Westminster Hall

Tuesday 18th April 2017 Westminster Hall

Tuesday 18 April 2017

[Mr Peter Bone in the Chair]

Child Maintenance Service

Tuesday 18th April 2017 Westminster Hall

00:00

[Mr Peter Bone (in the Chair)]

We start with a debate on the Child Maintenance Service. It is good to see so much media interest in this today at Westminster.

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

I beg to move,

That this House has considered the Child Maintenance Service.

It is a pleasure to serve under your chairmanship, Mr Bone. I want to thank the Backbench Business Committee for giving us the opportunity to discuss this extremely important issue affecting families across the UK. I would also like to extend my thanks to my colleagues present, who may have had to cut short their Easter weekend to attend today. The fact that they are present highlights the importance of this debate.

Many constituents have approached my office regarding issues with the Child Maintenance Service. In their experience and mine, it is an extremely frustrating and inefficient service to deal with. When it is responsible for something as important as financial support for children, and quite often single-parent families, it must execute its duties properly and get it right. That is not happening.

The Child Maintenance Service is under-resourced, unfit for purpose and failing families across the UK. It has disregarded historical maintenance arrears. It allows non-resident parents to renege on their responsibilities by failing to collect current maintenance, and it imposes a tax on parents who desperately require its services. It fails to provide a service of the decent standard that should be expected of any Government agency.

Despite the length of time I get to speak, when writing this speech I was not thinking about which issues to speak about; I was thinking about what things I would have to leave out, as the maintenance system is so rife with issues. The CMS needs a radical overhaul to ensure that parents and their children can access the support they are entitled to. That support is not optional.

[Mr David Burrowes (Enfield, Southgate) (Con)]

I congratulate the hon. Lady on securing this important debate on an issue that is getting attention in lots of areas at the moment. A group that she may want to leave out is those who are able to reach agreement. The Minister will come back and say that family-based assessments have increased and that many more are reaching agreement. Will the hon. Lady drill into the detail of whether or not that shows the success of the current system?

[Marion Fellows]

The hon. Gentleman is right; I am not going to concentrate on that. Family-based arrangements are what everyone wants, but they do not happen in all cases. I am here to support and talk about those who are outwith that scheme.

The support that the CMS gives is not optional; it is a legal right for children. The Child Maintenance Service is failing to secure children and their parents with care their rights, or it is taxing them to gain access to what is theirs. Maintenance payments have had both a current and historical problem with underpayment, people not paying and arrears. To date, the outstanding arrears for child maintenance stand at an astonishing £4 billion. That figure alone shows the extent to which the Child Support Agency and the Child Maintenance Service are failing people. At this point, I should add my thanks to the charity Gingerbread, because I am drawing heavily on its work in its recent report. It is likely that that figure does not represent the full picture, as paying parents under direct pay are assumed to have paid their maintenance in full unless the CMS is told otherwise.

According to Gingerbread, which has been doing fantastic work to raise this issue and support families, during the transfer process from CSA to CMS many parents have been pressured into not transferring their historical arrears over to their new claim. The Department for Work and Pensions calls that a fresh start. However, no equivalent letter is sent to paying parents to encourage them to pay off their arrears. In 2013, the UK Government issued “Preparing for the future, tackling the past”, in which they outlined their strategy of disregarding past debts and instead focusing on the payment of current maintenance. In line with that strategy, between December 2015 and March 2016, debt collections per case dropped from £35 to £22.

The DWP has calculated that as little as 12% of CSA debts on both the CSA and CMS systems will actually be collected. Current arrangements are allowing parents to renege on their responsibilities. Even though these debts were accrued in the past, parents should still be held responsible now. Collecting historical arrears should not mean a trade-off with current arrears; both are a priority.

[Stephen Timms (East Ham) (Lab)]

I agree very much with what the hon. Lady is saying. I want to mention one of my constituents, who first approached me in September 1999 and the father of whose child has steadfastly refused to contribute anything. He has spent a great deal on lawyers in the intervening almost 20 years to avoid paying maintenance. Today he owes £55,000, of which £15,000 is owed to my constituent. Does the hon. Lady agree that it is absolutely vital that the money is collected and that the parent receives what is owed to them?

[Marion Fellows]

The right hon. Gentleman makes an absolutely valid point. That is exactly what I am trying to argue. We should chase arrears; not to do so seems to fly in the face of common sense and natural justice.

Members of the public, and indeed Members of this House, may not be aware that during the switch from CSA to CMS case history is not transferred, leading to a loss in accumulated knowledge that wastes resources and could allow a non-resident parent another chance to renege on their payments. Despite waiting years for an effective service that will proactively seek to collect owed maintenance, these parents with care and their children are being forgotten, with no option for recourse. If debts are uncollectable or unlikely to be collected, parents must be made aware of that. Additionally, if the UK Government are unwilling or unable to take the steps to secure children their rights, they must compensate receiving parents for their failings.

Although the CMS is taking the approach of focusing on current maintenance, it is also failing in that regard. Most arrears were accumulated under the CSA. However, since the launch of the CMS in 2012, nearly half of paying parents have been allowed to accrue arrears. As I have said, those in direct pay are assumed to have paid the full maintenance. Given that 70% of CMS cases come under direct pay, compared with just 33% of CSA cases, the magnitude of the problem under CMS is likely to be far larger than the numbers show.

Just because parents agree to pay, it does not mean they will fulfil their obligations. Under the CSA, between January and March 2016, one quarter of paying parents did not pay the full amount due. Of that number, two thirds paid less than half or nothing at all, which demonstrates that the priority of focusing on the payment of current maintenance is not being met. This Government’s strategy is failing.

Stringent criteria must be fulfilled before CSA debts will even be considered for collection under the Child Maintenance Service: a parent must open a CMS case, and CSA arrears payments must have been received in the last quarter before moving to the Child Maintenance Service, or the parent must explicitly ask for those arrears to be collected.

The Child Maintenance Service process is extremely difficult to understand and is often not communicated properly to parents. For example, DWP figures show that 17% of those using direct pay whose payments stopped or never even started were not aware that the CMS could even pursue payments for them. Similarly, 15% did not even know about the collect and pay service. Shockingly, a recent report from PayPlan found that more than half of single parents did not even know their child was eligible for support from their absent parent. Communication with parents about services available to them and their rights is lacking; they need to be informed.

The CMS needs not only to take action to collect historical arrears, but to make parents aware of their rights and of what the CMS can do to assist them. A variation claim—the main tool for receiving parents to ensure that their ex-partners’ proper income is taken into account—is kept secret. The cynic in me believes that that information is intentionally withheld to reduce the likelihood of any sort of action being taken.

Taking simple measures such as providing written breakdowns of arrears, how they were accrued and what options are available to people would go a long way towards improving parents’ interaction with the service and awareness of their rights.

[Ms Margaret Ritchie (South Down) (SDLP)]

I congratulate the hon. Lady on securing this very important debate. Is she aware that in Northern Ireland, 40 members of staff in the Department for Communities who deal with child maintenance are apparently to be laid off? The Department will find itself without experienced staff when it should be ensuring that money goes from absent parents to the children who urgently require it.

[Marion Fellows]

I thank the hon. Lady for her intervention. She is absolutely correct. Indeed, what she refers to ties in with the whole DWP agenda of closing offices. I will come on to the under-resourcing of that Department.

Even if parents have an understanding of what the CMS can do to assist them, there is a hesitance on the part of the CMS to take enforcement action. That is a major reason why arrears have been allowed to accrue historically and currently.

[Antoinette Sandbach (Eddisbury) (Con)]

Does the hon. Lady agree that in effect that deprives resident parents of their rights, because they have no other means of enforcement? Their legal rights to enforce through the courts have been taken away by the child maintenance system, and that leaves them powerless to pursue what is their right: the maintenance due to them for their children.

[Marion Fellows]

I thank the hon. Lady for her intervention. Again, I completely agree. When I went to the Backbench Business Committee to apply for this debate, I was aware even there of the consensus across the House on the lack of action and the failings of the Child Maintenance Service, and that is being reinforced by these interventions.

Variation claims place the burden of proof on the parents with care to show that their ex-partners’ incomes are misrepresented. I have constituents who have either hired private investigators or become private investigators themselves to prove to the CMS that their ex-partner is lying about their income. That is not their job; it should be the job of the CMS.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I congratulate my hon. Friend on bringing this debate to the House. Does she agree that improvements need to be made to diminish further the ways in which former partners can manipulate and use the system as a weapon of abuse and control? That was the case with one of my constituents, who, as my hon. Friend clearly states is happening commonly, had to prove her ex-partner’s financial status.

[Marion Fellows]

I thank my hon. Friend for his intervention. Yes, that is at the heart of what I am trying to get across today. This system is not working, and the bottom line is that children are suffering because of it.

Both parents and my staff have raised concerns about the difficulty of making a complaint. The new system makes the first complaint an “inquiry” rather than a complaint. Parents and even my staff have to be persistent in escalating their issue to a complaint to have it properly investigated. I understand that the CMS cannot utilise the enforcement actions available to it without proper cause. However, I have had through my door numerous constituents who have not received full and proper payments from their ex-partners. Despite that evidence having been shown to the CMS, there is a severe lack of urgency. Parents are required to jump through hoops to get any sort of action taken and to fight their case. That demonstrates the lack of understanding of how important it is for parents with care to receive full and timely payments. It has also contributed to a culture of non-payment, which leads to ironically named “paying parents” not paying at all.

Without wishing to sound dramatic, I believe that the Child Maintenance Service should strike fear into the hearts of parents not making their proper contributions. If the CMS took more seriously its duties to pursue maintenance, parents would perhaps not be allowed to make incomplete, late or non-payments. The UK Government have sanctioned benefit claimants and clawed back supposed overpayments. I would like to see them take an equally enthusiastic approach in ensuring that “paying parents” actually pay.

In addition, parents must pay the maintenance that reflects their income. A major difference between the CSA and the CMS is that parents cannot claim for a variation on the grounds of a “notional income” if parents have assets of more than £65,000 or a lifestyle inconsistent with their stated income. That has removed a vital option whereby parents with care can challenge their ex-partners’ claims.

Furthermore, non-PAYE income such as dividends and rental income is not automatically taken into account when calculating maintenance. I have constituents who know that their ex-partner is earning large sums from rental income, for example, but that is not taken into account, allowing parents to minimise their maintenance payments at the expense of their children. We have to see the CMS take action against non-payment, and a change in the rules is required to ensure that maintenance calculations reflect incomes and that, in particular, wealthier parents with assets support their children.

A closer relationship with Her Majesty’s Revenue and Customs would be welcomed, especially regarding data sharing. A bolstering of the financial investigation unit would also be welcomed. That would ensure thorough investigations into those who are self-employed or have complex financial arrangements, so that they pay the right maintenance. It is not enough simply to add to parents’ arrears; action must be taken to collect the money.

The Child Maintenance Service is at crisis point. So long as that continues, we are allowing parents to avoid their responsibilities to their children. It is a common misconception that it is the receiving parent who is losing out if a paying parent fails to make proper payments, but it is the children who are paying the price. Proper receipts of child maintenance have been shown to lift one in five families out of poverty. If the UK Government do not take proper action to secure children their rights, they will be allowing that to happen. The risk of poverty for children in single-parent households is almost double that for children in a household with two parents. Child maintenance is therefore a vital source of income for those families. Some single parents are working themselves to exhaustion to provide for their children while non-resident parents and the Child Maintenance Service allow them to. The Minister must publish the new maintenance collection strategy with set targets for collection; a dedicated enforcement team focused on arrears collection and the collection of current maintenance; and greater use of enforcement powers.

Before the process of coming under the child maintenance system, a parent must pay a £20 charge, and when they come under collect and pay, receiving parents are taxed 4% of their payments. Responses from Ministers have revealed that that is to raise money to fund the maintenance service and to encourage parents to make family-based arrangements—arrangements between themselves—rather than having an application to the CMS as the default option.

When I tabled a question asking what percentage of those who applied to the CMS were parents with care and what percentage were non-resident parents, I was dismayed to find that those figures were not available. It makes sense to assume that the vast majority of people who make the initial application are parents with care. Many of those parents will be applying to the CMS out of necessity; they will pay the £20 application fee and be taxed at 4% of the maintenance that is collected simply for accessing their rights.

Of those who applied to the CSA, one third had already had a failed family-based arrangement. Although charges may encourage some parents to make family-based arrangements, they can also deter people from going into the child maintenance system in general, leaving them entirely without assistance or recourse. That is particularly true for people on low incomes, who require support the most. Two fifths of receiving parents on direct pay said that they found the application fee difficult to afford; so, too, did half of those on very low incomes. One quarter of receiving parents who moved from direct pay to collect and pay said that they found the 4% collection fee difficult to afford also. Astonishingly, 16% of parents with an FBA said that being unable to afford the fees was one reason why they did not apply to the CMS. Instead of supporting families, charges are taking money out of parents’ pockets, food out of children’s mouths and clothes off their backs—through no fault of their own and all for simply accessing their rights.

Pushing parents out of the maintenance system can leave them without any money at all. Some 29% of former CSA parents with care said that the application fee was a factor in not having an arrangement, and the 4% collection charge influenced 24% of those same parents. The charges are actively deterring people from seeking any assistance at all when they most need it.

One group in particular requires special attention and sensitivity: parents who have been the victims of domestic abuse or violence. Of those who applied to the CSA, half had experienced violence or abuse at the hands of an ex-partner—a substantial group, which must be considered with great care. After a year, about a fifth of receiving parents whose direct pay arrangements had broken down or had not even started said that domestic violence was a factor. In addition, 22% of receiving parents said that domestic violence made it difficult to set up a direct pay arrangement. That shows that so many such parents need maintenance services and need them to be effective. I appreciate that the Government have removed the £20 application fee for these parents; however, the same understanding and approach must be implemented in relation to the 4% collection charge. Those parents cannot be expected to interact in any shape or form with their abusive ex-partners. For most parents, the Child Maintenance Service should not be a default starting point but for such parents it absolutely should. Taking simple steps such as allowing for anonymised direct pay could protect those victims. When we consider that many parents on low incomes are deterred by charges, forcing those parents to deal with their ex-partners to save money is a danger to their security and wellbeing, and often, I should add, to the children involved as well. Some parents end up not reporting unpaid maintenance out of fear of reprised attacks or worsened relations. Those parents deserve to be treated with the utmost dignity and respect, and the Government must therefore make urgent provision for that.

Charges can be a barrier for parents and their children. While I believe that parents should seek a FBA if possible, we should not exclude those who have tried and failed. While I appreciate the Government’s need to fund the service, they should not penalise children. In a worst case scenario, the 4% charge should be added on to the 20% charge that non-resident parents incur under collect and pay—they should pay the price for non-compliance, not their children, especially if it can be proven that a FBA is not working or that the paying parent is not making the contributions that they should.

Gingerbread recommends that a means test also be implemented to ensure that those who most need the service are not deterred by the £20 application charge. Taxing children and parents, many of whom apply to the CMS out of necessity because of low incomes or domestic abuse, is not just. They have a legal right to this support, and the Government should not be skimming off the top of what can be a vital lifeline. We must therefore see an end to the 4% tax on maintenance.

I do not want to portray all paying parents as villains. Many pay support for their children both inside and outside of the maintenance service, but the CMS system also penalises them. It is an imperfect system for either parent. Implementing a 25% threshold on a change in income on paying parents can leave many lower income parents struggling, and allow higher income parents to retain more money that could be used for supporting their children. I agree that having the threshold provides payment stability and ensures that the CMS does not incur large administration costs for changes in income; however, it must be set at a level that ensures a more accurate reflection of parents’ incomes—the 25% rule must be looked at. CMS staff have also indicated to Gingerbread that there has been reluctance to move cases from direct pay to collect and pay because of the high 20% charge. Staff therefore need to utilise other enforcement measures to ensure proper payment. There must be a review of those charges to encourage staff to move cases to collect and pay if need be, and not to be deterred by placing higher charges on the payments of non-resident parents.

Both groups of parents will undoubtedly have had major issues with actually dealing with the Child Maintenance Service. That is one complaint that every parent who comes to my office has in common. The main complaint is that they are passed from pillar to post and every time they call the CMS they are given a new caseworker who has no previous knowledge of their case, requiring the calling parent to provide lengthy explanations of often complex arrangements within a complex system. Staff often provide parents with conflicting information depending on the call handler. One caseworker told a staff member from my office that due to a lack of resources, oral responses were given rather than written responses. That often leads to contradictory information being given to parents by different caseworkers. My staff have said that it is even difficult for MPs’ staff to receive a written response from the Child Maintenance Service. In one instance, it caused one of my constituents to accrue thousands of pounds worth of debts. He was not notified of that over the phone and was only informed in writing several months down the line. However, when letters are sent, and they still are, they can be misleading. The most ridiculous issue brought to my office was when a constituent received a letter outlining his maintenance for his three children. Imagine his surprise—or horror, rather—considering he had only ever fathered two children.

I have already outlined how receiving parents lack awareness as to what options are open to them to pursue maintenance, and that staff are reluctant to enforce action. However, parents who are aware have reported to Gingerbread and my office that they feel they constantly have to pursue the CMS to pursue their ex-partner. Rather than a game of cat and mouse, this is a game of dog, cat and mouse. When we look at how much is spent in total each year on the collection of child maintenance, that is not surprising. From 2013-14 to the forecasted projected spending for 2016-17, the total spent on the CSA and the CMS has decreased by 21%. That reflects what has been heard from staff—that the service is underfunded and unable to deal with its workload properly. As a result of poor customer service, satisfaction rates among both groups of parents have dropped significantly over the years.

“Dissatisfied” would perhaps be an understatement for how people feel about the Child Maintenance Service. Both groups of parents are suffering from the CMS’s administrative and operational inefficiency, which makes any dealings with it unbearable. Complaints are not taken seriously and communication on rights and actions is almost non-existent. I welcome the Government’s reviews, but the CMS is rife with problems, requiring a radical overhaul of how it operates.

With £4 billion of uncollected maintenance, and parents being allowed to renege on their current liabilities, the Child Maintenance Service is failing parents and children. Yes, implementing arrangements to deter and minimise non-compliance are welcome, so long as they do not deter parents with care. What is inescapable, however, is that the best way to secure for children their legal rights is for the Child Maintenance Service to get in there and secure those rights for them.

The Government need to take steps to strengthen enforcement teams to enforce payments and forge a closer relationship with HMRC to see parents’ actual incomes accounted for in maintenance calculations. The UK Government have taken an approach to welfare that promotes self-reliance while shrinking the welfare state. What better way to ensure self-reliance than to ensure that parents pay to support their children? If those children are not the responsibility of the state, they are the responsibility of their parents, who must pay their contributions.

The system of charges needs urgent reform. It is unacceptable for parents who turn to the CMS out of nothing other than necessity to be taxed for doing so. Children should not lose out on a single penny or pound—or shilling, in my memory—due to their parents’ non-compliance. Implementing reforms to abolish charges and collect maintenance properly would benefit parents with care by allowing them to receive maintenance in full and on time, and also provide a lifeline to lift low-income families out of poverty.

A culture of non-payment has developed. Parents are failing to make full and timely payments, because the Child Maintenance Service and the UK Government are allowing them to. As Gingerbread says, children living in single-parent families are at almost twice as much risk of poverty as children in coupled families. The UK Government should protect victims and survivors of domestic abuse, not punish them financially for their inability to engage with their abusive ex-partners. It is clear that the UK Government remain wedded to austerity, in stark contrast with the Scottish Government’s determination to create an inclusive, equal Scotland.

I call on the Minister to follow up on the Gingerbread recommendations. I will not go through them again, but they are easy to access, and there are not a lot of them. They would make a huge difference to parents with care and, more especially, to children. The CMS is insufficient, inefficient and incapable. Our children deserve better.

[Mr Peter Bone (in the Chair)]

Three Back-Bench Members are trying to catch my eye. The Front-Bench speakers cannot start the winding-up speeches later than 12.30.

12:01

[Antoinette Sandbach (Eddisbury) (Con)]

I thank the hon. Member for Motherwell and Wishaw (Marion Fellows) for securing this debate. I should perhaps put on record that I have used the Child Support Agency for the last 13 years. I would liken most of that time to banging my head against a brick wall. I also spent four years as a caseworker supporting parents with their cases, particularly with the Child Support Agency, the predecessor to the Child Maintenance Service, due to my personal knowledge of the procedures.

My experience is that staff are not properly trained. CMS staff in particular, since the move to the Department for Work and Pensions, have no idea what their enforcement powers are, are extremely reluctant to use them and regularly fail to do so. Proper compensation is also lacking when the CMS makes mistakes. I appreciate that the volume of complaints to my inbox about the CMS is relatively small, but that is because the vast majority of 3 million cases are still under the CSA system and have not yet been transferred to the CMS. Given my experience, that is probably a blessing in disguise.

I know that that is not this Minister’s fault. I feel sorry for her, because she has taken over a system that has had systemic failings for years. The fact that £4 billion in arrears is outstanding demonstrates how catastrophically single parents in this country have been let down by a system that was supposed to make collections easier. The hon. Member for Motherwell and Wishaw has ably outlined some of the key problems on which Gingerbread has made recommendations: I will concentrate specifically on avoidance by self-employed parents.

As we know from the Chancellor’s recent statement, a vast number of people are moving to self-employment. Their numbers are growing, particularly among non-resident parents. Self-employment makes avoiding child maintenance easier—there are online forums that provide advice to non-resident parents on how to avoid paying child maintenance—and frankly, the Government have not stepped up to the plate. It is absolutely scandalous that parents whose legal rights to maintenance for their children have been taken away and given to the state find the state unwilling or unable to enforce those rights. That is not good enough, and in my view, it is discriminatory, because it operates largely against women, as 75% of single parents with care are women. The Government must examine the issue again.

I call for specific action by the Minister. In particular, I echo the calls on “lifestyle inconsistent with earnings”. It is ridiculous to suggest that a parent who might have separated from their partner 10, 13 or 15 years ago should have a detailed knowledge of their financial circumstances. Often, the only evidence available to show the Child Maintenance Service is evidence of a lifestyle inconsistent with earnings. For example, a constituent of mine who left his wife and set up with another partner had a Range Rover and foreign holidays abroad, but was £33,000 in arrears. Eventually, after a long court case, the matter went to a tribunal hearing. The evidence in that case was lifestyle inconsistent with earnings; it is vital that that clause be reinstated.

The Government must consider how tax rules are used to disguise assets. In particular, if someone is self-employed or a director of their own company and makes a director’s loan into the company, that asset is owned by them, and it means that they can take a large amount of money out of the company, but it is not considered an asset for the purposes of child maintenance. That is wrong. It allows abuse of the system, and it is being used a lot. That information should be available from Companies House and Her Majesty’s Revenue and Customs. The issue needs to be examined again.

Further, I urge the Government to consider giving women an enforceable right in the courts where there is an asset threshold. Where that asset threshold is set is a matter for the Minister and her team to decide, but if there are more than £500,000 in assets, for example, that case ought to fall outside the CMS, because they are not taken into account. For example, the family home is exempt from consideration among the assets of the non-resident parent.

It does not take much looking to find past cases in the tribunal system where there have been assets of several million pounds in the form of the family home, expensive sports cars and other high-value items that the CMS cannot take into account because they do not generate an income. That is a convenient shelter allowing high-net-worth individuals to avoid paying for their children. The issue is important. The women involved in these cases have no other way of enforcing their rights. The Government have removed their rights in court, and they need to be reinstated, because so many assets have been excluded from consideration that non-resident parents’ ability to pay for their children is not being reflected.

I mentioned earlier that CMS staff do not know their rights. The CMS is completely unwilling to request data from the Land Registry, for example. I support co-location of HMRC and CMS staff. HMRC should automatically notify the CMS if a non-resident parent’s claim for tax relief increases. If they put in a tax return and are claiming up to the tax-free allowance in income, the CMS should automatically be notified. We should have much more effective data sharing across Government to enable enforcement.

