House of Commons
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Mr Speaker
I hope that colleagues in all parts of the House will want to join me in congratulating Andy Murray on winning the ATP world tour finals last night in London and on finishing the year as the world men’s singles No. 1.
Oral Answers to Questions
(8 years, 1 month ago)
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Henry Smith (Crawley) (Con)
Pauline Latham (Mid Derbyshire) (Con)
The Secretary of State for Work and Pensions (Damian Green)
May I, on behalf of the Government, echo the thoughts about Andy Murray? He is a great Scotsman who has made a great contribution.
There are more older people in employment than ever before, but we know that there is more to do. We recently appointed Andy Briggs, chief executive of Aviva UK, as business champion for older workers to promote the benefits they bring to employers.
Henry Smith
I am grateful to my right hon. Friend for that answer. What more are the Government doing to build on the fuller working lives strategy that they launched in 2014?
Damian Green
My hon. Friend is right to point out the importance of the fuller working lives strategy. We will be publishing a new strategy in the new year to build on the success of the fuller working lives strategy, and that will set out its future direction. I am particularly keen that it should be led by employers, because I think that employers are the best people to persuade other employers of the benefits of employing older workers. That is true for the employers themselves and for individuals, and it is particularly true for the public sector.
Pauline Latham
Many older workers have caring responsibilities, which can make it hard for them to remain in work or even to return to work. What is the Secretary of State doing to encourage employers to work responsibly with those very valuable employees?
Damian Green
I agree with my hon. Friend that those employees are often particularly responsible and have particular needs, if they have caring responsibilities. That is why the Government recognise the benefits of flexible working. We extended the right of workers to request flexible working from June 2014. We have also introduced older claimant champions in jobcentres, and we are working with employers to help to highlight the benefits of employing older workers. Aviva, which I have mentioned in the context of Andy Briggs, is launching a new pilot scheme this Friday specifically to support carers. I very much hope that other companies will follow its example.
Stephen Timms (East Ham) (Lab)
A year ago, Ministers committed to publishing an annual report on progress towards full employment, for the benefit of older workers and others. Does that commitment still stand, and if it does, when will the first of those annual reports be published?
Damian Green
Yes, it does. We will be publishing one next year, and I am happy to report in the interim to the right hon. Gentleman that there are more older people in employment than ever before. There are 9.8 million workers aged 50-plus in the UK. That is an increase of 1.5 million over the last five years, and I think that that is one of the strengths of our labour market.
Fiona Mactaggart (Slough) (Lab)
But is it not true that there has been a relative decline in the proportion of older women in employment? Is the reason for that just the increase in the pension age, or is it that the Government are not providing the support for carers and the other things that enable older women to work?
Damian Green
I am afraid I cannot agree with the right hon. Lady on that. Currently, there are 4.05 million women aged 50 to 64 in employment. That compares with just under 3.5 million five years ago. As a percentage, it has gone up from below 60% to more than 65%. The benefits of work for older people are being applied to women as well, and that, of course, gives them much more control over their own lives.
Louise Haigh (Sheffield, Heeley) (Lab)
On the question about carers, it is now seven months since the minimum wage was increased, but the income threshold for carer’s allowance has not risen in line with the minimum wage. Will the Secretary of State act to raise it by just £5 a week to ensure that carers are not forced to cut their hours because they are caught in this loophole?
Damian Green
Indeed. Carer’s allowance applies to people other than older workers, as you will be aware, Mr Speaker. The hon. Lady will also be aware that carer’s allowance was increased significantly at the most recent announcement. We keep all benefits under review.
Mr Philip Hollobone (Kettering) (Con)
Older employees bring many benefits to employers, including turning up on time, taking pride in their appearance and passing on a wealth of life experience to their younger colleagues. We have national recognition schemes for innovation, technology and exports. Has the Secretary of State thought of introducing a national recognition scheme for those employers who employ a large number of older workers?
Damian Green
As so often, my hon. Friend makes an innovative and good point. We work with employers to see what the best form of recognition is for employers who are particularly good at ensuring that older workers can carry on in the workforce, but I will certainly consider his suggestion.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
The Minister for Employment (Damian Hinds)
Many people aspire to be their own boss. Although the bulk of the growth in employment in recent years has been in employment, there are now 4.7 million self-employed people in the UK labour market, accounting for approximately 15% of everyone in work.
Bridget Phillipson
I am grateful to the Minister for his answer, but notwithstanding what he has said there is a growing issue of bogus self-employment. Trade unions such as the GMB have been at the forefront of exposing such practices, so will he commit to working with trade unions as part of the ongoing Taylor review?
Damian Hinds
Of course, what the hon. Lady refers to does not apply to the great majority of people in self-employment, but some concerns have been expressed. The growth of atypical employment was behind the Prime Minister quite rightly saying that there would be a proper review under Matthew Taylor. That review will look at a whole range of things, as its terms of reference are quite broad: rights, responsibilities, representation, training, representation of under-represented groups and so on.
John Howell (Henley) (Con)
Damian Hinds
My hon. Friend makes a very good point. We are launching a test—face-to-face and on a voluntary basis, from Jobcentre Plus work coaches—for self-employed people currently in receipt of tax credits. A range of support material is also available at gov.uk.
Margaret Greenwood (Wirral West) (Lab)
Ordering presents online is now a normal part of Christmas for many people, but there have been disturbing reports recently of delivery drivers who are classed as self-employed working dangerously long hours for less than the national living wage. Those workers make a vital contribution to the functioning of the digital economy. Will the Minister commit to meeting Labour’s five tests for social security for the self-employed?
Damian Hinds
I join the hon. Lady in recognising the necessity of looking at these issues. National living wage enforcement is very important. That is why we have raised the budget for it, as well raising the maximum penalty. As for the exact definition of self-employment, she will know that there are variations in definition for tax purposes and employment law purposes. The Matthew Taylor review is looking at precisely these issues to make sure that the appropriate protections are in place while enabling more and more people to avail themselves of the opportunities in the new economy.
Sir Desmond Swayne (New Forest West) (Con)
What is the Minister doing to help disabled people into self-employment?
Damian Hinds
My right hon. Friend makes a very good point. We know that many more disabled people want to get into work, and one route is through self-employment. I am pleased to be able to say that more than a fifth of the participants in the new enterprise allowance scheme are people with a declared disability, but there is a great deal more we can do.
David Mackintosh (Northampton South) (Con)
Justin Tomlinson (North Swindon) (Con)
Sir David Amess (Southend West) (Con)
The Minister for Disabled People, Health and Work (Penny Mordaunt)
We already support employers through the new Disability Confident scheme, Access to Work and the Fit for Work service. Other measures are planned. The Green Paper consultation will provide further insight into how we can support employers and their disabled employees.
David Mackintosh
What advice can my hon. Friend offer to people such as my constituent Jehanzaib Sabih, who is deaf, so struggles to speak on the telephone, worked hard to obtain a university degree and yet is really struggling to find employment in the financial sector?
Penny Mordaunt
A lot of our bespoke expertise lies in the partner organisations we work with. If my hon. Friend contacts Sarah Holtham, who is the work coach at the Northampton jobcentre, she will facilitate a meeting with Deafconnect for him and his constituent. It also does a huge amount of work getting placements in the financial services sector, in particular with Nationwide, whose headquarters are in his constituency.
Justin Tomlinson
Following numerous successful Disability Confident events, we launched the small employer offer directly to engage, encourage and signpost new employers to take advantage of this often overlooked wealth of talent. Will the Minister update the House on the progress of this vital pilot?
Penny Mordaunt
As part of the small employer offer, we will introduce over 100 employment advisers to small employers, and the feedback we have had is that that is very welcome—in particular, for organisations that do not have their own human resources departments.
Sir David Amess
Recalling the very happy days when my hon. Friend was training for her diving competition in Southend, will she join me in congratulating Southend Adult Community College and Poundland on leading the way in employing disabled people in Southend?
Penny Mordaunt
I am familiar not only with the diving boards at Southend but with that excellent college, which has done many things well, including understanding that the built environment has a huge, positive role to play in ensuring that people with profound and multiple physical and learning disabilities can achieve their full potential.
Ian C. Lucas (Wrexham) (Lab)
Very many individuals who previously received disability living allowance and who now receive personal independence payments are prevented from travelling to work—their Motability vehicles are being taken away because they do not qualify for the higher rate mobility component. This is a serious issue for people who are working, want to work and for whom the Government are making things more difficult. What is the Minister going to do about it?
Penny Mordaunt
I would point out that more people now have access to Motability than before, but I understand the problems that the hon. Gentleman raises, and we are looking at this in the Department.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
May I put on record congratulations to Andy Murray on his magnificent achievement and also congratulate his brother, Jamie Murray, who will end the year as doubles world No. 1? What Scotland lacks in football prowess, we more than make up for in tennis, and we are immensely proud of both Murray brothers.
Last week, Members on both sides of the House made it clear to Ministers that cutting employment and support allowance for those who are in the work-related activity group by nearly £30 a week, with corresponding cuts to universal credit, is not acceptable when the Government are still consulting on their Green Paper on closing the disability employment gap and do not have adequate support in place. Has the Minister discussed the outcome of last week’s debate with the Chancellor ahead of the autumn statement and impressed on him the need to postpone these punitive cuts?
Penny Mordaunt
I point out to the hon. Lady that the support that needs to be in place for those members of WRAG will be in place, and I gave the detail of exactly when that would be in place—before new claims come online—but I must stress that, as well as enabling people to endure and cope with such situations and the associated costs of living, we have an obligation to help them to get out of those situations. I have given assurances to the House that we will do both.
Dr Whiteford
The loss of the limited capability for work element of universal credit will mean that thousands of working disabled people will be about £1,500 a year worse off. Does the Minister think that slashing the incomes of working disabled people sends the right message about the Government’s commitment to those who are just about managing?
Penny Mordaunt
We are spending more money on disability benefits, and we are doing more in terms of support, so I do not recognise the position that the hon. Lady outlines.
Luke Hall (Thornbury and Yate) (Con)
Penny Mordaunt
Yes, I do, which is why we have brought forward a Green Paper, and we will be consulting on it until February. In the meantime, where we can make progress and foster the local connections and relationships between employment support and healthcare professionals and others those individuals will need support from, we will do so, and the flexible support fund, which goes live in December, will do that.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
On behalf of Labour, I offer my congratulations to Andy Murray.
The prospect of a further £1,500-a-year cut in support to sick and disabled people found not fit for work, on top of the previous £28 billion of cuts, fills many with dread. Why is the Secretary of State touting the propaganda that the cut will incentivise disabled people to find work, when his Department’s own research says the opposite? Will he listen to MPs on both sides of the House who unanimously rejected his policy last Thursday, and stop the cut in the autumn statement?
Penny Mordaunt
As I pointed out at length, we will mitigate the financial cut to the WRAG group through several measures, including the flexible support fund, which will help with costs related directly to work, and through other measures to help with costs not directly related to getting into work. I have stated to the hon. Lady several times in the last week that we have to do both those things. We need to ensure someone’s liquidity and financial resilience, but we must also ensure that they have other kinds of support. We will not pause that support when it commences in April.
Diana Johnson (Kingston upon Hull North) (Lab)
Carolyn Harris (Swansea East) (Lab)
Tracy Brabin (Batley and Spen) (Lab)
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
The Government will not be introducing further transitional protection beyond the £1.1 billion already in place. Going any further could not be justified, given that the underlying imperative must be to focus public resources on those most in need.
Diana Johnson
That is a very disappointing response. There are 10,000 WASPI women in Hull, and with 4,100 names, Hull’s was the largest WASPI petition presented to the House last month. Labour has suggested changes to pension credit that could be financed by clawing back handouts to the wealthiest in order to help these women. Is it not about time that the Minister understood that these WASPI women will not go away until justice is done and they get a fair deal?
Richard Harrington
As the hon. Lady has mentioned, Labour proposed using pension credit as a transition mechanism for helping these women. This was discussed extensively during our debates on the Pensions Act 2011 as it went through Parliament, and it was decided that £1.1 billion would instead be used as transitional relief.
Carolyn Harris
It is quite obvious from the Minister’s response that he is fed up with these questions, but I will keep asking them so long as I have women, such as my constituent Gillian Purcell, coming to me and saying, “I’m 60. I’ve worked all my life, but my body is telling me I can’t do it any more without a pension”. When will the Government do the honourable thing and start looking after the WASPI women?
Richard Harrington
The cost of reversing the changes varies depending on whom one asks. The different political groups have come up with different amounts, varying between £7 billion and £30 billion, and that is quite apart from the substantial practical problems, such as risk of legal challenge, deliverability and all the problems associated with such options.
Tracy Brabin
I recently spoke to a constituent working in a care home who was incredibly distressed at the thought of having to work another seven years in an increasingly physically demanding job, especially as she had made retirement plans to look after her daughter’s children so that her daughter could go back to work. What assessment has the Department made of the implications not only for the women affected but for their families too?
Richard Harrington
As the hon. Lady implies, the Department has considered this matter long and hard. The current average age of exit from the labour market for women is 63.1 years, which is well above the previous women’s state pension age of 60.
Mr Peter Bone (Wellingborough) (Con)
I just want to make it clear that it is not just on the Opposition Benches that there are concerns about this matter. Of course we do not know what the autumn statement will say on Wednesday, but we ought at least to keep options open, because the current state of affairs is not very satisfactory.
Richard Harrington
As my hon. Friend knows, the public finances are very complicated, and I know that he intends to wait until Wednesday to hear what the Chancellor has to say, but this matter has been looked at long and hard and transitional funds of more than £1.1 billion have been allocated. The change to the state pension age was discussed and enacted in 1995. Since then, there have been further Acts and all this has been extensively discussed.
Andrew Bridgen (North West Leicestershire) (Con)
I understand that reverting to the 1995 state pension timetable would cost something in the region of £39 billion. Does the Minister agree that it is easy to criticise the Government over this policy, but more difficult to explain where the money would come from for any policy changes?
Richard Harrington
I thank my hon. Friend for that question, and I totally agree with him.
Richard Graham (Gloucester) (Con)
Does my hon. Friend agree that the difficulty with Labour’s proposal on pension credit is that it does not reflect what is actually sought by the WASPI campaign, which goes right back to the Pensions Act 1995? That would almost certainly be illegal—[Interruption]—under the rules of fair progress for both sexes on pensions, and it would cost an absolute fortune?
Richard Harrington
I totally agree with my hon. Friend. I heard a Labour Member shouting, “Tell that to the destitute.” Well, we have a very good benefits system in this country, and I am sure that those people who are destitute are very familiar with it.
Alex Cunningham (Stockton North) (Lab)
The Minister has made it very clear that the Government will not act further to help those affected by the ill-managed change to people’s pension age. Will he tell us whether he or the Secretary of State have had any discussions with the Chancellor ahead of the autumn statement about whether there might be additional help for those most affected?
Richard Harrington
As the hon. Gentleman knows, I can do no better than repeat that the transitional arrangements have taken place and that Government policy is very clear. I would not want him to think or believe that there will be any change on this.
Alex Cunningham
Clearly there have been no discussions with the Chancellor. In the Westminster Hall debate on the issue, we heard about many people who have been left destitute and are living in poverty as they care for elderly relatives who may be unwell, but not ill enough to qualify for employment and support allowance, and about many others who are in dire straits. The Government have no intention of doing anything to help them and they have rejected Labour’s first-step proposal of extending pension credit to both women and men who are being denied their state pension for years to come. I ask the Minister to think again. Assuming that his hands are tied by the Chancellor and the Prime Minister, will he set up a dedicated proactive helpline for those affected so that they can access the social security benefits that the Minister says are sufficient to meet their needs?
Richard Harrington
As the hon. Gentleman is aware, there is a very good benefit system in this country and people in every area are well aware of how to access it. There are Jobcentre Plus offices and help available in every local area. If right hon. or hon. Members wish to write to me about individual constituents, as they do, I will be happy to refer them to the places in their local areas.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Dr Philippa Whitford (Central Ayrshire) (SNP)
Stuart Blair Donaldson (West Aberdeenshire and Kincardine) (SNP)
The Secretary of State for Work and Pensions (Damian Green)
I am happy to confirm that I work closely with my right hon. Friend the Chancellor, and hon. Members will not be surprised to hear that I will not be pre-empting what he will be saying in his statement to the House on Wednesday.
Gavin Newlands
That is a shame. The Resolution Foundation has suggested that the best way to help the 6 million just-managing households would be to scrap the planned cuts to universal credit, including the reduction in work allowances that could see losses of up £2,800 for a working single parent. Does the Secretary of State agree that, on Wednesday, the Government need to move beyond the soundbites and reverse these cuts before low-income families pay the price?
Damian Green
No, I do not agree. The hon. Gentleman will be aware of the tremendous successes we have achieved in getting people into work. We have employment at historic high rates. Very specifically, because of the introduction of the living wage, the latest Office for National Statistics data show that the group whose pay is going up the most—more than 6% last year—are the lowest-paid workers. I think that that is the system working exactly as it should.
Dr Whitford
The Institute for Fiscal Studies has shown that with the fall in the pound since the Brexit vote, prices are being pushed up by about 2.6%. This means that there could be a rise in inflation that would coincide with this Government’s benefit freeze, adding even more pressure on low-income families. Does not the Minister agree that in view of that situation, we should get rid of the benefit freeze in the autumn statement?
Damian Green
I am sure that we shall receive a list of bids from members of the Scottish National party. I repeat that it is not for me to pre-empt my right hon. Friend the Chancellor’s autumn statement but, as I said to the hon. Member for Paisley and Renfrewshire North (Gavin Newlands), the purpose of the various benefit changes—and, indeed, the whole benefits system—is to enable people to get into work so that they can not only earn more money, but take more control over their lives. In that respect, the system is working historically well. We have more people in work, more women in work, and fewer children growing up in workless households than ever before, and that is a huge achievement.
Stuart Blair Donaldson
Despite assurances from the Government that there would be no more austerity-driven benefit cuts, any family whose third or subsequent child is born after April 2017 will not qualify for child tax credit, which could mean a loss of more than £2,000 per child. Does the Secretary of State agree that to protect just-managing families, this repugnant measure must be abandoned on Wednesday?
Damian Green
As my right hon. Friend the Chancellor said at the weekend, the House has already voted for certain benefit cuts. We do not intend to make any new cuts in benefits during the current Parliament, but Parliament has decided on various measures, including the one to which the hon. Gentleman has referred, and we shall be implementing those measures.
Stephen Crabb (Preseli Pembrokeshire) (Con)
A great many families who struggle to get by each month do not receive universal credit; indeed, they do not receive any welfare payments at all. We should not fall into the trap of defining this issue solely by the benefits system, and we should therefore not commit ourselves to reversing those cuts. Does my right hon. Friend agree, however, that there is a strong case for sitting down with the Chancellor and looking into what more we can do to help people on low incomes, and to support families who struggle to get by month after month?
Damian Green
My right hon. Friend is right to say that this is not purely about the payment of benefits; it is about a system that enables and helps people to get into work, or back into work, and to make progress once they are in work. As I am sure my right hon. Friend will have observed, that is the thrust of the work and health Green Paper, which is specifically designed for people with a disability or long-term health problem who have often have found it particularly difficult to find work in the past. We want to find new, innovative ways of helping those people so that they can enjoy the wider success of the modern labour market.
Tom Pursglove (Corby) (Con)
Unemployment in Corby, in east Northamptonshire, has fallen by more than 50% since 2010. We have seen falls in youth unemployment, and record private investments that are coming on stream will bring thousands of new jobs. As well as ensuring that all the right support is being provided, will my right hon. Friend call on the Chancellor for more of the same when it comes to job opportunities?
Damian Green
I certainly will. I am delighted to hear that my hon. Friend’s constituency is sharing so fully in the wider benefits of the more flexible, dynamic and innovative labour market that we have created over the past few years. I am sure he has found that for many of his constituents—along with other people throughout the country—work is absolutely the best route out of poverty, and they are benefiting from what has been done in the past. I assure him that we will continue to take such action.
Rachel Reeves (Leeds West) (Lab)
Damian Green
I do think that the changes are fair. I also think that much of the problem with the various pieces of analysis that have been produced by a number of think-tanks is that they do not assess the effects of getting more people into work, or—I mentioned this earlier—ensuring that they make progress when they are in work. Both those actions help people’s family incomes, which is, I think, the way to give them more long-term security and to ensure that they do not just get out of poverty, but stay out of poverty.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Government’s flagship universal credit programme has been in trouble almost since day one, which has undermined the important principle of always making work pay more than social security. Two and a half million people in low-paid work will be, on average, more than £2,000 a year worse off as a result of the Government’s cuts in universal credit work allowances. How can the Secretary of State justify his mantra that work is the route out of poverty when, under this Government, there are 7 million working families in poverty and the cut in their support will make the position worse? Why will he not honour his pledge to make work pay and ensure that the cut is reversed in the autumn statement?
Damian Green
I do not agree with the hon. Lady’s analysis of universal credit. The great thing about it is precisely that it does make work pay. We all remember the cliff edges that people were faced with: once they started to work more than 16 or 30 hours a week, they had to decide whether they would be better off in work or on benefits. That is a terrible choice to put before someone. The whole point of universal credit, which we are steadily rolling out, is that work always pays. People know that if they go into work, or if they work extra hours, they will always benefit from that. If she does not accept that, I am afraid that she and I fundamentally disagree about the fact that work is the best route out of poverty. She appears to be denying that fact.
John Glen (Salisbury) (Con)
The Secretary of State for Work and Pensions (Damian Green)
Last week, we announced the remainder of the roll-out of universal credit full service through to September 2018. Universal credit is now being delivered in every jobcentre and local authority, with over 400,000 claimants now receiving it.
John Glen
I thank the Secretary of State for that reply. Given that one is more likely to be employed, to work more and to earn more on universal credit than on JSA, will he confirm, on the mechanics and progress of the roll-out, that the test-and-learn approach is enabling difficulties to be quickly identified and resolved so that the roll-out can be delivered smoothly in the next few months?
Damian Green
My hon. Friend is right to point out the technical aspects of the roll-out. We have always been clear that an undertaking of this size and scale would be bound to meet obstacles. That was precisely why we adopted the test-and-learn approach which, I am glad to report, has worked. We have listened to issues raised by our staff and officials, and by claimants and other stakeholders. We now have a solid foundation. Universal credit is delivered in every jobcentre and local authority area. As I said, 400,000 claimants are now receiving it and being supported to build a better future for themselves.
Margaret Greenwood (Wirral West) (Lab)
The UN International Day for the Elimination of Violence against Women is on 25 November. Universal credit is normally paid to a single person within a couple, but that can cause major problems for women or men in an abusive relationship, and asking for split payments could exacerbate the difficulties for someone in that situation. Will the Secretary of State consider automatically splitting payments for each partner in a couple?
Damian Green
I suspect that automatically splitting payments would introduce many technical difficulties and cause more problems than it solves. In individual instances, it is possible to split the payments to deal with problems including that which the hon. Lady rightly identifies. However, automatically splitting payments would probably not be practical.
Mr Speaker
If the hon. Member for Boston and Skegness (Matt Warman) can overcome his natural shyness, we will hear him.
Matt Warman (Boston and Skegness) (Con)
Damian Green
I pay tribute to the Salvation Army for its work in my hon. Friend’s constituency, in my constituency, where it has just celebrated its 125th anniversary, and throughout the country. We have developed a personal budgeting strategy to ensure that claimants have access to money advice in the transition to universal credit. A small minority might need alternative payment arrangements, which can be set up in various forms. Particularly in the housing sphere, that is a necessary part of the flexibility that we have with universal credit, so that a small minority who may not be able to cope with the way in which it is normally delivered are helped.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
I am dealing with a universal credit case whereby a constituent has been left near-destitute. Following his application, the DWP has alleged that he is not a British citizen, despite the fact that he has an English birth certificate and other proof of his citizenship. Will the Minister meet me to discuss this case to help my constituent and to stop this happening to anyone else as universal credit is rolled out?
Damian Green
I am always happy to meet the hon. Lady to discuss individual cases. Alternatively, if she wants to write to me, I will ensure this is dealt with as quickly as possible.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)
The Government are committed to the creation of jobs and making work pay. We know that work is the best route out of poverty, and that is why our welfare reforms are focused on supporting people into work, rather than leaving them to rely on benefits.
Mr Carmichael
It is interesting that that answer does not necessarily address the question that I asked.
Last week, the Institute for Fiscal Studies highlighted the impact that weaker sterling will have on the cost of many of the essentials for which welfare benefits pay—clothing and food. It estimates that inflation for those items could be 2.7% next year. These circumstances were neither known nor anticipated when the decision was made to freeze benefits, so should they not themselves be the catalyst for a review of the decision?
Caroline Nokes
The right hon. Gentleman will be aware that inflation was in fact down last month. What is really important is that we support people who can work into jobs, and into better jobs—that is the whole premise behind universal credit. We know that getting people into work lifts them out of poverty. Our reforms include increasing the national living wage to £9 an hour by 2020, cutting income tax for more than 30 million people and, of course, the roll-out of universal credit.
Kerry McCarthy (Bristol East) (Lab)
The Minister for Employment (Damian Hinds)
Jobcentre Plus district managers have discretion to work with food banks in their areas where those food banks are willing to work with them. This is part of the wider Jobcentre Plus outreach programme with community organisations.
Kerry McCarthy
In just six months the Trussell Trust has provided more than 2,000 children in Bristol with emergency food parcels, and east Bristol food bank has had to open another outlet in Fishponds. We know that changes to benefits or delays in payments account for nearly half of those cases, so will the Minister agree to the Trussell Trust’s simple request that a Jobcentre Plus hotline for food bank volunteers is provided?
Damian Hinds
First, I should say that 90% of out-of-work benefits are paid on time; of course, we always strive to make that better. On the question of whether the Jobcentre Plus network is willing to work with food banks, as I said, there is discretion locally to do that when it makes sense and if the food bank is happy to do so. There are plenty of examples of that happening around the country in terms of both signposting from Jobcentre Plus and work coaches going to food banks.
Jeff Smith (Manchester, Withington) (Lab)
The Minister for Disabled People, Health and Work (Penny Mordaunt)
Our policy is designed by service-user panels, provision is strictly monitored and measured by independent audit, and the provider is held to account through our contract with it.
Jeff Smith
Citizens Advice and the mental health charity Mind told the Public Accounts Committee in March that private contractor assessors were comprehensively failing claimants with mental health issues, so what progress has been made since in the recruitment of registered mental health nurses by healthcare assessment providers to ensure that claimants with mental health issues get the support they need?
Penny Mordaunt
Since then we have introduced a number of new measures, including improved training and additional recruitment. We are also monitoring to ensure those doing assessments are referring to mental health services if they feel that that is required.
Scott Mann (North Cornwall) (Con)
Fourteen-year old Olivia in North Cornwall is the primary carer for her mother, who has multiple sclerosis. PIP assessments create uncertainty for Olivia; no one else in her household is able to work or to care for her mother. Will my hon. Friend applaud young carers such as Olivia? In the light of the DWP’s proposed end to reassessment for people with long-term illnesses, will she consider extending this to people who rely on children to care for them until such time as those children have finished further education?
Penny Mordaunt
I certainly pay tribute to Olivia and the thousands like her who do a physically and emotionally demanding job for their loved ones. We recognise the principle. We have made changes to ESA reassessments and the Green Paper affords us the opportunity to look at how that principle could be applied to PIP. It might be to my hon. Friend’s constituent’s advantage to have further PIP assessments because her needs might increase, but there is an opportunity to have a much more streamlined process, which I hope the Green Paper will deliver.
Helen Jones (Warrington North) (Lab)
Does the Minister not realise how wildly wrong some of these assessments can be? I had a constituent with cerebral palsy who was told that he would get no mobility component with his personal independence payment, meaning that he risked losing his car and therefore his ability to work. Are any financial sanctions imposed on the contractor for getting such assessments so wildly wrong and hence threatening people’s jobs?
Penny Mordaunt
I think the hon. Lady’s question related to PIP. We have also introduced other ways in which we can measure a contractor’s performance, including the use of clinical data. Whether in relation to PIP or to ESA, we need to ensure that the evidence needed to make these judgments is submitted early in the process. We are doing some work to ensure that that happens, and it is improving things considerably.
Daniel Zeichner (Cambridge) (Lab)
The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)
In his written ministerial statement to the House of Commons on 15 September, the Secretary of State confirmed that from 2019-20 we will be introducing a new funding model for supported housing. I can also confirm that the Department for Work and Pensions, along with the Department for Communities and Local Government, will today publish a consultation document to develop the details that will underpin the new funding model, and the evidence review of supported housing in Great Britain.
Daniel Zeichner
One in five people affected by severe mental illness rely on supported housing. What discussions has the Minister had with the Department of Health about the effect that these policy changes have had on those who suffer from a mental illness?
Caroline Nokes
Colleagues from the DCLG and I have had extensive discussions with the supported housing sector since 15 September, and those conversations will continue now that the consultation document has been published.
Mike Freer (Finchley and Golders Green) (Con)
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
Automatic enrolment will give about 11 million people the opportunity to save into a workplace pension scheme, all of which must meet qualifying criteria and minimum requirements. I am pleased to say that just under 7 million people have already been enrolled by more than 293,000 employers.
Mike Freer
It is welcome that more people are joining pension schemes, but the Pensions Regulator issued 3,700 penalty notices in the quarter to September, up from 861. Does that perhaps suggest that this process is becoming a bit too cumbersome for small businesses?
Richard Harrington
The vast majority of small employers are meeting their automatic enrolment duties on time and without the need for any enforcement action. My hon. Friend is absolutely right to say that the regulator has issued more fixed penalty notices this quarter, but this is proportionate to the number of employers now implementing automatic enrolment.
Mr Ranil Jayawardena (North East Hampshire) (Con)
The Secretary of State for Work and Pensions (Damian Green)
Since my appointment as Secretary of State, I have been determined to look at the benefits processes to ensure that they are working in a fair and proper way. As part of that ongoing work, I have announced an extension to the groups that can access hardship payments immediately following a sanction. Those groups now include people with a mental health condition and homeless people. This change will help to ensure that sanctions do not discourage those vulnerable groups from engaging fully with the welfare system, and that we have a system that is fair, that protects the most vulnerable and that supports people into work.
Mr Jayawardena
I welcome what my right hon. Friend has said to the House. The new figures from the Office for National Statistics show an increase of 590,000 disabled people in employment over the past three years, and I am particularly pleased that the employment rates for disabled people in my local authority areas of Hart and of Basingstoke and Deane are 16.3% and 14% above the national average. Will my right hon. Friend join me in welcoming those figures? Can he also assure me that this Government will commit to building on this success by continuing to reduce the disability employment gap?
Damian Green
I am delighted to hear about the figures in my hon. Friend’s area, which reflect the national move that has narrowed the disability employment gap by 2.3% over the past year. There is an enormous amount still to do, which is why we produced the joint Green Paper with the Department of Health. It is a central task for this Department over the next three years, and we will pursue it with as much vigour as we can.
Yvonne Fovargue (Makerfield) (Lab)
The Minister for Disabled People, Health and Work (Penny Mordaunt)
That particular criterion, of which I am very aware, is obviously not the sole criterion—many other factors are taken into account. I wish to do more on Motability, and we are looking closely at the whole area.
Craig Williams (Cardiff North) (Con)
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
I can reiterate the fact that plans to expand auto-enrolment are happening, and hundreds of thousands of people are signing up, which is a significant improvement. As for the self-employed and other people who are not in the scheme, that is just the sort of thing that we should be looking at in our 2017 review of automatic enrolment.
Daniel Zeichner (Cambridge) (Lab)
Penny Mordaunt
I will happily write to the hon. Gentleman with the figures, but I do not recognise what he says. We have actually expanded such schemes, and the Green Paper asks what more we can do. We want to ensure that everyone who wants to get into work has the necessary equipment and support to do so.
Mr Nigel Evans (Ribble Valley) (Con)
Richard Harrington
I sincerely hope that my hon. Friend does not work until he drops, but I take his main point that people are retiring later. As part of the policy of continually reducing taxation on people, I am sure that the Treasury will be looking at the matter in future. With pension freedoms and the tax-free element that pensioners enjoy, the good news is that there is much more scope for pensioners to do the kind of thing he mentions.
Dan Jarvis (Barnsley Central) (Lab)
The IFS projects that child poverty will go up by 50% over the course of this Parliament. Why is that?
Damian Green
The IFS’s projections are for the IFS to explain, but I can give the hon. Gentleman the facts: the proportion of people living in relative poverty is near its lowest level for more than 30 years; and, since 2010, 300,000 fewer people, 100,000 fewer working-age adults, and 100,000 fewer children are in poverty. The whole House should welcome those figures.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Penny Mordaunt
I point my hon. Friend towards the joint Department of Health and DWP Green Paper that we have just published. It represents a key opportunity. If we want to, it is early enough in this Parliament to reform things such as the work capability assessment to ensure that support—whether from our services or from healthcare—gets to the people who need it.
Alison Thewliss (Glasgow Central) (SNP)
By Wednesday’s autumn statement, it will be 505 days since the Government first announced the two-child policy and the rape clause in the summer Budget 2015. The Resolution Foundation estimates that that policy will put 200,000 children into poverty by 2020. The Government still cannot tell us how it will actually work, and there is a measly 38-day consultation in which the public can respond. When will the Government finally admit that the rape clause and the two-child policy are completely unworkable and scrap the policy?
The Minister for Employment (Damian Hinds)
Difficult decisions had to be made in welfare reform, and the vast majority of families with children have two children or fewer. This is one decision that had to be made, and it applies only to new cases and will not take money away from those already in receipt of help. On the exemptions that the hon. Lady mentions, these are some of the most difficult and sensitive topics. It is right that we have a full consultation and that we work closely with experts within the sector to ensure that we get the process exactly right.
Heidi Allen (South Cambridgeshire) (Con)
Penny Mordaunt
Yes, I would be very happy to give those reassurances. In addition to discretionary payments that can be made through the work coach with the flexible support fund—[Interruption.] Yes, it has always been the case. Those payments are in relation to the costs that people incur from getting into work. As for those other costs that are not directly related to getting into work, we are looking at how we can reduce those outgoings, and there are a number of other national and locally administered schemes that would mitigate those costs. I am very clear that we have to do both things. We have to ensure that someone can endure and cope with the situation in which they find themselves, but we must also bring forward that support in April to enable them to get out of a situation.
Kate Green (Stretford and Urmston) (Lab)
With around £4 billion of child support debts still outstanding and DWP’s own figures to March this year showing that 90,000 non-resident parents have not paid child support in full, will the Secretary of State tell the House where extra resources can be found to ensure that those parents who are due child maintenance for the care of their children receive it in full and on time?
The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)
We encourage paying parents to pay their maintenance on time and in full and to avoid the accrual of arrears. However, if a paying parent fails to pay on time, we aim to take immediate action to recover the debt and re-establish compliance. We have a range of strong enforcement powers, including seizing property and commitment to prison. We attempt to re-establish compliance initially through a one-off card payment, or negotiated agreement, deduction from the paying parent’s earnings, or deduction directly from an individual’s bank account. We are currently in the process of responding to a consultation run earlier this year on using powers to deduct from joint bank accounts.
Mr Steve Baker (Wycombe) (Con)
Caroline Nokes
The DWP has long recognised the challenges that some claimants, particularly those with multiple or complex needs, may face in the transition to universal credit. That is why we have developed the personal budgeting strategy to ensure that claimants have access to suitable financial products and money advice. For the small minority who need them, alternative payment arrangements can be set up. All APA cases are dealt with urgently and the majority of cases are processed within the first assessment period and within a five-day average clearance time.
Greg Mulholland (Leeds North West) (LD)
It was a long overdue victory for common sense that those people with chronic illnesses and long-term conditions will no longer be subject to the work capability assessment, but what about our brave veterans in receipt of war pensions? Why are they still subject to work capability assessments?
Penny Mordaunt
The hon. Gentleman makes a very good point. It is one that I, as a former Armed Forces Minister, have discussed with the Department. That is why we have specific questions related to our armed forces in the Green Paper. It is a good idea.
Kevin Hollinrake (Thirsk and Malton) (Con)
The most challenging gap that we need to bridge in the disability employment statistics is the one relating to people with learning difficulties. In answer to a written question, the civil service was unable to break down the stats to show how many people with learning disabilities were employed. Does the Minister agree that those stats are vital to help us to provide policies and support for people in these circumstances?
Penny Mordaunt
I agree absolutely, which is why we are doing that at as local a level as possible. On 5 December we are holding a drop-in session to which every Member of this House will be invited. As well as giving them information about how they can run local events to encourage participation in the Green Paper consultation, we will be giving them some local data so that they can get that local focus on the people we are currently trying to help and the unmet need.
Neil Gray (Airdrie and Shotts) (SNP)
Why does the Secretary of State think that five of his colleagues voted for my motion last week calling on the Government to pause cuts to ESA and universal credit?
Damian Green
Hon. Members are entitled to vote in this House as they like. I am not sure that the Chief Whip would agree with me at all times, but it is a fact. I disagreed with the case that the hon. Gentleman made in that debate. As has been explored over the past hour in this Question Time, a balance clearly has to be struck between keeping the public finances in order and ensuring that our benefits system works as well as possible to help as many people as possible into work. That is what we have been doing successfully for many years now, and that is what we will continue to do.
Peter Aldous (Waveney) (Con)
Universal credit was rolled out in Waveney on 25 May. I am sorry to report that at present it is not going well and many vulnerable people are finding themselves in difficult situations. Can the Secretary of State assure me and my constituents that everything is being done to address these technical issues as soon as possible so that universal credit can play the role for which it was intended?
Damian Green
I am always happy to talk about any technical issues that arise as we roll out this important benefit, and if my hon. Friend wishes to bring them to my attention in detail, I will happily talk to him about them.
Diana Johnson (Kingston upon Hull North) (Lab)
Should not those people who were damaged in the contaminated blood scandal by the NHS be passported on to the new PIP regime if they are already in receipt of DLA?
Penny Mordaunt
I do not know whether this is an issue that the hon. Lady has raised before. I am sorry if I am not aware of the previous correspondence that she has had with the Department. I would be happy to meet her to discuss that.
Justin Tomlinson (North Swindon) (Con)
PIP continues to lead the way in identifying and supporting those with mental health conditions to a significantly greater degree than DLA, so what more can be done to signpost the people identified to additional support provided by the NHS, charities or the Government pilot?
Penny Mordaunt
We have been trialling a number of measures—for example, the mental health trailblazers, which combines employment support advice with psychological support delivered through the NHS, and we are going to roll that out nationally.
Helen Jones (Warrington North) (Lab)
Does the Secretary of State understand that the dismissive answers that the Under-Secretary of State for Pensions, the hon. Member for Watford (Richard Harrington), gave about the problems faced by WASPI women are a slap in the face to women who have worked all their lives and in many cases have retired to look after sick or elderly relatives, thus saving this country millions of pounds? It is time that Ministers recognised that those who have done the right thing ought to be looked at and their situation alleviated.
Damian Green
Since the original legislation was passed more than 20 years ago, and since the Pensions Act 2011, the Government committed £1.1 billion to lessen the impact of the changes for those affected. In the end, we have to address the issue that having the same pension age for men and women is fair, and that at a time when we are all living longer it is necessary, if we are to keep a credible pensions system going, for the pension age to go up gradually for both sexes. [Interruption.] I am sorry that many people in the Labour party do not seem to accept those basic facts of arithmetic, but they are basis facts and the mitigations that were put in place mean that no one has seen their pension age change by more than 18 months compared to the previous timetable—[Interruption.] For 81% of those women the increase will be no more than 12 months. Finally, for the hon. Member for Denton and Reddish (Andrew Gwynne) who is shouting from the Front Bench, other countries have done this faster than the UK. In nine European Union countries, including Germany, Denmark and the Netherlands, all of which run extremely sophisticated welfare systems, the state pension age was 65 for women as far back as 2009, so the Labour party will have to accept these basic facts.
Mr Speaker
I was hoping there would be time for the remaining two questioners. There is not, but it will have to be found anyway.
Tom Pursglove (Corby) (Con)
On Saturday evening, I met one of my constituents, who came to see me about PIP reassessments for those with deafness-related conditions. The question he wanted me to put to Ministers was whether, as part of the ongoing review of the reassessment process, they will look carefully at the situation relating to this group of individuals.
Penny Mordaunt
Yes, the Green Paper will afford us the opportunity to do that. Around certain disabilities, there are some very sensitive issues about how someone might need assistance provided—for example, they might prefer to use sign language, as opposed to assistive technology—which we also need to take into account, and we will do that.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
I was recently contacted by a constituent who was asked to complete an evaluation form at the end of a PIP assessment and who alleges that the Atos healthcare professional who conducted the assessment stood over her and watched as she completed the paperwork. I am sure the Minister will share my alarm that people may feel menaced into giving favourable feedback. Will she agree to personally look into this as a matter of urgency?
Penny Mordaunt
If the hon. Lady can give me any more specifics about that, I would be very happy to look into it. In terms of the satisfaction reviews that are done, the satisfaction rating is high, and I do not think—[Interruption.] No, we need to give credit where credit is due. But if that kind of practice is going on, or if any Member of this House has evidence or further examples of it, I will be very happy to look into it.
Independent Inquiry into Child Sexual Abuse
(8 years, 1 month ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
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Lisa Nandy (Wigan) (Lab)
(Urgent Question): To ask the Home Secretary to make a statement on the leadership, staffing, budget and structure of the independent inquiry into child sexual abuse.
The Parliamentary Under-Secretary of State for the Home Department (Sarah Newton)
The inquiry was set up to look at the extent to which institutions in England and Wales failed to protect children from sexual abuse. We know the terrible impact that abuse has on survivors, sometimes for many years.
As the House knows, following the resignation of the previous chair, my right hon. Friend the Home Secretary appointed as chair Professor Alexis Jay. She has a distinguished career in social work and a long-standing dedication to child protection. She led the independent inquiry into child sexual exploitation in Rotherham, where she scrutinised the work of social workers and proved her capability to uncover failings across institutions and professions. She is the right person to take this work forward.
Taking the work forward is vital for creating a sense of certainty for victims and survivors. The inquiry has set up 13 strands of investigation, and made 250 formal requests for information from over 120 institutions, with 164,000 documents having now been submitted. It has referred roughly 80 cases a week to the police. It has rolled out the truth project, providing survivors with the opportunity to tell the inquiry what has happened to them. More than 500 people have so far come forward.[Official Report, 23 November 2016, Vol. 617, c. 2MC.]
The inquiry has adequate resources to undertake its work, and we will support the inquiry with what it needs. The inquiry remains independent, which means it is not part of Government and is not run by a Government Department.
Professor Jay is mindful of the scale of the task and the need to move forward with pace. That is why she has instigated an internal review of the inquiry’s approach to its investigations, exploring new ways to develop its investigative work, while remaining faithful to its terms of reference. She has made it clear that, if any changes are proposed, the views of those affected will be sought.
We expect the outcome of this review soon. It is crucial that we now give the inquiry the space and support it needs to get on with its job—getting to the truth for victims and survivors—and I urge everyone in the House to do just that.
Lisa Nandy
I thank the Minister for that statement, but where is the Home Secretary, and why has nobody from the Government sought proactively to come to this House to provide reassurance about the serious events that have unfolded over the past week as this inquiry has unravelled in front of our eyes?
Has the Home Secretary met survivors groups since last Thursday? What steps has she taken to establish that the chair and the panel have the expertise and the working relationships for this to succeed? Has anybody from the Home Office investigated why so many lawyers have cited concerns about competency and leadership? Does she expect further resignations? Has a new chief legal counsel been appointed? Is the former chief legal counsel, Ben Emmerson QC, still being paid, and if so, why? What action has the Home Office taken to establish that there was a disclosure of sexual assault, and is she satisfied that that disclosure was dealt with properly by the inquiry? Can she give me a personal assurance that the intelligence services are standing by the commitment to hand over all files and that that is not being obstructed? We heard about Professor Jay’s internal review for the first time in August—where is it?
This is the second time in recent weeks that I have had to ask Ministers to come to the House and account for these failings. They have lost seven senior lawyers, three chairs and several survivors groups, and it is now impossible to see that this inquiry is still operating effectively. This may be the last chance that the Prime Minister and her Home Secretary have to rescue from collapse the inquiry that the Prime Minister set up. Will the Home Secretary now stop hiding behind the smokescreen of independence, recognise that she has responsibility for this inquiry’s success, and get a grip on it?
Sarah Newton
I am absolutely delighted, as the Minister responsible for vulnerability, safeguarding and counter-extremism, to be here to answer this question. It is absolutely at the core of this Government’s priorities to safeguard children in our country. The Home Secretary was in this House as recently as 17 October answering questions in detail. The Home Affairs Committee has asked detailed questions of the permanent secretary to the Home Office. The hon. Lady is really quite wrong in asserting that there is some sort of smokescreen and hiding behind independence. It is absolutely essential that this inquiry is an independent inquiry. The terms of reference of the inquiry were shaped with the voices and the opinions of the victims, and it is very important that this independence is maintained.
The hon. Lady asked a series of operational questions, all of which are for the chair and the leadership of the independent inquiry. It would be totally wrong for me to answer those questions here, because we would be intervening in the independence of the inquiry. I am confident, as are the Prime Minister and the Home Secretary, in the ability of Professor Jay to lead this inquiry. It is really important that we all get behind the inquiry so that it can get on and do its really important work in making sure that it gets to the truth and delivers for victims.
Sir Edward Garnier (Harborough) (Con)
I do not for one moment undervalue the intentions of those who set up this inquiry and those who are working with it, although it has had a very rocky road since it was begun. Nor do I underestimate for one moment the trauma felt by those who have been affected by child sex abuse. I have acted in a number of criminal cases in which I have seen with my own eyes the terrible consequences for adults of what happened to them as children. I want to ask my hon. Friend a question from a slightly different angle. I have a constituent who, since the early part of this century, has been left in a hideous, Kafkaesque limbo. He does not know whether he is an accused person or a witness. What is his status in relation to this inquiry? He, like the victims, needs to be told when this is all going to finish, both for him and for the victims. Will my hon. Friend please make some inquiries of the inquiry to ensure that this man can either be prosecuted or set free?
Sarah Newton
I thank my right hon. and learned Friend for the customary thoughtfulness with which he asked his question and reflected on the importance of this inquiry. As he quite rightly points out, child sexual abuse can have a devastating impact not just on the victims, but on the people caught up in such inquiries. He referred to a particular case that is an operational matter for the police. While I can understand why he wants to bring this matter to a swift conclusion on his constituent’s behalf, these are operational matters for the police, who, quite rightly, are independent of the Home Office.
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab)
This inquiry is on its fourth chair. Every time, Ministers have come to the House and asserted that the current chair is the right person to take the inquiry forward. Having said that for the fourth time, why do they expect the House, the public and, above all, the survivors to be reassured? As the Minister has said, this is of course an independent inquiry, particularly as to its conduct and findings, but that does not mean the Home Office can take no responsibility at all.
On the question of the Shirley Oaks survivors who were in the Lambeth children’s home, I have heard the Minister say that she will not answer operational questions, but she will know their concern about having a social worker as the overall chair of the inquiry. They have said they will accept a vice-chair for their strand who is not a social worker. Have Ministers put that to Alexis Jay? Above all—I hope the Minister will not dismiss this as an operational question—the Shirley Oaks survivors want to know what Home Office involvement there was in the monitoring and supervision of the Lambeth children’s home during the period when the historical child abuse occurred. Ministers cannot just let this inquiry run into the sand. The public expect better, this House expects better and the survivors expect better.
Sarah Newton
I absolutely assure the hon. Lady and every other Member in the House that we will absolutely not let this inquiry run into the sand. It is vital to the full protection of children in our country that we understand the failings of the past, seek remedies for the victims and use that intelligence to improve and have better safeguarding arrangements for children today.
The hon. Lady asked questions about operational details that she knows full well it would be completely inappropriate for me to answer. I can assure her that the chair of the independent inquiry regularly meets survivors groups, and I am sure that she will listen to the concerns raised by the Shirley Oaks Survivors Association. She is undertaking a review to make sure that the inquiry is properly focused to address the really serious concerns that are being raised.
Michael Fabricant (Lichfield) (Con)
I appreciate that this is an independent inquiry, but my hon. Friend must understand that the victims groups have become upset and disturbed about the nature of the inquiry and how long it is going to take. Will she at least assure me that the scope of the inquiry will not be reduced, and that whatever funds are required by the inquiry will be delivered by the Home Office?
Sarah Newton
I thank my hon. Friend for that comment. I quite understand that the victims, who have been abused, will feel disappointed at some of the issues that there have been with the inquiry. I quite understand that, but as he says, it is absolutely vital that the independence of the inquiry is maintained. The chair is meeting and engaging with the survivors organisations and individuals to make sure that the inquiry absolutely delivers on its terms of reference, which they themselves shaped. To go back to my initial response to the urgent question, the fact that 80 cases a week are being referred to the police and that over 500 people have come forward to participate in the truth project shows how valuable the inquiry already is to those victims.[Official Report, 23 November 2016, Vol. 617, c. 3MC.]
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
We all know that the inquiry has been dogged by setbacks and problems, so it is very disappointing to learn of further difficulties, namely the latest withdrawals and the concerns expressed by groups representing victims and survivors. I am sure that all right-minded people want the inquiry to succeed. We want it to meet its original purpose of investigating historical allegations of institutional child sexual abuse, and, wherever possible, we want, above all, justice for those people whose lives have been irreparably harmed by abuse. Yet, to do so we need to restore and secure confidence in the inquiry and its findings.
Notwithstanding the Minister’s reluctance to address what she considers to be operational matters, when does she anticipate that a suitable legal counsel will be appointed to ensure that the facts are well established throughout the proceedings? Following the resignation of the previous chair in August, does the Minister know whether internal procedures for resolving complaints about staff and panel members have been established? Most importantly—this is categorially not an operational matter—what does she plan to do to restore trust in the proceedings for those survivors of sexual abuse and to regain their support?
Sarah Newton
I thank the hon. Lady for her series of questions. I will take her last point first. On confidence, there is a huge amount that we can do in this House, and that is to get behind the inquiry. It is open for business. It is worth getting some perspective. Although I am really disappointed that one victims group has decided not to engage with the inquiry at the current time, I am hopeful that it will re-engage in the future. We must remember that it is one group. The inquiry is open for business and getting on with its work.
The question about the legal counsel is for the chair and the leadership of the commission. It is their responsibility to make sure that they appoint the people necessary to undertake the task. I am sure that the chair understands the concerns raised by Members and victims organisations regarding making sure that she gets on with resolving the issues so that the very important work that the inquiry is doing can come to a swift and really good conclusion.
James Berry (Kingston and Surbiton) (Con)
Does my hon. Friend agree that the role of the Home Secretary, or any Secretary of State, under the Inquiries Act 2005 is to appoint the chair and the panel and to agree the terms of reference with that chair, and that for a Member to come to this House with an imperious and censorious list of questions, such as those we heard from the hon. Member for Wigan (Lisa Nandy), does not help the inquiry and totally fails to understand the law?
Sarah Newton
I thank my hon. Friend, who is a lawyer, for asking such an insightful question. It is very disappointing that Opposition Members are coming to the House and making such censorious claims when what we really need to do is get behind this independent inquiry so that it can do the job for victims and make sure that we all learn what more we can do to keep children in our country safe.
Mr Chuka Umunna (Streatham) (Lab)
It is not just my constituents who are members of the largest survivors group, Shirley Oaks, whose more than 600 members have said that they no longer have confidence in the chair of the inquiry. White Flowers Alba, Minister and Clergy Sexual Abuse Survivors and lawyers representing numerous other survivors have also said that. On Friday, I was appalled that one response to Shirley Oaks’ withdrawal of support was a suggestion that it should be compelled to provide to the inquiry the evidence that it has gathered. Its members are survivors of child abuse—they are not criminals. Millions has been spent, there has been no public cross-examination of witnesses yet, and the most senior lawyers are resigning month after month. Does that not reinforce the need for a change in leadership, which is within the purview of Home Office Ministers? What we need is a senior judge of High Court standing or above to lead this inquiry. Why do the Government not act?
Sarah Newton
I thank the hon. Gentleman for his question. He is an assiduous constituency MP and he is quite right to raise the concerns of the victims based in his constituency. The Prime Minister and the Home Secretary could not have made clearer their confidence in the chairman of the independent commission. It is really important that we carry on with the inquiry and that we let it get on with its vital job of getting to the truth and making sure that we learn the lessons to keep children in our country safe.
Seema Kennedy (South Ribble) (Con)
Does my hon. Friend agree that if it is to have any degree of public confidence, no one should pre-empt the outcome of the inquiry?
Sarah Newton
My hon. Friend is quite right. We set up an independent inquiry so that it can get on with its work. It shaped the terms of reference with the victims themselves, and, as we have seen from my response to the urgent question, it is making good progress.
Ann Clwyd (Cynon Valley) (Lab)
It is a bit rich for Conservative Members to call for patience, understanding and so on. Eighteen years ago in this House I had to bring business to a stop two nights running to get allegations about child abuse in my constituency put on the record. The Waterhouse inquiry was set up, and that took years. There have been subsequent inquiries, one after another. One of the children in my constituency committed suicide before we heard any results from an inquiry. It is absolutely essential that the survivors of abuse have those results and have confidence in what is being done.
In north Wales, for example, it has taken all these years for Chief Superintendent Anglesea to be put on trial and to be sentenced for his involvement in child abuse in north Wales. It was good investigative journalism, not inquiries, that got to the root of his case. I appeal to the Minister: do not ask for patience from the Opposition. We have been patient long enough, and it is just not good enough.
Sarah Newton
I thank the right hon. Lady for her question, and I pay tribute to her for the work she has done in campaigning so assiduously for justice for her constituents. I reassure her and everyone who is here that those lessons have been learned from the past. The inquiry is an incredibly important part of what the Government are doing to learn lessons from the past and make sure that we are doing everything that we can to keep children in our country safe. As a result of people coming forward to the inquiry, as I said in my response to the urgent question, more than 80 referrals a week are being made to the police. Information and evidence gathered by the inquiry are being used to seek the prosecutions that absolutely need to be made, as the right hon. Lady described.[Official Report, 23 November 2016, Vol. 617, c. 3MC.]
Peter Heaton-Jones (North Devon) (Con)
This inquiry is doing incredibly important work. Does the Minister agree that the most important aspect is that it is independent of Government? “Independent” is the first word of its title. Does she agree, therefore, that the best thing that Members on both sides of the House can do to support its work is to give it the space it needs to do that work independently?
Sarah Newton
I am grateful to my hon. Friend for absolutely hitting the nail on the head. As constituency MPs, we have all met victims of domestic abuse and violence and children who have been involved in child sexual exploitation, so we know how absolutely devastating this is. It is really important that we do everything we can to support those people and encourage them to come forward to the inquiry. Wherever the evidence takes us, we will seek those solutions and those prosecutions.
Mr David Hanson (Delyn) (Lab)
It has taken 35 years for Gordon Anglesea to face trial at Mold Crown court, where he was convicted last month and sentenced to 12 years’ imprisonment for historical child abuse offences. While recognising the inquiry’s independence, will the Minister tell the House when the first evidence sessions in public are likely to be, so that my constituents and others can give their evidence of that level of abuse?
Sarah Newton
If the right hon. Gentleman or his constituents have any evidence whatever, they should go to the inquiry right now. We are not waiting for the end of the inquiry to take action, as I have said before; more than 80 cases are sent to the police every week so that action can be taken. It is really important that people engage with the inquiry and support their constituents in doing so, so that we can seek justice for the victims.[Official Report, 23 November 2016, Vol. 617, c. 4MC.]
John Howell (Henley) (Con)
I would like to pick up on a point the Minister has already made. This inquiry plays a vital part in protecting vulnerable children for the present and for the future. Will she put it in the context of what else the Government are doing?
Sarah Newton
My hon. Friend is quite right. The inquiry is incredibly important, but is part of an overarching strategy. We want to do everything we possibly can to keep children in our country safe. We are seeing record levels of prosecutions and huge investment in supporting victims, making sure that we take apart the culture of secrecy and cover-up that contributed to the delays we have heard about from Opposition Members.
Diana Johnson (Kingston upon Hull North) (Lab)
The inquiry was set up as a panel inquiry, then turned into a statutory inquiry. Was the biggest mistake not setting up a royal commission modelled on what is happening in Australia, which has had a royal commission for the past few years that is pursuing the issue very successfully and has the victims’ confidence, as well as having their interests at its heart?
Sarah Newton
Royal commissions can be very important, but they tend to take a very long time. The Government’s view was that an independent inquiry was the best way to learn the lessons and secure the justice that the victims were looking for.
John Glen (Salisbury) (Con)
There was speculation over the weekend about the way an inquiry was taking place in Wiltshire. When events might have happened a long time ago, evidence is difficult to corroborate and high-profile figures are involved, there is always a significant risk that things might somehow just get left. Will the Minister assure the House that when victims give evidence, although that evidence might be difficult to corroborate and it might be about things that happened a long time ago, our chief constables and investigating officers up and down the country will go where the evidence takes them, as they should? Will she commit to ensuring that sufficient resources are available so that everyday policing is not affected when these serious matters happen in individual constabularies?
Sarah Newton
My hon. Friend makes a very powerful point. I can absolutely give him the assurance he is looking for—we must go where the evidence takes us. It can be very painful for people to revisit terrible things that happened in the past, but I encourage them, as I am sure he is doing, to come forward, go to the police and give that evidence.
The inquiry has been given the status of one of the most important police functions in our country. The police have the resources to support investigations into historical sexual abuse of children.
Helen Hayes (Dulwich and West Norwood) (Lab)
On the Opposition Benches there is no question but that the inquiry is and must be independent. But this is a question of confidence, and confidence is not an operational matter. There seems to be an attempt to dismiss the Shirley Oaks Survivors Association as just one group of survivors. I can tell the Minister that that association represents 600 survivors of abuse. It has undertaken two years’ worth of rigorous, detailed, exceptionally high quality research on behalf of survivors and has very powerful evidence. I have raised concerns on the association’s behalf, as have both my hon. Friend the Member for Streatham (Mr Umunna) and the Home Affairs Committee, but they have not been answered. I am afraid that it simply is not good enough for the Minister to demand our unswerving confidence when the legitimate questions we have raised have not been answered. I ask her once again: will she intervene to ensure that we can have the confidence in the inquiry that is necessary for it to do the job it needs to do on behalf of victims and survivors?
Sarah Newton
I absolutely want to put it on the record and correct any doubt in the hon. Lady’s mind that we take every victim’s story extremely seriously. Every victim’s voice must be heard. That is why we set up the inquiry. If I were to intervene, it would no longer be an independent inquiry. It is absolutely essential that it maintains its independence. Professor Jay has a long and established record. She did a really excellent job in Rotherham. If people were to speak to the victims in Rotherham, they would hear the confidence that they placed in her and what a really good job she did there. I would strongly encourage Opposition Members to go back to victims and their organisations and encourage them to re-engage with the independent inquiry and with its chairman, so that we can move forward.
Mr Peter Bone (Wellingborough) (Con)
I congratulate the hon. Member for Wigan (Lisa Nandy) on being granted the urgent question, but I do not think that it has been the best question: there has been a lot of noise from the Opposition and not a lot of clarity from them. [Interruption.] As they are proving, Sir, at this very moment. Does the Minister agree that one of the most important things is that we look after potential child victims of abuse now? Is not the simplest thing that the Government could do to take responsibility for child victims of sexual abuse, especially those who were internally trafficked, away from the Department for Communities and Local Government and make it an independent responsibility of the Home Office, because too many children are re-trafficked into sexual abuse while under the DCLG’s care?
Sarah Newton
I thank my hon. Friend for his helpful question. Bringing us right up to date with the incredibly important work that we are doing to ensure that we keep children safe in our country, while addressing historical issues, is very important and it informs what we do now, but we leave no stone unturned in our determination to make sure that children are safe, including those children, as he rightly points out, who might be trafficked or who are victims of modern slavery. We constantly keep under review our care for those children.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
May I remind the Minister that the purpose of setting up this inquiry was to find out the truth and to allow the victims of child sexual abuse to get closure? To achieve that, they have to have confidence in the inquiry. If the inquiry alone cannot command the confidence of victims, the Government still has a role to play. She or the Home Secretary should be meeting the victims’ groups. She should be hearing their concerns directly from them and seeking their remedies if the inquiry is to do the job for which we set it up in the first place.
Sarah Newton
We have absolute confidence in the inquiry. I respectfully urge everyone in the House today to get behind the inquiry to make sure that it works for victims. More than 500 victims have come forward, and that is leading to cases going forward for the police to take action. It is really important that we send out a strong and united message from the House that we all think that this independent inquiry is vitally important for victims and survivors and that we will all do our best to support the inquiry’s work.
Margaret Ferrier (Rutherglen and Hamilton West) (SNP)
Over a month ago, when I brought up with the Home Secretary in this place the loss of survivor testimonies by the Independent Inquiry into Child Sexual Abuse, she suggested that I engage with the inquiry in a slightly more positive manner and that I write to her about the incident. As I have yet to receive a response to the detailed letter that I subsequently sent, and as the Home Secretary is not here today, will the Minister update the House now on what investigation has since taken place into those lost testimonies?
Sarah Newton
I agree to make sure that the hon. Lady gets a response to her letter and the detailed concerns she raises.
Christina Rees (Neath) (Lab/Co-op)
There has never been an official Welsh representative on the inquiry, despite intense lobbying by Welsh Government Ministers, the then Health Minister, Mark Drakeford, and the Social Services Minister, Gwenda Thomas. Considering that this is an England and Wales inquiry, will the Minister give an assurance that there are open lines of communication with the Welsh Government, so that devolved aspects can be appropriately discussed? Will she confirm that the interests of Welsh victims are adequately protected?
Sarah Newton
Of course, it is really important that people living in Wales, like those living all over our country, can have their voices heard. It is an independent inquiry, however, so I respectfully ask that the hon. Lady makes those representations to Professor Jay to make sure that she is satisfied that victims in Wales feel they are being listened to.
Paula Sherriff (Dewsbury) (Lab)
For years, I worked supporting victims of sex abuse. It is absolutely clear to everyone in the House that the seemingly endless cover-ups, scandals and delays will be painful and traumatic for all the victims and survivors. How does the Minister intend to restore trust and integrity to the inquiry as soon as possible?
Sarah Newton
The hon. Lady draws on her work and personal experience. In working with victims, she made a huge contribution before she came to the House, and I am sure that some of them look at what has happened and feel disappointed, but I can assure her that we are utterly committed to seeing the inquiry through and that we utterly support the chair, Professor Alexis Jay, who we believe is the person to see this through. I encourage the hon. Lady to speak to the victims in her constituency and assure them that this is a top priority for the Government. We will support the independent inquiry to do its job so that the victims she worked with and those all over the country get the justice they seek.
Ian C. Lucas (Wrexham) (Lab)
In north Wales, where many offences of child sexual abuse took place, there is extreme scepticism about the Government’s commitment to openness. The Macur review, which reported recently, redacted the names of people in positions of responsibility, some of them Members of the House, because of continuing court proceedings. We now know that Gordon Anglesea has been convicted. If the Minister is committed to openness, will she go back to the Ministry of Justice and ask it to revisit the Macur review and to make open those redacted names to make it clear that there is openness in this inquiry and that, following their conviction for heinous crimes of child sexual abuse, those responsible will be openly put for consideration as part of reports issued by the Government?
Sarah Newton
The hon. Gentleman says there are concerns about a lack of openness and transparency, which I simply do not accept. This Government have done more than any other to make people accountable, to be more transparent, to open up processes and to make those in authority accountable for their actions.
Sarah Newton
The question you are asking is about a specific case, but it would be completely inappropriate for me to comment on a case that is going through the courts. I have absolute confidence in our criminal justice system. The matters the hon. Gentleman raises should be raised with the justice system.
Mr Speaker
First, I should just point out that I was not asking any question, as the Chair does not do so. Secondly, notwithstanding the evident and audible frustration of the hon. Member for Wrexham (Ian C. Lucas), I simply make the point that there has been a full exchange today, but these matters will inevitably be returned to on the Floor of the House, possibly on innumerable occasions, and either the hon. Lady or some other Minister will toddle along to the Dispatch Box to respond. The matter will go on and on. I feel sure of that.
Higher Education and Research Bill
Monday 21st November 2016
(8 years, 1 month ago)
Commons ChamberRead Full debate Higher Education and Research Act 2017 View all Higher Education and Research Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 November 2016 - (21 Nov 2016)
19:01 - The House divided: - Ayes: 180 / Noes: 278 - Question accordingly negatived.
19:14 - The House divided: - Ayes: 181 / Noes: 278 - Question accordingly negatived.
20:31 - The House divided: - Ayes: 211 / Noes: 280 - Question accordingly negatived.
20:44 - The House divided: - Ayes: 216 / Noes: 277 - Question accordingly negatived.
20:55 - The House divided: - Ayes: 212 / Noes: 281 - Question accordingly negatived.
21:06 - The House divided: - Ayes: 217 / Noes: 275 - Question accordingly negatived.
