it is, in fact, more commonly a symptom of the problem of under-resourcing, rather than deliberately poor practice.
When faced with the threat of appeal on the grounds of non-determination, local authorities and individual officers will look to use conditions as a way of making a timely decision to avoid losing control of every aspect of that planning application to the Planning Inspectorate. That is an entirely rational way for authorities to behave, rather than taking the risk of losing an appeal on the grounds of non-determination.
Gavin Barwell
I very much welcome the hon. Lady’s speech, because she is admitting that there is a problem and that the pre-commencement conditions are being abused. She believes that the reason for that abuse is that local authorities are under-resourced. That is exactly what she just said. Would not the right solution be to stop that abuse? That will do one of two things. It will show either that it is all about resourcing—the proportion of applications approved in time will drop dramatically—or that there is a problem. Either way, it will stop the abuse and reveal the true problem.
Helen Hayes
I am arguing, first, that the scale of the problem is not nearly as great as the Government say, and secondly, that where there is a problem it is a symptom of the lack of resourcing in planning departments—the primary cause of that problem—not a problem in its own right. Therefore, the Government should be directing their energy towards the resourcing of local planning departments. I have argued many times that local authorities should be able to recover the full cost of resourcing and development management services through the fees they charge for those services. That proposal has broad support from the development industry, local planning departments and the organisations that represent local government in London and across the country. It would be a far better place to start the debate than clause 7.
As we have heard from many witnesses, there are circumstances where pre-commencement conditions are welcomed by developers, and where there is flexibility to agree some details when finance has been secured on the basis of a planning application, or when more is known about the site due to site investigations that take place in the earlier stages of a scheme. Last week, I sat down with several representatives of the local community and a developer who is bringing forward a very sensitive scheme in my constituency. The planning permission for the site in question was a detailed consent secured by a previous landowner who used that consent to sell the site on; that was a controversial issue in its own right.
Last week we met the developer, which did not take part in the planning application process for the site that it has now inherited. In that case, there are pre-commencement conditions on materials and archaeology. It is entirely right and proper that the developer has the opportunity to consider those conditions and make proposals to the local authority for those conditions to be discharged before development commences.
Chris Philp
In the hon. Lady’s example, did not the new owner have ample opportunity to consider those pre-commencement conditions before the purchase of the site? If they did not like the conditions, they could simply have not purchased the site.
Helen Hayes
That is a rather blunt and not nuanced enough understanding of how such things work in practice. Last week, the developer met with the community —a vociferous community who feel very strongly about the site. That conversation will enable the developer to inform the discussions and plans for some important detailed aspects of the scheme. That is entirely the right order of things. It would not have been appropriate for the developer to speak to the community ahead of securing the purchase of the site; the developer would not have had a relationship with the community that allowed such a conversation. The way that things are progressing is entirely right and timely; it is not leading to any delay in bringing forward the site in question.
Dr Blackman-Woods
My hon. Friend is making a series of important points, which are helping us to understand pre-commencement conditions more thoroughly. Does she agree that the provisions in the clause will in fact make communities much more anxious about possible development in their area? The local authority may set conditions that will make a particular planning application acceptable and then find some way down the line that those conditions have been removed by the Secretary of State.
Helen Hayes
My hon. Friend is exactly right. It is so important that the voices of local communities are heard, particularly given the volume of development that is needed to deliver the new homes that we need in this country. Conditions are one way that a local authority can broker and establish a relationship between applicant and community and the genuine and material concerns that our constituents all have about development can be taken into account and addressed. Communities will find ways for their voices to be heard. If the planning system excludes those voices and makes those negotiations much more difficult, those voices will be heard in other ways: there will be an increase in applications for judicial review of planning applications and much more in the way of petitions, protests and attempts to frustrate development. It is right that the concerns of local communities are heard and addressed through the planning system.
I further take issue with the clause and support the amendments in the name of my hon. Friend the Member for City of Durham because it simply does not reflect or encourage good practice. It is widely acknowledged—the Committee has heard evidence from experts across the sector about this—that best practice involves applicants and planning authorities, having undertaken appropriate public engagement and consultation, coming together to agree what is necessary for an application to meet policy requirements in relation to a given site.
Members on the Government side of the Committee have made the point that there is cost and risk for applicants in taking applications through the planning process. That risk is mitigated and minimised when applicants fully understand and take into account the policy context and do everything possible to ensure that their applications are policy-compliant. To suggest that local authorities are in the business of refusing planning applications on a whim in a policy vacuum misrepresents what actually happens. In the case that a local authority makes a flawed decision, it is open to the applicant to appeal, and such appeals will succeed.
Kevin Hollinrake
Is the hon. Lady not arguing for the clause? She talks about best practice and engaging with the applicant and the planning authority to agree the way forward rather than unilaterally sticking in some pre-commencement conditions without discussing those with the applicant. Is that not exactly what the clause will do?
Helen Hayes
It is my view that a clause that requires an exchange of letters and makes agreement to the principle of pre-commencement conditions the preserve of the applicant rather than the local authority does the opposite. It does not encourage best practice; it encourages a much more litigious and formalised approach to negotiation, which does not allow for genuine engagement between applicant and planning authority. It would be far better to resource planning authorities properly to undertake those detailed discussions with applicants, so that they can agree and discuss the issues that are important to local communities and ensure they are properly addressed, with as many as possible being within the planning permission itself rather than within pre-commencement conditions. However, there is a role for pre-commencement conditions and it is a very important one.
Finally, we should remind ourselves of what pre-commencement conditions seek to achieve and why they are important. Conditions cover many aspects of application, such as the choice of materials, which is sometimes belittled as a trivial matter but is in fact so important in determining the impact that a new development will have on a community in the long term. Once something is built, it is there certainly for the rest of our lifetimes and perhaps those of future generations. What a development looks like, the impact it has and how sensitively considered the materials are plays a really important role in how acceptable it is to the local community.
Conditions also cover issues such as sewerage capacity, which influences whether residents will have serious problems, sometimes in their own homes, in the long term. They are a key means by which local authorities can safeguard the interests of local communities and ensure the quality of new development. Of course, they should not be overused or misused, but where that occurs it is a symptom of the lack of resources rather than wilful misuse or poor practice.
I argue that the setting of conditions should be the preserve of democratically elected local authorities, not contingent on the agreement of the applicant. Local authorities must be properly resourced to undertake pre-planning discussions, to review properly the content of applications and to agree as much as possible within the framework of the planning permission itself, in order to minimise the use of conditions. The clause is simply misdirected. It is trying to treat the symptom of a problem, rather than the cause. I hope the Government will therefore reconsider it.
Mrs Theresa Villiers (Chipping Barnet) (Con)
It is a pleasure to take part in this Committee under your chairmanship, Mr Bone. I have what amounts more to an intervention than a full speech. I spoke about this clause on Second Reading and received some useful reassurance from the Minister, but now we have the more relaxed circumstances and timings of a Committee, I would like to reiterate broadly the importance that many of my constituents place on matters relating to the protection of habitats—that includes bats and newts—and landscape and flooding.
It would be helpful if the Minister expanded on his remarks on Second Reading to explain how it will still be legitimate for the planning process to consider such matters and how there will still be opportunities for local authorities to require research to be done into them, so that planning permission can be granted on the basis of full awareness of the facts. While the clause as drafted will help streamline the planning process, it must leave planning authorities with the ability not only to take matters such as habitats into account, but to require developers to provide the appropriate surveys and research. Will the Minister explain at what stage that is still open to the planning authorities? I am sure my constituents would be very grateful for that.
Gavin Barwell
I should say at the outset that the three amendments we are debating do not deal with the pre-commencement and application issue. We have rather drifted into a clause stand part debate, but I will try to respond to all the points colleagues have made.
This is probably the moment in the Bill when there is the strongest disagreement between the two sides of the Committee. Let me start on a consensual note. The hon. Member for City of Durham asked me to accept that this was a wide-ranging power, compared with the one in the previous clause, and I do accept that. The Government have sought, in drafting the legislation and in some of the other things we have done, to provide as much reassurance as possible.
We have put two provisions in the Bill that it might be helpful to clarify at the outset. The clause does two things: it gives the Secretary of State the power to prescribe certain types of planning condition, and separately it requires that pre-commencement planning conditions may only be made with the agreement of the applicant. So there are two different issues, and the amendments we are considering deal with the first part of the clause. We will come to the amendments that deal with pre-commencement later. It might be helpful to the Committee to put that on the record.
On the Secretary of State taking the power to prescribe certain types of conditions, I can offer three pieces of reassurance to the Committee. First, the Bill makes it very clear that the Secretary of State may use that power only to back up what is in the NPPF—the basic tests are written into proposed section 100ZA(2), which is inserted in the Town and Country Planning Act 1990 by the clause. One of the amendments deals with those four tests, which I will come to later. Secondly, proposed section 100ZA(3) makes it clear that the Secretary of State, before making any regulations, will have to carry out a specific consultation on them, so each time the Secretary of State seeks to use the powers under proposed section 100ZA(1), there will have to be a public consultation. That is written into the Bill to provide reassurance about how the power is to be used. Thirdly, when we published the Bill, we also published a consultation paper setting out how we believed that we would want to use the powers, were Parliament to grant them to the Secretary of State. I will refer to that consultation paper later on in what I have to say.
The point of principle is the point of difference, so let us start with evidence. I would argue that there is a lot of evidence to show that there is a problem, but first I point out that the Opposition have fallen into one of the traps that has bedevilled the housing debate in this country for 30 or 40 years—a trap into which many of the people who have come into my office over the past three months have also fallen—and that is to set out an either/or choice.
For the first two months that I was doing this job, I asked everyone, “Why do we not build enough houses in this country?” People would reply, “It’s all the planning system’s fault,” or, “It’s all down to the major developers, who are banking huge chunks of land. If they released those, we wouldn’t have a problem.” Some people came into my office and said, “Do you know what? It is impossible for people nowadays to own their own home. We should just give up on home ownership and put all the focus of housing policy on renting,” but others say, “There has been too much focus on renting. People want to own their own home. Everything should be about helping people to own their own home.” I believe such choices to be completely false.
Gavin Barwell
If the hon. Lady allows me to expand the argument, I will be happy to allow her to intervene.
The reasons why we do not build enough homes in this country are complicated. Lots of things work, but if the answer were simple my predecessors would have solved the problem. There is no silver bullet and no one thing that will solve the problem, which instead will require a complex web of policy interventions.
Gavin Barwell
To say that there is a problem with local authority resourcing of planning departments, which I think everyone on the Committee has accepted, and that therefore that is the sole problem and we do not need to worry about anything else, is to miss the point completely. There are a lot of reasons why there are problems in our system. We need to take action to deal with all those things, not simply say, “This is the main problem, so we should solely deal with that and forget about the rest.” I will now happily take the interventions.
Dr Blackman-Woods
I want to challenge the Minister’s characterisation of what the Opposition think about why in this country we are not building as many houses as we should. I know the Minister knows that that characterisation is not fair, because he has read the Lyons review; I know that because he and his predecessor have been cherry-picking bits out of it and bringing them forward in Government policy. It was a wide-ranging review, which looked at a whole set of different reasons why we do not build enough houses—everything from land availability to the failure of the duty to co-operate, to the inadequacy of the local plan-making system, and so on. I hope he and the rest of the Committee will understand that the Opposition do indeed know that the problem is multifaceted. This morning, however, we are simply arguing about this group of amendments, and saying that we do not think that pre-commencement planning conditions are the major issue that he sets them out to be.
Gavin Barwell
If it is helpful and the interventions are on the same subject, I will take both before responding.
Helen Hayes
I want to make two quick points in response to the Minister’s remarks. There might be multiple causes of the issue that the clause seeks to address in relation to the use of pre-commencement planning conditions, but as my hon. Friend has argued, we do not believe there is evidence that this is a primary cause of the problem. We believe the primary cause is the under-resourcing of planning departments, and Government Members acknowledge the extent of that problem. Will the Minister explain why there is nothing in the Bill that addresses that problem?
My second point relates to the remarks made by the Minister about housing. I welcome his acknowledgment that renting and the affordability of housing are part of the problem. His predecessor took an entirely binary approach to housing: he put all of the Government’s resource into home ownership and did not recognise that nuance at all. If the Minister is thinking of changing direction, that would be welcome.
Gavin Barwell
On the latter point, if the hon. Lady were to look back at some of the things I have said over the period that I have been Housing Minister, she would find that those signals have been loud and clear. A White Paper is coming shortly. I do not want to add any more on that point, but on the resourcing point, other members of the Committee will say that I was pretty clear about where I stood last Thursday. On the question about why there is nothing in the Bill, some things do not need legislation to fix them. There is a White Paper coming out. I have to be careful, but the Government have consulted on the issue of whether we need to get more resourcing into local authority planning departments. The results of the consultation were clear, and the Government will reflect on them.
I was glad to hear the comments of the hon. Member for City of Durham. I will come to the evidence on this point, which is where we should concentrate our debate, but I would observe that the modern Labour party, which is a rather different creature from the one in the late 1990s when I was getting involved in politics, seems to find it easier to recognise problems when the private sector is involved and is more reluctant to recognise problems when the public sector is responsible.
Let us turn to the question of evidence. Knight Frank’s house building report 2016 refers to
“the need to address the increasingly onerous levels of pre-commencement conditions applied in some planning permissions and the length of time taken to sign them off.”