I fought the system as a single mum for eight years. As a lawyer, I thought that I would be able to understand and work the system, but even now that I am a Member of Parliament, we still cannot get it to work. It is really a scandal and a disgrace that lone parents are being let down so badly by a system that allows non-resident parents to manipulate it.

I am grateful for this debate. If, as a Government, we are to be there for everybody, we must support those who are least able to enforce their rights. The fact that their legal rights have been taken away means that the burden and responsibility on the Government are that much greater. Having practised as a barrister for 13 years or more, I know that a judge in the courts would look at these things very differently from the Government. Quite frankly, it is time to give women more rights to take these matters through the courts, or to make sure that staff are properly trained to take the necessary action and enforce the rules appropriately. I note that there are £3.9 million of arrears in the Minister’s constituency; regrettably, there are £5.4 million of arrears in mine. I say to any single parent who reads this debate: please contact your MP—allow us to try to help to make the system work for you.

When the CMS makes mistakes, it should compensate appropriately. The compensation regime for the CMS has changed since responsibility moved to the DWP. That is wrong, and I suspect that we will see some reports from the parliamentary ombudsman about maladministration claims against the DWP. It is unacceptable that when the Department has made mistakes, it has been the children who have had to pay for them. There are some simple steps that could be taken that would not necessarily cost the Government huge amounts of money, but which would help parents to enforce their rights.

12:12

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Member for Motherwell and Wishaw (Marion Fellows) for setting the scene for us in detail. As elected representatives, we are all well aware of the issues because we see them in our offices every day. I will comment on some recent cases that I have seen.

The system is supposed to help people, but we often see cases in which it does not. It is meant to ensure that parents who do not have full custody of their children are still responsible for part of their care. Such a system is needed because, unfortunately, there are those in our society who believe that leaving their children’s mother entitles them to leave their children behind too. That does not need to happen—indeed, it should never happen—and the system is in place to address that. We are highlighting the system’s shortcomings today, but to be fair, the CSA has been able to sort out some of my constituents’ problems, whether those problems have been on the father’s or the mother’s side. There are occasions when things go right, but unfortunately there are more occasions when they do not. The system is in place to ensure that responsibility is spread, but as the hon. Lady pointed out, every time it is not used successfully, the loser is the child. It is also clear that the system is in no way addressing all the issues. I believe that a better and more effective way can be found.

The hon. Lady referred to a report by the charity Gingerbread. I also read that report—I am sure the Minister did too, because she is very thorough. The report, which was launched in June last year, found that

“hundreds of millions of pounds of child maintenance arrears owed to children are failing to be collected by the government”.

[David Simpson (Upper Bann) (DUP)]

My hon. Friend mentions children, who are the most vulnerable ones in these cases. Surely it is time we revamped the whole system—it would not be the first time that a Government scrapped a system and put in place a new one that worked. We have to think of the vulnerable.

[Jim Shannon]

My hon. Friend is absolutely right: it is the children who are vulnerable. In many cases it is the mother, too, and on the odd occasion it is the father—it depends on the issues—but the focus of our attention should be on the children, as it is in this debate.

Gingerbread referred to

“new debts piling up in the new system worth an average of £668 per family.”

That is a huge amount of money to a single-parent family; it could be the uniform or the lunch money. There must be a way of getting that money paid or the matter addressed. Gingerbread also notes that

“almost £4bn of unpaid maintenance arrears has accumulated over the 23-year lifespan of the Child Support Agency…which is in the process of being shut down and replaced by its successor, the Child Maintenance Service”.

We hope that the CMS will learn from the mistakes of the CSA and deliver a better system. I look to the Minister to explain how such a better system will be unveiled and how it will ensure that parents and children get their money when they should. However, the Government estimate that only 12% of that amount is ever likely to be recovered. Although I may look to the Minister for a positive response and for guidance, I am well aware that the Government have already stated that they will not get all the money anyway—they have almost drawn a line in the sand and said, “We can’t do it.” I have to say that that is very disappointing.

The hon. Member for South Down (Ms Ritchie), who is no longer in her place, referred in an intervention to the staff. Although the administration of the system is devolved, the rules, regulations and laws on the CSA and the CMS are decreed by Westminster. Staff are moved about all the time. In all my years of dealing with child maintenance issues, I cannot remember ever speaking to the same person twice about the same issue. More often than not, people phone up and say, “They said they would phone me back, but they didn’t.” How many times have I heard that? It is unbelievable how often staff move about and that happens.

The hon. Member for Eddisbury (Antoinette Sandbach) referred to cases in which a father moves job and becomes self-employed. Off the top of my head, I can think of a couple of cases in which a father in a very comfortable position, earning big money, has said to his wife and two children, “I am not going to be self-employed any more—I am going to go and live with my dad,” and has run away from his responsibility for maintenance. I believe that is wrong. There are others who go on the dole or who take up a job as a taxi driver—I have nothing against taxi drivers, but their earnings are all cash in hand and they can declare their own figure after their expenses. We need to look at this.

There are also delays in the system. I am now in direct contact with the manager of the system in Northern Ireland. To be fair, contacting him seems to initiate a response, but what about all the other people who are not MPs? What about the mother who is at her wits’ end because she does not have the money to look after her children? I expect—as you and other hon. Members would, Mr Bone—the same response to mothers like her as there is to us.

Gingerbread has found that

“evidence suggests that decreasing effort is being put by the government into collecting more than £700m of arrears on existing cases…Meanwhile, within the new CMS, a new system of incentives and penalties was intended to prevent arrears arising in the first place. Yet, after almost two-and-a-half-years of full operation, £52.5m has accumulated in CMS maintenance arrears, with almost half of all non-resident parents in the system having some child maintenance debt. And these figures will increase as cases are gradually transferred across from the old system.”

I have also seen cases of parents—I have to say that in all cases they were fathers—who have moved out of the country and got a job abroad. I wonder how we can chase up non-residents of the United Kingdom.

I echo the cry of Gingerbread’s former chief executive Fiona Weir, who said in June:

“Britain’s child maintenance system is contributing to a culture where too many parents think it’s optional, rather than obligatory, to pay their child’s maintenance…The accumulated level of CSA arrears is staggering and completely unacceptable. With analysis showing that one-in-five families are lifted out of poverty by child maintenance payments, this is vital money that parents, and their children, can’t do without.”

She clearly outlined the issue and where we are on it. She went on to say:

“And with the Institute for Fiscal Studies calculating that poverty rates for single parent families will double by 2020”—

therefore, the situation will get worse—

“more than ever that child maintenance owed for children needs to be collected by the Government.”

We look to the Minister and the Government to see how best they can do that.

There are also parents who are separated or divorced who come to a financial arrangement, which is an agreement by the two people. It is quite a good system, because by and large they come to a financial arrangement that is equal to what the CSA or the CMS would have arranged. However, I am frustrated, because sometimes the CSA—or, now, the CMS—will pursue those making financial arrangements to see if they can get more out of them. They almost look at them as easy targets and I find that most frustrating.

This issue is continually raised in my office. Just last week, I had a father in my office who has children from a previous relationship. His ex is in a better job than he is and is much better off financially. He has not run away from his obligations to support his children, but there must be a financial equation that is fair and realistic, and that enables everyone to do what they have to do. Fewer than half the eligible families receive child maintenance, an estimated 70% of closed CSA cases involve outstanding arrears, and £52.5 million is already owed under the CMS system.

Communication is also vital. Whenever a lady phones up looking for her CSA payments, I expect the Department to phone her back, so we must initiate a better system, because communication is so important. In the life that we live as MPs in this House, communication—how we relate to and respond to our constituents—is so much of our bread and butter.

I am conscious of the time, so I will finish with this. There are failures that are clear, and these must be addressed, so we must look at the rules, regulations and guidelines that come out of Westminster and consider how we can change them so that the system can work better, whether in Northern Ireland, Scotland, Wales or England. I look to the Minister for assurance that these past debts will be actively sought and that changes will be made to prevent that situation from continuing. With that in mind, we must do better than collecting just 12%.

[Mr Peter Bone (in the Chair)]

Before I call the last Back Bencher, which will be David Burrowes, let me say that I will now start the wind-ups at 12.33 pm, because this is a Backbench Business Committee debate and we want to make sure that Back Benchers have a chance to speak in it.

12:22

[Mr David Burrowes (Enfield, Southgate) (Con)]

Thank you, Mr Bone, for calling me to speak.

It is a pleasure to take part in this very important debate. It is a cross-party debate and quite rightly so, because this is a matter of cross-party concern; we all have constituents who have come to us and who are dealing with ongoing concerns about child maintenance arrears. So I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing the debate.

In many ways, I will echo the speech of my hon. Friend the Member for Eddisbury (Antoinette Sandbach), who has very personal knowledge of this issue, but I also want to bring to bear my constituents’ concerns. In some ways, this will be a dress rehearsal for the consideration of my ten-minute rule Bill tomorrow, although today’s events may prevent that from happening. Nevertheless, I am sure that everyone will want to wait and consider my ten-minute rule Bill before we finish this Parliament. It focuses squarely on equity and justice.

Let me mention a point of principle on which we can all agree—especially Government Members, as it was very much a creature of Margaret Thatcher’s Government, and we want to follow through on it. It is the principle of parental responsibility, which recognises that we have a statutory child maintenance system and that all parents have continued responsibility to make reasonable contributions towards the upkeep of their children. It is an important principle and it covers all children. Whatever system we have in place, whatever statutory arrangement exists and whatever administrative reasons are given by the Government—convenience, expeditiousness, or whatever—we must not lose sight of the overarching principle of ensuring that the ongoing responsibility of providing maintenance for all children is met.

This process is focused on the children and not so much on the parents. Whether a parent is employed or self-employed, there must be an equity in justice for the ongoing maintenance of children; that is at the heart of the debate and it must continue to be at the heart of the Government’s actions as they carry out their review. I am not sure what will happen after today’s news, but we are waiting with bated breath for the Government to lay their report before the House after the 30-month review. It was promised in the spring. We are in spring—spring has sprung—and so we look forward to that report being laid before the House, as it will set out the Government’s view. I know that they have an ongoing five-year review, but the 30-month review is of the current system.

Everything is coming together. The Select Committee on Work and Pensions is also conducting an inquiry on the subject, and the Public Accounts Committee has been waiting to do further work on it with the National Audit Office. The spotlight is very much on the Minister; I hope she feels the heat. It may be the case that when previous Ministers appeared in Westminster Hall and before the rest of Parliament in many debates about the Child Support Agency, child maintenance was the main issue in our constituency casework. That is not the case now, but I would not want the Minister to feel in any way that the situation has been sorted and that she can tell us all, as I am sure she will, that family-based arrangements are on the up, and there were 70,000 or so in 2014-15; that, as I know from her evidence to the Select Committee, and her written evidence, there is a view that the CMS is performing well, with seven out of eight parents now addressing their child maintenance liabilities; and that things are improving. Nevertheless, I would not want her simply to go away and say that she can move on to all the other areas of her brief, because this issue remains a genuine concern.

I want to draw attention to a constituency case that amplifies my point. There is an issue with arrears. For example, my constituent went through the old CSA system and she battled hard. When people come to us as MPs, they are at the very end of their tether, and they come to us only because they have the wherewithal to do so. They have probably been through trauma and conflict in their relationship and they now have to face further trauma and conflict to try to get the just deserts for their children. Eventually, therefore, they come to MPs; we only see a snapshot of the issues that people face.

Many others have given up. In fact, the Minister may need to reflect on the issue of the £20 fee, to establish whether some people have given up because they see that £20 as money that would be better spent on putting food on the table rather than seeking maintenance—they might have heard bad stories and they might not have the confidence to go through the process.

Although the Minister might say there is some good news out there, we must reflect on the deterrent effect, as Lord Freud did when he said that we would have this review. He said that if there was an impact, particularly on the poorest families, as a result of any changes, we would need to reflect on the deterrent effect. I would like the Minister herself to reflect on it.

My constituent went through the whole process, went to a tribunal and eventually got an assessment, as she knew all along she would. Our constituents know that effectively assessments are being made that are completely out of step with what they themselves know about the lifestyle of the non-resident parent, and that are totally out of step with what that parent is contributing, if they contribute anything at all.

In the case of my constituent, there were accumulated assets of some £600,000, which the tribunal eventually found and which plainly needed to be tapped into regularly to support her teenage son. That has now left arrears of £40,000, but she asks, “Where will that come from?” At the end of the day, will she see that money going to support her son?

My constituent has told me, and I have referred to it in correspondence with my hon. Friend the Minister, that the reality is that the variation grounds that she had been able to rely on have now been abolished. She could rely upon those grounds to get through to the tribunal and eventually to get through that interrogation or inquiry because she was able to get that redress. However, that option has now been taken away from her and from anyone in her position. That rug has been pulled away from them, and so they are very much reliant on, let us say, what is in some ways the “cheap and cheerful” CMS system, but the CMS does not allow—in fact, it actually stymies—redress being pursued through the courts. That redress must be there, particularly in high-value and complex cases, of which there is an increasing number.

My constituent, along with others, is no longer permitted to seek such redress. The reality is that the variation grounds, which allowed for a parent with no apparent income to be treated as having a notional income, have been abolished, and we need to consider whether they should be restored. The issue of jurisdiction is relevant, because it is so limited now within the family courts for child maintenance—dealing with consent orders, and also with top-up payments, but only when there is in excess of £156,000 a year. In all other cases in which the parents cannot agree, this statutory child maintenance system is the only way to seek redress, so we clearly need to consider whether there should, at least, be another option, another way for constituents such as mine, who are not seeing justice, to have the redress they need.

In the case of my constituent, under the current system the non-resident parent would legitimately be able to have a nil maintenance liability. That is the reality. From £600,000 of assets, a £40,000 liability would now be nil. That is madness. It is ridiculous. It does not make sense. It is woefully unfair and goes against the principles that started off the system back with Margaret Thatcher, and now today under the 2012 scheme.

[Ian Paisley in the Chair]

We need, therefore, to look at the situation properly. Since 2012, any review or variation of the calculation can take account only of taxable income on the basis of Revenue and Customs data, primarily from tax returns and pay-as-you-earn. Without the opportunity to interrogate through tribunals, we are reliant on that data. In Select Committee evidence, the Minister has said that she is working hand in glove with HMRC. There is now a financial investigation unit amassed with 50 investigators, and she has stated that she is homing them in on this challenging area of self-employed non-resident parents. I want to see evidence of that, because in some ways it is too little too late for many people who have been through the system.

It really is not good enough. At the moment, there is the invidious situation for many parents of saying, “You go off to HMRC, to their tax hotline, and there will be an investigation of whether it is fraud”. The Minister needs to reassure me that her investigators will bridge the gap regarding something that is not technically fraudulent but is seriously and scandalously avoiding liabilities. But it is almost too late. The system needs to be front-ended not back-ended, with the opportunity of redress. I hope that the review will bring some of that.

We have had the whole debate about national insurance contributions, and we now recognise the larger numbers of people gaining their income through self-employment. The system does not properly cater for the children of traders, company directors or those with financially complex affairs. I pay great tribute to Gingerbread, which gives the example of a haulier who had his tax return assessed for child maintenance liabilities in a year when he had bought a truck. That truck took away pretty much all his liability—the truck was being put before the children. That is a scandal. It is unacceptable. We must have a system in which we are real as to the situation facing parents today and to their different employments. We do not want to prevent people from being self-employed, but there must be fairness. If we are going to have fairness on national insurance we must have it for child maintenance. I look forward to the Government taking advantage of the Matthew Taylor review to get it right before it is too late for many more parents, with the Minister leading the way.

In conclusion, as time is moving on, we need to see how the £20 fee is affecting poorer families. I ask the Minister to do something about that. I want to reiterate the words of my hon. Friend the Member for Eddisbury and to use the parlance of the Prime Minister: we need a child maintenance system that works for everyone, not just the privileged few.

12:30

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

I was going to say, “You have become young, Mr Bone”, but we have someone else in the Chair. It is an honour to serve under your chairmanship, Mr Paisley. I thank my hon. Friend the Member for Motherwell and Wishaw (Marion Fellows) for securing this important debate. Like those of many Members, my office is being inundated with child maintenance cases at the moment.

The hon. Member for Eddisbury (Antoinette Sandbach) gave a detailed speech that focused on avoidance by self-employed non-resident parents and used her experience as a single mum. I think we all agree with her that lone parents are being let down by the system. The hon. Member for Strangford (Jim Shannon) stated that it is clear that more cases go wrong than right, and he also mentioned that the Child Maintenance Service seems to pursue those who pay and not those who do not, which is a ludicrous situation. The hon. Member for Enfield, Southgate (Mr Burrowes) stated that there must be justice and equity and ongoing maintenance for parents, with the redress they need. He hopes that the Minister will focus on the areas of concern and that there will be a review of the whole system before it is too late for other parents.

There appear to be problems not only with the system itself, but with its operation, and I will begin by speaking about policy and then highlight some constituent cases. It is clear from the many cases mentioned by hon. Members today that we are all suffering the same; but the parents are suffering even more, so we need to sort this out.

I will give the Minister an overview of what I see are the problems that need to be addressed. Simply put, it is not only unreasonable to charge single parents to access their right to support, it is utterly deplorable. As we have heard, some of those parents are survivors of domestic abuse, and the Government have not even attempted to make exemptions for them. The system has a real potential to create further distress and it is my position and that of my party that the Government need immediately to remove that obstacle for single parents, to protect all children from poverty, regardless of their family situation.

We need only look at the statistics to understand the logic in our argument. Children who live in single-parent families are almost twice as likely to be at risk of poverty compared with children in coupled families. Brutal cuts because of Tory austerity, combined with the rise in living costs, mean that child maintenance matters even more in protecting children from poverty. With no end in sight to the harsh ideological austerity agenda, and with living costs looking set to rise further due to Brexit, the situation looks set to worsen still. If the UK Government are not prepared to take measures such as scrapping child maintenance charges, they cannot claim to be serious in the slightest about dealing with child poverty.

Let us contrast that with the situation north of the border. The Scottish Government continue to prioritise the rights of children. Scottish National party Ministers are introducing a child poverty Bill that will enshrine in legislation targets to reduce child poverty. While we strive ambitiously forward, I hope that Westminster will not work against us. The Scottish Government do not have powers over the child maintenance service, so my colleagues and I urge the UK Government to follow the SNP’s lead. If they are not prepared to do so, then please, Minister, give us powers over the service and we will do something about it. Vulnerable families and the rights of the child must be protected. The Government cannot shy from their responsibilities; they must take urgent action to address the ongoing problems with the service that we have heard about today.

I agree with what everyone has said about Gingerbread. I support its Maintenance Matters campaign, and believe that the Government should immediately scrap the £20 application fee for single parents on low incomes, get rid of the 4% collection charge and make better provision to protect domestic abuse survivors. The charges are grossly unfair to the collecting parent and, in essence, punish them for the other parent’s non-compliance. The charges also create a barrier to accessing the statutory service for those on low incomes, who are arguably those most in need of support. The Department for Work and Pensions’ own evaluation research has shown that about half of those on direct pay and two fifths of receiving parents with a case closing are on very low incomes. Now, 4% may not sound much, but for someone on a low income it really matters. Ministers should be concerned that a quarter of receiving parents who have moved from a direct pay to a collect and pay arrangement say that losing 4% of their maintenance is difficult to afford.

There seem to be major issues with the internal operations of the service too. Recently, my office has seen a huge spike in the number of cases, and, as we have heard today, so have those of many hon. Members. My constituents are turning to me for help because they just do not know who to turn to. Naturally, I am only too happy to help, but I am dismayed that they are having a difficult and frustrating time dealing with the agency directly. A huge part of the problem is that when they call, they are speaking to a different adviser every time who could be in any of the different call centres in different locations across the UK. We are repeatedly told that people receive conflicting information and advice depending on who they speak to.

The service my office has been receiving has declined. On two occasions, I have had to escalate cases out of sheer frustration. It would be expected that my staff would receive the appropriate level of service by ringing the MP hotline, but that has not been the case. We are also not given responses by email—we get them only by letter. That slows the entire process down. Why can we not be given summary responses, confirming what has just been discussed and disclosed by telephone?

I have one constituent case that has gone on for about 18 months. Louise came to me as she felt her ex was hiding money from the CMS, and she could not get it to look into things further. After we got involved, it agreed to escalate the case to the financial investigations unit. Initially she was advised that the timescale might be six months. Then it went to a year, and so on. Parents and MPs’ offices understand that the work is sensitive and secretive, but many parents are just left feeling that nothing is happening. Meanwhile, they are left to struggle on, still not receiving a maintenance payment. Regular contact from the caseworker is essential, even if it is only to say, “No update.” Ultimately, people want to know that they have not been forgotten. The service I received in Louise’s case was appalling. My office must have called about 20 times for an update and never received a call back until we escalated it to a senior level.

Two separate constituents have intimated that the CMS has tried to push the collect and pay method when both parents have been happy with direct pay. Are advisers being instructed to do that so that the Department can make money from collection fees?

Another constituent, John, came to me after receiving a letter about arrears on his account. The arrears were extortionate, as were the proposed monthly payments. Once I got involved, my office asked for a full breakdown of the account, as John disputed the arrears. We received the wrong information from the CMS in a telephone call and were told the arrears were approximately £700. My caseworker called the constituent to tell him and within five minutes of hanging up the phone, we received a further call from the CMS with a correction that added thousands of pounds to the figure. Understandably, I was angered by that and asked for a full written breakdown. That took approximately six weeks to arrive. The case is still ongoing, moving at a glacial pace due to the Child Maintenance Service. Does that sound like an efficiently run service?

It is clear that the system is broken. I think the rise we are seeing in the number of cases is only the tip of the iceberg. When my office and my constituents do not get the service they should, it has a major impact on everyone, especially the children. The Minister simply must act to protect them and to stop the suffering of my and other Members’ constituents.

12:43

[Ms Marie Rimmer (St Helens South and Whiston) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I pay tribute to the hon. Member for Motherwell and Wishaw (Marion Fellows) for securing this important debate. It is right that parents who are separated or divorced fulfil their obligations to their children and provide financial support. As the hon. Lady mentioned in her opening speech, child maintenance is financial support for a child’s everyday living costs paid by one parent to another once they have separated. It is a vital source of income for separated families.

The Child Maintenance Service is meant to work by assessing a paying parent’s ability to pay, calculating the amount due and, if necessary, collecting and enforcing payment. However, the system has a number of failings—they have been outlined clearly today—that are forcing more and more children into poverty. Gingerbread, which supports single-parent families, maintains that the Government’s one-size-fits-all approach is placing support for children from separated families at real risk. There is real concern that the CMS, which was brought into effect in 2012, prioritises administrative convenience over the interests of children.

Three charges were introduced: a £20 application fee, enforcement charges for non-payment, and a collect and pay fee for those who ask the service to administer the payments. That is putting off parents who cannot afford the fee from claiming the financial support that their children are entitled to. Under collect and pay, parents must hand over 20% on top of their usual child maintenance amount—we have heard enough about that already this morning. The unfair charges will disproportionately impact survivors of domestic abuse who are unable to have a family-based arrangement and feel that they have no option but to use the service, as they are too frightened to have a direct link to their abuser.

I echo the concerns of previous speakers. The hon. Member for Eddisbury (Antoinette Sandbach) made an excellent contribution using her personal and professional experience. She clearly outlined many of the problems. The charges are a cruel and callous tax on child support. Ultimately, it is the children who will lose out on money intended to support them. Crucially, the application fee can be waived for domestic violence victims—around a third of applicants are given the exemption—but no such exemption exists for the collection service.

It is becoming increasingly clear that the CMS is yet to deliver the modern, fit-for-purpose service intended by the transition from the Child Support Agency system. That system was replaced by the CMS because it was riddled with failings, such as mistakes being made during the assessment process and poor performance. However, the CMS is performing just as poorly, due in part to poor case management and the lack of information and training for staff supplying the service and the lack of information for parents. Those things continue to hamper the CMS’s performance.

