House of Commons

Tuesday 31st October 2017 Commons Chamber

Tuesday 31 October 2017

The House met at half-past Eleven o’clock

Prayers

Tuesday 31st October 2017 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Tuesday 31st October 2017 Commons Chamber

The Secretary of State was asked—

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

1. What discussions he has had with the Home Secretary on continued participation in the European Arrest Warrant after the UK leaves the EU.

[The Minister of State, Ministry of Justice (Dominic Raab)]

Ministers in the MOJ and the Home Office have regular discussions on key aspects of criminal justice co-operation in relation to our EU partners, including on the European arrest warrant.

[Tom Brake]

I thank the Minister for that reply. The police have repeatedly underlined the importance of the European arrest warrant in fighting crime. If the price of maintaining our citizens’ security and the effective operation of other European crime-fighting mechanisms is the jurisdiction of the European Court of Justice, will the Minister put crime fighting first or let his arbitrary red line jeopardise our citizens’ security?

[Dominic Raab]

I am not sure that making sure the UK Supreme Court has the last word on the law of the land is some arbitrary red line. However, the Government’s position in relation to our future partnership with the EU was set out in the position paper that was published in September. It was very clear that we have an ambitious plan for co-operation on security, law enforcement and criminal justice. The right hon. Gentleman will see if he looks at it carefully—I am sure he has—that maintaining strong extradition relations will be an important part of that agenda.

[Robert Neill (Bromley and Chislehurst) (Con)]

Will the Minister take on board the clear recommendation from the Justice Committee’s report in the last Parliament that underpinning any practical means of criminal justice co-operation, including the European arrest warrant, should be a continuing relationship on maintaining data equivalency? Unless the data regulations are equivalent, it will not be possible for European agencies to share with us or vice versa.

[Dominic Raab]

I thank the Chair of the Select Committee. That is, of course, why we have taken through the Data Protection Bill. We have extradition relations—very vigorous ones—with countries all around the world, and we see no reason why we would not continue to do so with our EU friends and allies.

[Helen Jones (Warrington North) (Lab)]

Given that it took countries such as Iceland and Norway 13 years to negotiate extradition arrangements with the EU, does the Minister accept that not maintaining the European arrest warrant puts people in this country at risk of seeing criminals go free and that those criminals may well include terrorist suspects?

[Dominic Raab]

No, because we are not in the position of Iceland. We start from the position of the European arrest warrant, with strong, intensive co-operation on extradition, and we will make sure we continue that operationally for many years to come.

[Mr Peter Bone (Wellingborough) (Con)]

Does the Minister agree that one reason people voted to leave the European Union was to make the Supreme Court the supreme court?

[Dominic Raab]

My hon. Friend is absolutely right. Let us also not forget the advice of the former Lord Chief Justice, Lord Thomas, who made it clear in his evidence to the independent review of extradition that there were problems with the European arrest warrant. We have legislated for extra safeguards. We are ending the jurisdiction of the European Court, but there has been no suggestion that we are dispensing altogether with vital EU extradition—except, perhaps, as a figment of some of the furtive Liberal Democrats’ imaginations.

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

Surely the Minister can make it clear that the Government’s priority must be continued participation in the European arrest warrant and that that must come ahead of his obsession with ending the jurisdiction of the European Court of Justice.

[Dominic Raab]

I welcome the hon. Gentleman’s intervention, but I gently suggest that he read the position paper on the future partnership, which was published in September, because it deals directly with the question he has just asked and makes it clear that we do want to continue vital extradition relations with our EU partners.

[David Linden (Glasgow East) (SNP)]

2. What steps his Department is taking to maintain human rights standards after the UK leaves the EU.

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

The United Kingdom has a long tradition of ensuring rights and liberties are protected domestically and of fulfilling its international human rights obligations. The decision to leave the European Union does not change this.

[David Linden]

Last week, during evidence to the Brexit Committee, the Under-Secretary of State for Exiting the European Union, the hon. Member for Wycombe (Mr Baker), said of the charter of fundamental rights:

“It is right that we leave behind the charter, and that we continue to rely on the Human Rights Act and the convention.”

Is it now the Government’s intention to stay in the European convention on human rights and to keep the Human Rights Act after Brexit?

[Dr Lee]

The European convention on human rights is separate from the European Union, so leaving the European Union does not affect our membership of the convention.

[Sir Desmond Swayne (New Forest West) (Con)]

When I was in opposition, we were assured again and again by Ministers that the charter of fundamental rights would not apply in the United Kingdom. I hope that we will be able to deliver that.

[Dr Lee]

The European Union (Withdrawal) Bill ensures that the source rights that underpin the EU charter of fundamental rights will continue to have effect in UK law after we leave the EU. The charter was created as a collection of all the laws that the EU had passed, and it would be wrong if, post our leaving the European Union, that charter continued to be cited in any future legal case.

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

Can the Minister assure us that when we leave—if we leave—the European Union, human rights will very much involve the ability to put right miscarriages of justice and that the Criminal Cases Review Commission will be strengthened rather than weakened by our leaving Europe?

[Dr Lee]

I can assure the hon. Gentleman that the Government’s intention is to confirm that post our leaving the European Union—when we leave the European Union—such access to justice is available to British citizens.

[Mark Pritchard (The Wrekin) (Con)]

When the United Kingdom leaves the European Union—[Interruption.] I speak as a remainer. When that happens, does the Minister agree that the Council of Europe will become an increasingly important interlocutor between this country and the European Union? Will he reiterate this Government’s commitment to staying in the European Court of Human Rights?

[Dr Lee]

Yes, when we leave the European Union, it is important that Britain maintains a strong role in international affairs in terms of its lead on human rights. I remind the House that the original convention on human rights was written by two Britons.

[Alex Burghart (Brentwood and Ongar) (Con)]

3. What assessment he has made of the effectiveness of community sentences in reducing rates of reoffending.

[The Lord Chancellor and Secretary of State for Justice (Mr David Lidington)]

The reoffending rate for community sentences has been coming down since 2005. The latest figures show that 34% of adults given a community order or a suspended sentence order go on to reoffend. This evidence shows that community sentences are more effective at reducing reoffending than short-term prison sentences are.

[Alex Burghart]

I very much welcome the figures that were published on Thursday showing that recidivism was coming down for people on community sentences. However, about a third of people on community sentences do still reoffend, so will the Secretary of State consider the “swift and certain” programmes in the United States that have had considerable effect in reducing recidivism?

[Mr Lidington]

I am certainly keen to learn from best practice not just in the United States but in other jurisdictions around the world. What was striking about some of last week’s figures was that they showed that offenders who underwent drug or alcohol treatment in this country showed a 33% reduction in the number of offences they committed in the following two years. That is a lesson we can learn from.

[Mr David Lammy (Tottenham) (Lab)]

May I recommend to the Minister my proposal of deferred prosecutions, which also gets to the community responses that can reduce recidivism? That is among the recommendations I made in the review that the Government asked for.

[Mr Lidington]

I reiterate to the right hon. Gentleman the Government’s appreciation for the work that he put into the review. We shall be responding in detail to his recommendations, including the one that he mentioned.

[Mr Philip Hollobone (Kettering) (Con)]

But is it not the case that according to the Ministry of Justice’s own figures, there is a direct correlation between the length of a prison sentence and the likelihood of an offender reoffending? In other words, the longer that somebody spends in prison, the less likely it is that they are going to reoffend.