Crest Nicholson’s half-yearly report 2016 states:
“Speeding up the clearance of pre-start planning conditions and securing sufficient labour resources to deliver growth plans”
remain the two challenges to delivery.
The Persimmon annual report states:
“Whilst planning-related pre-start conditions continue to increase the time taken to bring new outlets to market, we are pleased to have...opened 60 of the 120 new outlets planned”.
I referred on Second Reading to a survey done by the National House-Building Council in 2014, which showed that a third of small and medium-sized builders identified planning conditions as the largest constraint to delivery. Specifically, the two questions were about the time taken to clear conditions and the extent of the conditions.
Gavin Barwell
The hon. Lady asked for evidence; I am giving it. The time to clear conditions was mentioned by 34% of respondents and the extent of conditions was mentioned by 29%.
The District Councils Network—local government, not developers—stated, in its submission to the Committee:
“The DCN has acknowledged that the discharge of planning conditions can be a factor in slow decision making and supports the government in seeking to address conditions.”
The hon. Member for City of Durham referred to a survey, but did not give the issue the prominence that it has in the survey. The planning system was identified as the second biggest challenge to small builders—tied with finance and behind the availability of land. The Government will be addressing all three issues. Among those commenting on planning difficulties, the signing of conditions was the second most cited challenge, behind the resourcing of planning departments, and the Government will be addressing both of those things.
The speech by the hon. Member for Dulwich and West Norwood was commendable. She acknowledged the abuse of pre-commencement conditions. Her explanation for it was not that local authorities were being lazy, but that there was a resourcing issue. I think the words she used were that people just did not have time to read planning applications, so they slapped pre-commencement conditions down. That clearly is not right, so the Government are absolutely justified in taking action in that area as well as looking to address the resourcing issues that she rightly identified.
Helen Hayes
The example I referred to was one that we heard in evidence to the Committee. It was an example of a landscape strategy having conditions despite having been submitted with the planning application. That practice is of course completely unacceptable, but it is, along with many other things, a symptom of the lack of resourcing.
More than half of the evidence that the Minister has just provided related to concerns about the signing off and discharge of pre-commencement planning conditions, not the setting of conditions themselves. If that is, indeed, a problem, as it would seem to be from the Minister’s evidence, I ask once again why the Bill is dealing with the symptom of a problem rather than the cause. Why does it contain nothing to deal with the issue of the discharging of planning conditions, and instead deal only with the setting of pre-commencement planning conditions?
Gavin Barwell
I have tried to answer that question already. Some of those things do not require legislation. There are problems in our house building system that require policy changes, and others that require legislative changes. We want to pursue a range of solutions encompassing both those options.
I want to pick up on three specific examples that we were given of pre-commencement conditions, one of which may help to provide my right hon. Friend the Member for Chipping Barnet with the reassurance she sought. I thought that the three examples delineated very well the difference between the two sides of the Committee on this issue. One example related to archaeological concerns. Clearly it is entirely appropriate to address those through a pre-commencement condition. If there are concerns that the moment someone gets on site and starts to do ground works they will destroy a key archaeological site, the issue has to be dealt with by a pre-commencement procedure.
The other examples concerned the use of materials and landscaping. I, and I am sure all members of the Committee, would accept that those issues are legitimate ones that communities would want to address through the planning process. However, I do not accept that they must be dealt with before a single thing can be done on site, as the development begins to get under way. There is no reason why they cannot be dealt with during the process.
The hon. Member for Oldham West and Royton made an interesting intervention in which he said that it is all very simple if—I will take care not to use unparliamentary language—one gets one’s ducks lined up. He said that people need to do all the work at the outset, come to the planning committee with everything sorted out, and then away they go. However, not only does that expose applicants to extra expense before they get planning permission, as my neighbour, my hon. Friend the Member for Croydon South, said, but it delays the process. The point that I am trying to get the hon. Member for City of Durham to accept is that, particularly with a large application, a huge amount of work must be done to get to the point where the applicant has satisfied all the legitimate concerns a community might have about it.
If, as I passionately feel, there is a desperate need to get us building more houses as quickly as possible in this country, surely anyone who has ever had any experience of managing a large project will think it is better to deal up front with the things that must be dealt with up front and then, while work is beginning on site, deal with some of the other issues that need to be dealt with. If we want housing to be built more quickly, we must allow developers to proceed in that way and not say that they must get every single thing sorted out before they can even turn up on site and begin vital work.
Dr Blackman-Woods
The Minister is in danger of presenting a bit of a caricature. It is not a question of absolutely everything being presented up front; it is a question of what is needed to be able to assure a planning committee and the community that a development is acceptable. If the Minister is serious about speeding up development, we know that the major problem with pre-commencement conditions is signing them off, so if he wants to address that it must be by further resourcing of planning departments, not by the removal of conditions.
Gavin Barwell
Again, the hon. Lady falls into the either/or trap. Both those things are problems. It is a problem both that the conditions are overused and that when they are legitimately used it can often take too long to sign them off. We are going to deal with both problems.
Gavin Barwell
I will give way once more; then I want to look at the specific example of flooding, talk about the consultation document and discuss the amendments.
Chris Philp
I have a genuine question on which I should be grateful for the Minister’s thoughts. If we proceed as per the clause as drafted, and the applicant has to agree in writing to the pre-commencement conditions, what if the applicant—the developer—unreasonably refuses to agree to any of the pre-commencement conditions, in order to frustrate them? What would happen in that circumstance?
Gavin Barwell
I am sure that my hon. Friend never asks anything but genuine questions. The answer is very clear. In those circumstances, the local authority would be able to refuse permission for the development. If the pre-commencement condition that the applicant sought to resist was an entirely legitimate one of the kind we have already discussed, and if the applicant appealed, the Planning Inspectorate would turn down their appeal.
Chris Philp
Just to be clear, any condition that a local authority feels strongly about has to be imposed as part of the main planning condition. It has to accept that anything that it does not put into the main planning condition, it cannot subsequently impose.
Gavin Barwell
Pre-commencement conditions must be agreed with the applicant. If the applicant is not willing to agree to a legitimate condition, without which the authority does not feel the application would be acceptable, the application should be refused. The authority absolutely has the right to refuse such an application. I put it on record that I expect the Planning Inspectorate to back up the decisions of local councils when it judges that such a condition is perfectly reasonable to make a development acceptable. I hope that any developer silly enough to play those games will quickly learn that lesson through the appeals process.
What we want is good practice; my hon. Friend the Member for Thirsk and Malton made that point powerfully. We want applicants and councils to sit down together and work out what legitimate pre-commencement issues are. We have no problem at all with such issues being used for pre-commencement conditions, but we want to stop them being abused.
The hon. Member for City of Durham used the instructive example of flooding. The test seems to me to be one of reasonableness. She used the phrase “There may not be evidence”. Local authorities are in difficult circumstances if there is no evidence to back up what they seek to do. However, if there is evidence of genuine concerns, that is clearly a legitimate and material planning consideration.
Dr Blackman-Woods
My point was not that there would be no evidence; it was that there might not be evidence about that specific site at that time, but that a wider reading of what a local authority was doing would produce evidence of the need to put in flood allevation some way down the line.
Gavin Barwell
I cannot sit in judgment on how a particular case might be considered, but I refer the hon. Lady to page 12 of the consultation paper, which sets out some examples from current planning guidance, which the Act will put into secondary legislation, of conditions that should not be used. It might be helpful to the Committee if I run through those examples. The first is:
“Conditions which unreasonably impact on the deliverability of a development”,
such as those
“which place…disproportionate financial burdens”.
The test is one of reasonableness. An inspector would look at whether the evidence that the local authority had presented was reasonable with respect to the use of those conditions. If the hon. Lady is asking me to make it clear that we would not rule out any consideration of flooding matters in planning considerations, I confirm that we absolutely would not. There are often applications in which it is entirely legitimate to do what she suggests.
The second example given in the guidance is:
“Conditions reserving outline application details”—
in other words, where an authority tries to specify things for an outline planning application that could very well be dealt with in a full application further down the line. The third example is:
“Conditions requiring the development to be carried out in its entirety”.
The fourth example is conditions that duplicate a requirement for
“compliance with other regulatory requirements”,
such as by just repeating something that is already in the building regulations and is therefore covered. The fifth example is:
“Conditions requiring land to be given up”.
The sixth is:
“Positively worded conditions requiring payment of money”,
as opposed to a section 106 agreement, which says that an application could become viable if a developer deals with certain issues. Those are the clear examples that we have tried to give in the consultation paper of the kinds of things we have in mind.
Having tried to address some wider remarks from Committee members, I turn to the three amendments tabled by the hon. Member for City of Durham. We believe that amendment 15 runs contrary to the purposes of the Bill, as it would clearly allow local authorities to get around regulations approved by this House to prohibit certain kinds of planning conditions. I hope my earlier remarks about reassurances in the Bill to limit the way in which the Secretary of State can use the power, and the requirement on each occasion for a public consultation, have reassured the hon. Lady about how the powers will be used.
Dr Blackman-Woods
That was a very helpful and, in some ways, enlightening response from the Minister. Unfortunately, we ended up having evidence presented to us that was not evidence and examples that were not examples, but instead a typology of circumstances in which the clause may or may not be applied. That is in a consultation document that sits outwith the Bill at this point.
Kevin Hollinrake
What does the hon. Lady regard as evidence? The submissions of developers, district councils, small and large builders—are they not evidence? Does she not recognise them as such?
Dr Blackman-Woods
The only example that has been given to us in the Committee, apart from the ones I speculated on myself, was landscaping. I think we dealt with why landscaping is so vital to know about at an early stage in the process.
Jim McMahon
A lot of examples have been used—we have had this debate often, and we have gone around the houses on bats and newts and, at one point, hedgehogs. That is all fine and well, but we really wanted to get to facts and numbers. How many planning applications have been frustrated or delayed significantly because of these conditions? We do not have those facts. We have people giving evidence of their experience and opinion, which is important, but is not the same as the hard numbers we have asked for.
Dr Blackman-Woods
My hon. Friend makes an excellent point about the various surveys that the Minister mentioned, which I was about to come to.
Chris Philp
I was about to draw the hon. Lady’s attention to the extensive list of submissions that the Minister read out in his speech a few minutes ago. Perhaps I might add my own experience. As I mentioned in my declaration of interests, prior to being elected I ran a business that provided finance for construction projects. The whole array of pre-commencement conditions are often very detailed. For example, they frequently stipulate precisely what kind of brick must be used and it often takes a very long time to get discharged. The pre-commencement conditions are often more detailed than one would reasonably expect.
With respect to the shadow Minister, I do think there is an issue here and that the Minister is trying to address it in a balanced and reasonable way.
Dr Blackman-Woods
In which case, what I would say is that we need the evidence in front of us. What examples are there? In how many sets of circumstances? How and why are the conditions inappropriate? In a conservation area, for example, the type of brick would be an important pre-commencement condition.
The evidence from Knight Frank was an assertion that there was a problem because we had no details and no number of applications—nothing. The Crest Nicholson example was a problem with signing off pre-commencement conditions and we on the Labour Benches have already said we recognise that is a problem. The signing off of pre-commencement conditions is a very different issue from the setting of conditions, and the clause is about the setting of planning conditions.
In the NHBC survey, the primary problem identified was again the time taken to discharge the conditions, not the conditions themselves. That was also the primary concern in the District Councils Network survey. We are not saying there is no evidence out there of problems signing off pre-commencement conditions—
Gavin Barwell
It is becoming increasingly frustrating that the Opposition do not seem to want to listen to evidence presented to them. Let me repeat two points so that the hon. Lady cannot skip over them. In the NHBC survey 34% referred to the time to clear conditions—she is quite right about that—and 29% referred to the extent of those conditions. She skipped over the quote from Persimmon that,
“planning-related pre-start conditions continue to increase the time taken to bring new outlets”—
not a word I like, so new homes—
“to market”.
What does she have to say about the very clear evidence?
Dr Blackman-Woods
I think the Minister and I have a really different understanding of what evidence means. I was coming to the District Councils Network and Persimmon because they mentioned, as did other people who gave evidence to the Committee, that there is an assertion that there is a problem, but we do not have hard and fast evidence of it. That is the point we have been trying to make to the Minister. He has not brought forward the hard evidence and we have not had good examples. We have been struggling to come up with examples and the Minister has certainly not presented any. We are not convinced that the clause is necessary.
For some of the reasons given by the Minister, I will not press the amendment to a vote, particularly as I take at face value his assurance about amendment 16 and that there will be consultation with local authorities. I am surprised that he did not take the opportunity in proposed section 100ZA(3) to add, “including local authorities”. If he is going to include “public consultation” in the Bill, he may as well include “consultation with local authorities.” Not doing so seems rather odd, especially as he has acknowledged so strongly that he wishes to consult local authorities in drawing up the regulations. Why not take the opportunity to amendment that subsection and put “local authorities” in the Bill? I am not sure why he does not want to do that, but at least something has been read into the record that perhaps will give some reassurance to local authorities that these regulations will not be as drastic or unworkable as they may be if local authorities were not involved in drawing them up. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Blackman-Woods
I beg to move amendment 19, in clause 7, page 6, line 18, at end insert—
“including in terms of sustainable development and public interest.”
This amendment would ensure that there is a sustainable development test in conditions and that they are acceptable to local people.