Parents on the previous child maintenance schemes are only being invited by the Government to apply to the 2012 scheme—transfer is not automatic. Can the Minister explain why the transfer is not automatic? Recent figures suggest a backlog of £4 billion in uncollected child maintenance payments. Does she agree that that is completely unacceptable? I am sure she does. Can she outline what steps the Government are taking to deal with the backlog?

The money is owed by non-resident parents and has built up over 23 years. Figures show that some 1.2 million resident parents are owed child maintenance. The vast majority of unpaid child maintenance money was accumulated under the CSA scheme, but a further £93 million has already built up under the new CMS system. The Government have failed to increase the incentive for non-resident parents to take responsibility for their children, reducing their children’s incomes as a consequence. Will the Minister outline how exactly the Government are actively pursuing unpaid child maintenance? Will they provide compensation to the families who have been left waiting for their unpaid maintenance?

The National Audit Office said that as of September 2016, there were more than 1.1 million cases of arrears. Although the majority related to the CSA scheme, more than 96,000 were from the new CMS scheme. Since the introduction of the new scheme, the NAO has said that the Department had reduced the number of enforcement actions it is taking. The Government have stated that they are offering parents a fresh start by suggesting that they write off debts to which their children are legally entitled. These are some of the poorest children in society, suffering from incompetence and cuts in enforcement workers and enforcement work. Why do the Government not restore staffing levels, step up enforcement and ensure that the new Child Maintenance Service is obliged to collect outstanding debts?

Child maintenance can make a huge practical difference for single parents. It can help pay fuel bills, buy clothes for children or fund school trips. It can put food in their mouths and clothes on their backs. For particularly financially vulnerable families, including single-parent families on benefits, it can also be the difference between children growing up in poverty or not. The risk of poverty for children in single-parent households is nearly twice that for children in two-parent households. That is particularly important considering that under this Government, 4 million of our children in the UK now live in poverty. Child maintenance alone lifts a fifth of low-income single-parent families out of poverty. When social security is being cut and child poverty is predicted to dramatically increase, it is more important than ever that children do not miss out on such vital financial support. Can the Minister please outline what steps the Government are taking to tackle the increasing levels of child poverty?

One in four families in Britain is a single-parent family, and 1.5 million families rely on Government-run schemes to ensure they get the right child maintenance payments. When child maintenance goes unpaid by a parent, it is our children who lose out. Increasing the barriers to statutory support is an ill-advised move if the Government intend for more children to benefit from maintenance arrangements. I urge the Government to do more to make sure that vulnerable families and children do not lose out from the changes, but benefit from them.

12:50

[The Parliamentary Under-Secretary of State for Welfare Delivery (Caroline Nokes)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for Motherwell and Wishaw (Marion Fellows) on securing this important debate. She is certainly committed to this issue. I thank her for the work that she has done in raising the profile of the Child Maintenance Service and for her contribution this morning. I also thank Members of all parties. It struck me this morning that this issue transcends party lines. We have heard from the three main parties in Westminster—

[Jim Shannon]

And the DUP.

[Caroline Nokes]

And from my friends in Northern Ireland. My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) raised the question of whether I felt the heat of this issue. I can assure him on this beautiful spring day that I certainly do feel the heat. Members have made me feel it this morning, but, much more importantly, I feel the heat of this issue every single time I open an email from a parent with care who is not receiving the correct amount of maintenance. I also feel it when I receive emails from non-resident parents who raise concerns about the amount they have to contribute and whether arrears that have built up are indeed the correct figure. So yes, I feel the heat. I also concur with what I think every single Member has said this morning: our first thought should be for the children. It is not a question of non-resident parents and parents with care. Their battles, to be frank, are not of interest to me compared with what we feel for the children who need support and maintenance from both parents.

I commented at a Select Committee last year when I was a new Minister—it seems a long time ago—that I wanted to hear about cases, because that helps me to point out to CMS officials where there have been failings and where we could do better. That matters to me, because it matters that maintenance flows to children in as many cases as possible. I said it at that Select Committee and I will repeat it today: I welcome receiving emails from parents with care and from non-resident parents because I need to know—although given this morning’s news, I do not know for how much longer I need to know.

I want to be clear that the responsibility for ensuring that child maintenance is paid on time and in full lies with paying parents. Parents who think they have got away with not paying their maintenance as their children grow up are not cheating the system; they are cheating their own children. The hon. Member for Motherwell and Wishaw spoke of having to think about what she left out when she composed her contribution this morning. I wake up thinking of the children who are not receiving the correct amount of maintenance. The words of my hon. Friend the Member for Enfield, Southgate about a truck being more important than paying maintenance to children will ring in my ears.

The DWP is currently delivering a comprehensive package of reforms to the system, which are intended to encourage and support parents to take responsibility for paying for their children’s upbringing. Where parents do not meet their responsibilities, the statutory scheme is there to enforce payments.

Hon. Members have rightly mentioned this morning that under the old system the Child Support Agency did not provide the right support to parents and was expensive to run. We know—Members have acknowledged this—that the bulk of arrears referred to accrued under the former CSA. The new system run by the Child Maintenance Service is designed to specifically address some of the shortcomings of the CSA. We have learnt from mistakes of the past. Where the previous system often drove a wedge between parents, the new system is designed to encourage collaboration at every stage. Evidence shows that parental collaboration has a direct positive impact on children’s outcomes such as health, emotional wellbeing and academic attainment. We know that a constructive inter-parental relationship, whether parents are together or separated, will improve outcomes for children.

The new child maintenance options service acts as a gateway to the scheme, ensuring that parents are given the information and support they need to make an arrangement that is right for them, whether that is a family-based arrangement or a statutory one. Our agents receive specialist training to help them to deal sensitively with clients, and tailored support is delivered via phone, live webchat and email. Child maintenance options has helped a quarter of the clients who contacted them to set up family-based arrangements, which we know are better for children in the long term. The number of parents who have made an effective arrangement following contact with the service increased in the first two quarters of 2016, from 82% to 87%.

We know that maintenance arrangements, while important, are one of the many issues that parents face when they separate, so our agents can also signpost parents to a wide range of organisations that can provide specialist support and advice on the issues they may need help with in their relationships.

The charges, which we have heard about this morning, were introduced in 2014 to provide a further incentive for parents to collaborate, and we know that collaboration works in the best interests of the children. Although the service is primarily funded by the taxpayer, the charges contribute a small amount, helping to offset some of the costs associated with providing the service—it is a small amount, in the region of 10%. All the measures are designed to encourage the parents who can to make their own family-based arrangements. It is perhaps inevitable that the families who end up in the statutory scheme will be the ones for whom that is most difficult.

It is important to reflect on that point. Parents who can collaborate do. Those who are committed to working together seldom come within the orbit of the CMS. It therefore follows that the parents with whom we do have contact are the ones who are most likely to have conflict and difficulties. It is true that, as the hon. Member for Strangford (Jim Shannon) said, family-based arrangements are the ideal solution and provide the best outcomes. We do not want parents to have to come within a statutory scheme. However, we acknowledge that that is not always possible.

We continue to use all the tools at our disposal to maintain compliance and recover arrears, but it is inevitable that some arrears will accrue as some parents go to great lengths to avoid their responsibilities. At the end of last year, I visited our CMS centre in Hastings and spoke to both the enforcement team and the financial investigation unit. I was very impressed by their professionalism and dedication, but I was also struck by how difficult their job is. Perhaps it is inevitable in a buoyant employment market that non-resident parents find it easier to change job than when the economy is not so good.

We have heard from various hon. Members that one of the significant problems lies with the self-employed and company directors. It is there that we have the biggest challenges. Both the financial investigation unit and the enforcement teams are determined to do what they can, using the powers already available to them. We can at present make deductions from single-held bank accounts, but not from joint accounts. We are looking at how we can best use our powers to include joint bank accounts. I am very conscious that some non-resident parents hide assets and income within the bank accounts of other family members. We desperately need to address such abuses, which will form part of our arrears strategy, which we will publish later in the spring[Official Report, 20 April 2017, Vol. 624, c. 1-2MC.], notwithstanding my earlier comment about this morning’s announcement.

I promised the hon. Member for Motherwell and Wishaw that I would leave her some time to conclude. I am conscious that I have been short of time, but I have a mass of information that I would like the opportunity to share. My parting shot is this: if we are to have an arrears strategy and an enforcement strategy that really works, we need to be creative and determined to do it. My door is always open to Members who wish to come forward with new and innovative ideas as to how we can best make parents accept responsibility for their children.

[Ian Paisley (in the Chair)]

I call Marion Fellows for about 45 seconds.

12:59

[Marion Fellows]

Will the Minister please send her notes? In the short time she may have left, will she send the stuff that she was unable to share with us, because we all want to know? None of us here can say that we will be here after the next election, but the issue will not go away. It needs to be addressed.

Question put and agreed to.

Resolved,

That this House has considered the Child Maintenance Service.

Serious Fraud Office

Tuesday 18th April 2017 Westminster Hall

12:59

[Kirsten Oswald (East Renfrewshire) (SNP)]

I beg to move,

That this House has considered the relationship between the Serious Fraud Office and other agencies.

It is a pleasure to serve under your chairmanship, Mr Paisley. I sought this debate because of concerns about investment losses suffered by my constituents, and because of my related work as chair of the all-party parliamentary group for the Connaught Income Fund. As a newer Member of the House, I am coming fresh to an issue that many longer-standing Members may have considered previously. I make no apology for that. I am also not a lawyer, so I do not intend to get into the legal principles underlying the work of the Serious Fraud Office. However, having participated in a debate in February on SFO funding, I was interested to hear talk of the need to make changes to the legal framework.

I thank the Library for its support. I found its summary hugely helpful in confirming that there is a problem—certainly of perception and possibly also with the balance of the law being wrong. The Library note states:

“The enforcement of law in the field of financial services is surprisingly complicated. It involves a matrix of law and rules overseen by different bodies, agencies or regulators. It often contradicts a ‘common sense view’ of what actually is a crime.”

In preparing for that February debate, I was amazed to learn of what I considered to be the under-resourcing of the Serious Fraud Office. Is £60 million the budget we should be devoting to tackling the most serious acts of fraud, or should there be a significant increase in SFO capacity? In a recent speech, Megan Butler of the Financial Conduct Authority identified that the banking sector alone estimates its financial crime compliance costs at some £5 billion a year. In that context, the annual cost of the SFO seems remarkably low and increasing it seems to be a worthwhile investment.

Some hon. Members here may have helped to put in place the legislative and organisational framework that appears to have so badly failed my constituents and others caught up in the Connaught and other financial services scandals. A debate on the relationship between the SFO and other agencies may help them to consider whether they view the current situation as satisfactory.

When we look at the matter in detail, we must look at issues in sequence. We must decide the balance we want to see between the criminal law and the regulatory framework. Only when that is clear can we allocate responsibility to the relevant agency. I would cite two examples of where the balance is perceived to be wrong.

First, despite the banking sector bringing the UK economy to the brink of collapse, very few individuals have faced sanctions, regulatory or criminal, following the 2008 financial crisis. Secondly, the manipulation of financial benchmarks such as LIBOR, on which billions of pounds depend, was not a specific offence until recently. By contrast, an inaccurate mortgage application has long been classified as mortgage fraud, and many applicants and their advisors have faced prosecution for such a crime. If law enforcement was similarly lax in response to any other explosion of what most of us regard as crime, there would be outrage. Instead, what we see is an increasing cynicism and a view that “There is one law for them, and another law for us.” We need to address that cynicism.

The late Tam Dalyell, former Father of the House, did not always see eye to eye with my party. However, he left a great legacy as a parliamentarian. During his campaign on the sinking of the Belgrano, he highlighted the principle that small inconsistencies tend to be part of larger inconsistencies and that seemingly small untruths are often part of larger untruths. Thinking about that issue, it struck me that if this House could not understand why such a fraudulent enterprise as Connaught was able to operate and the perpetrators able to go undetected for so long, we could have little confidence that the systems for regulating financial services in the UK are generally fit for purpose.

I make no pretence of having an answer. By holding this debate, I am providing the Minister with an opportunity to reassure the House that the Government think they understand—and that they propose to take steps to prevent a recurrence. An FCA investigation into the Connaught fund is under way and I look forward to the outcome. However, much information is already in the public domain.

Connaught was an investment vehicle launched in 2008 under the title “Guaranteed Low Risk Income Fund”. Members of a certain vintage, like myself, might recall the Wile E. Coyote cartoons, in which a hapless coyote bought devices from Acme Trading in a desperate effort to catch the elusive Road Runner. The devices inevitably misfired or backfired. Calling a fund that promised a high rate of return “guaranteed low risk” might raise suspicions that it was similar to the sort of product sold by Acme Trading. But the fund did not come from Acme Trading; the “guaranteed low risk” fund came fully signed-off with the Capita brand.

Capita describes itself as the UK’s leading customer, business and professional support services organisation. Indeed, a few years ago, the Ministry of Justice brought Capita in to operate a contract after concerns were raised about the original operators. Capita is known to sit close to the heart—if such a thing exists—of the UK’s financial services sector. Investors would rightly expect officers authorising use of the brand to have a high aversion to reputational risk. They would not expect the name to be allied with an obvious scam.

Unfortunately for investors, the supposedly “guaranteed low risk” fund proved no better a performer than an Acme Trading rocket and it careered right out of control from day one. Four years later, the fund, now rebranded as the Connaught Income Fund, hit the wall, taking the savings of more than 1,000 investors with it, with losses of more than £100 million pounds—less than a third of which has ever been recovered.

We know the Connaught fund careered out of control from day one, because one of the participants said so in the case of Connaught Income Fund, Series 1 v. Hewetts Solicitors. Mark Cawson QC, sitting as a Deputy Judge of the High Court, stated that in his view passages within the fund’s information memorandum

“were suggestive of an intention that the Fund would lend directly to the ultimate borrower requiring the bridging loan.”

However, the evidence given in court by Michael Davies, who had been at the centre of the fund throughout its life, was that that was never the intention,

“however the IM might have been expressed.”

From the start, the funds went to a single group of companies—Tiuta plc and its subsidiaries. Immediately, Tiuta used some of the funds to replace the group’s past dodgy investments. I hope that the origin of that dysfunctional fund as the product of a highly regulated financial services firm is central to the FCA inquiry. I believe it should also be of interest to the Serious Fraud Office. If it is not, there must be something seriously wrong with the body of law underpinning the financial services sector. Without Capita acting as an operator that boosted the fund’s credibility, it may, like an Acme Trading rocket, never have got off the ground—saving a lot of people a great deal of money and distress.

We know a lot about the operation of Tiuta because of a whistleblower, George Patellis. In early 2011, shortly after becoming its chief executive, he approached the FSA with what he called clear evidence of Tiuta defrauding the Connaught fund. In a recent finding, the Complaints Commissioner expressed doubt about whether at the time the FSA seriously considered whether fraud had occurred. Indeed, the FSA delayed acting on or sharing Mr Patellis’s allegations for approximately 18 months, allowing Connaught to rake in millions of pounds more from investors and to pass them to Tiuta to disappear. The companies in the Tiuta Group entered administration in 2012 and then went into insolvent liquidation.

When the information given by Mr Patellis was finally passed on, despite the scale of the losses identified by that time, it was not passed to the SFO—it was passed to the City of London Police. It seems that the FSA was very reluctant to do anything that flagged up the case as one of fraud, especially as it had been allowed to continue for so long on its watch. It is now six years since Mr Patellis made his report to the FSA. In those circumstances, the likelihood of any court action against participants in the Connaught scandal being challenged on the grounds of delay must be very high.

When I looked for the detail of the agreements between the SFO and the FCA to cover such circumstances, I was very disappointed at what I found. The SFO website contains a range of codes and protocols with other agencies governing its responsibilities. An agreement with the FCA is not listed. The FCA’s own enforcement information guide makes no reference to fraud or to a relationship with the SFO.

In 2014, two of the directors of Connaught were disqualified for a combined total of 16 years. The Insolvency Service cited their failure to manage Connaught’s relationship with Tiuta as the key factor in the failure of the fund. I am not sure what conclusion one can draw other than that the nature of that relationship, which was fundamental to the Connaught and Tiuta operation and had functioned for nearly four years, was not an accident. Again, there appears to be no published agreement between the Insolvency Service and the SFO—at least, there is not one on either agency’s website. There is a reference in the Insolvency Service’s guidance to the possibility that, if an offence has been committed, it may result in a report to the appropriate investigating or prosecuting authority.

One of the key events in the life of the Connaught fund came in September 2009—a year after it was opened. Capita stepped down as operator and was replaced by Blue Gate Capital. Surprisingly, the change triggered no requirement for due diligence, and no warranty or indemnity in respect of the operation of the fund to that date. The departure of the fund from its information memorandum and the conflicts of interest on the Tiuta side of the operation must have been well known by that time, because one of Blue Gate’s early acts was to issue a new information memorandum, which apparently brought the terms of the fund’s information memorandum and its operation into closer alignment. One might have expected that the discovery of that discrepancy would have resulted in some action, other than for Blue Gate to seek to align the paperwork with the practice it had inherited.

I note that, in some areas of financial services, a system of suspicious activity reports has been established. In 2014-15, more than 300,000 reports were submitted. That volume of reporting is underpinned by the clear identification that it is a criminal offence to fail to report knowledge or concerns about money laundering or that someone may be gathering money to fund terrorism.

It seems that the Connaught operation became practised in using investors’ funds to meet running costs, and elements of the Tiuta group accounts were falsified to overstate the value of assets underpinning the fund. As chief executive, Mr Patellis initiated a process of reviewing the group, including whether it should declare insolvency. In his report to the FSA, he highlights that the directors continued to draw high salaries and benefits, and that consultants established regular fee lines, despite the fact that they were all aware that new funds were being attracted and consumed with no plan in place for returning the group to financial stability.

Surely, given the FSA’s principles of business, the participants in that process should have been obliged to report their knowledge and concerns. By departing so markedly from the information memorandum, they had collectively fallen into the way of publishing false information. I can think of no reason why the people who were aware of that fraud should not have been under an obligation to report to the FCA or the SFO that investors’ funds were being handled in a way that did not match up with the prospectus or the information memorandum. Rather than being met with confusion, as Mr Patellis’ report was, the introduction of a formal mechanism, such as an SAR, may provide the clarity the system needs.

If an ordinary citizen had committed a comparable level of dishonesty in completing a mortgage application, they would immediately face investigation with a view to a criminal prosecution. Is it right that those embedded in our financial services sector should be protected from such investigations? Should we ensure earlier involvement of the SFO or the police when an apparently rogue fund is uncovered?

In previous debates, I have heard the senior managers regime cited as a solution to many of the problems in the sector over recent years. Having looked at some of the consultation materials issued as part of putting the senior managers regime in place, I have doubts if that will be the case. The consultation paper on duty of responsibility for senior managers appears to contain no reference to fraud or to the SFO. If I have missed it, or if it is buried in some other paper, I would be happy if that were highlighted to me. If I have not missed it and it is not there, that strikes me as an omission that must be corrected.

I found the discussion paper on the legal function even more concerning, because it opens the prospect of excluding the firms’ heads of legal function from the SMR. In terms of issues such as the design of investment opportunities and their operation, regulated entities should not have any closed books from the regulatory and enforcement agencies.

It strikes me that we still have some way to go to properly embed a fraud-aware approach into the regulatory framework of the financial services sector. Two ways in which that can be done—I would love to hear the Minister’s opinion on this—are to properly resource the SFO and to create much stronger links between the FCA’s staff and the SFO’s work. I look forward to hearing the Minister’s comments on all those points.

13:15

[The Solicitor General (Robert Buckland)]

It is a pleasure to serve under your chairmanship, Mr Paisley. I congratulate the hon. Member for East Renfrewshire (Kirsten Oswald) on securing this debate. I noted the remarks she made in a debate on an associated issue relating to the SFO in February. I pay tribute to her and to colleagues on the all-party parliamentary group for raising this undoubtedly very serious issue, which has caused real loss for those who invested in the Connaught scheme.

The hon. Lady outlined her concerns clearly, and said that she has already raised them with the FCA. She will appreciate that the Financial Conduct Authority is a separate, independent body, and I am not empowered to comment on its investigation, which is still ongoing and is extremely complex. The fact that many investors are still out of pocket is fully appreciated, and it is understood that certainty is needed about whether they can expect to receive compensation. The FCA will update them as soon as it can, and it is encouraging investors to consider what they can do in the meantime to protect their position.

The hon. Lady raised wider issues about, first, the status and funding of the SFO, and, secondly, its relationship with other agencies that help to police economic crime, misconduct and the sort of activity that, frankly, damages the reputation of financial services not only in the City of London but in the whole of the United Kingdom. I assure her that the Government take this matter extremely seriously, because it pertains not just to economic reputation but to our national security. That is why it was welcome that the Home Secretary announced last year that wider work will be carried out through the Cabinet Office to examine our response to economic crime more broadly. As part of that examination, we will look at the effectiveness of our organisational framework, and the capabilities, resources and powers available to the organisations that tackle economic crime, so it embraces fundamental questions of the type that the hon. Lady asked.

The SFO does vital work in tackling the most serious instances of fraud, bribery and corruption. It is an important part of the UK’s enforcement regime. It is right that questions continue to be asked about the adequacy of the way in which we deal with economic crime and how we can improve it. The hon. Lady was right to ask questions about LIBOR and the sort of activity that took place at the time of the economic crash in 2008. Although it is welcome that a number of people who were involved in manipulating the LIBOR regime have been prosecuted and, indeed, convicted, I agree that more needs to be done. It is acutely incumbent on the Government and the enforcement agencies to ask those questions at all times.

The hon. Lady rightly raised the issue of funding, about which we had a debate in this House not long ago. I assure her that the director of the Serious Fraud Office, David Green, who has been doing excellent work since his appointment in 2012, is satisfied that the funding his office receives is sufficient to carry out investigations and prosecutions. Let us not forget that the blockbuster funding allowed by the Treasury gives the SFO the flexibility and fleetness of foot it needs to mount special and unexpected investigations—it is, of course, very much a demand-led office.

I am glad to report that, in recent months, the SFO has yielded hundreds of millions of pounds for the Treasury in the form of new deferred prosecution agreements—most notably with Rolls-Royce and most recently with Tesco, to name but two. I am impressed by and pleased with the progress of the SFO since the appointment of David Green and with how it has focused on the criteria that it has to apply under the governing statute that set it up some 30 years ago.

Briefly, to remind ourselves, the SFO is a relatively small, specialised department that is allowed by law to investigate and, where appropriate, to prosecute cases of serious or complex fraud, which includes cases of domestic or overseas bribery and corruption. Such fraud calls for a multidisciplinary approach and recourse to the legislative powers available to the SFO.

The criteria for case acceptance are strict. The SFO will consider all the circumstances of a case, which include: cases that undermine the United Kingdom’s commercial or financial reputation in general, and the City of London’s in particular; cases in which the actual or potential loss involved is high; cases in which the actual or potential harm is significant; cases with a very significant public interest element; and, finally, new species of fraud. All frauds are serious, causing real detriment to those who fall victim to them, but the criteria rightly set a high threshold that has to be applied by the SFO.

On the way in which the SFO works with other agencies, I reassure the hon. Lady that it has constructive strategic and working relationships with all its law enforcement and regulatory partners. It engages with other agencies whenever relevant throughout the life of a case, right from the development of that case through to its investigation, prosecution and recovery of the proceeds of crime.

Those relationships are supported continually through attendance at various cross-Government working groups and regular bilateral liaison meetings, whether at the senior or operational level, and they are underpinned by memorandums of understanding or operational protocols where necessary. Such structures have evolved over time and in particular since the establishment in 2013 of the National Crime Agency’s economic crime command. The NCA plays a co-ordinating role in a structure of governance that applies across all areas of economic crime, and the SFO plays its part in all the relevant groups to form that collective response.

There are agreed roles and responsibilities, and the SFO investigates a particular species of serious fraud, bribery and corruption cases. At all stages of the assessment, however, reports of economic crime received by the SFO are under review to establish whether the matter falls within its jurisdiction and remit. If the matter is deemed not to reach that high threshold, it is closed and, if appropriate, consideration is given as to whether another law enforcement or regulatory partner may be better placed to develop the information.