[Mr Lidington]

It is true that short-term sentences appear to have the least effect in reduced reoffending, but the comparison with them is with alternative community sentences, which are available for that similar type of crime. Those community sentences work best when they link up with services such as drug and alcohol treatment programmes sometimes provided by other authorities in the community.

[Richard Burgon (Leeds East) (Lab)]

I think the whole House will agree that community sentences function only when magistrates have trust in the people supervising them. Last year, thousands of community sentences were served in London alone. Will the Secretary of State therefore commit today to an urgent independent review of the performance of the London company responsible for supervising many of these community sentences in London, following the revelations in last week’s “Panorama” investigation that the London CRC—community rehabilitation company—had failed to act on 15,000 missed appointments over 16 months?

[Mr Lidington]

Of course, as the hon. Gentleman knows, the company responsible has denied some of the claims that were made in the “Panorama” programme. None the less, it is quite clear that missed appointments are a serious matter. We expect the London CRC, like other CRCs, to take appropriate action. I believe that in the independent inspectorate of probation we have precisely the kind of independent body that he has called for. It is currently looking again at London and we look forward to its next report.

[Richard Burgon]

I hear the Secretary of State’s reassurances about the delivery of community sentences by the so-called CRCs, but for us to be absolutely sure about this, I argue that we need to know the advice that the Minister has had about the failure of the CRCs. The “Panorama” documentary revealed an in-house MOJ paper warning of the risks of handing much of the supervision of community sentences to the private sector through the privatisation of probation. Will the Secretary of State make that memo public, so that we and the House can ensure that those flaws are being tackled?

[Mr Lidington]

I think the hon. Gentleman is referring to a document that was produced some years ago. It is important now that in addressing the underperformance of some areas of the probation service, we act on the recommendations from the independent probation inspectorate and seek, through the contractual mechanism, to drive up standards to where the public would expect them to be.

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

4. What assessment his Department has made of the effect of the UK leaving the EU on the legal system of each legal jurisdiction.

[The Minister of State, Ministry of Justice (Dominic Raab)]

We recognise the distinct legal systems across the UK. We engage with our counterparts in the devolved Administrations to prepare the ground for Brexit, in terms both of achieving a smooth transition on things such as civil and judicial co-operation and of seizing the global opportunities for the UK legal sector, which contributed around £25 billion to the UK economy last year.

[Alan Brown]

That being the case, what actual steps has the Department taken to ensure that Scottish legal services and the Scottish legal system are protected when the UK leaves the EU?

[Dominic Raab]

There is a two-part answer to that. First, in relation to the negotiations with our EU partners, we are very focused on making sure that the current co-operation continues as well and as optimally as possible. Secondly, in relation to the legal position, the EU withdrawal position will make sure that there is legal certainty for citizens across the UK.

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

20. The Government’s “Legal Services are GREAT” campaign, which was launched in Singapore earlier this month, focuses solely on the global promotion of the English legal system; it contains no mention of Scotland or Northern Ireland. Will the Minister see that that is rectified prior to the campaign’s domestic launch later this year?

[Dominic Raab]

I can tell the hon. Gentleman that we are absolutely committed to promoting every one of Scotland’s finest exports, from whisky through to its brilliant lawyers.

[Joanna Cherry (Edinburgh South West) (SNP)]

The Government’s EU position papers on enforcement and dispute resolution and on security, law enforcement and justice have significant implications for the Scottish legal system and for areas of law devolved to the Scottish Parliament. Yet, in advance of the publication of those papers, there was absolutely no consultation with the Scottish Government or the Scottish Law Officers. What assurance can the Minister give me that such oversight will not happen again?

[Dominic Raab]

I do not know about the specific drafting in the papers, but there was considerable dialogue with all the devolved Administrations on the substance underpinning the position papers and the negotiating position that the UK has taken.

[Joanna Cherry]

Sir David Edward, a distinguished jurist and a former judge at the Court of Justice, recently gave evidence to the Scottish Parliament about these papers. He said, and I quote, that “the UK Government has overlooked the significance of the separate Scottish legal system, the Scottish judicial system and the Scottish prosecution system in relation to justice and home affairs issues such as Europol, the European Arrest Warrant, cross-border information systems and the conventions and regulations about recognition and enforcement of judgments.” Will the Minister undertake to meet me so that these oversights might be rectified?

[Dominic Raab]

I thank the hon. and learned Lady, but she has not actually pointed to one aspect, one paragraph or one point in the position paper that she thinks we have got wrong. We certainly accept, recognise and, indeed, embrace the huge contribution that the Scottish justice and legal systems make. In relation to the justice and home affairs strand of the negotiations, we will of course bear in mind very closely the different contours across the whole UK.

[Maria Caulfield (Lewes) (Con)]

5. What progress the Government have made on the implementation of the Farmer review published on 10 August 2017.

[The Parliamentary Under-Secretary of State for Justice (Mr Sam Gyimah)]

The family is the most effective resettlement agency that we have. That is a view shared by the prisons inspectorate, the probation service and Ofsted. The time to work on those relationships is from the moment an offender is sentenced to jail. To leave it longer is to leave it too late. That is why I welcome the excellent review by Lord Farmer, and we are working to implement all his recommendations.

[Maria Caulfield]

Figures from the Farmer review show that inmates who receive regular family visits are 39% less likely to reoffend. Will the Minister outline what steps the Government are taking to enable more family visits to happen in our prisons?

[Mr Gyimah]

My hon. Friend is absolutely right. Reoffending rates among people who have family contact are a lot lower than those for other offenders. We are working to implement all of Lord Farmer’s review over time. I will be meeting her and a number of colleagues to discuss our progress on this later.

[Alex Norris (Nottingham North) (Lab/Co-op)]

The Farmer review references prisoner wellbeing. At HMP Nottingham in the past two months alone, four prisoners have killed themselves and one has died of an overdose. Will Ministers say why they think this is happening, and what do they plan to do about it?

[Mr Gyimah]

The hon. Gentleman makes a very important point. Certainly, for a lot of prisoners—whether for their mental wellbeing and issues to do with self-harm, but also violence—family contact can make a difference. There are specific issues relating to HMP Nottingham, and I am willing to write to him about those.

[Andrew Selous (South West Bedfordshire) (Con)]

In Parc Prison outside Bridgend in south Wales, parent teacher evenings take place in the prison so fathers can demonstrate their ongoing responsibility to their children’s education. Will the Minister tell us if any other prisons are going to follow the excellent example set by Parc?

[Mr Gyimah]

The former Prisons Minister makes an excellent point about good practice at Parc Prison. As he is aware, there is good practice dotted around the prison estate. We have Storybook Dads and Mums in some prisons and Our Voice in other prisons. We want to see good practice spread across the entire estate. To enable us to do that, we are devolving budgets to prison governors, and we will also hold them to account when we pilot new family and significant relationship performance measures as of next year.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

6. What recent progress his Department has made on its review of legal aid reforms.

[The Minister of State, Ministry of Justice (Dominic Raab)]

Yesterday, we laid a written ministerial statement before the House setting out the details of the review of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, and publishing the post-legislative memorandum, which discharges the promise made by previous Ministers to this House. I expect the review to be completed by the summer of 2018.