The Minister often takes our probing amendments in a way that seeks to shine light on the Opposition’s view, but I stress that we have tabled those amendments to test the Government’s view, because, alas, the Government are putting forward the Bill, not the Opposition.
Amendment 19 would ensure that where regulations are brought forward by the Secretary of State, he would have to comply with an additional measure to those set out in proposed section 100ZA(2), to get around the problem that amendment 18 in some senses addressed. We understand that the list of measures in that subsection follows what is in the NPPF and the planning guidance, but it may be missing some important aspects of a development and the pre-conditions that apply to it.
The subsection says that when the Secretary of State is making regulations, he has to consider things such as whether whatever he is asking local authorities to do or not to do will
“make the development acceptable in planning terms”,
and whether it is
“relevant…to planning considerations”
and
“reasonable in all other respects.”
Given the way in which sustainable development apparently underpins the NPPF, the amendment would require the Secretary of State also to look at whether the regulations would make the development more acceptable in terms of sustainable development and the public interest.
I am sure the Minister will want to know that several bodies—not just the Opposition—are concerned that something could accidentally slip through the provisions in proposed section 100ZA(2) that may be unhelpful to wider sustainable development considerations, and in particular contrary to the wider placemaking objectives that a local authority may want to pursue. The amendment seeks to ensure that in setting or removing any conditions, the Secretary of State ensures that they contribute to the sustainable economic development of the community, protect and enhance the natural and historical environment, and contribute—the Minister has covered this to a degree, but we will test him again—to mitigation of and adaptation to climate change, in line with the objectives of the Climate Change Act 2008, which I will come to.
The amendment is important because the NPPF makes it clear that development should be sustainable. Paragraph 5 says:
“International and national bodies have set out broad principles of sustainable development. Resolution 42/187 of the United Nations General Assembly defined sustainable development as meeting the needs of the present without compromising the ability of future generations to meet their own needs. The UK Sustainable Development Strategy Securing the Future set out five ‘guiding principles’ of sustainable development: living within the planet’s environmental limits; ensuring a strong, healthy and just society; achieving a sustainable economy; promoting good governance; and using sound science responsibly.”
Neighbourhood Planning Bill (Sixth sitting)
Tuesday 25th October 2016
(8 years, 2 months ago)
Public Bill CommitteesRead Full debate Neighbourhood Planning Act 2017 View all Neighbourhood Planning Act 2017 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 October 2016 - (25 Oct 2016)
The Committee divided: - Ayes: 4 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 10 / Noes: 4 - Question accordingly agreed to.
Dr Roberta Blackman-Woods (City of Durham) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. The Minister will be relieved to know that I was not quite in the middle but towards the end of moving amendment 19. I was extolling the virtues of adding to clause 7 a provision that would ensure that the Secretary of State had to take account of the need to promote development that is both sustainable and in the public interest.
To recap, I went through the provisions in the national planning policy framework and in planning guidance relating to sustainable development. Of course, we are also asked to look at the key provisions of the Climate Change Act 2008, which I will only do in a cursory way. Those provisions rely heavily on reducing carbon and on further adaptation measures that help with addressing climate change issues. I am sure the Minister is very familiar with the provisions of that Act and the need to ensure that, where possible, all development addresses those provisions and therefore helps us to combat climate change.
That deals with the first part of the amendment, which is about sustainable development. The amendment also asks that the Secretary of State have some consideration of the public interest, which is much more difficult to deal with than sustainable development, in terms of having a straightforward definition of exactly what we are talking about. For sustainable development we have the NPPF, the guidance and the Climate Change Act. The definition of “public interest” is much harder to agree on.
“Public interest” is a term with a long history. It says something about transforming the interests of many people into some notion of a common good. I am sure that we all think that is a central task of the whole political process. Thomas Aquinas maintained the common good to be the end of government and law, which is interesting—we might want to ponder that for a moment or two, as a bit of light relief. We also know that John Locke put
“peace, safety, and public good of the people”
as the ends of the political system. That is quite a nice thing for us to reflect on as well. One says that the public interest is central to our task this afternoon, and the other says that it should be nothing to do with us at all. I use that only to show that there is probably no absolute and complete understanding of what public interest is.
Rousseau, as always, has come up with something that helps us. He took the common good to be the object of the general will and purpose of government. That might help the Secretary of State in this regard, because it says clearly that the common good should be an outcome of legislation and of what we are all doing in this room. I therefore take it as read that there will be no problem putting those words on the face of the Bill.
Of course, it is not quite that straightforward. In practice, the public interest is often subject to differing views. People can decide that a public or common good can be met in a variety of ways. It is therefore not always exactly clear in practice what is meant by the public interest, but we are happy to leave it to the Secretary of State to come forward with a clear definition, if he so wishes.
Standard dictionaries manage to come up with a generally held view of the public interest as
“the welfare or well-being of the general public”
and of
“appeal or relevance to the general populace”.
That Random House dictionary definition is incredibly helpful, because that is what we would want planning developments to be. We would want them to promote the welfare or wellbeing of the general public, and we would want them to have an appeal to, and be considered relevant to, the general populace. We would like that sort of consideration, particularly the relevance of a development’s appeal to the local population, to be quite high up on the Secretary of State’s list of issues and interests when determining which conditions he will or will not allow.
We have had a wide-ranging look at the amendment, so I really look forward to hearing what the Minister has to say.
The Minister for Housing and Planning (Gavin Barwell)
It is a pleasure to serve under your chairmanship, Mr McCabe.
I thank the hon. Member for City of Durham for tabling amendment 19, which brings us back to less divisive territory and raises the important issue of having to take planning decisions both in the public interest and with the aim of achieving sustainable development. As she explained, it would add to the list of constraints on the Secretary of State’s regulation-making power in proposed section 100ZA(2) by explicitly requiring the Secretary of State to take account of sustainable development and the public interest when deciding whether it is appropriate to prohibit certain classes of planning conditions. Although the matters that the hon. Lady has raised are of the greatest importance in the planning system, I shall argue that the amendment is not necessary, in much the same way as amendment 16 was not necessary.
Subsection (2)(a) and (b) of proposed section 100ZA already provide assurance that the Secretary of State will be able to prohibit conditions only in so far as it is necessary to ensure that conditions will
“make the development acceptable in planning terms”
and are
“relevant to…planning considerations generally”.
That includes the need to consider the presumption in favour of sustainable development, which is at the heart of planning policy, plan making and decision taking. Local views are also already central to the planning system.
I thought that the hon. Lady made my point for me quite powerfully by quoting voluminously from the NPPF. Nevertheless, I shall briefly pick out a couple of other quotes. The then Secretary of State’s forward to the NPPF starts with the words:
“The purpose of planning is to help achieve sustainable development.”
Further on in the document, at paragraph 14, it states:
“At the heart of the National Planning Policy Framework is a presumption in favour of sustainable development, which should be seen as a golden thread running through both plan-making and decision-taking.”
I do not think that anybody who has spent even a moment reading the document could doubt the extent to which it is based on the principle of sustainable development.
I assure Members that clause 7 will in no shape or form restrict the ability of local planning authorities to seek to impose planning conditions that are necessary to achieving sustainable development, in line with national policy. The proposals will not change the way that conditions can be used to maintain existing protections for important matters such as heritage, the natural environment and measures to mitigate flood risk.
On taking account of the public interest—I greatly enjoyed the quotes that the hon. Lady read out—and ensuring that planning decisions and conditions are acceptable to local people, the Government continue to ensure that the planning system is built on the principle of community involvement. The system gives communities statutory rights to become involved in the preparation of the local plan for their area, bring forward proposals for neighbourhood plans, make representations on individual planning applications and make comments on planning appeals should applicants object to decisions made by local planning authorities. Account is also taken of the views of local people if an application comes to my desk, as happens infrequently.
I have no problem with the language in the hon. Lady’s amendment; the principles of public interest and sustainable development sit at the heart of the planning system. I simply say that it is not necessary to add that language to subsection (2)(d), because that language goes much wider than that one subsection; it runs right through the NPPF, which is referred to elsewhere.
Dr Blackman-Woods
I have listened carefully to what the Minister has said. We are probably all just a little disappointed that we are not going to hear the outcome of the Secretary of State’s deliberations on what exactly is meant by the public interest and that that will not be put in the Bill. The purpose of the amendment was really to elicit from the Minister how important he felt upholding the principle of sustainable development was, and to get that read into the record.
The national planning policy framework document is widely accepted as a very good piece of work, but that does not mean that it will always be there. In the future there may be a significantly amended NPPF in which sustainable development is not so obvious. I quoted from it today to show that it is there at the moment. We want to ensure that decisions made under the provisions in the Bill are made with sustainable development and the public interest in mind. Given the Minister’s reassurances, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Blackman-Woods
I beg to move amendment 17, in clause 7, page 6, line 20, at end insert—
“(1A) Regulations made under subsection (1) must make provision for an appeal process.”
This amendment would ensure that provision is made for an appeals process.
The Chair
With this it will be convenient to discuss the following:
Amendment 20, in clause 7, page 6, line 24, at end insert—
“where agreement cannot be reached a mediation system should be prescribed.”
This amendment would allow for there to be a mechanism to resolve disputes.
Amendment 21, in clause 7, page 6, line 26, at end insert—
“(5A) The Secretary of State should provide guidance for appeal routes where an agreement cannot be reached on pre-commencement conditions, along with guidance on pre-completion and pre-occupation conditions.”
This amendment would ensure that there is clarity on appeal routes, pre-completion and pre-occupation conditions.
Dr Blackman-Woods
The amendments in this group deal with the need that may arise from clause 7 for appeal systems or mediation arrangements. The Minister did not like our amendment 15, which sought to provide a series of exceptions whereby local authorities may not have to follow the conditions directed by the Secretary of State. Amendment 17 seeks to put in place an appeals process for local authorities so that if they strongly disagree with regulations that the Secretary of State is trying to introduce through conditions that he or she has already applied, they can appeal against that decision. I understand that that puts us in a constitutionally difficult situation, because it is of course the Secretary of State who ultimately adjudicates on appeals, but I am sure it is not beyond the wit of all of us here to come up with an independent arbitration system whereby local authorities at least feel that they can put their case to an independent body or an individual and have them adjudicate on whether the Secretary of State has acted properly and reasonably.
Jim McMahon (Oldham West and Royton) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. May I refer you to my declaration of interest as a member of Oldham Council?
Clearly, I agree entirely with my hon. Friend the Member for City of Durham, who added real weight to what the Secretary of State and the Minister are trying to achieve. The Bill allows the Secretary of State to make regulations that prescribe the circumstances in which certain conditions may or may not be imposed, but we believe that it is important for the planning authorities to be consulted.
There has been some conflict in the discussion that has taken place about the spirit in which the guidance has been written so far, because a lot relates to how matters of heritage, the natural environment, green spaces and flood mitigation will be accommodated. A lot of the pre-planning conditions that have been raised to date have dismissed such issues—we have talked about bat surveys, newts, drainage conditions and landscaping, all exactly the types of issues that fall into those categories. It is important that we are absolutely clear, not just for us, but for the public who will have to navigate what is already a very complex system for people not used to it, so that they know what to expect.
An appeals process makes complete sense. Any idea of natural justice allows people who are unhappy with a decision to go somewhere—where can be up for debate—and to have their argument heard again. That is right, and why worry about it? In this whole debate, in all our sittings, we have seemed to talk down what are quite small matters—to be honest, when we talk about them in Parliament they can be very small issues. The colour, type or texture of bricks are perhaps not issues that we should be discussing in this House, but they are very important for someone in a sensitive area with deep history and heritage when there is a development taking place next door.
If something is not agreed pre-commencement and then goes to appeal, is it right that someone who lives hundreds of miles away from the development should be able to express a very different view about the importance of that feature of the application? Local people want to know that, in the spirit of the neighbourhood plans, which we all welcome because they empower people to have more say over their communities, we will not snatch that control away from them unintentionally because we have not made accommodation further down here.
I will leave it there, but in the spirit of trying to make this work—nobody wants Bills that do not work in practice—let me add that the art of consensus is not waiting for people to come to our point of view, but accepting that we all have a responsibility to add to this process and take on board others’ views. If a good suggestion has been made, it should be taken on board.
Gavin Barwell
Addressing that last point directly, it is certainly my intention to achieve consensus where possible, but sometimes we have to accept that we disagree on issues. Let us look at the three amendments in detail and with a positive spirit.
Amendment 17 introduces a rather radical constitutional concept. The hon. Member for City of Durham went even further, suggesting that Governments always follow the results of every consultation they have, but I will not be drawn into that territory. In the current planning system, if an application for planning permission is refused by the local planning authority or granted with conditions, an appeal can be made to the Secretary of State under section 78 of the Town and Country Planning Act 1990. It is also possible for the applicant to apply to the local planning authority for the removal or variation of a condition attached to planning permission. If such an application is turned down, it is also possible to appeal to the Secretary of State in relation to that decision. As Opposition Members have recognised, in the unlikely event that an applicant refuses to accept a necessary condition proposed by a local planning authority, the authority can refuse planning permission for the application as a whole.
Amendment 17 would do a much more radical thing, which is to give an individual local authority the right of appeal against regulations passed by Parliament. There are some rather interesting constitutional questions about who would hear that appeal and what the result would be if it was upheld. Whoever was hearing the appeal would essentially be telling Parliament that the regulations were wrong and should be abandoned. The hon. Lady is always keen to stress that these are probing amendments and that she is merely inquiring into the Government’s thinking. I understand that, but this amendment raises some rather complex questions.