21:48 - The House divided: - Ayes: 279 / Noes: 214 - Jeff Smith
Mr Speaker
Members will note that I have, unusually, selected some starred amendments. I have done so in the circumstances applying to this particular Bill—the hon. Member for Southport (John Pugh), following his point of order on this matter, will be conversant with the issues—because the deadline for tabling amendments had already passed when today’s business was announced last week. In those circumstances, it seemed to me sensible and helpful to the House to proceed in this way.
New Clause 1
Duty to monitor and report on financial sustainability
“(1) The OfS must monitor the financial sustainability of the following registered higher education providers—
(a) those who are funded wholly or partly by a grant, loan or other payment from the OfS under section 37 or 38 (financial support for providers),
(b) those who are not so funded but are eligible to receive such funding under section 37 or 38, and
(c) those who provide higher education courses which are designated for the purposes of section 22 of the Teaching and Higher Education Act 1998 (financial support for students) by or under regulations made under that section.
(2) The OfS must include in its annual report a financial sustainability summary for the financial year to which the report relates.
(3) “A financial sustainability summary” for a financial year is a summary of conclusions drawn by the OfS for that year, from its monitoring under subsection (1), regarding relevant patterns, trends or other matters which it has identified.
(4) Patterns, trends or other matters are “relevant” if—
(a) they relate to the financial sustainability of some or all of the registered higher education providers monitored under subsection (1), and
(b) the OfS considers that they are appropriate to be brought to the attention of the Secretary of State.
(5) In this section—
“annual report” means the annual report under paragraph 13 of Schedule1;
“financial year” has the same meaning as in that Schedule (see paragraph 12(6)).”—(Joseph Johnson.)
This new clause, which is for insertion after clause 61, requires the OfS to monitor the financial sustainability of registered higher education providers who are in receipt of, or eligible for, certain kinds of public funding. It requires the OfS to include in its annual report a summary of conclusions which it draws from that monitoring regarding patterns, trends or other matters which it has identified relating to the financial sustainability of some or all of the providers monitored and which it considers are appropriate to be brought to the attention of the Secretary of State.
Brought up, and read the First time.
The Minister for Universities, Science, Research and Innovation (Joseph Johnson)
I beg to move, That the clause be read a Second time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 4—Committee on Degree Awarding Powers and University Title—
“(1) The OfS must establish a committee called the “Committee on Degree Awarding Powers and University Title”.
(2) The function of the Committee is to provide advice to the OfS on—
(a) the general exercise of its functions under sections 40, 42, 43 and 53 of this Act, and section 77 of the Further and Higher Education Act 1992;
(b) particular uses of its powers under section 40(1) of this Act; and
(c) particular uses of its powers under section 77 of the Further and Higher Education Act 1992.
(3) The OfS must seek the advice of the Committee before—
(a) authorising a registered higher education provider or qualifying further education provider to grant taught awards, research awards or foundation degrees under section 40(1) of this Act;
(b) varying any authorisation made under section 40(1) of this Act so as to authorise a registered higher education provider or qualifying further education provider to grant a category of award or degree that, prior to the variation of the authorisation, it was not authorised to grant; and
(c) providing consent under section 77 of the Further and Higher Education Act 1992 for an education institution or body corporate to change its names so as to include the word “university” in the name of the institution or body corporate.
(4) The OfS must also seek the advice of UKRI before authorising a registered higher education provider or qualifying further education provider to grant research awards under section 40(1) of this Act.
(5) The OfS does not need to seek the advice of the Committee before—
(a) revoking an authorisation to grant taught awards, research awards or foundation degrees; or
(b) varying any authorisation to grant taught awards, research awards, or foundation degrees so as to revoke the authorisation of a registered higher education provider or qualifying further education provider to grant a category of award that, prior to the variation of the authorisation, it was authorised to grant.
(6) Subsection (4) applies whether the authorisation being revoked or varied was given—
(a) by an order made under section 40(1) of this Act;
(b) by or under any Act of Parliament, other than under section 40(1) of this Act; or
(c) by Royal Charter.
(7) In providing its advice to the OfS, the Committee must in particular consider the need for students, employers and the public to have confidence in the higher education system and the awards which are granted by it.
(8) The OfS must have regard to the advice given to it by the Committee on both the general exercise of its functions referred to in subsection (2) and any particular uses of its powers referred to in subsection (3).
(9) The majority of the members of the Committee must be individuals who appear to the OfS to have experience of providing higher education on behalf of an English higher education provider or being responsible for the provision of higher education by such a provider.
(10) In appointing members of the Committee who meet these criteria, the OfS must have regard to the desirability of their being currently engaged at the time of their appointment in the provision of higher education or in being responsible for such provision.
(11) The majority of the members of the Committee must be individuals who are not members of the OfS.
(12) Schedule 1 applies to the Committee on Degree Awarding Powers and University Title as it applies to committees established under paragraph 8 of that Schedule.”
This new clause would create a committee of the OfS which fulfils much the same functions as the current Advisory Committee on Degree Awarding Powers.
New clause 7—Automatic review of authorisation—
“(1) The OfS must consider whether to vary or revoke an authorisation given under section 40(1) if—
(a) the ownership of the registered provider is transferred,
(b) the owner of the registered provider has restrictions placed on its degree-awarding powers in relation to another registered provider under its control or ownership, or
(c) for any other reason considered to be in the interest of students enrolled at the institution or the public.
(2) A decision taken under sub-section (1) to vary or revoke an authorisation shall be carried out in accordance with section 43.”
This new clause would ensure that a review of a provider’s degree awarding power would be triggered if the ownership of a provider changes, if the owner of the registered provider faces restrictions to its degree awarding powers in another jurisdiction or if the OfS deems a review necessary to protect students or the wider public interest.
New clause 9—OfS report: international students—
“(1) The OfS shall, in accordance with information received under paragraph 8(1)(ba), produce an annual report for the Secretary of State on—
(a) EU (excluding from the UK), and
(b) non- EU
students enrolled with English higher education providers.
(2) A report under subsection (1) must include an assessment of—
(a) the number of international students, and
(b) the financial contribution of international students to English Higher Education providers.
(3) The Secretary of State shall lay the report produced under subsection (1) before each House of Parliament.”
New clause 12—Prohibition: use of quality of higher education when determining a visa application—
“An assessment made of the quality rating of a higher education provider in the United Kingdom under section 25 of this Act may not be used when assessing a person’s eligibility for leave to enter or remain in the United Kingdom under Part 1 of the Immigration Act 1971.”
New clause 14—Post Study Work Visa: evaluation—
“(1) Within six months of this Act coming into force, UKRI must commission an independent evaluation of the matters under subsection (1B) and shall lay the report before the House of Commons.
(1B) The evaluation under subsection (1A) must assess—
(a) the effect of the absence of post study work visas for persons graduating from higher education institutions in the United Kingdom on—
(i) the economy, efficiency and effectiveness of the higher education sector, and
(ii) the UK economy, and
(b) how post study work visa arrangements might operate in the UK, including an estimate of their effect on—
(i) the economy, efficiency and effectiveness of the higher education sector, and
(ii) the UK economy.”
This new clause would require UKRI to commission research on the effects of the absence of arrangements for post study work visas and assess how such arrangements could operate in the UK and their effect on the higher education sector and the UK economy.
New clause 15—Standing Commission on the integration of higher education and lifelong learning—
“(1) The Secretary of State shall establish a Standing Commission on the integration of Higher Education and Lifelong Learning.
(2) The terms of reference of the Commission shall include the following purposes—
(a) to report on progress being made in respect of the opportunities available to individuals, employers and communities to integrate higher education with lifelong learning in England;
(b) to consider the potential to update and review the range of higher education qualifications available for mature students at all registered higher education providers;
(c) to evaluate current funding systems for registered higher education providers with respect to the opportunities available to individuals, employers and communities to integrate higher education with life-long learning, in England;
(d) to examine and report on the introduction of personal learning accounts to be used for higher education—
(i) funded on the contributory principle from employers, individuals and structures of devolved local and national government; and
(ii) on the arrangements that will operate to facilitate input from corporate or trade union bodies, which can be used to support lifelong learning and adult education;
(e) to examine and report on the potential to develop education and skills accounts (ESAs), including the possibility of a single lifetime higher education entitlement; and
(f) to examine and report on the establishment of a national credit rating, accumulation and transfer system as a mechanism to improve flexible learning in further and higher education, including for mature students, and on the feasibility of a digital credit system, which could also facilitate where appropriate the integration of work-based learning and higher education.
(3) The Commission will make the following reports on the matters set out at subsection (2) to be laid before Parliament—
(a) within 12 months of its establishment; and
(b) thereafter annually.
(4) When the report in respect of ESAs required at subsection (2)(e) has been made, the Secretary of State may authorise the OfS to work with higher education providers, employers and financial institutions to develop a framework for ESAs.”
New clause 16—Migration Statistics: students—
“When the Secretary of State publishes statistics on the immigration of people to the United Kingdom, the relevant publication must provide—
(a) the figures net and gross of those people who are students studying in the UK, or
(b) a note indicating how many students included in the total immigration figures are students studying in the UK.”
Government amendment 1.
Amendment 51, in clause 5, page 4, line 9, at end insert—
“(1A) Subject to subsection (1C), initial registration conditions of all providers under paragraph (1)(a) must include a requirement that every provider—
(a) provides all eligible students with the opportunity to opt in to be added to the electoral register through the process of enrolling with that provider, and
(b) enter into a data sharing agreement with the local electoral registration officer to add those students to the electoral register.
(1B) For the purposes of subsection (1A)—
(a) a “data sharing agreement” is an agreement between the higher education provider and their local authority whereby the provider shares—
(i) the name,
(ii) address,
(iii) nationality,
(iv) date of birth, and
(v) national insurance data of all eligible students enrolling and/or enrolled with the provider who opt in within the meaning of subsection (2A)(a);
(b) “eligible” means those persons who are—
(i) entitled to vote in accordance with section 1 of the Representation of the People Act 1983, and
(ii) a resident in the same local authority as the higher education provider.
(1C) Subsection (1A) does not apply to the Open University and other distance learning institutions.”
This amendment would ensure that the OfS includes as a registration condition for higher education providers the integration of electoral registration into the student enrolment process. Distance-learning providers are exempt.
Amendment 37, page 4, line 17, after “providers” insert “, staff and students”.
This amendment would ensure consultation with bodies representing higher education staff and students.
Amendment 52, in clause 8, page 5, line 35, at end insert—
“(ba) a condition that requires the governing body of the provider to provide the OfS with information on the number of international students enrolled on a higher education course at that institution and the fees charged to those students,”
Amendment 38, page 5, line 39, at end insert—
“and
(d) an access and participation plan condition, as defined in section 12.”
This amendment would make access and participation plans mandatory for all higher education providers.
Government amendment 2.
Amendment 39, in clause 9, page 6, line 13, at end insert—
“(iv) age band,
(ii) people with disabilities, and
(iii) care leavers.”
This amendment would include the number of people with disabilities and care leavers, as well as the age of applicants, in the published number of applications.
Government amendments 3 and 4.
Amendment 46, in clause 25, page 15, line 25, at beginning insert “Subject to subsection (7),”.
See the explanatory statement for amendment 47.
Amendment 49, page 15, line 32, at end insert—
“(1A) The scheme established under subsection (1) shall have two ratings—
(a) meets expectations, and
(b) fails to meet expectations.
(1B) Each year, after the scheme established under subsection (1) comes into force the OfS must lay a report before Parliament on the number of international students—
(a) applying to, and
(b) enrolled
at the Higher Education Providers that have applied for a rating within the meaning of subsection (1).”
This amendment provides for a pass/fail only Teaching Excellence Framework (TEF) rating, and requires the OfS to report on the number of international students applying to and attending Higher Education providers each year from the coming into force of the TEF.
Amendment 47, page 16, line 23, at end insert—
“(7) No arrangements for a scheme shall be made under subsection (1) unless a draft of the scheme has been laid before and approved by a resolution of both Houses of Parliament.”
This amendment and amendment 46 would ensure TEF measures were subject to scrutiny by, and approval of, both Houses of Parliament.
Amendment 50, page 16, line 23, at end insert—
“(7) In making arrangements under sub-section (1), the OfS must make an assessment of—
(a) the evidence that any proposed metric for assessing teaching quality is correlated to teaching quality, and
(b) the potential unintended consequences that could arise from implementing the scheme including proposals on how such risks can be mitigated.
(8) Prior to making an assessment under subsection (7) the OfS must consult—
(a) bodies representing the interests of academic staff employed at English higher education providers,
(b) bodies representing the interests of students enrolled on higher education courses, and
(c) such other persons as the OfS considers appropriate.
(9) The assessments made under subsection (7) must be published.”
This amendment would require an assessment of the evidence of the reliability of the TEF metrics to be made and for the assessment to be published.
Government amendments 5 to 11.
Amendment 40, in clause 40, page 23, line 22, at end insert—
“(c) the OfS is assured that the provider is able to maintain the required standards of a UK degree for the duration of the authorisation; and
(d) the OfS is assured that the provider operates in students’ and the public interests.”
This amendment requires the OfS to be assured about the maintenance of standards and about students’ and the public interest before issuing authorisation to grant degrees.
Amendment 41, page 23, line 47, at end insert—
“(9A) In making any orders under this section, and sections 41, 42 and 43, the OfS must have due regard to the need to maintain confidence in the higher education sector, and in the awards which they collectively grant, among students, employers, and the wider public.”
This amendment would ensure that the granting and removal of degree awarding powers would be linked to a need to maintain confidence in the sector, and with a view to preserving its excellent reputation.
Amendment 58, in clause 51, page 31, line 41, at end insert—
“(A2) The power described in subsection (A1) may be exercised so as to include the word “university” in the name of the institution only if the institution can demonstrate that—
(a) it offers access to a range of cultural activities, including, but not restricted to—
(i) the opportunity to undertake sport and recreation, and
(ii) the opportunity to access a range of student societies and organisations,
(b) it provides students support and wellbeing services including specialist learning support,
(c) it provides opportunities for volunteering,
(d) it provides the opportunity to join a students’ union, and
(e) it plays a positive civic role.”
Government amendments 12, 13, 18 and 19.
Amendment 36, in schedule 1, page 69, line 37, at end insert—
“(h) being an employee of a higher education provider, particularly in the capacity of teaching or researching.”
This amendment would ensure the Secretary of State had regard for the experience of higher education employees, teaching or research staff.
Amendment 48, page 69, line 37, at end insert—
“(h) representing or promoting the interests of employees in higher education establishments.”
This amendment requires that at least one of the ordinary members of the OfS has experience of representing or promoting the interests of employees in higher education.
Government amendments 21 to 34.
Joseph Johnson
New clause 1 relates to the Office for Students, which is central to the Bill and has quality, student choice, equality of opportunity and value for money at its core. Through the creation of the independent OFS, the Bill will join up the currently fragmented regulation of the sector—essential to ensure that students are protected, and that students and the taxpayer receive good value for money from the system. The Bill will boost social mobility and promote opportunity for all. It will drive up innovation, diversity, quality and capacity in our world-class higher education sector, while protecting academic freedom and institutional autonomy. The Bill will also create UK Research and Innovation, a new body with strategic vision for research and innovation in the UK.
I am pleased that the Bill received such thorough scrutiny in Committee. I have reflected on the points made by Opposition Members and I am pleased to present some important amendments today. We made it clear in our White Paper that the OFS will have responsibility for oversight of the financial health of the sector, and will monitor the sustainability of individual institutions. It is absolutely essential that all providers who are eligible to receive some form of public funding have sustainable finances to ensure value for students and taxpayers.
We have listened to stakeholder evidence and to the Committee debates. Stakeholders including Universities UK consider the Higher Education Funding Council for England’s holistic oversight of the health of the sector to be an essential part of the regulator’s role. I understand the importance of this oversight in maintaining confidence in the sector and preserving its world-class reputation. The stakeholders share the desire to make our policy intention in the White Paper explicit in legislation. This role will include financial oversight of all the institutions’ activities, spanning teaching and research.
John Howell (Henley) (Con)
I understand the need for monitoring the financial sustainability of organisations, but the new clause does not say what actions will result if some of them are found to be financially unsustainable. Would my hon. Friend comment on that?
Joseph Johnson
The duty of the Office for Students will be to ensure that it is monitoring effectively the overall financial health of the sector in such a way that it is able to inform the Secretary of State, so that the Government can take appropriate actions. It will not be the role of the Office for Students to bail out struggling institutions—if there are any such institutions. These are private and autonomous bodies, and it is important that the discipline of the marketplace acts on them. It will be the role of the OFS to assist them in transitioning towards viable business plans so that they can continue to provide high-quality education to their students in the medium and long term.
New clause 1 introduces a statutory duty for the OFS to monitor and report on the financial sustainability of all registered HE providers in England which are in receipt of or eligible for OFS funding or tuition fee loans.
Mr Jim Cunningham (Coventry South) (Lab)
Will the regulator have the power to ensure that there are good industrial relations within our universities? There is certainly a problem with industrial relations at Coventry University, particularly as regards subcontractors.
Joseph Johnson
Higher education institutions are private and autonomous bodies that are self-organising. It is of course important that they provide a framework of governance that enables students to learn well in their institutions, and I am sure that that will include a healthy dialogue with their staff and employees. It is not for the Government to mandate particular forms of relations, given that these institutions are private and autonomous.
In performing its role, the OFS will have a clear picture of the number of international students and the income they bring—just as HEFCE currently does. I therefore do not agree that there is a need for an additional duty for the OFS to report on international students, as amendment 52 and new clause 9, tabled by the hon. Member for Southport (John Pugh), would require.
Similarly, I do not believe that the Bill is an appropriate vehicle for a requirement for the commissioning of research on post-work study, as proposed by the hon. Members for Glasgow North West (Carol Monaghan) and for Kirkcaldy and Cowdenbeath (Roger Mullin). The Bill focuses on the creation of the necessary structures that will oversee higher education and research funding for many years to come, and a short-term piece of research on an element of migration policy is not consistent with the scope and functions of UK Research and Innovation.
Wes Streeting (Ilford North) (Lab)
The Minister clearly does not believe that the Bill is the right vehicle for the issues under consideration, but does he understand why Members would pick this vehicle? His Department understands the importance of international students to UK higher education, and the Treasury understands their role, so why do the Home Office and the Prime Minister not understand it? Does the Minister not realise that, like him, we will be banging our heads against a brick wall at the Home Office?
Joseph Johnson
The Home Secretary has said that in the coming weeks we will consult on a non-European economic area migration route that will benefit international students who want to come and study at our world-class institutions, and I would encourage the hon. Gentleman to wait until we see the details of that consultation before jumping to any conclusions.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
The Minister referred to “an element”. The post-study work visa is not just the subject of “an element” of concern to universities in Scotland; it is of major concern, especially given that what the Home Office has proposed is a tiny and completely unrepresentative pilot. This is a matter of great importance to the university sector.
Joseph Johnson
Indeed. The Government fully agree with the hon. Gentleman that international students bring a lot to our higher education system. They bring income, valued diversity, and many other benefits to our universities. We welcome them, and we have a warm and welcoming regime to accommodate them.
Let me now deal with Government amendments 1, 12 and 13. Academic freedom and institutional autonomy are keystones of our higher education system, and the Bill introduces additional protections in that area. In his evidence to the Bill Committee, Professor Sir Leszek Borysiewicz, vice-chancellor of the University of Cambridge, said that he particularly liked the implicit and explicit recognition of autonomy in the Bill. However, I wanted to make absolutely clear how important it is for the Government to protect institutional autonomy, which is why I proposed a further group of amendments to strengthen the protections even more.
I recognise the concerns expressed in Committee and in stakeholder evidence that allowing the Secretary of State to give guidance relating to particular courses might be perceived as leaving the door open to guidance calling specifically for the opening or closing of particular courses. One of the real strengths of our higher education system is diversity and the ability of institutions to determine their own missions, either as multidisciplinary institutions or as institutions specialising in particular areas such as the performing arts or theology. To avoid any confusion, I proposed the amendments to add an additional layer of reassurance regarding the protections given to institutional autonomy. They make it clear that the Secretary of State cannot give guidance to, or impose terms and conditions or directions on, the OFS which would require it to make providers offer, or stop offering, particular courses.
Our reforms place students at the heart of higher education regulation. I agree with Labour Members that it is important to build the student perspective into the OFS. Government amendment 21 clarifies beyond doubt that at least one member of the OFS board must have experience of representing or promoting the interests of individual students or students generally.
Labour Members tabled amendments 36 and 48, which relate to higher education staff representation. We share the view that the OFS board should benefit from the experience of HE staff. However, the Bill already requires the Secretary of State to have regard to appointing board members with experience of the broad range of different types of English providers in the sector. We are therefore confident that a number of OFS board members will be, or will have been, employed by HE providers, and we do not believe that we need to make an additional requirement in legislation.
Students make significant investments in their higher education choices, and it is right for them to be aware of what would happen if their course, campus or institution were to close. That is what Government amendment 4 will achieve. We expect all providers to make contingency plans to guard against the risk that courses cannot be delivered as agreed. The requirement for providers to produce student protection plans would be a condition of regulation. I listened to points made in Committee, and have reflected on the need to strengthen the power of the OFS to ensure that there is transparency in student protection measures, and that is exactly what the amendment does. It enables the OFS to require providers not only to develop student protection plans but to publish them, and we would expect providers to bring them to students’ attention.
The Government believe in opportunity for all and through the Bill we are delivering on that. We believe that transparency is one of the best tools we have when it comes to widening participation. Universities have made progress but the transparency duty will shine a spotlight on those institutions that need to go further. That is why I am pleased to propose amendments 2 and 3, which change the language in the Bill to make it clearer that the OFS can ask HE providers to publish and share with the OFS the number of applications, offers, acceptances and completion rates for students, each broken down by ethnicity, gender and socioeconomic background.
The Bill will also give the OFS the power to operate the teaching excellence framework. Thirty years of the research excellence framework and its predecessors have made the UK’s research the envy of the world but, without an equivalent focus on excellence in teaching, the incentives on universities have become distorted.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
The Minister mentioned the TEF and the REF. Does he agree that the REF took several years to bed down and to become a measure of research, and that a lot of institutions feel that the TEF is being rushed through, particularly the link between teaching excellence and fees? I have been emailed by the University of West London, which has asked me strongly to oppose that. The TEF will be done on an institution-by-institution basis, not, like the REF, by department. Courses can vary widely in quality. Will he think again in relation to those points?
Joseph Johnson
The TEF is not being rushed; it is being piloted for the first two years. Awards will not be differentiated until 2019-20, with effect from the 2019-20 academic year. That is a significant period for the reforms to bed in. The university sector has welcomed the link to fees. Universities UK has recognised that there is a need for such a link and that we need to fund on the basis of quality as well as quantity. There is no attempt by the sector to separate the link.
Mark Field (Cities of London and Westminster) (Con)
I applaud the Minister’s view that we should focus on quality in the sector, rather than just volume, which is one of the problems that has beset the higher education sector in the past 20 or so years. Is there any international parallel for the OFS? Does such a body exist in Canada, Australia or other big global higher education sectors? Are we taking a lead, or following elements of what has happened elsewhere?
Joseph Johnson
I thank my right hon. Friend for his helpful intervention. We have studied regulatory systems around the world in drawing up our proposals for the OFS. Our system is in line with several in the Anglophone countries that have moved towards a market-based system in which the student is the primary funder of his or her higher education experience. It is therefore incumbent on us to put in place a system of regulation that recognises that we are moving away from the classic funder model of regulation that was put in place by the Further and Higher Education Act 1992, which created the Higher Education Funding Council for England.
New clause 12 and amendment 47 seem to misunderstand the aim of the TEF. Changing the ratings, as proposed by amendment 49, would fundamentally undermine the purpose of the TEF by preventing students from being able to determine which providers are offering the best teaching and achieving the best outcomes. Amendments 46 and 47 would stifle the healthy development of the TEF, and amendment 50 ignores the reasoned and consultative approach that we have taken and will continue to take in developing the metrics.
Let me set out the reasons why amendments tabled by Opposition Members on our plans for degree-awarding powers are unnecessary—namely, new clauses 4 and 7, and amendments 40 and 41. Our reforms will ensure that students can choose from a wider range of high-quality institutions. If the higher education provider can demonstrate their ability to deliver high-quality provision, we want to make it easier for it to start awarding its own degrees, rather than needing to have degrees for its courses awarded by a competing incumbent. We intend to keep the processes on scrutiny of applications for degree-awarding powers, which have worked well so far, broadly as they are. That includes retaining an element of independent peer review for degree-awarding powers applications. Setting this out in legislation, as new clause 4 suggests, would tie this to a static process which would be inflexible. We intend to consult on detailed circumstances where degree-awarding powers and university title might be revoked, including changes of ownership, so there is no need for new clause 7. As for amendments 40 and 41, I can reassure Members that we will, as now, ensure that the very high standards providers must meet to make such awards will be retained. We are streamlining processes, not lowering standards, and these amendments are therefore unnecessary.
The hon. Member for City of Durham (Dr Blackman-Woods) has proposed amendment 58 on the criteria an institution should demonstrate in order to be granted university title. None of these are current criteria. Like now, we intend to set out the detailed criteria and processes for gaining university title in guidance, not in legislation.
This group also includes some technical amendments to ensure that the legislation delivers the policy intent set out in our White Paper. I know Opposition Members will be keen to talk about the amendments they have tabled, and I look forward to responding to any further points raised.
Paul Blomfield (Sheffield Central) (Lab)
I rise to speak on new clause 7 and amendments 49 to 51, which are in my name. New clause 7 and amendments 50 and 51 cover ground we discussed at length in Committee so I will refer briefly to those points then talk a little longer on amendment 49.
New clause 7 provides for automatic review of degree-awarding powers where ownership of a university changes. This is rooted in experience of the sort of system the Minister is seeking to create in the United States, where a number of institutions with a reasonably well-established reputation changed ownership and fundamentally changed the product and service delivered to students. We need to learn from the mistakes made in the States by ensuring that, should we find ourselves in this new terrain with institutions in this country with degree-awarding powers changing ownership, that should automatically trigger a review of their status. I would welcome some reassurance from the Minister on how he intends to deal with that issue, if not through this new clause. Otherwise we could find ourselves in the same situation as the States, and not only have the reputation of the sector damaged, but students let down and still carrying a fee-debt. So this is a crucial issue that we need some clarification on.
Amendment 51 covers terrain I have discussed with the Minister on a number of occasions. It simply seeks to require universities to introduce the integrated student enrolment system with voter registration, which is recommended by Universities UK, supported by the Cabinet Office and was originally and very successfully piloted by—I have to get this reference in—the University of Sheffield.
The Minister and I share a common objective of trying to improve the levels of voter registration among students. This has been a demonstrably effective way of doing that where we rolled it out not only as a pilot in Sheffield, with the support of the Cabinet Office, but in other universities—Cardiff, de Montfort and many others, which have gone on to introduce it. This seems like a good opportunity, as we are looking at the registration requirements of universities, to roll it out across the country to achieve objectives we both share.
I have discussed this with the Minister and also his colleague from the Cabinet Office, the hon. Member for Kingswood (Chris Skidmore). There was due to be a roundtable at which we were going to discuss it further tomorrow, but that has been cancelled and kicked into the long grass of sometime in the new year, I was told last week. Given the shared objectives in this area, I would like to hear from the Minister why we cannot simply use this opportunity to get this matter sorted out.
Amendment 50 reflects concern over the reliability of the metrics used to measure teaching excellence. I emphasise, as I did many times in Committee, that we all welcome the Government’s focus on teaching excellence, and we can all work effectively together on the principle of the teaching excellence framework. However, the metrics on employment outcomes, on retention and on the national student satisfaction survey have been identified by the Government themselves as a proxy for teaching excellence.
The amendment simply seeks to add to the Bill a requirement that the metrics used by the Government to determine teaching quality should have a demonstrable link to teaching excellence. This was the unanimous recommendation of the then Business, Innovation and Skills Committee, of which I was a member. We all agree that employment outcomes do not necessarily demonstrate teaching excellence. There are also enormous regional variations in employment outcomes and salary levels. The Minister will know that someone who comes from the right family and goes to the right school and university could have an awful teaching experience but still get a decent job. The converse is also true. People who do not come from the right family and who do not go to what many see as the right university could have an excellent teaching experience but not command such high salary levels. So employment outcomes are a crude and almost perverse proxy measure of teaching excellence. I would therefore welcome the Minister’s observations on why this simple amendment to introduce a demonstrable link between the metrics and teaching excellence would not strengthen the Bill and will not be accepted by the Government.
Mr Mark Hendrick (Preston) (Lab/Co-op)
Should the demonstrable link involve a recognition of the experience and qualifications of lecturers? What does my hon. Friend have in mind when it comes to proving that teaching quality exists?
Paul Blomfield
Measuring teaching quality is difficult, but if we are going to do it, and if we are going to link fee increases to it, we should do it well rather than badly. For example, the Higher Education Funding Council for England is piloting some work on value added to determine how it can be demonstrated that good teaching has contributed to students’ learning outcomes during a particular period. That is the kind of research we should be looking at before we rush into establishing a teaching excellence framework that might end up measuring everything but teaching excellence.
Roger Mullin
Does the hon. Gentleman therefore agree with Professor Jack Dowie’s view that the teaching excellence framework measures what it measures but does not measure the quality of teaching excellence?
Paul Blomfield
The hon. Gentleman has expressed my concern exactly. This is the reason behind my amendment. There should be agreement across the House that the teaching excellence framework should measure the quality of teaching. That does not seem controversial to me, and I am therefore disappointed that the Government were unable to accept the unanimous recommendation of the BIS Committee. I want to press the Minister further today to find out his reasoning for this.
Amendment 49 raises new concerns that became clear only as the Bill progressed through Committee. It is apparently the Government’s intention—although I recognise that it might not be the Minister’s wish—to link the visa regime for international students to quality measures. There are Members present on both sides of the House who share my concern, so let me put it in context. The Minister will agree that international students are hugely beneficial to this country and to our universities. They enrich the learning environment of our campuses. In an even smaller world, in which we need to understand each other better than ever, it is a huge advantage for British students to learn in our classrooms and laboratories alongside students from around the world. International students add hugely to our universities’ research capacity, also strengthening local businesses, as I know from my experience in Sheffield.
We should add to that the huge benefits of the lasting relationships that we build with those who study here. According to the Higher Education Policy Institute, 55 world leaders from 51 countries studied here. That leads to the sort of soft power that is the envy of other countries—political influence, commercial contracts, and so on.
Dr Huq
I am loth to interrupt my hon. Friend because he is in full flow and making a powerful point, but does he agree that the Bill was conceived before Brexit and that the world has changed since then? I am holding a Westminster Hall debate on this subject on Wednesday and have received emails from academics and students from all over the country saying that this entire thing should be scrapped because the context is so different and everything has changed for higher education since the decision on 23 June.
Paul Blomfield
I look forward to joining my hon. Friend in Westminster Hall on Wednesday, because she makes a valid point—one that a number of us made in Committee. This pre-Brexit vision should have been parked and rethought as a result of the decision on 23 June because the challenge facing our universities is fundamentally different and of enormous proportions. We need to reconsider the proposals.
Mr Hendrick
On that point, many mainland European universities now offer courses in English. Our leaving the European Union will significantly disadvantage British universities in attracting foreign students, because degrees in some European countries are now offered in English, not necessarily in French, German or the native language.
Paul Blomfield
My hon. Friend highlights a new dimension to the challenge facing our universities as a result of Brexit. My wider point about international students existed before 23 June, but we now face a situation in which the 185,000 international students, of some 500,000, from EU countries may no longer choose to come here. However—this is crucial in relation to my hon. Friend’s intervention—30% of the non-EU students who were polled before 23 June said that the UK would be a less attractive destination if we chose to leave the European Union. Our competitors in Europe, adding to the competition that we already get from Australia, Canada and the United States, are seizing the opportunity to teach English-language courses, which will become very attractive.
Mr Jim Cunningham
Coventry has two universities. A big concern following Brexit is that international students, in particular from countries such as India, are now looking at north America, given the difficulty they will have in coming to this country when they are treated as immigrants. They should be removed from immigration figures, because the benefits amount to just under £10 billion coming into this country. I hope the Government are taking that seriously.
Mr Deputy Speaker (Mr Lindsay Hoyle)
Order. The hon. Gentleman is certainly testing my patience. It is one thing to come in and then ask a question, but it is another thing to stretch it into a speech. The hon. Member for Sheffield Central is being generous with interventions, but we do not want to get into a Brexit debate.
Paul Blomfield
Thank you, Mr Deputy Speaker. I appreciate the intervention of my hon. Friend, because he is a strong champion of the two universities in Coventry and he makes, on every occasion, this strong point about the importance of international students. He is right. Many universities around the country will be in crisis if there is a significant drop in the number of international students. It will mean not only that their incomes will drop, but that many of their postgraduate taught courses, which are viable only because of the levels of income that are brought through our international students, will cease to be viable, cease to exist and cease to be available for UK students. It is a hugely important issue.
Mark Field
The hon. Gentleman will know that I entirely accept his last point about a number of these postgraduate courses. In an ideal world, as he knows, I would not have students in the immigration figures, but we are where we are and they will remain in those figures. Surely one of the lessons of Brexit is that this issue is of massive concern to many of our fellow countrymen. Therefore, it is incumbent on universities to ensure that we get high-quality students from abroad, and that is really the focus of what the Government are trying to achieve here. We need to ensure that those students who come here are the crème de la crème and will add the sort of experience to which he referred earlier in his contribution. By having a group of high-quality students, we will command the confidence of the public that we are getting only the brightest and the best, rather than a volume operation in our universities.
Paul Blomfield
I thank the right hon. Gentleman for his intervention. He and I have worked closely on a number of these issues, and we do agree that international students should be taken out of net migration targets. On the point that he raises, I disagree with him. I know that we would come together in saying that our universities are a great British export industry, but I am genuinely puzzled why the Government do not see them as an industry in other terms. We do not put in measures to seek to discourage the automobile industry from selling cars; we try to encourage it to sell more cars. Similarly, on the point that he raises, we do not say, “Well, we just want you to sell Rolls-Royce cars. We don’t want you to sell Minis.” It is nonsense economically for our country and for the local economies that we all represent. That is the nub of the problem.
The right hon. Gentleman talks about the way in which these issues are viewed by the public. International students are not viewed as a threat or as an issue on which the Government should be taking action. A recent poll showed that 75% of people wanted to see the numbers of international students either stay the same or go up, but the Government strategy, as he knows, is moving us in the other direction.
The Home Secretary, albeit against her will, made a speech to the Conservative party conference in which she put international students at the centre of her plans to cut migration—I am sure that the right hon. Gentleman will agree that she was wrong to do that. She introduced a new tool, to which he has alluded, with which she planned to do it. It is by linking visa approval to the quality of courses. We need to reflect on that, because it is a very significant development, as we now have a policy objective of reducing international students—the Government did it by default in the previous Parliament.
Joseph Johnson
The hon. Gentleman should remind himself that international student applications have gone up 14%.
Paul Blomfield
Well, I would be interested to hear the Minister intervene again and say over what period, because he will know that, over last Parliament, the numbers flatlined and we lost market share.
Paul Blomfield
We will probably disagree on those figures. I think I have heard the Minister say previously—if it was not him then it was his predecessors and previous Immigration Ministers—that there was no damage from the measures that were taken in the last Parliament, because numbers flatlined. From my point of view, flatlining in a growing market is a defeat. We would not say that the world is buying 20% or 30% more cars, but the great news is that our exports are flatlining. It does not make sense. However, I am sure the Minister will agree that international students are an extremely good thing for our economy. It is therefore deeply worrying that the Home Secretary put international students at the centre of her plans to cut migration.
Wes Streeting
I strongly agree with everything that my hon. Friend is saying. Can he imagine a scenario where higher education institutions are recruiting UK students on to courses, but sending a message to people from overseas that the courses are not good enough for them? What conclusion will UK students draw? If the courses are not good enough for international students, surely they are not good enough for home students.
Paul Blomfield
My hon. Friend makes the point that I was about to make. If we were looking at a teaching excellence framework in parallel with our competitors around the world, and if we were together saying that we think the world market in international education needs such a tool and that in that world market it would be helpful to have institutions ranked as gold, silver and bronze, that would be one thing; but for us unilaterally to declare to the world that we are differentiating our institutions and saying that a good two thirds of them, perhaps, are less good than others, that can do nothing other than damage our ability to recruit international students and to earn the money that we do from them, as well as the jobs and support for our economy that that brings.
Hywel Williams (Arfon) (PC)
Does the hon. Gentleman agree that there may be not just reputational damage at home, but consequences abroad? My own university, Bangor, takes a large number of Chinese students, but its good name in Bangor enables it to have a site in China and a very successful operation there. There would be reputational damage of that sort as well.
Paul Blomfield
The hon. Gentleman makes an important point. It is not just the recruitment of students but the brand strength of UK universities, which is extraordinarily high, that is put at risk by the measure.
Last week in Westminster Hall I sought assurances from the Immigration Minister as to whether it is the Home Office’s intention to use the teaching excellence framework measurement of quality as a basis for its visa regime in an attempt to cut down the number of international students. I got no reassurance. I gave the Minister a couple of opportunities to say that the Government did not intend to use the TEF for that purpose and he failed to do so.
The amendment says that until we are clear about the Government’s intention in relation to differentiation by gold, silver and bronze grading, and following a proper economic impact assessment of what that might mean for our universities, we should not seek to differentiate the teaching excellence framework in this way and we should simply have meeting expectations or not meeting expectations ratings. I accept that it is not the Minister’s intention to damage our universities by the introduction of this differentiation, but it could be the unintended consequence of the actions of the Home Office, so we need reassurance on the issue.
As we have heard, these are challenging times for our country. Charting our post-Brexit place in the world will be a big job. We need to win friends, not alienate them. The prime ministerial trade mission to India recently demonstrated that many of those friends will put access to our universities at the heart of any discussion of our future relationship, even on the issue of trade. We will not be able to separate those. We cannot afford to put the sector and the export earnings that we get from international students at risk in this way. I therefore ask the Minister to think again.
Carol Monaghan (Glasgow North West) (SNP)
I rise to speak to new clause 14 on post-study work visa evaluation, and I reserve the right to push it to a vote, if required.
The SNP continues to press for the reintroduction of the post-study work visa. The new clause would ensure we had an evaluation of how the absence of this key visa has affected the UK economy and how a new visa may be implemented.
As we have heard, the post-study work visa is an important lever for attracting the best international student talent. There is consensus in Scotland among business, education and every political party represented at Holyrood that we need a return of the post-study route to allow these talented students to remain and to contribute to the Scottish economy.
The outcome of the EU referendum makes it even more important that the UK Government honours the recommendation in the Smith report to explore a potential post-study work route to ensure that Scotland continues to attract and retain talent from around the world. The longer we wait for the Government to move on this, the more damage is being done socially and economically.
The current post-study work offer is not adequate for Scotland. We have offered to discuss the reasons behind that with UK Ministers and Home Office officials, but, disappointingly, UK Ministers appear to rule out a return of the post-study work visa— without meeting Scottish Ministers or the cross-party steering group that has been set up at Holyrood.
The current immigration policy poses a significant risk to Scottish universities. Data published in January show that Scotland saw a 2% increase in international entrants in the academic year 2014-15, compared with the previous year. On the face of it, that may appear positive, but by comparison, from 2013-14 to 2014-15 the number of international students entering higher education in the United States increased by 10%. Rather than being able to take advantage of this growth sector and use it to create economic growth locally, our numbers are expected to remain stagnant, which is simply not good enough.
The Home Office released details of a low-risk tier 4 pilot in July this year, which was—maybe “welcomed” is not the correct word—viewed with some interest. However, we are troubled that it was introduced without any consultation with the Scottish Government, Scottish institutions or, indeed, institutions from across the UK. Universities Scotland said:
“we’re disappointed that the opportunity of the pilot has been framed so narrowly to only four universities none of which are in Scotland. We’d argue that a broader pilot, involving a wider group of institutions, would have provided more meaningful lessons from which to build.”
Mark Field
The hon. Lady has made a strong case for why she feels post-study work visas should be reintroduced. Does she accept that one of the main reasons for a clampdown by the UK Government is that a number of people come in on these visas and then simply go to ground, and they cannot be removed from this country even though they are here only on a student visa? In making the case that these visas should be reintroduced, will she tell us a little about the further obligations she thinks should be on the universities granting them? They surely cannot simply get students in, take the money and then wash their hands of any responsibility.
Carol Monaghan
Certain rogue institutions—particularly private FE colleges—have in the past not complied with visa regulations, but there is little evidence that the HE institutions in the scope of this Bill have any record of non-compliance, so I do not accept the points the right hon. Gentleman makes.
Roger Mullin
In last week’s Westminster Hall debate, I specifically challenged the Home Office Minister to name any institutions in Scotland that could be said to fall into the behavioural category the right hon. Member for Cities of London and Westminster (Mark Field) suggested, and he said he could not name one.
Carol Monaghan
The 19 higher education institutes in Scotland have a strong record in attracting international students and a strong record of compliance, so I agree 100% with my hon. Friend.
Mr Jim Cunningham
The Scottish Affairs Committee has been looking at some of the issues that the hon. Lady has mentioned, and we found evidence that the Government need to look at the situation in Scotland differently from that in the rest of the country. Scotland has a declining population, so we have to find an anchor to keep the talent in Scotland to develop the Scottish economy.
Carol Monaghan
I thank the hon. Gentleman for his intervention. It is well documented that in Scotland our issue is emigration, not immigration, so this is a key lever for allowing us to trigger economic growth in Scotland and something that would make a massive difference to our local economy.
Carol Monaghan
No—I have given way enough for the moment.
Last month, Professor Timothy O’Shea, the principal of Edinburgh University, addressed the Scottish Affairs Committee and warned that future restrictions on free movement would have a damaging impact on the sector. He said:
“Yesterday the Prime Minister said helpfully that perhaps a special relationship might be necessary for workers in the City, for the car industry. But God help me if the City and the car industry deserve a special deal, then the universities...they are more dependent on the mobility of highly skilled labour than any other sector.”
As we move towards Brexit, we have the potential for a much wider pool of international students who may wish to come to study in our universities, and we need to think very seriously about the visa solution for that. For example, there is the situation of Ireland. Under the Ireland Act 1949, Ireland is stated not to be a foreign country. What special arrangements will be in place for Irish students who want to come and study in our institutions?
I want briefly to discuss the amendments tabled by the hon. Members for Blackpool South (Gordon Marsden), for Ashton-under-Lyne (Angela Rayner) and for Sheffield Central (Paul Blomfield) that deal with their concerns about the proposed metrics in the teaching excellence framework. There was much discussion in Committee about this. As the hon. Member for Sheffield Central said, there is concern that the metrics being used give no indication of the quality of teaching. In Committee we mentioned the Scottish enhancement-led approach, which is a far more thorough and possibly better method of determining quality. Apparently, however, the metrics proposed by the Government are being pushed ahead with. We are happy to support the amendments tabled by Labour Members.
Amendment 51 would require automatic voter registration in universities. That looks like an extremely innovative idea—and for once, I have to admit, it has not come from Scotland. Perhaps we can start to consider it in Scotland.
We are short of time and there are later amendments that my hon. Friends are keen to press, so I conclude by saying that we will support the amendments I have mentioned and that I hope we can have some movement on new clause 14.
Dr Roberta Blackman-Woods (City of Durham) (Lab)
I want to speak to new clause 16, which draws on some of the points that my hon. Friend the Member for Sheffield Central (Paul Blomfield) made in relation to amendment 49. In essence, the new clause seeks to remove students from the net migration figures. It would be interesting to hear from the Minister whether the Government have that on their agenda.
I also want to comment on how damaging it would be for the university sector if the number of international students that can be recruited in any one institution is related to the traffic light system in the TEF.
As we know, international students are important not only to higher education but to our economy. The contribution of international students to UK GDP is almost certainly in excess of £10 billion, and they support about 170,000 full-time equivalent jobs. Many of the students go on to do postgraduate work, and they are involved with and drive forward world-leading research and innovation in this country. They are therefore very much to be commended and supported.
While international students are in this country, they not only get to know the UK but develop an affinity with it. They develop links with staff, and they contribute massively to soft diplomacy, as we have already heard. It cannot be overemphasised that they improve Britain’s standing in the world, so it is very important that the Government do not put the recruitment of international students at risk. Once they are in this country, such students also enrich our society and contribute to its diversity. I know that from my Durham constituency, where international students very much add to the whole cultural experience of the local population.
Mr Hendrick
I concur with my hon. Friend on the contribution of international students and the very good experience they get. My local university, the University of Central Lancashire in Preston, has many thousands of foreign students, who very much enrich the city and bring it to life. Once they leave the UK and go back to their countries of origin, these students become some of our best ambassadors and, whether they go into industry or government, their experience in the UK always makes them very positive about the future.
Dr Blackman-Woods
My hon. Friend makes an excellent point. The Government should take on board his point about that ambassadorial role.
We can only be bewildered at the mixed messages the Government are giving international students. One message is coming from the Department for Education, another from the Department for Business, Energy and Industrial Strategy and another from the Home Office. I do not yet know whether the Department for International Trade has a view on international students, but, if it does not, it really ought to. Its view should be one of promoting an important industry, as hon. Members have said clearly this afternoon.
Instead of supporting an increase in the number of international students, the Home Office seems to be giving the message that we need to reduce the numbers, and that is having an effect. The figures I have for the number of international students and the trend are very different from those read out by the Minister. It appears that the number of new entrants has fallen by 2.8%. Indeed, one study has put the reduction as high as 5%. The Minister must know that the British Council has stated that the UK is beginning to lose market share to our competitors. Again, the Government should be very concerned about that.
New clause 16 also seeks to find out whether the Minister or the Home Office has any notion of introducing a system in which the number of international students that any institution can recruit is linked to what happens to it in the TEF and, in particular, to where it is in the traffic light system. To give the Minister an example, if the institution is given a gold rating, there may be no cap whatsoever on the number of international students that it can recruit, but if it gets a bronze rating—oh, dear—a cap might be put on the number of students it can recruit. To use the automobile analogy that my hon. Friend the Member for Sheffield Central used earlier, that is like telling Nissan, “You can sell as many cars as you like,” while telling Vauxhall, “We’re going to put one of your hands behind your back and limit the number of cars you can sell.” That is clearly nonsense. We need definite reassurances from the Minister that the Bill will not be used to link the TEF to the number of international students that can be recruited.
Mr Hendrick
Given that the Government are supposed to believe in markets, it is bizarre that, when Times Education Higher produces university rankings across the world, they should choose to intervene and say which students should go where when students clearly have a choice in a market-based system.
Dr Blackman-Woods
My hon. Friend makes an important point. International students are central to the business model of every higher education institution in the country. In addition to the possible reputational damage that could be done to our universities, we do not want a message to go out that international students are not welcome. The Minister, the Home Office and other Departments could deal with that by saying that students are temporary visitors, which is what our international competitors do in Australia, New Zealand and Canada. That means removing students from the net migration statistics, which would be a very simple thing for the Government to do, and I hope that the Minister will tell us that he is going to do that. We should be ambitious for our universities. We should enable them to grow, particularly in international markets such as Canada, Australia and other countries, and not limit their international potential.
As the Minister will know, he has a mandate to do that. A recent ComRes study—my hon. Friend the Member for Sheffield Central mentioned this—showed that 75% of people who expressed a view would like to see the same number or more international students in the UK. The poll also revealed that the overwhelming majority of the British public think that international students should be able to stay and work in the UK for a period of time. A very clear case has been made and I hope that the Minister will respond positively.
The Minister has referred to amendment 58. There is huge concern in the higher education sector about enabling bodies to call themselves universities even when they do not provide the range of student services and support that most of us would expect from a university. The reason that there is no particular guidance is that we have not needed it. Most of this country’s universities provide a system of student support and access to sport and recreational opportunities. They also provide wellbeing services and volunteering opportunities, enable students to join a students’ union, and play an important civic role.
The reason that I tabled amendment 58 is that the Bill will allow a series of higher education institutions to call themselves universities even though we as yet have no idea whether they will have to offer a range of basic services to students. Will they be able to join a students’ union and sports clubs? Will they play an important role in the local community, as is the case with existing universities? Will they have an important role in the local economy? We have heard nothing yet from the Minister except that there will be some guidance, so I am minded to press amendment 58 to a vote. I would like to hear from the Minister what will be in the guidance about how we describe universities, what the Minister’s understanding of a university is and when the guidance will be made available. In particular, will it be available before the Bill is considered in the other place?
Jo Churchill (Bury St Edmunds) (Con)
A university is an establishment where higher-level study, education and research are done. It is not somewhere where one would necessarily avail oneself of volunteering experiences, for example, or of the other things that the hon. Lady has listed. I contend that as we move into longer lifespans within which we may take degrees at different times, we may be looking merely to access a degree to enhance our careers rather than making it part of our lifestyle.
Dr Blackman-Woods
The hon. Lady was on the Committee, and I am sure that she will recall that the things in the amendment are in addition to what we might call the core business of a university, which is to enable people to study for a higher-level qualification. The amendment is designed to ensure that we do not get a whole series of institutions that can use the title of university but that offer only a single course of study and a single qualification, because we think that that will dumb down the sector not only for UK students but, in particular, for international students. The hon. Lady will know that the sector is a highly competitive one internationally, and we want to ensure that our universities compete with the best in the world.
We have huge concerns about allowing an institution to say that it is a university when it does not have to provide any access to sports, recreation, cultural activities, volunteering opportunities, work-based learning experience or any of the other things that our universities do right across the piece. I hope that the hon. Lady is as proud as I am that our universities do so.
Jo Churchill
I concur, up to a point. I am hugely proud of universities, and I am hugely proud of what they deliver into our economies. But I would also argue that we have other great institutions; BT in Suffolk, for example, hopes to have a specific degree around research, learning and so on, and such things should be enabled for a future workforce that is fit for purpose. They should not just be wiped away because an institution does not offer the chance to play five-a-side football.
Dr Blackman-Woods
I, too, think that BT has a number of strengths as a company, but it is yet to be determined whether it is very good at running a university. We will only know that in due course. If BT runs a university, I want to ensure that it is a university as we would commonly understand it, not simply a company that offers a degree course.
Paul Blomfield
The hon. Member for Bury St Edmunds (Jo Churchill) picked out the issue of five-a-side football, but does my hon. Friend acknowledge that there is a wider issue? This is the first major Bill on higher education for a generation, and it provides an opportunity to extend university title quite widely. Is not the nub of the problem the fact that no attempt is made to define what a university is?
Dr Blackman-Woods
I concur exactly with my hon. Friend. In Committee, the Minister said that he was setting
“a high bar that only high-quality providers will be able to meet.”––[Official Report, Higher Education and Research Public Bill Committee, 11 October 2016; c. 410.]
Unfortunately, at this point in time we have absolutely no idea what is meant by that high bar. I am hoping we will hear from the Minister exactly what he means by a university and what will be in the guidance, and that the quality and breadth of offer of our universities will be protected and will not be got rid of by this Government.
Wes Streeting
I am grateful to colleagues for raising so many points that came up in Committee which particularly exercised me with regard to part 1 of the Bill. Because of the shortness of time, I will restrict my remarks to two issues concerning students and staff in higher education.
I welcome Government amendment 21 on student representation on the board of the Office for Students and the fact that the Minister has listened to the huge number of representations he has received from members of the Bill Committee, from student unions and from higher education sector leaders, who really value the contribution students make and want to see students on the board. It would have been perverse to have a regulator whose purpose was to protect the interests of students and that had the word “students” on its door and headed paper but did not have students around the table on its board. I am glad the Minister has moved on that particular point.
As the Bill progresses to the other place, I hope the Minister might consider moving further on the issue of student representation. In Committee we raised the issue of having student representation on the board of the designated quality provider and in drawing up the quality code, and also ensuring that students have representation in what, as my hon. Friend the Member for City of Durham (Dr Blackman-Woods) pointed out, could be a wide range of private providers. Whether an institution is a traditional university, a modern university or one of the new private providers, it is absolutely crucial that students’ rights are protected and their voice is represented at the top of the institution.
I also ask the Minister to address how he sees the issue of student representation playing out on the board of the Office for Students. The wording in Government amendment 21 is not quite what I proposed in Committee —that was slightly more prescriptive, specifying that the representative should be either a student, a sabbatical officer of a students union or an officer of the National Union of Students. I am slightly cautious about the amendment the Secretary of State has tabled, because we could define someone with “experience of representing … students” quite loosely. For example, a number of Members of this House, myself included, have experience of representing students, but I am sure that we would not expect to find ourselves, years later, on the board of the OFS. Perhaps the Minister will sketch out what that representation might look like.
Jo Churchill
Will the hon. Gentleman define what he considers a typical student to be, so that I can gauge his idea of someone who could represent, for example, me—I went to college as a mature student—or a lifelong learner, or whatever? We must not be too tight with the definition. The wording in the amendment gives us scope to have a looser definition and might be more appropriate.
Wes Streeting
I certainly do not think that we will be able to find a typical student to sit on the board of the OFS because, as others have said from their perspectives, no such thing exists. That leads me on to where I wanted to direct the Minister, in as far as I can. We should value the skills and expertise that representatives of students develop through their roles in student unions, precisely because there is no such thing as a typical student or a typical student experience. We should value and champion the role that the officers of student unions play in developing their skills and experience as representatives to make sure that student unions champion the broad diversity of students at their institutions; whether students are full time or part time, or are doing part of a course on a credit-based approach, whether they are living at home and commuting to university or have moved away from home, there are a wide range of student experiences. The challenge for anyone who seeks to be a representative is to make sure that they genuinely draw on that broad range of experiences, just as we have to as constituency MPs.
I hope that, when the Minister appoints one of these representatives, he appoints one who is a students union sabbatical officer, for example, because we are lucky in this country to have a means by which students can develop a good base of skills and expertise. Many of the country’s leading chief executives of voluntary sector organisations have been students union sabbatical officers, as have many Members of Parliament and people in all sorts of professions, because the experience and skill sets that it gives them are genuinely valuable beyond the scope of representing students during their time at university. I hope that that is the sort of person the Minister has in mind and that we will not drag people back from beyond to dust themselves off from retirement.
Mr Hendrick
Although I agree with everything that my hon. Friend is saying, I think that the hon. Member for Bury St Edmunds (Jo Churchill) was perhaps referring to distance learning students, mature students and people who follow a less usual course to obtain qualifications. Certainly, when I have met the presidents of my students union over the years, they have been sympathetic to the needs of such students. Will my hon. Friend perhaps address the hon. Lady’s point?
Wes Streeting
I absolutely agree with that point, which brings me back to the skills and expertise that student union sabbatical officers develop in that role. The Open University students association or Birkbeck students union are institutions almost entirely dedicated to part-time students, people from non-traditional routes and people who often work alongside their studies who have returned to learning later on in life. It is important that that broad range of experience and perspective is represented on the board of the Office for Students. I hope that the Minister will appoint someone to that position who can represent the broad interests of students.
I want now to deal with staff. I should probably declare that I am a member of the trade union Unison, which represents a number of staff in higher education, and I should draw Members’ attention to my entry in the Register of Members’ Financial Interests on that point, too. Amendment 48 picks up the theme that I have been discussing—student representation on the board of the Office for Students—and makes the case for having staff on that board.
Staff are absolutely crucial to the success of our higher education sector, whether they are academic staff directly engaged in teaching and learning or the wide range of support staff, whose contribution to the student experience is often unheralded. Thinking back to my student experience, the first member of staff I spoke to at my university was not an academic; it was Gina Vivian-Neal in the admissions office. When I was at university, I spoke to staff such as Bill Simmonett, who was involved in catering and conferencing, because of my role as the students union entertainments officer. When I had a particularly small room in my second year and a larger one became available, Sue Jeffries made a substantial difference to my learning environment. Margaret Hay, who, I believe, recently retired from her role in the tutorial office, was absolutely central to the experience and welfare and care of students.
Bearing in mind what other hon. Members have said about the role that international staff play in our institutions, it is important that people on the board of the Office for Students have experience of representing the interests of staff. Many of our trade union colleagues, particularly in the University and College Union, have made a powerful case about the impact that the casualisation of contracts, for example, is having on our ability to recruit and retain good staff and their ability to deliver a good student experience.
Other trade unions, such as Unison and Unite, represent those staff who, while perhaps not directly engaged in teaching, often provide essential support functions that can make the difference between an excellent or a poor student experience. I hope that their voice and interests are represented on the board of the Office for Students. Given where we have taken our country in the debate about our ability to attract and retain excellent staff from around the world, we could leave ourselves in a vulnerable position in a sector such as ours that is so world-leading in its performance and reach, and we need to champion and protect the interests of staff.
I hope that the Minister will take those points on board. I thank him for the movement that he has shown since the Bill Committee. I had almost given up hope by the end of the Committee that we would see much progress, but, to give him credit, he has moved. I hope that he will listen to the points that we make today, and perhaps they can be addressed in the other place.
John Pugh (Southport) (LD)
I apologise to members of the Public Bill Committee: I did not make the cut, so they have the advantage over me, but I assure them that I read the entire transcript, cover to cover, in one fell swoop—and riveting reading it was.
New clauses 9 and 12 deal with overseas students. The Minister tried to suggest that they would widen the scope of the Bill, but the new clauses, like Labour’s amendments, are in order, and we get very few opportunities to talk about this issue. The key point is that overseas students are very much part of the viability of the university sector, and if the Bill is about anything, it is about the viability of the university sector. We are in a brave new world, post-Brexit, and universities clearly wanted a very different outcome. I have been to many events where the Minister has tried, valiantly, to reassure a traumatised sector. It is easy to see why the sector needs reassuring: the loss of good students; the loss of opportunities for UK students; and the severe outcomes for the research sector. I recently polled a range of vice-chancellors and found that 86% of them thought that the impact of Brexit on their research programmes would be severe. The impacts are financial, cultural and academic—in the sense that it could lead to the collapse of undergraduate courses—and the impact on the research conducted by universities will be profound.
Some things are certainly true—the Minister repeats them from time to time—and nothing changes in the short term. As other Ministers have said to me, we had international students before we were ever in the EU and when Erasmus was thought to be a Dutch humanist, rather than an EU programme, but EU membership makes it a whole lot easier for British universities, and there has been a big increase in their number for as long as we have been in the EU. There is a case for following the numbers, therefore, and that is all new clause 9 endeavours to do. Numbers affect viability, and if the OFS does not do it on an independent basis, who will?
New clause 12 deals with something equally worrying, and something alluded to by the hon. Member for Sheffield Central (Paul Blomfield): nonsensically, we include student numbers in net immigration stats, but the Government—certainly in the form of the Minister—welcome international students. I have heard him on many occasions, at many events, say how welcoming we are supposed to be to international students. As has been established through polling, the public also welcome international students, even when worried, at the same time, about immigration in general. Including them in the net immigration statistics, therefore, is clearly a nonsense.
What really worries the Government is when higher education is used as a stepping stone to employment and residence. This clearly bothers the Home Office. The hon. Member for Sheffield Central has already talked about the Home Secretary’s comments, which I found worrying, but also worrying is the suggestion from the Prime Minister’s senior adviser—regarded as her brain—that the Government’s post-qualification leave to remain should depend on whether someone qualified at a Russell Group university. This is obviously silly because the Russell Group is essentially a self-selecting group and slightly snobbish.
Another way of doing it, as suggested in last week’s Westminster Hall debate, is to depend on the teaching excellence framework of a student’s institution. In my view, that would be sillier, because the teaching excellence framework is in its infancy and not suited to the task, because not all universities buy into it anyway and because an individual’s ability and utility cannot be predicated simply on the institution he or she attends. Few of us would like to be judged by the quality of the teaching we have received. Actually, surviving poor teaching is a considerable and entirely marketable skill; it is slightly easier to profit from good teaching. There are good and valuable courses in institutions that may well pan out with a poor teaching excellence framework in general. This will clearly affect the ability of some institutions to attract overseas students, and valuable courses will collapse as a result—certainly many valuable courses in the capital. Further, if overseas applicants concentrate their applications on universities with good TEFs, it could make it more difficult for UK students to access them. Universities might, in despair, simply shun the TEF if it is used for those purposes.
The list goes on. Welding together Home Office policy and education policy seldom works, but we should clear this up. The Minister has an opportunity to do so from the Dispatch Box later, but so far the Government view and the Government take on this issue has been less than clear. That is certainly the case when it comes to the Home Office. Last week in Westminster Hall, the Home Office had an opportunity to say, “Categorically, this is not going to happen,” but we do not know categorically whether it will or not.
I may not get support for my amendment, and I would be happy to support other amendments that travel in the same direction. This issue, however, will not go away because it is important to the sector.
Gordon Marsden (Blackpool South) (Lab)
I rise to speak to our amendments, but also to comment on others, including the Minister’s new clause 1. Let me start with that and the Minister’s other remarks to make a general observation.
Of course we welcome the move to include a student representative on the body, as has been described. I have to say, however, that it is relatively thin gruel by comparison with the range of positive amendments that would involve employees and students in respect of some of the key issues that the OFS will have to face, some of which we debated in Committee. If the Government want to calm suspicions about the OFS, they need to do more to ensure that as a body, it has sufficient powers directly defined in the Bill. I have always said that we have to work on the assumption that we will have the worst and the naughtiest Secretaries of State, not necessarily the best ones and not necessarily the best Minister with responsibility for universities. That means that we need to build things directly on the face of the Bill. We have not had the ability to do that, and it is not helpful that the ability to tease out these issues should be confined to one day’s discussion of 113 clauses and 12 schedules. Other Members who might have been able to attend today know perfectly well that many of the issues that need to be discussed will have to be dealt with in the other place.
Let me begin by speaking briefly to our amendments, particularly those relating to staff and student involvement. Amendment 37 deals with consultation regarding ongoing registration conditions. It might sound very techy, and I know that there is some consultation with bodies or informal groups representing HE staff and students at the moment. Some of the new providers that the Minister wants to see coming into the marketplace may be relatively small, and may have relatively informal groupings, so it is important that the position of their staff and students is taken into account.
Let me move on to amendments 36 and 48. My hon. Friend the Member for Ilford North (Wes Streeting) has already mentioned the latter. The Government must get into the right mind-set with HE and realise that it is not all simply about vice-chancellors, however excellent they are. It is not simply about business managers either, however excellent they are. It is about the support staff, who live in the local communities where the universities are situated; and it is also about excellent teaching, social mobility and student choice. Sometimes cleaning staff can be the first point of contact for live-in students who face isolation and need someone to talk to. The Government need a cultural step-change in the way they address these issues, and should not put some of these groups in as an afterthought. We believe that these modest amendments would take us down that route.
In Committee, we talked a great deal about the whole issue of social mobility. The Minister waxed lyrical on the subject—genuinely, I believe—but those who want to walk the walk must do something about putting the beef on to the talk. That is why we tabled amendment 38, which
“would make access and participation plans mandatory for all higher education providers.”
The Government have plenty of angles on the Bill, but two that are raised continually are competition and consumers’ rights. In fact, competition must go hand in hand with consumers’ rights. I am perfectly happy for the pool of new providers to be expanded—I spent 20 years working for an organisation, the Open University, which was once a new provider—but I am anxious to ensure that, if there is to be a competitive market, providers bring to the table a proper sense of the responsibilities that they will have to meet. That is why it is so important to ensure that an access and participation plan is at the heart of what the new providers do. There may be circumstances in which the numbers that that produces are relatively modest, but if the Government want the process to go ahead, providers must accept those responsibilities.
It is in the same spirit of inclusion that we tabled amendment 39, which
“would include the number of people with disabilities and care leavers, as well as the age of applicants, in the published number of applications.”
A number of Members have emphasised the importance of the issue of mature and older students, and indeed part-time students, about which I shall say more when I talk about new clause 15. Amendment 39 demonstrates that emphasis. If we want to have realistic expectations of where those groups are going and know what the Government need to do—and this has already been raised by several Members in the context of international students—we must have that evidence, and the amendment stresses the need to broaden the parameters.
New clause 4, which would establish a “Committee on Degree Awarding Powers and University Title”, is actually modelled on provisions in the Further and Higher Education Act 1992, which we want to passport into this Bill. The Government, rather curiously, do not want such a committee, although one might have thought that they would welcome a backstop. After all, we know that Ministers are bedding down, inevitably slowly, in a new Department with further and higher education responsibilities. Again, the Government cannot be surprised if people think that they want as little outside scrutiny of the new providers as possible.
New clause 4—which, I might point out to the Minister, is supported by all the university groups that have spoken to us—was tabled because, as the Bill stands, the OFS could revoke degree-awarding powers or university title without consulting a committee. The current arrangements for conferring degree-awarding powers require HEFCE to seek the advice of the Quality Assurance Agency for Higher Education—the Minister made great play of that—but it is vital for the OFS to seek advice from a designated quality body prior to any conferring of degree-awarding powers and/or university title.
Amendments 40 and 41 are designed to underline points that were raised by my hon. Friend the Member for City of Durham (Dr Blackman-Woods) in a hugely important intervention about her own amendment 58. We need to shine a light on and distinguish between broad-based new providers and those that could go for opportunist, fast-buck courses, or those that are inefficiently structured or financed to do the things that my hon. Friend talked about. As she and others have said, there is huge concern in the HE sector about single-course universities. What has not been mentioned much—we talked about it in Committee—is the huge amount of public money that will go into those new providers, providing they jump through the hoops that the Government are putting in front of them. We contend that those hoops are inadequate. Because of that, we want to press the matter further. Amendment 40 requires the OFS to be assured about the maintenance of standards, students and the public interest before issuing authorisation to grant a degree. That is important. I give notice that we will press amendment 40 to a vote. Whatever the outcome, I assure the Minister that the issue is unlikely to go away and that he and his team will face further questions on it after the matter goes to the other place.