Such decisions are made with a clear understanding of the remits of the other law enforcement agencies. The decisions are underpinned by frequent meetings between members of the SFO’s intelligence unit and their counterparts in the NCA, the Financial Conduct Authority and the other law enforcement and regulatory agencies. They meet in order to avoid the inevitable duplication or the conflict that might occur between reports. It will therefore be clear that only one agency is in the lead on any given issue.

We have to appreciate that many referrers—members of the public or others—will approach several agencies with the same matter, so each other’s expertise and capabilities are needed to make real progress with an investigation and to avoid, for want of a better phrase, reinvention of the wheel. That is essential if we are to make proper progress.

In particular, regular meetings are held between members of the foreign bribery clearing house—“foreign” means the involvement of other jurisdictions, which of course includes Scotland—to place potential investigations with the relevant authority. An SFO secondee therefore works with the NCA bribery and corruption intelligence unit, which helps with that process by providing direct access to the assets of the NCA and SFO.

Operation of the clearing house is governed by a memorandum of understanding that was agreed in 2014 and is published on the SFO website. Parties to the MOU are the City of London police, Scotland’s Crown Office and Procurator Fiscal Service, the Crown Prosecution Service of England and Wales, the Financial Conduct Authority, the Ministry of Defence police, the National Crime Agency and the Serious Fraud Office. We need not end there, however, because the MOU is being looked at again and refreshed to ensure that it is as relevant as possible, bearing in mind current challenges.

Another MOU, between the SFO and the Scottish prosecuting authorities, sets out further rules for co-ordination and co-operation between the two bodies. The SFO does not have prosecutorial authority north of the border, but it has investigatory powers over frauds that could be prosecuted in England, Wales and Northern Ireland, so the co-operation with the Scottish authorities is vital.

Those MOUs set out the remit of each agency involved in tackling bribery, in accordance with the agreed roles and responsibilities grid that exists for bribery and corruption cases, and provide a framework for how the agencies will co-ordinate foreign bribery work. That ensures that all credible allegations of foreign bribery with a connection to the UK are properly assessed.

The SFO also takes part in other strategic delivery and working groups, including Project Bloom, which relates to pension fraud and is chaired by the Pensions Regulator, and the Panama papers taskforce announced by the then Prime Minister in April last year. The SFO is a founding member of the joint financial analysis centre, which is an important part of the Panama papers taskforce and was launched in July last year with the NCA, Her Majesty’s Revenue and Customs and the Financial Conduct Authority.

The SFO has invested a significant amount of its intelligence resources into that new joint analytical centre, which is complemented by a dedicated group of officers based within the SFO who manage and develop the resultant intelligence and contribute to the analytical process and the product of it generated by the JFAC.

The SFO also actively participates in a number of Panama papers forums, including the JFAC co-ordination and response group, which provides a platform to share efficiently information and intelligence, agree primacy and co-ordinate joint working. The SFO’s commitment to the principle of joint working has directly benefited numerous SFO investigations as well as an operation with HMRC, supported by the NCA, in relation to serious and complex fraud allegations. There is a referral mechanism; the SFO refers matters to the JFAC as well as being a part of that centre itself.

The SFO does not have its own powers under the Police and Criminal Evidence Act 1984. It carries out searches and arrests with the support of the NCA and police forces and it works with them collaboratively, where appropriate, throughout investigations. That symbiosis is very much a part of the way in which the SFO operates with other organisations.

I take on board what the hon. Lady said about the need further to refine and improve the process. I can assure her that with each year that passes, that is precisely what happens. If lessons can be learned from previous failures or omissions, they are learned and they are used to refine existing memorandums of understanding and existing partnership working to ensure as seamless a response as possible to economic crime. There is much to be done. Much has been achieved, but I accept the spirit of the hon. Lady’s motion: there is more to do.

Question put and agreed to.

13:29

Sitting suspended.

Future Accommodation Model

Tuesday 18th April 2017 Westminster Hall

[Mr Charles Walker in the Chair]

14:29

[Jeff Smith (Manchester, Withington) (Lab)]

I beg to move,

That this House has considered the Future Accommodation Model.

It is a pleasure to serve with you in the Chair, Mr Walker. I hope that you and other Members had a good Easter recess and are looking forward to an exciting few weeks ahead.

I brought forward this debate because of widespread concern about the way in which the Government are progressing the future accommodation model, the consultation process and the impact that the FAM may have on recruitment and retention by our armed forces. The Ministry of Defence seems to lack a convincing case, other than simply wanting to get personnel out of service family accommodation and into either their own homes or the private rented sector. The worry is that that threatens the practical availability of affordable quality accommodation for service personnel. I hope that the Minister can reassure us about some of the concerns and perhaps give clearer answers about what the FAM will look like.

I thank hon. and hon. and gallant Members for attending today’s debate. I do not intend my opening remarks to be very lengthy, as other Members in the Chamber have much more experience of and knowledge about this issue than I do and I am looking forward to hearing from them. I thought that there might be one or two more Members here, actually, but today’s events have perhaps focused minds elsewhere. The House discussed this issue a few months ago in a half-hour Westminster Hall debate, and I hope that this longer debate gives Members a greater opportunity to express views and the Minister an opportunity to give us some assurances.

During the recent debate on the armed forces covenant, the Minister said that the future accommodation model

“is a complex model, and it is a controversial matter. Much of the problem is that we have not had the opportunity to communicate what the options will be in the future, and I am determined to address that.”—[Official Report, 2 February 2017; Vol. 620, c. 1291.]

I hope that this debate gives him the opportunity to do that in rather more detail than we have had so far.

The context of the debate is a long period of dissatisfaction with military housing and what the hon. Member for Berwick-upon-Tweed (Mrs Trevelyan), who I am pleased to see here today, described as a “crisis” in military housing. The Public Accounts Committee found that service families

“have been badly let down for many years and are not getting the accommodation service that they have a right to expect”

and added that the

“current model for providing accommodation for families is not flexible enough to meet the reasonable needs of service families in the 21st century.”

There is a clear need for change, and the Opposition understand that need. We welcome the principle of broadening choice for service personnel and families, but that must include an important role for service family accommodation. Military accommodation is not just about bricks and mortar; the support networks and communities in a patch are absolutely crucial, too.

The future accommodation model is the Government’s response to their commitment to make a new accommodation offer to service personnel. The Government committed in the 2015 strategic defence and security review to

“help more Service personnel live in private accommodation and meet their aspirations for home ownership.”

They say that the future accommodation model will be based on need, be more flexible and reflect modern demands, which will provide personnel with more choice about the type of accommodation they live in and its location, and help if they wish to buy their own property or rent privately. I hope that we will get some assurance from the Government today that the FAM can deliver those aspirations—we are not yet convinced about that—and, most importantly, that they are taking fully into account the views of service personnel and families. There is concern that the proposals that come forward may be rushed through without full understanding of the long-term repercussions in terms of cost and impact on retention.

I want to raise a concern about the potential increased use of the private rented sector. Many of us will know from our constituency casework—I certainly know from mine—that that sector causes the greatest problems in terms of affordability, quality and security of tenure. There is real worry about the suitability and affordability of the private rented sector in some of the areas in which it might be needed. Although we understand the need for change, change is sometimes difficult, and we are worried that the future accommodation model is causing significant concern for both personnel and the families federations. There is real concern that the consultation was not carried out satisfactorily—let me put it that way at this stage.

The Armed Forces Pay Review Body’s 46th report highlights the need to maintain a clear line of communication with forces families about the FAM. It states that service families federations

“said that honest and clear communication around the implementation of the People Programme strands, especially the Future Accommodation Model, will be essential as housing is seen as a key element of the overall military offer, particularly for the Army.”

Hon. Members will be aware that the Department conducted a survey on the future accommodation model. The sample size was 137,000 and there were 24,302 valid returns, which represents a response rate of just 18%. Of those respondents, 42% had not previously heard of the FAM and a further 19% had heard about it but did not know anything about it. The Government surely cannot claim that a one-off survey to which fewer than a fifth of eligible respondents replied wholly represents the views of the armed forces, and they should not base significant policy changes on it.

I have a few questions. Given that the response rate for the FAM survey was so low, would it not make sense to re-run the survey with more detailed options and try to raise awareness of the future accommodation model ahead of that survey? Can the Minister tell us whether there are plans to run another survey at a later date when there are more details about the model? What is he doing to ensure that he takes into account a more representative cross-section of views? If there is concern about the cost of another survey, could it be run as an additional part of the armed forces continuous attitude survey or the families continuous attitude survey, which both had higher response rates last year than the FAM survey?

The Department has said that the FAM is not a one-size-fits-all policy, but as it has been presented so far it treats the three services exactly the same. We know that when it comes to housing, what works for one service may not work for the others. There is a big difference, in particular, between the situation for members of the Navy and that for members of the Army and the Royal Air Force. Army personnel are less likely to own a home—28% are homeowners—than Royal Navy or Royal Marine personnel, of whom 42% are homeowners. Being an owner-occupier makes a lot more sense for Navy personnel, because their jobs are more geographically concentrated and because of the particular housing markets in the areas where they tend to serve. Does the Minister think that a review of accommodation might present an opportunity to allow the individual services greater autonomy to deliver the housing that works for their personnel? Can he tell us whether the Department will let the services make the case for what will work for them, not just apply the new model across the board?

There are real concerns about the consultation, but I am also keen to hear what the Department is doing to examine the potential impact of the options on both cost and retention. On cost, the MOD told the Armed Forces Pay Review Body that

“whilst maintaining the total subsidy that Service personnel receive, FAM would deliver around £500 million savings over ten years…this will be delivered primarily through reduced running costs, capital receipts and savings.”

I am interested to know how the Department got to that figure when so few details about how the FAM will work seem to have been finalised. The Department said that

“the Future Accommodation Model will not reduce the total pot of money currently used to subsidise housing”

and

“the rental allowance would be adjusted so that no one loses out if they are required to work in more expensive areas”.

If the total pot is not reduced, there will clearly have to be some redistribution of funding away from some types of accommodation and towards others, particularly if some options are considerably more popular than others. What analysis has the Department done of the likely take-up of different options?

Furthermore, if servicemen and women increasingly move into the private rented sector, there is a strong likelihood of costs going up for either the Department, service personnel or both. The private rented sector is getting more and more expensive, with Savills estimating that rents are set to rise by 19% by 2021. Would a rental allowance rise with rental inflation? Most military personnel spend about 10% of their monthly salary on accommodation compared with civilians, who spend 30% to 40%. Will families see their costs go up, or will the Department make up the shortfall? A significant feature of the future accommodation model is increasing home ownership among service personnel. Of the FAM’s potential options, “Owning away from work” and “Owning near work” both mention the Forces Help to Buy scheme. Will the Minister confirm that that scheme will be extended beyond 2018?

The Army Families Federation’s “Big Survey” 2016 found that, when asked what they like most about service family accommodation, 74% of Army families said that they like living close to other service families and being part of a community, and 66% said that they like having access to service community support facilities such as the Army welfare service and unit welfare staff. We know that living in military communities can be really important for military families, particularly when partners or parents are away.

Similarly, the Army Families Federation asked families about their experience of living off the patch in substitute service family accommodation, and

“many commented on the impact of not living in a military community, leaving them feeling isolated and unsecure, sometimes living in a civilian community that did not understand the issues and challenges of military life.”

My worry is that families would face a similar issue in the private rented sector. They would not have the support network that they have on the patch, and the potential impact of that on morale cannot be underestimated; Opposition Members would have real concerns about a move towards greater use of the private rented sector. Those families would also not have the security that comes with service family accommodation. With no guarantees of tenure, landlords can put a property on the market with no warning, and 86% of respondents to the Army Families Federation’s “Big Survey” raised that lack of guaranteed tenure as a negative aspect of renting privately.

Military families with disabled members would have to look for properties that were already adapted or which had landlords willing to make adaptations, whereas SFA properties can be more easily and quickly modified. Perhaps most importantly, given that the Government’s Housing and Planning Act 2016 does not set a standard that all rental properties are required to meet, what are the safeguards against military families ending up in substandard properties?

We know that affordable, accessible housing is a vital component of the offer made to military families. The Army Families Federation’s “Big Survey” 2016 found that, if service family accommodation was reduced in favour of a rental allowance, 30% of those surveyed would definitely leave the Army, and a further 46% would consider leaving. Both the Armed Forces Pay Review Body and the Centre for Social Justice, in a report written by the hon. Member for Canterbury (Sir Julian Brazier), acknowledge that the future accommodation model will necessarily reduce the level of benefits that military families receive now, and are concerned about the consequences for retention and recruitment. Any future accommodation model must balance not just costs but the need to ensure that personnel feel valued and continue to see the armed forces as an attractive career option.

I will try to finish, Mr Walker. I am concerned that the Government are attempting to rush through what could look like short-term savings without considering the longer-term repercussions on the families of service personnel or the future ability of our military to recruit and retain staff. I would like to see improved consultation with individual services on their accommodation needs, greater scrutiny on the costs of the roll-out of FAM and improved safeguards to ensure that no military families feel isolated or lose out financially as a result of these changes. I look forward to hearing from other hon. Members on this important issue.

16:44

[Sir Julian Brazier (Canterbury) (Con)]

May I say what an honour it is to serve under your chairmanship for the first time, Mr Walker? I congratulate the hon. Member for Manchester, Withington (Jeff Smith) on securing the debate and on his thoughtful and interesting speech.

The House, and indeed the Minister, have heard me speak several times before on this subject, so I will be fairly brief. However, it is worth saying at the outset that we face some quite serious manning shortages in two of our three services. The Army is now 4.9% under strength on paper and, looking at the large rise in the number of people who are still serving but who have been medically downgraded over the past five years, the underlying trend is worse. The Air Force, on paper, actually has a slightly higher deficit than the Army, but the Navy has managed to stay within 2% or so of its target. Retention is a very big factor, but so are justice for, and the welfare of, our armed forces.

I have been a passionate believer in opportunities for home ownership for the armed forces for my whole political career. The only time I went to see Margaret Thatcher when she was Prime Minister—which shows how old I am—specifically regarded a scheme for home ownership opportunities for members of the armed forces; I did ten-minute rule Bills and the rest of it. I will try to set out now why I think the vision for home ownership in the future accommodation model is not quite right. We are essentially talking about a move towards two models—not a complete move, but a move away from service family accommodation as the main model and towards a system of allowances and owner-occupation.

The hon. Member for Manchester, Withington has already mentioned some of the complexities involved. We are not proposing to do as the Australians do, which is a very expensive scheme whereby its Department of Defence takes on houses in a community and all of the legal risks; it does the tenancy, maintenance and all the rest of it, and people move in and out as if they were in service family accommodation. The proposal that has been put forward, as originally announced, would leave people in a position whereby, at most, the Ministry of Defence might find a property, but after that the tenant would be responsible for the tenure, the length of which might not correspond with the length of their tour. If it is a rolling tenure, they can be thrown out with two months’ notice, and if it is an annual tenure, they will clearly have problems with renewals because their postings will not always tidily fit the years.

Above all, on maintenance, whatever the issues now— I pay tribute to my hon. Friend the Minister for his progress in driving up the quality of what we are getting out of the maintenance contracts from CarillionAmey—the reality is that, with the private sector, people would be on their own. Like the hon. Member for Manchester, Withington, I have had some very bad constituency cases. For soldiers on operations, such as airmen flying in Iraq, if their family’s boiler breaks down or roof leaks and the landlord does not want to know, they cannot go to their commanding officer because Defence would not have a say in it.

The hon. Gentleman mentioned the importance of morale when troops are away, not only on operations but also often on extended exercises abroad and so on. When we still had Howe Barracks in Canterbury, I remember canvassing there and meeting a little boy kicking a football with his friends. His father had just been shot the previous night by a sniper in Iraq. The fact that he was there with all his mates, whose fathers were all subject to the same risk, was an important part of the supportiveness that the military estates provide.

I am also puzzled—I hope my hon. Friend the Minister will say something about this—as to whether we really are serious about moving people out into the community. The places we seem to be moving out of, such as Canterbury, Ripon, Chester and Maidstone, have affordable accommodation in the community and good employment prospects for wives, but we are expanding places like Catterick, and keeping open places like Lossiemouth—for at least 15 years or so—where there is very little of either.

This knocks on to the armed forces covenant. I pay tribute to the work that my hon. Friend the Minister has done on the covenant. One thing to come out of that is that we have persuaded councils to remove the local requirement in the case of service families for housing, so that if a serviceman or servicewoman is serving in an area and does not have a local connection beyond the fact that they have been posted there, they will still be eligible to get on the housing list when they come out. However, as we increasingly focus on super-garrisons, I cannot see how that can continue. Are we really going to say that the council in North Yorkshire, which covers Catterick, will have to take on soldiers from that very large—and further to be increased—base, and that that is suddenly a problem just for the ratepayers in that one small area?

I do not think that a move towards an allowance is a good idea. I do not have an ideological objection to having allowances for some fringe cases, so that we can manage the housing stock more efficiently, and some people would occasionally have to wait for a short time in a hiring on the way in. However, we have debated this before, and I cannot see how a needs-based allowance will deliver this for the officer corps.

We are critically short of young majors, and captains becoming young majors. They are roughly the same group as pilots coming up to the first breakpoint. These are the most expensive people in the armed forces in many cases and the people we most need to run the system. They are the people who, in many cases, have not yet started their family; they are perhaps married but do not have children yet. They will end up with a very small allowance, rather than good-quality married quarters that are compensation for the penalties of service life, including the lack of spousal employment in many cases.

As I said at the beginning, I am a passionate believer in home ownership. I certainly do not believe it is fair at the moment to have a situation where the Army, and to some extent the Air Force, are so gravely disadvantaged. I urge my hon. Friend the Minister to consider that promoting owner-occupation is not the solution for the Army and the Air Force. It means that if someone is posted in an area where there is no affordable local housing or housing on a scale where large numbers of people could buy it without driving the house prices up, they are then outside it.

If we start to reduce the subsidy for married quarters—as we increasingly did in the last review, when 81% of rents went up—but provide extra allowances for people who are owner-occupiers, the people in service life who suffer least from it are the very ones who will then get the most benefit out of it; one could mention a couple of examples. For example, if someone is living in RAF Waddington, which is one of a very small number of airbases on the edge of a big city—in that case, Lincoln—where there is plenty of spousal employment and plenty of affordable housing, they will be able to do very well out of it. If someone is living in Colchester, they will be able to do very well out of it; that is one of the few Army bases where that applies.

However, the people who are paying the extra rents and losing are those who are living in the Cattericks of the world or in Aldershot, where there is lots of housing but it is too expensive for them. It is the people living in remote places such as Lossiemouth or the instructors at RAF Valley and the infantry training school at Brecon. Those are crucial people who do not have affordable housing there, and who in many cases have very little opportunity for spousal employment. They cannot go down an owner-occupier route.

If we want to provide a fair route to getting a foot on the housing ladder, it must not be tied to owner-occupation. It has to be available for a mixture of different tenures, so that if someone happens to be living near a house and at one point in their career lives in it, they can let it the rest of the time. Unfortunately, if someone does that at present, they will be hit by the Chancellor’s new landlord tax when they let it.

I know that the Minister is starting to free it up a little, but the rules are still pretty dour at the moment. If someone has taken out a forces help to buy loan, they have to apply for permission to let the house to anybody. Looking at the small print, that is not a commercial risk I would want to take on. So yes to home ownership for getting a foot on the property ladder, but no to tying it to owner-occupation.

I want to reinforce what the hon. Member for Manchester, Withington said and what my hon. Friend the Member for Berwick-upon-Tweed (Mrs Trevelyan)—I am glad that she will be speaking shortly—has been saying for a very long time about the survey carried out on the future accommodation model. For my sins, I am a graduate mathematician, and I worked as a professional statistician. It cannot be said too often that a self-selected sample is not a sample. The problem is not that one fifth is not enough. It is easily big enough if it is a sample, but this is not a sample; it is a self-selected sample, which is very different. If only one fifth choose to fill in a survey, they are not representative. Any polling organisation —I know that one was involved in this survey—should advise that.

I have a print-out here of the first page of the survey website. After the note on privacy at the beginning, the very first words read:

“Service personnel are dissatisfied with the current accommodation system and it is becoming unaffordable, so the MOD is thinking about accommodation options for the future—the Future Accommodation Model.”

From the word go, the scene has been set to encourage people to support change. The current option is not actually given as an option anywhere. There may be more, but on flicking through quickly I found no less than 10 references to opportunity for home ownership. However, nobody says that the number of postings that are near affordable housing will be reduced; that is not mentioned. Nor does it tell people that there will be an extra tax if they buy a property and let it.

Group after group have hints that they will get extra allowances out of this. We are told that it will be extended to the unmarried. There is a very strong case for that, but will it include children from a previous relationship? It will become very expensive if it does. That is not made clear, but that is one group of people to whom it could apply. There is a hint that people might get more help with their mortgages. As we go through, it is suggested that more money may be available for area after area. It does not actually spell out that if the thing is to remain affordable, we will end up potentially with higher rents and other issues for those who are still in married quarters, unless money can be found elsewhere. There is just one comment at the very beginning about this being within a fixed budget. As we go on, we can see why more and more people thought this was nirvana coming.

I will end by saying that I have the highest respect and regard for my hon. and gallant Friend the Minister. We worked together, which I very much enjoyed. I know he is deeply committed to the armed forces. Indeed, he has served for nearly 30 years in what was the Territorial Army. I share his vision that we need to find routes to home ownership for people in all three services; there is a perfectly good one for the Navy at the moment. However, I urge him to think again about whether owner-occupation is the right way for the Army and Air Force and to ask himself whether moving towards a needs-based allowance and away, in many areas, from SFA will maintain a happy and effective Army and Air Force.

16:58

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Manchester, Withington (Jeff Smith) on securing this important debate.

Living arrangements are an eternal dilemma for those who choose to serve in our armed forces. On the MOD side, that has a huge impact on recruitment and retention of those who choose to serve. The very sacrifices of that service are underlined by the unique challenges to personal and family lives presented by frequent moves, long periods deployed away from home and rigid working hours. Ensuring that that sacrifice is met appropriately by the Government they serve is imperative.

The Scottish National party supports much of the future accommodation model in principle, but, a bit like in a Gordon Brown Budget of old, the devil is always in the detail; I am sorry, but an election has been called. The current Government also have an attachment to allowing the private sector to profit from tasks that are not naturally relevant to the free market. The point was well made by the hon. Member for Canterbury (Sir Julian Brazier).

I hope that the MOD does its utmost to provide for armed forces personnel comfortable and appropriate accommodation that is flexible to their needs and those of their family. However, it is also incumbent on Members of this Parliament and of the next Parliament to provide the scrutiny and accountability that is applied to the delivery of this model to ensure that the mistakes of the past are not repeated and that sufficient investment is made in the estate as a whole. We welcome the provision for flexibility in the future accommodation model. I hope that the MOD prioritises working with personnel and their families, along with relevant experts in the field, to explore ways of increasing the effectiveness of its overall delivery.

As I said at the start, the unique pressures of military life mean that pastoral care and stable and fit-for-purpose accommodation are the foundations of strong morale among the men and women who serve in all three armed forces. An army may well march on its stomach, but it fights for something to come home to, and the Government must provide that.

Just as the armed forces have moved with the times in areas such as the role of women and minorities, so they must move away from the entirely rigid forms of accommodation that were previously the norm, not just to maximise their offer to serving personnel, but to fulfil their responsibilities as a decent employer. It is therefore welcome that the future accommodation model highlights the fact that

“the accommodation allowance of tomorrow will be provided based on…need, regardless of age, rank or relationship status”.

I hope that that is a sign that there is a move towards a more equitable system for all.

However, that is not to say that there have not been problems with the application of the model up to now. As MPs, we must shine a light on the worst practices in the delivery of accommodation across all three services. The Public Accounts Committee found last June that CarillionAmey was

“badly letting down service families by providing them with poor accommodation”.