[Mr Dhesi]

I thank the Minister for his response about progress on the review of legal aid reforms, but it is disappointing that, even though the Government first announced this review nine months ago, it still will not conclude for another nine months, which is nine more months of many thousands of people not being able to afford to access our justice system. His Government’s reforms of legal aid were intended to save £350 million. In fact, legal aid has fallen by double that. Will the Minister lobby his colleague the Chancellor, so that some of those additional savings go immediately to help those who have been priced out of access to our justice system?

[Dominic Raab]

I thought the hon. Gentleman might at least welcome the fact that we laid out the terms of the review yesterday. I am not sure whether he has had a chance to study the post-legislative memorandum. Let us be clear about one thing: last year, we spent £1.6 billion on legal aid in England and Wales, which is a quarter of the Ministry of Justice’s budget. International comparisons are not exact, but according to the Council of Europe’s review last year, the UK spent more per capita than any other Council of Europe member.

[Tim Farron (Westmorland and Lonsdale) (LD)]

In looking at the effect of the reduction in legal aid on access to justice, will the Minister also comment on the impact on access to justice of the closure of magistrates courts. The closure of Kendal court this summer has removed easy access to justice for hundreds of people, increasing pressure on the police, legal professionals and local families. What will he do to restore such physical access to justice?

[Dominic Raab]

I understand the hon. Gentleman’s concern if the court estate is situated in his constituency, but we have a £1 billion court reform programme, which is investing in updating, modernising and introducing technology. As a result, we will actually deliver more sensitive justice for victims and witnesses, but also a better bang for the taxpayer’s buck.

[Jessica Morden (Newport East) (Lab)]

18. Wales has seen one of the largest drops in legal aid providers, at 29%, particularly with regard to housing. Will the Government’s belated review of their deep cuts in legal aid look specifically at the impact of this?

[Dominic Raab]

The terms of reference have been set out very clearly. The post-legislative memorandum is wide in scope, and the hon. Lady should feel free to submit any particular points that she wants us to consider. I am obviously not going to pre-empt or prejudice the scope of the review that we have just undertaken.

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

Has my hon. Friend seen any evidence that reductions in legal aid have reduced the cost of litigation in this country? If not, will he look into why the market is not working properly?

[Dominic Raab]

A good many of those issues will be examined by the review. If my hon. Friend would like to write to me with any concerns he has, I would be very happy to look at them.

[Gloria De Piero (Ashfield) (Lab)]

Twenty months ago, the Court of Appeal ruled that the Government’s restrictions on legal aid for victims of domestic violence were unlawful. Nine months ago, Ministers told the House that they would make changes by secondary legislation that would

“make it easier for victims of domestic violence to access legal aid.”—[Official Report, 25 April 2017; Vol. 624, c. 983.]

Nothing has happened. Victims cannot wait another nine months, so when will the secondary legislation be brought forward?

[Dominic Raab]

The hon. Lady is right that it is vital to ensure that legal aid is available to victims in circumstances of domestic violence. Of course, it was granted in more than 12,000 cases last year. We have reviewed the evidence requirements again and are committed to making it easier for victims to access legal aid. I will announce the details shortly.

[Fiona Bruce (Congleton) (Con)]

7. What steps the Government are taking to empower prison governors.

[The Lord Chancellor and Secretary of State for Justice (Mr David Lidington)]

We have given governors greater freedom over their prison’s daily routine and timetable, staffing and family services. We intend to give governors control of areas such as education and training provision. As other current contracts expire, I will look for opportunities to devolve further powers.

[Fiona Bruce]

There were 21 recommendations in the Farmer review and Ministers have made the welcome commitment to implement them all. What further support and incentives are being given to prison governors, as they have increased autonomy within their prisons, to ensure that that implementation happens on the ground?

[Mr Lidington]

The budgets have already been devolved to governors, enabling them to commission family services that are tailored to the specific needs of their prisoners. I have seen examples of that when visiting HMP Parc and HMP Bronzefield. Governors will be supported in future by new family services guidance, which will incorporate elements of Lord Farmer’s report, in the hope that they will all develop best practice.

[Mohammad Yasin (Bedford) (Lab)]

A recent independent monitoring board report confirmed that the riot at Bedford Prison last year was caused by “chronic understaffing” and “poor systems”. Improvements have been made while the prison has operated at half capacity, but will the Minister assure me today that the same problems will not happen again once the prison is operating at full capacity?

[Mr Lidington]

I am sure that the hon. Gentleman will welcome the fact that we are about halfway towards recruiting the additional 2,500 prison officers that my predecessor, my right hon. Friend the Member for South West Norfolk (Elizabeth Truss), announced about a year ago. If he has particular concerns about a specific prison, I am sure that my hon. Friend the Prisons Minister will be happy to discuss them with him.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

I warmly welcome the commitment of the Secretary of State and the Prisons Minister to implementing the Farmer review in full. They have acknowledged the important link between family ties and rehabilitation. Now that prison governors are being further empowered, what more can be done to ensure that that is rolled out across the whole prison estate?

[Mr Lidington]

One thing that has struck me since being appointed to this role in the Government is that we need to get better at ensuring that the best, most successful practices in prisons are disseminated rapidly and widely. One means of doing that is to ensure that there is additional support for individual prison governors at regional level, so that they have experienced mentors available to them—particularly for new governors. I hope that that shift will help deliver the change that my hon. Friend seeks.

[Richard Burgon (Leeds East) (Lab)]

Governors cite the outsourcing of facilities management, maintenance and repairs as something that undermines their ability to manage important elements within their prisons. Labour has announced a review, working with prison governors, to identify private service contracts that can be brought back in-house to save the taxpayer money and, at the same time, improve prison conditions. Will the Government also commit to review those contracts?

[Mr Lidington]

As I said in answer to my hon. Friend the Member for Congleton (Fiona Bruce), as existing contracts expire, we shall seek new opportunities to devolve powers to governors and to clusters of prisons. Along with Prison Service headquarters, they will then have to strike the appropriate balance between the local provisioning of services and the need to secure the best value for taxpayers’ money.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

8. Whether the Government plan to respond to the findings of the European Parliament’s Committee on Petitions in December 2014 on the treatment of Cammell Laird strikers in 1984.

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

In Justice questions in April, I committed to looking at this case further. Having done so, however, I remain to be convinced that this is a matter for the Ministry of Justice.

[Jim McMahon]

Does the Minister agree that it is completely unacceptable for a British citizen representing the Cammell Laird strikers to take that issue to the EU Parliament petitions committee, for a judgment to be found in his favour and for his own Government not to even bother to respond?

[Dr Lee]

The Ministry of Justice does not think it holds any documents with regard to this case. I think that the hon. Gentleman is referring to a petition brought by Edward Marnell. I would be grateful if the hon. Gentleman wrote to me to set out the issues and I will arrange for my officials to have a meeting with him.

[Simon Hoare (North Dorset) (Con)]

9. What steps the Government are taking to stop the use of drones over prisons.

[Jim Shannon (Strangford) (DUP)]

15. What steps the Government are taking to stop the use of drones over prisons.

[The Parliamentary Under-Secretary of State for Justice (Mr Sam Gyimah)]

Drones are a threat but also an opportunity for our prisons. Where they are a threat, we are absolutely determined to tackle the organised crime groups who use them. In terms of the opportunities, the prison service is investing in drones to proactively manage large-scale incidents as our eyes and ears to improve our intelligence and allow us to respond more effectively and swiftly.

[Simon Hoare]

My hon. Friend will know that technology moves ever faster, day by day. Can he assure me that HMP Guys Marsh in my constituency will have access to the relevant funds to have the technologies in place to combat the use of drones and mobile telephones?