Joseph Johnson
This has been a good debate and I am glad to have the chance to respond to some of the points made. Many points were made this afternoon, and I will not be able to address all of them, but I will do my best.
The hon. Member for Sheffield Central (Paul Blomfield) spoke passionately about amendment 51. We debated it in Committee, as he mentioned. He met my colleague, the Minister for the constitution, my hon. Friend the Member for Kingswood (Chris Skidmore), after the Bill Committee, and we also met my hon. Friend the Member for Bath (Ben Howlett), who is not in the Chamber at present, to discuss this issue. That is because we share the hon. Gentleman’s aim of increasing the number of younger people registered to vote. We demonstrated our commitment to that cause by supporting, and contributing financially to, the pilot project at the University of Sheffield, in the city he represents. That is why when we met him we undertook to encourage take-up of the initiative by other institutions by writing to describe the outcome of the pilot to vice-chancellors. We also agreed that he should attend a formal roundtable meeting on student registration, and the Minister for the constitution promised to consider other ways registration could be increased. I regret that owing to a scheduling issue with one of the external stakeholders—not the Minister—we were unable to hold the meeting as planned, and we are actively looking to rearrange it, to fulfil the commitment we made to the hon. Gentleman at that meeting following the Bill Committee.
Amendment 37 seeks to widen the base of those the Office for Students should consult before it determines or changes the initial and ongoing registration conditions, to include staff and students as well as those representing the interests of English higher education providers. The Office for Students will take the views of students into account in all of its activities. It will consult on the initial and ongoing registration conditions as part of its wider consultation on the regulatory framework. Clause 68 makes it clear that bodies representing the interests of students, and other such persons it considers appropriate, as well as bodies representing the interests of English higher education providers, should be involved in that consultation. It is my clear expectation that the Office for Students will strongly encourage providers to engage with and consult their key stakeholders, including staff and students, as a matter of good practice. The Office for Students itself will always listen to representations from students and staff if it thinks that that would add value. The amendment is therefore unnecessary.
Hon. Members made a number of points on new clause 9 and amendment 52 relating to international students. I recognise that the number of international students our higher education system attracts and the income they provide are key issues for the sector, so I understand the motivation behind this amendment. However, I do not believe that the Bill is the appropriate vehicle for commissioning annual reports on the number of international students in UK higher education institutions and their economic impact. As I have set out, Government new clause 1 requires the Office for Students to monitor and report on the financial health of the English higher education sector in the round. To do that, the Office for Students will have a very clear picture of the number of international students and the income they bring, as the recent Higher Education Funding Council for England report did. In addition, clause 8(1)(b) requires all registered providers to give the Office for Students the information it needs to perform its functions. That will allow the Office for Students to gather information on international student numbers and income in the context of its duty to monitor financial health. In effect, new clause 1 and clause 8(1)(b) already achieve the policy intent of the amendments.
A wide range of information is also already in the public domain. The Higher Education Statistics Agency, for instance, already collects and publishes data on international students. Further to that, the Department for Education will shortly be publishing statistics on the value of education exports. As I mentioned to the hon. Member for Sheffield Central, the Home Office also publishes data, and its data show there has been a 14% increase in the number of international students coming to study in the UK since 2010.
Regarding new clause 14, I thank hon. Members for bringing this issue back to the House after it was raised in Committee, but I still do not believe that this Bill is the appropriate vehicle for commissioning research into post-study work. The Bill is focused on creating the structures needed to oversee higher education and research funding for many years to come. The scope of what this amendment proposes—a short-term piece of research on an element of migration policy—is not consistent with the scope and functions of UK Research and Innovation.
Gordon Marsden
I entirely accept the Minister’s bona fides and commitments on this issue, but is it true that Home Office officials accompanying the Prime Minister on her visit to India were openly talking to people about using the bronze element of the TEF as a way of reducing the migration numbers for students?
Joseph Johnson
The visit to India, which I was honoured to be part of, was a big success in that it gave us numerous opportunities to reiterate our strong message that we welcome genuine students. There is no limit on the number of genuine students who can come and study at our world-class institutions, and there is no better place than the UK to receive a higher education. We want to see more such students coming to study here.
Paul Blomfield
I assure the Minister that we are very calm about this issue, but he could calm us further by explaining what the Home Secretary meant when she talked about the use of quality in relation to the visa system, and in particular when she said that she would be
“looking at tougher rules for students on lower quality courses.”
What does that mean?
Joseph Johnson
High-quality institutions are compliant institutions. We want compliance to be a strong feature of our system. It is important that the sector should do all it can to be compliant with Home Office regulations. The ability to bring students in on tier 4 visas is a privilege, not a right, and it comes with an obligation to ensure that students who come to this country to study follow the terms of their visas. The sector should welcome that because it wants a high-quality system of international study. The Government will be bringing forward a consultation paper in the coming weeks that will enable everyone across the sector, including the hon. Gentleman, to contribute their views on how best this can be achieved.
Paul Blomfield
The Minister talks about compliance. Why did the Home Secretary not talk about compliance? She talked about
“tougher rules for students on lower quality courses”,
but there was nothing about compliance. What did she mean by that?
Joseph Johnson
If the hon. Gentleman reads the Home Secretary’s speech carefully, he will see that she did mention compliance. She mentioned compliance and quality. High-quality institutions are compliant institutions; they are one and the same.
Carol Monaghan
High-quality institutions could offer poor-quality courses, just as institutions with a bronze rating could offer extremely high-quality courses. How is the distinction going to be made?
Joseph Johnson
I urge the hon. Lady to wait for the consultation document. She will be able to assess the Government’s proposals in due course when the Home Office is ready to publish them.
Amendments 46 and 47 would require greater parliamentary scrutiny of the TEF, but I do not believe that the content of the amendments is either necessary or proportionate. As I have said, the development of the TEF has been, and will continue to be, an iterative process—as the research excellence framework was before it. Requiring Parliament to agree each and every change to the framework would stifle its healthy development. The REF scheme is not subject to that level of oversight by Parliament, and nor should it be.
Hon. Members have talked about the “gold”, “silver” and “bronze” descriptors as though they were new inventions from this Government. They are in fact familiar to the sector through their use in other areas. Such terminology is already used, for example, in the Athena SWAN awards and by Investors in People in many universities. In every case, bronze is still recognised as a high-quality award, while gold is reserved for the highest quality.
Amendment 49 would not add any value to the TEF framework that we have developed. Changing the TEF ratings would fundamentally undermine the purpose of the TEF by preventing students from being able to determine which providers were offering the best teaching and achieving the best outcomes. It would simply allow for a pass/fail assessment. The teaching excellence framework assesses excellence over and above a baseline assessment of quality, and our proposed descriptors will allow students, parents, schools and employers to distinguish clearly between providers. We have consulted on the proposed metrics and considered the evidence, and we still feel that these metrics represent the best measurements for assessing teaching. They are widely used across the sector.
Turning to amendment 50, we have consulted extensively on the metrics, as I have said, and made significant improvements. Setting out the requirement to consult in legislation would be unnecessarily burdensome. We have taken, and will continue to take, a reasoned approach to the metrics. Given the co-regulatory approach I have described, we would expect the OFS to take a similar approach.
I shall now address the points made on degree-awarding powers and university title. Let me be clear that only those providers that can prove they can meet the high standards associated with the values and reputation of the English HE system can obtain degree awarding powers. If a higher education provider can demonstrate their ability to deliver high-quality provision, we want to make it easier for them to start awarding their own degrees, rather than needing to have the degrees for their courses awarded by a competing incumbent. Maddalaine Ansell, the chief executive of the University Alliance, has said:
“These plans strike a healthy balance between protecting the quality and global reputation of our country’s universities, whilst also encouraging innovation.”
Gordon Marsden
The Minister might wish to comment specifically on new clause 4, but will he tell us why the Government are so reluctant to allow a process that has served the HE sector well since 1992 to be read across into the new arrangements for the OFS? I refer to the degree-awarding powers committee proposed in the new clause.
Joseph Johnson
In relation to new clause 4, we intend to keep the processes relating to the scrutiny of applications for degree-awarding powers—which have worked well to date—broadly as they are. That includes retaining an element of independent peer review for degree-awarding powers applications. I said as much in Committee. The processes are not currently set out in legislation to avoid being tied to a static process, and we intend to keep it that way. We have published a technical note on market entry and quality assurance that sets out more detail on the operation of the quality threshold.
Turning to new clause 7, our policy is that degree-awarding powers cannot be transferred or sold for commercial purposes, and we do not see that changing. If the holder of degree-awarding powers were involved in a change of ownership, or if complex group ownerships change, the provider would be expected to inform the OFS and to demonstrate that it remained the same cohesive academic community that was awarded degree-awarding powers and that it continued to meet the criteria for university title. We intend to consult on the detailed circumstances for when degree-awarding powers and university title might be revoked, including instances of changes of ownership, so there is no need for this new clause.
Turning to amendments 40 and 41, the OFS is already required under clause 2 to have regard to the need to promote quality when carrying out its functions. The OFS will therefore have regard to the need to promote quality when authorising providers to grant degrees. I reassure Members that we will, as now, ensure that the high standards that providers must meet in order to be able to make such awards are retained. One of the key criteria for obtaining degree-awarding powers is the ability to set and maintain academic standards, and we expect that to continue. As now, we want all criteria to set a high bar, and we plan to set them out in departmental guidance to which the OFS must have regard. The amendments are therefore unnecessary.
Dr Blackman-Woods
Will the Minister give the House some idea of when that guidance might be available?
Joseph Johnson
We plan to put out guidance in the coming months. The hon. Lady will be the first to receive it when it is ready.
Turning to amendment 58, we are absolutely committed to protecting the quality and reputation of our universities. We are not changing the core concept of what a university is and are not planning any wide-ranging changes to the criteria for university title. As now, we want only those providers with full degree-awarding powers to be eligible. Students make the choice where to study based on many factors—not only the qualification they will receive, but the cultural and social opportunities—and one size does not fit all. As independent and autonomous organisations, higher education providers are best placed to decide what experiences they want to offer to students and the local community. Like now, we intend to set out the detailed criteria and processes for gaining university title in guidance, not in legislation. We plan to consult on the detail prior to publication.
Several interesting points have been made in the debate on this group of amendments. Let me conclude by thanking hon. Members for their responses to the amendments that we have brought forward to enshrine the OFS’s duty to monitor and report on financial sustainability, to ensure there is always an OFS board member to represent or promote the student interest, to promote institutional autonomy further, and to compel providers to publish student protection plans.
Gordon Marsden
I think the Minister is coming to his peroration, so I just wondered whether he will be able to make any comment on new clause 15 and lifelong learning.
Joseph Johnson
I touched on that at the start of my remarks. The Opposition proposed a commission for lifelong learning in new clause 15. The Government are obviously strongly committed to lifelong education, in which the Secretary of State and I have taken a close interest. Studying part-time and later in life brings enormous benefits for individuals, employers and the general economy. Alongside our higher education reforms, we are reforming further education, including implementing the skills plan that was published earlier this year and through the recent introduction of the Technical and Further Education Bill, which had its Second Reading last week.
As the hon. Member for Blackpool South is well aware, the Government committed in the last Budget to review the gaps and support for lifetime learning, including part-time flexible study. That review is ongoing. Higher education already offers flexible options for the thousands of mature students who want to study each year. In addition, much work is under way to expand access to lifelong learning through a variety of routes to suit learners. I am confident that those reforms, like others in the Bill, will continue to have a positive impact on learning—lifelong or otherwise.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Student support: restricted modification of repayment terms
“(1) Section 22 of the Teaching and Higher Education Act 1998 (power to give financial support to students) is amended in accordance with subsections (2) to (4).
(2) In subsection (2)(g) at the beginning insert ‘Subject to subsections (3)(A) and (3)(B),’.
(3) In subsection (2)(g) leave out from ‘section’ to the end of subsection (2)(g).
(4) After subsection (3) insert—
‘(3A) Other than in accordance with subsection (3B), no provision may be made under subsection (2)(g) relating to the repayment of a loan that has been made available under this section once the parties to that loan (including the borrower) have agreed the terms and conditions of repayment, including during—
(a) the period of enrolment on a course specified under subsection (1)(a) or (1)(b), and
(b) the period of repayment.
(3B) Any modification to any requirement or other provision relating to the repayment of a loan made available under this section and during the periods specified in subsection (3A) shall only be made if approved by an independent panel.
(3C) The independent panel shall approve modifications under subsection (3B) if such modifications meet conditions to be determined by the panel.
(3D) The approval conditions under subsection (3C) must include that—
(a) the modification is subject to consultation with representatives of the borrowers,
(b) the majority of the representative group consider the modification to be favourable to the majority of students and graduates who have entered loans, and
(c) there is evidence that those on low incomes will be protected.
(3E) The independent panel shall consist of three people appointed by the Secretary of State, who (between them) must have experience of—
(a) consumer protection,
(b) loan modification and mediation,
(c) the higher education sector, and
(d) student finance.’”—(Wes Streeting.)
Brought up, and read the First time.
Mr Speaker
With this it will be convenient to discuss the following:
New clause 3—Student loans: regulation—
“(1) Any loan granted under section 22(1) of the Teaching and Higher Education Act 1998, (“student loans”) irrespective of the date on which the loan was granted, shall be regulated by the Financial Conduct Authority.
(2) Any person responsible for arranging, administering or managing, or offering or agreeing to manage, student loans shall be regulated by the Financial Conduct Authority.”
New clause 5—Revocation of the Education (Student Support) (Amendment) Regulations 2015—
“The Education (Student Support) (Amendment) Regulations 2015 (Statutory Instrument No. 1951/ 2015) are revoked.”
This new clause would revoke the Education (Student Support) (Amendment) Regulations 2015, which moved support for students from a system of maintenance grants to loans.
New clause 6—Higher Education loans: restrictions on modification of repayment conditions—
“(1) A loan made by the Secretary of State to eligible students in connection with their undertaking a higher education course or further education course under the Teaching and Higher Education Act 1998 shall—
(a) not be subject to changes in repayment conditions retroactively without agreement from both Houses of Parliament;
(b) not be subject to changes in repayment conditions in the event of the loan being sold to private concerns, unless these changes are made to all loans, in the manner prescribed above;
(c) be subject to beneficial changes, principally to the repayment threshold, in line with average earnings.
(2) In section 8 of the Sale of Student Loans Act 2008, for subsection (1) substitute—
‘(1) Loans made in accordance with regulations under section 22 of the Teaching and Higher Education Act 1998 (c. 30) are to be regulated by the Consumer Credit Act 1974 (c. 39).’”
This new clause would ensure no retroactive changes could be made to student loan repayment conditions without agreement from both Houses of Parliament.
New clause 8—Access to support for students recognised as needing protection—
“(1) Within six months from the day on which this Act comes into force, the Secretary of State must, by regulations made under the Higher Education Act 2004 and the Teaching and Higher Education Act 1998,make provision for financial support for higher education courses offered to students with certain immigration statuses.
(2) The regulations specified in sub-section (1) must include, but shall not be restricted to—
(a) provision for persons who have been brought to the UK under the Syrian Vulnerable Persons Relocation Scheme, or any equivalent scheme, and their family members to access student loans on the same basis as refugees recognised in-country, and
(b) provision for persons who have claimed asylum and been granted a form of leave to remain in the UK to be eligible for—
(i) home fees for a higher education course if they have been ordinarily resident in the United Kingdom and Islands since being granted leave, and
(ii) student loans for a higher education course, if—
(a) they have been ordinarily resident in the United Kingdom and Islands since being granted leave, and
(b) are ordinarily resident in the United Kingdom and Islands on the first day of the first academic term of that course.
(3) In this section—
‘home fees’ means fees for a higher education course charged to persons considered as ‘qualifying persons’ under regulations made under the Higher Education Act 2004;
‘student loans’ means loans made to students in connection with their undertaking of a higher education course under the Teaching and Higher Education Act 1998.”
This new clause would allow all refugees resettled to the UK, as well as people seeking asylum granted forms of leave other than refugee status, to access student finance and home fees.
New clause 10—Student support: requirement to assess repayment terms—
“(1) The Teaching and Higher Education Act 1998 is amended as follows.
(2) In Section 22 (new arrangements for giving financial support to students)—
(a) in subsection (3)(b), after “and” insert “subject to subsection (3A)”
(b) after subsection (3) insert—
‘(3A) Regulations under subsection (3)(b) must include a level of earnings below which a person shall not be required to make repayments of such a loan.’
(3) After Section 22 insert—
‘(22A) Duty to assess consumer prices in determining terms for loan repayments
(1) In relation to regulations made under section 22(3A) the Secretary of State must, for each tax year, review UK consumer price inflation for the period since the last review under this sub-section.
(2) If the review concludes that consumer prices for the previous tax year have increased, the Secretary of State shall, by order, amend the level of earnings specified in regulations made under sub-section 22(3A) by the same percentage increase as consumer price inflation determined under sub-section (1).
(3) If the Secretary of State is not required to make an order under this section, the Secretary of State shall lay before each House of Parliament a report explaining the reasons for arriving at that determination.
(4) For the purpose of this section—
‘consumer prices’ means the Consumer Price Index;
‘consumer price inflation’ refers to the annual assessment made by the Office for National Statistics in the UK consumer price inflation Statistical bulletin.’”
Government amendments 14 to 16 and 20.
Wes Streeting
I am grateful for the opportunity to move new clause 2 and to speak to the other new clauses concerning student finance.
Millions of people across the UK have been mis-sold loans and will end up paying thousands of pounds more than expected as a result. The perpetrator of the mis-selling scandal is not an unscrupulous high street bank or a payday lender; it is our own Government. The victims are current students and graduates who were sold student loans on the basis of false assumptions and broken promises.
For the vast majority of students in England and the rest of the United Kingdom, Government-backed loans are an essential source of financial support to cover the cost of their tuition fees and the substantial costs associated with their studies, such as the rising cost of university accommodation, food and subsistence, course materials, and making the most of their student experience. In England, students are able to take out a tuition fee loan of up to £9,000 a year and an additional maintenance loan to cover living costs of up to £11,000 a year. As a result, English students now graduate with the highest levels of debt in the western world. Following the Government’s decision to axe non-repayable student grants for the poorest students, those from lowest-income households, scandalously, graduate with the most debt. It is a terrible iniquity in the system and one that I am glad to see the Opposition Front-Bench team addressing this afternoon.
Many students will not have forgotten that the decision to scrap student grants was not taken in this House, but down the corridor and up the stairs through a statutory instrument in a Committee of which most people have never heard. That is not how the Government should take major decisions on student finance. Students and their families were sold loans on the basis of a series of simple promises from Ministers: loans will be repaid only once students have left university; they will be repaid only after graduates start earning over £21,000 a year; graduates will repay 9% of everything earned above £21,000 a year; and the £21,000 figure will be uprated each year in line with average earnings from April 2017.
Around this time last year, however, buried in the fine print of the previous Chancellor’s autumn statement was an announcement that the repayment threshold will remain frozen at £21,000. As a result, graduates will end up paying more each month and thousands of pounds more over the 30-year lifetime of their loans. Worst of all, the change will affect not only future students, who can consciously decide to sign up to those repayment conditions, but thousands of existing students and graduates who took out their loans in good faith on the promise that the repayment threshold would increase from 2017. Not only does that retrospective change fly in the face of the principles of good governance, but it is deeply regressive. It is estimated that around half of graduates will never pay off their loans before their debts are written off by the Government. Such graduates, by definition on lower and middle incomes, will end up paying back thousands more over the lifetime of their loan, whereas the richest graduates will be able to repay their debts more quickly and accrue less interest.
Financial experts and advisers are rightly furious. In an astonishing performance in a Bill Committee evidence session, Money Saving Expert’s Martin Lewis described the Government’s decision to break their commitment to students as “abominable and disgraceful”. The Government will argue that the small print of student finance regulations makes the change entirely permissible and reasonable, but as Martin Lewis told the Committee:
“Looking at students as consumers, if they had borrowed money from a commercial lender, the Financial Conduct Authority would have struck out in a second the idea that, five years after announcing that the repayment threshold would go up from £21,000 in April 2017 with average earnings, that would be frozen.”––[Official Report, Higher Education and Research Public Bill Committee, 6 September 2016; c. 38, Q55.]
It is important to bear it in mind that the Government’s promise to students and applicants was not just in the marketing material of Government and of universities, which understandably assumed that the commitments would be lasting, but written in black and white by the former higher education Minister, now Lord Willetts. Having worked with Lord Willetts over a number of years, I have no doubt that he made that undertaking in good faith. He could not have possibly known that a future Chancellor, or a future Government, would not only break that commitment, but apply the change retrospectively.
Banks would not get away with mis-selling on this scale, and neither should our Government. I have teamed up with Martin Lewis to put forward amendments to the Bill. The amendments, which I am delighted to say have cross-party support, will prevent Ministers from making retrospective changes to student loans that would penalise existing students and graduates.
New clause 2 would put in place some architecture through the appointment of three independent advisers, who would look carefully at any proposals that, retroactively, make changes to student loan repayment conditions. They would apply a number of tests: is it to the benefit of the majority of graduates; do the Government believe that to be the case as a result of consultation; have the Government made a case that the proposal would be progressive in effect; and would it help some of the most disadvantaged students or graduates? If those conditions are passed, the Government might be able to proceed, because, clearly, this House would not want to prevent the Government from making positive changes that would benefit graduates. What those tests would do is prevent Ministers from behaving as the previous Chancellor did, which was to make changes in the small print of the autumn statement and apply them retrospectively after commitments have been made in good faith.
New clause 3 would also bring student loans within the scope of the Financial Conduct Authority. Despite the existence of an independent student loans company, Ministers have still found ways to flout regulations for the benefit of the Treasury and to the detriment of students and graduates, which is really quite appalling.
Paul Blomfield
My hon. Friend is making an extremely powerful case. Does he not think that, had this happened in another context, the behaviour might have been described as fraudulent?
Wes Streeting
I entirely agree with my hon. Friend, which is why the student loans system should be brought within the scope of the Financial Conduct Authority. Had a high street bank or a payday lender behaved in such a way, there would be outrage everywhere, including in this House. The Financial Conduct Authority would mount an investigation. The Treasury Committee, of which I am a member, would ask questions. It seems that a Chancellor can just decide to save a few quid in the autumn statement and make retrospective changes that would penalise existing students and graduates.
This is an issue not just of fairness and equity for existing borrowers, but fundamentally of trust. What is to stop future Governments making changes further down the line about all manner of things, including interest rates, repayment periods, tapers and thresholds? On that basis, how can current or prospective students have confidence that promises being made today will be kept tomorrow? To be honest, this is a very personal issue for me. Some years ago, Martin Lewis, from Money Saving Expert, and I agreed to work with the coalition Government on an independent taskforce on student finance information. Martin was invited to take part because of his widespread reputation as one of the most trusted people in the country when it comes to financial advice and saving consumers money. It was felt, quite rightly by Lord Willetts— then the higher education Minister—that Martin would be an independent voice on those matters and someone whom people could trust. Martin then asked me to work with him as his deputy, with Lord Willetts’ agreement, on the basis that I had recently completed my term as president of the National Union of Students.
Although I opposed the decisions that had been taken by successive Governments around higher education funding and student finance, I believed that it was critical to take part. I thought it would be appalling if a single student was deterred from applying to university on the basis of misunderstanding the information. If students look at the information and the student finance system and decide to make a different choice, that is for them, but I thought that it would be a travesty if a single student was deterred on the basis of misunderstanding and misinformation.
We went round the country visiting schools, colleges and universities and we appeared in the media, promoting the Government system—not on its merit, but on the facts of the system. We served what I thought was an important public duty and purpose, but we were misled—inadvertently—which means that we therefore misled students and graduates up and down the country. We told them that the repayment threshold would go up in line with earnings from April 2017; that is what we were told by Ministers at the time. That is what students, teachers, parents, family members and advisers were also led to believe.
The Government need to reflect very carefully on what message it would send to each of those groups if future Governments can come along and retrospectively change the system to suit the Treasury. It is a terrible, terrible precedent that undermines trust not just in the student finance system, but in politics as a whole. We are not so far from a general election, or indeed from a referendum campaign, to know that trust in politics in this country is at rock bottom. People do not trust politics and they do not trust politicians. From my experience of this place in the past 18 months, I can say that, for all our disagreements, I have great pride in our political system and in the way in which it works. However, when it comes to decisions such as these, I completely understand why politicians are held in such low regard. On too many occasions, politicians have said one thing and done another. On higher education and student finance, politicians have said one thing and done another. Since the coalition Government put their reforms through, with cross-party agreement and with—to be fair to them —concessions to the Liberal Democrats in government, every single concession has been undone. Student grants have been scrapped. The emphasis on widening participation in a number of respects is now weaker. Now we find that many of the actual repayment conditions, which the right hon. Member for Sheffield, Hallam (Mr Clegg) would argue were some of the more progressive elements of the system, are also being undone. This is an issue about trust not just in the student finance system, but fundamentally in politics as a whole. Martin Lewis says:
“If you sign a contract, both sides should keep to it. If you advertise a loan, the lender should be held to the terms it was sold under.”
It is a total disgrace that, although the UK is well regarded around the world for its excellent laws and regulatory environment, there seems to be one exception, which is student loan contracts. That is why I hope that, this week before this change kicks in, the new Chancellor will take the opportunity to reverse the decision in his autumn statement. The Chancellor and the Prime Minister could go some way to rebuilding trust in politics. I also urge the Government to support new clauses 2, 3 and 6, which would ensure that no Government could be tempted to behave in this way again. It is scandalous and unjustifiable and it sets a very dangerous precedent. That is why I hope that we will see some progress on this today.
Joseph Johnson
When we reformed student finance in 2011, we put in place a system designed to make higher education accessible to all. It is working well: total funding for the sector has increased and it is forecast to reach £31 billion by 2017-18. It is vital to our future economic success that higher education remains sustainably funded.
Last year, the current Leader of the Opposition announced that he was keen to scrap tuition fees. Senior Labour party figures have criticised that, saying that it was not a credible promise to make, with Lord Mandelson, among others, noting that Labour had
“to be honest about the cost of providing higher education.”
Of course, it was not just Lord Mandelson. The former shadow Chancellor, Ed Balls, went further when he noted that his party’s failure to identify a sustainable funding mechanism was a “blot on Labour’s copybook”.
Paul Blomfield
The Minister is talking about the affordability and sustainability of systems. Does he acknowledge that when the proposals to change the student funding system were put to this House back in 2012, it was on the understanding from his predecessor, Lord Willetts, that the resource and budgeting charge—the uncollectable level of student debt—would be at around 28%? That prediction was rubbished by many experts in the sector and from the Opposition Benches, and gradually, over the lifetime of the Parliament, the percentage went up into the 30s and the 40s, to the point where it became unsustainable. The unsustainability of the system that the Government created was then dealt with by imposing that burden on students by varying the charges and the deal on student loans in the way that my hon. Friend the Member for Ilford North (Wes Streeting) described.
Joseph Johnson
The estimation of the RAB charge is still broadly in that ballpark, with the current estimate being between 20% and 25%, so it is not substantially different.
On new clause 2, the hon. Member for Ilford North (Wes Streeting) suggested that an independent panel should approve any changes to terms and conditions for student loans. However, the key terms and conditions governing repayment of the loan are set out in regulations made under section 22 of the Teaching and Higher Education Act 1998. The repayment regulations are subject to scrutiny under the negative procedure, which allows Parliament to call a debate on any amendments. It is right that Parliament, rather than an unelected panel, should continue to have the final say on the loan terms and conditions.
Wes Streeting
I anticipated that the Minister would point out how permissive the terms and conditions were, which is why I suggested that student loans should be regulated by the Financial Conduct Authority. The sad truth is that I agree with him. As new clause 6 suggests, Members of both Houses should have a role in shaping the terms and conditions, but Ministers, whether in the Treasury or the Department for Education, have shown that they cannot be trusted to keep to their word. That is the indictment and that is why the amendment was tabled.
Joseph Johnson
The hon. Gentleman mentioned the Financial Conduct Authority. I remind him that it was under the Labour Government that Parliament was invited to confirm, as it did, that student loans were exempt from regulation under the Consumer Credit Act 1974 when the then Labour Government passed the Sale of Student Loans Act 2008. The hon. Gentleman should look back at his own party’s record on the issue.
New clause 3 proposes that student loans should be regulated by the Financial Conduct Authority. I share the hon. Gentleman’s desire to ensure that students are protected, but student loans are not like the commercial loans of the sort regulated by the FCA. They are not run for profit and are available to all, irrespective of their financial history. Repayments depend on income and the interest rate charged on them is limited by legislation. The loans are written off after 30 years with no detriment to the borrower. By contrast, lenders regulated by the FCA are obliged to assess the credit-worthiness of all their borrowers, and the affordability and suitability of the loan product for each borrower. Were the FCA to regulate student loans, that could affect the ability of some students to obtain them.
Wes Streeting
It would be perfectly possible for the FCA to regulate within the scope of the student finance system. The Minister talks about the suitability of borrowers; I am talking about the suitability of lenders to keep their word. I am not asking for the FCA to regulate students. I am asking for the FCA to regulate Ministers, who cannot be trusted.
Joseph Johnson
The key terms and conditions are set out in legislation—it is the law that binds us—and are subject to the scrutiny and oversight of Parliament. FCA regulation is therefore unnecessary, as students are already protected. Our system allows the Government, through these subsidised loans, to make a conscious investment in the skills base of our country. I should have thought that Labour Members would welcome that.
New clause 5 would revoke the 2015 student support regulations. These regulations replaced maintenance grants with loans, which increased support for students on the lowest incomes by over 10%. Revoking these regulations would reduce the support available for students from some of the most disadvantaged backgrounds, while costing the taxpayer over £2.5 billion per year. Opposition scaremongering about this policy risks deterring students from attending university. The sustainable system that we have put in place has enabled us to remove the cap on student numbers and offer more support for living costs than ever before.
New clauses 6 and 10 would require the repayment threshold for all income-contingent student loans to increase in line with either earnings or prices. Loan repayments continue to be based on the ability to pay, and graduates earning less than £21,000 were not affected by the threshold freeze. Those who benefit from a university education are likely to go on to earn more than taxpayers who do not go to university, so it is only fair that graduates should contribute to the cost of their education. Uprating the repayment threshold for all income-contingent student loans, as new clause 6 proposes, would cost about £5 billion in the first year due to a reduction in the value of the loan book. Thereafter, it would increase the resource account and budgeting charge by about 7%.
Sir Peter Bottomley (Worthing West) (Con)
Is that £5 billion a capital estimate of the value of the loan book or is it the annual running cost?
Joseph Johnson
That represents a decrease in the capital value of the loan book.
The cost of uprating by the consumer prices index, as new clause 10 proposes, would be less, but still significant. These costs would need to be paid for by taxpayers, many of whom will be earning less than the graduates who would benefit from the threshold increase.
New clause 10 relates to access to support for students recognised as needing protection. This is an important issue which was raised by the hon. Member for Sheffield Central (Paul Blomfield) in Committee, and is already addressed, as we have discussed, within the student support regulations. I am pleased to say that those who come to this country and obtain international protection are already able to access student support. Our regulations have for some time included provision for those granted refugee status or humanitarian protection, and their family members.
Those persons entering the UK under the Syrian vulnerable persons relocation scheme, and granted humanitarian protection, will be eligible, like UK nationals, to obtain student support and home-fee status after only three years’ residence in the UK. Persons on the programme are not precluded from applying for refugee status if they consider that they meet the criteria. Those with refugee status are uniquely allowed to access student support immediately, a privilege not afforded to UK nationals or those granted other forms of leave. There is a distinction in international law between such status and that of those in need of humanitarian protection.
Recently the Supreme Court upheld the Government’s policy of requiring most persons, including UK citizens, to be ordinarily lawfully resident in the UK for at least three years immediately prior to starting their course in order to be eligible for student support. The amendment would allow people who may subsequently be required to leave the country to access taxpayer funding for their study.
The last group of amendments includes some technical Government amendments relating to alternative student finance. Unless hon. Members show an interest in them, I will move on to my conclusion.
This Government are committed to a sustainable and fair student funding system. We are seeing more people going to university than ever before, and record numbers of students from disadvantaged backgrounds. Our funding system has enabled us to lift the cap on student numbers and, with it, the cap on aspiration that it represented. I hope the Opposition can see that if their amendments were not pressed, the student funding regime would remain sustainable, working in the best interests of students and taxpayers.
Paul Blomfield
The Minister briefly addressed new clause 8, although in anticipating it, he understated and, to some degree, misrepresented the actual position. Let me therefore explain the new clause, for which I think there is support on both sides of the House—I think there was some discomfort on the Government Benches in Committee when it was voted down.
New clause 8 would allow all refugees resettled to the UK, as well as those young people who, having made an application for asylum, are granted a form of leave other than refugee status, to access student finance and home fees. It would be of particular benefit to Syrian refugees resettled to the UK under the Government’s own policy, so it is perhaps not surprising that there is support for it on both sides of the House. Only small numbers of people would be affected, but as those of us who have dealt with such cases know, it would have a huge impact for the individuals.
Let me explain the context. Currently, individuals with refugee status can access student finance and qualify for home-fee status from the moment they are awarded their protection. That is where the Minister was economical with the truth in his comments about the new clause, because those with a slightly different status—that of humanitarian protection—are treated differently: they have to be able to show that they have been ordinarily resident for at least three years at the start of the academic year to be able to receive financial support.
The group most affected by that different definition are those Syrian refugees currently being resettled to the UK under the vulnerable persons resettlement programme, as they are granted not refugee status but humanitarian protection. The result is that a young Syrian refugee who arrives in the UK today would not qualify for student finance until the start of the academic year in 2020. The only exception is if they are resettled to Scotland, where the Scottish Government—I commend them for this—have introduced a special fee status for resettled Syrians, allowing them immediate access to student finance.
Subsection 2(a) would ensure that all resettled refugees, no matter what status they are given, and no matter where they live in the UK, could access student support immediately. Subsection 2(b) would make student finance available for those who are granted humanitarian protection after making an application for asylum. As set out in the immigration rules, humanitarian protection is granted to people who face a real risk of suffering harm if they return to their home country. That includes the risk of facing the death penalty, torture or inhumane treatment, or their lives being at risk owing to armed conflict. Now, the future of those who are granted humanitarian protection after applying for asylum is clearly in the UK. If their future is here, they should be enabled to build their lives here. They should be allowed to access university education not simply to build their lives but to contribute fully to our society.
Subsection 2(b) would also provide access to student finance and home-fee status for people who have applied for asylum and then been granted another form of immigration leave. Again, in these cases, the Government have accepted that the immediate future of these individuals is in the UK, so they should be given every opportunity to contribute and develop, yet they face significant hurdles in doing so. The reason is that, in 2012, the last Government changed the rules so potential university students in this situation could no longer access student finance. They would also have been reclassified as international students, meaning they would face higher fees.
Unsurprisingly, the Supreme Court found that the Government’s rules were discriminatory. I realise the Government have not been doing very well in the courts recently, but this is a slightly earlier case—the Tigere case. As a result of the Supreme Court ruling against the Government, the Government changed the rules and introduced the new criterion of long residence. What that means is that young people who have gone through the asylum process—including children who arrived as unaccompanied asylum-seeking children—and who are unlikely to meet the long residence criterion, will have to watch their school peers go off to university, leaving them behind.
Wes Streeting
I have a constituent in just that position. They went through school, they did well, they were ready to go to university and they had a university place secured, but they were told that they had not yet met the residency requirements. They are going to be sitting around for another year or two, waiting until they do meet the residency requirement. That is a waste of their time, a waste of their potential and a waste of everybody else’s time. That is the perverse situation we are in, isn’t it?
Paul Blomfield
My hon. Friend is absolutely right. Not only is this a waste for the individual, but we as a society are cutting off our nose to spite our face. It is a waste of potential for all of us, when we could benefit from that person’s higher education.
New clause 8 is not about creating special circumstances for refugees—the Minister falsely contrasted the position on refugees, humanitarian protection and UK students—and others who have arrived in the UK seeking asylum. Instead, it is about removing the existing barriers preventing young people who came to the UK seeking protection, and who are capable of attending university, from fulfilling their potential, so I urge him to think again.
John Pugh
I rise to add a brief footnote to new clause 10, which is in my name, and to say things that other people in the room possibly cannot say.
Liberal Democrats hesitate, for some reason, to talk about university fees. I have no particular embarrassment—I voted against top-up fees under Labour, and I voted against the increases under the coalition. In both cases, though, I made dire predictions about take-up, which certainly were not fulfilled, and take-up in both cases carried on. Unfortunately, I was right in my predictions about the political consequences of breaking our contract with the electorate. I believe we were tricked into that by a very clever Chancellor, and there was very little saving in the end to the Exchequer, contrary to what some of my colleagues supposed at the time.
It was a painful process, and the hon. Member for Ilford North (Wes Streeting), who introduced this section of the debate, pointed out that it involved a certain number of concessions to the Liberal Democrats. What we are looking at now is the elimination bit by bit, piece by piece of those concessions, starting with grants and moving on to access and so on. So the policy has clearly worsened, and what we have currently, with the raising of the threshold, is nothing short of a scandal. A contract has been broken; there has been a one-sided redefinition of the terms of the loan. In any other context, as Martin Lewis quite correctly said, that would lead to legal action. The only reason legal action is not possible in this case is the small print, which, as far as most undergraduates are concerned, was very, very small indeed.
New clause 10 is simply an attempt to avoid a repetition of that bad situation by defining a minimum level of earnings and a mechanism for adjusting it in a rational, open way. It would avoid partiality, exploitation, misunderstanding and—the hon. Gentleman mentioned this briefly—the lack of trust, which is absolutely crucial. That, surely, is the way to go.
Gordon Marsden
I rise to speak to Labour’s new clause 5, which would revoke the Education (Student Support) (Amendment) Regulations 2015, which moved support for students from a system of maintenance grants to loans. I also rise to speak to Labour’s new clause 6, which follows on from the excellent speech made by my hon. Friend the Member for Ilford North (Wes Streeting) on new clauses 2 and 3.
At a time when the Government’s own Social Mobility Commission reported only last week that our nation is facing a crisis in social mobility, it is a travesty that I have to stand here today to talk about the problems caused by scrapping maintenance grants and replacing them with a further loan, disproportionately affecting students who come from a low-income background. As this House knows, students in the UK already face the highest levels of student debt in any European country. Figures from the Institute for Fiscal Studies show that the average student in the UK will leave university saddled with £44,000-worth of debt, and the Sutton Trust has suggested that the figure could go even higher. This figure is only the average; for students from low-income backgrounds, it will be much higher, and these changes will make it higher still.
Labour Members have pledged to bring back the maintenance grant. My hon. Friend the Member for Ashton-under-Lyne (Angela Rayner), in the Bill Committee and recently at the Labour party’s north-west conference, gave powerful testimony as to why that is. It is not just because we cannot afford to lose these people from our economic process, or just because it will help to aid social mobility generally; it is because by doing so we will empower hundreds of thousands of people who will otherwise lose their life chances, or be in danger of that, under this process. There were half a million students in the last year before the Government scrapped the grant, many of whom were in higher education in further education colleges. If a significant number of those students do not take out loans because, for a variety of reasons, they do not wish to do so or are unable to do so, we will increase still further the progressive weakening that this Government have put on to the higher education and FE sector, which is currently servicing some 34,000 students who got the grant in the last year before the Government scrapped it, including a significant number of people in my own constituency pursuing higher education at the excellent Blackpool and The Fylde College.
The Government—I give credit to them for it—have put into the Bill the ability for FE colleges to have their own degree-awarding powers, and Blackpool and The Fylde College is one of those, but it is rather perverse then to introduce something that will weaken the support for such colleges. The Government seem not to think in holistic terms about further education. Taking people in higher education in further education colleges out of the equation will weaken the economic and social base of those colleges. The Government do not give anywhere near enough attention to that.
Jo Churchill
Will the hon. Gentleman allude to how Labour intends to pay for all these benefits, because I think I am right in saying that it was to be via corporation tax?
Gordon Marsden
The hon. Lady must be a mind reader because I am just coming to on that issue.
Bringing back the maintenance grant would help to enable over half a million students from low and middle-income backgrounds to go on to higher education. Rumour has it that in the autumn statement this coming Wednesday, the Chancellor is set to announce a further cut in corporation tax, helping only those at the top. We are asking the Government to reconsider this position. Our policy, which has been costed, of bringing back grants would be the equivalent of a rise of less than 1% in corporation tax. Do the Government not believe that this rise would be more beneficial to our nation as a whole—
Gordon Marsden
No, I will not—the hon. Lady has had one go. Let me proceed because we do not have a lot of time.
Do the Government not believe that that rise would be more beneficial to our nation as a whole than pushing ahead with a policy that benefits only a relatively small number of large corporations, and not even a big range? If the Government are serious about supporting social mobility, they need to do something about it. The Minister, in a rather Panglossian way, went on about all the terrible things that were predicted when loans were introduced not having come to pass, but that is actually not true, or certainly not true across the board. We have seen what a disaster the introduction of advanced learning loans for level 3 was for over-24-year-olds. Only 50% of the £300 million that was allocated for them was taken up, and that money has been sent straight back to the Treasury. Now, unabashed, the Government want to serve up the same recipe to 19 to 24-year-olds.
“Nudge” has been a fashionable word in the Conservative party in recent years—indeed, Lord Willetts wrote quite a lot about it—but it is possible to nudge people away from things as well as towards them. As the Minister well knows, the quality impact assessment on grants and loans let the cat out of the bag on the difficulties that would be faced by all the groups who desperately need access to higher education, such as women, disabled people, people from the black and minority ethnic communities, and care leavers. No wonder Ministers were so keen to bury this issue in a Delegated Legislation Committee. It took our efforts in bringing it to an Opposition day debate at the beginning of the year to have a decent debate on it.
The Government need to think again on this. I give notice that we will press our new clause 5 to a vote.
Jo Churchill
How does the hon. Gentleman explain the fact that covering the figure of £12 billion would mean a rise in corporation tax of between 4% and 5% rather than the 1% that he stated? Surely we need business and industry to be making money in order to create the jobs and opportunities for students once they leave education.
Gordon Marsden
That was a hell of a lot more than two seconds, but I forgive the hon. Lady. We need to look at this issue in the context of our proposal, to which I have already alluded.
New clause 6 deals with yet another regressive policy that has been highlighted during the passage of this Bill. My hon. Friend the Member for Ilford North spoke about some of the significant issues in this regard. The students affected will end up having to pay more than they were loaned as a greater proportion of their income. To those who have, more will be given, because they can pay their loans back more speedily; from those who have not, more will be taken. The Government seem to have been disregarding in their education policy the fact that there is a regional and demographic dimension to this as well. Constituents of mine taking up a graduate job in the past 12 months will have had a more reasonable ability to hit a threshold that was supposed to be uprated on a regular basis. Students in parts of the country where starting incomes for graduates are much lower than in London and the south-east will be particularly badly hit by this proposal.
Sammy Wilson (East Antrim) (DUP)
Does the hon. Gentleman accept that the situation he describes particularly hits students in places like Northern Ireland where starting salaries are much lower? Does he also accept that the Minister’s point about the affordability of this is a red herring, because when the loans were sold to students, surely the cost of raising the thresholds was taken into consideration? The Government cannot now go back and say, “We want to rewrite the rules.”
Gordon Marsden
The hon. Gentleman is absolutely right, as he is to make that point about the situation for students in Northern Ireland. When we discussed this matter in the Opposition day debate and again in Committee, we made the point that students in Northern Ireland, Wales and Scotland—the students of all of the devolved Administrations—would be affected by this process. It is nonsense for the Government to say that this will not make any difference. The Minister said to my hon. Friend the Member for Sheffield Central (Paul Blomfield) that the RAB charge was now okay, but as my hon. Friend said, it is only okay because this Government—the Minister and the rest of his colleagues—have created a Frankenstein’s monster that is going to cause problems for so many thousands of students.
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
Amendment 57, in clause 40, page 24, line 13, at end insert—
“(13) Before authorising any provider to grant research awards, the OfS must consult with—
(a) UKRI, including Research England,
(b) the appropriate National Academies and learned societies, and
(c) such other persons as the OfS considers appropriate.”
Amendment 53, in clause 85, page 54, leave out line 19.
This amendment, together with amendment 54, would keep Innovate UK as a separate organisation to UK Research and Innovation.
Government amendment 17, in clause 86, page 55, line 3, at end insert—
“( ) The functions conferred by subsection (1)(a) to (e) include, in particular, power to encourage and support the provision of postgraduate training in science, technology, humanities and new ideas.”
This amendment makes clear that the functions of UKRI under clause 86(1)(a) to (e) include the power to encourage and support the provision of postgraduate training in science, technology, humanities and new ideas.
Amendment (a) to Government amendment 17, after “humanities” insert “, social sciences”.
Amendment 54, page 56, line 30, leave out clause 89.
See explanatory statement for Amendment 52.
Amendment 42, in clause 90, page 57, line 21, after “appropriate” insert
“including relevant bodies in the devolved administrations”.
This amendment allows Research England to coordinate with its devolved counterparts.
Amendment 55, in clause 94, page 58, line 38, at end insert—
“(1A) In making grants to UKRI under subsection (1), the Secretary of State must specify the separate allocation of funding to be made by UKRI to—
(a) functions exercisable by the Councils mentioned in section 88(1) pursuant to arrangements under that section,
(b) functions exercisable by Innovate UK pursuant to arrangements under section 89, and
(c) functions exercisable by Research England pursuant to arrangements under section 90.
(1B) No variation may be made to the allocation of funding specified by the Secretary of State in subsection (1A) unless each House of Parliament has passed a resolution approving any such variation and has the consent of the devolved administrations.”
This amendment would ensure there would be separate financial allocations to the Research Councils (collectively), Innovate UK, and Research England.
Amendment 56, in clause 95, page 59, line 45, at end insert—
“(6) In giving direction to UKRI, the Secretary of State must act in the best interests of all constituent parts of the United Kingdom and, before giving such direction, must consult on research and innovation policies and their priorities with the following—
(a) the Scottish Government,
(b) the Welsh Government, and
(c) the Northern Ireland Executive.
(7) Before giving any direction to UKRI under subsection (1), the Secretary of State must seek agreement to the terms of that direction from—
(a) the Scottish Government,
(b) the Welsh Government, and
(c) the Northern Ireland Executive.”
This amendment would place a duty on the Secretary of State such that before giving directions to the UKRI in regards to research priorities, the Secretary of State must consult the devolved administrations.
Amendment 43, in clause 105, page 63, line 23, leave out “may” and insert “must”.
This amendment would ensure cooperation and information sharing between the OfS and UKRI.
Amendment 44, page 63, line 24, after “functions” insert—
“(1A) The OfS and UKRI must cooperate with one another on—
(a) the health of disciplines,
(b) awarding of research degrees,
(c) post-graduate training,
(d) shared facilities,
(e) knowledge exchange and
(f) skills development”.
This amendment sets out where UKRI and the OfS must cooperate on issues at the interface between teaching and research.
Amendment 45, page 63, line 25, leave out subsection (2).
This amendment would ensure cooperation and information sharing between the OfS and UKRI.
Government amendment 35.
Amendment 59, in schedule 9, page 101, line 20, at end insert—
“(9) A joint committee is to be established by UKRI and OfS, which must—
(a) consist of representatives of both UKRI and OfS, and
(b) produce an annual report on the health of the higher education sector.
(10) The report must make an assessment of—
(a) the strength of the sector,
(b) work undertaken to improve equality of opportunity,
(c) the strength of separate disciplines,
(d) the availability of research funding,
(e) the awarding of research degrees,
(f) the quality of post-graduate training,
(g) access to shared facilities,
(h) the effectiveness of knowledge exchange,
(i) skills development, and
(j) measures taken to act in the public interest.”
John Pugh
It might be helpful if I refreshed hon. Members’ memories about what new clause 11 contains, so that we know what we are talking about. It states:
“Within six months of section 84 of this Act coming into force, and every year thereafter, UKRI shall report to the Secretary of State on—
(a) EU (excluding from the UK), and
(b) non-EU
specialist employees employed by UKRI and English higher education providers.”
It contains the critical subsection (3), which states:
“Should any report made under subsection (1) identify a decrease in the number of international specialist employees since the previous report was produced, the Secretary of State must make an assessment of the impact of such a reduction on UKRI’s ability to deliver its functions under section 86 of this Act.”
We all accept that universities have major anxiety about research funding post Brexit, simply because while we are in the EU there is a huge net benefit to the UK, in cash and personnel terms—in all terms—in key subjects such as science and medicine in particular. The Government are doing their best to pour oil on troubled waters with various reassuring mantras. They say that there is no change yet—well, we know that—and that there will be vigilance about what the EU is up to so that it does not cut us out of projects we ought to be involved in; there are vague promises of future largesse, with hopes of continuity, and statements that there are always prospects beyond the EU.
Sadly, none of that is working particularly well. Anxiety in the university sector is as emphatic as it was to begin with. We are not simply talking about money; we are talking about people. That is what new clause 11 is principally about. In some universities the number of foreign nationals working as lecturers and specialist employees is as high as 30%. That contrasts markedly with French universities and many other continental universities. It is a feature of the British university scene that makes it very different and very desirable.
Recognising that universities were worried about this issue, we asked vice-chancellors through a survey exactly what their views were and how concerned they were. I am happy to share the full results of that survey with any Member who expresses an interest. One question we asked was:
“Are you worried that the uncertainty regarding research grants and the future of EU academics could have a negative impact on standards at UK universities?”
Some 73% said yes. We also asked:
“Do you agree that it is necessary to maintain freedom of movement between the UK and the EU to protect research funding, the right to reside and work of EU academic staff and the right of all UK and EU students to study anywhere in the EU?”
It was a slightly inelegant question, but Members get the gist. The answer was that 83% said that yes, freedom of movement was crucial.
In the process of conducting the survey, I got a phone call from a vice-chancellor who spoke with a more anecdotal and personal view about his own university. He told me of the difficulties academics were currently facing in planning their future, thinking ahead, considering what they would do about their families—young academics, in particular—and wondering where their future lay. Like a lot of people planning their lives, they wanted a bit of certainty and security. Towards the end of the conversation he made what I thought was a very shocking confession. I had conducted the conversation on the assumption—my assumption, from his impeccable English —that he himself was English. I have probably given the game away, but it turned out that he was Belgian, and shared all the concerns that he was voicing on behalf of his colleagues.
This is a personal issue for a lot of valuable and skilled people, some of whom are already facing, unbelievable though this is, an increase in prejudice and, sadly, something that amounts at times to hate crime on their university campuses. If those skilled contributors go, some courses simply will not happen, because we need those people—that is why we got them in the first place—and some will worsen; university life will itself worsen.
The Minister is a very civilised man, who I am sure wants a diverse university sector and wants the best of EU talent to stay here, and to continue to come here. He would not welcome an exodus. He speaks fluent French, so has a true continental mindset, although it may not be encouraging to describe him as having that at this stage in the Government’s deliberations. I am sure he would welcome an early warning of any kind of exodus, and any kind of problem with or diminution of the involvement of international lecturers in our universities. The new clause would simply give him that.
Carol Monaghan
I will speak to amendments 55 and 56. I will start with amendment 56, which is in my name and that of my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin).
The proposals in the Bill to reform the UK research councils have implications for higher education in Scotland, and we have concerns about the potential consequences for Scotland’s research base. The SNP tabled an amendment in Committee that sought to ensure representation on the UKRI board of people with relevant experience of the Scottish, Welsh and Northern Ireland higher education sectors, as well as an understanding of the research and innovation policy context and landscape across the whole of the UK. We withdrew the amendment but reserved the right to bring it back on Report. That is what we are doing now.
We are pleased that the Government listened to the Scottish National party’s concerns in Committee and have tabled their own measure on this issue, Government amendment 36. However, although we welcome their acknowledgement of the need for the board of UKRI to include experience of the devolved Administrations, it is disappointing to note that amendment 36 requires experience of only one of those Administrations. That does not allow for the proper consideration of all devolved Administrations and their policy priorities within UKRI.
UKRI must have an understanding of the whole UK research and innovation landscape and must act in the interests of all devolved Administrations. That is why we have tabled amendment 56. What we have in front of us in Government amendment 36 does not adequately address our concerns and those of stakeholders, including Universities Scotland, Universities Wales, Queen’s University Belfast, the Scottish Council for Development and Industry, NUS Scotland, the University and College Union Scotland and the Royal Society of Edinburgh. Our amendment is not partisan, but draws on a whole sector of university opinion throughout Scotland, Wales and Northern Ireland, and has the full support of the Scottish Government.
The UK Government said that they would introduce a Higher Education and Research Bill that included measures set out in Paul Nurse’s review of the research councils. Our amendment would ensure the Bill matched what Sir Paul Nurse noted in his review, that
“there is a need to solicit and respond to distinct research priorities and evidence requirements identified by the devolved administrations”.
The Bill as it stands does not meet the overarching principles of the Nurse review, as the governance of UK Research and Innovation is accountable only to the UK Government, with principally English interests. We believe that the governance of UKRI needs to reflect the priorities of each of the Governments within the UK; if it does not, there could be a lack of consideration of Government priorities and research needs in Scotland and other devolved nations among the decision-making bodies of the research councils and of Innovate UK.
Hywel Williams
I back the hon. Lady’s points, and note that Welsh universities have particular priorities when it comes to research, not least the very low level of funding that they get, which is probably around 2%—a figure that contrasts with the fact that we are 5% of the UK population. Irrespective of the Haldane principle, that is a specific concern in Wales.
Carol Monaghan
I thank the hon. Gentleman for that point. Scotland does very well out of the research councils, because there is a large research body in Scotland and the research environment is vibrant across our 19 higher education institutes.
We want the Secretary of State and the UK Government to consult Scottish Ministers and their equivalents in the other devolved Administrations before approving UKRI’s research and innovation strategy. How else can we be certain that the new body set up in the Bill will be used in the best interests of the whole of the UK and is not simply focused on English-only priorities?
The Scottish National party is proud of our HE sector and acknowledges that it is valuable to ensure Scotland’s cultural, social and economic sectors prosper. It is worth over £6 billion to our economy, and we must ensure that this continues. The Bill has the potential to harm Scotland’s world-renowned research. The Minister and this Government need to ensure that devolved Administrations have an equal say and that their voice is heard within UKRI to ensure that the Bill will be of no detriment to any part of the UK.
Amendment 55 deals with funding. The integrity of the dual support financial system must be protected, and the Bill does not go far enough to do that. We need to be sure that the balanced funding principle is clearly defined in the Bill to ensure that the integrity of the financial system set up within cross-border higher education sectors continues. Any flow of funds between reserved and devolved budgets needs to be clearly defined, and the Bill does not address how the balance of funding allocated through competitive funding streams will be supported. There is a serious worry that Research England funding could be taken from the UK-wide pot, of which Scotland’s and other devolved Administrations’ HE institutes rightly receive a share. If that pot were to diminish, it would be to the detriment of the Scottish HE sector and, indeed, those of Wales and Northern Ireland.
We are already seeing uncertainty about funding for our HE sector, thanks to the reckless gamble over Brexit. Is it right now that we should deprive our HE institutes by taking UK funding away from them, too? Many stakeholders in Scotland are concerned about the potential hazard that will be placed in their way because of the funding structure. Amendment 55 would ensure separate funding allocations for the research councils, Innovate UK and Research England.
Although Scotland performs well, as I have already mentioned, in attracting funding from Research Councils UK for grants, studentships and fellowships, Scotland does less well in infrastructure spending for research and currently only attracts 5% of UK spending. As with many things, a lot of this spending is concentrated on the south-east of England, and we want UKRI to have a full overview of research infrastructure across the UK.
We are very concerned that that clause 94 will allow the Secretary of State to alter the balance of funding between the research councils. Any grant to UKRI is ultimately research project funding, which should be competitively available throughout the UK. It is therefore necessary to have transparency about what goes to UKRI and what goes to Research England, given that that body will distribute funds for research infrastructure that is available only to English institutions.
We are extremely concerned that no provision in the Bill will ensure that the Secretary of State cannot give directions to UKRI to move funds in-year on its own initiative between constituent parts. If, for whatever reason, funds had to be moved by the Secretary of State between research councils and Research England or Innovate UK, this must happen only if the Scottish Government and other devolved Administrations give consent.
This SNP amendment would ensure that fairness and transparency are at the forefront of reserved funding allocation to UKRI and the allocation to Research England, while ensuring that the balanced funding principle is measured in relation to the proportion of funding allocated by the Secretary of State for reserved and for devolved England-only funding and providing clarity about when that might not be achieved.
Joseph Johnson
I thank honourable colleagues for their enthusiastic support for our world-class research and innovation system. UKRI will be a strong and unified voice, championing research and innovation nationally and internationally. It will support fundamental and strategic research, drive forward multi and inter-disciplinary research, support business-led innovation and help to promote business links with publicly funded research.
UKRI will build on the great work already being undertaken by our research and innovation bodies and maximise the benefit to the UK of a Government investment of over £6 billion a year. That is why the Prime Minister this morning announced that, by the end of this Parliament, we will invest an additional £2 billion in research and development, including through a new industrial strategy challenge fund, led by Innovate UK, by our world-class research councils and, once established, by UKRI. This is clear testament to how UKRI can help to deliver greater outcomes for the research and innovation communities and for the whole UK.
Hywel Williams
I am sure that the record will show whether the Minister said earlier, in respect of Government amendment 35, that membership would include at least one person or more with relevant experience in relation to at least one of Wales, Scotland and Northern Ireland. Is it “one person” with relevant experience or “one person or more”?
Joseph Johnson
It will be at least one person with experience of one or more of the devolved Administrations. To be absolutely explicit, the Government have tabled an amendment that places a duty on the Secretary of State to have regard to the desirability of having at least once such member. For the individual councils, we think it right that UKRI be free to appoint the very best people for these roles, and we expect it to appoint candidates with the highest levels of relevant skills and experience from a diverse range of backgrounds, both nationally and internationally.
On new clause 11, I absolutely agree with the hon. Member for Southport (John Pugh) that there must be proper monitoring of the international diversity of the research sector workforce. We already take this very seriously and collect and discuss such data, but let me reiterate the Government’s position on the importance of international researchers. As I have said, we remain fully open to scientists and researchers from across the EU, and we hugely value the contribution of EU and international staff. There has been no change to the rights and status of EU nationals in the UK or of UK citizens in the EU, as a result of the referendum. As the Prime Minister said in her letter copied to Venki Ramakrishnan, president of the Royal Society, only five days after she came into office:
“Our research base is enriched by the best minds from Europe and around the world – providing reassurance to these individuals and to UK researchers working in Europe will be a priority for the Government.”
Paul Blomfield
The Minister has articulated exactly the sentiments shared by Opposition Members—for us, too, this issue is a priority—but does he not recognise that in reality the Government are failing in that objective? Around the country, we are receiving reports of EU academics saying, “Our future isn’t here, because we haven’t had the reassurances we need.”
Joseph Johnson
There is no higher authority in the Government than the Prime Minister, and we have heard from her that it is absolutely our intention to provide the reassurance that EU scientists and researchers working in this country want and need. The Brexit Secretary has given similar assurances and reminded EU nationals living and working in the UK that those who have been here for five years are already entitled to indefinite leave to remain—I understand from his figures that that relates to about 80% of the group concerned—and that those who have been here for six years are entitled to apply for dual nationality. We want brilliant researchers from other European countries to continue to enrich our universities and student experience, and we have every expectation that they will be able to do so, as long as UK nationals in other EU countries receive reciprocal rights in those countries.
Kirsten Oswald (East Renfrewshire) (SNP)
Does the Minister appreciate that such statements are cold comfort to people in that position and that we need far greater certainty to make sure that our higher education institutions can flourish as they should?
Joseph Johnson
We as a Government can only reiterate that we fully appreciate and value their presence in our institutions. We welcome them and think their work crucial, and we want them to stay and to continue doing that work. We cannot be more categorical than that.
On amendments 43, 44, 45, 57 and 59, I absolutely agree that co-operation between the OFS and UKRI is critical. Clauses 105 and 106 provide for this. It is counterproductive, however, either to restrict the areas or to be too prescriptive about how and where UKRI and the OFS should work together through legislation as required by these amendments. We have recently set out in a factsheet published on 15 November further details of where we expect both bodies to work together. One key area explained in the factsheet where we believe that the OFS and UKRI should work in close co-operation is in the assessment of applications for research degree awarding powers. The provisions in the Bill will facilitate this.
Another important area of joint working between UKRI and the OFS is postgraduate training. In turning, therefore, to amendment 17, I would like to thank the hon. Member for Sheffield Central (Paul Blomfield) for raising this important issue in Committee. While the functions of UKRI, as drafted in the Bill, do enable this, the Government have tabled the amendment to provide absolute clarity that UKRI will continue to support postgraduate training. The hon. Member for City of Durham (Dr Blackman-Woods) has proposed an amendment to our amendment to ensure that it includes “social sciences”. I can assure her that this is already the case, because clause 104 ensures that all references to science or the humanities include social science and the arts. Our support for postgraduate training will be across the spectrum of disciplines. The OFS will be responsible for protecting the interests of all students, including all postgraduate students. The two bodies will work together and share understanding to support their respective functions, and the Bill makes clear provision for this.
I hope that hon. Members recognise the considerable progress made in ensuring that the Bill meets the needs of the research and innovation communities. I believe that UKRI will catalyse a more strategic, agile and interdisciplinary approach to addressing global challenges and developing the UK’s research and innovation capability. This is fundamental to strengthening UK competitiveness as part of the new industrial strategy. I therefore ask hon. Members not to press their amendments.
Gordon Marsden
Our amendments 43 to 45 are on collaboration between the OFS and UKRI. I will come to those and the Minister’s comments on them in a moment, but shall start with amendment 42.
Amendment 42 would allow Research England to co-ordinate with its devolved counterparts. Labour considers this an important principle to establish in the Bill. The Committee did not include members from Wales or, obviously, from Northern Ireland, yet, in both Wales and Northern Ireland, universities and higher education institutions will be significantly affected by the process. They will also be affected if the process with the new bodies is not universally seen, at this important time for our university system, to be fair in sharing out its attentions. Not to consider including such provisions in the Bill is a great mistake. Surely we should consider those interests when setting up a new research body.
This is highly relevant to the future of those research bodies. The Minister will be well aware that research bodies are generally still not entirely mollified by the various blandishments and reassurances given, particularly on the role of research councils. I am sure he will hear more about that when the Bill goes to the other place. While we have not pressed further any of the amendments that were proposed in Committee, because of time pressures, I assure him that our noble Friends in another place will want to scrutinise in detail what he has said and what he is planning to do.
These are not arcane arguments about technical details. One of the problems the Government face is that they have overlooked a vital factor. There is little sense of what the knock-on effects of all this will be on the importance of what I describe as the brand UK plc in HE—particularly so, in view of the further uncertainties that have arisen since the advent of Brexit. I am not the only person to make that observation; other commentators and academics have also done so.
Jim Shannon (Strangford) (DUP)
On the subject of Northern Ireland, the Minister will know that Queen’s University Belfast has an extensive partnership with companies and other universities across the whole of the United Kingdom, and we are all proud to be British in relation to that. With that in mind, I am wondering what consideration the hon. Gentleman feels this Government should give to Queen’s University, particularly for its innovative medical investigations to find new cures for cancer, diabetes, chest, heart and stroke illnesses and such like?
Gordon Marsden
I am grateful for the hon. Gentleman’s intervention. It would, of course, be invidious for me to single out Queen’s University over and above others—if I did, my postbag would no doubt be full—but he is absolutely right to champion what it is doing. There is an important point, which I am not sure the Government have entirely grasped. The research done at Queen’s and other universities and HE institutions under the devolved Administrations does not depend only on whether the Government get a good Brexit settlement with the European Union; it depends on maintaining the trust and support of those EU nations that we will rely on to get that sort of investment for clinical trials. For example, a lot of charities—the Minister will be aware of this because they made representations to his Department—particularly those relating to heart disease and cancer, are concerned that if we do not get a decent settlement, the problems of getting field trials in Francophone Africa or Lusophone South America will become more and more complicated because we rely on those researchers and the good offices of our EU counterparts in those countries. I do not think that the Government are taking anywhere near enough notice of that particular issue.
As I said, the architecture is complex, and it is crucial to get it right. Although the Minister may think that some of these amendments are nit-picking and do not need to be on the face of the Bill, as I said to him throughout our discussions in Committee, I think he neglects the importance of sending a signal to the devolved Administrations and others that their interests are going to be represented. That is why these amendments were tabled.