I will repeat the reassurances I have already given. Safeguards are in place under subsections (2) and (3) of proposed section 100ZA of the 1990 Act, inserted by the clause, which constrain the Secretary of State’s power to prohibit conditions imposed so that he or she can only prevent the use of conditions that clearly fail to meet the well-established policy tests in the national planning policy framework. It was very nice to hear the hon. Lady be so complimentary about the NPPF document. I share her admiration for it and, like her, cannot envisage a future Government wanting to unpick its key principles. Subsection (2) will ensure that conditions we all agree are necessary and appropriate to the development in question—for example, as my right hon. Friend the Member for Chipping Barnet mentioned, to protect important matters such as heritage or the natural environment—are not prohibited through use of this power.
The second safeguard, in subsection (3), states that before making any regulations on how the Secretary of State might use this power, the Secretary of State must carry out a public consultation. As I have told the Committee, we are currently consulting on the detail of how we might wish to use those powers. Ultimately, we want local authorities and developers to work together from the earliest stage in the development process, including holding discussions about what conditions may be necessary and reasonable. That is the approach advocated in the NPPF and the planning guidance.
I understand what the hon. Lady is trying to achieve with amendment 20. Of course, we have to ensure that where agreements cannot be reached, a sensible solution can be found. However, I am not convinced that a formal mediation system would speed things up, which is the test that the hon. Lady set for it. Clause 7 builds on best practice, as set out in our planning guidance, which states that applicants and local authorities should engage at the earliest possible stage to come to an agreement about these matters. That is what we all want. The question is how best to frame the law and policy to make that happen.
My concern is that if agreement was not possible and there was then a mediation process, and then a possible appeal, that would effectively add another possible stage to the process, which I fear would delay things further. I repeat the assurance that I gave to my neighbour, my hon. Friend the Member for Croydon South, that it is clear in the Bill that if a planning authority felt that an applicant was being unreasonable in not being prepared to accept a well warranted pre-commencement condition, the application could be turned down and the council should be confident that that judgment would be backed up by the Planning Inspectorate.
Dr Blackman-Woods
I wonder whether the Minister has thought about circumstances in which a local authority could not get the developer’s agreement and may feel pressured into lifting a condition that it would otherwise think was necessary because the developer tried to suggest it was unreasonable by making the local authority go to appeal. We are not sure—I would like some assurances from the Minister on this—that that would not trigger the Secretary of State getting involved to impose restrictions on conditions. It seems to me that if the Secretary of State will be able to do that in such circumstances, local authorities will be placed in a difficult situation.
Gavin Barwell
I think I can provide the hon. Lady with quite a lot of reassurance on that front. I think she is envisaging a situation in which a particular application is the cause of conflict and the applicant goes to the Secretary of State and says, “Council A is being unreasonable and you should exercise your power under these regulations to resolve the problem.” I think that this House would want to see a more substantive body of evidence for the use of these regulations than one particular case, and in any event there would clearly be a significant time delay in drafting the regulations and bringing them before the House. I think I am also right in saying that there is a general presumption that there are two dates during a given year on which most regulations are brought in. Practically, it is highly unlikely that an applicant will be able to run off to Marsham Street and say, “We need help with this; deal with this.” Speaking for myself, I would not want to take decisions based on such one-off cases.
More generally, the hon. Lady raised the question of the balance of power in the planning system. I can speak only for myself, but my approach—it was when I was a councillor and it is now I am a Minister—is to listen to the evidence that people give me when they make complaints about things that they think are unreasonable about the planning system. If I am convinced that they have a case, I think the right thing to do is to shift public policy, as I am doing in relation to pre-commencement conditions.
People complain to me about other matters. For example, developers often complain about how local planning committees work. Local democratic representation has an important role in our planning system, and when developers fall foul of planning committees, it is often because they have not engaged with the relevant local political representatives early enough in the process—or they have engaged, they have been given clear feedback about the likely concerns, and they have not reflected or responded to those concerns.
The point that I have slowly been trying to work my way around to is that my advice to local authorities is to listen, and if a developer is saying, “This condition is unreasonable, for the following reasons,” to consider that argument fairly. But if, having reflected on it, they think that the argument has no merit and they are doing the right thing for their community, they should stick to their guns and not be afraid to stick up for the position they believe in.
Dr Blackman-Woods
I have heard the Minister’s reassurances on specific individual cases, but what about the generality? For example, a lot of developers may come to Marsham Street and say, “We’re absolutely fed up with having to do bat surveys and think about newts”—or even, as the hon. Member for Plymouth, Sutton and Devonport may say, hedgehogs—“and therefore we want these regulations to have much clearer guidance for local authorities in terms of restricting the conditions that they can apply to protect wildlife.” Is that a real danger of the clause? Would it not help to have an appeal or mediation system to deal with that?
Gavin Barwell
I can give the hon. Lady strong reassurance on that front. First, she has my hon. Friend the Member for Plymouth, Sutton and Devonport completely wrong; far from wanting to further persecute hedgehogs, he is first to the barricades to protect and defend them.
Let us take the hypothetical example that the hon. Lady gave, where at some point in the future more and more developers are coming to the Secretary of State and saying, “There’s a real problem about the way in which the protection of bats is working and the onerous conditions that are being put on us.” If the Secretary of State was persuaded by those arguments, we would need to look at planning policy and whether we wished to shift it.
Broadly speaking, the test with all these things is one of proportionality. I think all of us would place significant weight on the protection of our wildlife and fauna. The test is always one of reasonableness, in terms of the costs incurred by the developer to do that. If a future Secretary of State decided that in his or her judgment that balance was wrong, that would involve a shift in policy. It would not be possible to outlaw a type of condition that is consistent with what current policy says. I hope that reassures the hon. Lady.
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
It is not only a case of trying to talk to politicians at an early stage; it is also about engaging with the local community, so that it feels it has a say and has been involved in the decision-making process.
Gavin Barwell
My hon. Friend makes a good point. Clearly, councillors and Members of Parliament are representatives of those communities, and engagement with them is important, but he is quite right that developers should also be talking directly to local people in the relevant area. They should be talking and listening. In my experience of the planning system, that kind of positive engagement is very good for the developer because it avoids problems later on when things come to a planning committee.
The broad point I was making to the hon. Lady is that my approach, were I on a local planning committee, would be to listen to concerns that developers expressed about planning conditions and judge whether the evidence backed up those concerns. If it did, I would adjust my policy, but if it did not, I would stick to my guns and do what I thought was the right thing for my local community.
On amendment 21, the hon. Lady made an important point about providing clarity for the applicant during the process. The amendment seeks to ensure that associated guidance is made accessible to inform parties of the appeals procedure, should an agreement not be reached on the application of conditions. I agree that we need to ensure that applicants are fully aware of the options available to them and how they can pursue that action. However, I would like to assure hon. Members that that information can already be found online as part of our planning guidance, and I believe it provides the right support to those looking to appeal against the imposition of certain conditions. On that basis, I hope the hon. Lady will accept that the necessary protections are there.
Dr Blackman-Woods
I thank the Minister for his helpful additional information on how this process might work in practice, particularly with regard to instances that might provoke the Secretary of State to develop and put out to consultation regulations to affect the conditions being applied by local planning authorities. I heard what he said about giving clarity to applicants about the appeals process and the circumstances in which the Secretary of State might get involved. I would like some time to consider that further. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
We now come to amendment 22 to clause 7. Before I call the shadow Minister, it might be helpful to advise the Committee that, in the light of the wide debate we have had on the amendments tabled to the clause, we are not planning to have a separate debate on clause stand part. If hon. Members wish to make any further comments about clause 7, I suggest they do so after the shadow Minister’s speech on amendment 22.
Dr Blackman-Woods
I beg to move amendment 22, in clause 7, page 6, line 23, leave out subsection (5).
This amendment would ensure that local authorities are still able to make necessary pre-commencement conditions on developers.
Thank you for that direction, Mr McCabe. I will address my comments not only to amendment 22, but to some of our wider concerns about clause 7.
The Minister knows, because he heard the evidence, as we did, that clause 7 was the one bit of this relatively short Bill that concerned people who gave evidence to the Committee. In fact, a number of people thought that the clause was just as likely to slow down development as it was to speed it up. Councillor Newman, who represented the LGA, said:
“The whole perspective of what I am seeing in the Bill looks very much like a sledgehammer to crack a nut approach—another layer of red tape.”
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure, Mr McCabe, to serve under your chairmanship. Is not that exactly the opposite of what has been said? We are trying to get rid of the complexity of the system. Clause 7 creates conditions of good practice, where people sit down together and make an agreement. If a council is being reasonable and a developer is reasonable, there will be no issue. There will be written agreement and things will move forward. If either party is being unreasonable, an inspector will be able to look at that and judge for the other party. It is in everybody’s interests to sit down and get a sensible agreement on the conditions. Is not that a sensible piece of legislation?
Dr Blackman-Woods
The hon. Gentleman has described the situation that exists at the moment, not the position in which we will all be in after the Bill is enacted. The Bill puts in writing the agreement between the local authority and the developer. Significantly, as we have all been discussing, it gives powers to the Secretary of State to intervene in the process by producing regulations that will say something about the conditions that can be attached.
I agree with the hon. Gentleman that the system is working well at the moment because, as Councillor Newman reminded the Committee,
“nine out of 10 permissions are given, and 470,000 permissions are already granted for homes up and down the land that await development for various reasons.”
All those reasons are not pre-commencement planning conditions.
Hugh Ellis said:
“From our point of view, the concern about conditions is that they are fairly crucial in delivering quality outcomes.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 23, Q31.]
He also said that he had no evidence whatever that conditions result in delay. Duncan Wilson from Historic England said that local authorities are usually reasonable already. He did not feel that unnecessary conditions were being imposed, and he believed that that particular assertion could be challenged. That is what we have been attempting to do thus far today.
It is not just Her Majesty’s Opposition saying that all this is unnecessary; it is the Town and Country Planning Association, the LGA, Historic England and the British Property Federation, which said that it saw an issue with the discharge of conditions, but could not give us much detail on pre-commencement conditions.
I want to outline the evidence we have been given on why the clause is unnecessary. Various people who gave evidence said that they felt that if an application was turned down because an agreement could not be reached with the developer, it could take longer to argue about the condition and determine it than under the current set of arrangements. I point out to the hon. Member for Thirsk and Malton that that point has been made not only by me but by lots of other people.
Helen Hayes (Dulwich and West Norwood) (Lab)
My hon. Friend is setting out her case powerfully. It has been suggested that the proposal set out in clause 7 is a sledgehammer to crack a nut. Does she agree that it is a sledgehammer to crack the wrong nut, because what really needs to be addressed is the resourcing of local authority planning departments, so that they can apply the existing guidance thoroughly and rigorously, give each application the time it needs and properly negotiate with applicants to ensure that applications are policy compliant?
Dr Blackman-Woods
My hon. Friend, as ever, hits the nail on the head. It is the wrong target, which is exactly our point. A lot of information is available to local authorities, never mind their experience of applying conditions. The problem is not setting conditions, but the lack of resourcing for planning departments. As we rehearsed this morning, most people’s problem with pre-commencement planning conditions is not the conditions themselves but the time it takes to discharge them because of the lack of resources in planning departments. A lot of information is available to local authorities, so in general one would not expect them to set unnecessary conditions, because that would clearly be in breach of all the documents I have discussed.
I picked up, at random, a list of pre-commencement planning conditions from my constituency. The developer has just written to me about them, to ask me to ensure that the local authority discharges them, and I thought, “Here’s a helpful bit of information that has just dropped into my inbox at a very appropriate time.” To give the Committee some context, the development is taking place in a conservation area—a rather large student accommodation block—so one would expect the local authority to take some care and use some diligence over the pre-commencement planning conditions, and indeed it has. I want to go through the list—I will do so as quickly as possible—because Government Members are saying that these pre-commencement planning conditions are often unnecessary, yet when I went through the list I could not find a single one that was unnecessary. The list states:
“No development shall take place until samples of the materials to be used in the construction of the building hereby permitted have been submitted to and approved in writing by the local planning authority.”
Dr Blackman-Woods
It is absolutely necessary; it is in a conservation area.
Dr Blackman-Woods
Well, we will have to disagree. I think that if somebody is asking for planning permission—not just outline planning permission—for a major development in a conservation area that abuts a world heritage site, it is vital that the materials to be used are included as a pre-commencement condition.
Government Members will love the next part:
“No development shall take place until full details of the location of the proposed bat loft and a scheme for the provision of 10 house sparrow terraces have been submitted to and agreed in writing by the local planning authority.”
We all agreed earlier that protecting wildlife is really important. As the Minister knows, sparrows need to be protected if they are to survive and thrive. Such mitigation and compensation are necessary within the breeding bird assessment regulations.
Kit Malthouse (North West Hampshire) (Con)
I hope that the hon. Lady is not going to go through too extensive a list. One of the points that we have been trying to make is that quite a lot of the conditions that have been mentioned could be carried out during, say, the demolition phase; they do not have to take place or be agreed before the contractor starts at the site.
On the particular condition that the hon. Lady just raised, although it might be possible for the developer to agree a location for the bat and sparrow accommodation, there is no guarantee that the inmates will transfer willingly. Anybody who knows anything about bats—I happen to, strangely—will know that one can put up a bat loft to accommodate displaced bats but they might not use it for years, and they might never use it. They are capricious creatures that might decide to go elsewhere, perhaps because of the noise of the development.