[Mr Gyimah]

Absolutely. Guys Marsh will benefit from the £2 million pot being used to invest in mobile phone detection technology. An additional £3 million is being invested in a national intelligence team to help to tackle serious and organised crime. This will allow us to deal with serious and organised crime in our prisons and in our communities. We will be working with the Home Office on this project to improve prison security and social reform.

[Jim Shannon]

In April 2017, the Police Service of Northern Ireland and the Prison Service in Northern Ireland set up a special unit to address the delivery of drugs, mobile phones and contraband into prisons using drones. Has the Minister considered setting up such a unit? Has he also considered a radio blocker that would prevent drones entering prison property?

[Mr Gyimah]

Absolutely. As I said, we have an intelligence unit dealing with organised crime in our prisons in a very concerted way across the estate. We are doing that alongside investing in anti-drone and mobile phone detection technology. Bringing this together will mean that we are able to deal with the threat that drones pose across the prison estate and, as I said to my hon. Friend the Member for North Dorset (Simon Hoare), in the community. Organised crime is not just in the prison estate, but often in the community.

[Thangam Debbonaire (Bristol West) (Lab)]

Approximately 200 kg of drugs were smuggled into the England and Wales prison estate last year. Exactly what proportion does the Minister believe was smuggled in with the use of drones, and what specific support is he giving to HMP Bristol in Horfield in my constituency to help to deal with it?

[Mr Gyimah]

It is difficult to tell exactly what proportion was brought in by drones. We do not know how many drones are successful; we know only those that are unsuccessful. We know that drones are a very serious and emerging threat because of the load they can carry into our prisons. Dealing with drugs in prisons is not just about our counter-drone strategy, but the overall illicit economy in prisons as a whole: mobile phones, which help to facilitate it; cracking down on corruption, where it exists, in the supply chain; and working with law enforcement. There is no single way to deal with it; we are going to do all those things across the piece to crack down.

[Dan Carden (Liverpool, Walton) (Lab)]

11. What assessment he has made of the effect of overcrowding and staff numbers on recent serious disturbances in prisons.

[Mr Gyimah]

I have seen a number of incidents in prisons. Every incident in any prison has its own unique situation, which is why we always investigate incidents in prisons very thoroughly. Obviously, we hold some of the most challenging individuals in society in our prisons, so incidents do sometimes occur. Our job is to minimise the risk and manage those incidents when they happen.

[Dan Carden]

The chief inspector of prisons has said that staffing levels are simply too low for a decent regime to be run. We need prison officers on the frontline, not filling in for cuts elsewhere. Under this Government, we have lost 6,000 prison officers. Will the Minister take some of the responsibility for the crisis in prisons such as the one in Walton?

[Mr Gyimah]

Obviously, I take a keen interest in the hon. Gentleman’s local prison, where the staff complement is exactly as it should be. It is one of the 10 pathfinder prisons in which we are implementing the new offender management model. I discussed the staffing situation there with the new national chair of the Prison Officers Association, and he commended the fact that staff numbers there are at full strength, but that does not mean that there is not more to do across the estate. We are halfway to our target of 2,500, and I am confident that we will achieve that.

[Imran Hussain (Bradford East) (Lab)]

The chief executive of the Prison Service has stated that, because of overcrowding, the Government will not be able to proceed with planned closures, throwing the financing of their prison building plan into disarray. In the light of concerns that the Ministry of Justice will not be able to build new prisons without selling off the old—the model on which its building plan was based—will the Minister today guarantee that no new prison places will be built from private funds?

[Mr Gyimah]

The hon. Gentleman seems to have forgotten that we have a duty to house those who are sentenced by the courts. The prison population in England and Wales is 86,000; we have a duty to provide accommodation for them to serve their sentence in. We still have a commitment to investing £1.3 billion in the prison estate to create 10,000 additional prison places during this Parliament.

[Lucy Powell (Manchester Central) (Lab/Co-op)]

The Minister will be aware that one of the main causes of overcrowding in our prisons is the very long delays in our criminal justice system and the number of prisoners on remand. I wrote to him about Cordell Austin’s very long delay on remand; he was first arrested back in May 2016 under a very large joint enterprise case, but was acquitted in August this year. He is still in prison after nearly 18 months, and his oral hearing is not due until December; originally, we were told it would be next year. Are these not the sorts of cases that need attention, and do not hearings need to be prompt?

[Mr Gyimah]

Justice for those going through the system has to be swift. May I correct an assumption in the question? The reason why the prison population has increased in England and Wales is that more people convicted of sex-related offences are serving longer sentences. Given our duty to protect the public, it is right that when these people are convicted by the courts, they serve their time. The hon. Lady mentioned a case in her constituency and what she perceives to be the injustice there, but I would not generalise from that case and say that that is why there is overcrowding in our prisons.

[Eleanor Smith (Wolverhampton South West) (Lab)]

12. What recent steps he has taken in response to the finding of the chief inspector of prisons that no young offender institution inspected in the last year was safe to hold juveniles.

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

Improving safety and reducing the risk of serious incidents of violence and self-harm in youth custody are among my highest priorities, and we are committed to reforming custodial provision.

[Eleanor Smith]

Given that no prison is safe for children, that over a third of children in prison have diagnoses of mental health conditions and that nearly 70% of children sent to prison reoffend within a year of release, does the Minister believe that it is time to find an alternative to sending children to prison?

[Dr Lee]

I recognise that the recidivism rate of 69% is unacceptable, and that is why I am bringing forward two new secure schools, one in the north-west and one in the south-east of England. We recognise that we have a problem with the environment in the youth custodial estate; I have never hidden this from the House. The mental health issues are deep-seated. We are dealing with approximately 1,000 individuals who are locked up at any one time, and they can often be quite deeply damaged; I assure the hon. Lady that I am cognisant of that.

[Tony Lloyd (Rochdale) (Lab)]

I very much welcome the idea of the secure school in the north-west. That is the right direction of travel, but will the Minister give a guarantee to the House and to the public that staffing levels will ensure that such schools both are safe and become places where we can break any reoffending cycle?

[Dr Lee]

The hon. Gentleman is fully aware that the part of the world that he used to represent as a Mayor is quite ahead in dealing with individuals more holistically. Staffing is an issue. We have brought forward a youth custody officer role, which will start in 2018, and we are bringing forward another 80 people for a course to improve the type of care that those individuals can offer. We are under no illusions about the challenges. The guidelines on how we are procuring secure schools and their staffing arrangements will be announced in the new year.

[Oliver Dowden (Hertsmere) (Con)]

13. What steps the Government is taking to ensure successful prosecutions for child abuse.

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

We are taking action across the Government to bring about a step change in the response to the sexual abuse and exploitation of children, including the commencement of the roll-out of recorded pre-trial cross-examination for vulnerable witnesses in Crown courts in January 2017. Further roll-out for vulnerable witnesses, which includes child victims of sexual abuse, will continue in the autumn.

[Oliver Dowden]

It takes tremendous courage for children to come forward in such cases. The process of giving evidence is often extremely harrowing. They deserve justice, and when that does not happen they are left deeply disillusioned with the system. It is something I have seen in my own constituency. What further steps can the Government take to ensure that justice is done? In particular, will the Minister look at the operation of the criminal injuries compensation scheme to ensure that child abuse victims are treated fairly?