Our amendments 43, 44 and 45 would ensure that there is co-operation and information sharing between the OFS and UKRI. The Minister obviously knows that UKRI and Innovate UK have historically done different things. Again, he is at pains to try to reassure us that all we will get under the new structure is the best of both worlds. Unfortunately, we sometimes end up getting the worst of both worlds. I was struck, particularly during evidence sessions in Committee, by the fact that certain concerns remain—amendment 53, tabled by the hon. Member for Southport (John Pugh), is also relevant here. The chief executive of Innovate UK outlined his concerns in Committee about whether Innovate UK and the Department that supports it will be sufficiently fleet of foot to do the sort of innovative things in finance and everything else that they have so far been very good at. This is not to say that the architecture cannot work; it is just saying that the Minister and his officials need to think rather harder about the how the process will go forward.
There is also, of course, the broader issue in part 3 that the process of separating teaching and research—and in this context, the Research England body is relevant—will mean that issues and activities at the interface of teaching and research, such as the health of disciplines, the awarding of research degrees, post-grad training and sharing of facilities, might not be effectively identified and supported.
Daniel Zeichner (Cambridge) (Lab)
My hon. Friend will appreciate that a number of institutions are concerned—I suspect he was about to make this point—about this gap between teaching and research. I was quite surprised when my University of Cambridge told me that 89% of people who are involved in teaching at the university are also involved in research. That integration between the two is absolutely essential, yet it seems to be what is missing in some people’s eyes from the Bill. I believe that this is the force of the amendment that my hon. Friend is proposing.
Gordon Marsden
I was going to say that my hon. Friend, as the MP for Cambridge, is at the cutting-edge, or certainly at the coal face, of this particular issue. I know it is important to Cambridge University and indeed to Oxford University, whose vice-chancellor has expressed similar concerns. This is not the Minister’s fault, but it is unfortunate that at the time this comes through, we will have had the machinery of government changes in terms of the Department for Education and the new expanded Department for Business, Energy and Industrial Strategy. Time alone will tell what the benefits of that are—I think there might be a number of them—but there could be problems in the short term. With the best will in the world, that bedding-down process between the two Departments—I know the Minister has a foot in both camps, so I hope he will be able to help—is going to be a real concern.
We have talked about the OFS and UKRI co-operating on the health of disciplines and so on. Our amendment proposes a mechanism by which this collaboration could be achieved. The Royal Society, as I am sure the Minister is aware, has suggested that a committee on teaching and research should be established. The Wellcome institute, with which I am sure Members are familiar, has also offered its thoughts. Teaching and research are intrinsically linked, but that intrinsic link would be lost from higher education if the bond between them were broken.
Clause 105 sets out the interactions between the OFS and UKRI, but we wanted to strengthen that co-operation by replacing the word “may”—no disrespect to the Prime Minister—with “must”. In parliamentary and governmental terms, “must” is a great deal more useful than “may”. The Royal Society of Chemistry has said:
“In many HE Institutions we see positive interactions between teaching and research responsibilities…There is a risk that the separation of teaching and research in the new HE architecture will mean that the benefits of research informing teaching and learning practices could be lost.”
No one is suggesting that that would be done deliberately, but it could happen. The society has also said:
“The current draft of the Bill allows for information sharing between the OfS and UKRI. It does not, however, require their cooperation unless directed by the Secretary of State”.
Other learned bodies and societies have contacted me, and fellow members of the Committee, to make similar points.
The Minister referred to the guidance paper that he has issued. I thank him for that paper, which provides some further clarity, but it has come very late in the day. I wonder whether it was issued with an eye to the passing interest in the other place, to which the Bill is shortly to be committed, rather than with the aim of keeping us happy down here, but it is useful nevertheless. At the end of the day, however, it still does not establish an obligation or mechanism for co-operation; that is left to the whim of an individual Secretary of State or universities Minister.
As I have said, the issue is made more pressing by the new machinery of government structure and the responsibilities shared by the two Departments. Who knows what will happen in the future? The Minister may be looking forward to a long period as the universities Minister, but at some point, no doubt, he will go onward and upward, and there is no guarantee that his successor, in this or any future Government, will also share responsibilities with BEIS.
For all those reasons, we are suggesting that the Bill be amended to provide that the OFS and UKRI must co-operate without having to be required to do so by the Secretary of State. If SNP Members choose to press their amendments, we will support them.
Dr Blackman-Woods
I wish to speak about amendments 57 and 59, and amendment (a) to Government amendment 17.
In Committee, my hon. Friend the Member for Blackpool South (Gordon Marsden) and I said that the OFS should not have sole power and control over authorisations of research awards, and that UKRI and other bodies should be involved in authorising degrees. I argued that there were two major problems with giving the OFS sole power to award research degrees. First, it would not allow any research funding bodies, or indeed any other relevant agencies, to take part in the process of deciding whether to grant an institution powers to award research degrees. That is problematic, because granting research degree-awarding powers without reference to other bodies diminishes the level of expertise in the decision-making process.
Secondly, as UKRI, Research England, and the national academies and learned societies have responsibilities for providing research funding, it would surely be a major error not to consider what role they would have in the granting of research degree-awarding powers, or the effect that it could have on their funding decisions. That is particularly important given the concerns that many organisations have about giving away degree-awarding powers. For example, the University and College Union is worried about the impact of removing a minimum period before institutions are allowed to apply for full degree-awarding powers. At a time when many groups fear that the restrictions on degree-awarding powers are being watered down, we should be ensuring that organisations such as UKRI are scrutinising the decisions made by the OFS.
Joseph Johnson
UKRI and the OFS are under an obligation to act efficiently and effectively, and to deliver value for money. That will inevitably mean that when collaboration would deliver those objectives, they will also be under an obligation to work together.
Dr Blackman-Woods
That seems a bit convoluted.
A number of universities are still raising issues. We have just heard from the University of Cambridge, which says that
“the Bill itself does not contain any specific duty on the OfS to consult with UKRI towards the award of research DAPs. We believe that this should be specifically provided for in the Bill.”
I agree. I think that we would all like the Minister to include a specific requirement for the OFS to consult the UKRI and other bodies before granting degree-awarding powers. That, we think, would be a major step towards ensuring that decisions are effective and appropriate.
Amendment 59 suggests that one way of ensuring that the OFS and UKRI work together would be to establish a joint committee consisting of representatives of both organisations and requiring them to produce an annual report on the health of the higher education sector. They would have to report on, for instance, post-graduate training, research funding, shared facilities, skills development, and the strength of the sector. The amendment is intended to obtain—even at this late stage—a bit more information from the Minister about how he envisages the two organisations working together, and, in particular, how he will ensure that there is holistic oversight. That issue arose again and again in Committee. There was widespread concern, expressed in our amendments, that the split into two organisations would lose some of what HEFCE had provided for the sector. This amendment suggests just one way in which the two could be made to work together more effectively; there are others.
The Minister has provided us—rather late in the day—with framework documents that help to establish how the Government envisage collaboration between the organisations, and I thank him for that. I found it interesting reading. I hope that the Minister appreciates that I read the document immediately. It sets out a number of things that the OFS and UKRI may do. It says, for example, that the OFS and UKRI may co-operate with one another in exercising any of their functions and that the OFS may provide information to the UKRI. I just reiterate the point—why not just say “must” or “shall” where appropriate, and then we are all absolutely clear that those two organisations have to work together in a particular way?
I want to emphasise one thing about the amendment. At the end of it, it says that the UKRI and the OFS should have to publish a report on
“measures taken to act in the public interest.”
I am not going to go through again all the things we would expect to see from two organisations working in the public interest, but it would be helpful to have some understanding from the Minister about how the UKRI and the OFS are going to comment and report on the public interest as expressed by institutions and the work that they are carrying out.
On amendment (a) to Government amendment 17, the Minister is right that clause 104 says that the social sciences should be covered by the term “sciences” and arts by the term “humanities”. I tabled amendment (a) so that I could ask why, as only a few additional words would have to be added, “social sciences” cannot be added to the provision. We will all remember that arts is covered by humanities and social sciences by sciences because we are considering the Bill, but once the list is out there will be a danger of both the arts and social sciences falling out of everyone’s memory. I make a plea to the Minister: may we have the words “arts” and “social sciences” added to the provision?
Roger Mullin
I hope not to detain the House for terribly long, but I would like to make several points. The Minister said in relation to our amendment 55, “The Secretary of State would not agree to the varying of money”. That strikes me as the nub of the problem. Although the Minister is someone who I know to be honourable, absolutely committed to the university sector and assiduous in his work—he has listened to us, hence the modest changes he has made, which are welcome—he will not be there forever and in future we may get someone with much less stable characteristics, like his brother, for example. Can you imagine the havoc that could be wreaked if his brother were to replace him? Therefore, we need to ensure that some of the requirements are enshrined in statute.
When we look at the needs of the different Administrations, we see that there is a great difference between the needs of the economies in Wales, in Northern Ireland and in Scotland and the needs in England, particularly the south of England. I have had the great pleasure of working in Queen’s University Belfast and Ulster University at different times, as well as in many Scottish universities and a few in England. The differences can be profound.
Take one of the universities in Scotland—the University of the Highlands and Islands, a multi-campus university that has grown out of the college sector and has research interests that are not shared by any other university in the UK. The same is true of Ulster University and, I am sure, although it is many years since I was there, Bangor University. There is a great variation is research interest. More than that, there is a profound difference economically, to which they have to respond. Their interests diverge in many ways. We only need to look at the debate about exiting the EU in Scotland, where 62% voted to stay. We and others are working hard to have as close a relationship as possible with the EU and all that that would bring. Look at the debate taking place in other parts of the UK, where precisely the opposite view is being taken. That will have profound economic consequences that need to be reflected, and they will not be unless there is proper consultation with the devolved bodies.
The Minister talked about bringing together, which I would welcome, research, innovation, the academic community and the business community and all that that involves. In the vast majority of cases, I would agree with him, but let me put in a word of caution. Some years ago, when I was chair of the joint departmental research ethics committee at the University of Stirling, we were faced with a situation where research programmes into smoking were being challenged by business, which was trying to get access through legal means to the original data that the academics had used, so that the tobacco companies could twist them for their own interests. Therefore, it is not always the case that there is a coincidence between academic and business interests. That is another reason why there needs to be much greater co-operation. The devolved Government in Scotland would have been much more sensitive to that matter than any other part of the UK.
Ms Margaret Ritchie (South Down) (SDLP)
Is the hon. Gentleman aware that Queen’s University Belfast—I must declare an interest; I graduated there—has a particular interest in precision medicine and has been trying to get funding from Innovate UK to pursue a particular project, but it is in direct competition with a university in Britain? However, Queen’s has a particular expertise in that area.
Roger Mullin
I thank the hon. Lady for that intervention. I was not aware of that, but she raises a situation where surely it would make sense for there to be co-operation and co-ordination to understand the different economic and medical interests that exist.
I appeal to the Government: it is not too late to think and to improve the Bill. I ask the Minister to think about those points again.
Deidre Brock (Edinburgh North and Leith) (SNP)
As my hon. Friend has mentioned, many people working in higher education in Scotland are very worried about these reforms and I do not blame them. The Brexit mess is already causing tremendous uncertainty over future research funding and international collaboration. We need to make certain that changes to governance do not put even more blocks on the road.
As my hon. Friend the Member for Glasgow North West (Carol Monaghan) said, the Scottish Affairs Committee recently had the privilege of taking evidence from Sir Tim O’Shea, the Principal of the University of Edinburgh. He was clear about the probable damage that Brexit would do to universities in Scotland and in other parts of the UK if a deal were not reached similar to the deal that the Prime Minister floated for the City of London. The Scottish research industry secured some €217 million from Horizon 2020 up to February 2016. That is 11.6% of total UK funding. Access to that funding will be lost unless agreement is reached between the UK and the EU, and that will necessitate the UK putting the money into the research pot in the first place.
Of perhaps more direct concern for the business in front of us, however, and a major concern about these reforms in Scotland, is that research councils will be sucked up into the new UKRI along with Research England, meaning the research funding pot for the UK could be too closely entwined with England’s funding council. We need clear lines and full transparency between UKRI and Research England. Scotland’s universities currently perform very well in attracting funding from research councils for grants, studentships and fellowships; we cannot allow the system to be skewed to their disadvantage, and we certainly look forward to seeing the Government guidance on this.
We also need more than lip service to be paid to consulting devolved Administrations. The Scottish Government and the Scottish Funding Council need input into those decisions, as do the Welsh and Northern Ireland Administrations, so that their voices and priorities are not drowned out.
The Scottish research industry has different priorities from the rest of the UK, and there is a concern that this will be missed from a UK-wide research body. For example, Scottish institutions have been pioneers in research collaborations since the first research pools were formed in 2004. These are often in smaller, less research-intensive institutions, and there is a worry that the new criteria could leave such smaller pockets of excellence locked out of funding. In light of this, Government amendment 35 simply does not go far enough in assuaging the very real concerns that have been voiced long and loud by the Scottish higher education sector. To only
“have regard to the desirability of the members including at least one person with relevant experience in relation to at least one of Scotland, Wales and Northern Ireland”
is simply not good enough. That is hardly a cast-iron assurance that the new structure will not affect our research priorities or damage our research funding.
These changes will affect Scotland. We will be keeping a close eye on their effects, and we can be sure Scottish universities will take full advantage of any edges they can find.
One final point: one likely consequence of the Bill, in its current state at least, is that Scottish universities will become far clearer in their national and international branding.
John Pugh
I do not propose to press my new clause to a vote.
Clause, by leave, withdrawn.
New Clause 14
“Post Study Work Visa: evaluation
‘(1A) Within six months of this Act coming into force, UKRI must commission an independent evaluation of the matters under subsection (1B) and shall lay the report before the House of Commons.
(1B) The evaluation under subsection (1A) must assess—
(a) the effect of the absence of post study work visas for persons graduating from higher education institutions in the United Kingdom on—
(i) the economy, efficiency and effectiveness of the higher education sector, and
(ii) the UK economy, and
(b) how post study work visa arrangements might operate in the UK, including an estimate of their effect on—
(i) the economy, efficiency and effectiveness of the higher education sector, and
(ii) the UK economy.”
This new clause would require UKRI to commission research on the effects of the absence of arrangements for post study work visas and assess how such arrangements could operate in the UK and their effect on the higher education sector and the UK economy.—(Carol Monaghan.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Speaker
Our consideration having been completed, I will now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motions. Copies of the consent motions will be available shortly in the Vote Office and will be distributed by the Doorkeepers.
Mr Speaker
I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified clause 81 of the Higher Education and Research Bill as relating exclusively to England and Wales and within devolved legislative competence; and clause 56 and schedule 5 as relating exclusively to England and within devolved legislative competence. Under paragraphs (4) and (5) of Standing Order No. 83L, I have also certified the following amendments as relating exclusively to England: amendments 109, and 243 to 245 made in Public Bill Committee to clause 80 of the Bill as introduced (Bill 4), now clause 81 of the Bill as amended in the Public Bill Committee (Bill 78). Copies of my certificate are available in the Vote Office.
Under Standing Order No. 83M, consent motions are therefore required for the Bill to proceed. Does the Minister intend to move the consent motions?
Joseph Johnson
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England and Wales) (Standing Order No. 83M).
[Natasha Engel in the Chair]
Motion made, and Question put forthwith (Standing Order No. 83E),
That the Committee consents to the following certified clause of the Higher Education and Research Bill:
Clauses and schedules certified under Standing Order 83L(2) as relating exclusively to England and Wales and being within devolved competence
Clause 81 of the Bill (Bill 78)—(Joseph Johnson.)
Question agreed to.
The House forthwith resolved itself into the Legislative Grand Committee (England) (Standing Order No. 83M(4)(d)).
Motion made, and Question put forthwith (Standing Order No. 83M(4)(d)),
That the Committee consents to the following certified clauses and schedules of the Higher Education and Research Bill and certified amendments made by the House to the Bill:
Clauses and schedules certified under Standing Order No. 83L(2) as relating exclusively to England and being within devolved legislative competence
Clause 56 of and Schedule 5 to the Bill (Bill 78);
Amendments certified under Standing Order No. 83L(4) as relating exclusively to England
Amendments 109, 243, 244 and 245 made in the Public Bill Committee to clause 80 of the Bill as introduced (Bill 4), which is Clause 81 of the Bill as amended in the Public Bill Committee (Bill 78)—(Joseph Johnson.)
Question agreed to.
The occupant of the Chair left the Chair to report the decisions of the Committees (Standing Order No. 83M(6)).
The Speaker resumed the Chair; decisions reported.
Third Reading
Queen’s consent signified.
Joseph Johnson
I beg to move, That the Bill be now read the Third time.
Let me first convey my thanks to those from all parts of the House and those outside who have given their time and expertise to help to strengthen and improve this important and much needed Bill. We have been listening carefully to all the points made during the debates on the Bill, and I am pleased that the Bill has received such thorough scrutiny in this House.
We are reforming the complicated and outdated regulatory landscape. We are giving students more choice, driving up quality and ensuring our world-class research and innovation sector can maintain its standing in these ever more challenging times.
As we have heard from those in the sector, our reforms will make a real difference. I remind the House why the Bill is so important and so firmly in the national interest. The current regulation of the system reflects a bygone era of grant funding, elite access and student number controls. Things have moved on and we must catch up. We are therefore putting in place the robust regulatory framework that is needed. It joins up the regulation of the market and will give us a “best in class” regulatory system. This is essential to ensure that students are protected and that students and the taxpayer receive good value for money from the system.
The Bill will also create a level playing field, making it easier for new providers to enter, but only if they can demonstrate the potential to deliver high-quality provision. New universities will drive more diversity and innovation and more choice for students; elicit competitive pressure to drive up quality; and provide employers with more of the skills our economy needs. Nowhere has this been better demonstrated than by the announcement last month that Sir James Dyson, one of this country’s greatest inventors, is creating a new Dyson Institute of Technology. Dyson intends to take advantage of our planned reforms to give high-quality institutions a direct route to degree-awarding powers and university status in their own right. It will equip students and future employees with the skills that will be vital to the growth and productivity of our economy.
We have seen recently that new providers, such as the Dyson Institute, can be recognised as some of the most respected within the sector. The University of Buckingham was ranked first for teaching quality in The Times Good University Guide for 2015-16, while the University of Law, which became a university only in 2012, was joint first for overall student satisfaction in this year’s national student survey.
Our reforms to our research system, which draw on the Nurse review, have also been widely welcomed. As Venki Ramakrishnan, president of the Royal Society, recently commented in Nature:
“UK Research and Innovation…will boost cooperation among the research councils; allow a more flexible, interdisciplinary approach to global challenges; and position research at the heart of a new industrial strategy”,
just as Sir Paul Nurse envisaged in the review we are now implementing.
Those are just a few of the important aspects of our reforms, but as we arrive at the final stage of the Bill’s passage through this House, before its transfer to the other place, I want to take this opportunity to explain how the Government have listened and how the Bill has changed since it was first introduced. Our reforms place students at the heart of higher education regulation. I have always been clear that experience of representing or promoting the interests of students is a key criterion in appointing the board of the new market regulator, the Office for Students, but we heard concerns that that was not sufficient, so we have strengthened our proposals. Through amendments agreed today, we will ensure that the OFS always has a board member with experience of representing or promoting the interests of students.
We have also listened carefully to university representative bodies. Institutional autonomy has been the foundation of the success of our higher education system. Through the Bill we are fully committed to recognising the fundamental and ongoing importance of academic freedom. To that end, the Bill creates numerous and robust safeguards ensuring protection of academic freedom and institutional autonomy at all times. Today, I have clarified in the Bill our clear intention that the Government, when giving guidance or directions to the OFS, or setting conditions of grant framed by reference to particular courses of study, will not have the ability to compel the OFS to perform any of its functions in a way that prohibits or requires the provision of particular courses. Many people told me that they wanted the OFS to take more of a role in monitoring the financial sustainability of the sector, working closely with UKRI as needed, to protect and enhance its reputation. We are enshrining that duty in law through the amendment agreed today.
The Bill is not just about reforming how we will regulate higher education institutions; we are also creating a body to strengthen the UK’s world-class capabilities in research and innovation. UKRI has a UK-wide remit. As I explained in Committee, to deliver that and our overall integrated and strategic ambitions for the new body, UKRI must have a proper understanding of the systems operating in all parts of the UK, and I am pleased we have agreed an amendment that will ensure that. We have also responded to the community’s feedback in recognising the important role that UKRI will play in supporting postgraduate training working together with the OFS.
The Government remain committed to ensuring that our higher education sector retains its international standing. The reforms in the Bill are crucial in enabling us to do so. I am grateful to the hon. Members for taking the time to scrutinise and contribute to this important Bill, and I commend it to the House.
Gordon Marsden
I associate myself with the Minister’s thanks to all who have contributed to the Bill, most especially to my hon. Friends who served in such a sterling fashion on the Public Bill Committee. We have also had a huge number of responses, as the Minister said, from the university sector and indeed other sectors, which underlines the importance of getting a Bill such as this one right.
The Minister said, no doubt feeling released from the scrutiny of this House, that we were escaping a bygone era, but more than once during the previous course of the Bill and again this afternoon, I got a sense of 20th-century déjà vu in respect of a naive belief in unproven and unregulated competition. It seemed that nothing had changed since 23 June, whereas of course, everything has changed.
The aspect that we criticised most as the Bill was taken forward is that we have seen no sense of adjusting to the realities of Brexit, and no indication that it might have been sensible to have paused and reflected on what structural change, particularly regarding the new providers, might do for our higher education sector—not just in England, but across the whole of the United Kingdom.
The Government could have given pre-legislative scrutiny to this Bill; but they did not. They could have conceded, frankly, far more than they did in Committee. SNP Members as well as Labour Members put forward positive suggestions, but very few of them were taken into account. I welcome what the Minister said about students, but to be honest, I have to say to the Minister that this is a pretty poor start at this stage.
What is happening? The Government are not looking beyond Horizon 2020; they are not looking beyond the European structural and investment funding, and the £2 million that the Minister trumpeted today for the industrial strategy will not go too far in dealing with the immense problems we are going to have to face out of Brexit. Too often, when the Government had the opportunity to reach out in Committee, we got civil service boilerplate.
I went back and looked at what I said on Second Reading, and to be honest, I cannot see much of a need to change what I said then. I said:
“Instead of looking at urgently needed and constructive ways of reducing the financial fees burden on our students, the Government have produced mechanisms which dodge Parliament’s ability to judge and regulate them.”
We have talked about that again today. I continued:
“Instead of strengthening and shoring up our universities and higher and further education at a most critical time, they risk seriously undermining them by obsessively pursuing a market ideology. Instead of presenting analysis in the wake of Brexit, offering relief, assurances and strategies to safeguard both research excellence in our traditional and modern universities and the involvement of higher education in the local communities and economies that they serve, the Government have presented no answers to the urgent threats”.—[Official Report, 19 July 2016; Vol. 613, c. 728.]
As a result, as I indicated this afternoon, the Government have managed to alienate diverse groups of people. In the process, they have treated lightly in the Bill issues such as academic autonomy. They have missed opportunities to be forward thinking.
I have already mentioned the throwback to the 20th century in the naive way in which the Minister seemed to believe in terms such as competition. If I did not know the Minister better, I might have thought that he was a disciple of Ayn Rand and wanted to go back to the 1950s. Nowhere in the Bill are there adequate protections for students or for existing institutions. The Bill does nothing to support them in that way. In the process, as I have said, the Government have tried to do everything to avoid scrutiny of their new institutions by the House in the future. That will come back to bite them when the first of these innovations goes wrong.
We did manage to prise one thing out of the Minister in Committee. We expressed concern about rogue providers, and asked who would bear the costs of the OFS. We obtained some snapshots from a technical paper which showed that, increasingly, the costs would be covered by higher education providers; and who will provide the money for the HE providers? The students: the same students who have been double-crossed over the threshold by the Government—the same Government who have jeopardised the life chances of tens of thousands of young people by scrapping maintenance grants and replacing them with loans which they may or may not take up, and the same Government who have moved too slowly, too feebly, to address issues of reskilling and higher education which affect people throughout their lives and which we have done our best to bring to the fore in this Bill.
The Government have done too little, too late. I would have genuinely liked to come to the House today and say that we were satisfied with what the Minister had said and with the changes that he had made, but I am afraid that we cannot be satisfied at this stage. The Government have left an enormous number of question marks for the other place, which must carry out due diligence. I believe that the other place will do that, but the Bill, as it stands, represents a lost opportunity. It has failed in its overarching aims for social mobility, and that is why, with regret, we cannot support it and will vote against Third Reading tonight.
Carol Monaghan
Let me begin by associating myself with what was said by the Minister and the hon. Member for Blackpool South (Gordon Marsden) in thanking those who were involved in the preparation of the Bill, and all the stakeholders who have provided input for the Bill and supplied excellent briefings throughout its passage.
Despite the raciness of the Bill, we still have concerns about many aspects of it, some of which affect Scotland directly. Although Scottish higher education providers will not be bound to participate in the teaching excellence framework, it is feared that Scottish universities that do not participate will be disadvantaged when it comes to attracting international students, who are a crucial source of funding for all higher education institutions. That is compounded by the Government’s refusal to reinstate post-study work visas, despite calls from HE institutions throughout the United Kingdom, as well as business leaders and all political parties in Scotland. Now Brexit has been added to the mix, along with the reputational damage that it has done to UK higher education internationally. There are serious issues in the sphere of higher education, and we should be addressing them before we proceed with the Bill.
Patrick Grady (Glasgow North) (SNP)
My hon. Friend is making very clear why so much of the Bill is important to our constituents in Scotland, and not least to the University of Glasgow, which is in my constituency. Does she share my concern about the fact that what we witnessed a few moments ago in the Grand Legislative Committee procedure makes a mockery of the scrutiny that ought to be given to clauses that affect England and Wales in particular? Does she also agree that if there is an answer to the West Lothian question, the current “English votes for English laws” procedures certainly are not it?
Carol Monaghan
I am not sure who those procedures served, but I cannot imagine that they served the people of England particularly well.
The establishment of UKRI without a proper devolved voice—a voice that would understand the distinct nature of Scotland’s research landscape—could lead to a lack of consideration among the decision-making bodies of the research councils and Innovate UK of Government priorities and research needs in Scotland and other devolved nations. We welcome the Government’s movement on that in their amendment, but it simply does not go far enough or offer the guarantee we sought.
Scotland is already disadvantaged in terms of infrastructure spend for research—it currently attracts only about 5% of UK spending. Therefore, to prevent further leakage of funding or continued disparities, the firewall between the HEFCE and the rest of the UKRI must be in place. That would ensure not only that funding followed excellence but that the vibrant research community in all devolved nations continued to flourish.
Like the hon. Member for Blackpool South (Gordon Marsden), SNP Members have concerns and are not able to support the Bill’s passage tonight.
Dr Blackman-Woods
I rise to echo some of the comments of my hon. Friend the Member for Blackpool South (Gordon Marsden) from the Front Bench. We can agree with some of the Bill. I do not think any Labour Member has a problem in principle with putting a teaching excellence framework in place. We think that it is a necessary corrective for many of our institutions to ensure that teaching gets the same level of applause as research currently does. However, even though we are on Third Reading, we do not have enough information about how the TEF will work in practice and whether it will measure teaching quality, or use proxy measures. We know that the metrics still have to be sorted. From now on, we will have to rely on the other place to scrutinise that matter and the issue of how the traffic light system will come into operation and whether it will be used in any way for the recruitment of students, particularly international students.
Other issues remain unresolved relating to the quality of new entrants, what they will do and the services they will provide to students in addition to their degree course. There are issues to be resolved about how UKRI and the OFS will provide holistic oversight to the sector and work together. There are issues about how higher education relates to the needs of part-time and mature students. There are a number of unanswered questions, which Members in the other place will have to examine in more detail, as they will student finance and the increasing demands that are being imposed in that regard. As my hon. Friend said, another issue is how all this is going to make sense to universities in the context of Brexit. Therefore, we are handing over to the other place quite a list of challenges, and I wish it well in further scrutinising the Bill.
Question put, That the Bill be now read the Third time.
Business without Debate
Shale Wealth Fund
(8 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Caroline Flint (Don Valley) (Lab)
Thank you for granting me this debate, Mr Speaker. I begin by welcoming the Government’s recent consultation on their shale wealth fund, to which I want to draw attention. It is only right that this House should have an open, constructive debate about this new Government-created fund and how it might be used most effectively. This may be the first debate about the new fund, but I hope it is not the last. Perhaps the Minister will confirm in her response whether the Treasury will be publishing submissions to the consultation. The fund is a new concept and exchanging the information and ideas that were submitted can only be good for policy making, so if the Minister is able to, I encourage her to make them available online.
I should perhaps say what this debate is not about. I have not secured this chance to bring the Minister to the House to debate the whys and wherefores of fracking. My views are well known from my time as Labour’s shadow Energy Secretary in the previous Parliament. With appropriate environmental regulations in place, shale gas has a role to play in the UK’s energy mix. It could assist the UK’s transition to renewables, replacing coal with gas, reducing dependency on imported gas, some of which is fracked, and reducing the UK’s carbon emissions. The Government could have gone further on the regulation, but that is for another day.
If shale gas exploration is proceeding, communities should have a fund for their use. Communities in my constituency of Don Valley have tolerated quarrying, but they have benefited from such funds, too. The fracking industry has agreed two forms of community benefit: a one-off payment of £100,000 per well; and a share of revenue from each well—currently set at 1%. Each should give communities dedicated funds for the lifetime of the project. In addition, local authorities will be able to keep 100% of the business rates that they collect from shale gas sites, which is the case with renewable developments.
This evening I want to advance the conversation about the best way of spending the revenues that the Government receive in the form of nationally determined taxes, levies and duties. Specifically, I want to discuss the proposal for an initial 10% of tax revenues to be deposited in a shale wealth fund—a sovereign wealth fund by any other name. The fund should be ring fenced for a clear purpose, such as improving the UK’s energy efficiency, using the proceeds from a fossil fuel to reduce our future dependence on those same energy sources.
Graham Evans (Weaver Vale) (Con)
I pay tribute to the work that the right hon. Lady did in the House over her many years as a Minister. Weaver Vale is affected by shale gas exploration. Does she agree that the most affected communities should benefit from the shale gas wealth fund?
Caroline Flint
I do agree. Whether shale gas or nuclear, when it comes to developments in energy we should recognise the enormous contribution communities make towards our future energy security. Such communities should be seen as guardians of the country’s interests, and they should receive support from some of the good things that could happen to them as a result of such developments.
As I said, it would be helpful if we could ring fence the fund, but I am aware that it is not an immediate win. We are some years from receiving significant taxable profits on shale. However, I cannot help but look at our neighbours in Norway and think how different things might have been had we also protected our North sea oil and gas revenue. This fund will never equate to the scale of such revenue, which has never been less than £2 billion a year since the 1970s and reached over £12 billion in one year during the past decade. Successive Governments poured that revenue into the general taxation pot and simply use it to fund general public spending. By contrast, Norway created a sovereign wealth fund that is now so significant that the income it generates for the nation outstrips the revenue from oil production, but it also has some interesting rules.
Sammy Wilson (East Antrim) (DUP)
Given the reserves of shale gas that are believed to exist in the United Kingdom, does the right hon. Lady think that the wealth fund could be a massive boost to the economy, not just for a short period, but for a very long time?
Caroline Flint
The hon. Gentleman makes a good point. From what I understand of the places where shale gas could be recovered, it is an open question as to how much could be received in revenue. There may be difficulties in getting the gas out of the ground: it might be under the ground, but we might not be able to recover it all. It is an open question. At the moment, it is too early to know just how much could be gained. Now is the time to think about the principles for such a fund and about how we can ensure that it is not frittered away across Government on different schemes so that, at the end of the day, we cannot really see the power of good that it has provided for the nation.
As I said, the Norwegian wealth fund was quite amazing in how it was put together. First, the Norwegian Government said that they could draw down only 4% of the fund each year to spend, but March this year was the first time that they drew down 4%, and that is despite the fact that the fund was worth $890 billion. Secondly, they invested for the long term. The oil fund is Norway’s pension fund. We do not know exactly how much the shale wealth fund will generate, but it is forecast to generate £1 billion over 25 years, which is a considerable sum to put to good use, and it may be more.
To create a defined wealth fund is a start. The Government’s intention is that it should be a fund that is clearly separate from the general revenue pot. A further lesson would be to follow the Norway example and use the fund for a specific purpose. I am talking about one that everyone could see the point of—a big picture idea, with an impact that can be clearly seen.
Norway looked forward to a day when it no longer depended on oil. We could look forward to a day when we are not dependent on fossil fuels by reducing our long-term energy use. Energy efficiency in this country is at a crossroads, as existing programmes end or decline. As shadow Energy Secretary, I raised serious concerns about the coalition Government’s flagship proposal, the green deal. We were sceptical about how it would work. It lasted two years before it was scrapped.
I am a member of the Public Accounts Committee and we recently revisited the coalition Government’s household efficiency schemes. The Department of Energy and Climate Change’s financial model depended on large numbers of households taking out a green deal loan. The Government projected around 3.5 million green deals, yet a tiny 14,000 households signed up. That was bad policy making and, sadly, it wasted taxpayers’ money.
Jim Shannon (Strangford) (DUP)
The Prime Minister has indicated that 10% of tax revenue could be used for communities, which could amount to up to £10 million per eligible community. Does the right hon. Lady think that new infrastructure, skills training and long-term job opportunity could benefit each and every community?
Caroline Flint
Absolutely. The great thing about energy efficiency is that it has a multiplier effect. It not only makes our homes warmer and reduces bills, but creates jobs and encourages innovation, too. Although it will be a national fund, the delivery should be at a local level, and the leadership should be held regionally within our communities across the UK.
One bad scheme such as the green deal does not mean that we should give up. With the green deal gone, and the energy company obligation soon to exist solely to tackle fuel poverty, we need to be asking serious questions about how to move forward on energy efficiency. We know, because the Competition and Markets Authority told us, that 70% of bill payers are paying over the odds for their energy and even if the latest Ofgem measures are introduced, they will reduce bills for only a few. It is very likely that, even by 2020, we will still be talking about energy bills that are as high, if not higher, than they were in 2010. I am sure the Minister would agree that the cheapest energy is the energy that we do not use. A shale wealth fund could provide an opportunity to enhance a large-scale retrofit of the UK’s housing stock, protecting households from future energy price rises. The fund should not be the only programme for energy efficiency, but it would provide a new means beyond passporting the cost to the general bill payer.
For a moment, let us consider the future if we do not make energy efficiency a priority. Quite rightly, the UK has ambitious and legally binding emissions targets, and we shall have to meet those targets, with 80% of the UK built environment still existing in 2050. The UK building stock is a long way from the low-energy housing stock that the UK will need, and the challenge is still huge. The Government’s own figures for 2015 show that, overall, their largest energy efficiency scheme, ECO, installed one or more measures in around 5% of homes. Some 320,000 homes had cavity wall insulation installed, 230,000 had new loft insulation, and 50,000 had solid wall insulation fitted. Yet of the 620,000 green deal assessments, 89% of those homes were rated as D, E, F or G. There is a long, long way to go.
There is a huge job that needs to be done, and for whatever reason—poorly directed funding or lack of profitability—the hard-to-treat properties have been substantially ignored. Many of the easiest measures have been undertaken first. Now Britain needs to finish the job. An energy efficiency dedicated shale wealth fund could be a hugely positive step, and I am not alone in suggesting this. Neil Marshall, chief executive of the National Insulation Association, commented:
“There are still some 5 million cavity walls, 7 million solid walls and 7 million lofts that need insulating and therefore we welcome this proposal. Insulating these homes will combat fuel poverty and climate change as well as reducing energy bills and creating jobs.”
The association rightly identifies the fact that many homes have yet to be adequately insulated, including 95% of homes with solid walls.
Kevin Hollinrake (Thirsk and Malton) (Con)
Most of my constituency is covered by exploration licences for shale, so I have done a lot of research, visited Pennsylvania and set up an all-party parliamentary group on the subject. Does the right hon. Lady accept that the greatest impact of shale gas exploration is above the ground and consists of traffic movements, noise and light pollution? As a consequence, does she agree that some of the financial benefits should go directly to some of the householders who bear the brunt of those difficulties?
Caroline Flint
I entirely agree. Some of those problems come down to planning. As in any other planning arrangements, there should be mitigation by any developer of any undue impacts caused in the community. It is important to emphasise that not every place that is the subject of an application will get through, because of the drawbacks that the hon. Gentleman outlines. There are many different ways that compensation could be found from shale gas development, whether through the planning process, the £100,000 per well, 1% of revenues to local communities, or the shale wealth fund, which I believe has a particular role to play in addressing a massive problem in this country—the lack of energy efficiency.
IGas has decided to focus its community fund awards this year on local renewable energy generation and long-term conservation. In its submission, INEOS argued:
“The Government may wish to consider allocating a portion of funding towards energy efficiency initiatives or developing renewable technologies. This will also help to debunk the myth that it is an either/or between gas and renewables.”
Let us remember that INEOS is one of the firms that has had to import shale gas from the USA to meet its current needs.
Lancashire County Council argues in its submission that as part of a devolution deal the shale wealth fund in Lancashire
“could be focussed on green and renewable technologies and also ensuring that ordinary families in the county can help reduce their energy costs through energy efficiency measures in the home.”
Graham Jones (Hyndburn) (Lab)
I am delighted that my right hon. Friend has secured this debate, as it is extremely important. The topic is being discussed to some extent in Lancashire, and it is certainly being discussed among MPs. In my constituency 40% of properties have category 1 hazards—cold and damp—yet shale gas in the Bowland basin sits underneath it, as it does under the rest of Lancashire. Is it not imperative that we examine the problems, and is it not to the Government’s shame that they have abandoned housing regeneration programmes in the north that retrofitted many of those hard-to-treat properties?
Caroline Flint
It is certainly demoralising that in the coalition Government five years were wasted advancing methods to tackle the tricky problem of energy efficiency. I would not claim for a minute that all the schemes before that were perfect, but I know that the decent homes programme did a huge amount to bring our social housing stock up to a better standard, and that some of the work that we were doing through the Warm Front programme and other schemes was making an impact. Unfortunately, we wasted five years not learning from what worked and what did not work, and we ended up with something that did not work. We have lost time and we need to get back on track.
It is important to understand that there does not have to be a top-down approach. The past decade or more of energy efficiency programmes have generally shown that national targets need local delivery. Energy companies found that they could deliver their programmes more quickly and reach more households if they had a trusted local partner, such as a local council, acting as the face of the project.
Local authorities have lots of the data needed to create the heat maps, and they are well placed to pull together the records of the elderly and the vulnerable and the lists of the most inefficient properties. When they can see a street where 80% of properties are eligible and 20% are not, they can fill the gap to make sure that we do not leave streets with some properties done and some not done, with all the rage that follows in our communities.
Nor should we underestimate the significance for local economies. Home insulation is a skilled job, requiring high standards. These jobs are delivered locally. There are ready-made training providers to skill up apprentices. This is an ideal opportunity for tradespeople to retrain or to adapt a small business to provide this service. These are jobs for people in every town in Britain, with local investment producing jobs in every local economy—for installers, supply chains and British manufacturers. This fund can help to stimulate growth, jobs and innovation. With the fund’s principles and priorities set nationally, with regional co-ordination and leadership, and with local delivery, our communities can benefit in a more profound way, beyond compensation grants.
At Treasury questions, I recently asked the Chancellor for his views about a shale wealth fund providing for energy efficiency. He said:
“We have a serious challenge on this country’s energy capacity over the next 20 years, and we are going to have to invest eye-wateringly large sums of money—perhaps £100 billion—just to ensure that the lights stay on. Of course it makes sense to look at ways of reducing demand for energy through energy conservation measures.”—[Official Report, 25 October 2016; Vol. 616, c. 140.]
The Minister knows I will never shirk from holding the Government to account. I will continue to press for bill payers to get fairer energy prices, for shale gas to be produced responsibly and for communities to benefit from local funds. We may disagree from time to time, but I have worked with her before—not least to change the law on tax transparency. I will not allow party advantage to prevent the sharing of good ideas or the possibility of finding consensus to meet a problem or find a solution. This debate, and the Government’s consultation, may be such an occasion. Let the shale wealth fund become a warm Britain fund: a fund that is a friend to those households who have yet to see the benefits of energy efficiency; a fund that foresees a low-carbon Britain and contributes to that goal; a fund that creates jobs in every community, uniting politicians and the public for the common good—a fund that truly leaves a legacy.
The Financial Secretary to the Treasury (Jane Ellison)
I thank the right hon. Member for Don Valley (Caroline Flint) for bringing this debate to the House and for a typically thoughtful and constructive speech. I also thank other hon. Members who have stayed to make their contributions on this important topic.
I should say straight away that I absolutely agree that energy efficiency is one of the best ways to reduce energy bills in the long run, so we start on a note of consensus. As the right hon. Lady will know, and as I will make clear in my remarks, the fact that the consultation closed relatively recently inevitably limits a little what I can say. However, I enjoyed her speech, and I would like to make some general comments about where we are in terms of shale and the shale wealth fund.
The Government are backing the safe development of shale gas. We have over 50 years’ experience of regulating onshore oil and gas. The UK has the experience to develop our shale gas industry while at the same time ensuring the most robust and stringent protections for our environment, too.
We believe, as I sense other Members do, that shale gas is an important step forwards in a number of respects. It is a way to secure our energy supply by using our own domestic resources, as we have heard. It also brings with it the potential for tens of thousands of new jobs across various sectors, from the oil and gas industry to construction and engineering. I was very struck when I recently chaired our oil and gas forum in the Treasury just how many jobs are created in supply chains by these industries—it was one of the most striking things to come out of that discussion.
Of course, natural gas will continue to play an important role in our energy system as we move towards a low-carbon economy. We are absolutely committed to reducing our carbon emissions by at least 80% by 2050, compared with 1990 levels. Members on both sides of the House will recognise the fundamental importance of our doing so as part of the collective— indeed, global—efforts to stop climate change in its tracks. We are the first country to propose a phase-out of unabated coal, with gas and nuclear forming the secure base of our future energy mix as we continue to develop renewables and improve energy efficiency. I could not agree more that that is a really important part of the mix.
Shale will be a new, domestic source of gas, which adds to our energy security as we make the shift from coal to reduce our carbon emissions. Gas is the cleanest fossil fuel, producing half the carbon emissions of coal when it comes to generating power. Studies have shown that the carbon footprint of our shale gas would be significantly less than coal and comparable to the liquefied natural gas we import. In short, the shale gas resources beneath Britain could contribute to our security of supply, to jobs, and to increasing tax revenue, while providing a bridge to the greener future we all support.
That is why, in the previous Parliament, we put in place the right fiscal framework to make sure that the incentives are in place for investment in shale gas. It is worth reminding the House that there is an estimated potential cumulative investment in the region of £33 billion. As we explore our shale gas resources, we are also exploring how we can make the most of the benefits that the industry could bring to our economy. Specifically, we want to ensure that the communities and regions that host shale activity will benefit directly from doing so. By that, I mean that they should benefit beyond the boost to the local economy that one would expect them to receive in any case from the development of this new industry. The Prime Minister has been very clear on this. Local people must come first, not only in their involvement in the planning decisions that affect them, with all shale gas applications requiring a full consultation with local people, but in sharing the benefits with the areas in which the industry is developed, with a significant proportion of this expected in the north. That means that the shale industry could play an important role in the economic development of parts of the northern powerhouse, helping to drive local growth, investment and jobs even further.
Graham Jones
The autumn statement of 2015 said that the community dividend benefit of 1% is expected to rise to 10%. Are the Government going to make good, to local communities specifically, on that statement that the 1% dividend will rise significantly?
Jane Ellison
I am about to come on to the dividends for local communities and how we see that working through.
The shale wealth fund is a big part of how we are going to deliver these benefits for local areas. It will consist initially of up to 10% of all the tax revenues arising from shale gas production, all of which should be used for the benefit of the communities that host shale sites. I want to be clear on two points: first, this is new funding, not money used to replace any existing Government funding; and secondly, it will be in addition to any benefits provided by the shale industry itself, because, as Members know, the shale industry has independently committed to making payments to communities that host shale gas developments. The industry’s benefits scheme currently commits to providing £100,000 for each well site of hydraulic fracturing, as the right hon. Member for Don Valley said, as well as 1% of revenues from any site that enters into commercial production. The shale wealth fund is in addition to that. We estimate that it could provide up to £l billion in total and each community could receive up to £10 million. We want this money to go towards leaving a positive legacy for the future of these areas. I note that the issue of legacy was also on the right hon. Lady’s mind.
The shale wealth fund will be the latest in a line of local benefits schemes designed to support communities. For example, a number of renewable energy firms have made a voluntary commitment to provide community benefits of £5,000 per MW of installed capacity.
Graham Jones
The Minister says that this wealth fund is going to be available. I am Lancashire MP, so let us just talk Lancashire, where development of fracking is predominant at the moment. What discussions has she had with Lancashire County Council, Lancashire authorities, the local enterprise partnership or other interested parties about how the wealth fund may be delivered? How does she see it being delivered at a regional level in Lancashire?
Jane Ellison
I am afraid that, inevitably, it is a bit too early for me to comment in detail on that. The consultation closed only in late October, and we have had a very substantial number of responses that we want to go through very carefully. People have responded in quite some detail on exactly these sorts of issues, so we will return to this topic and it will be possible to look at them in more detail later on. Suffice it to say that we have had plenty of ideas about how this might work as we move forward, but we need to look at this carefully.
I was giving examples of other funds. The landfill communities fund is another example of statutory community benefits provision, and the Government’s coastal communities fund is also similar.
The Government have been clear that local communities should benefit directly from shale gas resources in their areas, because we are committed to delivering an economy that works for all, ensuring that the benefits of economic growth and investment are spread as widely as possible. We have also been clear, though, that local people often know best what the individual needs of their communities are. We want them not only to benefit from the fund, but to have a real say over how it operates.
That is why we have sought views from the country through our consultation on how the fund should operate and ensure tangible, lasting benefits for communities and regions that host shale activity. We asked how the shale wealth fund should be delivered, and what its priorities ought to be. As I have said, the consultation closed on 26 October. We have had an excellent response from a range of individuals and organisations—from right hon. and hon. Members, including the right hon. Lady, to charities, local businesses and community groups. We are now looking carefully at the responses, and we plan to publish our response to the consultation by the end of the year. I hope the House will therefore understand that I cannot give an indication of the responses at this early stage.
On publishing the responses, it is for respondents to consider whether to do so, but we will of course provide a list of respondents at the end of the consultation document, as we always do. I would have thought that councils and LEPs would normally make public their contributions. Given the interest in the debate, I am sure many people will decide to do that.
In answer to the right hon. Lady’s query about the purpose of the shale wealth fund, the main purpose is clear. The fund is a way of ensuring that, as this country develops our shale gas resources in a safe and sustainable way, local communities and areas that hold the resources and therefore support the industry’s development should directly benefit from doing so. As I have said, this could amount to as much as £1 billion of extra funding across these regions. We believe that local people should have a say over how best to use any such funding—for example, about whether it should be used to support new job opportunities, develop or enhance community assets, be invested in skills or be invested in green energy.
Caroline Flint
I understand that the submission from Lancashire County Council talks about the investment going into renewables or energy efficiency, but may I give the Minister a little word of warning? As the MP for a constituency that has been involved with the landfill fund and the aggregates tax, I know there can sometimes be a danger that only the loudest voices get heard. Quite a few local football teams get more strips than Manchester United because they are back every year putting into funds. Can we think bigger about the impact of this once-in-a-lifetime opportunity, and will she bear that in mind?
Jane Ellison
Of course. I take this debate very seriously, and the fact that it has essentially taken place in a consensual atmosphere makes me think that there is a possibility the House can find things on which we substantially agree about how we move forward. We need to look at the responses. I am sure there will be other contributions and thoughts about how we move forward, but we just have not had the chance to look at them yet.
The right hon. Lady has made a significant contribution to the debate this evening, and she has clearly set the ball rolling in the House’s debate on a topic to which I am sure we will return. We have consulted extensively, asking how the shale wealth fund should be delivered and what it should be spent on. I look forward to reporting on the outcome of the consultation in due course. As I have said, I feel confident in saying that we will return to debate this important subject further, and I thank the right hon. Lady for kicking off the House’s debate on this issue in the way she has this evening.
Question put and agreed to.
Petition
Change of use of Abberley Hotel
Westminster Hall
(8 years, 1 month ago)
Westminster HallRead Full debate Read Hansard Text
Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Free Childcare
(8 years, 1 month ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Helen Jones (Warrington North) (Lab)
I beg to move,
That this House has considered e-petition 132140 relating to free childcare.
It is a great pleasure to serve under your chairmanship, Mr Davies.
The petition has so far garnered more than 132,000 signatures, but the amount of public engagement generated through the Petitions Committee has been quite astonishing. We have had 33,000 posts on our Facebook page, which has been viewed by more than 492,000 people. I did a webchat, which, for someone so useless with technology, is a step forward in itself. A number of people also emailed me personally and some of the stories they told were quite heart-breaking.
The difficulties that many parents have to go through simply to go out to work ought to give us all in the House pause for thought. Because of the difficulties they face, some of those parents, understandably, are quite angry, and sometimes their anger—not in the majority of cases—turns against the wrong target, which is those getting free childcare for two-year-olds. I want to set out the position as it is because there is a misunderstanding. Many people think that free childcare for two-year-olds is only available to parents who are unemployed, but that is not the case.
As we all know, all three and four-year-olds are currently entitled to 15 hours of free childcare for 38 weeks of the year. The provision was brought in by the Labour Government for four-year-olds for 33 weeks of the year, and it was gradually extended. It is a universal provision and most families take up their entitlement. That Government also sought to start to extend free childcare to the most disadvantaged two-year-olds, and the coalition Government broadened that further. It is available not only to those on income support or income-based jobseeker’s allowance, but to children in the poorest working families: those in receipt of tax credits and—the last time I looked—with an income of less than just over £16,000. Crucially, the provision is also available to looked-after children, to children with disabilities and to children with special educational needs. I say that it is available to the children, rather than the parents, because that particular policy is aimed at tackling disadvantage in the early years so that children are ready to start school and benefit properly from their education.
The Government have taken a different course, and seek to extend free childcare for three and four-year-olds to 30 hours a week. Crucially, that is not a universal provision. It is for working parents only, and will be subject to minimum and maximum income limits. It is currently in the pilot stage, and I have reservations, which I will come to later, about how it will be paid for. There is no doubt that the situation is very confusing for parents, and it is understandable that many of them are very angry at the problems they face because the cost of childcare has risen alarmingly in the past few years. It rose by 30% on average between 2010 and 2015, which is five times higher than the rise in wages. The parents who have contacted me have told me about the problems they face not just with childcare during the day, but in getting after-school childcare and holiday care.
Kirsten Oswald (East Renfrewshire) (SNP)
The hon. Lady is making an important point about the need for flexibility in the timing of childcare. I am particularly encouraged that the Scottish Government, after a major consultation, have launched a series of trials to ensure that, in Scotland, we can offer places where and when families need them. Does she agree that those steps are significant in making the provisions work for everyone?
Helen Jones
I agree with the hon. Lady that we need flexible provision of childcare because what we have does not always fit with parents’ working hours. I will come to that later, but first I will give a few examples of the cost to parents.
Of course, costs vary throughout the country, but so do wages. One lady who contacted me from the north-west said that her family pay £840 a month for three days of childcare a week. Now, they are not highly paid and, to put it into context, that is exactly the same amount as their mortgage payment. Another parent from Surrey, at the other end of the country, got in touch with me. She and her husband have a reasonable joint income of £69,000, but they have twins. They have found that the cheapest way to provide childcare for their twins is to hire a nanny, but the cost of hiring a nanny is about £25,000 a year, which is more than a third of their joint income—an astronomical sum. These parents feel caught in a trap that is not of their own making. They want to work and, in many cases, they need to work just to keep their heads above water, yet a huge chunk of their earnings is being taken by childcare.
I was also contacted by a nurse who wants to go back to work in the NHS, and the country certainly needs nurses to go back to work. She found that, for a 12.5 hour day shift, she would be just £25 better off after paying for childcare. Her solution is to work night shifts, which, for various medical reasons, are not good for her. That is an example of the barriers people face just in doing their job.
The other issue that many parents raised with me was one of access, and that seems to be particularly true when one partner is in the armed forces. One family contacted me—again, not pleading poverty. They said, “We have a good income”, but they found that every time they moved, the decent nurseries, at a reasonable cost, were full, and they charge—certainly in the south of England—between £50 and £100 per child just to be put on the waiting list. Frankly, that is a rip-off that the Government could and should end very quickly.
Another member of the armed forces—a single parent who is not earning a high income—told me of the real difficulty she faced in finding childcare that would fit with her irregular working hours. Another family told me that when they move, they find that some local authorities provide free childcare for two-year-olds of military families, and that others do not, but those families have no control over where they are posted or, therefore, whether they can access that provision.
These are parents who are trying to do the right thing and set a good example to their children but, naturally enough, they want the best provision for their children, as we would all want for our children. That is why we should be talking about early years provision and early years education, rather than childcare. We want to provide the best we can for our very youngest children, but the problem is that for many years there has not been sufficient investment in the sector, and there are not sufficient qualified staff. I am convinced, as someone who began her career as a secondary teacher, that if we invested more in the early years, we would prevent many problems further along in the education system. Such a move would pay us because it is the right thing to do not only morally, but economically.
The last Labour Government recognised that problem and they particularly recognised the difficulty of ensuring that we had a sufficiently skilled workforce. Therefore, part of the job of Sure Start centres, which became children’s centres, was about providing day care, but it was also about giving advice to parents and, crucially, working with other providers and childminders to raise standards across the sector. It therefore seems a tragedy that the coalition Government decided to remove from centres in the most deprived areas not only the obligation to provide full day care but the need to employ a qualified teacher. There are some Ministers—I except the Minister present from this—who believe that anyone can teach, but I assure her that that is not the case. I suspect that many members of the Government would not last a day in early years provision. I know that I would not, and I am a qualified teacher. Early years provision is a highly skilled occupation if we are going to do it properly.
At the same time, the Government set up the early intervention grant and ended the ring-fencing of funding for children’s centres. They then reduced the grant year by year, meaning that not enough money was going into the system. The House of Commons Library estimates that the predecessor grants that were rolled up into the early years grants were worth £2.79 billion in 2010. Immediately on taking office, the coalition Government reduced the sum to £2.48 billion, and to £2.24 billion the year after—that is 10% lower than what they spent the previous year and 20% lower than planned. Two thirds of that money was spent on the under-fives, which gives an idea of the impact of the grants on the whole sector.
There was no extra money when the coalition Government expanded childcare for two-year-olds. They paid for it by moving some of the early intervention grant across to the dedicated schools grant, thus starving the rest of the sector of resources. The remains of the early intervention grant continue to go down. The grant was part of the start-up funding assessment when the Government changed to a business rate retention scheme for local government finance, and it was £1.71 billion in 2013, going down to £1.58 billion the following year. This year it is £1.32 billion and, if the indicative totals we have are right, by 2019-20 it will be just over £1 billion.
What is the point of this ramble through the byzantine pathways of local government finance? I must admit that I find it fascinating, but I have never found anyone else who does. The simple reason is that we can have good early years provision and we can have cheap early years provision, but we cannot have good, cheap early years provision. The real problem with what the Government are doing is that it pushes more of the cost on to parents because the free hours are underfunded, and it ensures that the expertise that was being built up in children’s centres is gradually disappearing as they close and as the services they offer are restricted.
There is doubt about whether the extended hours that the Government are offering will be properly funded. The National Audit Office published a report earlier this year in which it said that there was real difficulty because the Government’s implementation of the provision will mean the end of much cross-subsidisation. At the moment if a parent has, say, 40 hours’ childcare a week, 15 of those hours are paid for by the local authority but at a fairly low rate. The hours that the parent takes on are paid at a higher rate to cross-subsidise the other hours. If the Government do not properly fund the extra hours, several things could happen: the quality might reduce; many providers might not take part in the scheme at all; or there might be a further cost for parents because providers decide to charge more for other types of childcare, such as childcare for the under-twos, holiday provision and out-of-hours provision.
Several providers that have contacted me say that they are already struggling to keep going, even though low wages are endemic in the sector. Staff have contacted me about how little they earn, which makes it even more difficult to attract good, skilled staff. Those issues are important to parents because the Government estimate that the parents of some 390,000 children will want to take up the extra hours, which means an extra 45,000 places are needed. In fact, even more places are likely to be needed as the figure is likely to be an underestimate. If the policy is successful in getting more parents into work or in getting parents to work extra hours, even more childcare places will be needed. The Government’s response was to announce last year that they would increase the average national funding rate for early years to £4.88 an hour from £4.56 an hour for three and four-year-olds. That, of course, is an average. Many councils do not pay that amount because they are having such difficulty funding even statutory services that there is not enough money left to fund early years services.
It is fair to say that many providers found the Government’s response unconvincing. The Family and Childcare Trust told the Childcare Public Bill Committee that it was
“unlikely to be sufficient to address the strategic challenge the 30 hour offer presents”.
The National Day Nurseries Association found in a survey of its members that only 45% were likely or very likely to take part in the scheme. If so, the shortage of places that we already face will simply get worse. Already 45% of councils in England do not have enough places for families who work full time.
The second issue to which the Government must face up is where most three and four-year-olds access this provision. Some 58% of them are in the maintained sector, usually in nursery classes attached to a primary school. Many of those schools are on restricted sites and would not be able to expand even if capital funding were available, which at present seems fairly unlikely. There is also a bulge in the number of primary-aged children coming through the system. It does not take a genius to work out that if it is having to address a bulge in the number of primary schoolchildren as well as extra demand for nursery places, any school that can expand will expand to meet the primary provision because it has to—it is as simple as that.
At the same time, the Government risk hugely damaging the best provision in the childcare sector, which is in maintained nurseries. Some 60% of maintained nurseries are rated “outstanding” by Ofsted, and 39% are rated “good.” Nowhere else in the education system even gets near that level of supply. In their consultation on early years funding, the Government say that they want to fund all providers equally. Wherever they are, each child will receive the same amount of funding per hour. That sounds reasonable until we understand that nursery schools are required to employ qualified teachers and a qualified head, and many of the heads in this sector are very well qualified indeed. Nursery schools also provide training places for staff. They do outreach work not only with families but with other providers. The very good maintained nursery in my constituency, Sandy Lane, is based on the same site as a children’s centre and a private nursery precisely so that the three can work together, but they need the funding to do that.
We are in a position where we risk getting rid of the best provision, or hugely damaging it, where the Government are underfunding childcare and where the cost is being heaped on to parents for the extra hours they purchase. Frankly, it is a mess. It is a national disgrace that we treat our youngest children in that way. By trying to do it on the cheap, we are putting huge stress on working families. I would love to be able to say that we can deliver free childcare for all working families, but we cannot do so without more money in the system and without more training for staff.
That situation cannot be solved overnight—it cannot, I believe, even be solved in one Parliament—but we need a national strategy for early years. The Government should consider it seriously and set up an inquiry, perhaps a royal commission, staffed by experts. I know that some Government Members do not like experts, but we need them. They are experts because they know something about the subject. The inquiry should do several things. It should chart a path to, if not free, at least heavily subsidised early years provision, and it should lay out how we can grow the workforce that we need. At the moment, for instance, when we need nursery nurses the most, the number of applications for training is falling. The inquiry should also set out how we can raise the skill levels of people already working in the field.
At the moment, if we are honest, a lot of children are being cared for by unqualified teenagers, who might be nice people doing their level best but who do not have the skills necessary to develop the minds of young children, at an age at which they are developing more rapidly than at any other time in their lives and need constant care. We must amend that to give them the best. I hope that such an inquiry would have all-party support, so that we could take a consistent approach through several Parliaments.
I recognise that it will not be enough to alleviate the problems that parents face now. I urge the Government to consider seriously what they can do to support parents. The first thing that they should do is end a policy that threatens the best provision in the sector. The Government need to consider how to develop maintained nursery schools, how nursery classes attached to primary schools can expand and what capital provision can be given for that. They also need seriously to consider raising the hourly rate paid for the care of under-fives. If they do not, decent providers in the private sector will not be able to continue. Those who try to provide good, decent childcare cannot do it without proper funding. The Government should work much more with businesses to develop workplace nurseries—not simply providing vouchers, but talking to businesses and explaining why nurseries are vital to retaining a trained workforce and why they benefit businesses as well as children.
The Government should also consider giving parents decent help now with the costs of childcare, perhaps by extending child tax credit or by other methods. What is happening now is not helping families or children. We need to stop thinking of early years provision as an add-on that we think about after we have thought about the rest of the education system and realise that it is the way to tackle disadvantage and ensure more social mobility. If the Government concentrated on early years provision rather than grammar schools, they would do much better.
Kirsten Oswald
The point about disadvantage is key. Mark McDonald, the Scottish Government Minister for Childcare and Early Years, has identified that high-quality early learning and childcare plays a vital role in narrowing the attainment gap, which is why there is such a commitment to increasing early childcare and education provision.
Helen Jones
It is certainly true that it narrows the gap, but I want to make the point that it is good for all children. All children deserve the best provision that we can offer them, and we are not offering them that at the moment. We need to get a grip on the situation, for the sake of families in this country and of our children. If we do not, although we might not pay for early years provision immediately, we will pay the price further down the line in educational failure, social disadvantage and children not reaching their full potential. I urge the Minister, when she replies, to take the issue seriously so that we can at last move forward in this often-forgotten and certainly underfunded area of our education system.
Alison McGovern (Wirral South) (Lab)
It is a pleasure to speak in this debate and to serve under your chairship, Mr Davies, and to follow my hon. Friend the Member for Warrington North (Helen Jones), who has given us a brilliant exposition of the current problems with funding for childcare. Hopefully I will not repeat much of it, but I think it is interesting that so many people signed the e-petition and, as she explained, wanted to get involved in this debate.
This morning, before this debate, I was lucky enough to be asked to speak on Radio Merseyside—a fabulous local radio station. Often, when I take my little girl to the school gate, I do not have much political discussion there—parents tend to be busy and not thinking about politics—but it was notable to me that this morning when I dropped off my lovely girl, her teacher said to me, “I’ve just heard you on the radio talking about childcare,” and proceeded to talk to me about all the issues. It does not surprise me at all that my hon. Friend has had the experience of all those people getting in touch with her. This is one of the most significant issues that faces our country, and even though it may not appear to be high politics in the conventional sense, it is where politics in our country could most influence families’ lives for good.
I will go back to basics and talk about the principles of why Government should be involved in childcare, and then make a couple of points about how we should do so. In the end, support for families and children, and for parents at work, goes back a long way in our country. Beveridge recognised when he was considering what made people poor that there were two times in people’s lives when they had less earning capacity and extra cost. One of those was when they got old, and the other was when they had children.
Beveridge recognised that having kids had the power to plunge families into poverty that they would not be in otherwise. That is why he designed family support as part of the very nature of our welfare state. He thought that people should be able to smooth their costs over their lives and receive state assistance at times when they had extra costs and less capacity to earn, so that when they had the ability to pay in, they could do so, smoothing their income over their lives to prevent poverty. That is the principle of our welfare state, and it always has been.
Beveridge knew something else as well about preventing families from being poor. He knew that Government needed to be committed to the principles of full employment and prepared to provide public services to underpin good health and good education, to ensure that people had the ability not just in theory but in practical terms to get a job. When I read the e-petition as submitted, with its emphasis on helping working people, I agree with my hon. Friend that that is exactly what our country should be all about. That is why I think we should adopt the same principles, attitude and approach that Beveridge did when he designed our welfare state.
However, there is a crucial difference between the labour market then and now: people like me can get a job. Women now rightly expect to go to work. It turns out that once the historic prejudices against women in the workplace were removed—piece by piece, by those women in the ’50s, ’60s, ’70s and ’80s to whom I owe every chance that I have had as a woman in the workplace—women in great numbers wanted to go to work and have a career. We therefore need to fundamentally rethink the way in which the Government support families when their children are small, and we need to confront the fact that our labour market is now very different. That means that, as a country, we must applaud the nature and instinct of people who want to go to work and we must seek to provide good public services to back up that driving instinct. That simple conclusion is supported by the contribution of the woman who spoke before me on Radio Merseyside this morning, a dedicated Scouse nan called Linda who had gone on the radio to explain how stretched her family was; not just the mum and dad but the grandparents were trying to work and do childcare.
Kirsten Oswald
The hon. Lady makes a point that we should all consider very carefully, which is that this issue is not just about women—even though someone who looked around this Chamber might be forgiven for thinking that it was. It is about all of us. It is about everyone in a family: not just the children, but the parents and the wider family too.
Alison McGovern
I thank the hon. Lady for her intervention. Of course childcare is not just a women’s issue, but it is a fact that the labour market has changed because women have joined it in greater numbers, so we have to rethink how the Government support parents in work. As it happens, I am sure that in my constituency as many men as women care about the cost of childcare. As many granddads as nans are supporting their children to take care of their children. This issue affects the whole family, older and younger alike, for all the reasons that my hon. Friend the Member for Warrington North has set out: costs are cantering away ahead of wages and successive Governments have been too slow to be radical on childcare.