The same is true of colonies of sparrows. Sparrows are strange birds, in that they do not travel very much. They tend to live in one place—as the hon. Lady said, they colonise particular areas—and they might even pick a particular tree that they never leave, but they are unlikely to move simply because someone decides to put up accommodation. All these things are iterative and could be done during the demolition phase. There is no reason to wait months and to have an argument about where the sparrow accommodation should go, because even the sparrows might not agree on where is decided.
Dr Blackman-Woods
The hon. Gentleman might have had a point had there been a demolition phase. As there is not, it is important that all these things are known up front. A further condition was noise mitigation. The developers were asked for details of proposed foul and surface water drainage; for an archaeological investigation; to refrain from site clearance, preparatory work or development; for a tree-protection strategy; and for a site map.
Dr Blackman-Woods
I shall take the hon. Gentleman’s intervention and then explain why, given the circumstances, those preconditions were necessary.
Oliver Colvile
I thank the hon. Lady very much. I should have declared an interest: I have a shareholding in a communications company. Does she agree that we need to ensure that we have hedgehog super-highways so that hedgehogs can get from one garden to another?
Dr Blackman-Woods
Absolutely. The hon. Gentleman makes an excellent point. In the development in Durham that I am describing, because it abuts a wooded area in the centre of the city called Flass Vale, several local residents were concerned that there was no particular order in the pre-commencement conditions about the protection of hedgehogs. We are all terribly concerned about hedgehogs and I am grateful to the hon. Gentleman for raising their profile in Parliament—it is very much needed.
The point I wanted to make by going through that list—I have not gone through it all, but I have highlighted the most important conditions—is that it is an extremely contentious development in a very sensitive area of the city. Because the developers were made to provide all that information to the local community, the development is going ahead and the community is engaged with the developer in ensuring that the pre-commencement conditions are discharged. That seems to me to be a sensible way forward.
Had the developers been able to not agree, and to hope that six months down the line the Secretary of State would intervene and overrule the local authority, they might not have worked so hard to meet the conditions, and the local community might have been very upset with them indeed. As it is, as the local MP I have been able to ensure that everyone is speaking to each other about the trees and the sparrows, and about the hours during which work will take place on the site, as it abuts residential properties. The conditions have been carefully thought through by the local authority and were applied for a reason. I would like to hear why the Minister thinks—this is the important point—that those conditions do not comply with the requirements set out in the NPPF, because that is what the Government would have to show in order to have a provision in the clause to take away from local government the power to set the conditions, and give it to the Secretary of State.
The LGA and London Councils both made exactly that point to the Committee, so it is not just the Opposition who are saying that there is no evidence. The LGA said:
“The NPPF, and the associated national planning practice guidance, already clearly sets out expectations on use of planning conditions and the new primary legislation is unnecessary…There is little evidence to suggest development is being delayed by planning conditions. Planning conditions provide a vital role by enabling planning permissions to go ahead which would otherwise be refused or delayed while the details are worked out. They can also save developers time and money as they do not need to invest in detailed submissions until after the principle of the development is granted…Joint working between councils and developers is the most effective way of dealing with any concerns about planning conditions and the LGA strongly advocates the use of early, collaborative discussions ahead of planning applications being submitted for consideration.”
I do not think it could be clearer.
To rub the point in, London Councils said that there was little robust evidence to suggest that the current system of planning conditions was the reason for the under-supply of housing generally or for the slow build-out rates of residential developments. It also questioned the need for the Bill to prohibit certain conditions in defined circumstances, where they do not meet the national policy test. It said that adequate tests on conditions were already set out in national policy, and that there is already a system in place that allows applicants to appeal against conditions that they consider fail those tests.
London Councils, the LGA and lots of other people who gave evidence to the Committee appear to back up what the Opposition are saying, which is that there is already a huge amount of information, advice and guidance that local authorities have to apply in setting pre-commencement planning conditions—and, indeed, conditions per se. The provisions in clause 7 are unnecessary and are further evidence that the Government are anti-localist and are taking powers back to the centre.
Gavin Barwell
We had some of this debate this morning when we considered the first group of amendments, while Mr Bone was in the Chair. Let me rehearse some of the arguments. There are four points that I want to make.
First, it is pretty undeniable that we have had a very partial presentation of the evidence we received, so I want to put on the record again what the evidence we received is. I acknowledge that it is mixed. Certainly, people came to us and said, “I don’t see a problem here,” but there were also plenty of people who said that there is a problem, so let me counterbalance what the hon. Lady said. The district councils network said that it supports the Government in seeking to address conditions. It was interesting that when I put it to Councillor Newman, who was speaking on behalf of the LGA, that that was the view of district councils, which make up the vast majority of local planning authorities, it seemed to be news to him.
I quoted a number of major developers earlier. Persimmon said in its annual report that,
“planning-related pre-start conditions continue to increase the time taken to bring new outlets”—
new homes—
“to market”.
Knight Frank stated that we
“need to address the increasingly onerous levels of pre-commencement conditions”.
The NHBC survey that I quoted provided clear evidence of small and medium-sized enterprises being concerned about, yes, the speed of discharge of planning conditions, but also the extent of those conditions.
Dr Blackman-Woods
Actually, I am pretty certain that I did answer the Minister’s question. I simply do not accept its premise, because we do not believe that pre-commencement planning conditions slow down development. In fact, much of the point that I have been making is that the system that the Government are about to put in place could slow down development, because more developers may now have to use an appeal route. We do not think that pre-commencement conditions slow down development; that is the Government’s case. It is not me who has to address that point; it is the Minister.
Gavin Barwell
—and my hon. Friend the Member for North West Hampshire is going to help me.
Kit Malthouse
I am grateful to the Minister for giving way, because I could not intervene on an intervention. Would the Minister care to ask the hon. Member for City of Durham how long the period was between the granting of the application of which she spoke, and a spade going into the ground, while materials, sparrows, bats and all those sorts of things were dealt with? How long did the process take?
Gavin Barwell
The hon. Member for City of Durham may intervene, but I suspect that the answer is that it has not happened yet. I was going to come to that, but the hon. Lady gave a clear response to my point, so let me deal with her two points in turn.
The hon. Lady’s first argument is that there is a danger that the process will lead to more appeals, and will therefore slow things down, not speed them up. I do not agree, and I will make it clear why. If, at the moment, an applicant does not like the pre-commencement conditions imposed on them, they already have the right to appeal. It seems that there is no evidence that they are any more likely to appeal as a result of the fact that the local authority will now not be able to impose those conditions on them than they would have been otherwise.
The second argument, which is irrefutable, is that if an applicant is asked to do a large number of things before they can start any work on site, that is bound to delay the start of work on site. On most things, my hon. Friend the Member for North West Hampshire is beyond reproach, but on this issue, I blame him, because the hon. Member for City of Durham was in the midst of giving us a long and detailed list, and he rather hurried her up, so we did not get the full list. I managed to scribble down at least six of the conditions she mentioned. One condition was details of the materials to be used. That does not necessarily have to be a pre-commencement issue, but I accept that it is not that onerous. However, the designs of new homes for bats and birds will clearly take some time, as will the noise mitigation scheme, a drainage scheme, and tree protection schemes. Archaeological work is necessary and will always have to be pre-commencement, but it clearly takes time. All those things take time to design, work up, go to the local authority with, and get discharged.
It is difficult to comment with certainty, not knowing the site in question, and I would not want, without knowing the site, to express strong opinions, because the hon. Lady will have pictures of me printed and shown at local protests or something. None the less, some of those things, all of which it is important to deal with, can arguably be dealt with later in the process. It seems unarguable that the hon. Lady’s council requires of the developer a significant chunk of work that will take time and will delay the point at which the developer can get on site. The question of how many of those conditions are a necessary delay to the development is a legitimate source of public debate. The legislation tries to weed out those that are not necessary and focus on those that are.
Gavin Barwell
I will take one final intervention and then conclude my remarks.
Jim McMahon
I fear that the Minister has chosen the wrong application to pick on, because it is a very particular one—for anyone without knowledge of it to say what should or should not be allowed is embarrassing, to say the least. In a local context, those issues could well be extremely important. If you, Mr McCabe, lived next door to that development, you would want to know that the noise mitigation element would be dealt with before it was approved. If it could not be dealt with, we would all want to have a say on whether it was appropriate for the development to go ahead at all. With all due respect, I am not convinced that this was the right battle for the Minister to choose.
Gavin Barwell
I thought that I had been careful, but perhaps I was not careful enough; I think I said that I did not know the site in question and could not comment on the detail.
Let me comment instead on a generic application in which these issues arose. My view, generally speaking, is that materials are important, particularly in a conservation area, but their colour does not necessarily need to be agreed before a spade can go into the ground. The situation of bats, birds or other species that inhabit a site clearly needs to be dealt with before their habitats are disturbed. However, on a large site, of which a part was existing buildings and another part was a wooded area where those species had their homes, work could be done on the buildings before touching the habitat. Noise mitigation needs to be dealt with at the outset, because clearly initial works can be noisy. On drainage, a clear commitment would be needed at the outset that the drainage solution would be sustainable, but the detail would not be needed until the detailed works were to be done. Archaeology clearly needs to be considered.
On a generic site, some of those points are clearly pre-commencement, but I argue that some are not. It cannot be denied, however, that the more a developer is asked to do before a spade goes into the ground, the longer the wait until that happens. The Government are therefore quite right to focus on this issue, alongside lots of other issues such as raising the performance of our utility companies, resourcing our planning departments better so that they can take decisions more quickly, and getting section 106 agreements more quickly.
The hon. Member for City of Durham cited a statistic that gets to the core of the issue. The coalition Government’s planning reforms have done an amazing job of increasing the number of homes given consent through our planning system. In the year to 30 June, a record number of homes were given consent. However, we have seen a growing gap between consents and homes being started, because the number of homes being started has also gone up but not by anything like as much. A strategy to get the country building the homes we desperately need therefore needs to address bridging that gap. My contention is that these pre-commencement conditions and other abuses of planning conditions are one issue, albeit not the only one, that we need to address in order to do that.
Dr Blackman-Woods
I will start by addressing the specific question asked by the hon. Member for North West Hampshire: when did the scheme I mentioned start on site? Planning permission came through in April and the developer was hoping to start on site in August. Actually, I got a phone call to say that there was a delay in the system. Hon. Members are right that there was a delay in the system, but it had nothing whatsoever to do with the pre-commencement planning conditions, which were not mentioned at all; it was because the Brexit vote meant that the developer lost its funding and had to go out to the market again to get support for the development. It was therefore unable to start on site until October—and start in October it did. We have had the first meeting with residents, and they all agree that the pre-commencement conditions were essential.
Gavin Barwell
I will not delay the Committee for long. Schedule 2 sets out the amendments that need to be made to the Town and Country Planning Act 1990 as a consequence of clause 7(1), which will allow the Secretary of State to make regulations that prohibit local authorities from imposing certain planning conditions in circumstances to be prescribed when they grant planning permission.
The amendments in schedule 2 seek to ensure that any such regulations the Secretary of State may make under clause 7(1) would also apply to conditions that are imposed via the ways in which it is possible to gain planning permission other than by application to the local planning authority. That includes planning permission granted by: development order; local development order; mayoral development order; neighbourhood development order; applications to develop without compliance with conditions previously attached; simplified planning zones; development in enterprise zones; orders requiring the discontinuance of use or alteration or removal of building works; and appeals against enforcement notices. We have already debated the principles.
Question put and agreed to.
Schedule 2 accordingly agreed to.
Clause 8
Register of planning applications etc
Jim McMahon
I beg to move amendment 28, in clause 8, page 7, line 21, at end insert—
“(e) information on the number of permitted demolition of offices for residential use to a similar scale including—
(a) the impact on a local plan;
(b) an estimate as to how many homes the development will deliver and
(c) a consultation with the local authority regarding the effect of the change of use on any urban regeneration plans.”
This amendment would ensure monitoring of the impact of permitted right of demolition on offices, on urban regeneration that requires office space and on the provision of housing.
The Chair
With this it will be convenient to discuss amendment 29, in clause 8, page 8, line 10, at end insert—
“(9) The cost of compiling a register and gathering the information to underpin it should be met by the Secretary of State.”
Jim McMahon
I have been brought off the subs bench to do this. I am quite excited about the debate we have had and the evidence we have heard, because I am a localist; I believe that communities should have a say and be able to direct their futures in the most appropriate way. Neighbourhood planning gives them the ability to do that, framed in the context of a national plan and the land supply. That means national Government can achieve what they want to achieve, local authorities can take a view of the wider area and, integral to that, the community has a strong voice. That is why I am slightly at odds with permitted development.
A number of representations have been made over the years that are at odds with the “community first” approach that we have been talking about. The Local Government Association’s evidence frames that quite well. In the survey it carried out of its members, to which 93 local authorities responded, 82% were making a loss on maintaining that process. It is important we get some comfort from the Minister today and accept that local authorities are taking on an additional burden that they should be compensated for.
Moreover, that flies in the face of what we might assume would happen. Let us take light industrial and office accommodation as an example. The view surely is, “Well, there’s all this accommodation that isn’t being taken because the market demand for it isn’t there, so it’s far better to put that to good use as residential accommodation.” However, that is not what we have seen. Areas often have low office demand and low residential demand going hand in hand. I could take Members to Oldham town centre and show them empty office blocks, and alongside those is an empty potential residential conversion that, because demand has not taken hold, is commercially unviable.