[Dr Lee]

It is an important point that the nature of grooming can make signs of abuse particularly challenging to detect. That is something that CICA—the Criminal Injuries Compensation Authority—has to address. That is why it has consulted with experts and charities to produce recently published new guidance to ensure every victim gets the compensation to which they are entitled.

[Vicky Ford (Chelmsford) (Con)]

14. What progress the Government has made on improving the safety of prison officers.

[The Parliamentary Under-Secretary of State for Justice (Mr Sam Gyimah)]

We are working to keep our brave prison officers safe by strengthening the frontline. We had 20,000 individual officers in post at the end of August. That is an increase of 1,290 since October last year and the highest level since 2013. We are also giving our prison officers the tools that they need to do their job. We have invested in 5,600 body-worn cameras across the prison estate to protect and deter assaults.

[Vicky Ford]

In Chelmsford Prison, the number of attacks against staff rose to more than 120 last year, but since then it has recruited more staff and installed innovative mobile phone detectors and it will soon roll out a new digital initiative; where that has been piloted, attacks on prison officers have more than halved. Will the Minister join me in welcoming that progress to put staff safety first?

[Mr Gyimah]

I certainly welcome the progress. I would like to visit Chelmsford—I make that offer to my hon. Friend. We want to go further: she will be aware that we are supporting the private member’s Bill introduced by the hon. Member for Rhondda (Chris Bryant) on emergency workers, which will increase penalties for assaults on prison officers.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

16. What progress he is making on reviewing cases of prisoners serving a sentence of imprisonment for public protection.

[The Parliamentary Under-Secretary of State for Justice (Mr Sam Gyimah)]

We are making good progress in helping IPP prisoners to progress to eventual release. We have implemented measures such as individual psychology-led case reviews, increased access to offending behaviour programmes and we are increasing places on progression regimes, with an additional three regimes planned to come online at the end of March 2018.

[Ruth Cadbury]

On 18 October, the Select Committee on Justice heard that 760 released IPP prisoners were recalled in the past year, but 60% of those were quickly re-released. Does the Minister agree with the chair of the Parole Board that the threshold for recall is too low and should be reviewed to stop the revolving door for prisoners who have already long served their minimum tariff?

[Mr Gyimah]

I do not agree that the threshold is too low. When an IPP prisoner is recalled, it is not because they were found, for example, hiding under their mother’s bed. It is often because there is a clear causal link to the behaviour exhibited at the time of the index offence. Our duty is to keep the public safe. Where there is any signal or any cause for concern, it is right that such prisoners are recalled into custody. However, the national probation service is working on a programme to help IPPs when they are released into the community to transition into the community and to reduce the incidence of recall in a way that protects the public, but also allows IPPs to rebuild their lives.

[Wendy Morton (Aldridge-Brownhills) (Con)]

17. What steps the Government are taking to improve the court experience for victims and witnesses.

[The Minister of State, Ministry of Justice (Dominic Raab)]

We are investing over £1 billion to bring our courts into the 21st century, to make them more sensitive to victims and witnesses and to deliver swifter and more effective justice.

[Wendy Morton]

I am grateful to the Minister for that response. What can be done to ensure that the courtroom environment and the wider environment of the court building itself help to put victims and witnesses at ease, and support them through the process of giving evidence?

[Dominic Raab]

My hon. Friend is absolutely right that we need to reduce the stress and trauma experienced by victims and witnesses. We are doing a range of things. First, we are establishing model waiting rooms for victims and witnesses so that they will feel less stressed and more comfortable, meaning that they are more likely to give compelling evidence. Secondly, in the courtroom itself, we are rolling out section 28 measures for pre-recorded cross-examination to Crown courts nationally. This autumn, we will extend that to victims of sexual offences or modern slavery offences in Leeds, Liverpool and Kingston upon Thames.

[David Hanson (Delyn) (Lab)]

19. What recent changes his Department has made to community rehabilitation company contracts.

[The Lord Chancellor and Secretary of State for Justice (Mr David Lidington)]

We changed CRC contracts earlier this year to better reflect the fixed costs that they were incurring. However, payments to CRCs are still below our original forecasts.

[David Hanson]

I am grateful for that answer. Will the Lord Chancellor and Secretary of State publish how much additional resource he has given to CRC companies in total, which CRC companies have received that additional resource, and what he intends them to do with the product they have been given?

[Mr Lidington]

The answer to the right hon. Gentleman’s last question is that we expect them to use that money to improve the delivery of services and to match the best CRCs, such as Cumbria, which recently received a very impressive report from the inspectorate. We did not award the CRCs a specific sum, but agreed to alter the contracts in such a way that we accepted a greater proportion of their costs as fixed. The figure of £277 million that is in public circulation is an estimate of how that adjustment might increase the total contract value, but that is based on certain assumptions about volumes and payment by results, and I reiterate that payments will still be well within the forecast budget.

[Mr Speaker]

I think that the House has savoured the treatise from the Secretary of State, and we are deeply obliged to him.

I call Stephen Morgan. He is not here. Peter Kyle? Not here either. Where are these fellows? How extraordinary. Well, all is not ill with the world because the hon. Member for Banbury (Victoria Prentis) is here.

[Victoria Prentis (Banbury) (Con)]

23. What steps the Government are taking to reform the youth justice system.

[The Lord Chancellor and Secretary of State for Justice (Mr David Lidington)]

We outlined our plans to reform youth justice in response to Charlie Taylor’s review last December. Since then we have created a new youth custody service that is responsible for the day-to-day running of the youth estate and committed £64 million towards its reform.

[Victoria Prentis]

The Justice Committee heard this morning that a third of people on jobseeker’s allowance have criminal records. What further steps is the Secretary of State taking to ban the box?

[Mr Lidington]

The Ministry of Justice is trying to set an example by banning the box and treating ex-offenders on a par with any other applicant for a job. That example is being widely followed throughout the public service, and we look to the private sector to match it, because we believe that ex-offenders can contribute a great deal to the successful work of private sector companies.

[Daniel Zeichner (Cambridge) (Lab)]

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

[The Lord Chancellor and Secretary of State for Justice (Mr David Lidington)]

Since the last Justice questions, it has been my pleasure to welcome the appointment of Lord Burnett of Maldon as Lord Chief Justice of England and Wales, and the historic appointment of Baroness Hale as President of the Supreme Court of the United Kingdom. Where she leads we hope that many others will follow. I look forward to working with them both to ensure that the judiciary’s essential role at the heart our nation continues to be championed and respected.

Further to the comments made a few moments ago by the Under-Secretary of State for Justice, my hon. Friend the Member for Bracknell (Dr Lee), about the new guidance issued by the Criminal Injuries Compensation Authority, I can tell Members that I have asked my Department to give full consideration to wider concerns that have been expressed in the House about the rules of the compensation scheme as part of my Department’s work to develop a strategy for victims, and in the light of recommendations we expect next year from the independent inquiry into child sexual abuse.

[Daniel Zeichner]

After last week’s “Panorama” investigation into the dangerous failings of the privatisation of probation, will the Minister halt any plans to outsource night-time supervision in probation hostels?

[The Parliamentary Under-Secretary of State for Justice (Mr Sam Gyimah)]

Of course we seek to get the best value for money for the taxpayer in all our services. I understand that we are hiring people to cover some night-time shifts in probation hostels. We will ensure that we bear in mind value for the taxpayer while also protecting the public.