Some 5,000 complaints were made by service families in just two months of last year alone, according to The Guardian. As a member of the Select Committee on Defence, I have enjoyed visiting bases throughout the UK and Scotland, but this is one issue that continually comes up, with similar enough examples occurring to indicate a pattern across all the accommodation that has been provided. It might be easy to dismiss some complaints as inevitable, but we should take the warning from the Public Accounts Committee that

“frustration with the failure to undertake small-scale repairs may be driving some highly trained personnel to leave the military, wasting the investment made in them.”

Given the state of recruitment in some aspects of the military services, we cannot afford to ignore that situation. It is a catalogue of errors for which the ultimate sanction for CarillionAmey must apply. Hearing that the Minister is considering withdrawing the contract if the company does not continue the marginal improvements that it has made recently is welcome.

I am not sure whether service personnel and their families will have much good to say about CarillionAmey, but it is vital that the Government continue to move forward with a wide-ranging and worthwhile consultation of those who use the accommodation most. Countries such as Denmark and the Netherlands have a much more holistic approach to supporting personal and family choices in the military. I can only hope that this is an opportunity to move towards a similar system in the UK.

Ultimately, the armed forces must represent the society that they protect in all its diversity. There must be a solid and sustainable offer to people from all walks of life. That begins with a flexible approach to accommodation and the necessary investment committed in full. The Minister can be assured that those on the SNP Benches today and, we hope, in the next Parliament will continue to hold him to account on that point.

17:04

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It is an honour to follow the hon. Members who have spoken. In particular, I thank the hon. Member for Manchester, Withington (Jeff Smith) for bringing the debate to the House. As colleagues know, this issue is very close to my heart. It has become, unwittingly, something of a passion for me, because military families have regarded me as the person to come to with their issues. It is lovely to hear filtering through to the national consciousness all the work that we did last year through the Public Accounts Committee and the National Audit Office about the problem of accommodation that just is not good enough for those families’ needs.

Looking specifically at the future accommodation model, I come back to the question that I raised with my hon. Friend the Minister before Christmas: is the survey good enough to work up a policy from it? My hon. Friend the Member for Canterbury (Sir Julian Brazier) made the point—we raised this issue at the time—that it was a leading survey. It was predicated on driving answers that could only say, “I like one of the four new options.” It did not offer those who are not yet married, those who are married and do not have children and those who are married with children and have served for 20 years plus, who have been through the gamut of the CarillionAmey experience—good and bad, as it often is—the opportunity to say, within the set of four options, “Actually, what we have now is the best option. Although the house is rubbish, the plumbing is rubbish and the windows don’t shut properly, it is still the best option.” That was not in the survey and therefore the Ministry lost the confidence of all the armed forces at that point.

Those who completed the survey did so with a heavy heart. They filled in that blank box, but the Minister has not released the information from that. I will continue to press the Department to release all those data. The excuse given is that that might identify people. Well, we have seen every Department ever remove, with a black pen, things that might identify people. Families who filled in that box would like to see the data published, so that they know that the Department has read and is taking seriously the endless comments—I have seen many of them, because people sent them to me—that said, “But we don’t like any of those four. We would like to stay in service family accommodation, however rubbish it is, on patch, in the community where it is provided.” I will therefore continue to press the Minister to think about how that information could be published in a way that does not put any individual at risk, and to question whether that survey, in its extremely biased and leading form, was a good enough basis on which to set policy.

There are certain key concerns that families continually raise with me. For instance, will the allowance be taxable? Perhaps it will not be initially, but does not the Treasury always end up finding its way around allowances? There is a real sense of anxiety about the lack of clarity. Will the allowance be adequate? As my hon. Friend the Member for Canterbury said, the cost of housing changes dramatically depending on where people are posted. I understand that the Department is moving towards looking at FAM in two streams, in terms of both mobility and stability. I am very pleased if that is the case. I hope that the Minister can explain to us whether we are now looking at two different types of FAM package for those who have different needs. Those who are in the RAF and will always be based in one part of the country, where their families like to be, will have a different perspective on how this might work for them.

The deepest anxiety, which families raise continually, is: “If we are expected to rent a house or buy a house”—it will be probably be to rent a house—“what if we then move?” As so many Army wives in particular say to me, “Is it so wrong to want to actually live with my husband? Sorry, but am I supposed to be dumped somewhere in Birmingham while he goes off and does stuff? I want to live with my husband. My kids want to see their dad at the end of the day.”

This is particularly relevant to Army families. Unless those personnel are deployed abroad on long postings, they go off on exercise for a few days or a few weeks at a time. They are fundamentally living on patch and taking part in family life. The situation is not the same for the Royal Navy, whose personnel deploy for six to nine months at a time. There is a real concern, particularly among Army families, that it is not understood that this scheme will not support the family unit, but that is vital. As the hon. Member for Dunfermline and West Fife (Douglas Chapman) said, family life is what keeps soldiers, sailors and airmen fighting abroad for their country. They do so knowing that their family is back here; there is a real purpose to their efforts on our behalf.

Another area of real concern that I would like to raise with the Minister is how the children will cope—or not cope. My hon. Friend the Member for Canterbury has already raised the question of nursery provision and of schooling. We battle on, and the Minister is very supportive in relation to individual cases in which children cannot find a school place when their parents are moved at short notice. That is difficult. Let us say that children are placed, for the purpose of stability, with their non-serving parent somewhere away from where the families are, in a non-military environment. We are seeing already too many cases in which the schools do not know how to support adequately those children whose parents are serving in the military. Quite a few, and I imagine there will be more, now have two serving parents. Those schools need resources, support and understanding.

In my constituency, in the village of Longhoughton, which is next door to RAF Boulmer, we have a primary school that is 80% military children. The headteacher is extraordinary in the way that she adapts the teaching to the children’s needs. She has a direct relationship with the commanding officer of RAF Boulmer so that she knows what is going on. Those children can be well supported, their education can be maintained and stability can be provided even though their parents are doing really difficult jobs. An awful lot of them are coming and going to the Falkland Islands, which is not round the corner—they are off on a long old journey. Teachers who are within the military framework and have lots of military children can provide the stability that those children really need, but if a single child is in a school nowhere near a military establishment we have real problems and see cases of the inability of school teachers to really understand how best to support such children. That is a key area.

Again, our boys and girls will serve our nation and protect us—they love their jobs, are extraordinary people and take incredible risks—but if they feel that their families are not being looked after while they are away serving, they will leave the service earlier than we would wish them to or need them to. We have also invested heavily in their training and, as my hon. Friend the Member for Canterbury said, our numbers are still low. It leads to the question of retention risk and whether the Department has actually done the value-for-money assessment of whether this policy will have a serious impact on retention. All the evidence I see—anecdotal and in more detail from the survey results that have been published—indicates that this is just not robust enough.

We cannot afford the risk of greater loss from that cohort in the middle in particular. They may have filled in the survey and, at the moment, have no kids and quite like the idea of being able to buy their own home—it all sounds relatively rosy in the garden—but if in two or three years’ time they have children and suddenly find that it is really difficult and the framework the Department offers through FAM is not robust enough to support them, we will lose them and that investment. I really challenge the Minister to make sure that we have done the proper value-for-money analysis of whether this is the best way forward in terms of the housing investment we make for those families and future families, so that we do not get this wrong.

On the positive side, because I am hugely supportive of what the Minister does in a very difficult environment, we have seen a move forwards. I was at RAF Boulmer last week catching up with my local team. The move to put into the local rented market houses within service family accommodation that are not presently lived in by service families is interesting. It is starting to happen at RAF Boulmer—the Minister might want to come and talk to them—and is working well and gives flexibility.

The key is to remember that families move. Interestingly, at the moment Boulmer has quite a lot of single young men and two single young women—they are in the mess in the barracks—but if two or three of them were to move and two or three new families to arrive, family housing will suddenly be needed. That continuing fluidity will always be needed. The concern is that if we rent out too much service family accommodation, we will not have the fluidity that we need as individuals move around the country as they are posted. I ask the Minister to bear that in mind, although I support the idea that those houses should have someone in them. That is a good idea because, as all the work we have done with CarillionAmey and its efforts have shown, if a house is left empty, it deteriorates. We need to invest in them, either by putting people in them and making sure that the kitchen functions and the plumbing works, or by making sure that they are lived in and supported with a CarillionAmey contract, which works. It is getting better—I definitely have less casework than I used to have, so that is good news—but we need to continue to watch over that.

I will leave two questions for the Minister. The conversation suggests that three pilots for FAM will start next year. I think we would have greater confidence that the Department is listening and making progress if we were to know early on where those are likely to be—which military groups are likely to be asked to test this out—and how long those pilots are likely to run before anyone else is asked to move under this unknown and anxiety-causing part of the Ministry of Defence’s proposals.

17:14

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to be called to speak in this debate, Mr Walker. I congratulate the hon. Member for Manchester, Withington (Jeff Smith) on raising this issue. The fact that so much is happening elsewhere in the House explains why the numbers are small for this debate; none the less, the quality of the contributions has been exceptional and everyone has contributed thoughtfully. I am pleased to see the Minister in his place. Every one of us respects the Minister because of the personal service he has done. We understand that, and he probably understands where we are all coming from as well. We look forward to his response, but we also encourage him—in a nice, gentle way—to move towards where we want to be and where he knows we want to be on this. That is the important thing. It is always good to have a Minister in place who understands the issues and can respond to them.

I represent Strangford, which has a very proud service history. Service in uniform is the norm for many in my constituency. I wholeheartedly support those who have served in the past and who are currently attempting to establish a veterans’ centre in Northern Ireland, although that is a topic for another day. The Minister will know about that issue because he had the occasion to meet some of those people a short time ago.

We all know the background to this debate. As hon. Members have indicated, armed forces personnel are entitled to service housing depending upon their circumstances. Some 40% of personnel live in single living accommodation and nearly a third live in service families accommodation. I am particularly taken by what the hon. Member for Berwick-upon-Tweed (Mrs Trevelyan), who preceded me in this debate, said about the demand for education. There is also the demand for health. When we look at accommodation, a lot of other things have to be bolted into that process. This is not just about accommodation and property; it is also about schools and health. All those things come together.

I am fortunate to have had the opportunity to be in the armed forces parliamentary scheme—I did three years with it. That gives us a chance to go and see accommodation and meet the soldiers. When we met the soldiers we got what they really thought, then we met the officers and they perhaps gave a different opinion—somewhere in between was where the mix and the balance was. There was one thing that those soldiers told us over and over again wherever we were meeting them in their accommodation and on exercise. We always asked what the issues were. One of the major issues for those looking at the long term was pensions, but for those who were family-orientated it was accommodation. The issue of accommodation came up again and again, and I believe that indicates its importance to those people.

The Government committed to making new accommodation offers available during the 2015 strategic defence and security review to enable more service personnel to live in private accommodation and look to home ownership. I have a certain sympathy for those who want to gain the opportunity of home ownership and was not aware of the tax that could apply—the hon. Member for Canterbury (Sir Julian Brazier) referred to this—for those who buy accommodation and then rent it out. There is a tax on that, so perhaps the Minister will address that in his response. The future accommodation model has been touted as being based on need, being more flexible, reflecting modern demands and providing personnel with more choice over the type of accommodation they live in, the location and the help if they wish to buy their own property or rent privately.

I commend the Government, and the Minister and his Department in particular, for the Forces Help to Buy scheme. I believe it is a good scheme if done correctly. Many service personnel have chosen to pursue it, and they should have that opportunity. By the way, an issue that came up during my travels with the armed forces parliamentary scheme over the last three years was that of having somewhere to put down roots and the accommodation that personnel wanted. Again, I believe that the Government and the Minister’s Department have moved at least to address some of those issues. I have been made aware that some 9,000 personnel have already bought their own home via the Forces Help to Buy scheme—that is great news—but my concern is that that is nowhere near the number of people who wish to secure their accommodation in the places where they want and that more help is needed. I look to the Minister’s response for how we address those issues and the needs of service personnel. That is what our troops and their long-suffering families need, and that is what I am calling for.

In my three years in the armed forces parliamentary scheme, we visited many camps, mostly RAF, across the east coast of England, as well as in Catterick and Cyprus. The accommodation in some of those places was not up to standard, although the Ministry of Defence was taking steps to address it. It was not just about whether the kitchen worked but about leaking, draughty windows and other bread-and-butter issues that we deal with every day among our constituents. Those issues must be addressed.

When I read the Committee’s report, I was dismayed to see that accommodation remains the issue most reported by far to the families federations. I echo that opinion. The report asserts that the national housing prime contractor is still not delivering to the standard expected and should be held to account. CarillionAmey’s performance this year has been so inadequate that the Public Accounts Committee considered that families had been let down and were not getting the service that they had a right to expect. Despite some statistics showing recent improvement, the lived experience of too many service family accommodation occupants remains poor, causing stress and frustration. On top of that, it is difficult for families to live apart while service personnel are on duty in other parts of the world. Separation has an impact on families that can lead to other difficulties. The effect on children has been addressed, but there is also an impact on wives at home, and we must consider that forcefully.

If repair services are not at contracted levels, we must question whether the levels set by the MOD are good enough. Furthermore, although we agree with the broad principles and aims of the combined accommodation assessment system, the decision to implement charge increases for most occupants at a time of such poor performance on maintenance was inappropriate, and the roll-out of the CAAS in the UK was far from successful from many families’ perspective, due to poor communication and a complex appeal process.

I should declare an interest, in that I served in the armed forces for 14.5 years as a part-time soldier in the Ulster Defence Regiment and the Royal Artillery. The bureaucracy in the Army and the services is mind-boggling at times; my goodness, the appeal process is complex. On poor communication, whenever the opportunity arises, we should ensure that we communicate with personnel and families on an accountable basis. It is totally unfair to charge for accommodation if it is not up to standard. I witnessed some of the accommodation issues that I have mentioned. I understand that there has been a direct commitment to address those issues, which is good news.

The report is a damning assessment. Clearly, urgent changes must be made for the sake of our armed forces families. I understand the need to reduce the estate. I remember the Palace barracks in Holywood, where some of the accommodation, over the years, could not be lived in, because it was not up to standard. That needs to be addressed. The Abercorn barracks in Ballykinler are a separate issue, on which the Minister knows my opinion. I believe that that accommodation should be retained by the estate. That is a different issue and not for this debate, but just to put it on record, the MOD should retain at least ownership of that accommodation. Should we have to resort to taking it over again, we can do so.

More can be done on accommodation. We have a duty of honour to provide a home life for those who serve us by giving up their home and risking their life. What has gone before is not acceptable. We must do better, and I remain to be convinced that this model is the way to go. I look to the Minister for assurance. We need more than a hint of help, to use the word used a short time ago; we need concrete proposals that bring change and look after our service personnel.

17:24

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

It is a pleasure to serve under your chairmanship, Mr Walker. I thank the hon. Member for Manchester, Withington (Jeff Smith) for securing this important debate and putting accommodation for service personnel and their families under scrutiny once again. I feel that a certain announcement made this morning may overshadow what is happening here, but that should not diminish the importance of the message that we are sending out. I absolutely agree with the hon. Member for Strangford (Jim Shannon) that despite the numbers in attendance at this debate, its quality shows how important the issue is to every single Member of this House, regardless of political party.

We as elected politicians have a responsibility—indeed, a duty—to do everything that we can to ensure that our service personnel and their families get the homes that they deserve. As the UK Government are preparing the accommodation model, it is only right that the accommodation should be seen to be comfortable and of an appropriate standard and that the model should be sufficiently flexible to meet our military personnel’s needs and those of their families.

The hon. Member for Manchester, Withington discussed the 2015 strategic defence and security review, and he was right to question the practicalities of supplying suitable and affordable housing in areas where it is needed. It is an issue that must be addressed. He also highlighted the failings of the future accommodation model survey and asked whether it could be carried out.

That has been a recurring theme throughout this debate. Several hon. Members have mentioned the future accommodation model survey. The hon. Member for Berwick-upon-Tweed (Mrs Trevelyan), who has been a great champion of our armed forces personnel, spoke out about the faults in the survey, describing it as biased and leading. The hon. Member for Canterbury (Sir Julian Brazier), the experienced statistician among us—that was news to me, but it is always good to have expertise in the room—highlighted the serious problem that the survey was entirely self-selecting and so leading in its questions as to render it almost meaningless.

The hon. Gentleman also questioned the wisdom of moving personnel out of established military communities into areas where housing was not as suitable and perhaps not as affordable, and where job opportunities for spouses were not as plentiful. He has given us much to think about, and so has my hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman), who said that housing is an eternal dilemma for those serving in our armed forces. He was right to say that we in the Scottish National party support in principle much of the content and spirit of the future accommodation model. We will support the MOD in providing comfortable, appropriate accommodation for our armed forces personnel that is flexible enough to meet their needs and those of their families.

We welcome the announcement on the Government’s website that the new future accommodation model will be fairer than before,

“bringing more choice and helping more people get the housing they need, irrespective of age, rank or relationship status.”

Some might argue, with some justification, that it is remarkable that that was not already the case, but in the spirit of “better late than never”, we are pleased that it is happening now.

We welcome the acknowledgement that the current system simply does not work for many families. That recognition is extremely important. The Government must understand that that model’s level of understanding cannot apply if the new model is to succeed. The Government’s commitment to providing flexible accommodation through the new model is broadly welcome. If it can become a reality, it will undoubtedly lead to genuine improvements.

However, I say to the Minister that in order to do that, it is vital for the MOD to work directly with our service personnel and their families. It must also speak with experts in the field to ensure effective delivery. Every opportunity to consult and review must be taken, and the key to that must be engagement with the people at the sharp end: those for whose accommodation the model is being established. We welcome the proposal, as I have said, but we also want guarantees that the utmost scrutiny and accountability will be applied to the delivery of the model to ensure that the mistakes of the past are not repeated.

All too often, the Government are behind the curve in planning, particularly now and particularly for issues that relate to our service personnel and their families. The needs of our service personnel and their families should be a key priority. Planning for achieving the right accommodation model must include military personnel and their families in a genuine and meaningful way. When the Government published the most recent SDSR in 2015, they committed to developing such a new model to

“help more Service personnel live in private accommodation and meet their aspirations for home ownership.”

As we have heard, the model aims to deliver, from 2018, an approach to accommodation that is more flexible and gives better value for money, both for service personnel and for the MOD.

It is right that the Government recognise that change is needed. In 2016, The Guardian reported:

“Almost 5,000 complaints were made by service families between March and May this year alone.”

Service families are already under pressure and already have to sacrifice an awful lot. They really should not have housing complaints added to the list of pressures that they suffer. It beggars belief that, as the hon. Member for Strangford pointed out, service families have had to endure a housing repair provision that is so poor that the Public Accounts Committee has had to intervene to publicly criticise CarillionAmey for having

“failed to meet its key performance indicator of completing 95% of its tasks within the agreed response time.”

Indeed, with just one exception, it failed to meet that target every single month between December 2014 and January 2016. That is simply not good enough. Our service personnel and their families deserve much, much better. The Committee stated unequivocally that

“CarillionAmey are badly letting down service families by providing them with poor accommodation”.

As if the cost to the individual were not enough, let us consider the cost to the country as a whole. As the Committee has made clear,

“frustration with the failure to undertake small-scale repairs may be driving some highly trained personnel to leave the military, wasting the investment made in them”

by the country. Can we really afford to lose highly skilled, highly committed military personnel for what is essentially the want of a washer? The hon. Member for Canterbury made the same point when he spoke about retention of personnel.

Like many other hon. Members, I have many serving personnel in my constituency of Argyll and Bute. Their families make an enormously positive contribution to our local community, day in, day out, and they deserve better than what they are getting at the moment. Let us never forget the jobs that our service personnel do, which are highly skilled, highly stressful and potentially highly dangerous. Trying to maintain normal family life in such circumstances can be extremely difficult, because their families have to move around, they have rigid working hours and they may be away on long periods of service.

This debate is an opportunity to thank our service personnel and their families. It gives us a golden opportunity to do the right thing by them and provide them with a proper accommodation model. Doing so would provide the reassurance that the MOD is learning from the mistakes of the past and would send a very useful signal to other sections of the community from which we hope to recruit. As my hon. Friend the Member for Dunfermline and West Fife said, we ask so much of our armed forces personnel, so the least we can do is give them something worth while to return to.

17:34

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Walker. I thank my hon. Friend the Member for Manchester, Withington (Jeff Smith) for securing this debate, for making a very powerful case and for his questions to the Minister, which I hope will be answered today. It is also a pleasure to follow the hon. Member for Argyll and Bute (Brendan O’Hara).

I am sure we all agree across the Chamber that our armed forces need to evolve constantly to meet the security situation of the day, whether that is in their make-up, their equipment or their basing. Labour welcomes the chance to re-examine how we provide accommodation to our service personnel and consider how to make the offer as attractive as possible in order to keep encouraging our best and brightest into a career in the forces. It is vital that the wellbeing of our servicemen and women is a top priority in the changes made, but I am concerned that the future accommodation model focuses more on savings than on what is best for our personnel.

The hon. Member for Canterbury (Sir Julian Brazier) raised concerns that mirror those of my hon. Friend the Member for Manchester, Withington. The hon. Member for Dunfermline and West Fife (Douglas Chapman) reminded us of the Public Accounts Committee’s findings on service family accommodation. The hon. Member for Berwick-upon-Tweed (Mrs Trevelyan) asked whether the survey was good enough and stated her opinion that it was a very leading survey with limited choice—I shall refer to that point later. The hon. Member for Strangford (Jim Shannon) highlighted the importance of this issue to us all and related his experience with the armed forces parliamentary scheme and his involvement with serving personnel.

To put the debate in context, voluntary outflow rates for our armed forces are at an historically high level, particularly for jobs with transferable skills such as engineering. In the 12 months to 31 January 2017, more than 7,000 personnel left the armed forces earlier than planned through voluntary outflow. It appears that the overall offer of life in the armed forces is becoming less attractive: this is the sixth consecutive year of pay restraint, national insurance contributions are going up and rents are rising under the combined accommodation assessment system. It is therefore more important than ever that service personnel feel valued and that they should want to join the forces and stay in them. I will return to that point shortly.

One of the most significant changes made to service family accommodation was the selling off of married quarters to Annington Homes by the Major Government. I was not a Member of the House in 1996, but I am sure that those who were will remember the debate about the sale. Under the deal, the Department retained the freehold, but Annington Homes holds a 999-year lease, with the Department renting the properties back from Annington Homes on a 200-year under-lease. The deal was met with opposition from the Labour Benches; the then shadow Defence Secretary, the former Member for South Shields, said:

“The deal is breathtaking in its short-termism.”

He also said:

“The Government have never seriously attempted to deny the fact that the sale was not concerned with the long-term interests of our service men and women: the scheme was concocted solely to raise finances for the Treasury coffers”.—[Official Report, 16 July 1996; Vol. 281, c. 952-953.]

I understand that a rent review is due in 2021, 25 years after the initial sale, and every 15 years thereafter. As a consequence of that review, as is usually the case, the rent paid by the MOD is likely to increase.

I am concerned that if the future accommodation model is not done properly, we may see history repeating itself and the Government further tying the MOD’s hands. We are now hearing reports that because of poor management of the defence budget to the tune of £1 billion per year over the next decade, the Secretary of State is having to consider cuts to the Royal Marines. The Department has said that the future accommodation model will save it £500 million over 10 years, but we need to see more detail before we can take it at its word.

What we know about the future accommodation model so far is that the Government are fairly clear that they want to get personnel into the private rented sector, as well as promoting more home ownership, but are unclear on the detail of how to deliver that. The proposals laid out in the survey suggest that four potential options will be available to service personnel, loosely structured around the idea of stability or mobility. My hon. Friend the Member for Manchester, Withington has already pointed out the need for transparency and much more consultation with service personnel; I completely agree, and I look forward to the Minister’s answers to my hon. Friend’s questions.