We have seen a displacement in areas where there is significant high demand. In some London boroughs, for example, we have not seen empty office blocks being converted into solely residential accommodation; we have seen profitable businesses and charities that are there for the community benefit and value being displaced by landlords, who recognise that it is more financially beneficial to get rid of a tenant who is not paying anywhere near enough. They convert the building for residential use and displace the local business or charity in favour of greater profits.
Don’t take my word for it. We have examples in Barnet, where 100 small businesses and charities were displaced with just four to six weeks’ notice. We have a situation in Islington where 71 office buildings have been converted to residential accommodation. More than 40,000 square feet of office accommodation has been taken in that one borough, where there is demand for that facility.
Chris Philp
Is not Islington, along with many other London boroughs, now subject to an article 4 direction, which will prevent the conversions that the hon. Gentleman describes from taking place in future?
Jim McMahon
That is a fair point about where things are today, but the damage has been done and we cannot change things back to what they were. The phrase “a sledgehammer to crack a nut” has been used probably once too often today, but article 4 is a good example of a very big sledgehammer being used to crack a very particular nut. Article 4 affects everybody in the vicinity or within the boundary and obliges them to comply with the directive. I am talking about a particular problem that has been brought about by the extension of permitted development.
Dr Blackman-Woods
My hon. Friend is making a powerful case. Does he agree that in policy-making terms it is nonsense to set up a scheme to relax permitted development rights, recognise that it causes a huge problem and then introduce another system to try to counteract the adverse consequences of the original policy? All the Government had to do was allow local authorities to grant planning permission in the first place, rather than introducing a relaxation of permitted development rights.
Jim McMahon
My hon. Friend is absolutely right. A lot of people are of the view that permitted developments of this type mean that an empty office is simply converted—from the outside there is very little difference, but it is what happens inside that changes, and that is surely up to the person who owns the building—but the rules actually allow for a building to be completely demolished and then rebuilt to a similar scale. That can change the street scene significantly, so it does go further.
Let us also consider the location of some of the buildings. Take an everyday town centre. It is easy to imagine two restaurants or bars operating with an office block in between. If the office block is converted under permitted development, the tenants who move in are forced to live with the noise nuisance of a pre-existing use in an acceptable location. What is not taken into consideration is how to create a vibrant community that has the requisite facilities, amenities and, importantly, quality of life. For a lot of people, permitted development as it stands does not have that balance in place.
The LGA, which is the voice of local government, has said that. It consults its members, who have been clear in numbers that the problems with permitted development should be looked at. It is odd that a Government who say that they are all about community voice and control—about people being empowered, for once, to have some control over what their communities look and feel like—are not tackling permitted development in the right way.
If we take ourselves out of the town centre, we could go to an industrial estate where small industrial units can be converted for residential use. It is perhaps okay if a unit is converted, but what about the existing users who suddenly have a barrage of complaints from the local authority about the noise nuisance from their pre-existing use, which might have been going on for decades? There might be early-morning or late-night deliveries at what is a predominantly industrial location that has suddenly changed into a residential neighbourhood, without the required facilities or amenities. It is a really big issue.
We have talked a lot about bricks and how important their colour and texture are. We have discussed whether they are important in pre-commencement or could be dealt with later. At least we are talking about them. If someone goes for a change of use under permitted development, very little attention is given to the quality of finish, design and detail. An entire shopfront has been removed in my town. Imagine how a shopfront block looks: there is a hole on the ground floor where a full shopfront used to be, with a sign on top. I know of several examples where the shopfront has been taken away, leaving an exposed girder where the sign used to be, and a completely inappropriate insert has been added that has no relationship to the wider street scene. In a normal planning application, such issues would be negotiated with a developer to ensure that they were dealt with appropriately.
We must recognise that permitted development flies in the face of the community voice and empowerment that we have been talking about.
Chris Philp
On the question of shopfronts, class A1 retail use, to which the hon. Gentleman is referring, is not subject to permitted development rights, which apply only to class B1 office use.
Jim McMahon
Of course, what I am talking about is the physical appearance of a shopfront, not necessarily the fact that a building was previously a shop. A building may be in use as an office but have the external appearance of a shop. It is that conversion that I am talking about. I am thinking in particular of professional services businesses that are based in accommodation with a shopfront façade but where there is office-type use behind that. That is the point that I was getting to.
Whatever our view about the finish, we need to accept that when we are talking about a policy of empowering communities and giving them a voice and a say, it is important to manage expectations to ensure that they are not let down after the fact. Permitted development flies in the face of that empowerment, because it takes power and control away from them. If nothing else, we should at least accept that permitted development rights are a significant burden for local authorities, and when we talk about capacity being an issue, we should at least ensure that local authorities are given the finances to administer that policy in the right way.
Helen Hayes
It is a pleasure to serve under your chairmanship, Mr McCabe. The gathering of data on homes delivered through permitted development rights is a small beneficial step. It is long overdue; it should have been introduced when permitted development rights were extended. It remains a significant problem that although the negative impacts of the extension of permitted development rights are widely reported, there are no consistent data to monitor those impacts, and we therefore cannot have the debate that we need in the House and elsewhere about this significant problem.
Concerns have been raised with me consistently, ever since the permitted development rights policy was introduced, about the size and type of new homes that are being delivered under those rights; the quality of those homes; the lack of section 106 contributions to provide properly for the physical facilities and public services that an expanding residential population needs; the lack of affordable homes; and, particularly in London, the loss of much-valued employment space for small and medium-sized businesses. We cannot quantify the scale of the problem, because the policy was flawed from the start.
Although the small measure in the clause will help with the monitoring of data, I am concerned by the fact that the Government are extending permitted development rights to include the demolition and rebuilding of office accommodation for residential purposes. That brings with it exactly the same concerns that I have about the previous extension of permitted development rights—but more than that, it will result in local authorities’ total loss of control over the quality and aesthetics of new development. As we debated earlier, those are often among the issues that matter most to local communities and make the difference between something being acceptable and not being acceptable.
The Minister argued on Second Reading that permitted development rights are helping to accelerate the delivery of new homes. The delivery of new homes at speed and at scale is of course of utmost importance, but the housing crisis is more complicated than that.
Kevin Hollinrake
The hon. Lady refers to the Minister’s comments about speeding up delivery. Does she accept that permitted development rights have in many cases done exactly that? She talks about the negative consequences of that policy but has not spoken about the positive consequences. Does she accept that there have been positive consequences, including the delivery of more residential units?
Helen Hayes
I was just about to say that in addition to the numbers, which I do not dispute are important, the size and type of homes that we are delivering matters. It matters whether we are delivering homes that families can live in and have a good quality of life in, or only homes that are too small even to fit adequate furniture into. Minimum space standards matter, and the Government have failed to address that issue. The provision of amenities matters. It matters whether there is a local park that is properly funded through the planning process. It matters whether the roads and pavements are of an appropriate standard, whether there is lighting and whether our neighbourhoods are attractive to live in. It matters whether there are places in schools and GP practices for an expanding population to access.
Above all else, affordability matters to my constituents. It is simply not fair and not appropriate that new homes are allowed to be delivered with no contribution at all to the affordable housing that we need more than any other type of housing in London. As a Member of Parliament for a London constituency, the Minister should, quite frankly, know that.
The extension of permitted development rights is a disaster for the delivery of the high-quality neighbourhoods with good facilities and services that we all want to see. We want to see the right numbers of homes being delivered, but we also want to build attractive and successful communities for the future, not tomorrow’s regeneration projects. I am deeply disappointed that, through the Bill, the Government are trying to patch up a broken policy, rather than accepting that it is not working in the way it needs to and reforming it to make it more fit for purpose, so that we can deliver not only the number, but the type and quality, of new homes needed within the successful neighbourhoods that we all want to see.
Dr Blackman-Woods
My hon. Friends the Members for Oldham West and Royton and for Dulwich and West Norwood have done an effective demolition job on the Government’s case for promoting permitted development. The Opposition are on record, on a number of occasions, as being totally against the relaxation of permitted development rights for all the reasons that my hon. Friends outlined, including the very poor-quality development that often ensues from developers taking a permitted development route.
It is not that we are against a change of use from offices or agricultural buildings to residential; we just think that it is critical that local people have a say on whether those changes of use take place. The process should take place through the planning system, not through permitted development. We are living with some of the huge consequences, such as poorly planned developments and neighbourhoods, emerging from too much permitted development.
On amendment 28, we are not in favour of permitted development, but if the Government are in favour of it, it makes some sense that they might actually want to know what is going on with it. To date, they are probably not that aware. The compilation of the planning register would elicit further information from local authorities about what is happening with regard to permitted development. The circumstances set out in clause 8 are too restrictive and will not capture some of the information that local authorities have told all members of the Committee is very important to them.
How many additional homes have been created through permitted development? What is the impact on any local council regeneration plans, and on the local plan? Those questions are important. Let us begin with the local plan. If a lot of windfall sites have emerged through permitted development, and a lot of homes—even of relatively poor quality—have been created that contribute towards meeting the housing need, there might be an impact on local plan provisions. The local authority might like an opportunity to tell the Minister and everyone else about the impact of permitted development on the local plan. It will also want to be able to give information not only on the type of housing delivered but on the number of homes, who they are for, whether they are affordable, their quality and a whole lot of other issues.
My most significant point about the amendment is what it would mean for regeneration, and I am really interested to hear what the Minister says about that. As my hon. Friend the Member for Oldham West and Royton touched on earlier, a number of cities and towns have areas with empty shops, pubs or offices, but they are empty for a reason: the local authority has or is developing a plan to regenerate the area. Local authorities have told us that a developer will now be able to come along, get the office block and say, “I can make a quick buck here by converting this block into housing through the prior approval route”—and bang goes the council’s ability to regenerate the whole area in line with a local plan that has emerged through the neighbourhood planning system or consultations with the community. That does not seem a very sensible way forward.
If I were the Minister, I would want to know whether a policy of mine was actually impeding local authorities from regenerating their areas because permitted development was getting in the way. I would want to do something to put that right and to help the local authority with that process. The Minister will know that the prior approval system in place for permitted development simply does not give a local authority the tools to turn down a permitted development, either for regeneration reasons or because it severely, or even mildly, affects the authority’s local plan.
Indeed, the prior approval system is very complicated. The Government make much of the fact that they have simplified the planning system; I could not help but smile when I saw the statutory instrument that they passed last year, the Town and Country Planning (General Permitted Development) (England) Order 2015, which is 162 pages long—such have been their extensions to permitted development. Each class of permitted development has different prior approval conditions, but none of them allows consideration of the issues addressed by our amendment. For instance, for a change from offices to dwelling houses, the local planning authority has to consider
“whether the prior approval of the authority will be required as to…transport and highways impacts…contamination risks…and…flooding risks”,
but it cannot take account of anything else. If the development will impede a regeneration scheme, the authority cannot even consider that. If there are huge energy conservation issues because the office block has poor energy efficiency, the authority cannot do anything about that either. If it thinks the materials are wrong, it cannot do anything about that. If it absolutely needs affordable housing in the area, it cannot do anything about that. There is really a very small list of things that it can do anything about, and that list certainly does not cover the issues in the amendment.
Jim McMahon
The resources of local government are a critical issue. Many are looking at the next three to four years and wondering how on earth they will make ends meet or cover the costs of adult social care and children’s services. When faced with such choices, clearly the councils go to the back office—or what people consider the back office until they are an applicant who needs to use the planning system when, all of a sudden, it becomes a front-line service. If the Minister is determined to make everything work, it is important that the proper resource is given. We have been given some hint about a White Paper that is due and about conversations that might or might not be taking place, and we are intrigued, but a bit more certainty would go a long way.
Dr Blackman-Woods
My hon. Friend makes an excellent point. He more than any of us in Committee understands the day-to-day, lived experience of people in local authorities and just how difficult it is to keep managing, in particular, the huge portfolios that some of our local planning officers have to on such limited resources and—this is pertinent—with no end in sight. We do not know what is to come in the Minister’s White Paper, but there is no clarity at all about when the contraction of budgets in local planning departments will stop. At the moment, we have contraction figures right up to 2020. If the Minister is to reverse that and put in additional resources, that would be a good thing, but at this point in time we do not know whether that is the case.
We do not know whether there will be any means by which local authorities can fund the putting together of the register. Several people who gave evidence to the Committee were at pains to stress to the Minister that responsibility for an operation of this type will fall on planning policy officers. Some district councils have only one planning policy officer to do all their local plan-making work, to support all neighbourhood planning and to do all the work required for a register. That just does not seem possible, or possible to deliver.
We have made the case that the planning register as proposed under clause 8 is wholly inadequate. If the Government did not rely so heavily on permitted development, it would not be necessary anyway. If the Minister wants to stick to his thoroughly discredited permitted development scheme and ask local authorities to produce a register, he should also pay for it. I look forward to hearing what he has to say.
Gavin Barwell
It is a pleasure to welcome the hon. Member for Oldham West and Royton to the Front Bench as a substitute, as he described himself. I am a keen fan of the beautiful game, and I observe that substitutions happen in one of two circumstances: either a team are winning and coasting, so give some fresh talent a chance, or they are struggling and bring on someone different. I shall leave it to Committee members to decide which of those sets of circumstances applies now.