[Mark Menzies (Fylde) (Con)]

T5. As my hon. Friend the Minister is aware, Kirkham Prison is a category D open prison in my constituency that works to enable prisoners to make the transition to life outside. What steps are the Government are taking to support Kirkham and other prisons to rehabilitate offenders and to improve prisons’ ways of operating?

[Mr Gyimah]

In prisons across the estate, including Kirkham, we are empowering governors by giving them control over their budgets and holding them accountable for training and education outcomes so that we enable them to deliver rehabilitation.

[Yasmin Qureshi (Bolton South East) (Lab)]

The family courts are full of people representing themselves. The new President of the Supreme Court, Lady Justice Hale, has described the Government’s legal aid reforms as a “false economy”. Does not the Minister agree that restoring early legal aid would not only reduce the number of cases coming to court, but save court time? Will he guarantee that the legal aid review will include an analysis of the cost to the rest of the legal aid system that has resulted from the Government’s abolition of early legal aid?

[The Minister of State, Ministry of Justice (Dominic Raab)]

It is certainly right that we need to try to reduce the number of cases getting into the family courts in the first place, especially given that witnesses and others involved are often more traumatised by the process of going to court. The terms of reference for the legal aid review have been clearly set out, and there is wide scope for the issues that the hon. Lady mentions to be taken into account, but I will not pre-empt or prejudice what the review will look at right now.

[Robert Jenrick (Newark) (Con)]

The exceptionally high cost to businesses of commercial litigation is good for commercial lawyers—perhaps I should declare an interest—but it is not good for businesses, whether they are large or small. One answer that has recently been developed is the use of commercial litigation financing. Will my right hon. Friend the Lord Chancellor look into ethical and other concerns surrounding that, as outlined by Lord Faulks in the other place recently?

[Mr Lidington]

We will be happy to look into that and to take account of any representations that my hon. Friend wishes to make.

[Ian Austin (Dudley North) (Lab)]

T2. Why are the Government planning to give security companies and bailiffs the power of arrest, because that will be the result of privatising the collection of court fees? A petition opposing those plans has been signed by 16,000 people because they do not believe that either 150 jobs, or the safety and finances of vulnerable people, should be put at risk.

[Mr Lidington]

These are not in fact new powers; they have been in use across the country for many years. They apply to arrests relating to debt and community penalty breaches, and they must follow the issue of a warrant of arrest from the criminal courts. Any use of these powers is overseen by Her Majesty’s Courts and Tribunals Service.

[Philip Davies (Shipley) (Con)]

Following the triumph of the Conservative manifesto at the election, may I congratulate the Lord Chancellor on finding another half-baked and unpopular policy to put before the electorate: giving prisoners the vote? Will he acknowledge that nobody is taking the vote away from prisoners—they are taking it away from themselves? If voting is so important to them, perhaps they should not commit the crimes that lead to them being sent to prison in the first place. I urge him to reject this ridiculous policy, which goes down like a lead balloon with the electorate.

[Mr Lidington]

The Government are preparing their position ahead of the December meeting of the Committee of Ministers of the Council of Europe. We will announce any changes in our position to Parliament in the usual way.

[Matt Western (Warwick and Leamington) (Lab)]

T3. What steps are the Department taking to ensure that there is adequate funding for youth justice services in places such as Warwickshire, which has seen significant funding cuts?

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

We spend more than £200 million a year on youth justice and, as I outlined earlier, we are spending an additional £64 million on the custodial estate. We are conscious of the difficulties within the custodial estate, but this is about not just the estate, but the community, which is why I have commissioned a report on the value of sport to the criminal justice system, and especially young people, which will be published in the new year.

[Lucy Allan (Telford) (Con)]

Tomorrow sees the release of Mubarek Ali, who is a serial child sexual exploitation offender in Telford. Will the Secretary of State please confirm whether all that should be done has been done to protect the public and the victims concerned?

[Mr Lidington]

To the best of my knowledge, that has been done. Mr Ali is, of course, being released in accordance with the law having served the term that was set out by the judge in his case for the purposes of punishment and deterrence. However, if my hon. Friend or her constituents have any concerns about the circumstances of the release and the supervision arrangements that should follow, I ask her to bring them to my attention without delay.

[Chris Elmore (Ogmore) (Lab)]

T4. Sixty-one per cent. of women who leave prison after a sentence of less than 12 months are reconvicted in the first year. In my recent Westminster Hall debate on women leaving prison, the Minister made various commitments about new interventions and various reviews to support women in prison and those leaving it. When will those reviews be complete? When will there be a better, fuller programme to support women in and leaving prison?

[Dr Phillip Lee]

The hon. Gentleman arranged a good and well-attended debate. He is aware that I have committed to producing a women’s strategy. It will be published once all the moving cogs of government are in place, and I can promise him that it will be about how we can do more in the community to prevent locking women up.

[Sir Peter Bottomley (Worthing West) (Con)]

May I invite the Minister to join me in saying to our hon. Friend the Member for Shipley (Philip Davies) that most people in prison never voted and are unlikely to vote when they come out? By making it compulsory for them to register to vote, they are far more likely to think about other people, not just themselves.

[Mr Lidington]

We hope that all prisoners will be fully integrated into society when they come to be released from prison and will lead a law-abiding life of constructive citizenship. As I said a few moments ago, the Government will make clear their approach at the forthcoming Committee of Ministers meeting and in an announcement to Parliament in the usual fashion.

[Jo Swinson (East Dunbartonshire) (LD)]

T7. Some 54,000 women lose their jobs each year due to pregnancy and maternity discrimination. The Secretary of State may remember the chaos of the early weeks of caring for a newborn, but the time limit for bringing an employment tribunal claim is just three months, so will he look again at this issue, as recommended by the Women and Equalities Committee, the Justice Committee and the Equality and Human Rights Commission, and extend the time limit for claims related to pregnancy and maternity discrimination?

[Dominic Raab]

I have looked into this important and sensitive area, and I have also spoken to my right hon. Friend the Member for Basingstoke (Mrs Miller), the Chair of the Women and Equalities Committee. I urge the hon. Member for East Dunbartonshire (Jo Swinson) to send me any evidence that putting the limit back to six months would actually make a difference, because some of the considerations that apply in relation to three months would also apply to six months.

[Several hon. Members rose—]

[Mr Speaker]

Well, what a rich vein. I call Mr Dominic Grieve.

[Mr Dominic Grieve (Beaconsfield) (Con)]

I welcome the news that the Government are again considering prisoners’ right to vote. My right hon. Friend the Secretary of State may find that this is a matter on which public opinion and the mood in this House has shifted. It is high time that we remedied something that places us in a very small category of countries. Most countries manage to allow their prisoners to vote—certainly those sentenced to short terms of imprisonment—without the world coming to an end, and it is an important tool for both civic participation and rehabilitation.

[Mr Lidington]

My right hon. and learned Friend expresses a view that he has held for a long time and has been clear about, and I am sure that he will be following the debate closely. When the Government have reached a view on our approach to the Committee of Ministers meeting, we will share that with Parliament.

[Liz Kendall (Leicester West) (Lab)]

T8. The Government have new proposals to limit legal costs and damages recovered in clinical negligence cases. Patient groups are extremely concerned this will mean serious cases involving older people, child deaths and stillbirths will be impossible to pursue. Will the Minister meet me and those groups to hear their concerns and to sort out the proposals?