Our main concerns with the future accommodation model as proposed are the impact on service families and standards in the private rented sector, costs, and the knock-on effect on retention rates. In the future accommodation model survey, the most important factor in accommodation for service personnel was good quality: 97% ranked it as a top priority. All of us here are all too familiar with the question of standards in the private rented sector. While many landlords are good, there are also those who are not good, and we are concerned that there will be nothing to check standards, and that in some cases families may be forced to live in less than appealing conditions. There will not be the same access to maintenance and repairs that personnel have now, and while service family accommodation can be adapted for families with disabled members, in the private rented sector such families will have to find housing that has already been adapted or convince a landlord to adapt a house for them.

There is also the need for security of tenure in the private rented sector. Some 86% of respondents to the AFF survey stated that the lack of guarantee of tenure during a posting was either a negative or a very negative aspect to renting privately. I simply do not see how it can be workable to encourage families or individuals who need to be mobile to move into the private rented sector. In the event of a posting, the onus will be on personnel to find new rented accommodation. That may be in a place they have never been before, and there will likely be cost implications for ending tenancies early, which will have to be covered. The complications are seemingly endless.

As for cost, my hon. Friend the Member for Manchester, Withington pointed out that there are no details when it comes to costing, except for the saving of £500 million over 10 years that the Department told the Armed Forces Pay Review Body it expects FAM to deliver, primarily through reduced running costs, capital receipts and savings, while maintaining the total subsidy that service personnel receive. However, if nothing has been settled in terms of the model, how can the Department make such a projection? I would be extremely interested to hear from the Minster what type of model that figure was based on and how the Department came to it.

Finally, there is the risk that FAM poses to retention rates. As I have mentioned, voluntary outflow remains high and we need to continue to attract people into the armed forces. Subsidised housing is a significant part of the overall offer, particularly when we consider that housing is becoming less and less affordable across the UK. The AFF survey made it clear that if service family accommodation was reduced in favour of a rental allowance, 76% of those surveyed would either consider leaving or would definitely leave the forces. That should be of great concern to the Government. The combination of a number of factors has created “the perfect storm” for retention issues and if the Government do not get the accommodation model right, they risk exacerbating the situation to a point of serious concern.

In conclusion, we know that in the past the Conservatives have made some rash decisions when it comes to service accommodation and we are concerned that this could be yet another costly example of that, hitting both the public purse and retention rates. The primary focus for a new accommodation model should be a balance between what is good for the service personnel and what works within the Department’s budget. Service accommodation should not be the first thing that gets cut to try to balance the books. The Government need to show that they value personnel just as much as they value equipment, and show that that view is much more than just words and translates into policies that have the wellbeing of our servicemen and women at their heart. I look forward to hearing the Minister’s response and I hope that it will clarify some of the points that have been raised this afternoon about this very important issue.

[Mr Charles Walker (in the Chair)]

I call the Minister. Minister, would you allow the hon. Member for Manchester, Withington (Jeff Smith) two minutes at the end to wind up?

17:43

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

Mr Walker, it is a pleasure to serve under your chairmanship for what I sense will be the last time this Parliament, although we shall see.

I start, of course, by congratulating the hon. Member for Manchester, Withington (Jeff Smith) on securing this debate, which provides us with another vital opportunity to discuss the future accommodation model. It is vital because the welfare of our service personnel is the basis on which we build a world-class armed forces, able and willing to take on the threats and challenges of these volatile times. Getting this matter right is absolutely in all our interests. Let us be honest—we have not always done that.

As I have said previously, nobody is under any illusions that successive Governments’ records on service family accommodation in recent years have been an unqualified success. Indeed, issues with CarillionAmey, which several hon. Members raised today, have been well-documented. Nevertheless, I am grateful for the comments made by my hon. Friends the Members for Canterbury (Sir Julian Brazier) and for Berwick-upon-Tweed (Mrs Trevelyan), and others, which show that there is at least an acknowledgement that we have made progress in recent months. There has definitely been an improvement, but I am not remotely complacent. Much more needs to be done and I reaffirm my previous statement that if CarillionAmey does not perform on its contract, it will be replaced.

Equally, a number of detailed questions were put to me today and I will do my best in the time I have available to answer many of them. As ever, with some of the more technical questions, I will endeavour to write to hon. Members in the shortened timeframe we now have before this Parliament dissolves; I am sure that my officials will work especially hard to try to get those answers for me as soon as they can.

However, I will start by gently making just one point. The hon. Member for Manchester, Withington basically said that he felt this process was being rushed; I would argue that it is anything but. Absolutely no firm decisions have yet been made, and this debate is yet another valuable opportunity for colleagues from all parties to contribute to this process and influence it. We do not anticipate coming to any firm conclusions, or rather that the next Government will not come to any firm conclusions, until probably the end of the year, with a trial not starting until the end of 2018, and a move to a new model will probably not be completed for perhaps 10 or even 12 years. With respect, that is hardly a rush.

The focus of today’s debate is not the past but the future, and in particular our intent to ensure that, when it comes to service family accommodation, we move with the times in a way that is logical and beneficial for all. As our troops return from Germany and we look to rationalise our estate, there is an unprecedented opportunity for us to do just that, by taking the opportunity to modernise the way we provide housing for our people, making it fair, flexible, and affordable.

Our future accommodation model is the mechanism for achieving that goal. Its benefits are not well understood —I accept that—and there are many myths and misconceptions shrouding it. However, before I hopefully go on to debunk the most prominent of those, I should start by explaining why the FAM will be a vast improvement on what has gone before.

Equally, however, in response to the comments from the hon. Member for Strangford (Jim Shannon), I must say that I believe that across the House there is a will to provide a workable, practical and sensible solution for our armed forces personnel. Indeed, this may well be one of the last points of unity that we find over the next seven weeks as we head towards the excitement of the general election in 51 days’ time. As I say, there is a will to try to get this matter right and although, judging by his comments, my hon. Friend the Member for Canterbury may feel that we are on different sides of this argument, I am not sure that we are. This is all about delivering choice rather than prescribing to our service personnel what they will take. Also, let us not forget that some 20% of our service personnel opt out of the system and get absolutely nothing, which cannot be right.

First, I want to see a system that will be fairer, reflecting the societal norms of the 21st century rather than those of some bygone era. Let me give just one example. Currently, a married senior officer will be assigned a four-bedroom home, even if he or she has no children or other dependents, and will usually pay just £350 to £450 a month for it. By contrast, an unmarried member of the junior ranks, with a partner of 10 years and two children, is entitled to nothing more than a single bedroom in a block. How can that be right? If that service person moves out into the private sector to live with their family, it could cost them well over £1,000 every month.

The absurdity of this state of affairs becomes all the more apparent when one reads the testaments of the men and women whom it affects, such as the Royal Navy sailor who wrote to tell me how he cannot live with his girlfriend, even though they have been in a relationship for several years and have children together, or the couple forced to live apart because they are not married, or the father forced to live as a visitor with his own family. We cannot turn a blind eye to these situations any more. So, under the new model, we are committed to ensuring that provision is based on need.

However, FAM will not only seek to redress inequity but to be far more flexible than the current model, and flexibility is the key. The current model is failing to keep pace with modern life. What our service personnel want today—indeed, what they need—is choice and stability. They want to be given the choice of how to live, where to live, and with whom they want to live, and to be near the schools of their choice, to own their home and to provide their partners with stability and employment opportunities. Currently, however, our personnel must like what is on offer or lump it and, if they choose to go it alone, we cut the purse strings and they get nothing—no assistance, financial or otherwise, from the Ministry of Defence. That does not make sense and it needs to change.

We have made a start, through our forces Help to Buy scheme, which has so far helped more than 10,000 service personnel, but we have to go further. Under the proposals being considered as part of the future accommodation model, service personnel will be better supported to make their own decisions, and will receive our support regardless of where they choose to live.

The final point in this section of my speech is that the future accommodation model will be affordable. The current offer is inefficient and increasingly unaffordable. At present, we spend more than £800 million a year on accommodation, and that is set to rise, but a fifth of the personnel do not benefit from it. FAM will make savings by reducing management overheads, reducing further spending and stamping out inefficiencies. Let me make it clear—in case hon. Members are in any doubt—that savings will not be made through reducing the effective subsidy that personnel receive. This is about doing away with inefficiencies, such as the 10,000 or so MOD properties that currently sit empty. How can it be right for the taxpayer that we have those properties, all of which take money to maintain and currently serve no purpose because they are empty? We now try to rent them out when we can, getting an income that is reinvested, but we must keep a number of them empty, and rightly so, to try to always have ready what we say a service family should live in.

The intent is clear: we want a model that is fair, flexible, affordable and fit for the 21st century. That is our steadfast intention, but exactly how we get there is still being carefully considered and debates like today’s are feeding positively into that. To give just one example, the point has been raised with me before that even though we are moving to a system based on need there should be certain appointments that absolutely maintain a property: a commanding officer probably should have a property that goes with the appointment because of the wider needs of his role. We are looking at the various options to ensure that that is possible but, as I have said, at this stage no final decisions have been made. Nothing is set in stone. Ideas and plans will continue to evolve as we assess policy options over the coming months. Towards the end of the year we should be able to give more certainty about what the future policy will look like, but it will be important to continue engaging with service families to get the detail right, and we will eventually test policy in the real world with several pilots towards the end of 2018. I cannot at this stage give the exact details of what shape those pilots will take, but hope to do so shortly.

Crucially, our people will remain at the core of the decision-making process. We are listening, and will continue to listen, to service personnel, their families, family federations and other organisations. For instance, since we last debated FAM in Westminster Hall in October 2016, the FAM survey results have been published, with more than 24,000 servicemen and women responding and giving us their views on the model, indicating their housing preferences and needs. Hon. Members made some criticism of the survey in their contributions, and I shall attempt to address that, but it is interesting that this did not include cases in which the survey produced information that supported their points. None the less, I agree that it was a self-selecting survey and will be subject to response bias, but that has been recognised in our use of the results, which we have combined with many different sources of evidence. It is, after all, only one source of evidence. We tried to find a balance between giving enough information to inform a response and not putting in so much that we made it too complex. Crucially, I can say, as a statistician, that because of the number of responses, the survey gives a 99% degree of confidence that broadly—[Interruption.] I can see that my hon. Friend the Member for Canterbury is itching to intervene. I have provoked him.

[Sir Julian Brazier]

A sample of 24,000 would give an exceptionally high level of confidence but, as I stressed earlier, this is not a sample—it is a self-selected group. I am sorry, but the claim of 99% just does not stand up.

[Mark Lancaster]

My hon. Friend has made that point twice and I take it firmly on board. I will respond only by saying that the survey is one of several sources of evidence we are using.

It is because of the views of service personnel and suggestions made in this Chamber last October that we have looked in more detail at how personnel should be supported in the private market, at how service families accommodation might be a bigger part of the future model and at how we assess the potential impact on retention and operational effectiveness—matters raised by several hon. Members. Later this year, we will visit garrisons, air stations and naval bases to talk to service personnel about the model, to ensure that they understand what it could mean for them, to inform them of the opportunities that lie ahead and to listen to their feedback.

Much remains fluid as we continue to seek the most expedient solution for all involved but, despite our best intentions, that fluidity has resulted in speculation, concerns and incorrect assumptions that must be quashed, and I turn briefly to those now. First, we are not getting rid of all service family accommodation and single living accommodation. That could not be further from the truth. Single living accommodation enables rapid mobility of personnel, offers good value for money and delivers a unique service not seen anywhere else on the private market, so we will be keeping it. Likewise, we recognise and value the additional support to service personnel that service family accommodation provides. Decisions on the quantity of retained service family accommodation will be based on the local private market, demand, value for money and operational needs. Those factors will be at the forefront of our minds during the decision-making process. I encourage all hon. Members to go and look at the nearly 1,000 homes we are building around the Larkhill area if they want to see for themselves our commitment to service family accommodation.

Secondly—I said this earlier, but it is a point worth repeating—the £400 million effective subsidy that service personnel as a whole receive will not be cut. Thirdly, just as we do now, the MOD will shield our people from variations in rent across the country. From north to south, be it in Catterick, Northolt, or Andover, service personnel will have access to subsidised accommodation, and will make the same contribution for the property regardless of the geographic location and of whether it is service family accommodation or a private rent. In practice, that means that a service person in Yorkshire will contribute the same as one in Wiltshire, with the difference being covered by their allowance. What is changing is that we will move to a model that, for the first time, provides support to service personnel both in and outside of the wire.

We have had a well-informed and useful debate. Whatever our opinions on the finer points at stake, we should not lose sight of the overriding fact that we all share the same fundamental desire to ensure that those who serve us are well provided for. I reassure hon. Members that their views, and those of their constituents, will continue to shape our plans. Working together, I have no doubt that we will engineer a future accommodation model that will provide our people with the greater choice and stability they expect, deserve and need; as I said earlier, something that it is in everyone’s interests to get right.

17:49

[Jeff Smith]

I thank the Minister for his comments and welcome the fact that he said that this is an ongoing debate and that he is prepared to listen to the concerns. This is an opportunity to influence. I urge him to reflect on the fact that the concerns have come from across the House. They are shared concerns, and I hope he will take that on board.

There are a number of questions that, understandably, have not been answered, and I look forward to receiving some written responses. I thank hon. Members for their contributions and for bringing their experience and knowledge to this important debate. As the Minister said, the debate will continue as we attempt, I hope with some consensus and collectively, to provide a solution that will work for our armed services personnel and of which we can all be proud, just as we are proud of their service to our country.

Question put and agreed to.

Resolved,

That this House has considered the Future Accommodation Model.

Long-term Health Problems and Work Outcomes

Tuesday 18th April 2017 Westminster Hall

[Mr Philip Hollobone in the Chair]

[Mr Philip Hollobone (in the Chair)]

Will Members not staying for the next debate please be kind enough to leave quickly and quietly? We now come to the important subject of the role of employers in improving work outcomes for people with long-term health problems.

18:00

[Craig Tracey (North Warwickshire) (Con)]

I beg to move,

That this House has considered the role of employers in improving work outcomes for people with long-term health problems.

It is a pleasure to serve under your chairmanship on this very interesting day, Mr Hollobone. The Prime Minister has promised that her Government

“will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”

Today, I intend to focus on what that means for employers of people with long-term health problems and disabilities. In all the very welcome debate about how the Government can best achieve their aim of halving the disability employment gap, the critical role of employers in supporting people to stay in work and, more positively, to reach their potential has been relatively neglected. “Improving Lives”, the Green Paper on work, health and disability, is an excellent foundation to start filling that gap. The Department for Health and the Department for Work and Pensions are to be commended for working in partnership and shining a light on the role employers can play in preventing people from falling out of work through ill health.

Some 83% of disabled people acquire their disability during their working lives. We all know friends, colleagues, family members and constituents who had a job and then suffered a serious health problem. We have seen how, once the shock of diagnosis starts to dull, people quickly ask themselves whether they will be able to keep working and how they will support themselves and their loved ones. When ill health stops someone from working long term, getting back to work can be a key milestone in their recovery and a big step towards them feeling themselves again.

Effective support from employers can make an enormous difference to people’s physical, mental and emotional health and to their chances of returning to work. But sadly, the reverse is also true. Many employers do not create a culture where employees can even disclose health problems. Groundbreaking campaigns such as “Time to Talk” and those run by Heads Together have done much to make it easier for people to speak about their mental health, for example, but too many people are still too scared to speak to their employer and too few employers are ready to respond in the right way.

Research by the Mental Health Foundation last year found that 45% of working people with a diagnosed mental health problem had not disclosed it to their employer in the past five years. Of those who had told their employer, only half reported mainly positive consequences. As one of the people who took part in the research said,

“no one is able to say, ‘I have a mental health problem and I can’t come to work today’”.

As co-chair of the all-party parliamentary group on breast cancer, I have heard at first hand how hard many people find it to tell their employer that they have cancer. I suspect that may be even more of an issue for those types of cancer that are more common among men. Research by the charity Maggie’s found that one in five men with cancer find it so difficult to tell their employer that they put it off until they have to leave work to seek treatment. One in 10 do not tell their employer at all. If employees do not feel they can disclose a health problem, employers cannot hope to put in place the right support.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on bringing this important matter forward for debate. Does he agree that one way of doing it would be for the Government to create an index of employers based on how they support staff with disabilities and health conditions? Companies could be encouraged to consider how best to promote disability inclusion. Further, the Government could look at how employers’ legal and tax obligations could be changed to incentivise them to engage more proactively with the health of workers.

[Craig Tracey]

The hon. Gentleman is right, and I will touch on tax incentives later. There are lots of opportunities there. The Green Paper is a good and innovative start in looking at how we can move things forward.

The earlier those open supportive conversations between employers and employees happen, the more effective the support will be. Well-managed employees can focus on their recovery and are more likely to successfully come back to work when they are ready.

[Jo Churchill (Bury St Edmunds) (Con)]

By 2035, one in two people will get cancer. In the two short years I have been in Parliament, I can think of perhaps half a dozen colleagues across the House who have had cancer. Cancer is often defined by its survivorship, such as the great work that Macmillan does. Does my hon. Friend agree that a more open dialogue allows people to be helped through that illness—which is not necessarily a long-term condition or a terminal illness—so that they can return to work and enjoy fulfilling careers and supporting their families?

[Craig Tracey]

I thank my hon. Friend for that intervention. I know she speaks from experience. She is a few steps ahead, mind-reading my speech. I will come to the valid point she makes, but I definitely agree with her comments.

Obviously such conditions can have many knock-on effects for families. When someone gives up work for health reasons, their partner will often cut back or stop working to become their carer. That can double the financial impact. Employers clearly have an enormous role to play in the health and working lives of disabled people and those with long-term health conditions. As the number of working people living with chronic health problems grows, the impact employers have on the population’s work and health outcomes—both positive and negative—will grow, too. Around 21 million people of working age in the UK will have at least one long-term condition by 2030. By the same year, the number of working-age people with cancer is set to increase from the current figure of 750,000 to an estimated 1.7 million. Ensuring that employers retain as many of those people as possible and support them to progress their careers will also help the Government to tackle some of the other big challenges facing our society.

The Government’s report “Fuller Working Lives: a partnership approach” and the recent independent review of the state pension age by John Cridland are both responses to our ageing workforce. Demographic change is sometimes presented as a problem for the long term, but we need to confront some implications now. In five years’ time, there will be 763,000 more people in the UK aged 50 to 64 and 292,000 fewer aged 16 to 49. One in eight people stop working before reaching the current state pension age due to ill health or disability, and raising the pension age will only increase that figure. It is inevitable that as people age, they are more likely to have health problems—half of over-50s have a long-term health problem—but it is not inevitable that so many should be forced to give up work.

More flexible and understanding employers would retain a greater amount of those people, and it would also mean that people would retire with bigger pension pots. The DWP has said that if the average earner worked to 65 instead of 55, they could have more than £200,000 in extra income and increase their pension by 60%. It would also be good for people’s health and the sustainability of the health service. The “Five Year Forward View” for the NHS in England recognises the need for “new partnerships” with employers to help people

“get and stay in employment”

as part of a

“radical upgrade in prevention and public health”

to protect

“the sustainability of the NHS, and the economic prosperity of Britain”.

I am pleased that the Government prioritised the critical role of employers in the Green Paper, which also makes a strong business case for employers to invest in inclusive workplaces and health and wellbeing. It would reduce the £9 billion direct cost of sickness absence and boost productivity through healthier, more engaged employees. The Green Paper includes welcome plans to ensure that the public sector

“leads the way in developing employment practices that allow disabled people and people with health conditions to flourish.”

But it is the Government’s proposals for the 26 million people working in the private and third sectors that could have the biggest impact on work and health outcomes, and it is on those that I wish to focus. The Green Paper asks how those employers could be incentivised to invest in the things we know create healthy workplaces and prevent people from falling out of work. How can we create a culture where people feel confident about disclosing health problems? How can we ensure employers have regular conversations with employees who are off work to agree steps to support their return? How can employers put in place timely access to occupational health and vocational rehabilitation support? The Green Paper proposes sensible reforms to statutory sick pay to ensure that people are not penalised financially by returning to work. It also proposes putting in place a one-stop shop for employers with information on the different things they can do to support staff and the return on investment they can expect to see from such measures.

While such measures would be welcome, they would not alone bring about the vision set out in the Green Paper of a society where everyone is ambitious for disabled people and those with long-term conditions, where jobs actively support and nurture health and wellbeing and where everyone at risk of long-term absence or falling out of work due to ill health gets early action as needed to stay in or return to work. The Government acknowledge that much more needs to be done.

The Green Paper is a call for bold, ambitious ideas and I understand the response from individuals, charities, employers and others has been very encouraging, with thousands already putting their views forward. That momentum must not be lost. Making progress towards the Government’s vision will bring enormous benefits to working people who live with long-term health problems, and to their families, employers, the economy and taxpayers. My first question to the Minister is therefore how the Government will involve those outside Parliament who have engaged so valuably up to now and have so much to bring to the debate.

My second question relates to one of the bold ideas put forward to rapidly improve the ability of employers to provide effective early support for those at risk of long-term sickness absence. The Green Paper includes a section on group income protection insurance, recognising that it not only provides an income to those who are too ill to work, but also includes vocational rehabilitation and practical support for employers, which together prevents and reduces sickness absence and stops people from falling out of work altogether. Group income protection insurance is purchased by employers, who cover their staff. One virtue of that is that, save for the very highest earners, there is no medical underwriting, which means that insurers do not ask any questions about employees’ medical history or existing conditions. People with health problems are covered at no additional cost.

The evidence is that group income protection is highly effective. The Green Paper cites a report from the Centre for Economics and Business Research, which found that such insurance reduces the length of sickness absence by an average of 16.6%. Research from one provider, Unum, found that seven out of 10 people with serious health problems who used its return-to-work service got back to work with the same employer. The most common conditions for those returning to work were mental health and musculoskeletal problems, which are the two health problems prioritised in the Green Paper.

Currently, just 7% to 8% of employees have group income protection from their employer. The Green Paper states that the Government think group income protection insurance has a much greater role to play. Coverage is particularly low among female workers and those working for small and medium-sized employers, yet both are most likely to benefit from the support it provides. Rates of sickness absence and disability are higher among female workers than men, yet for some reason employers fail to protect them in equal numbers.

SMEs are less likely to have experience of managing someone with a serious health problem or to have access to human resources, occupational health or vocational rehab expertise. As a former small business owner myself, I know what an impact it has when one of a small team needs to take time off. I know how difficult it can be to try to support an employee with a long-term condition, while also meeting legal obligations and keeping a business on track.

In my role as chair of the all-party parliamentary group on insurance and financial services, I have received representations from across the sector that make the case for tax incentives for employers to invest in group income protection for their staff. Insurers, their trade bodies and employers, through EEF, make the case that a tax incentive for employers would be the most effective way to increase coverage. They argue it would raise awareness of the benefits of providing the insurance, would act as a signal from the Government that group income protection is something good that employers should consider investing in, and would stimulate demand for and supply of this insurance.

Working with its members, the Association of British Insurers has produced an economic evaluation highlighting the gains to taxpayers if a modest incentive increased coverage. Fewer people would fall out of work or would require state support. Those in work and those who were too ill to work and so receiving an insured income would continue paying taxes on their salaries. Will the Minister explain how the Government intend to support a much greater role for group income protection insurance? Are they minded to consider the case for a temporary tax incentive for employers, particularly SMEs, to invest in it?

The Green Paper vision is rightly ambitious and I am sure it will have broad support from those inside and outside the House who follow the debate. The Green Paper talks of a 10-year plan to achieve that, but there is clearly potential to make great strides in a much shorter timeframe. The Government can take action now that will make a huge difference to the lives of working people with long-term health problems, their families, employers and the taxpayer.

Janey, a solicitor who shares her story in a guide from the British Heart Foundation, was 35 when she was diagnosed with a serious heart condition after giving birth to a baby boy. Janey’s employer communicated with her and together they agreed a successful plan so she could return slowly and steadily to her job, starting after a long absence on a two-day week and building up to four days a week over six months. She got back to work doing longer hours, but always making sure she was home in time to be with her son. That is the kind of positive experience we want everyone to have. So my final question is how the Government will measure success in delivering their vision. What are their top priorities in supporting employers to improve the work and health outcomes of people with long-term health problems?