Another reality that we have to face is that we have a productivity crisis in this country: we are still working longer to make less than our competitors, and I think childcare plays a hidden role in that. Over the summer I went back to work—I did days at work with different types of businesses throughout the north-west, including in retail, manufacturing and care. Managers often told me that they wanted to find people to promote from within their businesses, who could do more, earn more and drive the business forward, but that people were not able to take on that extra responsibility because of their responsibilities at home. They did not think that they necessarily had the back-up to step up and get that promotion. Businesses can get people in through the door to do the basic jobs, but helping them to move on brings the risk of their fragile family caring responsibilities being unpicked.
Helen Jones
Does my hon. Friend agree that working hours have changed across the whole range of businesses and jobs? When I worked at holiday jobs in retail, for instance, we finished at 5 o’clock—it was 9 to 5. That is no longer the case, and it places a huge burden on parents.
Alison McGovern
My hon. Friend is correct. These days, retail is 24 hours a day. She makes an excellent case for some sort of royal commission or cross-party inquiry into the matter, partly because we need to take a sectoral approach. The challenges in retail are immense, and so are the challenges in care. The NHS and the care sector need their own childcare strategy. We have a nursing recruitment crisis on our hands, and a lot of it has to do with care. When I was shadow childcare Minister in the last Parliament, I argued that the NHS needed its own childcare strategy, which the Department of Health should lead across Government. That has not happened yet, but it must. In the present situation, with the risk of Brexit and the possibility of an NHS hiring crisis, we must recognise that a lot of the problems are of our own making. Nurses, doctors and other health professionals—women and men—are really struggling to work the hours they need to and to stay in work as they wish to, when they simply do not have the appropriate back-up.
The world has moved on, as my hon. Friend said. We want our businesses to be as productive as they can and our public services to be as efficient as they can. It is therefore incumbent on the Government to think strategically and to question the infrastructure support we offer so that our economy can work well. I know that the Government are committed to cutting corporation tax, but I really question whether that is the priority for business right now. When we talk to people in the business community, they are more interested in business rates than in corporation tax, and they are definitely interested in childcare. The childcare challenge that many employees face is a problem for small and big businesses alike. As the CBI has said, the Government could have a real impact on dealing with the infrastructure challenge that childcare represents.
I have two final points: the first is about children, who I feel always get left out of this conversation, and the second is about a possible way forward, adding to the very good suggestion of my hon. Friend the Member for Warrington North.
Disabled children, who face particular difficulties in accessing the right care and support, are often forgotten in all this. Their parents are entitled to the same childcare support as everyone else. Given the communication difficulties and medical needs that children with disabilities may have, their childcare provision is clearly incredibly important. We now know much more about how to help children with disabilities to progress, but the earlier that help comes in their life—the earlier they get that support—the better and more successful it is. I have seen that with families in my constituency who have children with disabilities. If the Minister takes up my hon. Friend’s sensible suggestion of an inquiry, I ask her to include those who have expertise in working with families who have a child with a disability. We can do more than ever before to give those children the best possible chance of a successful life, so let us do it from the very beginning.
The second group of children who are often forgotten about is those who live in rural areas. Towns and cities face many challenges in getting the right childcare provision, because geography can be a natural barrier to access. Those challenges can often be overlooked in our modern economy. I ask the Minister to think about that too.
Frankly, even for those who do not face those challenges, being a parent of a small child is terrifying. All of us who have ever experienced it know that. We need to move towards universal childcare for a very simple reason, in addition to all the reasons that I have set out about the benefits it would bring to businesses and our economy. Being a parent can be a huge challenge for anyone, and the one thing that gives a parent a little bit of confidence is meeting that key worker in the nursery or the childminder who has brilliant expertise, so that they have someone in their life to ask, “Am I doing this right?” I know that in the past parents coped without help and support, but these days our experience is that difficulties with parenting can strike anybody, whatever their income level or their confidence.
Helen Jones
Before my hon. Friend finishes her speech, may I point out that parents in the past had a lot of support? Extended families lived together or near one another, which is no longer the case. People did not look after a baby on their own; they had grannies, aunties and great-aunties all around them. As families become more mobile, that support network tends to disappear, which is a real problem for parents.
Alison McGovern
That is a very good point. In addition, bearing in mind what we know now about child development compared with what was known many years ago, I would argue that childcare is a real expertise. All parents welcome expertise on the best way to help their child to develop. All the evidence shows that the most important learning years of a person’s life are those when they are very small, but that is terrifying for the parent of a very small person. We know that what we do in those important years will echo down that child’s life and we desperately want the best for them, so it is really great to have a professional there who can help.
We should have a vision that runs from the midwife who cares for the child when they are first born, and for the parents before that, through the health visiting system to which the Government have said they are committed, to that family working with a key worker through nurseries and some universal childcare provision. That way, all through the child’s earliest years, professionals would consistently be around the family to help them, alongside their extended family, where possible.
How do we do that practically, though? I wish to add a final thought to the mix. We have heard from the hon. Member for East Renfrewshire (Kirsten Oswald) about the work the Scottish Government are doing, which is to be commended, but some new devolved institutions are also coming to England. We should look at how childcare is provided through local authorities, because there is a possibility of doing more and improving expertise if local authorities are able to work together across boundaries to come up with a good universal childcare proposal for their area. We might then benefit from the efficiencies of local authorities working together, and it would also help them to think strategically about the educational challenges faced by their city or city region and then to put investment in the right place. Ministers cannot know that from Whitehall. With the greatest respect to the Minister, she is never going to have a fine detail of knowledge about the best childcare arrangements for Merseyside, but we could do that in Merseyside for ourselves. Will the Minister think about how resources could be devolved out of Whitehall and given to city regions or groups of local authorities working together?
I am afraid I agree with my hon. Friend the Member for Warrington North: in the end, I do not believe we have backed up our children with nearly enough finance. Nevertheless, if we are going to spend more on childcare, let us do it in an effective way that respects the different challenges faced by cities throughout the country and does not dictate from Whitehall how it should be provided. If we do that, people will get a real sense that the Government are prepared to back them up. Our economy will most certainly feel the benefit, but—much more importantly—so will every family in the country.
Kirsty Blackman (Aberdeen North) (SNP)
It is really nice to speak on a petition in Westminster Hall; I have spoken in a number of other Westminster Hall debates, but never on a petition, so it is nice to have another first 18 months into the job. I thank you for your chairmanship, Mr Davies, and the hon. Member for Warrington North (Helen Jones) for leading the debate. As Members would expect, I wish to talk about the situation in Scotland, and what we are doing there on early learning and childcare. I shall discuss the real-life importance of childcare provision. The hon. Members for Wirral South (Alison McGovern) and for Warrington North both gave a lot of real-life examples; I, too, will discuss a few. I shall also talk about the importance of choice for parents.
I shall start by talking a little about the numbers and finances. Labour Members, particularly the hon. Member for Wirral South, have discussed the amount the Government will spend to increase the number of free hours. I understand that the UK Government are committed to spending an extra £1 billion by 2020. The Scottish Government are committed to spending £500 million by 2021; considering how much smaller Scotland is than England, that is a stark contrast.
The Parliamentary Under-Secretary of State for Education (Caroline Dinenage)
May I correct the hon. Lady? Although there is an additional £1 billion, the figure is actually £6 billion by 2020.
Kirsty Blackman
Yes, the Scottish Government have committed to spending an additional half of the UK Government’s additional spend. Considering the differential in the respective populations, there is probably a differential in the spend. I took the figure for UK Government spending from the Library debate pack.
In Scotland, we will create 600 new early learning and childcare centres, with 20,000 additional qualified staff. Doubling the free early learning and childcare hours for all three and four-year-olds, as well as for the most disadvantaged two-year-olds, will benefit families by more than £4,500 per year, per child. That is a significant saving. I will come on to discuss the importance of that in the context of choice.
Our doubling of free childcare in Scotland will not be linked to employment status, unlike the changes down here, but changes will be made in both England and Scotland, and I do recognise that England is making positive changes to childcare provision. Our respective Governments are doing that in slightly different ways, with slightly different funding structures. I am not criticising the UK Government for increasing the number of free hours; quite the opposite. It is a very good thing. I have spoken before about how important it is.
I have a five-year-old and a three-year-old, and I have friends with similarly young children. A number of the women have had to go back to work for nothing. After the childcare costs are taken out, it turns out that they have gone back to work for pretty much no pay. The hon. Member for Warrington North mentioned £800 for three days’ childcare a week; for a while, we were paying £300 a month for one day a week. That is an incredible amount of money, and it is difficult to earn that much in a month when working only one day a week.
Ms Margaret Ritchie (South Down) (SDLP)
The hon. Lady is making a compelling case. Does she agree that there is a compelling need for both partners in a household to work, and that sometimes inhibits childcare provision? If they do not work, they will not be able to pay for that provision.
Kirsty Blackman
Absolutely. There is a real problem with choice for families. In some cases, families cannot afford to go to work because of the cost of childcare. We should not be in that situation. All parents—men and women—should be able to choose whether they go into the workplace. For some parents, it is much healthier to go to work. I was a rubbish stay-at-home mum and did not enjoy it very much at all. I did not do it for particularly long, because it just was not for me—I was going mad. It was much better for me to be in the workplace, but in some cases it was costing me money to do that. I was having to spend more on childcare than I was earning, especially once commuting was taken into account. As has been mentioned, that is a real issue in rural areas, and there is a need for specific provision for such areas.
Choice is a real issue. There has been a little discussion about whether childcare is a women’s issue. In Aberdeen and my local area, it is probably more of a women’s issue than in some other areas of the country. We have so many people, mostly men, who go offshore for work. As they are offshore for two or three weeks at a time, there is a real issue with women going back to work. They certainly cannot work night shifts, because there is nobody there to care for the children overnight. Historically, a huge number of women have had to decide not to work on the basis of their partner’s working hours. The lack of flexibility in childcare is a real issue in that respect.
Alison McGovern
Does the hon. Lady agree that her argument is an absolutely cast-iron reason why this issue has to be addressed in a devolved way? It has to be devolved down to the best possible level, because local economies are different and not everything can be dictated from Whitehall.
Kirsty Blackman
It is really important that we look at how this issue is addressed in terms of devolution, and in different areas, because there are specific challenges—around specific industries, such as the one I mentioned; around rurality and the kind of distances involved in some rural areas; and around staff numbers.
We have a specific issue in Aberdeen with attracting qualified staff, because as we have historically had a lot of people working in the oil industry, where they have made lots of money, housing is more expensive than in other areas. Consequently, someone who works in childcare, or even teaching, will find it more difficult to live there. Although we have made local provision to deal with some aspects of this issue, we are not there yet, and it is necessary that local authorities, institutions and organisations can have input into how childcare provision is managed.
Kirsten Oswald
I am interested in what my hon. Friend says about Aberdeen, which is one of the areas taking part in a pilot scheme to examine the different models of childcare that might suit families in different areas of the country, as part of the Scottish Government’s aim to double childcare provision. Does she agree that it is very important that childcare matches the needs of not only the local area, but individual families, whose work lives may have very varied patterns?
Kirsty Blackman
I absolutely agree, and my hon. Friend has given me a nice opportunity to talk about the trials that we are undertaking. Nobody, certainly in the UK, has cracked this childcare thing. We have not all got it sorted; there is no way that we can look at the system and say, “It’s perfect. We’ve sussed it out.” We all need to learn from each other about what works in different areas, and ask whether those things would work in ours. The Scottish Government are undertaking three trials, on three different things that local authorities have specifically requested.
In Edinburgh, the trial is establishing outdoor nursery provision. Children who live in the centre of the city may not get out too often to the woods and forests around Edinburgh, so that local trial, in which the Scottish Government will invest £32,000, will provide access to outdoor learning for specific groups of children. We will see how that works, and will evaluate it.
In Aberdeen, in my constituency, we are having a stay-and-play session for parents of two-year-olds. A group of parents have been reluctant to leave their two-year-old in nursery provision; they are not quite sure how that would work, and perhaps think that it is a bit too far for a two-year-old. The parents will be able to stay with their two-year-old, who will still get the benefit of being in an educational setting. Also, the parents will benefit. As was said earlier, parenting small children is terrifying, and a new parent has no idea if they are doing the right thing, ever; they just have to try their best. This trial is a good opportunity for parents to learn, too.
In the Scottish Borders, the trial being undertaken by the Scottish Government is about wrap-around provision—provision outside of core hours, holiday provision and after-school provision, and provision that is more appropriate for most people with normal working lives. Hardly anybody I know can fit in a job in the three hours and 10 minutes of morning nursery care that my youngest child receives. In fact, a lot of people struggle to fit in a job between 9 am and 3.15 pm, which is when my eldest child is at school.
Kirsten Oswald
That is an incredibly important point. Nobody I know, or almost nobody, works from 9 am to 3 pm. If I had not been able to get childcare provision from 8 am to 6 pm, including for holidays, I would have had to stop my career progression when my children were little. It is really vital that we do not impede women, children or families in that way.
Kirsty Blackman
Absolutely. As the Scottish Government go forward with these pilots, and with possible changes, we will look to have much more flexibility, and much more access to nurseries and childminders, rather than just the kind of maintained provision discussed earlier; I am not sure that we use that phrase in Scotland, but I understand what it means. We look to have much more flexibility in the settings that children and young people can access with these free hours, which will allow more flexibility around hours and holidays.
I have already talked about choice and the benefits of choice. Heriot-Watt University has carried out a study for the Joseph Rowntree Foundation that says that
“reinforcing and extending the improved provision for good quality, flexible, subsidised childcare across the working year”
would be one of the “most significant measures” to tackle poverty.
We have spoken about how childcare can have the benefit of tackling poverty by changing the system for parents who cannot afford to work. We have also spoken about the benefits of childcare as regards children’s attainment; actually, it has benefits for the attainment of all children, and not just those who are starting off with a disadvantage and are, if you like, at the bottom of the pile. However, we have spoken less about the benefits for the workplace and for productivity, although that was mentioned by the hon. Member for Warrington North.
If people can access the workplace without worrying about their children, and about whether they can get home for a 3.15 school pick-up, they will concentrate more on their job, and as a result they will be more productive. The more we can do to increase the choice for parents, the better. Whether they choose to work or not to work, we need to ensure that they can make that choice at all times; that would benefit everybody, including employers.
I produced a blog for Family Friendly Working Scotland, during its National Work Life Week, that encouraged employers to consider flexible working seriously. We are trying to make clear to employers the benefits of flexible working—for them, as well as for employees. The real benefit for the employer is in improved productivity, and in having access to a talent pool to which they currently do not have access. Sometimes employers hear the words “flexible working” and think, “Panic! We can’t do that!”, but some aspects of flexible working are really very reasonable. If, for example, an employer is able to give shift patterns a couple of weeks out, instead of a week out, that makes all the difference for employees when it comes to planning and childcare. Using grandparents and other family members for childcare was mentioned earlier. Some women, parents and families do not have choice; some of them are not able to access grandparents. For example, a parent may not have a partner and so they have to try to do everything themselves.
The benefits of increasing free childcare are so wide-ranging that it is almost impossible to talk about them all in a half-hour speech, or even in a three-hour debate such as today’s. However, I think everybody recognises that increasing free childcare has huge benefits, and both the UK and Scottish Governments have made positive moves in the direction of increasing the amount of free childcare, and increasing provision, particularly around the number of hours and the changes to allow two-year-olds free nursery care.
In the future, we can learn from each other—something I always seem to find myself stressing in Westminster Hall. The Scottish Government can learn from what the UK Government are doing, and the UK Government can learn from some of the pilots that we are running, and some of the changes that we are making in Scotland. As the hon. Member for Wirral South said, local authorities and devolved institutions can learn from what is happening in other areas. They can learn whether good things that are happening elsewhere can be transferred across.
On the whole, what we are doing is largely positive, but I would like to see more of that, and more choice for parents; I would also like more access to free, high-quality childcare, and the assurance that enough funding will be provided for these things to happen.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies. I pay tribute to my hon. Friend the Member for Warrington North (Helen Jones), who opened the debate, for all the work she has done in raising the importance of the issue we are debating. She said at the beginning of her speech that she was not very savvy about technology, but she has done an amazing job, not just by having web chats but by engaging a record number of people on Facebook—mothers and fathers from across the country. It is not just about social media, however; it is about the number of face-to-face meetings she has had, the amount of research she has evidently done and the personal experience, as a secondary schoolteacher, that she has brought to the House. There are lots of people in Government who might not believe in experts but I believe in listening to them, and it is evident from my hon. Friend’s speech that she knows what she is talking about.
This is the first debate I am responding to as shadow Minister for early years, but I do not need to have that role to recognise that to give every child the best start in life, nothing is more important than the care they receive in the first few years. High-quality childcare is critical for our economy, as has been mentioned over and over by Members on both sides of the House. The biggest barrier for parents and carers returning to employment is the cost of childcare, and parental employment is vital to lifting families out of poverty.
I grew up in London in the ’80s and I remember the struggles my parents had when it came to providing childcare. We did not have grandparents around—something other hon. Members have mentioned. Before 1997, access to childcare, as well as its quality, varied enormously, and it is not a secret that Labour revolutionised the sector by introducing universal free childcare. Every three and four-year-old became entitled to 15 hours’ free childcare a week for 38 weeks of the year, which was a life-saving opportunity for parents. The measure was a huge success, with more than 90% of children aged three and four benefiting.
Another thing I benefited a lot from—as I am sure parents on both sides of the House have too—were the Sure Start centres, which were also created by a Labour Government and which served every family in the community, regardless of how much money they had. Labour expanded school nurseries and more than doubled the number of childcare places. Most importantly perhaps, we extended maternity leave from 12 weeks to 12 months, increased maternity pay and introduced paternity leave. It is shocking that it took so long, but it happened. We made childcare a key part of our plans to support families and to make work pay, but today’s debate, in 2016, shows that huge challenges remain.
Make no mistake, the petition speaks directly to the failure of the Government’s childcare policy over the past six years. Nevertheless, it is clear that hon. Members on both sides of the House, of different political colours, feel they have shared ambitions for childcare. Even if we believe in different ways of achieving those ambitions, we agree that childcare is a priority that needs to be addressed. The Government’s response to the petition fails to recognise, I am afraid, the effects of chronic underfunding on providers, but it at least acknowledges that childcare costs profoundly affect parents across the country. Labour agrees with the Government that disadvantaged two-year-olds are less likely to access formal early education than their more affluent peers and that they therefore deserve the support that will level the playing field. Further, we do not believe that we should pit those out of work, often because of circumstances beyond their control, against working parents struggling to afford childcare. We believe a distinction needs to be made between work incentive schemes and policies that must be pursued to give equal opportunities in life to impoverished children, and also to children who are disabled—a point made movingly, over and over, by my hon. Friend the Member for Wirral South (Alison McGovern).
The Government should also be frank about the fact that those out of work are not receiving the free childcare to which their two-year-olds are entitled, with only 42% of families in England who qualify receiving it, which compares with the uptake of Flying Start provision for two-years-olds under the Labour Administration in Wales, which stood at 86% in 2015.
Caroline Dinenage
I am sorry to interrupt the hon. Lady’s flow, but I would like to correct her, as she has just given out a completely factually inaccurate statistic. Some 70% of eligible two-year-olds are taking up their entitlement to a funded learning place.
Tulip Siddiq
I thank the Minister for her contribution, but the source I have, which I believe and which is very credible, says that it is 42% of families, so we will have to figure out who is right. I would just like to point out again that under the Labour Administration in Wales the uptake of Flying Start provision for two-year-olds stood at 86% last year.
Labour believes that the Government have failed to deal with unacceptable local variations in the information that is available to families who could benefit from the childcare offer for two-year-olds. I have seen it myself, when knocking on doors in my constituency, and the Public Accounts Committee has heard that only 30% of parents are even aware of the family information services. That weakens the value of the childcare already on offer, when the socioeconomic gap in educational attainment is large and the benefits that come from high-quality provision for disadvantaged children are clear for everyone to see. Extending the entitlement to 30 hours a week for working families is likely to place further strain on quality and access for the most disadvantaged children, so we need to tread carefully. Labour believes that that is due to the policy criteria, the capacity of the sector and the quality of the provision that can be offered under the current funding rates. Will the Minister outline in her response how her Department will improve the quality and consistency of the information available to parents and also explain how providers can double provision with the funding they currently have?
It is clear that Government measures to help working families have been insufficient and have led to the justified anger seen in the petition. Over the last Parliament, the cost of a part-time nursery place for a child under two increased by 32%. A family paying for that type of care now spends in excess of £1,500 more than they did in 2010, and wages have been largely static, which adds to the pressures on working families. The member of the public whose Facebook post prompted the conversation we are having spoke for many when he said:
“Myself and my wife work full time and pay over £800 per month for childcare…If we had another child, I would have to give up my job, as it’s simply outrageous the amount we have to pay”.
On the Facebook page are other poignant comments by people who are struggling to make ends meet because of childcare costs. That individual’s experiences are also reflected in research by the Resolution Foundation, which shows that more than a third of mothers who want to work are unable to do so because of high childcare costs. That issue was referred to by the hon. Member for Aberdeen North (Kirsty Blackman), and my hon. Friend the Member for Wirral South spoke extensively and eloquently about the problems of the current labour market. She told us the story of Linda from Merseyside. I can safely say to her that there are countless other Lindas, not just in my constituency but across the country, who will be able to relate to that story. Of course, childcare is not only a women’s issue—a point that has been made—but it is no secret that the pressures of childcare fall disproportionately on women, in lots of situations, especially the one that the hon. Member for Aberdeen North mentioned.
I want to come back to the tax-free childcare scheme that the Government speak about. The Government talk about helping those who are just managing, but the cap on working tax credit means that in 11 local authorities the average cost of part-time childcare now exceeds the support on offer. Furthermore, the tax-free childcare scheme, which I am sure the Minister will mention, has been poorly communicated and twice frustrated by Government delays. Research has indicated that the scheme will only deliver for those on high incomes, meaning that it may not support the families who need it most. Labour believes that it is proving to be a wasted opportunity in addressing the root cause of mounting childcare costs, not least for those struggling to make ends meet.
I also want to touch briefly on the funding formula and the lack of places. We believe that the extortionate costs that parents face—different Members have mentioned that over and over again in this debate—are the result of reduced funding being given to providers and the shortage of places available. Under the new early years funding formula, many providers will receive a much lower hourly income for free early education places, which is a disgrace. That reduction is happening when providers are experiencing higher running costs and expanding provision to keep alive the Government’s pledge of 30 hours of free childcare a week. Anyone who listened to the last Education questions will know that I have raised the issue over and over again.
The Family and Childcare Trust reveals that the number of English local authorities reporting a shortage of free early education places for three and four-year-olds has more than doubled. Figures from the House of Commons Library show that the number of places available has fallen by 45,000 since 2009. The figures speak for themselves. The Department for Education recently announced that it was paying £3 million for a private consultancy to find the 45,000 places needed to make the 30 hours’ free entitlement work. That is a choice figure. The costs that providers face, such as business rates and pension auto-enrolments, are fuelling the rapid increases in childcare costs. However, what worries me is that more than one quarter of local authorities will lose money through the funding formula while being asked to manage the costs and to double the childcare entitlement. A 2015 report by the Institute for Public Policy Research explored the possible consequences of such a funding gap. It said:
“Underfunding the 30 hours offer would lead to a smaller, less flexible market as providers…either exit, reduce the breadth of services that they offer, take on fewer children, or refuse to offer the free hours…This would reduce parental choice and potentially push up costs for paid hours or other services outside of the free offer, such as childcare for most under-3s”.
I will draw my remarks to a close, because I want to hear what the Minister has to say. In addition to their punitive funding formula, the Government have as yet refused to commit to supplementary funding for nurseries beyond the two years. Nurseries have been clear, both in the conversations I have had and in writing to all Members of the House, that the cocktail of funding pressures will ultimately push them into an unsustainable financial situation. My hon. Friend the Member for Warrington North eloquently referred to that in her speech. I hope the Minister will put an end to the uncertainty and immediately commit to funding to guarantee the long-term future of nursery schools.
Labour believes that working parents are bearing the burden of the Government demanding unachievable expansion in provision while providing woeful under- funding. It is no secret that the autumn statement is happening this week. We demand that the Chancellor provides parents and teachers across the country with the funding to keep nurseries open, to reduce the costs of funded places and to meet the Government’s 30 hours promise to parents. I hope the Minister will be able to offer even the slightest encouragement that those figures will be in the Chancellor’s autumn statement.
I finish by echoing the words of my hon. Friend the Member for Warrington North, who secured this debate. The early years cannot just be seen as an add-on. They are crucial to social mobility and to children reaching their full potential. Most importantly, they are crucial to the future of our country and the productivity of our economy.
The Parliamentary Under-Secretary of State for Education (Caroline Dinenage)
It is a great pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Warrington North (Helen Jones) on securing this important debate and on all the hard work she has taken part in leading up to today, including all her various online activities. Regardless of her technical expertise, she has certainly triumphed. I am delighted to be here to set out the Government’s childcare offer to parents. As you know, Mr Davies, one of our top priorities is to give children the best start in life and to support working parents.
I congratulate all the Members who have taken part in today’s debate. Almost without exception, their contributions have been helpful and constructive and have shown that we all share a common goal, which is to support working parents and children in getting access to the best childcare, to work together with that aim, to share best practice and to find a common ground to build on. I say almost without exception because, while I welcome the shadow Minister to her place—I know that she is quite new to the shadow Government—I gently say to her that there was nothing positive or constructive in anything she said. At no point did I get the sense that she wanted to work with me on this area to make it work. All she wanted to do was make cheap political points in the name of the Labour party. She might as well have been dressed as a great big red rose and be done with it, but this area is too important for political point scoring. It is about children’s futures and parents being able to get out and work and make the money they need to run their families. It is not about cheap political point scoring, and she should be ashamed of herself. However, I congratulate the others who spoke.
I have been in the same position as other Members. I am a working mum, and the decisions I have made about my children’s education and their childcare have been among the most difficult I have ever made. It is difficult being in that position. For many years I was a single mother who felt like she was working only to pay for her childcare, so I understand how people feel. Wearing my other hat as the Parliamentary Under-Secretary of State for Women and Equalities, I go round the country speaking to many women, and they tell me that the biggest obstacle to them getting back into work and fulfilling their potential is the cost of childcare. That is why we want to get things right.
The petition asked why we give free early learning to the two-year-olds of non-working parents. I want to be clear up front that the Government are proud to provide early learning to the most disadvantaged two-year-olds. We want to ensure that all children get the best start in life, regardless of their background. Unfortunately, evidence tells us that children from less advantaged backgrounds can be up to 19 months behind in their learning by the time they start school. We all know that gaps in learning can start appearing as early as 22 months of age, but high-quality early learning from the age of two can narrow that gap, helping those children to achieve better GCSE results and ultimately earn higher wages.
For that reason, in September 2013 the Government introduced the early learning for two-year-olds programme. Initially, it was for the most disadvantaged two-year-olds from non-working households in England. The programme was later expanded in September 2014 to include low-income working parents, as well as looked-after children, children who have left care, adopted children and children with special educational needs and disabilities. Now, 40% of two-year-olds are eligible. The Government are committed to supporting those parents who are just about managing, and the policy is focused squarely on those families.
Looked-after children and children who have left care can face multiple challenges in progressing well in the early years and at school. As a group, they persistently underachieve at key stages 1 and 2. As we know, adoptive parents are brilliant and play an incredibly important role. The Government want to ensure that they and their children get the best possible start and support. Giving adopted children an early education place is one aspect of the Government’s significant package of adoption support.
Research indicates that children with special educational needs and disabilities particularly benefit from early education. It helps their development and improves their social inclusion and wellbeing. However, families sometimes find it difficult to access appropriate care and can face higher costs. The hon. Member for Wirral South (Alison McGovern) spoke about that, and she did an excellent job while she was the shadow Minister for childcare. Since 1 September 2014, two-year-olds entitled to disability living allowance, or those who have a current statement of SEN or an education, health and care plan, have been entitled to an early education place. Our new offer for three and four-year-olds includes a £12.5 million disability access fund to support disabled children in order to access the free entitlement.
Alison McGovern
I thank the Minister for giving way and for her kind remarks. I have one specific question on children with disabilities. Often it is the perception of difficulty in welcoming children with disabilities into early years settings that is a problem. Are the Government working on a way to break down barriers so that nurseries and childcare settings make it clear to parents of children with disabilities that they are welcome?
Caroline Dinenage
Absolutely. The hon. Lady makes an excellent point. We have heard a lot today about maintained nursery schools, which do a fantastic job with children with special educational needs or disabilities. They need to be supported to carry on doing that work.
Helen Jones
Many maintained nurseries have special units for children with special needs. They take in disabled children. Does the Minister accept that that is another reason why maintained nurseries need to be fully supported in the extra responsibilities that they take on?
Caroline Dinenage
Absolutely. I am a great fan of maintained nursery schools. There is one in my own constituency, which has significant pockets of deprivation, that provides outstanding support for children. That is why the Government have committed, as part of the funding formula, to an extra £55 million a year for at least the next two years to support maintained nursery schools over and above the normal funding formula. Maintained nursery schools make up only 3% of childcare places. However, 98% of them are good or outstanding and 80% work in areas of disadvantage, which is why we want to consult them further about how we can support them in their very important work.
We know that good quality education at two can have a fantastic effect on a child’s development. We want children in care, children who have left care, adopted children and children with special educational needs and disabilities to benefit from that, as we have a duty to help them thrive and reach their potential. It is unacceptable that a child should have inferior life chances because of their background; this programme is key to tackling the problem. I am sure all hon. Members would agree that it is vital we help such children.
Kirsty Blackman
It is still the case that a child’s long-term future exam results can be predicted by the highest level of their mother’s qualifications. Does the Minister agree that both our Governments are working hard to do something about this and that we should continue to keep this as a top priority?
Caroline Dinenage
I did not know that interesting statistic. The hon. Lady is right. Providing better early education can only ever be a really good thing.
Some hon. Members have asked why all two-year-olds do not get a fully funded place. Such places are not offered to all two-year-old children because evidence tells us that the greatest proportion of parents return to work and need childcare when their children turn three. Some parents feel that two years is too young for their children to be in formal childcare and prefer to keep them at home. I was similar to the hon. Member for Aberdeen North and did not stay in the childcare environment for as long as I could have done. That probably gives me an added respect for the amazing individuals who work in that incredible profession.
We wanted to focus resources where they would have the greatest impact for the largest number of families. That is why we prioritised the introduction of an additional 15 hours for the working parents of three and four-year-olds.
The main driver behind the two-year-old programme is to improve outcomes for the children who need the most help in getting the best start in life. For that reason, we do not impose conditions on parents who are eligible for a place, but we hope the programme will support parents from poorer backgrounds to move into employment and training. We have come an incredibly long way since 2013. As I have already mentioned, 70% of eligible two-year-olds now take up their entitlement to a funded learning place.
We also know that 84% of all two-year-olds who take up their entitlement do so in good or outstanding settings, which means that children are receiving their learning in high quality environments. That is fantastic progress and will ensure that thousands of disadvantaged children get the right start in life.
Tulip Siddiq
I am sorry the Minister seems a bit rattled by what I have said. I am the Opposition spokesperson and I will hold the Government to account and do my duty in making sure that childcare is properly provided to parents; and I want to hear about the funding. The statistic I cited, which the Minister disputed, was from the Family and Childcare Trust childcare costs survey 2016. In England, the uptake of free early education among two-year-olds stood at 58% in January and at 46% in London. I would like to hear what the Minister has to say.
Caroline Dinenage
I am keen to tell the hon. Lady what I think. Because she is very new to her role, I am prepared to cut her some slack. If she chats to her hon. Friend the Member for Wirral South, she will find that she can hold the Government to account in a constructive and positive way, rather than in an endlessly and relentlessly negative way.
Caroline Dinenage
No, I have given way enough. In answer to her question, the figures are the Government’s figures and they are correct.
I want to make progress. We know that it is not only the most disadvantaged parents who need help with childcare costs. That is why we are increasing our investment in childcare from £5 billion to £6 billion a year by 2019-2020. We remain absolutely committed to providing 15 hours a week of early learning to all parents with three and four-year-olds. In addition to this universal entitlement, we will introduce 30 hours a week of childcare from September 2017, which will support more than 400,000 working families with three and four-year-olds, saving them around £5,000 a year in childcare costs. We want to remove the real financial barriers that prevent parents from going back to work or increasing their current hours, so that they can realise their potential and contribute to our economy and their children’s future.
Kirsten Oswald
I echo the Minister’s sentiments about removing financial barriers. Does she agree it is also important to remove structural barriers as far as possible by making sure there is flexibility of provision and that we do not continually assume that one size will fit all?
Caroline Dinenage
The hon. Lady is right. Flexibility is really important, which is why our recent consultation response committed us to offering free hours between the hours of 6 am and 8 pm to meet the needs of parents who work shifts. We also encourage local authorities and providers to offer the free hours over more than 38 weeks a year so that parents can stretch their hours, whether it is fewer hours over more weeks or during the school holidays. The flexibility that she talked about is really important.
At present, the Government are piloting the programme in eight early implementer areas. The hon. Member for Aberdeen North spoke about the importance of the really good trials going on at the moment. It is the same in the early implementer areas. Through these early implementers, more than 3,500 children have already taken up a 30-hour place one year early, which is giving their parents more disposable income and an opportunity to return to work or work more hours. We expect that figure to increase during the course of early implementation, because more parents will become eligible for the extended entitlement at different points during the year. I want to put on the record my gratitude to Hertfordshire, Newham, Northumberland, Portsmouth, Swindon, Staffordshire, Wigan, York and the childcare providers in those areas who have worked tirelessly to make the programme a reality.
The eight early implementers provide us with an opportunity to address key delivery issues for the 30-hour offer, and for us to test the practical ways that councils and providers can work together. Various Members have spoken about the specific challenges of different areas of the country: for example, the challenges in Aberdeen with the offshore workers. My constituency has a lot of families with partners in the armed forces, particularly in the Royal Navy, who face a similar challenge. That is why we have various early implementer pilots going on to look at all such challenges. For example, Northumberland is focusing on rurality and Staffordshire is focusing on work incentives, as is Swindon, along with flexibility, including the use of Saturday provision via a nursery attached to a hospital to support the staff who work there. Newham is focusing on developing a range of delivery models and supporting children with special educational needs and disabilities. Wigan and Hertfordshire are exploring partnerships through the use of childcare hubs and supporting parents back into work, and Portsmouth is supporting low-income families.
[Ian Paisley in the Chair]
Alongside our early implementers, we have also recruited 24 early innovator local authorities, which will provide valuable learning to support the roll-out of the 30-hour offer by developing approaches to support children with special educational needs and disabilities; developing scalable, flexible models that meet the needs of working parents; ensuring the sufficiency of the local childcare markets; and stimulating parental demand for the new entitlement to act as a work incentive.
I would like to point out that the consultancy that the Opposition spokesperson said £3 million is being spent on is actually not a consultancy; it is a contract to offer practical support to local authorities and childcare providers to help them get ready to deliver the 30 hours. It includes sharing lessons from the early implementers—
Caroline Dinenage
It is not a consultancy. It provides courses and shares best practice. It is about being out there, on the ground, speaking one-to-one to administrators and deliverers. The hon. Lady really needs to look up the meaning of the word “consultancy”. It offers practical help on the ground to providers, and helps them to get the very best out of their business models.
The lessons learned from the combined delivery approach of the early implementers and innovators offer a unique opportunity to provide vital information to the local authorities getting ready to meet parental demand when national roll-out takes place. We are capturing learning throughout the year and sharing it with all local authorities to ensure that early implementation is a success—that is what the £3 million contract is about—and that full roll-out has the benefit of the learning that success generates. The more planning and testing we can do in the widest possible number of areas, the more likely we are to have a smooth launch of this key Government priority.
At the same time, the Government will introduce tax-free childcare from early 2017, which is intended to help parents with the cost of living by subsidising the cost of childcare. The tax-free childcare will be paid per child, rather than per parent, and childcare costs will be subsidised for children up to the age of 12, or 17 if they are disabled. The Government calculate that, once it is fully implemented, about 2 million working families across the UK will have access to the new scheme. It will give parents a 20% subsidy on their childcare costs, up to a maximum contribution of £2,000 per child per year, or £4,000 for disabled children. The scheme will effectively subsidise 20% of childcare costs—up to £10,000 per child.
In addition, the Government’s flagship welfare reform programme, universal credit, also offers help with the cost of childcare for parents on lower incomes, even if they work only a few hours a week. Working parents on universal credit can now claim up to 85% of their childcare costs. Together with the 30 hours and tax-free childcare, that amounts to an unprecedented level of support to working parents for their childcare costs.
The hon. Member for Warrington North talks as though the high cost of childcare—we all know it is high, and I have outlined the many things the Government are doing to tackle it—is a recent phenomenon. Many hon. Members who spoke today have the advantage of having youth on their side and of having young children— I am jealous of them—but I was a parent during the previous Labour Government, which the Opposition spokesman spoke about in such glowing terms. I put my children through early years childcare under a Government who presided over the most expensive childcare in Europe. I was working to pay for my childcare. The Government introduced the 15-hours offer, but not everybody offered it, and I had great difficulty accessing it. Childcare is one of the biggest obstacles to women getting back into work, which is why it is important that we have all the schemes I have talked about.
Helen Jones
I am sorry, but I cannot let the Minister get away with that. She is right that childcare has always been expensive, but the Labour Government expanded the number of childcare places in this country hugely and set up Sure Start and children’s centres for the first time. She cannot get away from the simple fact that the cost of childcare went up 30% under the coalition Government—five times the rate of wage growth. That is what has put so many families in such a difficult position.
Caroline Dinenage
As the hon. Member for Wirral South said, this is not a recent phenomenon; it has accumulated over a number of years. I can speak only from my personal experience—I know that the children of the hon. Member for Warrington North are a bit older. My children were accessing early years childcare during the years of the Labour Government, and I saw those prices go up exponentially. That is why we are dealing with this issue. In addition to various other policies that help many of the issues that have been described today, such as giving people access to flexible working and shared parental leave, which was never introduced under the previous Labour Government, more than £6 billion will be spent on childcare by 2019-20 in cash terms—[Interruption.] I know the hon. Lady is not listening, but that is more than any other Government have ever spent on this issue. It includes an extra £1 billion on the free early years entitlement.
Kirsten Oswald
The Minister is being very generous in giving way. Will she humour me and agree that the Scottish Government have gone further than any other Government in their commitment to early years education and childcare?
Caroline Dinenage
I do not know, but I am keen to learn from best practice wherever I find it, so I will be hot-footing it back to my office directly after this debate to see what we can learn from what is happening in Scotland.
A large amount of the additional money that we are spending on childcare is going to increase the average funding rate. The Opposition spokesperson said it is going down, but it is actually going to go up for private and voluntary providers in 88% of local authorities, including that of the hon. Member for Warrington North, where the hourly rate will go up by 19%.
Helen Jones
The Minister is missing out the fact that going up from a low hourly rate to a slightly better one does not solve the problem. The Government’s problem when they introduce the 30-hour provision will be that, unless they fund those hours properly, they will simply raise costs elsewhere in the system, so parents will be unlikely to benefit. Once the cross-subsidisation is taken out, costs will go out somewhere else, whether for under-threes, out-of-hours childcare, or whatever. The low rate of funding throughout the system is what needs to be addressed—it leads to some providers struggling to maintain their provision and to endemic low wages in the sector, which work against recruiting skilled workers, and it does not provide the best quality of care.
Caroline Dinenage
I do not understand why the hon. Lady is saying that what we are doing is already leading to that, because we have not yet done it. The early years funding formula response has not even been published—it will be out soon. She is sniffing at a 19% rise in her area, according to the figures we saw in the summer, which seems a little unkind.
I was also a little disappointed with how the hon. Lady described early years professionals. She talked about them as unskilled teenagers, slightly undermining the quality—
Helen Jones
On a point of correction, I am sorry, but the Minister misquotes me. I said that children needed the best skilled and professional care but that some of them are being looked after by unqualified teenagers, who are not the professionals in this. The professionals are those who have the proper qualifications and experience. She really must not misquote me on that, because I was clear that the best outcomes for children are when they are looked after by skilled, experienced people.
Caroline Dinenage
I am grateful for the clarification, but the hon. Lady should be aware—I hope she already is and is just playing with me—that the quality of the workforce is already good and has been improving: 87% of staff in full-day care settings are now qualified to level 3, the proportion of such staff with at least that level having grown from 75% to 87% between 2008 and 2013, while the proportion of those with a degree or higher increased from 5% to 13%. We are not, however, resting on our laurels. We have a workforce strategy that will seek to support even further those excellent people who work in our childcare environment.
Kirsten Oswald
Regardless of the difference of opinion between the Minister and the hon. Member for Warrington North (Helen Jones), will they both agree with me that the quality of staff in those childcare establishments is absolutely key? It is one of the main things that makes it possible for mothers and fathers to feel confident about leaving their children in such establishments. The staff’s work is exceptional.
Caroline Dinenage
The hon. Lady is right: the work those staff do is exceptional. Any of us who have had access to early years education all know that the quality of early years childcare is exceptional. Recent Ofsted statistics show that 91% of providers in the early years are good or outstanding, and that is the highest such figure we have ever seen. Alongside that, the most recent EYSS—early years SEN support—outcomes data show that almost 70% of children are reaching a good level of development by the age of five.
I thank all Members who have contributed to this important debate. I hope they can see that the Government care enormously about outcomes for children and childcare costs for all parents. It is completely unfair for children who are disadvantaged not to have the same opportunities as others, but the significant burden that childcare costs can have on parents is also unfair, which is why we have put in place all the measures that I have mentioned today to help solve the problem.
Helen Jones
I only want to make a few remarks to wind up. I am grateful to the Members who have spoken, but I am disappointed that the Minister has still not responded to efforts to reach a long-term solution to the problem, and one that can command support over several Parliaments, if necessary. We do not yet have that, and we will not get it without proper inquiry into the way in which we do early years education in this country. We should not elide childcare with early years education, and early years education is what we really want for our children, by the best-qualified and most experienced staff. She needs to address both the shortage of early years teachers—I say “teachers”, not other staff—and, despite what she has said, the underfunding. We need to progress to a long-term solution to the problem, and I am sorry that she did not address it in her closing remarks.
Question put and agreed to.
Resolved,
That this House has considered e-petition 132140 relating to free childcare.
Written Statements
(8 years, 1 month ago)
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Social Housing
(8 years, 1 month ago)
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The Minister for Housing and Planning (Gavin Barwell)
Social housing has a crucial role to play in supporting those in most housing need. To that end, powers were provided for in the Housing and Planning Act 2016 to introduce an income based rents policy, requiring local authorities to set higher rents for higher income council tenants.
Since the summer, the Government have been reviewing this policy. We have listened carefully to the views of tenants, local authorities and others and as a result, we have decided not to proceed with a compulsory approach. Local authorities and housing associations will continue to have local discretion.
The Government remain committed to delivering their objective of ensuring social housing is occupied by those who need it most. But we need to do so in a way that supports those ordinary working class families who can struggle to get by, and in a way which delivers real savings to the taxpayer. The policy as previously envisaged did not meet those aims.
This is why we are introducing the mandatory use of fixed term tenancies for new tenants in local authority housing. This will better enable councils to give priority to people with the greatest housing need. Councils will review tenancies at the end of each fixed term to ensure that tenants still need a socially rented home. The Government’s guidance to councils will make clear that they should take into account a household’s financial circumstances when looking at this, and that, except in exceptional circumstances, tenancies should be targeted on those on lower incomes.
We will also consider whether other options exist to ensure that high income tenants in social housing make a greater contribution to costs.
We are keen to work with local authorities to tackle housing tenancy fraud. In 2013, the National Fraud Authority estimated the cost of such fraud—largely illegal sub-letting and lying about circumstances to obtain tenancies—to be in the region of £850 million a year.
For most existing tenants, social housing represents a home for life at a rent well below market levels. The Government remain committed to ensuring it goes to those who need it most.
We have already announced for this spending period we are putting £8 billion into affordable housing delivery. Building more homes is central to this Government’s vision of a country that works for everyone. We will publish a Housing White Paper shortly, setting out measures to help us deliver this ambition.
[HCWS274]
Education, Youth, Culture and Sport Council
(8 years, 1 month ago)
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The Secretary of State for Culture, Media and Sport (Karen Bradley)
The Education, Youth, Culture and Sport Council will take place in Brussels on 21 and 22 November 2016. Shan Morgan, the UK Deputy Permanent Representative to the EU will represent the UK at the Youth, Culture and the Sport sections of the Council.
Youth
The Council will be asked to adopt draft conclusions on promoting new approaches in youth work to uncover and develop the potential of young people. The conclusions will recommend the need to promote effective and innovative cross-sectoral policies that can help young people realise their full potential. The UK intends to support the adoption of the conclusions.
The presentation will be immediately followed by a policy debate on youth engagement
Culture
The Council is expected to present a progress report on the proposals for the revised audiovisual media services directive. The audiovisual media services directive seeks to ensure the effective operation of the internal market for television broadcasting services by ensuring the free movement of broadcasting services throughout the EU.
This will be followed by first reading on the proposal for a European Year of Cultural Heritage (2018). The objective of this initiative is to raise awareness of the opportunities that cultural heritage bring, mainly in terms of intercultural dialogue, social cohesion and economic growth. At the same time, the European Year aims at drawing attention to the challenges that cultural heritage is facing, including environmental and physical pressure on heritage sites and illicit trafficking of cultural objects. The UK intends to support this proposal.
The Council will then be invited to adopt a proposal to amend the European Capitals of Culture for the years 2020 to 2033 to extend the access to EFTA/EEA countries. The UK Government are supportive of this proposal.
Finally there will be a public debate, ‘towards an EU strategy for international cultural relations’. This will discuss how the EU and its member states can co-operate to bring about a more strategic approach to culture in external relations.
Sport
The Council will seek adoption of its draft conclusions on sport diplomacy. The conclusions will acknowledge that sport is a possible tool in supporting intercultural, economic and political co-operation, and that its potential can be part of extending and strengthening contacts between the EU and third countries. The UK intends to support the adoption of these conclusions.
This will be followed by a public debate on the impact of sport on personal development. The UK intervention will be to demonstrate the work the UK is already carrying out in this area through participation, Olympic legacy and the sport strategy.
Other business
The French delegation will present information on reform of the European copyright framework. This will be followed by the Croatian and Irish delegations on the European Capitals of Culture 2020. The Italian delegation will then present information on ‘Facing crisis in Europe: Investing in Culture’.
The Council will also be presented with information on the World Anti-Doping Agency (WADA) meeting in Glasgow (19-20 November). This information will be provided by the EU member states representatives in WADA; Belgium, UK and Malta. This will be followed by the French delegation on development and specific features of the organisation of European sport. Finally there will be information from the Maltese delegation on the work programme of their incoming presidency.
[HCWS272]
Housing Benefit and Universal Credit
(8 years, 1 month ago)
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The Secretary of State for Work and Pensions (Damian Green)
One of the Government’s key commitments is to protect the most vulnerable. Supported housing supports hundreds of thousands of the most vulnerable people across the country. A safe, stable and supportive place to live can be key to improving people’s lives, and for many it is a stepping stone to independent living in the longer term. The Government value the role supported housing plays and are committed to protecting and boosting the supply of supported housing and ensuring it provides value for money and works for those who use it as well as those who pay for it.
On 15 September I announced how from 2019-20 we will be introducing a new funding model for Supported Housing. This will ensure that the sector continues to be funded at the same level it would have otherwise been in 2019-20, taking into account the effect of the Government policy on social sector rents. From 2019-20, core rent and service charges will continue to be funded through Housing Benefit or Universal Credit up to the level of the applicable local housing allowance rate. For costs above the level of the local housing allowance rate, Government will devolve an amount of funding for disbursement locally. In England, we will devolve funding to local authorities to provide additional “top-up funding” to providers where necessary, reflecting the higher average costs of offering supported housing, compared to general needs. An equivalent amount will be provided to the devolved administrations and it will be for them to decide how best to allocate the funding. Until 2019-20 the application of the local housing allowance rate to supported housing will be deferred. This measure confirms the Government will continue to provide support for those who require supported housing and ensures providers can have the confidence they need to invest in new development
I set out in my statement of 15 September 2016 my intention to consult on the implementation of this new funding model and committed to publishing a consultation. Today, along with my right hon. Friend, the Secretary of State for Communities and Local Government, we are publishing a consultation document to develop the detail that will underpin the new funding model. We are also publishing the evidence review of supported accommodation in Great Britain, jointly commissioned by my Department and the Department for Communities and Local Government at the end of 2014. The review has provided a helpful insight into the scale, scope and cost of the sector.
Furthermore, I am able to announce today a simplification and alignment of the application of the local housing allowance policy for general needs accommodation, in light of the changes that have been made to supported housing. We propose to bring in the policy for general needs accommodation in the social rented sector in 2019, instead of 2018 as previously announced, to align with the changes to supported housing.
For Housing Benefit it will apply, as announced at autumn statement 2015, to tenants who have signed new or re-let tenancies from 1 April 2016 and their social sector rent is higher than the local housing allowance rate. Those on Housing Benefit who took their tenancy before April 2016 will not be affected.
For Universal Credit, to ensure simplicity and a streamlined process, local housing allowance rates will apply to all new and existing tenants, again only where their social rent is higher than the relevant local housing allowance rate.
People moved by the Department from Housing Benefit to Universal Credit after April 2019 whose overall benefit entitlement is lower will be protected, in cash terms, under transitional protection arrangements. On reaching state pension age Universal Credit claimants flowing back on to Housing Benefit with tenancies signed before April 2016 will also be protected.
Additional discretionary housing payments were made available at autumn statement 2015 to protect the vulnerable and help people make the transition to the new rules.
[HCWS273]
House of Lords
Strategic Defence and Security Review
(8 years, 1 month ago)
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Lord Touhig
To ask Her Majesty’s Government whether they are intending to review the Strategic Defence and Security Review in relation to maintaining the size of the army at 82,000 personnel and increasing the size of the Royal Navy and Royal Air Force.
The Minister of State, Ministry of Defence (Earl Howe) (Con)
My Lords, the Government have no plans to reopen the strategic defence and security review. The national security strategy established clear national security objectives and the SDSR set out a funded plan to achieve them, all based on a clear-eyed assessment of the risks and threats that we face. Our energy is now devoted to its delivery, including the desired size of each of the armed services.
Lord Touhig (Lab)
SDSR 2010 reduced the size of the Army from 102,000 to 95,000. Three years later, in Army 2020, this was further reduced to 82,000. Despite paying Capita £440 million to take over Army recruitment, this September we had an Army of just 76,000 trained personnel. But lo and behold, last Thursday the Government changed the definition of “trained personnel” and tell us that we now have an Army of 80,780—5,000 more this month than we had last month. Do the Government have any idea of the true size of the British Army, and when will they get to grips with recruitment, as both the Navy and the RAF are smaller than they promised they would be?
Earl Howe
My Lords, the key question is whether the Army is configured with enough strength to deliver the demands that we place upon it. We are clear that it is. The noble Lord is absolutely right that we have a way to go on recruitment, but the figures are heading in the right direction—that is, the inflow figures are looking encouraging. The change in definition of “trained strength” is simply a reversion to previous methods, which included phase 1 trained personnel as part of the trained strength, with their ability to engage in homeland resilience and in basic tasks that we place upon them within the UK.
Lord Boyce (CB)
My Lords, Russia is growing in intent and capability. We are not only not matching either but we are shrinking in both. We do not have enough numbers in the RN and the RAF to man properly the equipment we have today. Brexit will surely demand that we be prepared to operate more autonomously. Surely the Government must realise that SDSR 2015 is not fit for purpose.
Earl Howe
The question is whether the Joint Force 2025 concept that we set out in the SDSR is the right choice for the current strategic context. We are clear that it is. It is a concept that is about making more effective use of our Armed Forces because it both invests in new capabilities and makes better use of the people we have. Of course, with more people and more equipment we could do more, but we are satisfied that the Armed Forces will be the right size to meet our defence and security policy requirements. I say that without wishing to give the impression that we are complacent, because we are not—these things are under constant review. However, we must remember that we face these challenges not alone but alongside our allies and partners.
Lord Sterling of Plaistow (Con)
My Lords, the world has changed since the last review—it has been only a year, but think of what has happened and what has changed. As far as I am concerned, we are living in the most troublesome time of my lifetime, and I have lived through both the war and the confrontation with Russia. I have asked for permission to have a full defence debate in this House because this is a most serious subject. Does my noble friend agree that, because of what is happening in Europe and in the United States of America, not only has the situation changed but the demands placed on our armed services could be greater in the years to come?
Earl Howe
My Lords, I am sure that my noble friend’s request will not have fallen on deaf ears as regards the usual channels. I am happy to speak to him afterwards about the possibility of a debate on these matters. We are not complacent about Russian capabilities, the political changes in the United States or Brexit. We remain, however, fully committed to NATO and our European partners, with whom we will deter threats across a wide spectrum in order to protect our people. We have a readiness action plan that we have developed with NATO. That gives NATO the tools needed to respond to short-notice, or indeed no-notice, incidents in order to protect alliance territory.
Baroness Jolly (LD)
My Lords, our defence is supported by a skilled Civil Service. Will the Minister confirm whether the SDSR commitment to reduce MoD staff by 30% by 2020 is still on track and what proportion the Government anticipate will be carrying out the same role but with a new employer?
Earl Howe
It is too early for me to answer the last part of the noble Baroness’s question, but I acknowledge that the last few percentage points in that 30% target are challenging—there is no doubt about that. At the same time, what we are impressing on our people is that to the extent that they are able to save money from a reduction in the Civil Service headcount, all that money is to be ploughed back into the defence budget under the efficiency agreement with the Treasury.
Lord West of Spithead (Lab)
My Lords, I am afraid that the comfortable words about our defence forces just will not wash. I am delighted that, in this Chamber and in the other place, there is a growing ground-swell of people who understand that we have not got sufficiently strong defence forces. That awareness is now growing in the public at large. This is a real concern, bearing in mind the risk. Is it possible to get the NSC to have a half-day’s discussion, or ideally a day’s discussion because it always meets for such short periods, to look at what capabilities we have—and my goodness me, they have been suffering death by a thousand cuts—and what that means for our position in the world and what we can do about the threats that are all around us?
Earl Howe
Again, my Lords, I am sure that that message can be conveyed very easily to the National Security Council. I recognise the concerns that the noble Lord has. It is no use denying that we live in a more dangerous and troublesome world. I come back to the Joint Force 2025 concept. It is a long-term programme, but it is designed to enable our Armed Forces to respond to a wider range of more sophisticated potential adversaries and complex real-world challenges. I believe that that is the right direction in which to go.
Lord Trefgarne (Con)
My Lords, what is the present strength of the Territorial Army, and what contribution is it making to the figures given by my noble friend?
Lord Foulkes of Cumnock (Lab)
My Lords, on configuration, why do we have 40 admirals and all their attendant costs? Would not that money be better spent on the front line?
Earl Howe
My Lords, I would refer the noble Lord and noble Lords in general to the Written Answer I gave on that very subject the other day, which explains that the number of admirals should not be taken in the context of the Royal Navy alone but in the much wider context of our NATO commitments and other commitments around the world.
Crime: Illegal Arms
(8 years, 1 month ago)
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Lord Harris of Haringey
To ask Her Majesty’s Government how many seizures of illegal arms entering the United Kingdom there were in the last year for which figures are available.
Lord Harris of Haringey (Lab)
My Lords, I draw attention to my interests in the register and beg leave to ask the Question standing in my name on the Order Paper.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, between April 2015 and March 2016, Border Force seized 445 real firearms, 321 imitation firearms and 1,533 other items captured by firearms law. This is an increase on real firearm seizures from 2014-15, when 126 real firearms, 419 imitation firearms and 2,301 other items were seized. Border Force works closely with other law enforcement agencies to combat smuggling of firearms.
Lord Harris of Haringey
My Lords, that improvement is welcome but in July and August of this year, the Metropolitan Police recorded 202 firearms discharges in the London area compared with 87 in the same period in the previous year. A record number of firearms have been seized within the United Kingdom, so there is clearly a leakage of illegal firearms into the country. The resources of the UK Border Force are woefully spread too thinly to deal with the task. Its budget has been cut by £50 million in the past four years and there are 100 fewer staff. Why do we still consider it adequate to have three vessels patrolling 7,723 miles of coastline while 16 patrol the Netherlands coastline of 280 miles?
Baroness Williams of Trafford
My Lords, we have increased our maritime capability and Border Force is an active member of the joint Maritime Operations Centre, where it works closely with partner agencies. Border Force is working to enhance its capability by training more firearms dogs and improving detection technologies. The technologies have formed a critical part of the improvement in performance in this area.
Lord Wallace of Saltaire (LD)
All these criminal networks smuggling into the country are cross-border and international, and the arms which are sloshing around the African continent and eastern Europe are smuggled by links of criminals across a range of different countries. As we withdraw from the European Union we are in severe risk of losing the co-operation in intelligence and policing that we have built up over the past 40 years. Can the Minister assure the House that, as this danger of arms smuggling rises for the UK, we are taking adequate steps to ensure that that crucial co-operation in intelligence and policing continues, and can she tell us something about the framework within which it will be organised?
Baroness Williams of Trafford
My Lords, I can confirm to the noble Lord that we intend to keep up and enhance our joint working capabilities at the border and between member states, both during our membership of the EU and afterwards.
Baroness Williams of Trafford
Dogs are generally very good swimmers, my Lords. I will get the exact figures for my noble friend of how many dogs are used on any given day—perhaps today.
Lord Rosser (Lab)
My Lords, given the figures that the Minister has read out, can she tell us what is the Government’s estimate of the percentage of illegally imported firearms into the UK that are actually seized?
Baroness Williams of Trafford
Without doing the maths, I cannot give the noble Lord the figures off the top of my head. However, I will certainly write to him with accurate figures.
Lord Skelmersdale (Con)
My Lords, in her original Answer my noble friend the Minister mentioned real firearms seizures, or words to that effect. Can she tell the House what the unreal firearms seizures are, and if so, why are they seized?
Baroness Williams of Trafford
I can tell my noble friend that “unreal” firearms include fake weapons and parts of firearms. BB guns, for example, are imitation guns, while others included in this group are bits of guns and other weapons like stun guns and pepper spray.
Lord Foulkes of Cumnock (Lab)
My Lords, does the Minister think that there is anything our 40 admirals could do to help with this problem?
Baroness Williams of Trafford
I think that 40 admirals would come in very handy.
Lord Harris of Haringey
My Lords, the noble Baroness has talked about the Border Force collaborating with other forces. At most Question Times we hear from my noble friend Lord West about the problems with the Royal Navy. Are there really enough ships, vessels and aircraft patrolling our borders?
Baroness Williams of Trafford
My Lords, I think I made it clear in my follow-up response to the noble Lord that Border Force has invested in its maritime capability, having purchased a number of new coastal patrol vessels, four of which will be in service by April of next year. We have also invested in new technology which has hugely helped in detection.
Brexit: Medical Research and Innovation
(8 years, 1 month ago)
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Baroness Andrews
To ask Her Majesty’s Government, in the light of the numbers of European Union scientists working on British research programmes, what assessment they have made of the impact of the United Kingdom’s exit from the European Union on medical research and innovation.
The Minister of State, Department for Business, Energy and Industrial Strategy (Baroness Neville-Rolfe) (Con)
The Government are looking at more than 50 sectors and at the cross-cutting regulatory issues to build a detailed understanding of how withdrawing from the European Union will impact on the UK, including in the important area of medical research and innovation. The recently formed UK EU Life Sciences Steering Group is engaging with a wide range of stakeholders to help us ensure a positive outcome for this sector and for UK science.
Baroness Andrews (Lab)
I am grateful to the noble Baroness for that Answer. Does she appreciate that what medical researchers in the UK really want to know is what is going to happen after Horizon 2020? Are the Government aware of the risk that there will be to the great progress now being made by UK researchers working with European teams, networks and funding in, for example, the treatment of cancer and rare diseases? If those researchers are excluded from the next research framework, Framework Programme 9, that progress will come to a halt. In short, can she say what specific plans the Government have to ensure that we are not excluded from framework 9?
Baroness Neville-Rolfe
My Lords, it is too early to speculate on our future relationship with Horizon 2020 and its successor programme, No. 9—I am assured that it is going to be given a better name. Whatever happens in the future, we are committed to ensuring that the UK continues to be a world leader in international research and innovation and that collaboration with Europe and others continues. Separately, and as part of our industrial strategy, the Prime Minister has today announced a substantial real-terms increase in government investment in R&D worth £2 billion per year by 2020 as well as a new industrial strategy challenge fund which will also help medical innovation. This is good news.
Baroness Morgan of Drefelin (CB)
My Lords, perhaps I may remind the House of my interest in this area. The Minister in the other place said in June that the life sciences industry was worth around £60 billion a year to the UK and supports some 220,000 jobs, We in this House know that the role of the industry in promoting better patient outcomes through clinical research is absolutely vital. Is the Minister able to give us some reassurance that regulation will be put on a more even footing in the future, and will the Government commit to signing up to the agreed 2014 clinical trials regulations when they come into effect in 2018?
Baroness Neville-Rolfe
I entirely agree with the noble Baroness about the importance of our unique life science industries. Regarding the clinical trials regulation, preparations are continuing to implement that regulation in 2018 because we remain in the EU while negotiations continue. Of course, a great repeal Bill will come before Parliament after the next Queen’s Speech. That will end the authority of EU law and return power to the UK, but we will transpose current EU law into domestic law while allowing for amendments to take account of the future negotiated UK-EU relationship in this and other areas.
Lord Foster of Bath (LD)
My Lords, does the Minister accept that if we are to succeed in medical science research and innovation we need more home-grown science and maths graduates? That requires more science and maths teachers in our schools. Is she aware that teacher training targets are being missed, that vacancies are rising, that retention rates are falling, and that now more than a quarter of maths and science teachers have no relevant post A-level qualifications? What action are the Government taking?
Baroness Neville-Rolfe
The situation on STEM teaching is incredibly important. Indeed, thinking about our skills and how they relate to our industrial base, and our research and innovation will be a key strand of our industrial strategy, on which we will issue a consultation paper this side of Christmas.
Lord Anderson of Swansea (Lab)
My Lords, is it not inevitable that we will lose the European Medicines Agency in Canary Wharf, with its consequent expertise and jobs?
Baroness Neville-Rolfe
All I can do is repeat that it is too early to speculate on detailed issues such as the future of the European Medicines Agency, but our approach remains to be fully open and supportive of scientists, researchers and our medical strength. This is particularly famous in the UK because of the National Health Service, which provides such a good base for our medical and pharmaceutical industries.
Lord Naseby (Con)
Is my noble friend aware that one has only to go up to Cambridge and look at the number of start-up companies that are there, then open up the file on the new companies dealing with medical discovery going on the AIM market, to have some considerable reassurance that the industry is confident of the future, recognises that there will be some transitional challenges but, as before we joined the EU, will continue to be a leader in medical research?
Baroness Neville-Rolfe
I entirely agree with my noble friend. The fund for backing priority technologies, which we have announced today, will further support the UK’s potential to turn strengths in research into a global, industrial and commercial lead.
Lord Kakkar (CB)
My Lords, I declare an interest as professor of surgery at University College London and business ambassador for healthcare and life sciences. The announcement of £2 billion a year of additional funding to support research and development is most welcome, but are Her Majesty’s Government able to confirm that that funding, in addition to driving an industrial strategy in this area, will be delivered through the activities of the research councils, secure excellence in terms of the purpose of research funding, and be used to ensure the ongoing participation of our great institutions in global collaborative networks, which are vital for the delivery of excellent science?
Baroness Neville-Rolfe
I entirely agree with the noble Lord on the excellence of our research and development base, and on the great work being done by the research councils. I look forward to debating the way forward when the Bill on education and research reaches this House in the coming weeks. New funding has been made available today. This vision and direction of travel is excellent news for our science and research base in every part of the country.
Lord Hunt of Kings Heath
My Lords, the Minister ducked the question on the European Medicines Agency. Will she answer a question about the MHRA, the UK medicines regulator, which is regarded as the finest regulator in Europe and is one factor behind the large investment in medical research in the UK? In the Brexit negotiations, will she ensure that there is mutual recognition, so that medicines licensed by the MHRA will continue to be recognised throughout Europe?
Baroness Neville-Rolfe
I will feed the noble Lord’s suggestion into the process that is going on to make sure that we get the best deal in the Brexit negotiations on all these issues. He will know that Jo Johnson has a set up a forum with senior representatives of UK Research and Innovation to look at such matters, and that work continues in the Department of Health. This is a very important area. A lot of the detail is complex, but we are aware of that and, as I said in my opening comment, a great deal of work is going on.
Defence Contracts: British Steel
(8 years, 1 month ago)
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Lord Hoyle
To ask Her Majesty’s Government whether they are planning to require all future British defence contracts to specify the use of British steel exclusively.
The Minister of State, Ministry of Defence (Earl Howe) (Con)
My Lords, this Government are committed to supporting the British steel industry and we are addressing any barriers that prevent UK steel producers competing effectively in the open market. Defence steel requirements continue to be sourced by our prime contractors from a range of UK and international suppliers. This reflects the need to source specific grades of steel, not all of which are available in the UK, and ensures competitive cost, time and quality.