[Mr Lidington]

Serious and sensitive though that matter undoubtedly is, it falls in large part to the Department of Health, but either myself or the Minister of State would be happy to discuss it further with the hon. Lady.

[Suella Fernandes (Fareham) (Con)]

Following my ten-minute rule Bill in March calling for the reform of family law, including a robust enforcement of child arrangements orders, opening up the family courts in care proceedings and updating our anachronistic divorce laws, what progress have the Government made on their family law review, which was announced in the summer?

[Dominic Raab]

I thank my hon. Friend for her proposals and the thought that she has put into them. The time taken to conclude public family law cases has nearly halved since 2011. We are still working through very real issues with the relevant Departments, including the Department for Education. On private law, we are committed to facilitating the settlement of far more family disputes so that we avoid families, vulnerable witnesses and sometimes victims having to go through the trauma of court proceedings.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

T10. Following a meeting with the Courts Minister, I received a letter from him last week that described Sunderland’s court building as below what would be expected, but that is putting it mildly. The court is more than 100 years old. It is damp, has very poor accessibility, and is wholly inadequate for victims and staff alike. Will he visit Sunderland and explain to the people of Sunderland, including my hon. Friend the Member for Sunderland Central (Julie Elliott), why they do not deserve better from his Department?

[Dominic Raab]

The hon. Lady raises her point tenaciously. I welcome the opportunity to sit down with her and the hon. Member for Sunderland Central (Julie Elliott) to look at the issue. We will ensure that the refurbishment is carried out as soon as reasonably practical. In the long term, we want to ensure that in her constituency and across the country we have the right courts in the right places, and with the right technology and refurbishment, to ensure that they deliver the best access to justice.

[Robert Neill (Bromley and Chislehurst) (Con)]

The reputation of our legal system partly depends on our respect for our international obligations. In advance of the Committee of Ministers, will my right hon. Friend the Secretary of State bear in mind that respecting the judgments of the European Court of Justice is a better guide for this country’s reputation than the amateur jurisprudence of the Dog and Duck?

[Mr Lidington]

The rule of law is at the heart of this country’s constitutional traditions and is expressed in the oath that I and every Lord Chancellor has to take. My hon. Friend will recall that the manifesto on which he, I and other Conservative colleagues stood earlier this year committed us to remaining party to the European convention on human rights for the remainder of this Parliament.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

The recently published Bach commission report highlighted a number of serious issues relating to access to justice, including representation at inquests. In the light of tragic events such as Grenfell Tower and Hillsborough, will the Minister commit to providing legal aid for inquests in all cases when the state is funding one or more of the other parties?

[Dominic Raab]

I thank the hon. Lady for her question on this pertinent and salient point. Legal aid remains available for inquests through the exceptional case funding scheme. Although those decisions are obviously decided independently, I reassure her that more than half the applications in relation to inquest cases in 2016-17 were granted.

[Andrew Selous (South West Bedfordshire) (Con)]

Full-body scanners that detect drugs that are concealed within the person are successfully used across America. The Ministry of Justice has trialled one scanner. Has there been an evaluation, will we see more trials, and could the scanners be used on a mobile basis?

[Mr Gyimah]

As my right hon. Friend the Secretary of State said in his party conference speech, one scanner was trialled in Wandsworth and we are looking at doing that across the entire estate. There has been an evaluation. Full-body scanners are not the only way to combat drugs and to prevent drugs from getting into prisons, as using intelligence, going after organised crime and working with law enforcement are also ways of dealing with drugs. We will use every measure possible to make sure that we stop the epidemic of drugs in our prisons and the flow of drugs into them.

[Stephen Kinnock (Aberavon) (Lab)]

The Minister will now be aware that there is a covenant on the land on the Baglan industrial park, in my constituency, where he wishes to build a prison. That covenant states that the land should not be used

“other than as an industrial park”,

or for

“any offensive, noisy or dangerous trade business manufacture or occupation or for any purpose or in any manner which may be a nuisance to the Agency or the occupiers of neighbouring or adjacent premises.”

Does he agree that the covenant is the final nail in the coffin of the Ministry’s plans to build a prison on the Baglan industrial park?

[Mr Gyimah]

The hon. Gentleman is incredibly persistent and tenacious in fighting for his constituents. Before moving ahead with any building project, we will of course carry out all the necessary legal and local authority searches. If they turn up any objections, we will take those into account accordingly.

[Mr Philip Hollobone (Kettering) (Con)]

With a population of more than 80,000, our prisons are bursting at the seams, yet according to the Ministry of Justice’s own figures, we transferred a pathetic 110 foreign national prisoners to prison in their own country last year, and this year’s number is 56. Surely we can do better than that.

[Mr Gyimah]

I think my hon. Friend is referring to the numbers transferred under prisoner transfer agreements. Last year, the overall number of prisoners deported from this country was a record high. We continue to work consistently with foreign Governments, and there is an inter-ministerial group that links not only the Department for International Development, the Foreign Office and the MOJ, but the Home Office, to make sure that we iron out all the issues that can be impediments to transferring prisoners to serve their sentence abroad. I assure him that this is a key focus that we will continue to pursue.

Gaming Machines and Social Responsibility

Tuesday 31st October 2017 Commons Chamber

12:36

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

(Urgent Question): To ask the Secretary of State for Digital, Culture, Media and Sport to make a statement on gaming machines and social responsibility.

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Tracey Crouch)]

I am pleased to inform the House that this morning I published a consultation on proposals for changes to gaming machines and social responsibility measures across the gambling industry. The consultation will run for 12 weeks, during which the general public, industry and all other interested parties will be able to voice their views on the questions raised. I appreciate that some might not understand why we have to run a consultation, but this is the right process by which to proceed if we are to address this issue thoroughly and properly.

As hon. Members know, the Government announced a review of gaming machines and social responsibility measures in October 2016. I am grateful to all those who responded, including individual former addicts, faith groups, local authorities and the bookmakers. The objective of the review was to ensure we have the right balance between a sector that can grow and contribute to the economy and one that is socially responsible and doing all it should to protect consumers and communities.

Although our consultation sets out a package of measures to protect vulnerable people from harm, the main area of interest has been the stake for B2 gaming machines, known as fixed odds betting terminals. We believe that the current regulation of FOBTs is inappropriate to achieve our stated objective of protecting consumers and wider communities. We are therefore consulting on regulatory changes to the maximum stake, looking at options between £50 and £2, to reduce the potential for large losses and therefore the harmful impact on the player, their families, and the wider community.

We are aware that the factors that influence the extent of harm to the player are wider than one product or a limited set of parameters such as stakes and prizes, and include factors around the player, the environment and the product. We are therefore also consulting on corresponding social responsibility measures, on player protections in the online sector and on a package of measures on gambling advertising. Within this package, we want the industry, the regulator and charities to continue to drive the social responsibility agenda, to ensure that all is being done to protect players and that those in trouble can access the treatment and support they need. The consultation will close on 23 January 2018, following which the Government will consider their final proposals and make an announcement in due course.

[Tom Watson]

Thank you for granting this urgent question, Mr Speaker.

First, I praise the Minister for the manner in which she has conducted this review. She has kept me and other Members of the House informed throughout the entire process and has shown exemplary attention to detail. It is a shame, therefore, that she does not have a completely free hand in this policy, because we think the outcome could have been very different.

The Government’s response, after a year-long process of delay after delay, and hundreds of submissions from industry, local government, charities, campaigners and Church groups, among others, is deeply disappointing. Instead of taking firm and reasonable action to counter the well known problems with FOBTs, the Government have simply kicked the process further into the long grass and announced another consultation extending beyond the Budget.