I welcome the Government’s approach to this important subject. There are some exciting opportunities for innovative solutions to help those with long-term problems to remain in work. I look forward to the Minister’s response.

[Mr Philip Hollobone (in the Chair)]

I know we are talking about long-term health issues, but I can see that the Minister is in some discomfort with a short-term health issue. It would be perfectly in order if she would like to give her speech sitting down.

18:16

[The Minister for Disabled People, Health and Work (Penny Mordaunt)]

Thank you, Mr Hollobone. It is a pleasure to serve under your chairmanship. I shall start standing, but will take you up on your kind offer if it becomes too much.

I congratulate my hon. Friend the Member for North Warwickshire (Craig Tracey) on securing this debate on a critical issue that faces the country, at an opportune moment, with the Green Paper consultation having just finished. I also thank the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Bury St Edmunds (Jo Churchill). We have had a lean but fit debate, and I thank them personally for their contributions.

As has been stated, the Department for Work and Pensions and the Department of Health published the “Improving Lives” Green Paper in October last year, to start a national discussion about how we can support more disabled people and people with health conditions to get into work, stay in work and have full and fulfilling careers. The consultation ended in February and we have received a huge response from a wide range of employers, disabled people, people with health conditions and organisations with an interest. I thank Members who held events during the consultation period, and healthcare professionals who have also responded. We are now taking stock of what we have heard and will decide the next steps on this important agenda.

In moving forward, we want to continue working with stakeholders—that includes employers—to build on those contributions to the debate and to keep the momentum going. It was always going to be tricky to give my hon. Friend satisfaction about exactly when a White Paper would appear; it is even more tricky bearing in mind announcements made earlier today. I can assure my hon. Friends that we want to seize the momentum that the Green Paper has built and bring forward a White Paper very swiftly. Work can continue outside of the civil service, in the private sector and the third sector, which will play a critical role in delivering the support. We want those organisations to continue thrashing out the issues so that we can arrive at a White Paper in good time.

Let me focus on the case for employer action. It is clear that there are compelling reasons for employers to take action on health and work. Employers who invest in inclusive workplaces and in the health and wellbeing of their staff can expect wider access to talent and skills, improved engagement and retention of employees and consequential gains for the performance and productivity of their businesses, reduced sickness absence and also reduced presenteeism, which is an issue, although it is not often spoken about. They will be more able to capitalise on the purple pound’s nearly £250 billion of spending power in this country because of the insight that their workforce will have.

Employers will increasingly need to help their employees remain healthy and manage their conditions if they are to benefit as much as possible from the skills and experience of our ageing population, which my hon. Friend the Member for North Warwickshire referred to. Older people will make up an even greater part of the workforce in the future. In the next five years, it is estimated that the number of people aged 50 to 64 will increase by 800,000, while the number of people aged 16 to 49 will fall by about 300,000. We know that older workers bring great benefits to businesses by drawing on their knowledge, skills and experience, and can help businesses to remain competitive.

My hon. Friend the Member for Bury St Edmunds spoke about cancer, which is becoming a chronic condition. Although we are living longer, we are living more years in ill health. There is clearly a correlation between our ageing population and the increased prevalence of long-term chronic conditions and multiple health issues, so this is an incredibly important agenda for the nation.

[Jo Churchill]

Cancer is often referred to as a generic, but various forms present very differently. The TUC has a great campaign called Dying to Work, which is driven by someone with metastatic cancer. They have a limited lifespan, but they want to carry on working. That is part of this agenda. If a person feels fit and able, whatever their condition, the Government should be doing all they can to encourage them.

[Penny Mordaunt]

My hon. Friend makes a very good point. Part of the importance of the Green Paper is that it tries to push the concept of work as a health outcome. Whatever someone’s circumstances, meaningful activity is a key part of keeping them healthy, and it benefits their emotional wellbeing.

We can already move forward with many of the things we trailed in the Green Paper. The one-stop shop will be not just a passive repository for Government information to support employers, but a shop window to the third sector and other organisations that can provide the expert, bespoke support that employers want. If, for example, a business has employed someone with autism, it will want expertise and expert advice, so we want to move forward with that immediately. The Disability Confident scheme is gathering pace, and there are many other things we can do to improve services, such as Access to Work.

On the issue of statutory sick pay and income protection, through the consultation we have been exploring how employers can actively promote health and wellbeing and manage sickness absence, including whether statutory sick pay should be reformed to better enable supportive consultations and a phased return to work. We also know that group income protection insurance, which offers preventive programmes, wellbeing services and income protection elements, can offer benefits and has the potential to help employers retain disabled employees and those with health conditions.

Analysis by the Centre for Economics and Business Research indicates that long-term absences among employees who have access to and use early intervention and rehabilitation services tend to be nearly 17% shorter than those among employees who do not. We want employers to do more to invest in their employees’ health and wellbeing, and thereby to reap the benefits that such investment brings. That includes actively considering whether group income protection could be part of the answer in promoting the health and wellbeing of their workforce. That was a key focus of the Green Paper, and we want to focus on it as we go forward.

We welcomed the responses to the consultation, in which we asked questions about the role the insurance sector should play in supporting the recruitment and retention of disabled people and people with health conditions. We also asked for feedback on the barriers and opportunities for employers of different sizes when adopting those insurance products for their staff. In particular, we asked why larger employers are not making better use of such protection schemes, and how take-up among SMEs in particular can be encouraged. We are now reviewing the full range of opinions expressed in the consultation, and we look forward to continuing to work with the industry to consider how those barriers can be overcome. We will consider what role the Government might play in reducing those barriers to take-up, and what the industry might need to do. We welcome offers to continue to work with the Government on these issues to encourage wider employer action to help employees stay in or return to work.

A number of health trials are going on at the moment, and we wish to run further trials with our innovation fund. Many of them touch on the incentives for employers to make the investments and follow good practice in their workplace. For example, one trial is introducing a wellbeing premium—a reduction in local business rates provided the business puts in place particular things to support the mental health and emotional wellbeing of its staff.

As we explore what works and what is good practice for employers, we need to remember that we are already asking employers to do a lot. They have done a lot on pensions, and some of them are doing a lot on the apprenticeship levy. Those are really good things, and businesses clearly see the merits of investing in them. We must also bear in mind that we want employers to create jobs, so we have got to get the balance right. That is why I think this is one of the interesting parts of the Green Paper consultation and the White Paper that will follow.

It is important that any efforts to improve opportunities and outcomes for disabled people and those with long-term conditions also focus on mental health. Only one in three disabled people with a mental health condition is in employment, and 49% of the 2.4 million employment and support allowance claimants have a mental health condition as their primary condition.

In January, the Prime Minister announced the first steps in our plan to transform the way we deal with mental health problems at every stage of a person’s life—not just in our hospitals, but in our classrooms, at work and in our communities. An important strand of that plan is to support mental wellbeing in the workplace. That is why Dennis Stevenson, who has campaigned for a better evidence base for mental health for many years, and Paul Farmer, the chief executive of Mind, have been commissioned to review how employers can better support all employees, including those with mental ill health or poor wellbeing, to remain in and thrive through work. They are considering best practice across the full range of employers, and engaging with individuals with lived experience. They will present evidence and recommendations for employers and the Government to consider.

My hon. Friend the Member for North Warwickshire made a point about measurement, which will clearly be a focus for us as we bring forward our ideas in the White Paper. Although we will continue to report the labour market statistics and look at the disability employment gap and other such numbers, we need locally driven solutions in health and employment services and education, so we need to focus on the current unmet need, whether in healthcare or employment support. By looking at the local numbers and getting local ownership so the different stakeholders can wrap support around the individual, we will get really good things to happen at a local level. That is what we need to enable and encourage—so expect some of those targets, which will look at the actual numbers, and formulas surrounding the disability employment gap. Once again, I thank my hon. Friend for securing this important debate and all hon. Members who took part in it.

Question put and agreed to.

Royal Institution of Chartered Surveyors: Property Act Receiverships

Tuesday 18th April 2017 Westminster Hall

18:29

[Jo Stevens (Cardiff Central) (Lab)]

I beg to move,

That this House has considered the regulatory role of the Royal Institution of Chartered Surveyors in Law of Property Act receiverships.

It is a pleasure to serve under your chairmanship today, Mr Hollobone. The Royal Institution of Chartered Surveyors is the professional body that accredits some 125,000 professionals in the land, property and construction sectors worldwide. The RICS banner slogan is “Confidence through professional standards”, and a mission statement proudly announces:

“We regulate and promote the profession, maintain the highest educational and professional standards, protect clients and consumers via a strict code of ethics, and provide impartial advice and guidance.”

That statement embodies the key principle that although a professional body has responsibilities to its members, such as setting standards, training and interpretation of legislation, its overriding responsibility is to the public at large—its members’ clients and customers—to provide assurance and confidence that RICS members are behaving entirely professionally to those third parties.

Self-regulation, which is what that represents, leads RICS to its immediate conflict of interest. On the one hand, it represents the interests of members, who fund the organisation; on the other hand, it has an overriding responsibility to the public at large. The issue becomes how RICS manages that conflict and whether RICS is achieving the appropriate balance in judging the actions of its members. That is the crux of what today’s debate is about.

RICS, naturally, claims that everything is in order. On its website it states:

“We assure competence and enhance our professionals’ status by providing confidence to consumers and markets”,

and:

“We are proud of our reputation and we guard it fiercely, so clients who work with an RICS registered professional can have confidence in the quality and ethics of the services they receive.”

No self-regulator will ever say otherwise, but the question is whether RICS is delivering on that commitment in practice. Unfortunately, in the experience of my constituent Mr Shabir and many others, the answer is emphatically no.

RICS has entirely misdirected itself in Mr Shabir’s case and should issue a revised decision that accords with RICS’s mission statement and the facts of his case. A further concern to me is that public pronouncements by RICS, specifically those made to the Select Committee on Business, Innovation and Skills under the chairmanship of my hon. Friend the Member for West Bromwich West (Mr Bailey), seem wholly virtuous and bear no relationship to RICS’s interpretation of its own standards when it responds to complaints such as those of Mr Shabir.

Turning to the Law of Property Act 1925, it is unfortunate that although the LPA or the relevant mortgage deed provides for a lender to appoint a receiver, section 109(2) of the Act defines the receiver as the “agent” of the borrower. That creates an immediate conflict, since a bank or other lender, when faced with claims of unreasonable behaviour on behalf of the receiver whom it has appointed and whose remuneration it has agreed, will shelter behind the fact that the receiver acts as the agent of the borrower. Most commentators acknowledge, however, that that is not the reality. The receiver’s first and often only loyalty is to his appointer, and the impecuniosity of the borrower, often as a consequence of the very actions of the bank or other lender, will deny the borrower the ability to defend himself. In such circumstances—for example, when a RICS member is acting in, or in association with, a receivership capacity—it is essential for RICS to set the bar for acceptable behaviour at the very highest possible standard.

On 16 September 2015, I led a debate in Westminster Hall about the case of Mr Shabir and that of Alun Richards, a constituent of my hon. Friend the Member for Ogmore (Chris Elmore). I will not repeat the details of the case, but in summary, as a consequence of the financial crash in 2007-08, Lloyds bank took the opportunity to reassess its relationship with customers who were borrowing large sums of money at low rates of interest above base. Those customers were known as fine margin customers. Faced with the significantly increased costs of funds in the money markets, Lloyds sought to improve its position by eliminating fine margin customers from its portfolio. The mechanism to achieve that was systematic down-valuation of a customer’s property in order to engineer a shortfall in the key loan-to-value ratio. Once that term was breached, Lloyds could pass the customer in question to the Bristol recoveries department—from which it was confirmed there was no escape—and resist all proposals for restructuring.

The Bristol recoveries department was in effect the graveyard of Lloyds, because no business came out of it alive. It has become infamous as the centre of the malpractice and it has dealt with cases from all over the country. Once a business was with the recoveries department, receivers were appointed. They then eliminated the customer and met Lloyds’s objective. Any shortfall for Lloyds was met by the Government under the taxpayer bailout arrangement. To add credibility to that manoeuvre, Lloyds needed the support of a professional firm with apparent independence and full RICS endorsement. In Mr Shabir’s case the firm was Alder King, which had at one time been owned by Lloyds. The advantages to Alder King were all too obvious: a significant source of extremely profitable consultancy and receivership work, much of which was unnecessary and would not normally have arisen were it not for the position that had been artificially created.

[Kevin Brennan (Cardiff West) (Lab)]

I congratulate my hon. Friend on securing the debate. I give her my full support. What she is presenting is the tip of the iceberg. I cannot name a constituent of mine in a similar case because he wishes to remain anonymous, owing to confidentiality agreements negotiated around the malpractice. Suffice to say, he is a victim of exactly the same kind of malpractice by Lloyds as she is describing.

[Jo Stevens]

My hon. Friend is right. We have the names of people who have been affected, but many cannot identify themselves because of gagging agreements in the settlement of disputes.

As far as Mr Shabir and others similarly affected are concerned, the Lloyds manoeuvre was not simply an esoteric exercise. The practices employed have destroyed perfectly viable businesses and sources of livelihood for their owners—Mr Shabir had a business worth about £10 million. Recognition of such practices is widespread, including in the Tomlinson report and the financial press, and there is much sympathy for those who have suffered financial loss. Redress, however, remains elusive, not least as a consequence of the prohibitive cost of litigation. This really is a David against Goliath situation.

At a time when RICS’s support might be decisive, it remains in denial about the malpractice that lies at the heart of this matter. What, therefore, was the malpractice? Mr Jonathan Miles, a partner in Alder King, was embedded in the Lloyds recovery department in Bristol. He was given a Lloyds email address, telephone and business card, and his true identity as a partner in Alder King was concealed. Mr Julian Smith, another Alder King partner, was not only instructed to do the valuation of Mr Shabir’s business—in reality, the down-valuation by Lloyds—but appointed receiver over his property. Mr Smith had significant involvement with Lloyds and he, too, was provided with a Lloyds email address and had access to confidential customer data. Disturbingly, RICS has confirmed that during that whole period Mr Smith was on a part-time secondment to Lloyds. That is about as obvious a conflict of interest as we will ever see. Mr Smith was acting as judge, jury and executioner.

The terms of those involvements—in particular Mr Miles’s full-time secondment, which lasted several years—were to act in an executive capacity within Lloyds. The relevant financial arrangements have never been disclosed, which raises doubts about whether they even existed. In that executive capacity, Mr Miles was threatening customers, making receivership appointments to his own firm and signing property sale completion documents as a senior authorised Lloyds official. The valuations produced by Alder King were up to 50% less than comparable valuations produced by valuers with a national profile. Furthermore, once appointed, Mr Smith acted in blatant disregard of Mr Shabir’s interests. Mr Shabir has been left with arrears of rates, service charges and utilities’ services, some of which have become the subject of county court judgments against him. An attempt was even made by Alder King to sell one property from Mr Shabir’s portfolio to Mr Julian Smith’s personal assistant at Alder King.

It goes without saying that each of those matters appears to raise serious concerns when placed in the context of RICS’s literature and professional standards. Naturally, therefore, Mr Shabir made a complaint to RICS. That was on 29 June 2011. It drew an extraordinarily disappointing response, which contained a list of reasons for doing nothing and, in particular, a denial that the issue had anything to do with ethics and conduct. A second approach in July 2011 did not even attract the courtesy of a response, and a further approach in April 2014 led to completely inconclusive dialogue for five months. RICS finally agreed to receive a formal presentation on 13 November 2014, but although all the complaints that had been given in were evidenced, three months passed, and in February 2015 RICS concluded in a letter to Mr Shabir that

“there is no evidence of misconduct by Alder King or the members in question”.

The letter also added that the matter could be referred to an independent reviewer—appointed by RICS—to review RICS’s procedures, but not the actual decision.

As might be expected, the issue of conflict of interest features widely in professional standards literature published by RICS. Doing something that secures an unreasonable pecuniary advantage to the detriment of others is so obviously irregular that there is not even any reference to it in that literature. On 4 March 2015, RICS’s public position was defined by Ms Eve Salomon, then chair of RICS Regulation, in evidence to the Business, Innovation and Skills Committee, chaired by my hon. Friend the Member for West Bromwich West, during an inquiry into the regulation and policies of the insolvency sector. Ms Salomon said in her evidence, in response to questions 20 and 21, that

“secondment…is subject to an arm’s-length contractual agreement between the secondee and his or her firm and the employing organisation.”

She went on to say that

“where somebody might be a secondee in a bank…and then subsequently…is appointed as a fixed-charge receiver, that could potentially raise issues of conflicts of interest, but those matters are dealt with by professional codes”.

She also said:

“If we found evidence that, say, a secondee had given advice on the expectation that the matter would be leading into receivership and that that particular chartered surveyor would be appointed as a receiver, then we would see problems.”

Ms Salomon’s colleague at RICS, Mr Graham Stockey, added:

“At that stage, provided it is at arm’s length and the contract that is set up clearly limits the involvement of the secondee, the conflict could be managed. We look very closely at what the terms of the contract would be and what the terms of the appointment are, and it is up to the firm to be able to show RICS Regulation that there is no conflict. This is something that we look at really closely.”

His comments were endorsed in the evidence session by Mr Julian Healey, who is the chief executive of NARA—the Association of Property and Fixed Charge Receivers. In response to question 19, he said:

“Yes, there is conflict between a fixed-charge receiver going into a bank and advising on matters and then saying, ‘I have identified this as a distressed property. What a good idea. I’”—

or my firm—

“‘shall now go and act as fixed-charge receiver’.”

Those comments were also endorsed by Mr Phillip Sykes of R3, who said in response to question 85 that it would represent an unacceptable conflict of interest if that secondee individual or his firm

“was then to go on and take the insolvency appointment…In my experience, certainly, the banks take enormous care to ensure that if a secondee is working on a particular case then their firm will have no part in any enforcement proceedings.”

From reading that evidence, which was given publicly, it is particularly disappointing that when I wrote to the director of regulation at RICS, Mr Luay al-Khatib, on 15 December last year, he sought to explain away Ms Salomon’s comments to the Select Committee as being

“of a general nature to assist the Committee and not comments made in relation to Mr Shabir’s case”.

It is of fundamental concern to me that Mr al-Khatib declares himself to be satisfied with the decision that RICS made when he knows that there are no agreements governing the terms of secondments that have lasted for five years, that the secondments were without charge to the bank, that there was no escape from the recoveries department—the excuse offered by RICS that there was no certainty of a receivership appointment following Alder King’s advice or valuations is therefore simply nonsense—that the issue of under-valuation has not been addressed and that there was no tendering for receivership work, as cases on which Mr Miles worked were invariably passed to Alder King.

Having attempted since late 2015 to get Lloyds, Alder King and RICS each to meet with me and my constituent to address the issues I raised in my debate in September 2015, I have come to the conclusion that RICS is failing to deliver an acceptable level of regulation. Worse than that, it is doggedly maintaining in its public pronouncements that it is subscribing to the highest possible principles and standards, whereas in reality it is condoning practices that are untenable and universally condemned by other professional bodies. Whatever the reasons for its actions, be they the extent of the practices, the importance of the members concerned, compensation considerations or others, RICS is completely undermining a principal basis for its existence, namely the maintenance of public confidence in a professional body. I recognise that LPA relationships bring their own difficulties, but on the evidence of Mr Shabir and others who have been affected by practices similar to those I have outlined, regulation has failed in the one area where it was most needed.

In March 2017, RICS published on its website a professional statement entitled “Conflicts of Interests”, together with some commentary notes. Obviously there is merit in refreshing professional standards from time to time, but the problem is that RICS is not using its statements or standards when dealing with members who are in breach of those standards. At a meeting held here in Parliament on 15 March 2017, the Thames Valley police and crime commissioner, Mr Anthony Stansfeld, who was responsible for the prosecution of the now convicted bankers behind the HBOS fraud, stated that in his opinion the board of Lloyds bank, which owns HBOS, had been well aware of the fraud since 2009, despite persistently denying it for many years. And here we are again, in my constituent’s case and that of many other small and medium-sized enterprises, dealing with the same Lloyds board, the same owners of HBOS and the same set of individuals: the chairman, Lord Blackwell, and the chief executive, António Horta-Osório.

Mr Shabir’s case has clear parallels with the Reading fraud case. It involves fraudulent activity and then a cover-up. The former chairman of Lloyds, Sir Win Bischoff, wrote to Mr Shabir’s former Welsh Assembly Member on 14 October 2010, completely refuting the allegation that the receivership had been mishandled and specifically saying that there had been no conflict of interest. But he then went on to say that Alder King was Lloyds’s preferred firm of professionals in the south-west. That statement is in itself conflicting. How can the guarantee of receivership work sit alongside Alder King secondments to Lloyds? We know that it sat alongside them very comfortably, because I have a letter from Alder King’s Julian Smith, dated 21 December 2009, to his Alder King boss Jonathan Miles, at his Lloyds bank address, thanking Mr Miles for appointing him as receiver. Sir Win was also sent the letter, but declined to respond. I also have a letter dated 22 May 2014, written by the then Secretary of State for Business, Innovation and Skills, Vince Cable, confirming that he had met Lloyd’s chief executive, Mr Horta-Osório, and discussed Mr Shabir’s case. The chief executive told him that he had “looked into the matter personally”. So the chair and the chief executive of Lloyds knew what was going on and did nothing. That sounds very familiar.

Lloyds has effectively opened up its bank vaults and allowed Alder King to walk right in and help itself. Meanwhile, RICS, supposedly keeping watch, ensures that Alder King has a clean getaway. The financial incentive for Lloyds and Alder King to cover up the fraud is clear, but this dereliction of regulatory duty by RICS, in the face of the most blatant conflict of interest, makes RICS complicit in the fraud itself.

I ask the Minister to address three matters in his response. If RICS is to retain its role in the sector, it should establish which, if any, of its member firms are on bank or lending institution panels and have secondment agreements operating with those lenders. If there are member firms that have such a relationship, does the Minister agree that that should be confirmed in writing to all associated parties before any involvement by those firms in potential receivership cases? Does he agree that RICS must immediately establish with its members, such as Alder King, a system of financial redress for victims of this fraudulent malpractice, including Mr Shabir and other SME owners? The victims should not have to put themselves through the stress and expense of litigation where there is no equality of arms. Since Lloyds has had the principal financial interest in cases such as Mr Shabir’s—Lloyds is still part taxpayer-owned—and has been pulling the strings of RICS members, it should be required to be the major party to that system of financial redress.

The past few weeks have not been good PR for the banking industry, and particularly not for Lloyds. The Reading fraud convictions, the subsequent announcement of yet another £100 million compensation scheme and the launch of a new independent lawyer’s investigation have all made headline news. The scope of that investigation covers the role of three successive chairmen at Lloyds—Bischoff, Blackwell and the chief executive, Mr Horta-Osório—all of whom denied knowledge of the Reading fraud case until it got to court. We know from the release of a leaked internal Lloyds document that those executives knew of the fraud—they even referred to it as fraud—as far back as 2009. Mr Shabir has received the same stonewalling from the same set of individuals.

I conclude by reiterating that banks, regulators and specifically RICS need to clean up their act to restore public confidence and trust. They need to offer full and immediate redress to the victims of their malpractice. The issue is not going to go away, even despite today’s announcement of a general election.

[Several hon. Members rose—]

[Mr Philip Hollobone (in the Chair)]

Order. The debate runs until 7.30 pm. Jo Stevens has three minutes to sum up at the end, which means I have to call the Front-Bench spokespeople no later than seven minutes past 7 pm. The Opposition spokesperson and the Minister each have 10 minutes. Three hon. Members are standing from the array of Labour parliamentary talent I see before me. I am going to have a five-minute time limit on speeches so that everybody has equal share, and we will start with Mr Adrian Bailey.

18:50

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

May I say what a pleasure it is to serve under your chairmanship, Mr Hollobone? I will do my very best to keep within the time limit you have outlined.

I congratulate my hon. Friend the Member for Cardiff Central (Jo Stevens) on her doggedness and determination in continually bringing this issue to Parliament and on the lucid and forensic way in which she outlined the issues. I would find it difficult to elaborate in any way on the details of the cases that she has brought to the notice of Members in this and the previous debate.