Lord Hoyle (Lab)
However, it is not only on the replacement for the Trident submarine that foreign steel is being used but on the Royal Navy patrol vessels, for which 60% of the steel comes from Sweden. Will the Minister not apply Article 346, which will ensure some relief to our beleaguered steel industry and provide some job security for the hard-working, highly skilled steel employees?
Earl Howe
My Lords, along with the rest of the Government, the MoD is fully committed to supporting the British steel industry. Most defence steel requirements are sourced by our prime contractors; in fact, the British steel industry has proved very successful in those competitions. We are taking specific action across government. We are compensating energy-intensive manufacturers such as steel for the costs associated with renewables and climate change policy, worth £126 million to them. We secured flexibility over EU emissions regulations. We have made sure that social and economic factors can be taken into account when the Government procure steel. We have also successfully pressed for the introduction of trade defence instruments to protect UK steel producers from unfair steel dumping. There is a range of measures that we believe will help our industry compete even more effectively.
Lord Brookman (Lab)
My Lords, I am rather surprised by the Minister’s response to the question posed by my noble friend Lord Hoyle. It is a serious situation; it is not as simple as the Minister describes. Only last week, or the week before, the general secretary of Community, which used to be the Iron and Steel Trades Confederation—a union of which I was a fully paid-up member and still am—wrote to the Prime Minister spelling out in some detail the problems that workers in Port Talbot and elsewhere across the country face. It is not an issue simply of whether the Government are dealing with the British steel industry fairly and properly; consideration needs to be given to making sure that for all the jobs that require steel—construction of the third runway, the Nissan car plant in Sunderland and elsewhere—the necessary support from the British Government is copper-bottom guaranteed.
Earl Howe
My Lords, the noble Lord is right: we have to acknowledge that the steel industry is currently dealing with very challenging global economic conditions. It is a global problem that I would maintain requires a global solution. We set up the Steel Council to work with all key stakeholders to explore actions that industry and government can take further to support the UK steel sector, but our aim is to leave no stone unturned. We have been addressing the asks of industry as I outlined in my earlier reply.
Baroness Jolly (LD)
My Lords, this is an issue of value for British taxpayers’ money and of our own industrial capability and capacity. What proportion of defence contracts is expected to be delivered by British suppliers and contractors? Are there any restrictions on using suppliers that are not British?
Earl Howe
My Lords, we have a policy to build our warships in British yards. Defence requirements for steel in that context are usually sourced by our prime contractors, taking into account—as the noble Baroness rightly said—value for money, quality and the time factor. We remain engaged with our prime contractors to ensure their support in implementing our policy guidance on steel procurement. That emphasises the importance of pre-market engagement activities to facilitate access to supply-chain opportunities for UK suppliers.
Lord West of Spithead (Lab)
My Lords, at the risk of a cull on admirals, surely a good way forward would be to order more ships; you would then need more steel. Will the noble Earl confirm that the new solid support ships to be built will use British steel and not be built somewhere abroad? If they are built here with British steel, that helps British shipbuilding and our steel industry, which is a strategic necessity for a nation such as ours, the fifth richest in the world. We need that capability in our country.
Earl Howe
My Lords, the ambition of Sir John Parker in his national shipbuilding strategy is for UK shipyards to be in an excellent position to compete internationally for procurement opportunities such as the fleet solid support ships. The emerging principles of the strategy should be applicable to those ships without the need to restrict procurement to the UK.
Lord Touhig (Lab)
My Lords, earlier this year the Government issued new policy guidelines to ensure that UK steel suppliers compete on a level playing field with international suppliers. They said that this would feed into our national shipbuilding strategy and that the Government regarded British steel manufacturing as vital to this programme. On 4 November, when the Defence Secretary announced plans to cut steel for the first batch of the new Type 26 ships, he was unable to confirm that British steel will be used. Can the Minister be clearer: will British steel be used? Can he list the British steel suppliers that won contracts to supply steel for the building of Royal Navy ships as a result of the policy announced earlier this year?
Earl Howe
My Lords, no steel has yet been produced for the Type 26 programme. UK steel suppliers will have an opportunity to bid for the work as part of an open competition. I believe that the Type 26 programme will secure hundreds of high-skilled shipbuilding jobs on the Clyde. In a wider context, it is worth noting that UK suppliers made a significant contribution to the supply of steel for our major defence programmes. The classic example of that is the Queen Elizabeth aircraft carriers, for which some 95,000 tonnes of steel used was British—88% of the content.
Pension Schemes Bill [HL]
Monday 21st November 2016
(8 years, 1 month ago)
Lords ChamberRead Full debate Pension Schemes Act 2017 View all Pension Schemes Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 65-I(Rev) Revised marshalled list for Committee (PDF, 113KB) - (18 Nov 2016)
Lord Flight
Lord Flight (Con)
My Lords, the intent of my Amendments 1, 3, 5 and 6—and, I believe, similarly the intent of the Opposition’s Amendment 2—is to remove from the definition of master trust certain non-associated multi-employer schemes, known as NAMESs, that are supported by employers and are not run for profit. Such schemes are often industry-wide schemes set up to provide benefits for employees within a particular industry sector.
I have identified at least 12 of these schemes, with member numbers ranging from 900 to 340,000 and the value of assets ranging from £80 million to £48 billion. They include the Railways Pension Scheme, the Merchant Navy Officers Pension Fund, the Merchant Navy Ratings Pension Fund, the Plumbing & Mechanical Services (UK) Industry Pension Scheme, the Cheviot Trust, the ITB Pension Funds, the Industry-Wide Coal Staff Superannuation Scheme, the Industry Wide Mineworkers’ Pension Scheme, the Motor Industry Pension Plan, the Pilots’ National Pension Fund, the YMCA Pension and Assurance Plan, and the Registered Dock Workers’ Pension Scheme.
The concern is that, without my amendments or other ways in which the Government may choose to address the issue, these schemes will need to comply with the new regulations on master trusts, despite being subject already to a very comprehensive regulatory regime. I had always understood that the intent of the new Government was not to double up regulation but to streamline it. I believe the USS—the Universities Superannuation Scheme—has raised this point already with the Department for Work and Pensions. I sympathise with its argument that such not-for-profit hybrid schemes should be excluded. By inserting,
“is not a relevant centralised scheme”,
my Amendment 3 would create such an exclusion.
Mostly, the schemes are occupational pension schemes regulated by the Pensions Regulator. They do not have a commercial agenda and have not been established with a view to making a profit, unlike the commercial master trusts, which are surely the intended target of the Bill. The NAME schemes provide defined benefit—DB—pensions and so are subject to the scheme-specific funding requirements of the Pensions Act 2004. It is usual in schemes such as these for the participating employers to be liable for the expenses of running the scheme. When relying on employers to fund the scheme and to pay expenses, there is the risk of employer insolvency but this risk is faced by trustees of all occupational pension schemes, except where there is a government guarantee.
The reason many of these schemes will be caught by the definition of master trusts for the purposes of the Bill is that they give members the option to accrue money purchase benefits on top of their DB pensions by choosing to pay additional voluntary contributions. Having to comply with the requirements for master trusts would cause difficulties for many NAME schemes and result in additional expense for those employees and, ultimately, employees participating in such schemes. In particular, there will not usually be a person involved with a scheme who fits the requirements of being a “scheme funder”. The Bill requires that a scheme funder,
“must be constituted as a separate legal entity”,
and that the only activities it carries out relate directly to the master trust.
It is not entirely clear whether or not the drafting of my amendments in this technical area succeeds in excluding all NAME schemes that the Government might want to carve out of being a master trust, and it is impossible to know what different pension arrangements may be developed in the future. The amendments therefore include a regulation-making power to enable the Secretary of State to remove further schemes from the definition of master trust.
I have referred to the Universities Superannuation Scheme, which is a classic example. Its starting position is that it believes it is “unintended, unnecessary and burdensome” that,
“hybrid schemes such as USS, which provide pension benefits for multiple non-connected employers … will be caught by the new regulation”.
It would like to see the definition of master trusts clarified in secondary legislation to ensure that it targets only those schemes which are currently subject to inadequate regulation.
I feel sure that it is not the Government’s intent that these NAME schemes should be covered by the definition of master trusts. If the particular changes that my amendment proposes are not to the Government’s liking, or if they think that it does not work, I hope to hear that they have alternative proposals to deal with these issues.
Lord McKenzie of Luton (Lab)
My Lords, I shall speak to Amendment 2, which we have in this group. I say to the noble Lord, Lord Flight, that the intent of our amendment is not to take schemes out of the definition of master trusts but to probe where those boundaries currently are, because there is a lack of clarity in some respects.
Before I touch upon the detail of the amendment, it might be helpful if I set out the context in which we plan to approach Committee. We have already made clear our support for the thrust of the Bill and what it seeks to do, but much of the detail is missing and will depend on regulations, at least some to be informed by further consultation. There are policy gaps, as well as gaps in the operational detail. The impact assessment recites that there is still,
“significant uncertainty over the full impacts of the proposal, as costs will be determined by the details to be set out in subsequent secondary legislation”.
Additional costs for master trusts and for the Pensions Regulator cannot currently be determined, as the charging structure has yet to be finalised.
The Constitution Committee has also commented on the degree of delegation in the Bill. It instances Clause 24(4), which lists 15 matters that regulations must address relating to continuity option 1. It also draws attention to the wide provisions of Clause 39, which would allow the Secretary of State to adjust the range of pension schemes to which Part 1 of the Bill applies, either to extend the regime or to disapply it in whole or in part. We will come back to this extraordinarily wide provision later. This almost turns on its head the normal approach, which is to determine policy first and then to legislate. We accept the importance of having flexibility to deal with the changing models which an agile sector might bring forward, but in scrutinising this legislation we need to have the opportunity to test the boundaries of that flexibility. I think it has already been indicated that we will not get a full set of draft regulations before the Bill leaves your Lordships’ House, but perhaps the Minister will set out when we might see the drafts of key regulations, as we have requested, or at least policy notes to expand on their intended coverage. In the meantime, we will proceed with a range of probing amendments to flesh out as much detail as possible.
The purpose of Amendment 2, in my name and that of my noble friend Lady Drake, is to probe why the Bill excludes single-employer occupational schemes from the scope of its provisions and why connected employers are therefore effectively treated as one. As it stands, the Bill would leave single/connected employer arrangements regulated as at present. These arrangements sit alongside the regulation of group personal pension plans, which is within the remit of the FCA, so we will be going from two approaches to three.
We understand the reasons why the existing regulation for trust-based schemes is inadequate, notwithstanding some prospects for improvement under the assurance framework and the 2015 code. It is inadequate to deal with master trusts, which have developed new types of business structures. This can alter the relationship between members, employers, trustees and providers, with some being run on a profit basis but not all, as the noble Lord, Lord Flight, indicated. The scale of some of them is also unprecedented in occupational pensions.
Our probing amendment is designed to give the Government the opportunity to put on record the overall scope of the new regulatory environment to justify how it all fits together and that the boundaries of the system are clear and do not overlap. We accept that the master trust regime is focused on schemes with particular risks, but does there not have to be some consistency across the piece? As it stands, the definition of master trust is potentially very broad. We do not particularly have a problem with that, but it can cover those set up by unregulated businesses as well as those set up by regulated businesses, such as insurance companies or investment managers. It can also cover what are described as “white label” master trusts, which are set up by a pension provider with commercial or non-commercial partners being allowed to brand their sections of the trust. Others may have partnering arrangements with large employers where each employer gets its own section of the master trust but does not make any profit from it. Schemes can include industry-wide schemes and schemes that happen to include two or more unassociated companies and schemes in the university, charitable and religious sectors. So within the master trust definition there are a range of differing situations, and a question arises about whether the line to exclude single unconnected employer arrangements is the appropriate line to draw.
The amendment also seeks, as a probe, to delete the exclusion from the definition of a master trust those schemes which are to be used only by connected employers. I have some questions on that. What is the position where a scheme starts life as a scheme for connected group employers only, but where one of the employers enters into a time-limited joint venture which causes it to cease to be connected? Does it then have to seek approval to operate? What is the position when the joint venture has run its course and the scheme reverts to being used only by employers which are connected? How do the Government justify the juxtaposition of a connected group of employers being outside the scope of the Bill and another connected group of similar size but with just one small associated employer presumably being inside it? This is a very thin distinguishing line. Are there any circumstances currently envisaged where Clause 39 would be used to bring within the scope of the Bill a single-employer occupational pension scheme?
So far as the amendment moved by the noble Lord, Lord Flight, is concerned, it is understood that AVC-only schemes are a type of arrangement that has been developed of late, prompted by the introduction of the Pensions Regulator DC code of practice, which introduced a degree of comprehensive governance and management tests for DB schemes where the only DC benefits are AVCs. It is suggested that the new code can lead to disproportionate costs—hence the plan to remove AVCs from individual DB schemes and corral them in a master trust. As we have heard, the proposition now is to remove them from this Bill’s provisions. Presumably, this implies that the current regulatory regime, as enhanced by the April 2015 changes, would continue to operate. However, in so far as comfort is being taken from the voluntary master trust assurance framework, its future is uncertain. We wonder whether that should be relied upon. In any event, do not such arrangements—that is, AVC-only schemes—exhibit at least some of the risks which this legislation is seeking to address, such as the existence of providers, funders, the profit motive and the promotion of the scheme? In the circumstances, it is difficult to see why they should be outside the Bill, acknowledging that some may have been created specifically to take advantage of the current regime.
We have a similar position in relation to the other group of schemes to which the noble Lord referred. So far as the noble Lord’s amendment about having the power to modify the Bill is concerned, the Bill already provides that power. In fact, we think the power is too broad and do not like it. We look forward to the Minister’s comments.
Lord Naseby (Con)
My Lords, I support my noble friend Lord Flight in his amendments, in broad terms. The Minister will recall that at Second Reading, at col. 570, I raised the question of mutuals and the mutual movement. His noble friend on the Front Bench confirmed that since a great many of them were defined benefit pension schemes, they would be outside the scope of the Bill. However, that does not take everybody out. Since that time I have had discussions with the Universities Superannuation Scheme. It is perhaps a bit of an oddball, but it is deeply concerned about the Bill and its effect on it and its members. Its representatives emphasised to me in our meeting that they were very much behind the intention of the Bill—so it is not a question of some organisation trying to undermine the situation.
They made three particular points on why the Universities Superannuation Scheme should not be subject to the Bill. First, there is,
“the comprehensive regulatory regime already in operation for hybrid schemes, which already provides a well-established, ample level of protection for pension savers”.
Secondly,
“the protection already afforded to USS members with Defined Contribution … benefits both under statute and the scheme rules, whereby the DC benefits are underwritten by the whole fund (DB and DC) which means that the only circumstances where DC benefits could not be fully satisfied would be where the whole scheme fund (assets currently circa £49 billion) was depleted in full”.
Lastly, there are,
“the anticipated costs of compliance”—
a common thread that has been raised by noble friends across the House. The cost of compliance is estimated at,
“in the region of £10.5 million in order to satisfy the financial sustainability requirements over 2 years, plus a further £250,000 per annum for compliance with the requirements of the Bill, which would be funded from the scheme assets”.
I hope very much that the Minister will take these points on board. I do not expect a full and complete answer this afternoon, but I would have thought that schemes such as this—there probably are others that have not been brought to noble Lords’ attention—could be dealt with in secondary legislation. It certainly seems to me that they need to be addressed at some point. All I am seeking this afternoon is a reassurance that my noble friend recognises that there are some schemes out there that should not be covered by the Bill but may need to be covered in some form in the regulations. I look forward to his response.
Baroness Altmann (Con)
My Lords, I will make just a few remarks at this stage. My noble friend Lord Flight mentioned the position of the NAME schemes. There are significant problems with the DB sections of those schemes, and a number of employers have written to me who are about to go personally bankrupt because they cannot meet the obligations—and that is setting aside the defined contribution issue that we are talking about today. From the perspective of the Universities Superannuation Scheme and other schemes that may have AVC-only sections to them, it would seem to me that we cannot, given the intentions of the Bill to protect scheme members’ benefits in the event of wind-up, just assume that the money will come from somewhere if there is not any proper provision for it—and currently there is not. It would suggest—my noble friend the Minister might consider this—that there may be a case for extending the Pension Protection Fund itself, which already covers the DB benefits of those schemes, to take care of any residual risk in the AVC section.
Indeed, the capital adequacy mentioned in the Bill will not necessarily achieve the aim that the Pension Protection Fund achieves for defined benefit schemes. In the event of wind-up, with a scheme’s records in disarray, it is not clear that any initial estimate of capital adequacy might be sufficient to cover those costs. I would be grateful for some comment from the Minister on the possibility of some sort of backstop or tail-risk insurance. That could also pick up the AVC schemes that have been mentioned. I understand the points that have been made there.
Lord Kirkwood of Kirkhope (LD)
My Lords, I wonder if I could make a short contribution on this amendment. I declare an interest: I am chair of a DB scheme for the superannuation fund for the GMC and have been chair for a number of years. It is a DB scheme and I do not have as much experience of DC schemes, but I am interested in the Bill. I am sorry that I was abroad when the Second Reading debate took place; I have read it carefully and some very powerful speeches were made.
We have heard again from the noble Lord, Lord Naseby, on the important point about mutuals and AVCs. An important point about AVCs has also been made by the noble Lord, Lord Flight, and I hope we will get some kind of indication about how the Government are going to respond to that.
My real reason for speaking is to support the comments by the noble Lord, Lord McKenzie. I have been doing legislation of this kind for some time, and this is by some margin the most statutory-instrument-framework type of Bill that I have come across. I understand perfectly well that there are reasons for this; long consultations about some of the problems that the Bill addresses could have provoked some of the outcomes we are trying to avoid. But I spent the weekend looking at the Bill and found that its vagueness—in terms of the policy that is left to the Government to decide at a later stage, much of it through negative rather than affirmative regulations, as currently set out in the Bill—makes it impossible to fit the pieces together properly.
I may be revealing my lack of experience—there are other colleagues in the Committee who know far more about some of the detailed aspects of master trusts—but I make a real plea to the noble Lord, Lord Freud, who has experience of dealing with concerns of this kind on all sides of the House from other Bills in the past.
Policy notes are one way of doing that. I do not think anyone is seeking to stop, hold back or prevent any of the ambitious and necessary outcomes that the Bill seeks to achieve, but we could well be in a position of being presented with statutory instruments in an undesirable way. We have had some conversations about what powers we in this House should properly have over secondary legislation and how we should exercise them. I think that can be avoided if the Minister adopts his tactic of consulting at every opportunity—at the appropriate moment as soon as the policy is finalised; offline, as it were—and with some policy notes. Then we will be confident that it will be safe for us to sign off Royal Assent for the Bill in the expectation that every opportunity will be taken by Ministers at every stage, if they cannot provide draft statutory instruments, to make alternative arrangements such as policy notes so we can be sure that we know what we are voting for and considering in secondary legislation. That is a very important point that the noble Lord, Lord McKenzie, made.
The Constitution Committee does not do notes of this kind unless it is seriously concerned, and we as a Committee would be foolish not to pay careful attention to the fact that it is urgently drawing matters of this kind to our attention. So I hope that we can get some kind of reassurance on that point from the Minister on the wind-up on these important amendments.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
Clause 1 is critical to the Bill. It sets out the scope for the regime, so I welcome these considered amendments, which give us the opportunity to explore this important clause in detail.
We have taken considerable care in defining master trusts and setting the scope for the new authorisation regime. The guiding principles throughout have been twofold: the first is to ensure that members are protected against the risks that arise in these new structures; the second is to ensure that the extent of any regulation is proportionate.
For example, the definition applies to schemes which are open to more than one employer because the level of engagement and involvement of the employers and scale of such a scheme is likely to be very different from that of a single employer scheme or a scheme in which all the employers are part of the same corporate group. It applies only to schemes which offer money purchase benefits because of the risks that the member bears in relation to such benefits, but we have been careful not to create a loophole for schemes which offer mixed benefits—as we will come on to later.
However, we also need to be mindful of the fact that master trusts are a recent development in a rapidly changing pensions landscape, and the master trust market is evolving all the time. A one-size-fits-all regime may not be proportionate, and we therefore need flexibility to be able to respond to the needs and changes. It is for this reason that Clause 39—which we will come to later in Committee—makes provision allowing for the disapplication of some or all provisions of the Bill for certain schemes.
Turning to the specific amendments, my noble friend Lord Flight seeks to exclude from the definition “AVC only” and “relevant centralised” schemes. I have sympathy with his intentions. Many defined benefit schemes offer AVCs for historic reasons and could be considered to be DB schemes to all intents and purposes, but schemes such as this could be excluded from regulation under our powers under Clause 39, and we prefer to use this power rather than to create a list of exemptions in the Bill, allowing time for more detailed consultation with industry about the diverse types of scheme that currently exist.
I put it on record that our intent is to propose such a carve-out. That is: we intend to consult on regulations under Clause 39(1)(b) to disapply some or all of the provisions of the regime for a mixed benefit master trust scheme, where the only money purchase benefits are those related to additional voluntary contributions of non-money purchase members, but we will also be considering carefully the need to avoid creating any avoidance loopholes as we go through that process.
In relation to the relevant centralised schemes, I am concerned that my noble friend’s amendment may go too far. The definition to which he refers is not confined to industry-wide or not-for-profit schemes, and although there may be a case for excluding some such schemes, I am wary of creating a loophole.
Our aim is to protect members from the risks that are particular to master trusts, and these may equally arise in industry-wide schemes. Similarly, although it is true that most master trusts are run for profit, and that this gives rise to certain risks which the regime seeks to protect, it is not this feature alone which determines the nature of master trusts.
I am grateful for the amendment tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake. As the noble Lord said, it is a probing amendment to investigate the boundaries of the definition. The amendment would change the definition of master trusts in the Bill and extend it to all schemes which offer money purchase benefits, including those which are used by only a single employer or employers connected to each other.
On the noble Lord’s question of how and when we plan to consult on draft regulations, and indeed on the question asked by the noble Lord, Lord Kirkwood, we have worked with the industry and the regulator to establish the key criteria for master trust authorisation. We intend to continue these discussions to develop more detailed policy and secondary legislation. We will follow the published government principles to ensure that consultation is an ongoing process, using the most appropriate forms of communication. The timing of that formal consultation on draft regulations will depend on a number of factors. We anticipate that the initial consultation to inform the regulations may take place in autumn 2017. I hope that that gives the noble Lord, Lord Kirkwood, some reassurance about the process.
The amendment would extend the scope of the definition and the authorisation regime considerably and would do so in a way that would be disproportionate. To take the example of the scheme starting as a single group employer picking up a non-associated one and moving back and forth, if the scheme is intended to be used for more than one unconnected employer, it is within the scope of the regime. If it starts with only connected employers but takes on an unconnected employer, it will fall within the regime at the point that it takes on the unconnected employer.
Lord McKenzie of Luton
Will the noble Lord help me on that point while it is on my mind? If you take on an associated entity and therefore have to join the scheme, what happens if you have a joint venture and that joint venture comes to an end? Are you perpetually in and out of the scheme? How does that work?
Lord Freud
In practice, one has to be fairly formal about the definition. The noble Lord has drawn up an example of a potential revolving door which I suspect may be in the black swan category. I will take that point away. I need not write to him on it because we will have a chance to come back to it, or I will make sure that we do. He describes a very volatile situation, but I suspect the very existence of a precise regime will tend to stop people doing that kind of thing unnecessarily, or without a very good reason.
On the question of bringing into the regulations schemes that have only one employer, we are currently considering whether some schemes offering decumulation-only benefits have the same rules as some master trusts. Any use of the powers to deal with this issue will clearly be subject to the affirmative procedure. My noble friend Lady Altmann asked whether PPF could be extended; an amendment has been tabled—I think it is Amendment 18—to explore this issue, and we will deal with it when we reach that point.
Much of our debate at Second Reading indicated that there is general acknowledgement that further regulation of master trusts is both desirable and necessary. Master trusts have developed in part in response to the success of the automatic enrolment programme emerging as a different kind of beast to the traditional structures that have existed in the occupational pensions sphere.
There is much to recommend master trusts as the schemes of choice for employers and members. They can drive value for money due to competition in the market and the economies of scale and offer a neat solution for smaller employers, for whom setting up an individual pension scheme for employees would be impractical and burdensome. But these very qualities also give rise to new risks that are not present in single employer defined contribution schemes in the same way. In a single employer scheme, the employer is typically far more closely involved in the running of the scheme and tends to have a more active relationship with the trustees. With master trusts used for automatic enrolment, employer involvement is generally limited to paying over the employer contribution. The different dynamics that exist in master trusts give rise to the need for a different approach to ensure that members are properly protected. These issues do not arise in the same way in single employer or connected employer schemes, and it is for this reason that we have been careful to confine the definition to multi-employer schemes in which the employers are not all connected.
Baroness Altmann
I ask my noble friend for some reassurance on the issue of defining the whole structure via the word employer. An employer in a single employer scheme may be considered a single employer but they may be attracting money from members who used to work for other employers and do not currently accrue. Therefore, I hope that the intention of the Government for the Bill is that it should apply in the case where there is a single employer but he has attracted money from people who worked for other employers in the past. I recognise that my noble friend says that this may be captured in Clause 39, but I would be grateful for some reassurance on that point.
Lord Freud
At the moment, these schemes would not be within the master trusts legislation. I cannot give a full answer now because I am not sure what other protections there may be for people in this situation, but we will have a chance to come back to this issue again and again and I shall make sure that we have a dialogue on this point later, as we consider the Bill in Committee.
This Bill addresses the risks that arise in master trusts. It is important to remember that these risks are specific to this particular type of structure, and it is therefore important that the definition reflects those structures and does not go wider. This ensures that the regulation in the Bill is a proportionate response to the issues arising. I hope that with these explanations and assurances particularly on the process of consultation, noble Lords are reassured, and I ask them not to press their amendments.
Lord McKenzie of Luton
In relation to the use of Clause 39 for carve-outs, is it envisaged that that will be done on a broad scheme basis or on an individual scheme basis? How will it work in practice? Will it be a carve-out for a defined type of scheme, as in the AVC scheme referred to, or could it be more specific?
Lord Freud
We will come on to discussing Clause 39 later, but I think that it will be fairly specific—sorry, no, I think that it will not be specific. It will be general types.
Lord Naseby
I raised a point on the specifics of the universities superannuation scheme, which is really very large. I do not expect a concrete answer this afternoon, but could my noble friend cover it for me in writing or make sure that it comes back in some form so that the universities can be reassured?
Lord Freud
Yes, I think that we will come back to that issue—and, if we do not, I shall make sure to write to the noble Lord before the end of the Committee stage.
Lord Flight
My Lords, I am pleased to hear the Minister advise that Clause 39 will be used for further consultation, and that he is certainly minded to introduce a carve-out for AVCs. I would like to push the case for NAME as well, particularly as regards the arguments made by the university schemes. However, I understand the Government’s reservations here. Considerable further discussions with the industry are needed. On the basis of such constructive use of Clause 39, I beg leave to withdraw the amendment.
Baroness Drake
Baroness Drake (Lab)
My Lords, I refer to the interests that I recorded at Second Reading. I will speak also to the other amendments in this group. In part, these amendments are probing to understand what happens to non-money purchase benefits in master trusts under the Bill.
Clause 1(2), taken together with other clauses, means that the Bill applies only to money purchase benefits provided through a master trust, and excludes non-money purchase benefits. This means that potentially some of the members’ benefits provided by these schemes, including retirement products, are excluded from key protections in the Bill. On first consideration of that clause, it does not seem fair or sensible to exclude certain members’ assets from all of the Bill’s provisions. Master trusts can provide a variety of services both to employers under auto-enrolment and to individuals exercising pension freedoms. The master trusts may provide at-retirement products, such as annuities, guaranteed draw-down, and investment products which include some form of guaranteed rate of return. Annuity payments, for example, may be paid to the member but the actual annuities supporting those payments may be held as an asset of the scheme rather than in the name of the member. How are savers protected in that situation? Pension freedoms have seen the annuity market shrink, and they may radically transform the market for guaranteed income products. Pension savers will still have an appetite for some form of guaranteed product. The Bill will not apply to non-money purchase benefits, so it is unclear what happens to those benefits and, importantly, the assets backing them, when the master trust fails.
Master trusts are innovative. One such trust, for example, allows members to add in other savings and assets such as ISAs and property used for funding retirement. I read that, of the approximately 100 master trusts, only 59 are being used for auto-enrolment. Some have blossomed on the back of pension freedoms. Regulation should anticipate that master trusts will expand further into the decumulation market of retirement products. The exclusion of non-money purchase benefits raises three important issues. It is not clear what happens to the treatment of all non-money purchase benefits, and the assets backing them, in the event of a wind-up or other triggering event occurring. Will those members’ benefits be protected against funding the costs of a triggering event, and how, and where, will they be transferred on exit?
The Government’s position is that all the requirements in the Bill bite only in relation to money purchase elements in the scheme because other legislation protects non-money purchase benefits. But will all retirement products with an element of guarantee be covered by the PPF regime? I doubt it. Master trusts are not regulated by the FCA, so where does the saver look for protection?
The continuity strategy required under Clause 12 in the event of a wind-up will have to set out how the interests of members of a scheme in receipt of money purchase benefits are to be protected in a triggering event, but it appears that it will not have to set out how members in receipt of non-money purchase benefits will be protected. Such a requirement would at least clarify what range of member benefits were in the master trust; Amendment 26 in this group addresses this issue. Will master trusts be required to set out how members with non-money purchase benefits will also be protected if a triggering event occurs?
Amendment 16 provides for any assessment of a master trust’s capital adequacy backing money purchase benefits, required under Clause 8, not to take account of resources related to benefits other than money purchase benefits. There is only a brief reference—in Clause 38(2)—to both money and non-money purchase benefits being included in a master trust account. How will this work in practice? Will master trust accounts have to be disaggregated by type of benefit? Will requirements be imposed to identify the assets backing money purchase benefits, those backing non-money purchase benefits and any cross-subsidies between the two? Is it the intention that none of the assets backing non-money purchase benefits could be used to fulfil the requirements for financial stability under Clause 8 or to meet costs arising from a triggering event, including wind-up? The Bill raises uncertainties as to the treatment of the different categories of benefits at authorisation, ongoing supervision and when a triggering event occurs.
Finally, Clause 8, to which Amendments 16 and 17 are directed, is the capital adequacy provision clause. At Second Reading, several Peers expressed concerns about the adequacy of these provisions. The terms used are rather open-ended and will require implementing instructions, of which we have yet to see a draft. Concepts such as “sustainability” and “sound” are undefined, and the Bill does not include any explanation of what is meant by a scheme having sufficient financial resources. Even the reference to a scheme holding sufficient resources to continue running as a scheme for between six months and two years means that there is a big gap between the minimum and the maximum requirements. Yet the capital adequacy regime is intended to be the cornerstone or linchpin protecting members in a master trust in the event of its failure.
I will return to these arguments in more detail when we reach Amendment 21 in my name and that of my noble friend Lord McKenzie, but they are compelling reasons why Amendment 17 seeks regulations under Clause 8 to be subject to the affirmative rather than the negative resolution procedure set out in the Bill.
Lord Freud
My Lords, I am grateful to the noble Lord and the noble Baroness for tabling these amendments. Amendments 4, 16 and 26 relate to the question of how non-money purchase benefits in a master trust are dealt with and affected by the new regime, and Amendment 17 raises the question of the appropriate parliamentary procedure for regulations under Clause 8.
I will first deal with the question of non-money purchase benefits, as we have given a great deal of thought to it in developing the Bill. Amendment 4 seeks to amend Clause 1(2) so that the provisions apply to non-money purchase benefits in master trust schemes. Amendment 16 seeks to ensure that the Pensions Regulator does not take account of resources which relate to non-money purchase benefits in assessing whether the scheme has sufficient financial resources.
Amendment 26 seeks to ensure that master trusts set out the protections for non-money purchase benefits in their continuity strategy. Many master trusts will be money purchase schemes—that is, they will provide only money purchase benefits. However, a number provide both money purchase and non-money purchase benefits, and we therefore need to make provision to take account of this. As we have previously discussed, it is important that we do not create a loophole for schemes that offer mixed benefits. However, the policy intent is to specifically address certain risks that apply to members in master trusts related to the nature of the structure and funding of these schemes. These types of risk are managed in different ways in relation to non-money purchase benefits, and it is the risks around money purchase benefits that the Bill is focused on addressing.
Baroness Drake
I thank the noble Lord for his detailed and helpful comments. I hope I have followed them all but I will read Hansard at leisure to make sure that I have captured them. In terms of money purchase, I completely accept that one would not want to create a regime that allows arbitrage between a weaker regime and a stronger one on non-money benefits, and I agree that it needs to be proportionate. My main concern is that given that everyone, including the Government, recognises that a key risk with a master trust is the members having to bear the cost of failure, then if there are assets of different types of members in that master trust, it is very important to have clarity about how the risk is shared or borne and the rules that apply. It is helpful that the Minister has confirmed that the Pensions Regulator will not be able to take into account the assets backing non-money purchase benefits when assessing financial resources and capital adequacy because it is the first time that we have had that clearly confirmed. However, I am still a little unclear as to how that will translate into equal levels of confidence when an actual triggering event occurs, and what will be the rigour around clarity as to which asset belongs to each benefit class. If I may presume, it would be helpful to the Committee to have a note or a letter setting out the thinking on that because it might address some of the issues which have certainly been of concern to my noble friend and me.
On the matter of capital adequacy and the amendment to Clause 8, I am anxious not to anticipate what I think will be a larger debate around Amendment 21. I do not want to run the risk of repeating myself, but it is the debate about what happens if a capital adequacy regime fails and the resources are simply not there. I will try not to go there, but the Minister’s comments have been helpful. There is still a lack of confidence about how the key concepts will be interpreted under the regime. When the phrase “more flexible” is used, I tend to have an instinctive reaction that it could actually reduce the level of confidence rather than increase it. More flexibility does not always produce good outcomes. If the Minister could consider that regulation should be subject in the first instance to the affirmative procedure rather than the negative one, that would be really helpful because people are struggling. They do not want to hold up the Bill but the capital adequacy regime in Clause 8 is so integral to the linchpin the Government are providing that people are anxious to understand it. That would be a helpful concession if the Minister is able to make it. I am happy to withdraw the amendment.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, in moving Amendment 7 I shall also speak to Amendments 8 and 78. Amendment 7 would require that, for a master trust scheme to be operated, it must be authorised under all the provisions of Part 1. Part 1 covers provisions relating to authorisation, supervision, triggering events, continuity options, pause orders and withdrawal of authorisation—in others words, the totality of the Bill’s requirements apart from Part 2, which deals with administration charges.
We have already touched on the reason for the amendment with our reference to the Constitution Committee. In its letter of 11 November to the Minister, the noble Lord, Lord Freud, it drew specific attention to Clause 39, which we just debated, pointing out that it could be used not only to extend the master trust regime to schemes to which it might otherwise not apply, but to prevent a regime applying in whole or in part to schemes to which, according to the terms of the Bill, it would otherwise apply. We would counter this by deleting the authority of Clause 39(1)(b) with Amendment 78. As I said, we would require all the Bill’s provisions to apply if someone is to be authorised to operate a master trust.
Clause 39, as we have debated, is an extraordinarily wide power to allot to the Secretary of State, notwithstanding the proposed use of the affirmative resolution procedure. I suggest it is incumbent on the Minister to do much more to justify these powers. In what circumstances will it be envisaged that the provisions would be disapplied? We identified some areas, but which provisions do the Government have in mind? This gives the opportunity to disapply some or all of the provisions. Some might be taken out of the scheme entirely—AVCs, for example—but how would they be partially disapplied? Further, if the provisions are to be ignored, what authority might there be to make alternative arrangements? What other regulatory procedures would kick in? This legislation is important to protect the savings of millions of people. However, much still needs to be developed.
Amendment 8 would require that a scheme’s policies relating to systems and processes be added to the list of matters to be included as part of the application. While we acknowledge that the Secretary of State can, by regulation, add to the list of matters that have to be addressed as part of the application, it seems odd not to include in the Bill information regarding matters about which the Pensions Regulator should be satisfied pre-authorisation.
Amendment 8 would also require the application to set out the extent to which it proposes to adopt the master trust assurance framework. This is a probing amendment. As an at least interim response to the acknowledged poor standards of governance administration, in 2014 the Pensions Regulator and the ICAEW developed a master trust assurance framework to help improve governance for DC schemes. This is a voluntary framework that has been adopted by only a minority of master trust schemes to date—some 11 out of a current total of 84. It involves commissioning an independent reporting accountant to assess the design and operational effectiveness of the control procedures in place. As we know, there are two types of report: type 1 checks the design of a scheme’s control procedures; type 2 checks the operational effectiveness over a reporting year.
The point has been made to us that, other things being equal, accreditation will increasingly become a commercial imperative for providers so they can demonstrate that their scheme is well run. We agree with the Government that simply making the assurance framework compulsory is not a full response to the risk that such master trust schemes engender. In contrast to the Bill, it does not cover, for example, the financial stability of the provider and capital adequacy. Although it is not an alternative to the legislation, a question arises as to the future of the framework. This is particularly pertinent, as it appears that the regulations which will enable most of the Bill to come into force are some way off—possibly two years. Can the Minister give us the Government’s view on what should happen in the interim? We urge them to set out some analysis of the key areas of consistency between what the Bill requires, in so far as it can be determined, and the assurance framework, and to encourage schemes which have not obtained assurance to do so.
The FCA states that master trusts are expected to obtain independent master trust assurance to demonstrate the meeting of standards of governance and administration that meet the DC code and DC regulatory guidance. Clear indications from the Government are vital now so that schemes under the Pensions Regulator and the ICAEW can know where they stand. I am aware that the noble Lord, Lord Flight, has an amendment still to come. I will withhold my comments on that until we have heard from him. I beg to move.
Lord Flight
My Lords, I support Amendment 8. It is disappointing that reference to the master trust assurance framework was not already in the Bill, particularly given that the accreditation procedure confirms the rigour in the administrative procedures within the master trust. It is right that that should be added.
My Amendment 9 is a probing amendment to ask whether a continuity strategy not be the ongoing responsibility of the trustees rather than something which the regulator determines.
Lord Young of Cookham (Con)
My Lords, this group of amendments relates to the nature of the authorisation regime, the requirement to meet the criteria, the information provided in the application and the regulation-making powers to vary the scope of the regime in respect of specified characteristics.
Amendment 7, tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, would modify the central tenet of the authorisation regime: the prohibition on a person operating a master trust scheme unless the scheme is authorised. It would amend Clause 3(1) so that it read:
“A person may not operate a Master Trust scheme unless the scheme is authorised under all of the provisions of Part 1”.
The prohibition on operating a master trust scheme has been drafted so that a person may not operate a master trust unless it is authorised and that, to become authorised, the master trust must satisfy the Pensions Regulator that it meets the authorisation criteria. As is set out in the Bill, these are that the persons involved are fit and proper, that the scheme is financially sustainable, that the scheme funder meets certain requirements, that the scheme has sufficient systems and processes to run the scheme and that the scheme has an adequate continuity strategy.
All the criteria must be met in order for the master trust to be authorised. They must continue to be met on an ongoing basis, with the Pensions Regulator having the power to withdraw authorisation if it ceases to be satisfied that all the criteria are met. It is these criteria that are relevant for determining whether a master trust should be authorised. For that reason, I am happy to be able to reassure the noble Lord that all the authorisation criteria must be met for the scheme to be authorised and for the master trust to be allowed to operate. I hope that he will agree that the amendment is not necessary.
Lord McKenzie of Luton
I would be delighted to agree that the amendment was unnecessary, but Clause 39 is about the Secretary of State making regulations,
“applying some or all of the provisions of this Part”,
and in particular,
“disapplying some or all of those provisions to Master Trust schemes that have the characteristics set out in the regulations”.
This is the point that we are getting at: if you are in, you should be in in respect of all the provisions. What alternative situations are envisaged in which just some of them might apply?
Lord Young of Cookham
I will come to Clause 39 in just a moment but my understanding is that at this stage all the criteria must be met. Clause 5(5), for example, says:
“If the Pensions Regulator is not satisfied that the Master Trust scheme meets the authorisation criteria, it must … refuse to grant the authorisation”.
That implies that it must tick all the boxes. I will come to the point that the noble Lord just raised about whether Clause 39 trumps some of the requirements in Clause 5.
In the hope that some in-flight refuelling might arrive on Clause 39 in the meantime, let us turn to Amendment 8. Tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, it would add to the information that the trustees of a master trust scheme seeking authorisation must submit as part of their application. Specifically, it would require that the scheme must submit policies that relate to the systems and processes authorisation requirement of the Bill, and it would require that the scheme submits some form of statement setting out the extent to which it is prepared to adopt the standards set out in the master trust assurance framework.
The first part of the amendment points to the regulations made under Clause 11, which are quite extensive. That clause deals with the requirement for a master trust to have adequate systems and processes. The Bill provides that these regulations may cover certain areas, such as processes for risk management and resource planning, which the Pensions Regulator must take into account in deciding whether the requirement is met. However, the Bill contains no provision for schemes to have policies in relation to the systems and processes requirement. It requires only that the scheme meets those requirements to become authorised. Requiring master trusts to include this information as part of an application creates a new requirement for those running schemes, who will have to develop these policies, but would not of itself ensure that the systems and processes are suitably robust. It is not clear how placing that additional requirement on the industry would increase protection for the members of master trust schemes.
Of course, it is important that the regulator has enough information to be able to assess whether schemes meet the criteria and it is in the interests of any applicant to provide such information to ensure that the regulator can be satisfied that the criteria are met and the application granted. Certain key documents are required under Clause 4, which also contains a regulation-making power to allow the Secretary of State to set out further information to be included in an application. We wish to consult on this matter before deciding what this information should be, and in that context can take on board the point made by the noble Lord, Lord McKenzie. We would also wish to retain appropriate flexibility to update the requirements at a future point to reflect experience of operating the new regime or changes in market practices.
The second piece of information that this amendment would require is a statement setting out the extent to which the scheme is prepared to adopt the standards set out in the master trust assurance framework. This would not be appropriate given the stringent new requirements the Bill introduces for master trust schemes, which go beyond those required to achieve accreditation under the framework. The master trust assurance framework provides a valuable set of principles and standards for good governance but it is and was always designed to be voluntary. I agree with what the noble Lord just said—we should encourage people to sign up.
In addition, as the amendment itself notes, the ownership of this framework rests with the Pensions Regulator and the Institute of Chartered Accountants in England and Wales. It will be for them to determine the future of the framework in the light of the new legislative requirements. It would not be appropriate for the Government to point towards this framework in primary legislation when we do not know what direction it will take or what its future will be. I hope that provides clarity about the relationship between the master trust assurance framework and the authorisation regime, and I trust it explains why the Government do not consider this amendment appropriate.
Amendment 9 is a probing amendment from my noble friend Lord Flight, which would remove the requirement for a master trust scheme to submit a continuity strategy to the Pensions Regulator as part of an application for authorisation. The master trust authorisation regime put forward in the Bill has been designed to protect the interests of scheme members by addressing the specific risks that arise in master trust schemes. The key to the regime is that master trust schemes will not be able to operate unless they have obtained authorisation to do so from the regulator. To do this, the trustees must satisfy the regulator that the scheme meets the authorisation criteria. One of those criteria is that the scheme must have an adequate continuity strategy.
Baroness Drake
I listened carefully to what the Minister said. Clause 39(1) has two parts, (a) and (b). Paragraph (a) would apply some of the modified applications in respect of schemes that are currently not master trusts, while paragraph (b) would disapply some of the provisions in respect of schemes that are already recognised as master trusts. There is no question of their identity under Clause 39(1)(b): they are master trusts. The Minister said that the Government’s policy was that they would not modify any application on the authorisation criteria for master trusts, or that they would modify those criteria for existing master trusts only if there was an alternative regulation in place somewhere else. Are we therefore talking about a substitution, so that the authorisation criteria for master trusts would be modified only if there was a pre-existing regulation or piece of legislation that met the part that it needed to play? Is that what I understood him to have said?
Lord Young of Cookham
The noble Baroness has accurately summarised what I said. We would use this clause to disapply only if we did not think that it was proportionate to apply the regime due to other existing protections in place.
Lord Kirkwood of Kirkhope
My Lords, perhaps I may make two quick points in response to the Minister’s explanation on these amendments, which was on the whole very helpful. The first is a wide point in support of the plea of the noble Lord, Lord Flight, that trustees need to be left with some discretion. I understand the responsibilities of trustees in a defined benefit context and I cannot believe that they are that different in a DC context. There is a body of trust law which they can found on; they have duties and responsibilities flowing from that. I think that a scheme’s continuity strategy would be an integral part of what trustees would want to do anyway. They would be derelict in their duty if they were not doing that, so the point made by the noble Lord, Lord Flight, is important. Other amendments which we shall come to later in Committee seem to take trustees for granted and use primary legislation to require them to do things that would interfere with their proper trustee duties. I would like the Minister to reflect on that.
My other point is that although I agree with the case of the noble Lord, Lord McKenzie, on Amendment 8 in preparing to adopt a master trust assurance framework— I do not make this as a cheap point just because I am Scottish—the Pensions Regulator and the Institute of Chartered Accountants in England and Wales may give the best advice in town but there is another part of the United Kingdom with a trust law which is, in some respects, slightly different from that of England and Wales. The Minister is on pretty firm ground in saying that putting this into legislation might startle the horses north of the border. We need to remember that trust law differs in some respects on each side of the border. However, the point made by the noble Lord, Lord McKenzie, was in principle the right approach. I support what he was trying to do but the Minister was also right to say that Amendment 8, as drafted, would not be acceptable—certainly not to me, if nobody else.
Lord Young of Cookham
If I may respond briefly to the first point made by the noble Lord, Lord Kirkwood, we are rolling out auto-enrolment, where employers have to enrol employees into a policy. Very substantial sums of money are in the process of being invested and it is crucial that there should be public confidence in the regime. I accept entirely what he said about the responsibility of trustees but we want to go beyond that and have a statutory framework in which people can have confidence that their master trust, which is getting their money and the employer’s money, is robust, has been approved and ticks all the boxes that we have outlined in earlier clauses. This is not to take away from the responsibilities of trustees but to give an added bonus of public endorsement and confidence in an area of public policy.
Lord McKenzie of Luton
I thank the Minister for his detailed reply to the amendments. In relation to the amendment tabled by the noble Lord, Lord Flight, we, too, would not be able to support it. The continuity strategy is very important. It sets out how members’ interests are to be protected if a triggering event occurs. Crucially, it sets out levels of administration charges which apply, and it must be approved by each of the scheme funders. It is a fundamental part. As for ignoring the trustees, the trustees themselves have to start the process to apply for authority, so they are covered in that respect.
I note what the Minister and the noble Lord, Lord Kirkwood, said about the institute’s framework. I am not sure I need to declare an interest as a retired member of the institute. It is a long time since I did any meaningful work in that regard.
My noble friend Lady Drake properly probed the Minister’s response to misapplying parts of these provisions. I think we want to go away and think long and hard about getting some more information on that. Basically, the Minister is saying that they would not apply this unless they were certain there was a satisfactory alternative in place. That is fine as a matter of principle but we would like to understand a bit better what likely alternative arrangements would be in place for the sorts of disapplications we would seek to engender by this. I beg leave to withdraw the amendment.
Lord McKenzie of Luton
“( ) the scheme’s member engagement strategy.”
Lord McKenzie of Luton
My Lords, I shall speak also to the other amendments in this group, Amendments 25, 31, 36, 41, 43 and 44. Amendment 10 adds to the matters which must be part of the application for authorisation of a scheme’s member engagement strategy. Understanding members’ views and needs is essential to designing investment strategies and to the assessment of value for members. It is, or ought to be, an essential component of designing a pension scheme and something which is integral to its creation and continuance. Amendment 25 is a parallel amendment. It requires that the Pensions Regulator should also be satisfied that the scheme has set up a communication strategy defining how it will communicate with members. Indeed, as the DC guide sets out:
“Good member communications, provided at the right time and in the right format, are vital if members are to engage and make decisions that lead to good outcomes in retirement”.
The strategy should cover not only style and approach but key content, and the code expects all communications sent to members to be clear, relevant and in plain English. Preferred methods of communication should be checked with members. Some will be more technologically savvy than others. A strategy should also cover the need for ongoing communications throughout membership to help members prepare for choices at retirement.
We know that pensions can seem complex and confusing to some and that the recent growth in schemes has largely been due to auto-enrolment, which has harnessed the power of inertia, the need not to make a choice. But at retirement, or earlier, new flexibilities now offer an increased range of choices which encourage the reverse of inertia, making effective communications more important. The risks of not communicating effectively on pensions are all around us: the growth of scams—albeit there is, belatedly perhaps, some good news due from the Government this week; confusion over the new state pension; and a failure to communicate properly changes to the state pension age, hence the WASPI campaign.
The Pensions Regulator should have the opportunity to review the systems and processes related to communications just as much as the features and functionality of the proposed IT system.
Lord Monks (Lab)
My Lords, I rise to support the arguments that have just been expressed so well by my noble friend. In doing so, I declare an interest as a trustee and chairman of the members’ committee of NOW: Pensions, which has 1 million members and 20,000 employers signed up. The whole area of member engagement and communications is a major preoccupation for us in a period of what has been very rapid growth—not just of NOW: Pensions but of certain other master trusts.
To find the right way to communicate with 1 million people is an extremely tricky task, but we note with some interest that a range of solutions are now being developed. For example, we note that Legal & General, which I think has about 500,000 people in its trust-based schemes, does hold annual meetings, as the amendment calls for, while others who find that concept difficult are beginning to look more seriously at what they can do in that area.
Finding ways to encourage the member voice is pretty close to the top of most of our agendas. Putting communications at the heart of a master trust, which is by definition a rather sprawling outfit, is very important to try to get it to centre stage. The Government’s idea of a dashboard would help. I hope that is not being put on the back burner, because it would be a very useful tool to show people where they are with their pension investments and entitlements. Trustees themselves need to work very hard to explain basic messages about pensions to the people who have signed up. A pension pot, for example, is the members’ money now—it is theirs. If that penny really dropped, a lot of people would take rather more interest in the process rather than simply pushing it to one side as they often do.
Getting members to see how their workplace pension sits alongside the new state pension is also important. Members need a wider view than just the workplace scheme to get a picture of their total position when they are coming up to retirement. Where schemes offer a choice of contribution rates, as some do, drawing the availability of higher contribution tiers—and associated higher employer contributions— to members’ attention would help to make them aware that these higher contributions in fact mean a greater amount of money from the employer contribution. These kinds of points are in the spirit of helping people to maximise their interest and entitlement in the pensions area. Members should be encouraged to set themselves targets, take ownership of their pot and see if they are getting a good return when they try to work out their pension arrangements for the future.
I accept that these ideas will never be legal requirements—nor should they be; they are more good practice—but they are in the spirit in which every master trust worth its salt should be acting, and they put the members of the trust more at the core of its work. A master trust needs a very good communications strategy. I support all the things that my noble friend Lord McKenzie mentioned, such as online technology and forums. We at NOW: Pensions conduct regional meetings of employers at the moment and are thinking of extending it to members, probably on a first-come, first-served basis as we are not inclined to try to hire Wembley Stadium to run the meetings.
In supporting my noble friend, I urge the Government to take this communications area very seriously and put it not on the edge of their requirements but in the middle, right at the core of the work that is to come.
Lord Stoneham of Droxford (LD)
My Lords, I very much welcome the opportunity to support this group of amendments. I have put my name to Amendment 10 but, having heard the speeches so far, I can see no difficulty in supporting the rest of the amendments in the group—and if they come back on Report I would be pleased to sign up to them. The arguments have been strongly made but I will make three specific points about why member engagement is really important.
The first reason is that the risk in contributory pensions is totally with the employee. They are not like direct benefit schemes, where the employer is sharing a lot of the risk; in this type of pension, employees are holding the risk and therefore their engagement and involvement with how their money is being handled is pretty important. If you are introducing a regulatory scheme at this stage, it should be a central point.
My second point is that if you are introducing a regulatory system, you do not want sole reliance on the regulator to make sure that things are running well and that members are satisfied; you want a counterweighting source of evidence and interest from members themselves to support that regulatory role. That is why this should have the attention of the Government in the Bill.
The third reason is that, as we have already heard, organisations such as Legal & General are already doing that. If that is good practice, the Government should take the opportunity of the Bill to encourage it, take it forward and make it more widespread. The concept of an annual meeting, which Legal & General already accepts as a valuable new forum for communication with members, should be examined and included as an option in the legislation. That would be a way to introduce the discipline of finding out what members want and to make it the fiduciary duty of the trustees to understand what members want from their pension investment. For all those reasons, the Government must take this very seriously. I hope that they will look at this more closely so that when we get to Report, there will be no need to retable the amendments.
Baroness Altmann
First, I support my noble friend’s remarks about the master trust assurance framework under the previous amendment, because that framework already exists and there are a number of shortcomings in it, so I could not support including it in the Bill’s requirements.
However, in these amendments we are dealing with member engagement—and, indeed, employer engagement, because with a master trust, the employer has in a number of ways handed over responsibility to the trustees. Many of the smallest employers who are currently joining auto-enrolment and using master trust schemes are not fully aware of all the implications and intricacies of pension arrangements. Therefore, it is important to have member engagement and information requirements as part of an authorisation process.
In particular, this might help to address one of the big injustices that your Lordships’ House has not yet addressed. Members who earn less than £11,000 a year who join a pension scheme—in particular, a master trust—which happens to use a net pay arrangement, are charged about 25% more for their pension than they would be if their master trust used a different scheme. I have to mention that that is apart from the NOW: Pensions master trust, which has itself made up the extra money that those low earners are unable to receive from tax relief they are due because of the administration of their scheme.
If there were proper member engagement and information that told both members and employers that this particular complicated administration arrangement denies low earners a significant amount of money, perhaps the operation of the schemes would work better in members’ interests and the employers themselves would be better informed.
Lord Flight
My Lords, I wish to express some concern about Amendment 36. Surely trustees need discretion over the timing of communicating with members in a triggered event period so as not potentially to cause unnecessary scares and worries.
Lord Young of Cookham
I am very grateful to all noble Lords who have taken part in this debate, and I agree with nearly everything that the noble Lords, Lord Monks, Lord McKenzie and Lord Stoneham, and my noble friends have said. We should encourage people to take an interest in their pension pot. Having auto-enrolled them, we should enfranchise them by giving them regular information. I agree with those who suggested that the pressure should come not just from the top down but from the bottom up. These amendments, in their various ways, all address the issue of how trusts should communicate and engage with their members. Then there is an amendment on the procedure for the regulation-making power about the time within which the implementation strategy must be made available.
As I said at Second Reading, I support the principle of member engagement and communication. Master trusts are no exception to any other pension scheme in seeking to keep their beneficiaries in the loop. Having said that, I may have one or two issues with some of the amendments. First, however, I shall deal with the three amendments relating to general communications. The first two relate to proposed member communication and member engagement strategies, and the third would make provision requiring the trustees of an authorised master trust scheme to hold an annual member meeting. I will then pick up on the important matters raised in the last four amendments in this group relating to communications during the triggering event period. Perhaps I may write my noble friend Lady Altmann about the position of those on just £11,000, who may be disadvantaged by the current regime.
Amendment 10 would add to the information that the trustees of a master trust scheme seeking authorisation must submit as part of their application for authorisation. Specifically, it would require the scheme to submit a member engagement strategy. As I said a moment ago, I have a lot of sympathy with the rationale behind this amendment. It is important for schemes to operate in a transparent manner, and for members to be kept informed on key matters, such as the charges that apply to them and the amount of money they have accrued in the scheme, which, as the noble Lord, Lord Monks, said, is their pot.
Indeed, the position of this and previous Governments on this matter is reflected in the various comprehensive statutory requirements that already apply to all schemes, including master trust schemes. These requirements set out the minimum standards for communicating with their members. The Pensions Regulator also publishes guidance for trustees which sets out the further standards it expects quality schemes to meet in relation to communications.
Some of the key requirements include the following. Trustees must provide members with basic information about the pension scheme within two months of their joining. There are also requirements to provide members with updates where this information changes. Trustees must provide most members with a statutory money purchase illustration, which illustrates a member-specific projected pension, and an annual benefit statement that provides details of contributions credited, before deductions, to the member in the preceding scheme year. That information must be provided within 12 months of the end of each scheme year.
Trustees must provide other information on request, including: the trustees’ annual report, including the scheme’s investment report, audited accounts and the auditor’s statement; scheme rules or other documents constituting the scheme, including names and addresses of participating employers; a statement of investment principles; and finally, ad hoc benefit statements and transfer values—obviously key pieces of information.
Those are just the statutory measures. The Pensions Regulator publishes detailed guidance for trustees about the standards it expects quality schemes to meet to ensure they communicate effectively and transparently with their members. Details of that can be found on its website.
The Bill does not seek to stipulate how the trustees of a master trust should run an excellent scheme, or to replicate other general requirements that apply to schemes more broadly. It seeks to address the key risks that arise in relation to master trust schemes to ensure that the interests of scheme members are protected. The Government’s view is that, provided that the communication requirements which already apply to all schemes are met, the trustees of an authorised scheme should have the ability to exercise their discretion in considering the most effective forms of member engagement without being unduly constrained by an additional prescriptive statutory requirement. In this debate we have heard many examples of good practice in that area. It is also worth noting that the amendment does not define the term “member engagement strategy” so, as tabled, it is not entirely clear what this would constitute. I hope that explains that, while I agree with the principles behind the amendment, I am not of the view that it should form part of the Bill.
I shall now touch briefly on Amendment 25, as tabled by the noble Lords, Lord McKenzie and Lord Monks, and the noble Baroness, Lady Drake. This amendment is very similar to the one that I have just touched on, although the precise wording is:
“The scheme must set out a communication strategy to define how it will communicate with members”,
and the amendment is inserted into a different clause. The effect of the amendment would be very similar, in that the content of such a strategy would become a matter the regulator must consider when determining whether it is satisfied that the scheme meets the authorisation criteria relating to the adequacy of systems and processes. As with the amendment we have just discussed, the effect would be that the trustees of a scheme must prepare such a strategy, although again its proposed content is not entirely clear. For this reason, the points that I would raise regarding this amendment would mirror the points I set out a moment ago, which I shall not repeat. I hope that argument might be accepted.
Amendment 31 would require the trustees of an authorised master trust scheme to hold an annual meeting which would be open to all members of the scheme and made accessible online. While I have set out my views on the more general matter of member communications, there are specific implications raised by this amendment which need further consideration. It is not clear that requiring trustees to hold an annual member meeting is necessary, nor that such a measure would significantly improve communications between the scheme and its members. Some master trust schemes have hundreds of thousands of members—indeed, I think we heard a higher figure from the noble Lord, Lord Monks. It is not clear that there is demand among this membership for such a meeting, nor is it clear what the financial and administrative implications of hosting such a meeting would be for master trust schemes.
According to the amendment, the meeting would need to be capable of hosting every scheme member. While a great many would in theory be able to connect to the meeting online, it seems likely that, in a scheme with hundreds of thousands of members, a significant number might need or want to attend in person. The cost of hosting a meeting capable of accommodating that number of attendees, in person and online, has not been set out, but it could be significant and might not be in the best interests of scheme members, especially if, in the event, demand turned out to be low. That is not to say that schemes should not hold such a meeting but, as I have said, the Government’s view is that, provided that the communication requirements which already apply to all schemes are met, the trustees of an authorised scheme should have the ability to exercise their discretion in considering the most effective forms of member engagement without being unduly constrained by additional prescriptive statutory requirements.
I turn to the amendments related to the triggering events—and here the balance is crucial. My noble friend Lord Flight touched on that issue in his intervention. Amendment 36 requires the trustees of master trust to notify members when it has a triggering event. Amendment 41 requires the trustees to notify the employers and members in the master trust that the Pensions Regulator is satisfied that the triggering event has been resolved. Amendment 43 requires the implementation strategy to be made available to members, in addition to employers.
The principles that we have applied to the policy and the Bill measures about communicating with members during a triggering event period are to consider, first, the current level of member engagement and understanding; secondly, the potential effect of the provision of certain types of information, which, again, my noble friend touched on; and thirdly, the level of protection afforded to provide demand-side pressure, in the absence of the provision of information or assumed member engagement. It is the consideration of these principles that leaves me with some doubt that the amendments as proposed are appropriate.
Amendment 36, tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake, would require the trustees of a master trust that had had a triggering event to notify the members of that scheme that this event had occurred, and other such matters as will be set out in regulations under this clause. Triggering events are events that pose a risk to the scheme and could lead to it failing. These events could put members’ pension pots in the scheme at risk. The scheme’s trustees must notify the participating employers that the event has occurred, and such other information as will be set out in regulations.
A master trust that has had a triggering event poses an increased risk to the members’ savings in the scheme. That is why additional measures and protections are required at this point—this is, indeed, what the Bill does. These aim either to resolve the issue the scheme has had and, with the regulator’s approval, enable it to continue, or, where this is not appropriate and the scheme is going to wind up, make sure that the members are transferred out. Following a triggering event, additional measures are in place to protect members’ pension pots and enable the Pensions Regulator to have more involvement with these schemes. The regulator will have additional oversight over schemes that have experienced a triggering event and extra controls that it can use. For instance, where the regulator was very concerned about a master trust, these controls include the regulator being able to direct the scheme not to take on any new members. This might be where the regulator considered that there was an immediate risk to the interests of the members of the scheme and that it was necessary to protect the interests of the generality of the members. This is covered by Clause 31.
This amendment would require the trustees to notify the members of the same information that they notify employers of. We specifically did not require schemes to notify members at this stage—again, for the reason that my noble friend gave—as we did not want to worry members unnecessarily and at a point when definitive information about the next steps may not yet be available. This is because informing members could risk them opting out of the scheme and stopping to save in a pension. We have instead provided additional protections during this period. Many members will have joined because they were automatically enrolled into the scheme by their employer. It will not have been an active decision on their part. Also, many members in this situation tend not to actively engage with the scheme of which they are a member. We would hope that, in many cases, the triggering event the scheme has experienced will be resolved and the scheme will simply continue, so in that case the members should not see any disruption to their pension saving, and we would not want them to be unduly alarmed or confused.
If members thought that their scheme was going to collapse and could not be given information about the next steps to maintain and protect their pension savings, they might opt out of saving in their current scheme, as I just said, and even lose confidence in pensions and not continue to save in any pension at all. Where the scheme is going to have to wind up, members would be informed ahead of this in accordance with requirements under Clause 24 and the regulations made under it. If the scheme is going to pursue continuity option 1, members will be informed of the situation well ahead of anything directly impacting them and given information about options.
The aim behind the clauses in this section of the Bill is that, where a master trust experiences a triggering event, members of the scheme continue to save in a pension. To this end, we do not think that members should be informed at the stage set out in the amendment because of the adverse implications it could have and the absence of any practical advantage to the members that would flow from them being informed at such an early stage. However, we recognise how important it is that members are informed well ahead of something happening that directly impacts on them and may disrupt their pension saving, and I think the Bill gets the right balance.
Amendment 41 seeks to make the trustees notify the employers and members in the master trust that the Pensions Regulator is satisfied that the triggering event has been resolved. This situation is where a master trust has experienced a triggering event but has resolved it, and the regulator is so satisfied. The aim behind Clause 25 is that, where trustees try to resolve the triggering event, they have the opportunity to do so, so the scheme can continue and members continue to save with as little disruption as possible. Amendment 41 seeks to make the trustees notify the employers and members in the master trust that the Pensions Regulator is satisfied that the triggering event has been resolved, where the regulator has notified the trustees to this effect. The Bill already provides employers with sufficient sight of this under Clause 22. Once the implementation strategy is approved, the trustees have to pursue the continuity option identified in the strategy and take the necessary steps. If something dramatic happened that caused the choice of continuity option to be changed or if the implementation strategy was required to be altered for some other reason, the trustees would have to seek the regulator’s approval. In principle, we agree with the objective of this amendment. However, we consider that we achieve the same outcome as intended but through a different route.
I am conscious that this group of amendments is taking a long time.
Lord McKenzie of Luton
My Lords, I start by thanking all noble Lords who have spoken in this debate, most of whom have supported the amendments. My noble friend Lord Monks made reference to good practice for master trusts. He also asked about the pensions dashboard, but I do not know whether we have any further information on that. The noble Lord, Lord Stoneham, set down the three key reasons why he supported member engagement: the risk lies with the employee; there should not be sole reliance on the regulator; and some schemes, such as L&G, are already doing it. The noble Baroness, Lady Altmann, raised an interesting point, probably relating to an earlier debate, about the big injustice for low earners because of how the tax system works. That is something that we ought to return to before the Bill leaves this House, and we should be grateful for that intervention.
I thank the Minister for a very full reply. I would certainly like to go away and read the record on what he referred to as the balance that is struck in these provisions. That is an important point. I was slightly concerned about what he said in relation to Amendment 36. The implication seemed to be that you had to protect scheme members from this knowledge because they might go and do something adverse. There was a smack of paternalism there, but let me read the provisions in the round because we may well wish to return to that. I am certainly grateful for the offer to reflect on Amendment 44 and the nature of the process that will apply to the resolution. Having said all that, I beg leave to withdraw the amendment.