I thank Opposition Members for tabling amendments 28 and 29 on changes to the planning register. Before I address them specifically, perhaps I can say a few general words about clause 8, which, as we have heard, aims to ensure that both local and central Government further understand the contribution that permitted development rights make to increasing the housing supply, while also increasing transparency about development proposals in an area.
The Government have introduced a series of permitted development rights for change of use to residential use since January 2013, and they are playing an important role in supporting the delivery of the homes that our country so desperately needs. We do not know exactly how many homes they have delivered, which is part of the purpose of the clause, but we have two bits of data that I shall share with the Committee.
First, since April 2014 there have been more than 6,500 applications for prior approval for changing from office to residential. We do not know how many housing units have been created, but we do know that. Secondly, the Estates Gazette reported that more than 5,300 new homes have been started in London as a result of permitted development, although I cannot tell the Committee the source of the data. I shall return to the remarks made by the hon. Member for City of Durham later in my speech, but it is worth putting clearly on the record now that 5,300 families in London have had the opportunity of a home as a result of the policy. Whatever other critiques may be made of it, that important fact should not be lost in the balance.
Clause 8 enables the Secretary of State to require local planning authorities to place information about prior approval applications or notifications for permitted development rights on the planning register. For the first time there will be consistent public-access data on the number of homes being created through permitted development rights in England. Details of which prior approval applications or notifications should be placed on the register, and specific information relating to them, will be provided in subsequent regulations, which we expect to be made available during the passage of the Bill.
Before I discuss the amendments in detail, I make a general observation: good-quality data are important in assessing public policy. My officials know me well enough by now to understand that I am interested in data and in understanding figures properly, so that Ministers can take good decisions based on clear evidence. The data collected under the clause will be important with respect to the main way we measure the success of the Government’s housing policies—the net additions measure of housing supply. I shall not detain the Committee too long on one of my pet subjects, but Members might be aware that data on starts and completions are published quarterly, and we then get annual data on net additions, which takes in not only starts but changes of use and permitted developments. That way, we get a total picture in terms of the net change in the number of homes.
Interestingly, even the starts figure in the net additions data is not consistent. If one adds up the net starts for the previous four quarters, one will not get the same total because they are measured differently. That often creates room for people to have political fun by using different figures. Even for those who oppose permitted development, clause 8 is good because it will provide data on the effect of the policy, which can inform our political discussions of it.
Dr Blackman-Woods
I want to return to the Minister’s point about planning permissions being put on the register. Planning permissions do not completely cover the cost of determining a planning application, but more money certainly goes to the local authority than under the prior approval system. Although there might be a case for additional resources to allow local authorities to put planning permissions on the register, does he accept that requiring them to put prior approvals on the register when they receive so little money from them is really a burden of a different order?
Gavin Barwell
I tried to answer that question in my remarks: we do not believe that there is any additional cost in requiring local authorities to place these applications on the register. The register is not new; it already exists and holds information on individual planning applications. We do not think that the requirement will place a new burden on planning authorities. However, the Department will carry out an assessment to confirm that before introducing regulations. I hope that reassures the hon. Lady.
Let me turn to some more generic points about permitted development. The hon. Member for Oldham West and Royton spoke passionately about his views as a localist and suggested that this area of policy points in the opposite direction. I understand his point, but I think it all depends on how we look at things. Our planning system is built on the understanding that people do not have the right to do whatever they want with their land; they need to seek permission from the state because what they do might affect the amenity of adjoining landowners or people who live on adjoining sites.
However, there has always been an understanding that, for certain kinds of applications that fall below a particular de minimis threshold, it is possible to proceed without having to make a planning application. A good example is that some of the smallest, single-storey extensions to domestic properties can proceed as permitted developments. That has been in our planning system for a long time. As the Government wish to drive up supply, they have extended that right to others.
There is no denying that permitted development removes from councils the right to consider a full planning application. It limits the freedom they have to the matters specified in any prior approval. However, it also gives the owner of a building the freedom to do what they will with their land because we have judged that the issue is unlikely to have a significant impact on adjoining owners.
Jim McMahon
Does the Minister accept, in this context, that the council is a community? The elected members of the council derive from the local community and are elected by it to represent it and sit on planning committees that make decisions based on the community interest.
Gavin Barwell
I would not accept that a council is a community, but I certainly accept that it comprises the elected representatives of that community and speaks with the authority of the community, if that is helpful to the hon. Gentleman.
Stepping aside from the controversial topic of office-to-residential conversion, the question that we should ask ourselves when deciding whether something should be a permitted development right or require a full planning application is whether the change being made to a property is sufficiently significant that it is likely to have implications for adjoining owners. If it does have implications, there are clearly arguments that it should go through the planning application process. I was trying to make the point that the Government did not invent permitted development—it has existed for a period of time—but have chosen to extend it to particular classes of conversion.
The hon. Member for Dulwich and West Norwood, who represents a constituency not too far from mine, spoke passionately, as she did on Second Reading, of her concerns about the permitted development process. It is entirely legitimate to say that, compared with the full planning application, the authority does not receive a section 106 contribution for local infrastructure or for affordable housing, and neither do the space standard rules apply. She raises legitimate concerns.
Weighed against that, we must look at the contribution of the policy to housing supply. I believe that in Croydon—my constituency neighbour, my hon. Friend the Member for Croydon South, also sits on this Committee—the policy has certainly brought back into use buildings that would otherwise not have come back into use. Therefore, it has contributed to supply. The debate on space standards is particularly interesting. We certainly need to ensure that at least a proportion of our housing stock is sufficiently large, providing the space to accommodate families with particular needs. There is a much more difficult balance to strike on whether we should say that all homes must meet a minimum standard, or whether we should allow flexibility. Strong arguments can be made both ways.
I visited a site just south of Nottingham at the end of last week, where I saw a good mixed tenure development with some owner-occupied housing. The housing association also provided some shared ownership properties and some affordable rent. When the Homes and Communities Agency master-planned that site before selling it on to the developer, it insisted that all the homes built on it meet the national space standard. Perhaps predictably, the developer argued to me that it would have preferred to have that requirement only for some properties, because it would have been able to build more homes, which is clearly in its commercial interests.
Interestingly, the housing association made the same argument. It needed some stock with sufficient space to accommodate families who perhaps needed a carer, or included somebody in a wheelchair. However, the association believed that housing need in the area was sufficiently acute that it would rather have had a compromise whereby some of the homes had that space standard but it could have got a larger number of homes overall out of the site. I am not expressing a view one way or the other; I am simply saying that there is a choice to be made between overall supply and space standards.
Helen Hayes
I simply do not accept that, in seeking to meet the need for new homes, we aspire to rabbit-hutch Britain. There are of course families who have exceptional needs for space, but every family deserves a home into which they can fit the right amount of furniture and within which their waste and recycling storage commitments can be met and there is appropriate storage for cycling equipment and all the other stuff that people accumulate in the course of family life. We should not accept that families being asked to live in homes that are too mean in space terms so they can afford an adequate and appropriate standard of life is a fair compromise anywhere in the country.
Gavin Barwell
The hon. Lady makes her point passionately. Let me be clear that I do not think anyone wants people to live in rabbit hutches. Her own local authority—her constituency crosses local authority boundaries, so I should be clear that I am talking about the London Borough of Lambeth—has given planning permission to a scheme in the north of the borough by Pocket Living, which I had the opportunity to visit. As part of a deal with the GLA, that developer has been given the flexibility to develop homes below the minimum space standard, and those homes have proved popular with young professional people.
A journalist gave a rather slanted representation of a presentation I gave at party conference in which I talked about housing for young people. I ran through a whole load of things that we could consider as part of that, and I referenced that Pocket Living scheme. The journalist wrote an article saying that I wanted people to live in rabbit hutches. Interestingly, that night I was speaking to students at a university and one of them had read the article in question and said, “I’d just like to say that, given the choice of being able to buy a small home of my own or there being bigger homes that I can’t afford, I’d be interested in looking at that flexibility.” Every single student in the audience agreed.
Helen Hayes
To be clear, developments of the type produced by Pocket Living are a specific type of housing—they are a niche in the market. There is certainly a place for that type of accommodation in the market, and Pocket balances space standards and quality particularly well for that niche, but we are talking about the much broader issue of national space standards for all types of homes, and particularly family homes. I have too often seen examples of schemes up and down the country that are not built to the national space standard, whose quality is too mean and that do not provide the best possible basis for successful communities or places that people want to live in.
Gavin Barwell
Well, it may be that the hon. Lady and I are not as far apart as I thought we were, because I agree with that. People have different requirements at different ages, and it is certainly important that adequate space is provided for family housing. She may agree with the point that I am going to make. I was going to close by giving an example of a permitted development conversion that I had the opportunity to see in Croydon. She may want to go and have a look at it herself.
Kevin Hollinrake
I quite agree with the hon. Member for Dulwich and West Norwood about family homes, but where the opportunity exists to innovate and create homes for young people and first-time buyers, particularly in areas of high house prices, should we discourage that purely on the basis of space standards?
Gavin Barwell
I suppose the story I told that prompted the hon. Lady’s intervention interested me because one might to a degree expect private developers to look to maximise the units that they can build on a site and their commercial return, but what was striking about that conversation was that the chief executive of a housing association also wanted that flexibility. He saw clearly that there was a trade-off between having homes that were fully accessible and fulfilled the space standard and maximising the number of homes for vulnerable people that he could have on the site. There is a debate to be had, but I do not think that the hon. Lady and I are as far apart on this as I thought we were.
Let me give an example. There is a building in Croydon called Green Dragon House, which was a fairly old office building that was not wholly vacant but had very limited use. It has been converted into 119 homes—a mixture of one and two-bed homes. It is a little like the Pocket housing schemes. It is very high-spec—the quality of the finish is very good—but the rooms are smaller than the national space standard. Interestingly, what is not taken into account is that there is a huge amount of communal space. Virtually the whole of the first floor of the building is given over to a high-standard communal lounge, and the whole of the roof is a terrace, which is communal space for residents. In a way, it is a different vision of how people might live, and it is targeted very much at young professional people.
Helen Hayes
The Minister is being generous with his time. I will simply say that the scheme he describes sounds commendable. It also sounds like exactly the kind of scheme that a local authority would have given planning permission for. The point about permitted development rights is that we cannot leave to chance whether the development industry will deliver to that high standard. We have to secure that high standard through the planning system.
Gavin Barwell
Clearly, part of the issue is that these schemes were not coming forward before. The cost of the conversion, if it goes through the full planning process, meant the schemes were often not viable, and permitted development rights have allowed some of these schemes to come forward that would not otherwise have done so.
I have had an interesting exchange of views with the hon. Lady. As I said, I understand her point of view, but these things have to be balanced against the urgent need to drive up supply of housing. She will know that there is no part of this country with a greater gap between what we are currently building and what we need to build than the city she and I represent. There are different views in the House about permitted development, but whatever one’s views on the issue, this is a good clause because it will give not only the Government but Members of the House and the wider world that is interested access to data, which we can then use as we debate this policy.
Jim McMahon
I thank the Minister for that response. Like him, I am a geek when it comes to data. I love nothing more than spending time in the library on the Office for National Statistics website—that counts as entertainment for me. However, I am also aware that data can often be used as a crutch for a weak argument. Data have been thrown out in bucket-loads, but the substance of this argument has not been deployed in quite the same way. We talked a lot about numbers, which is great. We have not talked anywhere near enough about affordability, quality or even if these units are occupied. We know that in many towns and cities foreign investors are coming in and buying up units that local people could live in, ensuring that no one lives there.
When we talk about data collection and how councils have enough to do—that is a fair point—we must also accept that development control teams will be in those buildings, making sure they comply with development control rules. They will be signing those buildings off for occupation. At that point the buildings will come on to the council tax register, and any council worth its salt will then make applications for the new homes bonus. So councils are reporting units anyway, but via a different route. One thing that councils would appreciate is a single point of reporting. Rather than all these Government Departments coming to councils from all over the place asking for individual pieces of data, the Government should say with one voice, “This is what we need to know.” Collating the data in one place would helpfully save time and energy.
There is quite a lot of agreement on the principles we have been talking about. The combination being mooted here is of quite small living spaces with a lot of communal areas. A development is being built today in Oldham on that model, where the flats are quite small but there is a gym facility, communal areas and quality space that will attract a niche market of commuters who no doubt work or study in Manchester city centre. There is a place for that, but that is where the local authority has made a conscious decision that that would add value to the overall mix of accommodation within the town. It is not a free-for-all. Unfortunately, the permitted development route at the moment is a free-for-all for far too many people, without the right checks and balances in place.
I suspect that we will not be able to come much closer than agreeing that permitted development seems to have worked quite well in one or two locations. The evidence, in particular when we hear representations from local government, says that it is fraught with difficulties and removes the local control we know is very important. Perhaps we cannot get any closer than that. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Dr Blackman-Woods
I will not detain the Committee for long, because we have had quite a wide-ranging discussion. The Minister started his comments on amendment 28 by referring to Opposition Members’ subbing policy. I want to tell him exactly what our policy is, then perhaps he will explain his. The Opposition recognise the talents of all our Members, including my hon. Friend the Member for Bassetlaw, who is not currently present. We have an incredibly inclusive policy because we want to ensure that everybody participates and is able to use their talents to the full. I am not sure that that is the policy the Minister is employing with regard to Government Members, but I will let him answer for himself.