I also compliment Mr Shabir and—although he is not mentioned in this debate—Mr Richards from the Ogmore constituency, who suffered a similar situation, for their doggedness and resilience in ensuring that this has been brought to the notice of parliamentarians and that the issues are examined in public. Their experience would have defeated lesser people and they deserve commendation for the way that they have campaigned.

As my hon. Friend said, the issues arising from the evidence were examined by the former Select Committee on Business, Innovation and Skills. Unfortunately, the hearing was just before the 2015 general election. Although we took the evidence, we never had the chance to make recommendations. However, the answers that my hon. Friend has referred to from that meeting quite clearly illustrate the vast gap between the public rhetoric of these bodies and the private reality of how they operate. Anybody hearing the particular case studies can only be astounded that a professional body, and representatives of that body, could have acted in such a way, and that there does not appear to have been any legal redress for the way in which they acted, or compensation for the victims of their actions. The wide consensus of opinion about the awfulness of the actions and the terribleness of the experience that the individuals have gone through—let us be clear: it is reflected by many other small businessmen and women up and down the country—raises matters of huge concern.

I would like to highlight one or two issues that the Government must address, the first of which is the gap that seems to exist in the Serious Fraud Office’s threshold for investigation of fraudulent activity. I will not repeat the words of the Solicitor General in the previous debate, but he basically said that investigation was reserved for high-profile and serious cases of fraud and was limited to companies such as GlaxoSmithKline, Tesco and Rolls-Royce. It would appear that we have a Government body that is prepared to act on behalf of big business but not small business.

The Solicitor General went on to say that ActionFraud had been established to ensure reporting. I have looked at ActionFraud; it reminds me a bit of the ill-fated cones hotline that existed in the 1990s, because someone can report something, but absolutely nothing will happen. If anything can happen, that is not made clear to anyone who makes a report.

[Kevin Brennan]

“Inaction Fraud”.

[Mr Bailey]

Absolutely.

In conclusion, the issues are of such seriousness, and the way in which the professional organisation has responded to them so inadequate, that the Government must look at some sort of intermediate implementation of action against fraud, to help small as well as big businesses.

18:58

[Mr Alan Campbell (Tynemouth) (Lab)]

I commend my hon. Friend the Member for Cardiff Central (Jo Stevens) for securing the debate. I would like to use the brief time available to raise a constituency case, with the permission of my constituent Mr Graham Stewart.

Mr Stewart has been a builder and developer since 2000. He was encouraged by Lloyds bank to move his account to Lloyds in 2003. He banked with Lloyds over the next decade, in which he developed a substantial property portfolio. His accounts were handled both locally and regionally without any great difficulty until they were moved to the Bristol business support unit. His loans were originally reviewed every two years; that period was shortened by the bank, which added a cost for him each time. In June 2012, he was told that his loan depended on his selling a number of his properties, that the valuation would be carried out by the bank’s own valuers and that his repayments would virtually double. When he complained about bullying, he was told at the end of November 2012 that the loan was to be called in and would have to be repaid in full, despite his not being in arrears at the time.

Mr Stewart was told by the Bristol business support unit that Alder King would be brought in to revalue his properties, which would be sold off to repay the loan. I am advised that, as has been alluded to earlier, staff at Alder King and Lloyds BSU moved seamlessly between the two offices. Alder King valued his properties at £1.1 million, despite a recent revaluation by Lloyds valuers at £1.8 million. I am told that the bank was able to access the Government’s enterprise finance guarantee scheme to recover the shortfalls that it had, but Mr Stewart was left with considerable debt. He has been told by local valuers who knew his properties that Alder King had knowingly valued them at a lower value. In their words, he has been sold down the river.

The relationship between Alder King and Lloyds has been the subject of much speculation and investigation, and indeed forensic analysis by my hon. Friend this afternoon. In October 2015, I asked the Serious Fraud Office to add Mr Stewart’s case to its wider investigation, but I was told that the amounts involved did not reach the necessary threshold. In my view and that of others, Mr Stewart and others have been let down by the various agencies and bodies that have been set up to protect their interests. Alder King’s website tells us:

“Alder King is regulated by the Royal Institution of Chartered Surveyors.”

The commercial property section of the RICS website states that

“you can be sure your survey will be carried out to the highest professional standards.”

There have been many other cases, so it is fair to ask why RICS has been so slow and reluctant to respond to this situation.

Another example—I will not go into it in great detail, because a legal case may well be pending—is a family business in my constituency that also banked with Lloyds. The bank appeared to engineer a default; this time, it brought in not Alder King, but PricewaterhouseCoopers. It tried to asset-strip the company to the benefit of the bank, but certainly not of the company or its employees. Not only is PricewaterhouseCoopers regulated by the Royal Institution of Chartered Surveyors, but senior employees have provided offices for RICS’ governing body.

Finally, it is important to point out that we are describing not just a crisis for businesses but a personal crisis for owners, often at cost to their health and their families. They ask, and I ask: if there are rules and procedures for companies regulated by RICS, why do those rules seem to work primarily in the interests of the banks and those acting in their name, rather than those of my hard-working constituents?

19:00

[Chris Elmore (Ogmore) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Cardiff Central (Jo Stevens) and congratulate her on securing this debate. The injustice that affected her constituent would warrant a debate in itself, but the fact that the same inequalities might have affected thousands of similar individuals deserves the attention of every Member of this House.

In my limited time, I will explain the situation of my constituent, Mr Alun Richards, in the hope of showing the damage caused by such malpractices. Shortly after my election last May, Mr Richards came to one of my constituency surgeries to explain his story. Alun Richards was once one of west Wales’s most successful businessmen. By the turn of the millennium, his farming and property enterprises had been recognised with awards, and they soon attracted the attention of Lloyds Banking Group. Eager to attract his custom, Lloyds offered Mr Richards a gold star account and an interest rate of 1% over base. After considering other offers, Alun took up the offer made by Lloyds, and all was well until the 2008 banking crisis.

Suddenly, with little notice, Alun’s bank managers in Carmarthen, Gwilym Francis and Ian Richards, transferred his accounts to a larger branch in Bristol. After a period of sustained silence, Alun spoke with his new branch to find out who his new bank manager would be. Stunned, he discovered that his new manager, Max Meredith, was in the business support unit, focused on recoveries. Mr Richards was understandably confused and alarmed. His business had been booming, and his new manager, Mr Meredith, agreed that the circumstances were not usual for such a transfer. He agreed to transfer Mr Richards’s account back to his old branch, but Gwilym Francis and Ian Richards at that branch refused to accept the account. Alun Richards soon received a visit from two representatives of the business support unit in Bristol, Mr John Holiday and Mr Jonathan Miles.

During the meeting, one of Alun’s accountants raised questions about Mr Miles’s behaviour and background. Mr Miles repeatedly claimed on this occasion and in the 2.5 years that followed that he was an employee of Lloyds. Mr Richards has since discovered that Mr Miles was actually a chartered surveyor, a member of RICS and a partner at Alder King estate agents. No official secondment was in place; Mr Miles even appointed partners from Alder King, Julian Smith and Andrew Hughes, as the Law of Property Act 1925 receivers. When that initially surfaced, Mr Hughes temporarily resigned. RICS has refused to take any actions and, following complaints against Bristol-based lawyers TLT, neither has the Solicitors Regulation Authority. The Insolvency Practitioners Association has also stood still.

The saga of Alun Richards’s case has involved Lloyds Banking Group, Alder King and the Royal Institution of Chartered Surveyors. Alun, who once owned enterprises totalling more than £5 million, was left penniless and on the road to ruin as a result of their actions. Similar injustices by those organisations have taken place in most constituencies across the UK. I wish it were possible for each Member of this House to understand how such scandals have affected their constituents, but unfortunately too many victims have felt powerless and remained silent.

At the heart of the matter are the Law and Property Act receiverships, which, due to their malpractice and dereliction of duty, should be considered by the Royal Institution of Chartered Surveyors. Unfortunately, there is cause to believe that RICS has failed to do so. I hope that this debate will encourage RICS to regulate Law of Property Act receiverships to the fullest extent and play its role in preventing injustices such as those that have affected my constituent.

19:03

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. My hon. Friends have set out examples of how their constituents have been badly treated over a number of years, first by the banks that distressed their thriving and successful businesses and then by the failure to secure justice after a long struggle, often with the support of my hon. Friends and their predecessors.

This is not just about one bank. It has been about Lloyds, HBOS and Royal Bank of Scotland. A constituent of mine came to see me just last week about NatWest, his business having been run down in a similar way to those of my hon. Friends’ constituents’. Businesses that were successful, that paid their interest on time and that were in a position to continue making their payments were run into the ground, in order to realise the maximum possible amounts for the banks and not in the interests of the customer. That is the reality of what has happened over many years and I am afraid that it could still be happening today, given the system that still exists.

The Tomlinson inquiry found at RBS a lack of competition and conflicts of interest, as well as the need for a proper retail banking sector, and yet we are in a situation today where those issues are still to be addressed. RBS may well have its own compensation scheme being set up, but no money has been paid out and at this stage it is being handled by RBS itself. It is still not independent of RBS. At the heart of this debate is that lack of independence and whether there are conflicts of interest in the LPA system.

[Mr Bailey]

Often, banks will say that the poor levels of business lending are because businesses will not come to banks for that lending. Does my hon. Friend agree that it is cases such as those mentioned today that have deterred many small businesses from going to their local banks and that, by default, inhibit our ability to invest in our economy for the future?

[Bill Esterson]

My hon. Friend is absolutely right, and I will address that point now—I was going to make it later. Our economy continues to struggle. We see sluggish productivity and low growth, particularly with smaller businesses, and one of the reasons is the lack of access to finance for those small firms, which undoubtedly causes them problems. I am in no doubt that the reputational damage done by these scandals and the lack of trust among smaller firms in the banks are factors that contribute massively to the problem.

We have seen businesses distressed and put out, people’s livelihoods destroyed and people’s lives damaged as a result of the behaviour of some of the banks, and of the people working in them and the people working for them as supposedly outside professional consultants. In the debate last December about alternative dispute resolution we heard about the activities of lawyers who are seconded into some of the banks and about the way they carried out similar activities. The convictions for fraud involved management consultants, and today we are talking about surveyors. There are conflicts of interests, whereby professionals are seconded into banks and then take decisions in the interests of those banks—why would they not do so, when their future lucrative work depends on those relationships?—and referring their own firms for the ongoing work, no doubt for fear of losing such work in the future.

With the LPA, the contracts have now been written in such a way that they favour the lender over the borrower. The borrower cannot then challenge the valuation of surveyors, because the valuer’s duty is to the client, not to the borrower. The original intention of LPA receiverships, which was to create a balance between borrower and lender, has been completely overwritten by the way that the banks prepare their standard terms and conditions in their contracts. Of course, most smaller businesses cannot afford the cost of legal action to challenge what is happening, especially when they are up against the financial clout of the financial institutions causing these problems.

So what is to be done? How can such scandals be avoided in the future? What are the remedies for what has happened before? There needs to be a sea change to ensure that the chances of repetition are reduced. There needs to be compensation, not just a scheme that is administered very slowly and internally without proper independent scrutiny and operation. I am talking about RBS, but in fact it is ahead of the other banks, given that it has any scheme at all. Perhaps the Minister can look at how we can ensure proper scrutiny, independent regulation and a proper complaints process within RICS and other professional bodies, so that RICS members do not get scrutinised by other RICS members. My hon. Friend the Member for Cardiff Central (Jo Stevens) explained the situation extremely well: there is a judge, jury and executioner system within RICS and elsewhere. That has to change if there is to be proper scrutiny to prevent such injustices and an opportunity for remedy when they happen.

We have to prevent such things from happening again, and there has to be compensation. Whatever Government are elected on 8 June have got to take these things seriously. It is long beyond time for that. Justice delayed is justice denied. It is 10 years on, and many former small business owners have lost everything and are completely unable to get compensation for what has happened to them.

My right hon. Friend the Member for Tynemouth (Mr Campbell) talked about the Serious Fraud Office’s potential interest, and he is absolutely right. I would like to hear what the Minister says about the potential for an SFO investigation into each and every one of these scandals. What prospects are there in the future for further fraud investigation?

We have got to prevent such things from happening again, and we have got to have proper regulation. The FCA’s remit does not include the regulation of business lending; it is there to regulate consumers. It does have a role in regulating sole traders and smaller partnerships. Is it time that small and medium-sized enterprises are given the same protection as consumers?

There is also the issue of the LPA receivership system. The Labour Government introduced the Enterprise Act 2002, which reformed aspects of insolvency law, but LPA receiverships were not included at that stage. Given what we have heard, is it time that LPA receiverships were given the same status as administration? Should we go down the route of having the chapter 11-type system that exists in the United States? In some way, we need to return to the original intention of LPA receiverships of achieving a balance between the interests of borrowers and lenders and some kind of limit on the level of fees that agents can charge.

My final point is about the process that can be used to deal with complaints. It seems to me that having self-regulation, whether through RICS or elsewhere, is not working, given the examples we have heard about. Is it time to look at meaningful arbitration and proper dispute resolution? I have raised a number of times the issue of the small business commissioner, which the Government are creating. They have acknowledged that there is an issue with the unfairness of contracts for the SBC. We will have a chance to look at that. When that post is created, will the Minister consider the need for proper, meaningful dispute resolution—perhaps binding arbitration—and giving that responsibility to the small business commissioner in relation to these matters, as well as in relation to late payments, which are its primary purpose?

There are a number of issues that need to be picked up. The Minister can respond to them now. The next Government really will have to act, otherwise—my hon. Friend the Member for West Bromwich West (Mr Bailey) was right to intervene on this point—we will continue to have a system where the relationship between small businesses and the banks is very poor. Unless that is resolved, we will not improve the performance of our small businesses, which are a crucial part of our economy. In the meantime, those who have suffered very seriously by losing their livelihoods will not see the remedy that they should, and there will continue to be a danger of a repeat performance by financial institutions, if that is not already happening.

[Mr Philip Hollobone (in the Chair)]

If the Minister would be kind enough to finish his remarks no later than 7.27 pm, that would allow Jo Stevens three minutes to sum up the debate.

19:15

[The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)]

It is of course a great pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Cardiff Central (Jo Stevens) on bringing the important topic of the regulation of Law of Property Act receivers back to the Chamber, and I congratulate other hon. Members on their contributions. This debate was postponed from March the 22nd because of the dreadful events on that day, and I am sure that I speak for everyone in the Chamber when I say that our thoughts are with the victims’ families even now.

This debate follows on from a debate that the hon. Member for Cardiff Central secured in September 2015 relating to concerns raised by one of her constituents, Mr Kash Shabir, about the appointment of fixed charge receivers by Lloyds bank and the conduct of the individual appointed. I understand that since then there have been separate investigations by the Serious Fraud Office and the Royal Institution of Chartered Surveyors into the treatment of her constituent by Lloyds Banking Group and Alder King, the firm of chartered surveyors used by the bank, but no further action has been taken against those investigated. She is dissatisfied with that outcome and, as a result, with the current regulation of LPA receivers. Law of Property Act receivers are also referred to as “receivers of rent” and “fixed charge receivers”. I will refer to them simply as “receivers”.

The Act in question is the Law of Property Act 1925, the key provisions of which in relation to receivers are sections 101, 109 and 110, which define the relationship of the receiver with the mortgagor and the mortgagee and set out the powers of the receiver. However, the Act provides that those provisions may be varied or extended by the mortgage agreement, and most modern mortgage deeds contain express provisions that replace or supplement the statutory provisions. The relationship of the mortgagor, mortgagee and receiver is therefore, as a general rule, governed by the contract creating the security for the agreed finance, not by the default provisions in statute. The terms of agreements vary from case to case but are likely to require the borrower to allow a person appointed by the lender to take over the management of the mortgaged property when the loan is in default, usually to collect rental income for the lender to service the arrears but with the right to sell the property if necessary.

On that basis, the appointment of a receiver provides a relatively straightforward way for the lender to protect its position. The ability to do that would seem, indirectly, to help keep the cost of borrowing low and the availability of credit greater than it would otherwise be. Those are clearly desirable objectives, but giving contracting businesses the right to decide the terms of their own contracts does not mean that the receiver has carte blanche as to how he or she exercises his or her powers. Receivers are under legal obligations. They must act in good faith and use their powers for proper purposes, and although their primary duty is to the lender in securing repayment of the secured debt, they must manage the mortgaged property with due diligence and have regard to the borrower’s interests.

There will be cases where lenders and receivers do not act properly, and the hon. Member for Cardiff West—I mean the hon. Member for Cardiff Central, not Cardiff West—described circumstances in Mr Shabir’s case where questions must at least be asked. In such cases, borrowers may have the right to seek compensation by an action for damages against the lender or the receiver in respect of the wrongs alleged to have been committed. Determining the rights and wrongs of such cases is a matter for the courts, and I can only recommend that borrowers caught up in such situations should take legal advice about their rights and remedies and how best and most economically to proceed.

[Jo Stevens]

The Minister has referred to the prospect of litigation, but does he not accept that in this situation—where a small business owner has lost their entire business, has no money and is up against the might of a financial institution—it is simply not possible for them to enter litigation? That is why some alternative form of redress and a scheme is necessary.

[Dr Lee]

Of course, in a difficult situation where all of someone’s funds have been exhausted, I recognise that litigation would be a problem. It would not be appropriate for me as a Minister to comment on an individual case, but I hear what the hon. Lady says and will take away her suggestions.

[Kevin Brennan]

The Minister mentioned Cardiff West, which is my constituency; my hon. Friend’s constituency is Cardiff Central. The point is not that we are discussing an individual case but that Members are trying to describe a systemic problem that exists in all our constituencies across the country. In many cases, as I outlined, constituents are unable to reveal in full in public what they have been through because of confidentiality agreements. As a Minister, does he not see the need for the Government to consider action along the lines suggested by my hon. Friend the Member for Cardiff Central (Jo Stevens) as a result of the systemic concern that Members are expressing?

[Dr Lee]

I thank the hon. Gentleman for his intervention. In the particular case that the hon. Member for Cardiff Central raised, a series of investigations have not uncovered any wrongdoing. The Government are listening in terms of the problem vis-à-vis small, medium and larger enterprises that other Members raised, and we will be taking that away, but as things stand, we have found no evidence of anything untoward being done by any of these organisations.

Private law actions are one type of remedy, but they do not preclude the question of whether there should also be regulation of other kinds. Receivership is not specifically regulated. It is not subject to insolvency regulation. Receivers are, however, generally members of professional organisations with regulatory functions, and they will be subject to the regulatory rules applied by their professional body.

Most receivers are likely to be members of the Royal Institution of Chartered Surveyors. RICS was established by royal charter in 1868 and is independent of Government. To protect consumers and to maintain and develop the standing of the profession at home and internationally, RICS sets professional standards for its members and takes disciplinary action against them for breaches of its rules. RICS’s regulatory regime is governed by an independent regulatory board, which has a majority of non-surveyor members. RICS has recently announced new rules to deal with conflicts of interest that will be introduced early next year. Other receivers belong to the Insolvency Practitioners Association, which also has regulatory powers.

Over the years, RICS and the IPA have both responded to concerns that there are general issues that need to be addressed in the field of receivership. In 1999, they entered into a memorandum of understanding relating to a voluntary registration scheme for receivers to provide a system of voluntary regulation against agreed standards. The memorandum was updated in 2012 and 2015.

Some 200 receivers are also members of the Association of Property and Fixed Charge Receivers, also known as the Non-Administrative Receivers Association. It is a relatively recently formed body. It aims to represent the interests of receivers and to promote better standards. Unlike RICS and the IPA, it is not a regulatory body. NARA, RICS and the IPA are jointly reviewing the professional practice standards underpinning the work of their members as receivers. The review is expected to include a public consultation, which will consider the degree of independence required from the lender and the borrower in receivership appointments. The new scheme should strengthen the self-regulatory regime.

Receivers are appointed only where a lender has concerns about the value of its loan. The borrower may not agree with the lender’s action, but should have been aware of the possibility that a receiver might be appointed in certain circumstances from the outset. One of the potential problems is that the receiver may face a conflict of interest. Conflicts arise in many areas of professional practice and are generally successfully dealt with in sensible and proportionate ways. Sometimes professional businesses have to turn down business opportunities because they are conflicted and the conflict cannot otherwise properly be managed. Sometimes of course the right action is not taken and legal and regulatory action may follow against those who got it wrong.

The hon. Member for Cardiff Central has identified cases where things may have gone wrong. I am not in a position to say whether there were unacceptable or improperly managed conflicts of interest that ought not to have been permitted to occur in Mr Shabir’s case. That is a matter for the courts and the appropriate authorities in the light of the law and relevant regulatory rules. We should also remember when considering Mr Shabir’s case and others like it that receivership has existed for many years and has during that time presumably worked well in many cases. The independent regulation of receivers through their professional bodies is also long-established and is subject to ongoing review with the objective of improving standards and better protecting consumers.

A number of points were made by hon. Members during the debate. I will respond to them as best I can, but insolvency, financial services regulation and the professional regulation of surveyors are not matters for which the Ministry of Justice is responsible. I will, however, ensure that the points raised on those topics by the hon. Member for Cardiff Central and other hon. Members during our debate are passed on to the appropriate Departments.

The hon. Member for Cardiff Central asked whether RICS has been doing its job. The Royal Institution of Chartered Surveyors has investigated the allegations made by Mr Shabir and has not found evidence of misconduct. It has also offered to speak with the hon. Lady to discuss her concerns, but says that it cannot reopen its investigation without new evidence. The Serious Fraud Office carried out an investigation and decided there was insufficient evidence to meet its criteria for prosecution.

The hon. Lady also asked why the Government have not acted against Lloyds. The Government believe that financial service providers must be properly regulated, but the case for more or different regulation must be made before the present system is changed. The Financial Conduct Authority is considering matters relevant to the regulation of the provision of financial services to small and medium-sized enterprises. The Government will consider the FCA report when it is published. It would not be appropriate for the Government to comment further while the process is ongoing.

The Opposition Front-Bench spokesman, the hon. Member for Sefton Central (Bill Esterson) asked a question about wider economic and regulatory issues. I will refer all the questions regarding the working of the economy to the Treasury for consideration. The FCA is still working on the issues raised in the Tomlinson report. As I have said already, it would not be appropriate to anticipate its investigations and the report.

In conclusion, I acknowledge the vigour and tenacity with which the hon. Member for Cardiff Central has campaigned on behalf of Mr Shabir and others. I appreciate the concerns she has raised and the very difficult situations that have been created for her constituent and others by the financial crisis of 2008-09. I cannot intervene in specific cases or commit the Government to any particular action to change the legal or regulatory framework relating to receivers. I can, however, promise that the Ministry of Justice will continue to keep the issues for which it is responsible relating to receivers under review and pass on concerns raised to other Government Departments as necessary.

19:27

[Jo Stevens]

May I thank the Minister for his response? I felt heartened in some respects and a bit downbeat in others. I am grateful to him for saying that he will take the concerns away. I thank the right hon. and hon. Members who have contributed to the debate.

Rather than focus on a particular individual in my summing up, I want to say that, as my hon. Friend the Member for Cardiff West (Kevin Brennan) has pointed out, this is about systemic failure. It affects huge numbers of people. It is not just about businesses, it is about humans—about families, individuals and the crises that it has caused them. It is clear that the difference between the public rhetoric, which was mentioned by my hon. Friend the Member for West Bromwich West (Mr Bailey), and the private reality is very severe for all our constituents. We are looking for a wider remedy and redress system to prevent this happening again.

I am grateful to the Minister for saying that he will take things away and look at them, but there is clearly evidence of wrongdoing here. It falls in the gap between SFO criteria and local police force criteria for investigation. Large numbers of people who have been badly affected have fallen into that gap. We need to look at some way of ensuring that their financial situation is redressed.

Question put and agreed to.

Resolved,

That this House has considered the regulatory role of the Royal Institution of Chartered Surveyors in Law of Property Act receiverships.

19:28

Sitting adjourned.