Lord Flight
Lord Flight
My Lords, this is a very simple amendment. The use of the word “the” assumes that a fee will apply and that, effectively, this legislation is laying that down. Should not it be best left to the Secretary of State or the regulator to determine whether or not a fee will apply? Hence, I suggest that “any” is substituted for “the”.
Lord McKenzie of Luton
My Lords, we have Amendments 12 and 82 in this group. We are happy to support the amendment of the noble Lord, Lord Flight, on this occasion.
Amendment 12 requires a new clause to be inserted in the Bill requiring the Secretary of State to report to Parliament on the sufficiency of resources available to the Pensions Regulator for the purposes of the Bill. I think we can anticipate the specifics of the reply to that formulation but I stress that this is about trying to get something on the record today about resources, rather than it necessarily being dealt with on the basis of a clause in the Bill. We know from the impact assessment that there will be additional costs to business from funding the Pensions Regulator and an ongoing levy charge. However, like so much of this Bill, we have no further detail.
The Pensions Regulator has a very significant role in the new era of master trusts and it is vital that the regulator is resourced to play its part in full. When fully commenced, the Pensions Regulator will be responsible for applications for authorisation; judgments about fit and proper persons; decisions as to whether a scheme is financially sustainable, with all the calculations that that entails; a sound business strategy with sufficient financial resources; taking a view on whether the systems and processes used in running the scheme are sufficient to ensure that it is run effectively; and determining whether a master trust has an adequate continuity strategy. On an ongoing basis, the Pensions Regulator is the recipient of supervisory returns and scheme accounts, and must deal with significant events—whatever that may be, and we are going to come on to that—issue penalty notices where appropriate and withdraw authorisation where criteria are no longer met. Further, the Pensions Regulator has an important role as a consequence of a triggering event and winding-up. Not all these responsibilities will bite immediately. It looks as though it could be two years before the commencement of all the Bill takes effect. However, there are responsibilities before that under the transitional provisions of Schedule 2.
Currently, of course, the Pensions Regulator has a role in relation to master trusts, but it is more limited than that provided for in this legislation. The extent of resources required depends upon the volume of master trusts, now and in the future. Although aggregate amounts are expected to increase—that is both members and investments, largely through auto-enrolment—there is the prospect at least of some providers exiting the market. Clearly the workload of the Pensions Regulator is likely to be front-end loaded as the authorisation of existing master trusts is completed and the role becomes more one of supervision. Notwithstanding that, there is much detail still to be settled and we are entitled to seek comfort on the capability of the Pensions Regulator to play what is a central role in the new regime.
On funding, is it proposed that fees and levies will provide the totality of additional resources needed to meet the requirements of the Bill? What assessment has been made of any recruitment needs given the expanded role? In particular, what, if any, changes are considered necessary to the skills set of the Pensions Regulator employees and what planning is under way to meet this? This is inevitably a probing amendment, but one to focus on the operational position of the Pensions Regulator given the important additional tasks of the organisation, which we support, based on the Bill.
Amendment 82 reinforces the Government’s commitment in the impact assessment dated October 2016. This recites that the level of uncertainty currently is too great to provide a meaningful estimate of the net cost to business of the introduction of the authorisation and supervision regime. However, it promises a full assessment at the secondary legislation stage. Our amendment causes this to be before triggering the bringing into force of the main provisions of the Bill. We seek some further clarification on timing, as presumably all the secondary legislation will not arrive at the same time. Are we going to get the impact assessment piecemeal? The purpose of these amendments is to make sure that we get the information about the overall impact of these provisions.
Lord Flight
My Lords, should Amendment 12 be in the Act? Generally the Government and the Secretary of State have responsibility to see that something like TPR is funded and it is not solely a master trust issue. I question whether this should be in the Bill.
Lord Freud
My Lords, these amendments all concern the resources, financial or otherwise, which will be required to ensure that the Pensions Regulator can implement and operate the master trust authorisation regime.
Amendment 11, tabled by my noble friend Lord Flight, would change the wording of Clause 4 so that subsection (5)(b) reads:
“The Secretary of State may make regulations setting out … any application fee payable to the Pensions Regulator”,
instead of “the” application fee.
The current provision in the Bill does not require the Secretary of State to set an application fee but it is important for the Government to be clear to the industry about their intentions now—and the Government intend to make regulations that specify an application fee. It is also important for the Secretary of State to have the ability to change the application fee in the future. That is one reason for specifying this fee in regulations. The master trust industry is developing, and will continue to do so, as it adapts to the new requirements of this regime. As the industry changes, it is entirely feasible that the cost to the regulator of assessing applications for authorisation may change too.
The fee serves two key purposes. First, it ensures that the Pensions Regulator can recover the costs of processing applications from master trust authorisation without indirectly placing those costs on the wider pensions community it regulates. Without an authorisation fee it would have to recover these costs through the funding provided by the general levy, and this would not be fair given that a large number of the schemes which pay into this levy are not master trust schemes. Secondly, the fee ensures that schemes seeking to become authorised submit carefully considered applications by acting as a deterrent to submitting multiple applications.
As I hope I have explained, it is important to make provisions for regulations to specify an application fee and that the industry is clear that the Government intend to use this power. The Bill as it stands achieves this intent.
Both Amendments 12 and 82 require that a report on the subject of the Pensions Regulator’s resources is laid before the Houses of Parliament before the provisions within Part 1 of the Bill are commenced. Amendment 82 would additionally require that Parliament is presented with a report about the impacts of the master trust authorisation regime. The additional report required by Amendment 82 is described as,
“a comprehensive assessment of the impact of Part 1”.
The other report is,
“a report demonstrating that sufficient resources are available to the Pensions Regulator to carry out the requirements on the Regulator pursuant to”,
this Act. The focus of Amendment 12 is very similar, but it requires that the resources report should address the resources required to conduct the regulator’s functions under Clause 5.
Lord McKenzie of Luton
My Lords, I thank the Minister for his response. I should say to the noble Lord, Lord Flight, that I accept that having this in the Bill in those terms would not be appropriate. The purpose of the amendment is to try to have a debate around the issue and thus have something on the record. I accept entirely the proposition around annual business planning and the assurance given that there is a need and recognition that the Pensions Regulator must be properly resourced to carry out these important functions.
Although there is an impact assessment, it is quite thin. It takes up lots of paper but it is thin in terms of the numbers that were on some of the schedules. The Minister has reiterated what was in that report about how there will be a further impact assessment at the secondary legislation stage. What precisely does that mean? Is it that when the regulations are in place and have been agreed there will be a comprehensive review, or that it is going be done piecemeal as each of the components of these regulations is put in place? If we tot up the number of regulations in the Bill—I have not done it—I am sure that they will run into the several tens. How is that actually going to work and when would the secondary legislation be laid for these purposes? Will there be an aggregate impact assessment at that stage?
Lord Freud
One of the things I have committed to do is to go back and think about how we make these regulations in the context of the noble Lord’s own suggestion of perhaps looking at the balance between the affirmative and negative procedures. In that context, the exact way in which the Government decide to present the regulations would clearly change. Regulations made under the negative procedure tend to be less of a set piece, while affirmative regulations do tend to be more of a set piece for obvious reasons. The answer to the noble Lord’s question will depend on our reflections on what we do with his proposition.
Lord Flight
My Lords, I am interested to note that my amendment has resulted in a clear statement by the Government that a fee will be charged and that it will be provided for in the Bill. I beg leave to withdraw the amendment.
Independent Inquiry into Child Sexual Abuse
(8 years, 1 month ago)
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The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, with the leave of the House I shall now repeat in the form of a Statement the Answer to an Urgent Question delivered by my honourable friend Sarah Newton MP, the Minister for Vulnerability, Safeguarding and Countering Extremism. The Statement is as follows:
“The inquiry was set up to look at the extent to which institutions in England and Wales failed to protect children from sexual abuse. We know the terrible impact that abuse has on survivors, sometimes for many years. As the House knows, following the resignation of the previous chair, my right honourable friend the Home Secretary appointed as chair Professor Alexis Jay. She has a distinguished career in social work and a long-standing dedication to child protection. She led the independent inquiry into child sexual exploitation in Rotherham where she scrutinised the work of social workers and proved her capability to uncover failings across institutions and professions. She is the right person to take this work forward.
Taking the work forward is vital for creating a sense of certainty for victims and survivors. The inquiry has set up 13 strands of investigation and made 250 formal requests for information from over 120 institutions, with 164,000 documents now having been submitted. It has referred roughly 80 cases a month to the police. It has rolled out the Truth Project, providing survivors with the opportunity to tell the inquiry what has happened to them, and more than 500 people have come forward so far.
The inquiry has adequate resources to undertake its work and we will support the inquiry with what it reasonably needs. The inquiry remains independent, which means that it is not part of government and is not run by a government department. Professor Jay is mindful of both the scale of the task and the need to move forward at a pace. That is why she instigated an internal review of the inquiry’s approach to its investigations, exploring new ways to deliver its investigative work while remaining faithful to its terms of reference. She has made it clear that if any changes are proposed, the views of those affected by them will be sought. We expect the outcome of this review soon.
It is crucial that we now give the inquiry the space and the support it needs to get on with its job, getting to the truth for victims and survivors. I urge everyone in the House to do just that”.
Lord Rosser (Lab)
My Lords, I thank the Minister for repeating the Answer to the Urgent Question asked in the other place. The independent inquiry into child sexual abuse may be in danger of turning into a soap opera. Unless it has changed its mind within the last few hours, the Shirley Oaks Survivors Association, which I understand represents some 600 victims, seems to have lost all confidence in the inquiry and appears to have done its own version of Brexit.
I have four relatively brief questions for the Minister. First, is it the case that the current fourth government-appointed chair of the inquiry has not, as claimed, met or contacted the Shirley Oaks Survivors Association since her appointment? Secondly, does the Home Secretary intend to meet the survivors association to find out at first hand the reasons for its apparent declared lack of confidence in the inquiry and its chair, with a view to seeing if any of those reasons can be addressed and the association persuaded to carry on participating fully in the inquiry proceedings? Thirdly, what powers does the inquiry have to require witnesses to attend, or would the thought of an inquiry into child abuse requiring an association representing 600 victims to appear before it simply, in the Government’s view, risk signalling the end of the inquiry as a credible channel for investigating child sexual abuse? Finally, does the Home Secretary intend to review the remit of the inquiry?
Baroness Williams of Trafford
My Lords, the Home Secretary has no plans to review the remit of the inquiry, which was originally set out with the support of the survivors. The chairman has also stated that she is happy with the inquiry’s remit and has no plans to change it. However, a review will be published in due course on the operation of the inquiry. That was laid out the last time I answered a question on this subject.
On the Home Secretary meeting the chair of the inquiry to discuss the way forward, or indeed the survivors, this is an independent inquiry. I cannot stress that strongly enough. It is for the chair, together with the panel and the survivors’ group, to work through the inquiry in the way it sees fit.
It is indeed sad that Shirley Oaks has chosen to step outside the inquiry, but the door is always open for it to return. I hope it does in due course. On the chair meeting the survivors, I assume that that either has happened or will happen in due course—I assume it has happened already. The survivors are at the heart of the inquiry; it is important that the chair not just listens to the panel, but hears from the survivors themselves.
Lord Paddick (LD)
My Lords, changes to the inquiry—four chairs so far, another review and another lead counsel—do not just leave survivors disappointed, as the Minister in the other place said this afternoon; they are retraumatising for survivors. Do the Government have confidence that all those involved are being appropriately consulted about the future of the inquiry? These may be operational decisions, but Ministers must satisfy themselves that this inquiry is being properly run. With 13 strands, 250 lines of inquiry, 164,000 documents, 80 cases a month being referred to the police and 500 victims having come forward so far, is the Minister confident that the inquiry and the police have sufficient resources to deal adequately with these issues in a reasonable timescale?
Baroness Williams of Trafford
My Lords, all reasonable resources are being provided for the inquiry’s purposes. I underline the point that lack of resource is not an issue. Resources are there to meet the needs of the inquiry. Last year it underspent slightly. I do not think there is any question that there is not sufficient resource in money and manpower.
The Government have confidence in the chairman, having appointed her, but I must underline again that this is an independent inquiry. It is not for the Government to interfere in the inquiry and we have every confidence that it will proceed with pace and clarity, as the chair outlined herself.
Lord Finkelstein (Con)
I thank the Minister for the Statement. It is obviously massively premature to suggest the chairman of the inquiry stand down, but I have questions about the remit. Given that it took 10 years or more for the Savile inquiry to inquire into a single institution on a single afternoon, how long does the Minister estimate it will take the inquiry to inquire into every institution in the country over 50 years?
Baroness Williams of Trafford
My noble friend asks a perfectly reasonable question. We are not holding the inquiry to a timescale, but the chair has indicated that by 2020 she should have concluded a large element of her work. We have absolute confidence in the chairman. She was appointed in view of the fact she had led such a successful inquiry into some of the terrible things that happened in Rotherham.
Lord McConnell of Glenscorrodale (Lab)
My Lords, my Government in Scotland appointed Professor Jay to head up our social work inspectorate in 2006. She is an outstanding individual and, I believe, not only the best appointment to this position but one who should have been appointed earlier, given her track record. I hope we will give her every support. That said, I ask a question I have asked before about the links between this inquiry and the similarly stuttering inquiry in Scotland into survivors of child sexual abuse. Have those links been properly set up, and will information be exchanged between the two inquiries to ensure that the whole of the United Kingdom is covered accurately?
Baroness Williams of Trafford
On the noble Lord’s second point, the entire point of the inquiry is that it is a full and proper inquiry into what happened in the past, both in Scotland and in England and Wales. I am sure there will be sharing of information across the piece. I am pleased he mentioned Professor Jay because she has shown in her past work into Rotherham what an outstanding chairman she is and how she got to the heart of what was a very difficult, complex issue. I am pleased to hear the noble Lord make that point. The Government also have full confidence in her.
Lord Elystan-Morgan (CB)
My Lords, will the review direct itself to seek to set a target no later than five years from now for the publication of the final report? Failure to do this may well place a very great strain on human memory. Witnesses will die; others will fail to give coherent evidence.
Baroness Williams of Trafford
The noble Lord makes a very good point. On the current chairman’s intentions, she has said she will operate with pace but also with clarity. The longer time goes on, the harder these things become. We will not press the inquiry to a timetable, but the chairman has laid out quite clearly that she intends to do it with clarity and pace.
Lord Faulks (Con)
My Lords, I wonder whether my noble friend will appreciate a suggestion pursuant to the internal review as to how the inquiry might be somewhat more focused. Rather than deciding who abused who when, which would involve a trial of some sort, would it not be better to focus on the complaints system so that there is an examination of when a complaint was made, why it was not heard, and, if a complaint was not made, why it was not made so that we can learn about the systems that will protect children in the future? The ambit of that would be much smaller and it should be possible to report much more closely. In asking that question, I declare an interest as being instructed on behalf of the estate of Lord Janner.
Baroness Williams of Trafford
My noble friend demonstrates that there are a number of views on how the inquiry should be conducted and just what focus it should take. I totally bow to his rich experience in this area, but I come back to the point that the Government are very clear that this is an independent inquiry. Therefore, the way it is conducted is entirely a matter for the inquiry itself.
Pension Schemes Bill [HL]
(8 years, 1 month ago)
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Lord McKenzie of Luton
Lord McKenzie of Luton (Lab)
My Lords, I shall speak also to Amendments 14 and 15. I shall be brief. Clause 7 deals with the fit and proper persons regime and sets out which persons the Pensions Regulator must assess. It provides that regulation should set out matters which must be taken into account.
Clause 7(2)(e) identifies as one of the persons who must be assessed as fit and proper,
“a person who (alone or with others) has power to vary the scheme (where the scheme is not established under a trust)”.
By way of a probe, Amendment 13 would delete the reference to a scheme not established under trust. We ask the Government to spell out the type of arrangement they envisage would not be established under a trust and, where responsibilities are placed on trustees in the Bill—for example, in Clauses 14 and 15—by whom they would be discharged. Amendment 14 would ensure that the Pensions Regulator was subject to an ongoing requirement to ensure that specified persons remained fit and proper. Can the Minister advise whether and how such a requirement is envisaged to be met? Amendment 15 would change the nature of the resolution from negative to affirmative. I trust that the amendments will receive the same favourable response as those raised previously. I beg to move.
Lord Young of Cookham (Con)
My Lords, I am grateful to the noble Lord, Lord McKenzie, for his introduction to the amendments. I hope to be able to respond almost as briefly—and as eloquently.
Amendment 13 would amend the description of one of the people whom the Pensions Regulator must assess as fit and proper. It would change the description of a person who,
“(alone or with others) has power to vary the scheme (where the scheme is not established under a trust)”,
by removing the words,
“where the scheme is not established under a trust”.
The preceding paragraph refers to a person who has the power to vary the terms of the trust under which the scheme is established, and the paragraph in question here is a counterparty to that provision. The two paragraphs work together to ensure that any person who has the power to vary the terms of the trust or the scheme is subject to the fit and proper person test. Clause 7(2)(d) describes the persons who have this function under a trust-based scheme and Clause 7(2)(e) describes an equivalent for schemes which are not set up under trust. Clause 7(2)(e) is therefore specifically to cater for those relatively rare exceptions where a master trust may be set up outside the trust-based structure and to ensure that we do not create an avoidance loop hole.
Incidentally, we have maintained the term “master trust”, as that is how such schemes are known in the industry, even where they may be set up outside the trust-based structure. Clause 1 defines what the term means for the purpose of this part of the Bill, to ensure that there is clarity about who is in scope of the new regime, but it is not necessarily the case that it would be possible only ever to set up the sort of scheme captured under trust. It would be relatively rare, but we need to cater for such circumstances. We would want the regime to bite where schemes were not set up under trust, and this is one place in the Bill where something separate is needed to provide such cover. The two paragraphs provide that anyone who has power to vary the terms of the master trust must be subject to the fit and proper test.
I welcome the sentiment expressed in Amendment 14, which would require the regulator to ensure that the authorisation criteria had been met continuously and that it should not be a “once and done” affair. I agree that it would not be sufficient to require the scheme to satisfy the regulator on these matters only once at the point of application for authorisation. The intent of the Bill is that the standards must be maintained continuously.
Clauses 3, 4 and 5 together ensure that a scheme cannot operate unless it is authorised—with various modifications for existing schemes in Schedule 2, which we will come to later—and provide for a clear application process and decision by the regulator. Clause 19 also allows for the Pensions Regulator to withdraw that authorisation at a point at which it stops being satisfied that the criteria are met. To be clear: this does not mean that the scheme will be asked to reapply for authorisation regularly and that, if it fails, this is the only way to change its status. Nor does it mean that, once the test is passed, the scheme will always remain authorised; the criteria must continue to be met. It does mean that the regulator can withdraw authorisation if it is no longer satisfied that the criteria are met. The scheme must be able to show to the regulator’s satisfaction that it is meeting the criteria on an ongoing basis.
Lord Hutton of Furness (Lab)
I am grateful to the Minister for his comments, which have been very clear, but where I am struggling with his account of this part of the Bill is his saying that the regulator has almost an implied power to review, for example, whether a newly appointed trustee is a fit and proper person. There is nowhere in the Bill so far as I can see where that implied power is expressed. It is always better for such matters to be dealt with by giving the regulator an express power than to rely on some clever interpretation of words to get to the point where it is implied the regulator has a power to review when all it has is, in the words of the Minister, the power to withdraw authorisation, which is altogether different.
Lord Young of Cookham
I take the point that the noble Lord has just made. I hope to be able to reassure him that other provisions in the Bill will satisfy him that the regulator will have the necessary information to withdraw authorisation if something happens that requires it. I will come to that shortly.
As a public body, the regulator must exercise its general functions reasonably and consistently with its duty to be satisfied that the scheme meets, and therefore continues to meet, the authorisation criteria. With respect, a specific regulation-making power to require the regulator to review fitness and propriety is not necessary.
I turn to other clauses, which I hope shed some light on the issue raised by the noble Lord, Lord Hutton. Clause 14, requiring the submission of annual accounts, Clause 15, requiring the submission of a supervisory return and, crucially, Clause 16, which creates a duty to notify the regulator of significant events, all serve to ensure that the Pensions Regulator can take an ongoing view of risk in relation to whether it remains satisfied that the scheme continues to meet the criteria.
Additionally, the regulator also has its information-gathering powers to bring to bear, so it can ask schemes for information to assist in assessing whether it remains satisfied that a scheme continues to meet the criteria and inquire for more information about reported events or information provided. The duty to notify the regulator of significant events, which is provided for in Clause 16, will be supplemented by regulations which specify the events which must be reported. Although we intend to consult on the regulations, our current thinking is that such events will include a change in status of anyone subject to a fit and proper test and any change in the personnel who are subject to the fit and proper test. The use of the significant events regime in Clause 16 to achieve this end is not set out in express terms in the Bill because of the detail which will follow in regulations, but I hope that my outlining of the intent above has helped to clarify this. I have no doubt that later we will return to Clause 16 for further debate.
Amendment 15 would change the regulation-making procedure in Clause 7 from the negative procedure to the affirmative procedure. I note that in an otherwise critical report, the Delegated Powers Committee acknowledged that this clause was one where the negative procedure might be appropriate. None the less, I refer to what my noble friend said in earlier debates about wanting to stand back and look at the totality of procedures, affirmative and negative, and then come to a conclusion at the end on whether we strike the right balance. On that basis, I hope the amendment might be withdrawn.
Lord McKenzie of Luton
I am grateful to the Minister for his response to those amendments, and am certainly grateful to my noble friend Lord Hutton for that important point about how, in the circumstances, it is better to have an express provision than an implied one. I will work through the record of what the Minister said to see how close we got to that express provision, or whether it is still essentially an implied power. I understand what the noble Lord said about the nature of the regulations. That will run through this Bill.
I return briefly to this question of when master trusts are set up but not under a trust. I think the noble Lord said that would be a rare or unusual occasion. I do not know whether he can say a bit more about that. Particularly, the raft of the Bill focuses on the obligations for the trustee or trustees who set up master trusts, but where it is not set up under trust, does it evolve into something that becomes a trust and therefore you get trustees in the normal way or does it continue with some other existence? If the latter, what is the nature of the person who would be a trustee were it set up under trust? That puzzled me a little. If the noble Lord felt it would be better to write to me, I would be happy with that, but if we could deal with it now that would be helpful.
Lord Young of Cookham
The noble Lord is very generous in suggesting that this matter might be addressed better in a letter than in an exchange across the Dispatch Boxes. I made inquiries and it is indeed the case that some are established other than under trusts. Obviously, we do not want a loophole that people can use because they are not formally constituted as a trust. However, I accept the noble Lord’s generous offer and will write to him giving a more detailed response to the issues he raised.
Lord McKenzie of Luton
I am grateful to the noble Lord. Just to be clear, in the follow-up I would like to try and see what the role or nature of that person would be who would be a trustee if set up under a trust. Are they something else under a regime that is not set up in that way? Having said that, I beg leave to withdraw the amendment.
Baroness Drake
“Scheme funding: triggering events
Where—(a) a triggering event under section 21 occurs; and(b) the scheme has insufficient resources to meet the costs mentioned in section 8(3)(b); and(c) a prohibition under section 33 applies;the Secretary of State shall make provision for a compensation fund or for the funding to be provided by another source as a last resort.”
Baroness Drake (Lab)
My Lords, Amendment 18 proposes a new clause that, put at its simplest, seeks a compensation fund or provider of last resort when a master trust fails and there are not enough resources to meet the costs of wind-up and transfer. It is the in extremis protection, ensuring a last line of defence for members’ funds if the capital buffer required under Clause 8 or the proposed continuity option provisions in Clause 24 fail.
Setting regulatory operational capital requirements for master trusts is important but does not guarantee the security of members’ benefits or rights. I am sure the Minister will reassure us that the Government intend to be robust. The trouble is that we are not sighted on the robustness of the capital adequacy or transfer-out regimes—indeed, neither is he at this point—because so much of it is still left to further policy decisions and regulations. Concepts such as “sustainable”, “sound” and “sufficient financial resources” are undefined in the financial sustainability requirement in Clause 8. There are no draft regulations for us to consider. There is no provision in the Bill for what happens if the regulatory regime fails to ensure that sufficient financial resources are available in the event of a master trust failure.
The Constitution Committee points out in its letter to the Government of 11 November that Clause 24, dealing with wind-ups and transfers-out, is an example of the Bill delegating the power to make regulations that will determine substantial policy issues when a draft of the regulations is not available and the Government have yet to determine their policy. This regulatory regime will be applied to an existing market that has developed in a variety of ways. The Government cannot guarantee that they will have time before its introduction to create and hold the benign behaviours needed to protect scheme members. The impact assessment acknowledged uncertainty about the Bill’s impact because substantive policy decisions will not be taken until the secondary legislation stage. Indeed, such is the amount of further work to be done that the authorisation regime will not come into effect until 2018. The Bill does not make clear what happens if no potential receiving scheme is able or willing to accept the benefits of the members on transfer. The scheme records may be in disarray. The actual costs of wind-up and transfer will not be known or knowable in advance.
Under Clause 33, there are prohibitions on the charges the master trust and the receiving scheme can impose on the members transferring, or on imposing any new charges to meet costs for which a receiving scheme is liable but which were originally incurred by the transferring scheme or as a result of the transfer. If the actual costs of wind-up are very high, the terms of the clause may deter other suitable master trusts from accepting a transfer in whole or in part.
The impact assessment explains that the prohibition on increasing member charges during wind-up and transfer will work because the money to pay for these costs will be met by the access to funding or capital reserves held in accordance with the new financial stability reserve requirements in Clause 8. Yet no regulator can guarantee that those will always be sufficient. Indeed, the impact assessment reasoning is restated by the noble Lord, Lord Freud, in his letter of 14 November. However, neither the Bill, the impact assessment nor the Minister’s letter inform us what would happen if, in a particular failing master trust, the capital reserve requirements proved insufficient for whatever reason. The Bill proposes no contingency plan for the failure of a master trust the records of which are in disarray, which has insufficient financial resources to comply with its duty when a triggering event occurs, and for which no master trust is willing to accept transfer of members’ benefits. What will happen in those circumstances? How will all the members’ funds be protected against increased charges? What liability for or immunity from the past provider’s mistakes will a receiving scheme have? What plans do the Government have for ensuring that bulk transfers between master trusts can legally proceed in an efficient and timely manner to ensure continuity of coverage for members of failed master trusts?
The suggested timetable in the Bill indicates that the new regime will come into full effect in 2018, after most remaining employees have auto-enrolled, so it will be some time before it is in place. However, the retrospective casting of the Bill—which I support—means that for existing unauthorised schemes, the scheme funder is liable for wind-up and transfer costs when a triggering event occurs on or after 20 October 2016. What if that funder has insufficient resources, is a limited liability company or is insolvent? Where would wind-up and transfer costs be recovered from?
In his letter of 14 November, the noble Lord, Lord Freud, comments that in such a situation,
“we would expect the normal considerations in terms of insolvency and court proceedings to apply to this financial debt as to any other”.
That prompts a series of questions for the Minister. What does that mean? Who would bring the proceedings and how would they be financed? If the members of such a master trust were transferred, would the receiving master trust be covered by the prohibition in Clause 33 on increasing charges? The noble Lord, Lord Freud, further comments in that letter:
“We do not expect the number of trusts who will find themselves in this position … without solutions for their members to be high. We anticipate that the market will wish to consolidate”.
That leads to a more general question: how exactly is it to be determined which is the appropriate master trust to be the receiving scheme in a wind-up under Clause 24? How will a potential receiving scheme be identified? Presumably, the regulator will not leave it to other schemes to do some self-organised divvying up. It could be problematic under competition law for a panel of providers to self-organise the divvying up of schemes. Will there be a formal regulatory allocation process, and if so, what will it be?
People need to be reassured that the Bill will provide them with protection in practice. At the moment, that ultimate reassurance is not there. The amendment does not prescribe the model but it fixes the principle of a last resort provision. I recognise that work needs to be done. There are matters to be considered—how to protect against moral hazard; how to ensure that market players do not game the process to cream off the best members; the need to look behind a triggering event to identify evidence of cherry-picking; and the funding underpin for a last resort provision—but there is a compelling need for a compensation or last resort provision, as proposed in the amendment. Without it, the Government cannot credibly assert that the Bill will do what is claimed in the opening line of the Explanatory Notes: protect all savers. I beg to move.
Lord Flight (Con)
My Lords, it is actually extremely unlikely—in fact, virtually impossible—that members will suffer if the manager of a master trust gets into difficulties. The assets attributable to the pension fund members are segregated from the assets of the manager. How valuable or otherwise they are will depend upon how well they have been managed and, if there is more than one fund choice, which fund people have chosen.
Secondly, it is clear that the Pensions Regulator will and is intended to play the brokerage role. If it perceives that a master trust manager is in trouble, it will quickly sort out who is going to take over that business. It has value because fees are attached to managing the money, which other master trusts will happily pay. There is even some source of revenue coming back to the master trust in trouble as it is bailed out.
I am afraid that this sort of plaintive request for a compensation fund does not have my support. I thought we had collectively agreed that we did not want another compensation fund. Adding it at the end, almost out of principle, when the chances of it ever being used are virtually zero, is not particularly constructive.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I support this amendment, to which my noble friend Lord Stoneham has put his name. The noble Baroness, Lady Drake, has set out the arguments in depth and there is very little left to say. Some means to guarantee the solvency of master trusts is needed, and will be fair. It is essential that it be fair.
If regulation is working well, it is to be hoped that the costs will be minimised and insured against. The regulator should have an incentive to merge schemes where resources look likely to be insufficient, and means to tide them over should be provided for. In other with benefit schemes, guarantees of last resort are provided and the liability risk is much greater. Confidence in pension schemes is essential. It would be very serious indeed if trusts became insolvent. As has already been said, protection as a last resort should be a rare occurrence. I support the amendment.
Baroness Altmann (Con)
My Lords, I, too, support the amendment. I am concerned that there are well-intentioned measures in the Bill designed to ensure that there is capital adequacy in these schemes. One hopes that they will work but how will any regulator know in advance what capital is actually adequate? The circumstances in which wind-up could take away people’s pensions, even if the assets are ring-fenced and protected for the members, are those in which there is no other mechanism for covering the wind-up costs. That is where the members’ pensions would be at risk.
Indeed, we saw this a number of years ago with defined benefit pension schemes, which is precisely why we ended up with the Pension Protection Fund. The Government put in well-meaning legislation that required minimum funding standards for defined benefit schemes which were supposed to ensure that members’ pensions were safe even if the scheme or the employer failed. Unfortunately, the situation with the schemes—due to lack of competent administration in some cases but not all; sometimes due to market movements as well—led to members losing their pensions, and the only real protection that ended up being available was this backstop insurance in the form of the Pension Protection Fund.
Yes, we need capital adequacy. Yes, the Bill is really important. But I would be really grateful if my noble friends the Ministers explained why the Government do not feel this is necessary, or how proper protection for members in extremis can be provided. For example, will NEST guarantee to take over these liabilities? Is there some other plan? I would be grateful for some reassurance from my noble friends.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
Amendment 18 requires the Secretary of State to,
“make provision for a compensation fund or for the funding to be provided by another source as a last resort”,
in circumstances where the scheme has had a triggering event and has insufficient resources to pay the costs referred to in Clause 8(3)(b)—that is, the costs of complying with duties imposed under the Bill during a trigger event, and the costs of continuing to run the scheme for a period of six months to two years—and a prohibition on increasing charges during the trigger period applies.
The amendment speaks to the heart of what the Bill is about: protecting members. Along with a number of other amendments, it seeks to add further protections and, perhaps, test us a little on the extent of the measures the Government have provided for in the Bill as introduced. I welcome both the focus on member protection and the opportunity to explore the specific measures in the Bill which provide the members with security should the scheme decide to close or start to fail. The amendment would mean that if a scheme experienced a triggering event and had insufficient money to pay for the costs associated with the options the scheme may pursue following a triggering event, other funds must be provided. It also goes further to say that it is the Secretary of State who must provide a compensation fund or for the funding to be provided by another source.
In responding, I will touch on a few areas. I will outline, first, the measures which provide that sufficient funds must be held; secondly, some of the costs and complexities that would be introduced into the system should a compensation fund or other funding be required; and, thirdly, the compatibility with the regime provided for in the Bill.
I turn to the measures which provide that sufficient funds will be held. First, the main provisions in the Bill requiring schemes to hold certain funds are in Clause 8, which provides that for the scheme to be authorised it must satisfy the regulator that it has sufficient resources to meet certain costs. This includes the costs of complying with the requirements under the Bill once the scheme experiences a triggering event and those of running the scheme for a period of between six months to two years, in the event of a triggering event occurring. The Government believe that these measures are sufficient and that this is an appropriate regime for the types of funding in question here. Further, members’ savings are protected via the restrictions on using members’ pots to pay for these costs provided at Clause 33. We therefore consider that the amendment is unnecessary.
However, it would be helpful to explore the counterarguments or challenges as to whether this is adequate risk mitigation—in particular, to explore any suggestions that there is still some risk in relation to: the period before the authorisation regime is up and running; the calculation of those funds to ensure they are sufficient at the point of need; the availability of the funds at the point of need; and the funds diminishing over time. Finally, what happens if the lack of these funds leads to the regulator withdrawing authorisation and creating a triggering event? Let me set out how those risks are addressed within the regime.
In respect of the period before the regime is up and running, paragraph 7 of Schedule 2 provides that the scheme funder is liable for these costs. It places this liability on the scheme funder when a triggering event has occurred in an existing scheme and the liability for those costs does not lie elsewhere. The prohibition in relation to increasing members’ charges applies during this period, so members are protected. If the funder should be in financial difficulty, the matter should be pursued via the normal court channels or insolvency processes. It is not the members’ money which is at risk in these scenarios; it is the running costs of the scheme and payment for activities during the triggering event period.
We also know that other schemes may well rescue the failing scheme, as has happened before, to protect the reputation of the industry. This is a different dynamic from what would be the case in non-money purchase schemes, where the debt is about money needed to pay member benefits and where funding obligations to pay for the promised benefits would attach if another entity took over the scheme. The master trust industry can support the movement of members—some trusts are willing to do so—or take over failing master trusts, so government intervention is less warranted where an industry solution may be possible. This might be an appropriate point to deal with the question from the noble Baroness, Lady Drake, about the identification of receiving schemes. They will be on a list kept by the Pensions Regulator, and some industry players may wish to step in and identify themselves.
On whether the funds available to the scheme will be sufficient, regulations will set out matters that the regulator must take into account when deciding whether it is satisfied that those funds are sufficient. We anticipate that these will include matters that will support the establishing of the assets needed to cover these specific costs, such as the business plan, the size of schemes, the costs of contracts and the value of assets, the nature and level of assumptions made in that business plan, the security of the scheme funder and the state of the scheme administration. Also covered will be the range of potential assumptions that may be used in arriving at the figure required.
Regulations may also specify the information that the regulator must take into account and requirements relating to the financing of the scheme or funder, such as requirements relating to assets, capital or liquidity. We anticipate that these will include matters such as how the funds are to be held to ensure that they may be accessed for specific purposes only, so that they are safe in the event of the funder becoming insolvent. In this way the Bill provides that to be authorised, a scheme must hold sufficient funds for those costs and that these funds must be held appropriately.
The supervision part of the regime focuses on ensuring that the funds remain sufficient and are not eroded over time, and that the Pensions Regulator can act swiftly should a drop occur in the funds held. There are measures in the Bill that work together to provide that this requirement to hold funds to cover the costs of the triggering period is an ongoing requirement, and one that the regulator will be able to supervise. Clause 19 states that if the regulator stops being satisfied that an authorised scheme meets the authorisation criteria, it may decide to withdraw the scheme’s authorisation.
Further, alongside the information-gathering powers that the regulator has under the Pensions Act 2004, Clause 14 requires the scheme and funder to submit annual accounts, while Clause 15 gives the regulator the power to require schemes to submit a “supervisory return” and Clause 16 places a requirement on certain persons to report “significant events”. We anticipate that these significant events will include matters in relation to the funds held under Clause 8. Through these means, the Pensions Regulator will have a stream of data in relation to which it can make further inquiries to ensure that it remains satisfied that the criteria continue to be met, and it can take action if that ceases to be so.
If the regulator becomes concerned that the assets are no longer sufficient to satisfy it that the criteria are met, it may issue a warning notice to withdraw authorisation, which is a triggering event, and will have access to the pause power and direction-making powers under the triggering-events part of the Bill. In this way, the Pensions Regulator can act quickly and decisively as soon as any risk arises, to diminish risk and prevent the situation deteriorating any further. On the question from the noble Baroness, Lady Drake, about which liabilities the receiving scheme will have for debt in the existing scheme, the Bill imposes no liabilities on the receiving scheme for debt in the existing scheme.
This approach caters for a number of different structures under which the master trust schemes have been set up. It ensures that the regulator can make a scheme-specific assessment of the funds that must be held to cover the requirements. It helps ensure that the risk of the scheme not holding these funds, or of the funds being eroded, is minimised.
In addition to the consideration that this risk is already dealt with via the Bill’s provisions, I will turn to a second matter: the costs and complexity that this amendment could introduce into the regime. As soon as compensation is added to the regime—based on the concept that where the funds are insufficient, someone else will step in—an element of moral hazard creeps in, as the noble Baroness, Lady Drake, acknowledged. Master trusts are businesses set up to provide a service to a number of employers. Many are set up to make a profit; some are not-for-profit, but all are selling or marketing their services to employers and must take responsibility for providing protection to their members. I would also be concerned about the added cost of delivering a compensation fund. Noble Lords have left it for regulations to establish whether this fund or requirement would be a government-funded compensation scheme or a levy-funded compensation scheme, or on whom any additional sourcing requirement would be placed. So this would be a broad regulation-making power.
In terms of what type of compensation may be envisaged, if it was levy-based there would be additional administrative costs to consider, as well as additional costs to the schemes that would presumably need to contribute to it as well as holding funds for their own scheme for a very low risk, as my noble friend Lord Flight pointed out. These would be funds that the scheme could not use for its own risk mitigation. The type of risk we are looking at here does not warrant the introduction of a compensation scheme. Members’ pots or promised benefits are not at risk. Clause 33 provides protection when a trigger event occurs, as it prevents charges being increased or new ones being introduced. It is about the risk of the scheme being unable to meet costs related to paying for activities under the trigger events such as wind-up, bulk transfers, finding a new funder or suchlike. The cost and complexity of a new compensation fund is not warranted.
A third matter is that I am not convinced that the amendment is compatible with the wider regime provided for in the Bill. There would be some significant challenge in ensuring that this provision did not lead to unintended effects: if, for example, the other source of funding was to place a requirement on a specific person to provide the costs as a last resort. The regime has been specifically crafted to ensure that all types and structures of master trusts can comply with the requirement. This has been specifically designed to ensure sufficient flexibility in enabling schemes to comply with the obligation.
Baroness Altmann
Will my noble friend write to me with some clarification on how costs would be covered? If a scheme fails and records are in disarray, how would the costs of wind-up be covered? I accept that they cannot come out of the members’ pots. If the company running the scheme or the employer has failed, where will the money come from to make sure that members’ current pension funds are transferred over and the costs of administering the transfer, executing the bulk transfer and clarifying the records are met? Currently it would seem that the members’ pots will be in limbo. The money cannot come out of their pots, but there is no one else to pay.
Lord Freud
The money cannot come out of their pots, but the Pensions Regulator will be looking to transfer those pots to another master trust. The protection that this amendment and my noble friend are suggesting is almost conditioned by what we watch in the defined benefit market. This is a different situation, where there are protected pots. There may be costs in a catastrophic situation, but they will not fall on members, and it is not the job of government to protect non-members from getting into a mess.
Lord Flight
Is it not very simple? The manager of the master trust would go bust just like any other business can go bust. It would go into liquidation and, to the extent that it owed debts to the suppliers of electricity or other such things, they would suffer.
Lord Freud
My noble friend has put very bluntly what I was trying to say in a subtle and gentle way. If the landlord or another supplier to the scheme finds itself out of pocket, for instance, that is what will happen. It will go through the normal insolvency process, but it is not the job of the Pensions Regulator or the Government to be concerned about that. Our concern is purely with the members’ pots. Are they protected and is there a process to transfer them to someone who can look after them properly? I hope that is what I have been able to explain in an overlengthy reply. I hope it has enabled the noble Baroness to withdraw the amendment.
Baroness Drake
I shall try to pick up some of the Minister’s points. There was a lot of detail in his reply. I am conscious of the time. I shall start with the risks that we are trying to mitigate; there seems to be a lot of confusion about them. The risk this Bill is trying to mitigate is that the costs associated with managing scheme failure and winding up the scheme fall on the members, so their pots are drained to pay for them. Their pots are not protected. We are talking not about the equivalent of a DB benefit provision or a Financial Services Compensation Scheme provision on an annuity, but about the specific risk that the Explanatory Notes and all the associated documents from the Government in support of the Bill identify that it is seeking to mitigate. Members’ pots should not be raided to pay for a master trust failure.
The Minister set out in great detail how the authorisation regime, the supervision regime and the scheme failure resolution regime will work very effectively to protect the members against that risk. That was very clearly laid out. I complimented the Explanatory Notes and other documents at Second Reading. It is possible to clearly follow the regime proposed. However, the regulatory regime cannot ensure that the capital adequacy and supervision regime will always ensure sufficient resources in the scheme to finance the cost of failure in respect of wind-up and transfer costs. That is the risk we are trying to deal with. It is not the function of a regulator, whether it is the PRA, the FCA or anything else, to eliminate all risk. It cannot possibly do so, unless there is an unlimited guarantee from the taxpayer always to remove risk in a regulated system.
This amendment seeks to address what happens when the regulatory system around capital adequacy or resolution through transfer of another scheme does not work. As the noble Baroness, Lady Altmann, said, at the moment there is only one place to go, which is back to the members’ pots, which will be drained.
If I heard the Minister correctly, he said that there would be no liability for debt placed on the receiving scheme in a transfer situation, so he is saying that if there are insufficient resources in the failing master trust they cannot be offloaded on to the receiving scheme on transfer. They are still floating around to be paid for, so we cannot put them there and we cannot put them on the financial resources in the capital adequacy regime because that has failed, so we are still waiting for someone to pick up these costs because the only thing exposed at the moment is the members’ pots. In that situation, no regulator can guarantee whether there is a suitable master trust that will pick up all the members. It may want to cherry pick some and leave a rump behind. We do not know how this will play out. What has to be possible is that the capital adequacy and supervision regime does not always work and, if there is any one occasion when it does not work, the prohibition clause—Clause 33—cannot work because prohibition on increasing member charges when a failure takes place can operate only if someone provides the resources to fund that prohibition on increasing the charges.
There is no provision in the Bill or in any other policy document from the Government that states that, if a scheme fails in extremis and there are not the resources in place, there is no one to fund the prohibition order on increasing charges as a result of managing that failure other than the members’ pots.
Lord Freud
I want to be very clear. There was a useful dialogue between me and my noble friend Lord Flight. I would like to repeat what I said. I am not saying that no one will lose money if something goes wrong; what I am saying is that it will not be the members because their pots are protected.
We have bankruptcy or insolvency proceedings for other people when they get into financial trouble, but that is a separate matter. The members are protected. What we are worried about in this Chamber is the position of the members, and Clause 33 provides that fundamental protection. It is not open to the failing scheme funder to raid those pots; that is prohibited, and we have a regime to prevent it happening.
Just because someone somewhere loses money around this process does not mean that we need a compensation regime. I want to make that utterly clear, because there seems to be a concern to see that nobody can lose money. If people mess things up, they may lose money—but members will not lose money.
Baroness Drake
I accept the clarification from the noble Lord. The amendment—which at this stage is partly probing, although underlying it is a principle that is a matter of substance—was not intended to prescribe the model. It does not say it has to be a compensation fund—it could be a provider of last resort—but there needs to be an explicit provision in the Bill that makes it clear what happens to protect the members’ pots when the supervisory and capital adequacy regime fail in a failing master trust. I do not believe that the Bill addresses that at the moment. I am not arguing for a particular model; I am arguing for a principle of absolute clarity as to how members’ protection against exposure to meeting the cost that I described—the risk that the Bill seeks to mitigate—will be addressed in an in extremis position.
It is not a plaintive request—I say to the noble Lord, Lord Flight, that I am not a plaintive request person. I am standing here quite firmly because potentially 7 million people are going to be affected and, over time, there will be trillions of pounds under management. This matter is worthy of interrogation, rather than us simply hoping.
Lord Flight
The issue is an administrative one, in that you have people’s pension fund money, and the manager has got into trouble and, let us say, gone into liquidation. What administration would make sure that a new manager takes over and continues to investment-manage those pots of money? There have been suggestions that the Pensions Regulator himself should be empowered, or maybe required, to act as a broker with regard to such arrangements, but that problem has not yet been solved. That, surely, is the practical issue, not people losing money out of their pension pots.
Baroness Altmann
The issue that we are dealing with is indeed an administrative issue, but saying members’ pots are protected does not protect members’ pots. In a scheme which has failed and is winding up, and whose administration is in disarray, it will take some time and money to decide and assess how much each member’s pot is actually worth, for example in the cases of a big master trust whose systems fail or of a smaller master trust whose systems simply were never up to scratch. We have 80 or so master trusts out there at the moment and have had no protection regime at all, no capital adequacy rules and no proper assessment of the quality of the trusts. We have so many members’ pension funds growing for them, and there is the possibility that more than one of these schemes will fail and need to wind up. There will be costs associated with assessing what the value of those members’ pots actually is. I do not hear anything at the moment that explains how the costs of administering and sorting out the records of that scheme, so that we know what each member’s pot is worth, are going to be funded. If the Pensions Regulator finds a way to pick up the cost, if NEST has to pick up the cost or if there is some insurance regime for industry-wide assessment of those costs, that is fine, but I just feel that we are assuming that this will be a wind-up of a scheme whose records are fine and it will be shipped off to another scheme, which will want to earn money for those members. That is not the case that is necessarily going to arise.
Baroness Drake
I thank noble Lords for the supportive argument on the point that I am trying to make. I should pull this to a close. It is not that the proposals in the Bill around authorisation, supervision and resolution on failure are, of themselves, something one would want to challenge—although there is the issue of how they and some of the policy will work in practice—it is what happens in the situation that the noble Baroness, Lady Altmann, set out, when one has a failure, costs are incurred in dealing with that failure and insufficient financial resources are available. How are the members’ pots protected in those situations? The reasoning in the impact assessment is that the prohibition in Clause 33 works because there will always be financial resources to fund it, but it is not clear, in the terms of the Bill, that there will always be financial resources outside of accessing the members’ pots. However, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, in moving Amendment 19, I will also speak to Amendment 20, which is grouped with it. Amendment 19 would remove the requirement that the scheme funder is constituted as a separate legal entity and, as an alternative proposition, would require it to be approved by the Pensions Regulator. Amendment 20 would remove the requirement that the scheme funder can carry out only activities that relate directly to the master trust scheme.
Taken together, it has been raised with us that, although it seems to be the intention that each scheme should have a scheme funder, the Bill does not actually require that. A variety of different structures are used for current master trusts, and the definition in the Bill does not fit easily with many of them. In particular, the requirement for a scheme funder to operate only a single master trust would require a number of existing schemes to move from being supported by an FCA-regulated entity with significant financial resources to being supported by a single-purpose vehicle set up just to run the master trust. The policy rationale for this is unclear, and perhaps the Minister would clarify whether that really is the intention.
Clause 10(3) would also prevent a single provider supporting more than one master trust, and it has again been put to us that this is likely to inhibit consolidation and the ability to rescue failing schemes, which we have just been discussing. It has been suggested by the ABI that, where the scheme funder is an FCA-authorised insurer, the requirements of Clause 10 should not apply. Alternatively, as our amendment suggests, that flexibility could be achieved by requiring the scheme funder to be approved by the Pensions Regulator. When it comes to submission of accounts, the insurer would not typically split out master-trust lines of business, and might have to rely on the PRA’s work to assess the strength of relevant firms. As suggested under Solvency II, firms must hold capital against pension scheme risks. These capital requirements are onerous and it does not seem reasonable to require the holding of additional capital on top of them.
If an existing body corporate conducts activities that relate directly to more than one master trust scheme, what do the Government actually want it to do? Splitting an existing operation into separate companies, even within a group structure, may not be without cost, including taxation. Further, how is this meant to work where a master trust provides money purchase benefits as well as other benefits? Clause 10 treats a scheme funder as a separate legal entity if, inter alia, it carries out activities only relating directly to the master trust scheme if it is a master trust scheme, as distinguished from a master trust, only to the extent that it provides money purchase benefits. So how can Clause 10 (3)(b) be satisfied where a master trust provides money purchase and other benefits? I beg to move.
Lord Flight
My Lords, I believe this clause has aroused most concern in the industry, particularly the insurance industry. A number of organisations, particularly life offices, undertake a range of business activities in addition to simply sponsoring a master trust. The clause suggests that the scheme funder or sponsor must set itself up as a separate legal entity and undertake no other activity beyond sponsoring the master trust. Given that the whole purpose of the Bill is to ensure that funds are available to see through the orderly exit of the scheme’s sponsor, the provisions of Clause 10 as it stands are surely counterintuitive. One wants the sponsor to be as strong financially as possible, but the clause as it stands could well invoke the very thing that the Government are trying to avoid.
More specifically, as the noble Lord has pointed out, the insurance industry typically will have master trusts side by side with group personal pension schemes. As matters now stand, they are regulated by the FCA and PRA, and there would be a considerable duplication of regulation under the arrangements as proposed. I am sure the Government have focused on this, but I certainly feel that Amendments 19 and 20 are appropriate to address the problem that stands.
Baroness Altmann
My Lords, I echo the comments made by my noble friend Lord Flight. Why do the draftsmen of the Bill think that having a separate legal entity is definitely a good thing? What are the risks that this approach tries to close down? Perhaps if we could understand those risks better, we might be able to address the issue in a slightly different way. Is the aim somehow to ring-fence the DC covenant of the scheme funder and prevent them from having other financial obligations that might take away from the support for this master trust, or to minimise the burden on checking accounts? Obviously, it is easier to review the accounts of a stand-alone entity than of a much broader group. Hopefully, if we could better understand what the rationale is, it might be possible to address some of the very important concerns that have been expressed by some of our major insurance companies.
Lord Young of Cookham
I am grateful to the noble Lord, Lord McKenzie, for his amendment. I gently point out that there is a spelling mistake in it, but there are other reasons for resisting it.
Amendments 19 and 20, tabled by the noble Lord and the noble Baroness, Lady Drake, deal with Clause 10, which sets out the requirements that a scheme funder must meet in order for a master trust to be authorised. I hope to explain to noble Lords, particularly my noble friend, the thinking behind insisting that there is a separate legal entity behind each scheme. A scheme funder by definition is key to the master trust’s financial sustainability. By “scheme funder” we mean a person who is liable to provide funds in relation to the scheme when the administration charges paid by and in respect of members are not sufficient to cover the scheme’s costs, or someone who is entitled to receive profits when the scheme’s charges exceed its costs.
Amendment 19 would remove the requirement for the scheme funder to be a separate legal entity that carries on business activities only directly related to the master trust, and would replace it with a requirement for the scheme funder to be approved by the Pensions Regulator. I listened with interest to the points that noble Lords made in respect of that amendment. Amendment 20 would similarly remove the requirement for a master trust’s scheme funder to be a separate legal entity that carries on only the master trust business. The effect of both amendments would be to allow the same legal entity that acts as scheme funder to engage in business activities not directly related to the master trust, making it more difficult for the Pensions Regulator to identify matters relevant to the master trust and therefore to assess the financial sustainability of the scheme.
To enable the regulator to assess the financial position of the scheme with certainty when deciding whether the master trust should be authorised or remain authorised, the scheme funder must be set up as a separate legal entity. This is defined in the Bill as meaning, in effect, a legal person whose only business activities are in relation to the master trust. Requiring scheme funders to be separate legal entities will make their financial position, and the financial arrangements between them and the master trust, more transparent to the regulator and provide greater clarity regarding the assets, liabilities, costs and income in relation to the master trust business. This will greatly assist the regulator in carrying out its assessment of schemes’ financial sustainability.
There will be greater transparency regarding any additional funding streams coming into the scheme funder entity, and the level of commitment of those funds for the purposes of running the master trust, should the scheme funder be in receipt of income generated from other lines of business carried on by connected entities. The amendments would remove that transparency by making it possible for the scheme funder to carry on business activities not related to the master trust under the same corporate entity. It would therefore be difficult for the regulator to identify the financial sustainability or otherwise of the master trust.
One of the other authorisation criteria of which the regulator needs to be satisfied is that the people involved in the master trust scheme are fit and proper. Clause 7 specifies people that the regulator must assess for this purpose, including the scheme funder. It is not clear to what extent Amendment 19, requiring the scheme funder to be approved by the regulator, would differ from the assessment that the regulator is already required to carry out under Clause 7. Requiring the regulator to approve the scheme funder in general terms, rather than setting out requirements in the primary legislation requiring the scheme funder to be set up as a separate legal entity, would not only potentially make the financial sustainability of the scheme less clear to the regulator but would also give master trusts and scheme funders less certainty about the conditions that must be met for authorisation.
To turn back to the requirement for the scheme funder to be set up as a separate legal entity, I am aware that a number of concerns have been raised about the impact that this will have on existing businesses, such as the removal of protection and cross-subsidy through diversified lines of business supporting the master trust, restrictions on the use of shared services and the disruption of existing business. I shall come to each of these in turn, but I reassure the House that this authorisation criterion is not designed to prevent funds from flowing from one business to another, nor is it our intention to disrupt existing arrangements unnecessarily. The overarching aim of the requirements is transparency in the cash flows to and from the master trust business, and the assets and liabilities related to it, so that the regulator can readily ascertain the financial position of the scheme funder and the financial arrangements between the funder and the scheme. I think that paragraph answers the question asked by my noble friend Lady Altmann.
The requirements in Clause 10 do not prevent the master trust benefiting from the support of other businesses. Support can be offered from the scheme funder’s wider group explicitly through the provision of a legally enforceable guarantee or other formal arrangement from another group company of sufficient financial strength. Where the scheme funder currently conducts other businesses, a degree of cross-subsidy may already take place, and there is no intention to prevent this.
Lord McKenzie of Luton
My Lords, I thank the Minister for that detailed explanation. Again, we will need to read the record to make sure that we have fully understood the proposition. Incidentally, I should thank him for pointing out the spelling error, but offer even greater thanks to those who did not.
The nub of the issue is that this is to help the regulator establish financial sustainability and make it easier to interpret the data before it. One can readily see that there will be a range of circumstances where it will be quite appropriate for a separately constituted legal person to be the sole funder, but, as we have discussed, the issue is wider than that.
The Minister said that it is unnecessary to unpick shared service arrangements. I question how that is consistent with what is in the Bill. Clause 10(3)(b) states:
“the only activities carried out by the body corporate or partnership are activities that relate directly to the Master Trust scheme”.
Where a scheme funder provides, on a transparent basis, services to a group company and charges for them without affecting the master trust scheme, how is that possibly consistent with the requirement that the only activities carried out by the body corporate are those that relate directly to the master trust scheme? I really do not see that it is. Perhaps the Minister will reflect on that and write further in due course.
There is also an issue about how this is all consistent with arrangements for non-money purchase benefits. I think that the structure of the Bill is that you take them out of the picture—they are not considered in all this—but, again, if those are the arrangements in a single funder which is supporting both of those lines of business, it seems to me that you cannot simply ignore that for the purposes of interpreting Clause 10(3).
This requires a rethink. I understand the Minister to say that there will be some period upfront when existing arrangements will be unpicked and restructured, and that may help, but how is an FCA-regulated entity, which is stringent in its capital requirements but covers a range of group entities, to be restructured? Do they have to be moved out? Does the single entity left, which is dealing with the master trust, have to go through an equivalent FCA approval process to ensure an equivalent position at the end of the day? It does not make sense. We understand the benefits of transparency, and there may well be a range of circumstances where it is better to have a separate body corporate, a legal person with a clearly identified, separate funding stream. However, if that is to be the only way it can be done, that creates enormous problems, particularly for funds operational now.
Like the noble Baroness, Lady Altmann, and the noble Lord, Lord Flight, we have continuing concerns which, with respect, have not been answered tonight. I do not know whether the Minister wants to have another go, but if he does not, I beg leave to withdraw the amendment.
The Lord Speaker (Lord Fowler)
My Lords, there is an error in the Marshalled List. Amendment 20A should read: “page 7, line 19, leave out ‘may’ and insert ‘must’”.
Baroness Bakewell of Hardington Mandeville
My Lords, I thank the noble Lord the Lord Speaker for putting the House right on that; the error was pointed out to me this morning. I shall speak briefly to the amendment.
All the information requirements relating to scheme processes as set out in Clause 11(4) are integral to a thorough assessment of a master trust’s capacity to run a scheme effectively. Therefore, it should be mandatory for regulations to include provision about the regulations. Master trusts must be effectively run so that members can be sure that their money and futures are secure. Security around master trusts is key to their success. It is much too important to be left to possible regulation; it needs to be enshrined in the Bill. I look forward to hearing what the Minister has to say about the amendment, and I support all the other amendments in the group.
Baroness Drake
My Lords, I shall speak to Amendment 21 and other amendments in the group. Amendment 21 would make it a process requirement under Clause 11 on authorised master trusts when making investment decisions to consider,
“environmental, social and governance risks”,
Most investments in master trust schemes will be longer term and therefore exposed to longer-term risks. Consideration of those risks, which include such factors as climate change, unsustainable business practice and unsound corporate governance, is integral to the long-term sustainability of the investments held. The assessment of these risks should not be seen as an ethical extra but, rather, potential vulnerabilities to the sustainability of the scheme which should be properly understood.
The Pensions Regulator code of practice strengthened guidance for trustees on consideration of ESG risks, but it is not legally binding and there is no direct penalty for failing to comply. At a recent pensions conference, Andrew Warwick-Thompson, the executive director of the regulator, warned trustees against complacency when assessing ESG issues within portfolios. He commented that the regulator expects trustees to take ESG issues into account, saying,
“I would urge any trustee or asset manager out there who still thinks these things don’t matter to wake up and smell the coffee”.
He referred to research by Professional Pensions which showed that only 18% of responses from trustees, fee managers and pensions professionals thought trustees should be obliged to take ESG issues into account.
If many in the industry are reluctant to make an assessment of ESG risks, it is hardly an auspicious basis for optimism that a voluntary code will work. As the regulator himself commented:
“We need to guard against complacency here”.
There is increasing evidence showing that companies which perform well on ESG produce better returns for investors. Poor corporate practice has a real effect.
Master trusts have already grown exponentially against the background of a regulator having insufficient powers, relying instead on exhortations to trusts to embrace the voluntary master trust assurance framework. That did not work. With this Bill the Government are trying to put things right. The regulator expects ESG risk to be assessed. The amendment moves beyond expectation to a process requirement that trustees actually consider these risks. I ask the Minister: will the requirements under Clause 11(4)(d) include a specific requirement to assess ESG risks?
Amendment 22 requires an authorised master trust to have processes in place for the identification, reporting, managing and minimising of any conflict of interest. How to manage conflicts of interest in a master trust is an, as yet, unresolved problem. It is difficult to assess how this Bill will resolve it because of the policies still to be decided. In 2012 the Pensions Regulator, when investigating potential conflicts of interest in master trusts, commented:
“It is very hard to understand how and when they are acting as agents of the provider and when they are acting in the best interests of the member”.
In 2013 the then Office of Fair Trading raised concerns that some trustee boards were not sufficiently independent of the master trust provider to avoid conflicts of interest and always act in beneficiaries’ best interests. The Occupational Pension Schemes (Charges and Governance) Regulations 2015 introduced stricter requirements on master trusts and although welcome, they are not sufficient to address potential conflicts of interest. Trustees of occupational pension schemes are required to have a process in place to identify and manage any conflicts of interest and there is a regulatory DC code which recommends minimum controls. But they do not meet the conflict of interest challenges in a master trust.
Market pressure, combined with sound regulation, are important tools in the fight against conflicts of interest. The only trouble is that in the pensions market there is little pressure coming from the supply side, the scheme member—a proposition we have rehearsed so many times in debates in this Chamber and in the other place.
The Government’s impact assessment identifies the particular risks that master trusts pose, which compellingly support specific regulation for identifying, reporting and managing conflicts of interest. Master trusts develop new types of business structures which alter the relationships between members, employers, trustees and providers, on which occupational pension law and regulation is largely based. There is no requirement to include member or employer representatives on the board, and providers have a significant influence over who they appoint.
Many master trusts have been set up with a profit motive—something that existing occupational pensions’ regulation does not cater for. As the OFT observed, this is a concern and a complex area as these companies have obligations to their shareholders and other stakeholders and, as with any company, seek to make a profit. IFAs and fund managers may be part of the provider group that set up that master trust.
The trust deed in a master trust can inhibit the trustees from acting in the best interests of members if the rules fetter their powers. The master trust multi-employer characteristic can increase complexity and, with it, the potential for conflicts of interest. The products they provide are not covered by ECA regulation.
Lord Young of Cookham
My Lords, I am grateful to those who have spoken to this group of amendments to Clause 11, which sets out one of the authorisation criteria, namely,
“that the systems and processes used in running the scheme are sufficient to ensure that it is run effectively”.
Amendment 21, tabled by the noble Lords, Lord McKenzie and Lord Monks, and the noble Baroness, Lady Drake, would amend Clause 11(4)(d) by making it clear that regulations on the matters that the regulator must take into account in deciding whether the schemes, systems and processes are sufficient to ensure that it is run effectively may include provisions about the processes that master trusts are required to follow in relation to environmental, social and governance risks. I think the intention behind the amendment is to do it in relation to the transactions and investment decisions of the scheme, rather than across the range of systems and processes that a scheme may operate on a day-to-day basis, such as staffing and travel. I see the noble Baroness nodding in assent.
Given that this amendment adds environmental, social and governance risks to subsection (4)(d), alongside processes relating to transactions and investment decisions, I am responding on the basis of that first interpretation. Clause 11 sets out specific areas that the Secretary of State may include in regulations and that the Pensions Regulator must take into account when deciding whether it is satisfied that the systems and processes adopted by schemes are sufficient to ensure that they are run effectively.
I have enormous sympathy with the case made by the noble Baroness that environmental, social and governance risks should feature in the way she described, but I remain to be persuaded that it needs to be included in the Bill. There are a number of reasons why. The current regulatory framework allows for ESG—environmental, social and governance—issues to be taken into account. TPR guidance makes it clear that trustees should take into account long-term financial sustainability in their investment strategies and new requirements can be inserted without primary legislation.
Environmental, social and governance issues are already, broadly, taken account of through the existing regulatory arrangements which apply to trustees of pension schemes with 100 or more members, including the statement of investment principles for their scheme, as set out in the investment regulations. The statement must include details of the extent to which the trustees take environmental, social and other factors into account in selecting, retaining and realising investments. These principles have been further supported by the Law Commission’s review of fiduciary duty, which confirmed that trustees should take these factors into account when they are financially material.
The Pensions Regulator has incorporated the Law Commission’s conclusions into its guidance for trustees and its code of practice on “Governance and administration of occupational trust-based schemes providing money purchase benefits”, which gives practical guidelines on how to comply with the legal requirements of pensions regulation. This guidance sets out the regulator’s expectation that when setting investment strategies, trustees will,
“take account of risks affecting the long-term financial sustainability of the investments”.
In addition, Regulation 4 of the investment regulations supplements trustees’ fiduciary duties under trust law by requiring that the assets of all pension schemes must be properly diversified in such a way as to avoid excessive reliance on any particular assets, and to avoid accumulations of risk in the portfolio as a whole. Should the Government subsequently decide to make regulations about the adequacy of the processes that master trusts are required to take into account in relation to environmental, social and governance risks in relation to investments, I can assure noble Lords and the noble Baroness that regulations would be able to cover this even if it was not specified in the Bill, as is done by the amendment. I hope I have said enough to explain why I am not of the view that the amendment should form part of the Bill.
Amendment 22 seeks to insert a new subsection into Clause 11 (4)(g) to make it clear that regulations about the processes used in running the scheme, which the regulator must judge are sufficient to ensure that the scheme is run effectively, may include provision about identifying, reporting, managing and minimising conflicts of interest relating to the work of trustees. The noble Baroness spoke about some of the risks involved here. The objective of Clause 11 is solely to ensure that the schemes are run effectively. It is not directly concerned about the conduct of the trustees undertaking their duties in relation to the pension scheme.
The Government recognised the potential for trustees’ conflicts of interest to arise in some multi-employer schemes and addressed this by introducing additional governance requirements for multi-employer schemes. These provisions were introduced in the Occupational Pension Scheme (Charges and Governance) Regulations 2015, which amended the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to require, first, that there should be a minimum of three trustees, and that a majority of these three or more trustees, including the chair, must be independent of the scheme’s service providers. Furthermore, the trustees must be subject to fixed-term appointment and appointed via an open and transparent recruitment process. The trustees must make arrangements to encourage members to make their views known to trustees on matters concerning the scheme. When establishing whether a trustee is independent of the scheme’s service provider, various matters must be taken into account, which are set out at Regulation 28(3) of the scheme administration regulations 1996 as inserted by Regulation 22 of the charges and governance regulations. An example is whether the trustee is a director, partner, or employee of an undertaking which provides advisory, administration, investment or other services in respect of the scheme.