We will return to permitted development when we discuss new clause 14, but I should say to the Minister quickly that a number of people who gave evidence to the Committee pointed out that permitted development was weakening the planning system. In particular, his own councillor, Councillor Newman from the Local Government Association, pointed out the nonsense of what had happened in Croydon where they had to get an article 4 direction. Although we are not going to vote against the clause, permitted development is not working as well in practice as the Minister suggests, for all the reasons given by my hon. Friend the Member for Oldham West and Royton. I hope the Minister will consider whether the register is really necessary. If he got rid of all the permitted development, it would be unnecessary.
Gavin Barwell
I will keep my remarks brief because I think I already covered clause stand part in my earlier comments on the amendments. To rehearse those arguments, if we got rid of permitted development rights, we would be giving up the thousands of homes—we will find out exactly how many—that the policy has contributed in the nine quarters since it came into place. I repeat the point that I made earlier: if Opposition Members share our view that there is a desperate need to get this country building more homes, it seems strange to oppose a policy that is making a significant contribution to that aim. I commend the clause to the Committee.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clause 9
Power to take temporary possession of land
Dr Blackman-Woods
I beg to move amendment 30, in clause 9, page 8, line 23, at end insert—
“(2A) The power of temporary possession of leasehold interests is not available if an interest would terminate within one year of the date on which the authority intends to hand back possession to the occupier.”
This amendment would establish a limitation on the temporary possession of leasehold interests.
Having been at the dizzy heights of permitted development, we turn to the really exciting bit of the Bill—the changes that the Government wish to make to the compulsory purchase order system. This is where we get particularly excited about the Government’s reading of the Lyons report, which recommended a major look at this country’s CPO system, with the particular intention of simplifying it and making it much easier for local government to operate.
Several of the people who gave evidence to the Committee seemed to suggest that the proposed changes to the compulsory purchase system were okay as far as they went, but that the Government could have used the opportunity provided by the Bill to do something much more substantial. However, people did express some concern about how the Government were taking simplification and rationalisation forward with regard to the power to take temporary possession in clause 9. Amendments 30 and 31 relate to temporary compulsory purchase, to which we do not object per se, but nevertheless we wonder whether, in pursuing the changes, the Minister should put in place further safeguards.
Some general concerns were expressed in the evidence received by the Committee about the interaction between temporary and permanent possessions. Witnesses just did not think that that had been suitably clarified. Richard Asher of the Royal Institute of Chartered Surveyors told us:
“There is one area of difficulty: the danger that authorities may use powers to acquire land compulsorily when it is only required on a temporary basis. That interferes with long-term prospects for development by landowners, whose development plans are quite often disrupted by compulsory purchase on a temporary basis. That needs to be considered to ensure that authorities only acquire land on a temporary basis when it is required temporarily.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 61-62, Q113.]
Similarly, Colin Cottage from the Compulsory Purchase Association said:
“There is still the possibility of taking both temporary and permanent possession, and that will create uncertainty for people affected by it, because, even if there is a period of temporary possession, it may be converted at a future date to permanent possession and they will have no control over that.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 66, Q117.]
Amendment 30 is a probing amendment that seeks to gain some clarification on whether the Minister thinks there should be a limitation on the temporary possession of leasehold interests so that there may be a greater degree of certainty in this area for the landowner, for the local authority and, indeed, for any possible future developer.
Some specific problems seemed to emerge on the temporary possession of leasehold land. The CPA pointed to those concerns in its written evidence:
“We are concerned that there should be limitations on the power to acquire short leasehold or other subordinate interests because the Bill does not deal with the situation where a leaseholder remains responsible to the landlord for the use, repair and payment of rent under the lease but is not in control of the property whilst it is under temporary use. The area is complex and clarity of the relative parties’ obligations to each other must be clarified in a leasehold situation where temporary possession powers are exercised.”
That was reiterated by Colin Cottage of the CPA when he said that,
“there are practical issues with temporary possession that need to be dealt with, including the interrelationships between different tenures in land, how to deal with an occupier of land when that land is taken temporarily, and what to do if buildings have to be demolished and so on. Those issues can be overcome, but they need to be looked at carefully if the Bill is to come into law and to not cause, rather than solve, problems.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 62, Q113.]
Those problems might be experienced by either the landowners or the local authority.
I hope the Minister will be able to answer some of the questions about the nature of temporary possessions, particularly with regard to leaseholds, and whether there might be some limitation on the timeframe. More generally, it is clear from some of the evidence we received that CPO legislation needs serious reform. The witness from the RICS said:
“I believe, and the Royal Institution of Chartered Surveyors has always believed, that codification of the whole of the CPO rules, which go back to 1845 and are highly complex, would be a sensible way forward. I think the simplification of the rules for CPO would be a major step forward…I think the complexity often deters people—particularly local authorities, in my experience—from using CPO powers. It also results in a number of CPOs being refused or rejected by the courts because of the complexity of the rules that surround them.”––[Official Report, Neighbourhood Planning Public Bill Committee, 18 October 2016; c. 63, Q114.]
Gavin Barwell
We have now moved on to the CPO section of the Bill. A number of clauses relate to those provisions. Let me address a couple of the points that the hon. Lady made right at the outset.
The hon. Lady is right to say that several witnesses said that they would be interested to see a more fundamental reform of the CPO system, and I am certainly interested in talking to people about that, but I do not think that that should preclude some sensible reforms to simplify the system now, to make it clearer, fairer and faster. We can then have a longer-term debate about a more radical reform.
On whether more homes will be delivered, I do not think that anyone claims this particular reform to be a game changer. However, I believe that simplifying the system will make it easier for local authorities to make use of those powers. I speak from some experience because my own local authority recently embarked on a significant compulsory purchase order in relation to the redevelopment of the Whitgift Centre in the centre of Croydon.
Amendment 30 would amend clause 9, “Power to take temporary possession of land”, so it might help if I briefly explain the purpose of the clause. All acquiring authorities may need to enter and use land for a temporary period to help to deliver development for which they have made a compulsory purchase order; for example, they may require land to store construction materials for the scheme or to provide access to the construction site. At present, however, only certain acquiring authorities—such as those authorised under special Acts for very large schemes, such as the Crossrail Act 2008—have the compulsory power to occupy and use land on a temporary basis. Crucially, compulsory purchase orders cannot authorise temporary possession.
Clauses 9 to 21 will give all acquiring authorities the power to take temporary possession of land needed to deliver their scheme. At the same time, they will ensure that those whose land is taken are fairly compensated, and that appropriate safeguards are in place to protect their interests. The hon. Member for City of Durham quoted a witness who said that we needed to ensure that when land is required only temporarily, only a temporary occupation is taken. That is precisely why the clauses are in the Bill: to ensure that all acquiring authorities can take both permanent and temporary possession. Clause 9 sets out who may exercise the new power; essentially, everyone with the power to acquire land, either by compulsion or agreement, will have the power to take temporary possession of land for purposes associated with the development scheme for which they need compulsory acquisition.
I agree with the hon. Member for City of Durham that we need to ensure that the interests of leaseholders are adequately protected in introducing this power. However, I believe that amendment 30 is unnecessary, because we have already built in a safeguard that will deliver the outcome she is looking for but in a more flexible way. Her amendment would restrict the temporary possession power so that it could never be used if a leasehold interest had less than a year to run after the land was handed back. It is completely understandable why she wishes to do that, but her amendment would mean—this is quite complicated, so I hope Members will bear with me—that if the land was essential to the delivery of the scheme, the acquiring authority would have to seek to acquire the leasehold interest by compulsion. At the same time, given that there would still be a need to occupy the land on a temporary basis to implement the scheme, the authority would have to seek temporary possession of the freehold interest and any other longer leasehold interests in the same land. That would be contrary to the established principle that the authorising instrument deals with the need for the land, while the interests in the land are dealt with afterwards. It would make the authorising instrument more complicated, because it would have to deal with different interests in different ways for that plot of land. It would also restrict the leaseholder’s options, because they might be content for temporary possession to go ahead.
There is a problem and the hon. Lady has rightly put her finger on it, but we have tried to build in a safeguard that I believe will achieve the outcome she seeks in a different way. That safeguard is clause 12(3), which allows leaseholders who are not content with the situation to
“give the acquiring authority a counter-notice which provides that the authority may not take temporary possession of the land.”
On receipt of that counter-notice, if the land is essential to the delivery of the scheme, the acquiring authority will have to look into taking it permanently. That is a neater solution. because it will give leaseholders the flexibility to decide whether they are content with what the acquiring authority sought to do or whether they have concerns and want to serve a counter-notice. I therefore ask the hon. Lady to withdraw her amendment.
Before I take my seat, it might help if I briefly respond on a couple of wider issues that the hon. Lady raised in relation to clause 9 and to temporary possession in general. She is right to say that some witnesses questioned whether being able to take both temporary and compulsory acquisition over the same piece of land would work. The Government believe that there may be circumstances in which that is required. It would be for an acquiring authority to make the case to the confirming authority that it was necessary. For example, temporary possession of a large field might be needed for a working compound for construction of a pipeline, but compulsory acquisition of a small part of the field might be required on a permanent basis to install and then maintain the pipeline. Actually, there are some good historical examples. Compulsory purchase and temporary possession powers are often sought in relation to the same land in development consent orders. To give two examples, the docklands light railway extension and the Nottingham tram system both involved a mixture of those powers.
There was one other point that the hon. Lady referred to that I probably need to respond to. Her amendment deals with the issue of a minimum time—what happens to a leaseholder when they reacquire their land and there is less than a year left on the lease—but she was also probing about whether there should be a maximum period of time for which somebody could take temporary possession of land.
No maximum period is set in the legislation, because circumstances can vary a great deal from case to case; however, acquiring authorities must specify the total period of time for which they need temporary possession at the outset of the authorising instrument. The confirming authority will then consider whether the acquiring authority’s justification for the length of temporary possession is strong enough before deciding whether to authorise it. There are some safeguards built in. Both freeholders and leaseholders can serve a counter-notice on an acquiring authority, requiring them to limit the temporary possession period to 12 months when the land is part of a dwelling, or to six years in any other situation. Again, leaseholders have the ability to serve a counter-notice provided that the acquiring authority cannot take temporary possession of the land at all, in which case the acquiring authority would have to look at taking permanent possession.
This is a complicated area, but I hope I have been clear—maybe not.
Jim McMahon
I am not usually a suspicious person, but during that contribution there was a voice at the back of my head saying, “Is this all about fracking?” Is this about the Government’s newfound commitment to fracking and about trying to remove landowners’ rights, trying to create temporary compounds and trying to create opportunities to drill without going through the full and proper procedure? That may not be for today, but I would certainly appreciate the position on that in writing.
Gavin Barwell
I am happy to write to the hon. Gentleman and provide him with a full response to that question. I can reassure him that these provisions do not come from that particular policy area. It was before my time—I am looking for inspiration—but I think I am right in saying that there were compulsory purchase provisions in the Housing and Planning Act 2016. It was in the discussion and debate around those provisions that these issues got raised, and that is why the Government are seeking to clarify the law in that regard. I will happily write to the hon. Gentleman and hope that I have now addressed the points that the hon. Lady raised, so I ask her to withdraw the amendment and hope the clause can stand part of the Bill.
Dr Blackman-Woods
I listened carefully to what the Minister had to say. I did emphasise that this is very much a probing amendment, testing whether the Minister and his Department had thought through some of the possible complexities that could arise with a temporary possession and a more permanent possession going through at the same time, and also some of the difficulties that might arise for landowners when a temporary possession is granted but they still have liabilities.
In the main, the Minister’s comments were quite reassuring. I am still not sure whether there is a need to have an overall time limit on temporary possession, to make sure that local authorities do not use it as a way of letting things run forward without having to put a full application for a CPO in place. I want to think about that; I will do so and will consult the Compulsory Purchase Association. For the moment, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 ordered to stand part of the Bill.
Clause 10
Procedure for authorising temporary possession etc
Question proposed, That the clause stand part of the Bill.
Gavin Barwell
It is clearly important that where an acquiring authority wishes to exercise the temporary possession power, it is subject to proper scrutiny, and that those with an interest in the land that will be affected have the opportunity to put forward their views. The clause achieves that by requiring the case for temporary possession to be set out in the same type of authorising instrument as the associated compulsory purchase—for example, in a compulsory purchase order or in a development consent order. It will then be subject to the same procedures for authorising and challenging it as the compulsory acquisition. That means that if, for example, a planning inspector holds a public inquiry to consider the CPO before it is decided whether the order should be confirmed, the public inquiry will also need to consider whether the temporary possession power should be authorised.
The clause sets out which information must be included in the authorising instrument—for example, the purpose for which the acquiring authority needs temporary possession of the land and, as I have previously mentioned, the total period of time for which temporary possession is required.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11
Notice requirements
Question proposed, That the clause stand part of the Bill.
Gavin Barwell
The clause requires acquiring authorities to give at least three months’ notice of their intention to enter and take temporary possession of the land. It will ensure that those affected have sufficient time to put in place any necessary arrangements—for example, to move livestock. The measure is a minimum requirement, and acquiring authorities will be able to give more notice where they consider it appropriate. The notice must specify how long the temporary possession will last, and a separate notice must be served for each period of temporary possession.
Question put and agreed to.
Clause 11 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Jackie Doyle-Price.)