In addition to these requirements that are currently placed on trustees, Clause 7(2)(c) places a requirement on the Pensions Regulator to assess whether a trustee of a master trust scheme is a fit and proper person as part of the decision on the application to establish a master trust, as set out in Clause 5(3)(a). Clause 7(4)(b) provides for the Pensions Regulator to take into account any matters it considers appropriate that are not covered by regulation when assessing whether a person is a fit and proper person to act.
When the Pensions Regulator is no longer satisfied that an authorised master trust scheme meets the authorisation criteria, including whether a trustee of the scheme is a fit and proper person, Clause 19(1) allows for the authorisation to be withdrawn. Clause 19(2) and (3) provide the process that the Pensions Regulator must follow once a decision has been made to withdraw authorisation. So, in light of existing legislative requirements setting out the required propriety and conduct of trustees of pension funds, and the clear role of the Pensions Regulator set out in the Bill to ensure that trustees of master trust schemes are fit and proper persons, I believe that this amendment is not necessary.
Amendment 23 requires the Secretary of State to make regulations that set a minimum requirement for each of the processes listed in subsection (4)(a) to (g) of Clause 11. I agree in principle that the question of minimum standards is a key one, but I reassure noble Lords that the clause as drafted enables the Secretary of State to set out in regulations factors and standards to which the Pensions Regulator must have regard when deciding whether it is satisfied that a scheme’s systems and processes are sufficient. However, the key difference between the drafting of the Bill now, compared to how the amendment would alter its meaning, is that the amendment states that regulations “must” make minimum requirements.
There are two closely related reasons why I shall ask the noble Baroness not to press her amendment. Both my points flow from the principle that the regime has been designed to ensure that we do not mistakenly apply a one-size-fits-all requirement to schemes. A minimum requirement, as something that necessarily has to be set out in regulations, may have some unintended consequences. First, were a minimum requirement to be applied, there is a risk that the one-size-fits-all approach could cause some schemes to fail to meet the criteria and therefore fail to achieve authorisation, despite having systems and processes which are sufficient to ensure that the scheme is run effectively.
Secondly, not all of the specified processes easily lend themselves to a minimum requirement. This brings a similar practical consequence to the point that I have just mentioned. Further, addition of the “must” in this amendment may result in finding the Secretary of State in a position where he cannot comply with his regulatory duties because there is no one-size-fits-all requirement in that case. An example for both these scenarios would be resource planning, where flexibility would be needed to cater for different scheme requirements. Another would be in relation to records management or administration, where flexibility would be needed to cater for different scheme requirements, sizes and structures.
For example, we would want to ensure that administrative systems must be adequate to support current operations; regularly monitored to ensure capacity; and adequate to support the anticipated growth of the scheme. This is more flexible than a minimum standard and tailored to a scheme’s own strategy for achieving sufficient scale. I hope that I have said enough for noble Lords to concur that the question of minimum standards is a key one, and that we will seek to use the regulation-making power in this way when appropriate, taking account of considerations to which I have just referred.
Finally, Amendment 20A stipulates that regulations about the processes must include provision about the areas listed under subsection (4) of the clause. As I have noted previously, we want to consult industry and other interested parties on the content of regulations made under Parts 1 and 2. The list provided at subsection (4) has been included in the Bill to provide clarity to industry now about the areas that the Government believe such regulations are likely to cover. However, the Government do not intend to stipulate the areas that must be included in the regulations made under this clause without consulting on those regulations. I hope that I have made the right assumption about what the amendment is aimed at and explained why the change would not be appropriate.
Finally, we have our old friends, negative and affirmative. I can only repeat what I have said on earlier occasions, and what my noble friend has said before—namely, that we would like to reflect on the balance of affirmative and negative in the Bill as a whole and come up with a balanced assessment of what we believe to be appropriate. On that basis, I hope that the amendments will not be pressed.
Lord Kirkwood of Kirkhope (LD)
My Lords, I support the case that the noble Baroness made for Amendment 22. I am very worried about conflicts of interest. The Minister was very generous and set out a detailed explanation that will repay careful study by us all tomorrow. I will certainly do that. What happens to trust deeds in all this? My experience as a defined benefit trustee is that the trustees have control, responsibilities and duties and are able to effect measures through the trust deed. We seem to be leaving all that to one side in this legislation. There may well be a case for not including measures such as Amendment 22 in the Bill. However, fundamentally different conflicts of interest face trustees in a profit-making master trust situation when they have members on the one hand and providers on the other. I am sure that the noble Baroness, Lady Drake, who knows a lot more about this than I do, makes an important point here. I am willing to discuss how we resolve this issue and whether we include the relevant measure in the Bill, but I will be following it very carefully as this legislation goes through.
Lord Young of Cookham
I take the noble Lord’s point. Under the authorisation criteria, the Pensions Regulator has to assess,
“whether each of the following is a fit and proper person”,
and one of them is a trustee. However, I take on board what the noble Lord says, which echoes what he said in an earlier debate—namely, that we should not lose sight of the responsibilities of trustees when we focus on the Pensions Regulator and everybody else. I should like to reflect on the point he has made and, indeed, the other point made about potential conflicts of interest and master trusts.
Baroness Bakewell of Hardington Mandeville
I thank the Minister for his very full response on all the amendments in this group. I agree that long-term financial sustainability is very important. I noted that when he talked about the responsibilities of trustees, he said that they “must” do certain things, not “may”, yet the Bill says “may” and not “must”. I will look in detail at what the Minister has said and I will be looking for clarity in the Bill. However, given the hour, I beg leave to withdraw the amendment.
Drugs Policy
(8 years, 1 month ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Meacher
To ask Her Majesty’s Government what policy changes they plan to introduce in response to the call from UN officials at the Special Session on Drug Policy on 19–21 April for member states to introduce evidence-based policies to promote public health and to place health rather than prohibition at the heart of drug policy.
Baroness Meacher (CB)
My Lords, I want to put on record the significant change in the position of the United Nations on drug policy at the UN General Assembly special session in April this year. This is a transformation in the UN position after no fewer than 55 years of a destructive, prohibitionist interpretation of the UN conventions.
The stated objective of the UN conventions on drugs is to advance the health and welfare of mankind. That remains a good starting point today. The problem has been that the UN conventions of 1961, 1971 and 1988 were drafted without any evidence base. In 1961, there was virtually no understanding about how best to reduce addiction and the harms caused by drugs and the drug regime itself.
For a long time it was believed that prohibition and prison sentences would create a drug-free world. President Nixon famously predicted such an outcome. How wrong he was. For more than half a century, far from reducing drug use and addiction, the prohibitionist approach has been accompanied by an explosion in drug use across the globe. The regime has generated a trade worth more than $300 billion for criminal gangs and terrorists. What an outcome.
For the past six years, our All-Party Parliamentary Group for Drug Policy Reform has been promoting the arguments for a new interpretation of the drug conventions through our international meetings of Ministers and senior officials from Latin America and Europe, our European initiative, my meeting with the ECOSOC president, and our briefing of President Santos of Colombia—a key player—before the UNGASS this year. Our guidance on interpreting the UN conventions provided the text for our international work. Human rights and public health were central to our argument, along with the emphasis upon flexibility and evaluation of new policies to produce an evidence base for future drug policy. We produced the guidance with the support of the White House senior staff in Washington and senior officials on drug policy in Mexico. George Soros, who backs our ideas, provided an invaluable link between ourselves and the deputy Secretary-General of the UN. He, too, supports our arguments. It may seem fanciful but I am confident that our small input to the key players of the UN and US was helpful but, of course, the presence of President Obama in the White House must have been a key factor in these developments.
At the UNGASS in April, the deputy executive director of the United Nations Office on Drugs and Crime was one of a number of UN top officials who signalled this dramatic change of direction. He finally made absolutely clear that:
“The Evidence based public health approach is here to stay”.
Surely the new UN position requires a major rethink of drug policy worldwide.
What does this mean for the UK? The Government need to adopt policies supported by evidence that they will reduce addiction, particularly among young people, and will reduce the harm caused by drugs and the drug control system. Three policies could be adopted immediately by the Government on the basis of evidence. The first is the decriminalisation of drug possession and use, as pioneered in Portugal all those years ago, and extensively evaluated and shown to be a success. It is interesting that all political parties in Portugal support the decriminalisation policy. The second is heroin treatment clinic programmes pioneered by the Swiss and, again, proven to be cost-effective in rigorous evaluations. The third is the legalisation and regulation of cannabis for medical use. I will concentrate on the third. Cannabis currently sits in Schedule 1—the schedule for dangerous drugs with no medicinal value, believe it or not. This has become unsustainable, and I would say laughable if it were not so serious. We have abundant evidence to support a change of that schedule. The reason for urgency is that the current policy is contrary to the human rights of hundreds of thousands of patients with severe chronic illnesses who we know could benefit from this change. About 10% of these people go to drug dealers but the rest just cannot face it. Should a very sick person risk arrest and being placed in a cell simply to get their medicine? The current position is also a terrible waste of NHS resources and inhibits research into the medicinal potential of this rather remarkable plant. I should make it clear that I have no personal interest in this issue. I have never smoked a cigarette and certainly not a spliff either. My only addiction is to chocolate and I am lucky; it is legal.
We now have a comprehensive and professional analysis of the research evidence proving that cannabis is not only a great deal safer than many prescribed medicines which it can replace, but works more effectively for some patients—not all—than prescribed medicines. If the Minister were not so ridiculously overworked, I would hope she would read the report of Professor Mike Barnes, honorary professor of neurological rehabilitation at Newcastle University, and Dr Jennifer Barnes, a clinical psychologist. The Barnes report looks at research evidence across the world and sets out those conditions for which there is now good evidence, through random control trials and other research, which makes very clear the efficacy of cannabis in treatment. These include chronic pain, including neuropathic pain, spasticity, nausea and vomiting, particularly in the context of chemotherapy, and the management of anxiety. Barnes also found moderate evidence of success in a range of other disorders and some evidence for including a further list of conditions, including drug-resistant childhood epilepsies. Barnes emphasised the need for more research. He certainly did not exaggerate the benefits of cannabis—very far from it; he rather underestimated the benefits. In order for that research to take place and for those improvements to be seen, we need a change in the schedule of cannabis.
Is the Minister aware that in early October the Medicines and Healthcare Products Regulatory Agency published its opinion that products containing CBD—one of the two primary ingredients of cannabis—should be regulated as medicinal products? The absolutely correct position of the medicines regulator does not sit easily with the Government’s outdated cannabis schedule.
At present, many parents of children with treatment-resistant childhood epilepsies are buying CBD from private companies or on the web and, despite the risks, they find that it can have dramatic and positive results for their children. I have a video of a child who was suffering hundreds of seizures a day and was unable to do anything. He was expected to die within a week when his father went to his consultant, who agreed that the child should be given cannabis. That little boy remains alive. He has very few seizures—perhaps one or two a day—and is able to run about and play. I have had helpful discussions with the chairman and chief executive officer of the MHRA, who are keen to ensure that these severely ill children continue to gain access to their cannabis medicine. How can the Government continue to deny the medical value of cannabis?
The evidence for cannabis as a treatment for chronic pain, including neuropathic pain, is examined in detail in the Barnes report. One of the great benefits of cannabis compared with other drugs seems to be that the side effects are often very much milder or even negligible, in marked contrast to the many side effects of prescribed pain-relieving medicines. Cannabis can also help patients whose pain does not respond to prescribed medications at all. The Barnes report considers the pain-relieving qualities of smoked herbal cannabis, as well as the synthetic versions. Of course, smoked herbal cannabis is a much safer option than the synthetic variants. In studies where patients smoked cannabis with 8% to 9.4% of THC, it reduced pain significantly in 46% of them, with mild side-effects. Any doctor will know that that is a pretty good result.
I hope that others will talk about the growing number of countries and US states which already provide legal access to cannabis for medical purposes under regulations. If cannabis has no medical value, maybe the Minister can explain why Germany is passing a government-backed law legalising cannabis for medical use for 60 conditions. Professor Barnes pointed to only four conditions where he said there was good evidence. I would say that he was being very modest. How can the UK Government sustain that discredited position?
Our APPG inquiry into medicinal cannabis includes a recommendation that the UK adopt a system of regulation based upon the German model. This would involve rescheduling cannabis to Schedule 4, thus recognising its medicinal value, and introducing a system of licensing for producers and suppliers, with availability of cannabis through doctors’ prescriptions. I ask the Minister to take this proposal forward in the light of the new UN support for an evidence-based drug policy and the new Barnes report, which shows that we have that evidence.
Lord Crickhowell (Con)
My Lords, first, I thank the noble Baroness, Lady Meacher, for giving us the opportunity to debate this important subject and for her clear and comprehensive introduction.
I go to Mexico every year and have done so for many years. Perhaps that is why I have come to believe that the so-called war on drugs has been a catastrophic mistake. It has led in Mexico and elsewhere in the Americas to vicious gang warfare, murder, violence against officials, corruption and the accumulation of vast wealth by those involved, and it has done little to reduce the consumption of drugs worldwide. That is one reason why I have been a warm supporter of the APPG for Drug Policy Reform and its demand for evidence-based action.
We are holding this debate at a time when a rapidly growing number of countries are moving to a much wider legalisation of cannabis consumption than we are discussing this evening. During the recent United States elections, there were referendums that added four new states to the 24 that had already decided to legalise marijuana consumption. In this country, a committee in the other place has recommended that cannabis should be legalised. Its report refers to the UK’s “dark ages” drugs policy. We are arguing tonight for the legalisation of only medical cannabis, and this debate comes a few days after the British Medical Journal urged doctors to push for legalisation, stating that doctors have “ethical responsibilities” to campaign for change.
We have already heard of the hugely important change in UN policy and that at the United Nations General Assembly Special Session held in April, both the US and the UN leadership rejected a moralistic and prohibitionist approach and called for all the proposed changes contained in the admirable report of the all-party group.
I add only one other thought. There is a great deal of evidence that, despite the present tight regulatory system, a great many people are using cannabis to relieve pain and to treat their own particular illnesses, and they are doing so in the knowledge that they are breaking the law. The noble Baroness referred to that. My daughter, Sophie Sabbage, in her book The Cancer Whisperer, describes a similar situation among those suffering from cancer who have not been fortunate, as I have been, to have their cancer cured by amazing surgery. She refers to treatments she has had in Mexico, reinforcing the orthodox treatments she had in this country. She writes that,
“it is so damn difficult, and in some cases impossible, to access those cancer protocols here in the UK … Interestingly I am now plugged into a semi-underground network through which I have been able to access some treatments in the UK, but it isn’t easy, I have met fully qualified GPs as well as highly experienced health practitioners who have to fly under the radar in order to provide these services”.
I am sure the same thing is happening with cannabis. We need the Government to move to a regime where it is not necessary to fly under the radar.
Lord Rea (Lab)
My Lords, I congratulate my noble friend Lady Meacher on keeping drugs and the law on the agenda—not only in this House but on the world stage. She has done much to encourage other countries and the World Health Organization to revisit the UN conventions on narcotics, as she has told us. Until the last few years these were regarded as virtually set in concrete in a prohibitionist mode. I speak of her as my noble friend because on this issue, her position is closer to mine than is that of my party.
My credentials for joining this short debate are, first, that for 30 years I practised as a GP in inner London, which has higher than average drug abuse levels, and, secondly, that 18 years ago I was a member of your Lordships’ Science and Technology Committee, which was chaired by Lord Perry—Walter Perry—and looked into the medicinal use of cannabis. Now, that has been superseded by the Barnes report, mentioned by the noble Baroness. Things have certainly moved on internationally since our committee reported, but there has been little fundamental change in the UK, though several other countries have made cannabis—and other drugs—legally more available.
The Select Committee took careful account of the composition of cannabis and its effects, both beneficial and harmful. One important finding was that,
“no-one has ever died as a direct and immediate consequence of recreational or medical use”.
In other words, it is a very safe drug. It can, however, have ill effects, one being that, rarely, it can precipitate psychosis. Our report considered that,
“there is little evidence that cannabis use can precipitate schizophrenia or other mental illness in those not already predisposed to it”.
It is sometimes difficult to say which came first: cannabis use or psychosis. Heavy use, of course, may slow cognitive processes and impair concentration, and therefore driving, and heavy users may suffer academically. But short-term use appears to have no lasting ill effects. Some adverse effects, occasionally lung cancer, are due to the products of combustion in inhaled smoke, which frequently include tobacco.
Since ancient times, preparations containing cannabis have been used therapeutically for a number of symptoms. In particular, we noted how effective it sometimes is in relieving the painful spasms associated with multiple sclerosis, but it is not a cure for MS or any other illness.
To avoid the ill effects of inhaled cannabis a pure extract has been incorporated by GW Pharmaceuticals into an oral aerosol spray, Sativex, which now has a product licence. However, it is so expensive that NICE has disallowed it for prescription. Vaporisers for cannabis are available in the USA. The price is too high, but it is coming down.
The fact that there are some undesirable effects of this drug, and all other drugs, strengthens the case for these products to be decriminalised and made available on prescription or through regulated, licensed outlets. Their effects could then be monitored more closely and the strength and purity of the product be subject to scrutiny before a licence is granted. However, as things stand, and as the noble Baroness said, cannabis will continue to be used illegally for therapeutic as well as recreational use in this country. It is illogical that patients should have to break the law in the UK to gain relief, when in several other countries they do not.
Baroness Walmsley (LD)
My Lords, I would like first to thank the noble Baroness, Lady Meacher, for the dedication she has shown to revealing and reversing the completely illogical, indeed cruel, position we have in the UK on drugs policy. I will focus my remarks on medicinal cannabis. I attended every meeting of the noble Baroness’s inquiry into this. To me, the evidence in favour of a change in the law is overwhelming in terms of compassion, economics, public order, scientific progress and indeed logic. As the UN says, drugs are a health matter.
On the same day as the presidential election, two additional US states voted to legalise the medicinal use of cannabis. When we wrote our inquiry report, 24 states, plus DC and Guam, allowed such legal use under certain circumstances. Now, it is the majority of states. I read the words of an attorney from Florida who had been campaigning for the change. He said:
“Compassion is coming. This November, Florida will pass this law and hundreds of thousands of sick and suffering people will see relief. What Tallahassee politicians refused to do, the people will do together in this election”.
And they did. I suspect that the same would happen here in the UK if the question were put to the vote.
While I was listening to the evidence during the inquiry, two things struck me particularly: the evidence from patients, and the scientific and medical evidence of benefits to sufferers of many different diseases. Nobody who heard the testimony of these patients and medical professionals could accept the positioning of cannabis in Schedule 1 among drugs that are very harmful and have no medicinal use.
One patient, having explained her symptoms and described how cannabis helped her, showed us two pages of A4 paper on which she had listed the conventional medicines she had been prescribed by doctors, along with the unacceptable side-effects she had suffered. It was a horrific list. Nobody reading it could have doubted that conventional medical services had done their best to help her, but nobody reading it would have tolerated the side-effects any more than she did.
Determined not to break the law, that patient had to get her GP’s referral, go to the Netherlands several times a year, see a doctor there and get a prescription, collect the medicine, and make prior arrangements with Her Majesty’s customs to ensure that she would not be arrested when bringing her medicine back—perfectly legally—into this country. This whole procedure cost her thousands of pounds and enormous effort—and all because successive Governments have resisted the overwhelming evidence that the benefits of laying down a legal framework for the provision of cannabis medicines vastly overtake any small perceived harms.
I hope that the Minister will not tell us that to raise this issue within government is above her pay grade. She is in a much more powerful position than I am. She is inside government and trusted by her colleagues. If she went back to her department and said, “Look here, we need to talk to the Department of Health about this and we need to do something”, she would make her name as someone with an open mind who acts on the evidence. She would also be thanked by up to a million people who might benefit. Otherwise, perfectly law-abiding sick people are having to risk their reputation and their liberty by breaking the law in order to alleviate their pain. That cannot be right.
What is it about the UK that is different from 28 US states, Canada, Israel, Austria, Belgium, the Netherlands, Romania, Portugal, Finland, Italy, Switzerland, Spain, Australia, Chile, Colombia, Uruguay and, most recently, Germany? Why are we afraid of this medicine, which was used legally until the 1940s? The scheduling of cannabis medicines in Schedule 1, while Sativex is in Schedule 4, is a complete nonsense and contradictory, and most people know it. The Royal Society for Public Health put its finger on it in a recent report:
“Given the poor correlation between drug harm and classification, the current system risks sending misleading signals to the public about relative harm, and this may be contributing to avoidable risk”.
Cannabis is a valuable medicine. Its legal use is a health matter for up to a million people and it should be treated as such. Will the Minister please go and talk to the Home Secretary and tell her the facts?
Baroness Stern (CB)
My Lords, first of all I thank my noble friend Lady Meacher for initiating this debate and also for her outstanding and very effective contribution over the past five years to the movement for reform of global drug policy. She is very well known on the world stage for her efforts and it is gratifying that a Member of your Lordships’ House has been so very prominent. I too must declare an interest as an officer of the All-Party Parliamentary Group for Drug Policy Reform, and in that capacity I want to express my total support for the legalisation of cannabis for medical use.
In my brief remarks, I would like to concentrate on the implications of the conclusions of the UN special session for UK foreign and development policy and for the protection of human rights worldwide. The UN special session concluded that national drug policies should,
“fully respect all human rights and fundamental freedoms”.
It proposed that the balance between law enforcement and harm reduction should prioritise harm reduction.
I therefore ask the Minister—I appreciate that she is very overworked and will understand if she prefers to write to me rather than reply in the debate—to assure the House that Her Majesty’s Government never provide support, either directly or through multilateral agencies, to anti-narcotics law enforcement in countries such as Pakistan and Iran, where those convicted of drug trafficking face the death penalty. In the past, the FCO has made great efforts to ensure that United Kingdom money is not used when it might lead to a sentence of death. There was a Foreign Office document called The Death Penalty: Policy on UK Justice Assistance, which provided guidance to those making decisions on how funding from the UK could be used. Does this document still exist? Has it been amended recently? Does it still guide those funding decisions?
My second point is about the impact of the conclusions of the special session on the policies of DfID and the implementation of the sustainable development goals. To quote the United Nations development programme,
“in many parts of the world, law enforcement responses to drug-related crime have created or exacerbated poverty, impeded sustainable development”.
The description of Mexico given by the noble Lord, Lord Crickhowell, illustrates this vividly and accurately. At the special session of the United Nations in April, the Minister for the Cabinet Office, Oliver Letwin, said:
“We must ensure that our work is fully integrated with the Global Goals because the 2030 Development Agenda and our efforts to address drug harms are complementary and mutually reinforcing”.
How is this being implemented? Can the Minister tell the House whether DfID is planning, for instance, in the countries where it works to put resources into policies such as harm-reduction measures and treatment as part of its support for the sustainable development goals?
Lord Mancroft (Con)
My Lords, I thank the noble Baroness not only for introducing this debate but for her impeccable timing in doing so when we are waiting with bated breath for the Government’s revised drug strategy to be published.
I hope your Lordships will forgive me if I start my remarks by using the same words that I did when finishing our last debate on this subject, which is that it is uniquely not party political. In views shared across the whole House, there is broad agreement on the objectives of drug policy; where we differ is on how to achieve those objectives and how to balance the need to control supply with the better target of trying to reduce demand.
There have been two significant changes since we last debated this subject. First, the overwhelming evidence now shows us that the attempts to control supply have failed. We have been saying this for some years, but there is now hard evidence that they have failed, particularly in relation to cannabis. Secondly, this view is now the pre-eminent view. Whereas it was the view of the minority in the past few years, it is now, following the recent United Nations meeting in New York, the view of most people throughout the world. As has been said already, 28 American states, including California, and a number of European states are moving in the same direction—a direction which has been indicated by the Royal Society for Public Health, as the noble Baroness, Lady Walmsley, said earlier. An all-party report today in the House of Commons also indicated the same direction.
All these reports are saying that we do not want devolution but evolution of our policy based on evidence. The All-Party Parliamentary Group for Drug Policy Reform report, which has been referred to by many speakers, produces that strong, scientifically supported evidence. What steps are Her Majesty’s Government taking towards the medicinal use of cannabis for the conditions we have already heard about, such as chronic pain, arthritis, insomnia, fibromyalgia?
This is not a movement that requires a matter of principle to be changed. Following representations from the royal colleges and a number of doctors, the Home Office Minister with responsibility for drug policy in 1953 told your Lordships that heroin was a uniquely effective pain killer for those with terminal cancer and that, as a consequence, Her Majesty’s Government had decided to change their policy and that heroin was not going to be prohibited in the United Kingdom but was to be a controlled drug, as it is now, because it is the most effective drug for those particular conditions. The Minister in those days could not have known anything about the heroin addiction that was going to sweep this country over the next 40 or 50 years, but there has been little seepage of legal heroin into the black market. The Minister said, “It is both uncivilised and cruel for the Government to deny patients a drug that uniquely alleviates their suffering”. My father was the Minister making that statement. I agree with what he said then and, if he was here now, he would agree with it too in respect of cannabis.
Lord Maclennan of Rogart (LD)
My Lords, I support the case of the noble Baroness, Lady Meacher, for legalising cannabis. It is a drug that helps and does not seem to harm. She has made the case very strongly. I note that the British Medical Journal has also called for the legalisation of illicit drugs. It is a source of expertise and is evidence that drugs can be helpful to those needing pain killers and could help stop illegalities. The international trade in drugs is colossal, particularly for heroin and cocaine. The current ubiquity of drugs in this country is a function of their illegal status.
I wish to draw attention to what is happening in Glasgow, where it is proposed that fixed rooms should be set up to enable people to inject under supervision, particularly heroin and morphine. Drug-related deaths in Glasgow so far this year amount to 345—quadruple the number of decades ago.
The nature of drug addiction is causing the international trade in drugs to be colossal. The ubiquity of drugs and the corruption and violence which illegality confers should be eliminated from society. The illegality of drug addiction spreads infection, and injecting equipment left in public areas is dangerous. They should be legalised.
Max Rendall wrote a book in 2011 called Legalize: The Only Way to Combat Drugs, in which he expresses the view that legalised drugs could be regulated and controlled. I wish to recommend this book to Ministers. The author is very knowledgeable about the problems in this area.
I am grateful to the noble Baroness, Lady Meacher, for bringing forward this debate.
Lord Norton of Louth (Con)
My Lords, I, too, congratulate the noble Baroness, Lady Meacher, on raising the question and I declare an interest as an officer of the all-party group. It is five years since I tabled a Question for Short Debate asking what consideration the Government had given to establishing a royal commission on the law governing drug use and possession. The timing was deliberate, coming 40 years after the UN Single Convention on Narcotic Drugs was promulgated and the Misuse of Drugs Act was passed.
I made two points by way of introduction. First, I stressed that I believe strongly in having evidence-based policy. As I said then, I am appalled at how much legislation is brought forward more on the basis of hope than evidence. Secondly, the best way to affect attitudes and behaviour is through education and persuasion. I repeat what I said then:
“The law alone cannot achieve change, and indeed it can be dangerous to rest on the law in place of education”.—[Official Report, 9/3/11; col. 1673.]
I drew the distinction between drug use and prohibition. Prohibition can have and has had appalling consequences—a point made powerfully by my noble friend Lord Crickhowell. I advocated a commission or some other body of inquiry to examine the facts and to undertake an evidence-based inquiry.
The Minister replying to my question on that occasion said that the subject was one that excites disagreement. It may well do, but the only person who disagreed with me in the debate was the Minister. Everyone else who spoke, on all sides of the House, supported the case for review. In effect, what we were arguing for then is encapsulated in the call now by UN officials. It is crucial that the Government should recognise the problem as one of health, that we start from the problem of drug use and evaluate the evidence on the way to tackle the problem.
The danger is that the Government adopt a mindset that is resistant to change and, as a result of that mindset, are reluctant to consider dispassionately the evidence that does exist and are reluctant to commission evidence to help identify what needs to be done. Part of the reluctance appears to be a fear of public opinion. I think that fear is overblown and indeed not necessarily evidence based—but, in any event, what we need is what has been shown by some Governments elsewhere, not least on the American continent, and that is leadership to address what is a very real global and national problem.
I look forward to my noble friend Lady Williams confirming that the Government accept the need for evidence-based policy, for being as transparent as possible in sharing that evidence, and to hearing what the Government plan to do to acquire, evaluate and act on that evidence.
Lord Paddick (LD)
My Lords, I thank the noble Baroness, Lady Meacher, for this debate. Some 15 years ago, when I was a police commander, I suggested that the police should not arrest people for having small amounts of cannabis for personal use. Now, 15 years later, some things have changed. Police officers can now issue a fixed penalty for possession of cannabis or simply issue a warning on the street—effectively decriminalising possession for personal use.
When this House debated the Psychoactive Substances Bill, I moved an amendment to decriminalise possession of small amounts of all drugs for personal use, because in that legislation the Government did not seek to criminalise possession of small amounts of new psychoactive substances—“legal highs”, as they were known. Many of these new psychoactive substances are more dangerous than the drugs listed in the Misuse of Drugs Act, so this made perfect sense to us. Others did not agree—but, as the noble Baroness, Lady Meacher, mentioned, another change from 15 years ago is that we now have a long-running example of what happens when possession of small amounts of all drugs for personal use is decriminalised, and when drugs are treated primarily as a health issue rather than a criminal justice issue.
It is very difficult to establish causal links between decriminalisation and what has happened in Portugal, but the reality is that Portugal’s drug situation has improved significantly. HIV infections and drug-related deaths have decreased, while the dramatic rise in use feared by some has failed to materialise. Among Portuguese adults, there are three drug overdose deaths for every 1 million citizens compared with 44.6 per million in the UK. The use of legal highs is lower in Portugal than in any of the other countries for which reliable data exist.
So why, when the Liberal Democrats tried to decriminalise possession of small amounts of all drugs, did the Tory Government and the Labour Party oppose the move? Another thing I said back in 2002 was:
“Not being cynical but politicians always have this dilemma: do the right thing but if it’s not popular and you lose votes, you lose power and then you cannot do anything. Do the popular thing, win votes and keep power and you could end up doing the wrong thing because there are more votes in it. Does that mean politicians make decisions on the basis of how many votes it will win/lose them or on the basis that it is clearly the right thing to do (or only when the two coincide)?”.
I guess that some things have not changed. Can the Minister please consider asking her colleagues in Government to base drugs policy on evidence rather than prejudice and to treat drugs as primarily a health issue, not a criminal one?
Lord Kennedy of Southwark (Lab)
My Lords, like other noble Lords, I start by thanking the noble Baroness, Lady Meacher, for bringing this Question for Short Debate to your Lordships’ House. In the time allowed it is not possible to cover all the points I would like to, or to respond to all the points made by noble Lords. I know that other noble Lords will be with me on this: I hope that for all government policy decisions the starting point is a reasoned, evidential base at the heart of what the Government promote as a policy. The noble Lord, Lord Paddick, referred to that, but the fact is that all three parties have failed that test over many years.
The Question before us concerns evidenced-based policies to promote public health and to place health rather than prohibition at the heart of our policies on drugs. Of course, we have two legal recreational drugs that can cause serious problems, namely tobacco and alcohol. I am fully aware of the debate about the legalisation of cannabis and the contention that it is less harmful than the two legal drugs I mentioned. My position is that I would not legalise cannabis for general use. It may well be less harmful than alcohol or tobacco but that in itself is not a good enough reason.
I do, though, see the point that the Government should give careful consideration to the case for the use of cannabis or cannabis products as a medicine. As the noble Baroness, Lady Meacher, said, where there is medical evidence, the Government should consider the case for trials and consider rescheduling cannabis from Schedule 1 to Schedule 4. These trials would be with named patients only. There should be further research seeking to establish for which ailments cannabis could be an effective and inexpensive treatment.
With the passing into law of the Psychoactive Substances Act 2016, there is no criminal penalty for the personal possession or use of new psychoactive substances, such as the synthetic cannabinoid known as Spice. There has been considerable press coverage of the harmful effects of this product, and I recall a debate in the Moses Room with the noble Baroness, Lady Williams of Trafford, when this very subject came up. There is no criminal penalty for possession of this product, but it is still illegal to produce and supply the drug—criminal penalties still apply. There seems to me some inconsistency between the Government’s policy on Spice, a synthetic cannabinoid, and that on cannabis itself. The Government should look at that carefully and urgently to get both products on the same footing. Maybe the noble Baroness can address that tonight. If she cannot, maybe she can write to me after the debate.
I turn to some of the points raised by noble Lords. I accept, as mentioned by the noble Lord, Lord Crickhowell, and my noble friend Lord Rea, that many people in the UK are using cannabis for the relief of pain and in doing so are breaking the law. The noble Lord, Lord Mancroft, made an important point in saying that what we want is not revolution but evolution on an evidential base.
The noble Lord, Lord Maclennan of Rogart, addressed the serious issue of drugs in Glasgow. It will be important to evidentially assess the programmes and the results of work being done to deal with the serious problems there.
The noble Lord, Lord Norton of Louth, made an important point that the Government should review these matters on the basis of evidence and not get themselves stuck and be unable or unwilling to move.
I thank the noble Baroness, Lady Meacher, for bringing this Question forward for debate and I look forward to the Minister’s response.
Lord Mancroft
If the Government were to move in the direction that the noble Lord talked about, would Her Majesty’s Opposition support or oppose the Government? That would make a huge difference to the Government’s position.
Lord Kennedy of Southwark
If the noble Baroness were to come forward tonight and suggest what I just described, I hope we would support them.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, that is good news, because somebody will agree with me tonight, I hope. I thank the noble Baroness, Lady Meacher, for securing the debate. I acknowledge the extensive work she has done in this area. Indeed, I thank all noble Lords, who have contributed very thoughtfully to the debate.
The Government used the UN General Assembly Special Session on Drugs to share our experience of delivering an evidence-based, balanced drug strategy within the UN drug conventions, and to strengthen international co-operation in tackling drug harms. The outcome document of the special session combines ambitious goals with operational recommendations that all Governments should consider implementing. The UK Government secured particularly helpful recommendations on our priorities on new psychoactive substances, proportionate criminal justice and comprehensive recovery.
We have heard that United Nations officials at the special session called for evidence-based policies that promote public health. These calls are fully in line with the Government’s approach. The noble Lord, Lord Kennedy, can rest easy about agreeing with the Government’s position. The Government are taking balanced action to prevent the harms caused by drug use. This includes educating young people about the risks, helping dependent individuals through treatment and supporting law enforcement in tackling the illicit trade. We are currently developing a new drugs strategy, working across government and with key partners, to identify what further steps we can take to tackle this issue.
We continue to take a broad approach to prevention, supporting investment in a range of programmes that have a positive impact on young people and adults. These programmes give them the confidence, resilience and risk-management skills to resist drug misuse. This includes the resilience-building resources available online, such as FRANK and advice services, as well as toolkits from Public Health England to support local responses.
Tough enforcement is a fundamental part of our drugs strategy, with action to restrict drug supply and reduce drug-related crime a key priority for law enforcement. We are tackling drug dealing on our streets, strengthening the border and combating the international flow of drugs to the UK to disrupt drug trafficking upstream.
Recovery remains at the heart of our approach. More adults are leaving treatment successfully compared to 2009-10. That can be only a good thing. The average waiting time to access treatment remains at three days. However, we recognise there is still further to go.
Drug treatment is invaluable to individuals, their families and the communities in which they live. It is vital that there is access to a range of options that can be tailored to individual need to provide the best possible chances of recovery. Such treatment should be provided alongside the wider recovery support essential to achieving and sustaining recovery, which includes access to training and employment, stable housing, and wider health services.
The Government are taking a leading role on drugs policy at the international level. Steering international action to strengthen our domestic response will be a key element of the new drugs strategy. The Government used the special session to strengthen our global leadership in the international response to new psychoactive substances. Our comprehensive action on this issue in recent years has resulted in, first, the formation of the UK-led International Action Group on New Psychoactive Substances, a group of more than 30 Governments and international organisations which drives the international response; secondly, in the establishment of a global early warning system at the United Nations; and, thirdly, in the first two tranches of international controls on some of the most harmful new psychoactive substances. I will write to the noble Lord, Lord Kennedy, on the Spice/cannabis differentiation, because I will not have a chance to respond on that point tonight. We will continue to press the international community to implement the recommendations of the special session outcome document, including on new psychoactive substances. They include enhancing the global collection of data on the health harms that such substances pose.
My noble friend Lord Crickhowell, the noble Baroness, Lady Meacher, and the noble Lord, Lord Maclennan, and others spoke about alternative drugs policies in other countries. We have heard this evening about some great successes in other countries which implemented policies that are not part of this Government’s approach, but we must be cautious when comparing the evidence between countries. Historical patterns of drug use, cultural attitudes, and policy and operational responses to drug misuse in a country will all affect levels of use and harm. Moreover, different countries have different means of collecting data, so it is often difficult to make direct comparisons.
Almost every noble Lord mentioned medicinal cannabis. I used to work with people who had multiple sclerosis—it was right at the beginning of the debate and what led to the development of Sativex. We recognise that people with chronic pain and debilitating illnesses are looking to alleviate their symptoms. It is important that medicines are trialled thoroughly to ensure they meet rigorous standards before being placed on the market and so that doctors and patients are sure of their efficacy and safety. The Misuse of Drugs Act 1971 enables the availability of controlled drugs which have recognised medicinal uses in UK healthcare, of which there are many. A clear regime is in place, administered by the Medicines and Healthcare Products Regulatory Agency—mentioned by the noble Baroness, Lady Meacher. This enables medicines including those containing controlled drugs such as cannabis to be developed, licensed and made available for medicinal use by patients in the UK. For example, Sativex has been granted market authorisation in the UK by the MHRA for the treatment of spasticity due to multiple sclerosis. It was rigorously tested for its safety and efficacy before receiving approval. The Medicines and Healthcare Products Regulatory Agency is open to considering marketing approval applications for other medicinal cannabis products should they be developed. As happened in the case of Sativex, the Home Office will consider issuing a licence to enable trials of any new medicine, provided that it complies with approved ethical criteria. The Government’s view is that cannabis should be subject to the same regulatory framework as applies to all medicines in the UK—I do not think that noble Lords demurred from that premise. To do otherwise would amount to circumvention of a clearly established regime.
My noble friend Lord Mancroft talked about decriminalising drugs. I am afraid to say to him that we have no intention of doing that. They are illegal because scientific and medical analysis has shown that they are harmful to human health. A number of noble Lords cited decriminalisation in Portugal. Successes cannot be attributed to decriminalisation alone, but I recognise them. At around the same time as implementing decriminalisation, Portugal made changes to its approach to drugs misuse, including widespread implementation of harm reduction programmes and investment in drug treatment. It is extremely challenging to disentangle the effects of decriminalisation from those of these wider changes.
The noble Baroness, Lady Meacher, and the noble Lord, Lord Maclennan, talked about other approaches, for example in Switzerland and Glasgow, and the heroin-assisted treatment. There is evidence from the UK and other countries that supervised injections of diamorphine or pharmaceutical heroin in a medical environment as part of a structured treatment plan can keep patients in treatment and out of criminal behaviour. In addition to cutting crime, the treatment also drastically reduces the risk of overdose. The Government’s commitment to that evidence is set out in both the 2010 drugs strategy and the 2016 modern crime prevention strategy.
We do not plan to change the law to enable drug consumption rooms to be established and operate in the UK because while there is international evidence that they can be effective in addressing the problems of public nuisance and reducing health risks in a very specific set of circumstances where open drug scenes presented a significant risk to public health, this is a complex and legally divisive solution to a problem that we do not have in the UK.
The noble Baroness, Lady Walmsley, talked about Schedule 1 of the Misuse of Drugs Regulations versus Schedule 4. Cannabis is controlled as a class B drug under the Misuse of Drugs Act 1971 and, given that it currently has no recognised medicinal benefits in the UK, a Schedule 1 drug under the Misuse of Drugs Regulations 2001. We recognise the value of important scientific research and the Home Office licensing regime allows that to take place in the appropriate controlled environment.
I am running out of time and will not be able to answer every single noble Lord’s question. I will finish with the noble Lord, Lord Kennedy, because it is a quick answer. On the Spice question, there may be no possession offence under the Psychoactive Substances Act as the harms of such substances may not be fully assessed. However, once assessed and if proven harmful, substances will be controlled under the Misuse of Drugs Act, which includes an offence for possession.
I thank all noble Lords for their contributions. I have not had time to answer everyone so I will do so in writing.
Pension Schemes Bill [HL]
Monday 21st November 2016
(8 years, 1 month ago)
Lords ChamberRead Full debate Pension Schemes Act 2017 View all Pension Schemes Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 65-I(Rev) Revised marshalled list for Committee (PDF, 113KB) - (18 Nov 2016)
Baroness Drake
Baroness Drake (Lab)
My Lords, I will also speak to other amendments in this group. This amendment would require a continuity strategy should a triggering event occur to set a cap on the charges that can be applied to members’ savings. Amendment 42 sets a similar requirement on an implementation strategy when a triggering event has occurred, and Amendments 28, 39 and 54 introduce an explicit provision that members’ funds cannot be used in whole or in part to pay for the costs of any wind-up of a failing master trust. That provision is to apply to the continuity strategy when a transfer-out and wind-up is triggered, and when an unauthorised master trust, on or after 20 October 2016, is subject to a wind-up. Indeed, all the amendments in this group in my name and that of my noble friend Lord McKenzie are probing to test the strength of the scheme members’ protection when a master trust fails.
The key function of the Bill in addressing weaknesses in the regulation of master trusts is to protect members from bearing increased—indeed, potentially unlimited—costs, so draining their savings pots when a master trust fails. The Bill introduces a prohibition provision, Clause 33, to protect members from funding increased costs in the event of a scheme failure. The prohibition is on both master trusts and the receiving scheme increasing charges, introducing new charges or charging a member for transfer during a specific period in which the scheme is at risk.
However, Clause 33 does not make it clear how and on what premise the charges it will be prohibited from exceeding will be set or determined in the first instance. To use my own simple language, members are protected by a prohibition from the imposition of additional charges above a charges baseline, either by the master trust or the receiving scheme on transfer in a triggering event, but it is not at all clear what that baseline is, how it is set or, indeed, if it is fair value. The amendments in this group seek a cap on the charges that can be applied to members’ savings should a scheme fail, underpinned by the provision that members’ funds cannot be used in whole or in part to pay for the costs of wind-up and transfer occurring as a result of a trust failing.
The parameters and restrictions on the use of members’ funds to meet the cost when a master trust fails need to be set out more clearly in the Bill. Such a restriction is too fundamental to leave to regulations and/or the Pensions Regulator’s discretion. To illustrate my point, the protection for members against meeting additional charges on wind-up and transfer in a triggering event are referenced in three main clauses. Clause 12 provides for a master trust continuity strategy, which is a requirement of authorisation, to set out how members’ interests will be protected if a triggering event occurs, including the level of charges that can apply. Clause 27 requires a master trust to submit an implementation strategy, which must set out how members’ interests will be protected when a trigger event actually occurs, including the levels of administration charges that will apply. Clause 33 sets out how the prohibition on increasing member administration charges will operate during the trigger event period, and provides that the Secretary of State may make regulations about,
“how levels of administration charges are to be calculated”,
and,
“how to determine … the purposes for which charges are increased or imposed”.
There is plenty of process here but nothing in Clauses 12, 27 or 33 informs what the actual quantitative level of member protection will be against increased charges on scheme failure; nor does the Bill say whether members will be protected from bearing, or will have to bear, any wind-up or transfer costs. Indeed, the level of protection for the member against increased charges on scheme failure can be revisited on three important occasions under different provisions in the Bill relating to triggering events. What is the Government’s policy on the considerations that will be taken into account when the Pensions Regulator authorises the level of administrative charges to be borne by the member on scheme failure under Clauses 12 and 24 and Schedule 2? Are there any circumstances in which some of the administration charges or transfer costs arising as a result of a triggering event can be passed on to the member, and what will be the limit on the charges that can be passed on to them?
In the current drafting, there seems to be no join-up with the Occupational Pension Schemes (Charges and Governance) Regulations 2015, which incorporate the value-for-money assessment. There is nothing in the Bill to cover what happens if a scheme fails to comply with these regulations. Would it impact on the authorisation process or lead to the withdrawal of authorisation? It may be that these points will be covered off in new regulations, but it is unclear how regulations made under the powers in the Bill would knit together with the existing charges and governance regulations.
The regulations supporting Clause 12 on the continuity strategy, which sets out a requirement about the level of charges that will apply in a triggering event, are subject to the negative resolution procedure. I am conscious that we are bouncing this ball on negative and affirmative resolution procedure but, again, there is a prohibition on increasing charges and various incidents where the charges that cannot be exceeded are set out. Yet we have no sight of the draft regulations, so we do not know the Government’s thinking on this. Again, this is an appeal as to why, in the first instance, the regulations should not be subject to the affirmative procedure.
This is an important matter that is at the heart of the level of protection the Bill seeks to provide to members. It is one thing to say that there is a protection, but understanding what that protection is in quantitative and real terms is important. Because we have not seen the draft regulations and do not know the policy intention, that is difficult to assess. That is why Amendment 30 provides for the first regulations to be subject to the affirmative resolution procedure. Given the importance of this matter and the lack of detail before the Committee, why is it not appropriate to apply that procedure in the first instance?
Lord Flight (Con)
My Lords, Amendment 29 and 40 are amendments to opposition Amendments 28 and 39. They would both add after “members’ funds”,
“, beyond the normal capped pension scheme charges,”.
The point is really very simple: without this change, the opposition amendments would have the undesirable —and I think unintended—effect of hampering the orderly exit of the sponsor. I am sure that is not the intention behind them.
The Minister of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, Amendment 27 would require information on any charge cap to be included in a master trust’s continuity strategy. I am grateful to the noble Baroness, Lady Drake, for making it clear that this is a series of probing amendments. I think it makes sense for me to go through what the process is on the continuity strategy.
One of the criteria for a master trust to be authorised by the Pensions Regulator is that it must have an adequate continuity strategy. That strategy is then kept under review on an ongoing basis. A continuity strategy is a document that addresses how the interests of the scheme members will be protected if, in the future, the scheme experiences a triggering event—an event that could put the scheme at risk. The strategy must include a section on the scheme’s levels of administration charges in a manner that will be specified in regulations in due course, as well as any such other information as may be set out in those regulations. Our intention is that the regulations will set out the detail and manner of the information to be provided on the administration charges in the strategy. We want schemes to provide information such as the charge levels per arrangement or fund, any discounts they apply to charge levels and on what basis these discounts are made.
Baroness Drake
I thank the Minister for his detailed reply. I should be honest and say that I do not think that I have absorbed all the detail that he presented, and I will read the Hansard in detail to follow it through. In my defence, as one would expect in preparation for a Bill such as this, I spoke to pension lawyers, and there was a clear view that the parameters and restrictions on the use of members’ funds to meet the costs when a master trust fails were unclear and needed to be set out more clearly, so I am not alone in not understanding exactly how the prohibition clause works, and therefore what quality of protection is afforded. I simply say that others are unclear what the Bill provides.
I took one or two things from what the Minister said. The information charges provided on the implementation strategy are key. They are the driver against which it is assessed. It is on additional charges that one applies the prohibition; it identifies the charges in the implementation strategy which it is prohibited from exceeding. That needs some reflection.
I was a little confused by one point in the Minister’s response. He referred to default funds. Of course, the cap on default funds is 75 basis points, but the nature of his reply was that if the scheme was running a default fund on 50 basis points, one could rise to the cap to fund the administration charges. Reassurance on that point would be really helpful.
Lord Freud
I hope that I made it absolutely clear that we will look back at what was actually being charged to ensure that it was an annual effective rate of 0.5%. There is no space to try to get the next 0.25% once a triggering event has happened. You are left at the level at which you have been charging historically, and there will be a way of assessing that rate, which means that both the original amendment and my noble friend’s amendment to it fall away, because there is another method of maintaining the level of charges.
Baroness Drake
I thank the Minister for that clarity; that is quite reassuring in respect of one point, but I think that my noble friend and I will probably want to reflect on the detail of the Minister’s statement. It is also helpful that he has confirmed that the implementation strategy information charges are key in deciding the charges and the prohibition that applies. We will reflect on what is in Hansard, but I beg leave to withdraw my amendment.
The Deputy Chairman of Committees (Viscount Ullswater) (Con)
I cannot call Amendment 29, as it is an amendment to Amendment 28.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, I beg to move Amendment 32 and shall speak also to Amendments 33 and 34. I shall be brief. We have dealt earlier with amendments relating to communicating and engaging with members. These amendments deal specifically with the requirements to ensure that an annual statement must be submitted to the Pensions Regulator, together with the scheme accounts. The annual statement for these purposes is that required by the 2015 DC regulations, with particular reference to relevant multi-employer schemes.
The requirement to produce an annual statement—the chair’s annual statement—although supported by the trustee board, is part of the Pensions Regulator’s DC code. The clause is designed to ensure that the Pensions Regulator has sufficient information about the master trust scheme to know when a scheme should be required to submit a supervisory return. I beg to move.
Lord Young of Cookham (Con)
My Lords, after some five hours of debate there is now a glimmer of hope for one of the amendments moved by the noble Lord, Lord McKenzie. Its intention appears to require the trustees of an authorised master trust scheme to submit the scheme’s annual governance statement to the Pensions Regulator each year.
The annual governance statement, sometimes known as the chairman’s statement, which trustees of most money-purchase occupational pension schemes are required to produce, provides information on the scheme’s compliance with governance measures such as the charge cap. It sets out, among other things, the level of charges in the scheme and the trustees’ assessment of the extent to which these represent good value for members.
I understand why this amendment may have been tabled, and I agree that it is important for schemes to operate transparently and demonstrate that they represent good value for money for members. This information would indeed be valuable to the regulator in its assessment of the master trust against the authorisation criteria. However, I have reservations about whether the approach, as drafted, represents the best way of achieving this. From a drafting perspective, there is a risk in making a provision of this kind in primary legislation which relies on a reference to a provision in regulations—in this case the Occupational Pension Schemes (Charges and Governance) Regulations 2015. Should those particular regulations be amended in the future—for example, so that the statement is no longer required under the same specific provision—there is a risk that this provision of the Bill would no longer have the desired effect.
A safer approach is to make use of the existing provision in the Bill, which enables regulations to specify that the regulator may require that further information is submitted to it. That provision is in Clause 15(2). I can confirm that it is intended that the provision of the annual governance statement to the regulator will be dealt with in these regulations by enabling the regulator to require the statement to be included in master trusts’ supervisory returns. We will of course consult on these regulations and we cannot confirm the final content until the consultation is concluded. I hope that I have explained to noble Lords that I resist the amendment not because I disagree with it but because there is a better way of getting there. The Bill already allows equivalent provision to be made in a manner more likely to secure the desired outcome in the long run. Against that background, I hope that the noble Lord will withdraw his amendment.
Lord McKenzie of Luton
My Lords, I am grateful to the Minister for that response. I thought for a moment that the glimmer of hope was going to be completely snuffed out, but I am pleased to know that it has not been. I accept the point about drafting and will look forward in due course to seeing this in the regulations. Having said that, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
Lord McKenzie of Luton
My Lords, I shall speak also against Clause 16 standing part of the Bill. The amendment is an alternative formulation that requires the affirmative procedure to operate for the regulations. We touched on this issue earlier this evening. The clause imposes a duty on a range of persons involved in running a master trust to give notice of the fact that a “significant event” has occurred. Civil penalties can be applied to anybody failing to comply. The only hint of what might constitute a significant event is what the Secretary of State sets out in regulations. No hint is given in the Explanatory Notes to the Bill. The information provided to the Delegated Powers Committee simply refers to a significant event being one that might affect the ability of the scheme to meet the authorisation criteria, such as a change of trustee or scheme administrator.
As the Delegated Powers and Regulatory Reform Committee pointed out, the delegated power confirmed by Clause 16(3) is a very wide one. It emphasised that the definition of what constitutes a significant event is fundamental to determining the duty imposed by Clause 16. It says that the width of the power appears to be needed because the Government have not yet decided on the policy or purposes for which the power is to be used. Its conclusion is that the power is inappropriate in the absence of any convincing reasons to justify its scope. We agree that as things stand the Government have more work to do to justify the change in the clause. I beg to move.
Lord Freud
I will begin by explaining why it is important that the clause stands part of the Bill, and then I shall set out my thoughts on the proposed change in the parliamentary scrutiny procedure.
Clause 16 addresses one of the requirements that will be placed on a master trust scheme once it has been authorised. One of the great strengths of the authorisation regime is that it is an ongoing system. This means that, in order to continue operating in the market, the Pensions Regulator must remain satisfied that the master trust continues to meet the authorisation criteria. This makes it particularly important for the Pensions Regulator to remain informed about the scheme. Indeed, I hark back to our discussion a little earlier about whether there should be someone to compensate as a last resort. It is really important that we make sure that the Pensions Regulator knows what is happening in schemes. That is one of the key ways in which to make that happen.
The regulator will collect information from authorised master trust schemes on a regular basis through a combination of existing requirements on occupational pension schemes and new requirements on authorised master trust schemes, introduced as part of the Bill. For example, all occupational pension schemes are already required to submit an annual scheme return to the Pensions Regulator and, under Clause 15, master trusts will be required to submit a supervisory return as well. In addition, Clause 14 introduces a requirement on the trustees of master trust schemes to submit the scheme’s annual accounts, and on the scheme funder to submit its accounts to the Pensions Regulator. These returns allow the Pensions Regulator to collect information from schemes on a regular basis in order to determine whether they still meet the authorisation criteria.
This clause provides that the Pensions Regulator must be notified in writing if significant events occur in relation to an authorised master trust scheme. The Secretary of State, following consultation with the industry, will set out in regulations what constitutes “significant events” for the purposes of this clause. These might include, for example, change of scheme trustee, change of scheme administrator, changes to the continuity strategy or changes to the business plan. The Government intend that the events which will be prescribed as significant events will be events of the type which the regulator would need to be made aware of promptly due to the potential impact on the scheme’s authorised status or because they are indicators that support or intervention may be required.
To be clear, the occurrence of a significant event in a master trust scheme will not necessarily affect the ability of the scheme to meet the authorisation criteria. It just may have such an effect or it may be a warning sign. For example, a scheme may have a change of trustee. As the fitness and propriety of a trustee is linked to the authorisation criteria, the Pensions Regulator must be informed of this change so that the new trustee may be assessed against the relevant standards. The new trustee may well meet the required standards, in which case the scheme’s authorisation status will not be affected—but there could be an impact. A civil penalty will apply to a person who fails to comply with this reporting requirement. For that reason, it is important to be as clear as possible about who will be subject to this requirement in the Bill. This clause therefore lists the persons subject to this requirement in subsection (2). Further persons may be listed in regulations.
There is a precedent for this requirement. Section 69 of the Pensions Act 2004 provides that key persons involved in the running of defined benefit occupational pension schemes must report the occurrence of certain events to the Pensions Regulator. That provision was made to warn the Pensions Regulator that such a scheme may require the support of the Pension Protection Fund. The provision in this Bill is made to warn the Pensions Regulator that an authorised master trust scheme may need support or intervention or be at risk of not meeting the authorisation criteria. This provision will protect scheme members and it will assist the Pensions Regulator to carry out its functions. That is why it is important that this clause stands part of the Bill.
Amendment 35 concerns the affirmative as opposed to the negative procedure. We have discussed that and we will also consider it in this context. On that basis, I hope that the noble Lord will see fit to withdraw both his opposition to the clause and his amendment. I hope that I have provided clarity on the wider purpose of Clause 16 and I commend it to the Committee.
Lord McKenzie of Luton
I thank the Minister for that response. I think we understand what the intent of this provision is. Obviously, the persons to whom this obligation applies are listed in detail in the Bill. Why, therefore, is it not possible to list at least some examples in the Bill—for example, a change of scheme trustees—as one of the significant events which might require action? There is silence on that side of the equation. However, there is a list of persons who are subject to this provision.
Lord Freud
I think the reason is that it is pretty odd to have a hybrid approach to a list of requirements some of which are in the Bill and some in regulations. We are looking to put them all together in a coherent way in regulations, which we will consider how best to introduce to the House.
Lord Kirkwood of Kirkhope (LD)
My Lords, has any consideration been given to a right of appeal against a civil penalty of this kind, which looks like a substantial potential fine? Who is to judge this? For example, whose duty is it to say that the trustees have changed? It could be any of the other trustees and the administrative fine could be imposed on any one of them at random. There needs to be some kind of due process about substantial fees of this kind landing out of the blue on people who may not bear the main brunt of the significant event over which they are being arraigned.
Lord McKenzie of Luton
My Lords, I think we need to read the record. In the meantime, I beg leave to withdraw the amendment.
Lord McKenzie of Luton
“except where the Pensions Regulator is satisfied that continuity is best achieved by the substitution of a new funder.”
Lord McKenzie of Luton
I shall speak also to Amendment 38. Amendment 37 seeks to probe an additional route to continuity. As the Bill stands, where trustees have chosen, or are required, to pursue continuity option 1, they must identify one or more master trust schemes to which members’ accrued rights and benefits are proposed to be transferred. Continuity option 2—an attempt to resolve the triggering event—is a route to be determined by the trustees, and not, seemingly, the Pensions Regulator. It is understood that in some circumstances a route to achieving continuity would be to change the scheme funder at the initiation of the Pensions Regulator as an alternative to transferring out or winding up a scheme. On the face of it, the regulation-making powers of Clauses 24(3)(a) and (b) do not seem to cover the position, but perhaps the Minister will tell us how, or indeed whether, this outcome can be accomplished.
Transferring the responsibility for a master trust to a new scheme funder could provide a quick answer to a collapsing master trust and would fit in with what happens with standard occupational schemes where it is wished to avoid having to wind up the whole scheme if a scheme sponsor becomes insolvent. Changing the scheme funder could be an easier solution that costs less and helps members because it keeps the scheme intact and avoids unnecessary investment transition costs and expenses for the members. Does the Minister agree that this opportunity should be available and, if so, can he put on the record how it might be accomplished?
The purpose of Amendment 38 is to highlight circumstances under continuity option 1 which require a transfer out and winding up and for members’ accrued rights and benefits to be transferred. Notwithstanding regulations which might require transfers to alternative schemes or the right of employers or members to opt out of a proposed transfer, what is the position if the trustees simply cannot identify a transferee scheme? How is continuity option 1 to proceed? It is accepted that the focus of the Bill is just the money purchase component of a master trust but, if other benefits are provided, what is the position regarding these and how are they to be covered by other legislation and regulations? I beg to move.
Baroness Altmann (Con)
My Lords, I want to raise an issue which is very relevant to this point. As the Bill will, rightly, require continuity strategies for the event of failing master trusts, I ask the Minister to consider introducing measures that will facilitate bulk defined contribution pension transfers. At the moment, the bulk transfers are governed in a way that would be suitable for defined benefit schemes rather than defined contribution schemes. It seems that we have an opportunity to disapply Regulation 12 of the 1991 preservation regulations and to introduce measures in this Bill to directly facilitate defined contribution pension transfers, which could also cut the costs of transferring across.
Lord Young of Cookham (Con)
My Lords, I am grateful to the noble Lord, Lord McKenzie, for proposing his amendment. I am afraid that I am back in the default mode of resisting.
Before I address the amendments, I say to my noble friend Lady Altmann that I would like to reflect on what she said about the transferability of defined contribution pots and perhaps write to her, because I am not sure that it directly arises from the two amendments before us.
Clause 24, and the regulations to be made under it, sets out the detail of continuity option 1 and the requirements relating to it—where a master trust chooses or is required to transfer out its members and wind up. This option would be pursued where a master trust scheme could no longer satisfy the regulator that it met the authorisation criteria and had its authorisation withdrawn or refused, or where, for any other reason, it could no longer continue to operate and the trustees chose to pursue continuity option 1 rather than resolve the triggering event and keep the scheme running.
To protect the rights that members have accrued in the scheme, it is necessary that these rights be transferred to alternative schemes or pension arrangements. Clause 24 therefore requires that under option 1, the trustees of the scheme must identify a master trust to which members’ rights and benefits can be transferred. Then the trustees have to notify members and employers of the transfer, as well as of other information that will be set out in regulations.
The aim of Clause 24 and the related clauses is that members will continue to save in a pension despite the master trust of which they are a member experiencing a triggering event that results in the scheme having to wind up. In this situation members should be transferred out to an authorised master trust and continue to save with as little disruption as possible. We want to encourage and facilitate the continuity of pension saving. Therefore, when a master trust is going to close, the provisions in the Bill will mean that members have the reassurance that, if they do not make an active decision to go elsewhere, they will become a member of an alternative master trust that has been authorised by the Pensions Regulator.
Amendment 37 provides that where the trustees have the choice, and have decided to pursue continuity option 1, they can do so, except where the Pensions Regulator decides that continuity of saving for members would be best achieved by the substitution of a new scheme funder. I think that the noble Lord, Lord McKenzie, was seeking to give the regulator some sort of power to require the trustees to follow continuity option 2 instead of continuity option 1, where the trustees had chosen the latter. However, in effect the amendment would give the regulator the power to exempt a scheme from fulfilling the requirements under continuity option 1 where the trustees have decided or are required to pursue this option and where the regulator is satisfied that continuity is best achieved by the substitution of a new scheme funder. I see real difficulties in what the noble Lord has proposed.
Trustees are responsible for running and managing their scheme and making decisions in relation to it. They have a fiduciary duty to act in the best interests of the members of their scheme—a point that the noble Lord, Lord Kirkwood, made during our discussions. This amendment would effectively allow the regulator to second-guess and overrule trustees and to make a decision about a pension scheme. This would be a fundamental change to the principle that trustees have responsibility for managing their scheme. We do not think such an intervention by the regulator would be appropriate.
The option of finding a new scheme funder, as proposed by the noble Lord, is already open to trustees as a means of resolving the triggering event and continuing. Depending on what triggering event the scheme experienced, there could be a variety of ways of resolving it. We consider it important not to limit these, but to give trustees the freedom to resolve the event and the regulator the power to decide whether it is satisfied that the triggering event has been resolved. Where the sourcing of a new scheme funder is the most appropriate resolution of a triggering event, as suggested by the noble Lord, it should be up to the trustees to identify this funder. It should not be the Pensions Regulator’s responsibility to decide what the resolution method should be, for example, that the method should be a new scheme funder, or to source that funder. That is not the regulator’s role and it would be overruling the trustees, who rightly have ultimate responsibility for the scheme and its members.
We consider it important that any resolution of the triggering event and continuation of the scheme be subject to the full requirements of option 2. These requirements include the preparation of a comprehensive and detailed implementation strategy by the trustees, having certain safeguards in place for members and employers, additional support and assistance for them, and greater protection for members. Further, there is oversight of the adequacy of the strategy by the regulator.
We agree that where a master trust has experienced a triggering event, a new scheme funder could be identified and could be the most appropriate resolution of a triggering event. However, the Government believe that it is the trustees’ responsibility to make decisions for the scheme, and that if they want to resolve the triggering event by finding a new scheme funder, they should go down the route of continuity option 2.
Amendment 38 makes two additions to what will be covered by the regulations. The first part of the amendment would require the regulations made under this clause to set out what happens where the trustees have not been able to identify a master trust into which their members will be transferred. As the Bill makes clear, there will be a comprehensive set of regulations under Clause 24 that will cover many areas. These regulations will cover members’ right to transfer to a scheme of their own choosing, if they do not wish to transfer to the trustees’ choice of scheme. Members could also take up other pension options open to them, where relevant. Where a member is in receipt of a pension from the failing master trust, they will have the right to transfer their benefits to an alternative appropriate arrangement. For example, this could include a draw-down arrangement or the purchase of an annuity.
Lord McKenzie of Luton
I thank the Minister for his response. Working backwards through our amendments, I think that in referring to the second paragraph of Amendment 38,
“dealing with benefits other than money purchase benefits”,
he said that there is legislation in place which in a sense covers those situations. Can we be clear—perhaps he would care to write to me and to my noble friend Lady Drake—that there is a perfect fit of that regulation in those circumstances where there is a master trust with money purchase benefits and other benefits, just to make sure that it fits those precise circumstances? I think that we remain to be convinced on that point.
On the point about continuity under option 1 or option 2 and who should initiate that, the amendment talks about the Pensions Regulator being,
“satisfied that continuity is best achieved by the substitution of a new funder”.
It does not itself say that the Pensions Regulator effectively has to initiate it. I am not sure if we are on the same page on that one, although perhaps there is more than a glimmer of light. But I think that there is an issue here. We understand what the Minister has said about the role of the trustees as opposed to the Pensions Regulator, but what we were seeking was that the Pensions Regulator could perhaps have some influence, or focus on nudging, to get people to accept a situation where there is a new funder rather than go through one of the other courses—we accept that, obviously, that would involve the trustees having to sign up at some stage, and this would not necessarily be something done over their heads. Again, we will read the record, but it is something to which we will return on Report, among some other things. In the meantime, I beg leave to withdraw the amendment.
The Deputy Chairman of Committees
I cannot call Amendment 40, as it is an amendment to Amendment 39.