Look at the public policy challenge the House faces: 430,000 people are addicted to gambling—up a third in three years—and a further 2 million problem gamblers are at risk of developing an addiction. Some £1.8 billion is lost on FOBTs each year—an increase of 79% over the past eight years. The gambling industry’s yield—the amount it wins in bets—has increased to £13.8 billion, up from £8.3 billion in 2009, yet it paid only £10 million for education and treatment services this year, through a voluntary levy. Worst of all, there are 450,000 children who gamble at least once a week. This situation requires action now.

There is an old maxim that the bookies always win, and they have won again today. Their shares are up and their lobbyists were grinning from ear to ear in their TV interviews this morning. We have consistently said to the Government that our gambling laws are no longer fit for purpose. There has been an explosion of online and digital-platform gambling that the Gambling Act 2005 could not have anticipated. We have offered to work with the Government on a cross-party basis to make our laws fit for the digital age. The report published today could have been a significant starting point for the process, because even by the most conservative estimates, the associated harms and costs of gambling addiction are believed to total more than £1 billion a year—and I bet the true figure is far higher. The impact is felt not only through the losses that gamblers accrue but through NHS and treatment costs, in our communities as families struggle and break down, and in our police forces, which deal with the resultant crime.

What discussions has the Minister had with the Home Office on how to measure gambling-related crime? Does she know how many people have received counselling or treatment for gambling addiction in the past 12 months, since her review has taken place? Does she know how much treatment for gambling addiction costs the NHS each year? She has said from the Dispatch Box on several occasions that the gambling industry has not done enough to fund research, education and treatment of gambling and gambling-related harm, but she has again failed to bring the industry to heel. She could have introduced a compulsory levy, and we would have supported her on that. This is a missed opportunity to settle the issue of FOBTs once and for all. Quite frankly, we expected more. The Government had a strong hand to play, but this is a busted flush.

[Tracey Crouch]

I thank the hon. Gentleman for the kind words at the start of his speech. I am pleased to see his conversion on this issue. He was of course a Minister in the Government who passed the legislation that liberalised gambling and caused the harm that many people have suffered as a consequence of FOBTs. It is this Government who are taking action.

I appreciate the hon. Gentleman’s concerns about the fact that we have announced a consultation, but the fact is that in 2005 the Labour Government rushed through the Gambling Act without paying proper attention to the issues with these machines, which then led to their proliferation. FOBTs did not exist in 1997, when the Labour party came to power. It is this Government who have recognised the harm that has been caused and who are taking action. There will be a consultation; it is due process, and I expect people to contribute to that process.

[Mr John Whittingdale (Maldon) (Con)]

I welcome the announcement of the consultation, particularly as there is now information about the effect of category B2 machines that did not exist when the Culture, Media and Sport Committee looked into the matter around five years ago. Will the Minister confirm that the Government’s position remains that any future decisions will be evidence-based?

[Tracey Crouch]

I can confirm that to be the case. The call for evidence brought in many people’s views and made the need to take action very clear. The consultation sets out four options for the reduction in stakes, but the call for evidence makes it certain that the status quo will not be maintained.

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

I fear that the Government have missed yet another opportunity to tackle this problem. By announcing yet another consultation, they are attempting to kick this matter further into the long grass. The move to cut the maximum stake, while welcome, does not go far enough. In Scotland, £4 billion is spent every year on 2,000 gaming machines, and this is at a time when more people are being identified as problem or at-risk gamblers. Action is needed now. If this Parliament is unwilling to act, the Scottish Parliament is. Will the Minister start today the process of devolving all gambling powers to the Scottish Parliament?

[Tracey Crouch]

We have already devolved a number of powers to the Scottish Parliament that it has yet to take up.

[Maria Caulfield (Lewes) (Con)]

I congratulate the Minister on her announcement today. Does she not find the hypocrisy of the Opposition astonishing, given that it was the Labour Government who doubled the number of fixed odds betting terminals in shops and tried to withdraw the powers of local councils to stop betting shops being placed on high streets? Is their attitude not extraordinary at this stage?

[Tracey Crouch]

I will be perfectly honest: I find their attitude disappointing. We have worked on this issue on a cross-party basis for a number of years. I have poured heart and soul into this consultation and feel that we have definitely taken the matter much further forward than ever before. It is this Government who are taking action on an aspect of gambling that brings great concern into our communities and affects individuals, families and society as a whole. It is this Government who are dealing with it.

[Conor McGinn (St Helens North) (Lab)]

I refer Members to my entry in the Register of Members’ Financial Interests and to the fact that I am co-chair of the all-party group on racing and bloodstock industries.

The Minister will know that horse-racing relies heavily on the levy from bookmakers and on advertising, sponsorship and media rights. Will she assure me that she will work with the industry—with horse-racing—in the coming weeks to ensure that, while protecting those who are vulnerable to gambling addiction, which we all want to do, we protect jobs, investment and economic benefits that my constituency receives through being home to the best racecourse in the country at Haydock Park?

[Tracey Crouch]

Horse-racing is an incredibly important sector within my portfolio, and my right hon. Friend the Minister for Digital would not let me forget that, as he has one of the largest racecourses in his constituency. We do not envisage these changes having a particularly negative impact on horse-racing—in fact, they may well encourage bookmakers and others to focus more on horse-racing.

[Several hon. Members rose—]

[Mr Speaker]

The hon. Member for Shipley (Philip Davies) is clutching some newspaper article from which, doubtless, he wishes to quote.

[Philip Davies (Shipley) (Con)]

May I urge the Minister not to listen to the shadow Secretary of State? He and I were both on the Select Committee that looked into these matters. and he was so interested in problem gambling that he did not even turn up to one evidence session. Perhaps if he had, he would be a bit more knowledgeable on the subject.

Over the summer, the Gambling Commission published its report on problem gambling. It found that the highest levels of problem gambling were in spread betting, followed by betting through a betting exchange, then playing poker in pubs or clubs, then betting online on events other than sports or horse or greyhound-racing, and only then by playing gaming machines in bookmakers. Those much higher levels of problem gambling all come with unlimited stakes and unlimited potential winnings. If the Government are so obsessed with evidence, why are they focusing so much on betting machines in bookmakers? Or are they just playing to the gallery, which most of us know this is really all about?

[Tracey Crouch]

May I gently urge my hon. Friend to read the consultation document we published today? If he does, he will discover that this is not just about problem gamblers, but about those who may be at risk from harmful gambling. One thing we know is that there are many more people out there who are at risk of harmful gambling, of which FOBTs are just one aspect. The consultation delivers a package of measures on all areas of gambling and the risks that they may cause.

[Graham P. Jones (Hyndburn) (Lab)]

My constituency has 54 FOBTs. Some £2.5 million was lost on these machines last year and £15 million has been lost since 2008 in a deprived constituency. The recent report by the Institute for Public Policy Research and GambleAware said that it is costing the UK £1.2 billion to look after the victims of gambling—people who are addicted and have various problems. What assessment has the Minister done of the cost to the UK Government of looking after people who will continue to be affected if the £50 option is chosen, because it is still such a high stake?

[Tracey Crouch]

I congratulate the hon. Gentleman on his work on the subject. He is a long-time campaigner on the issues of FOBTs and has done an excellent job standing up for his constituents who have become the victims of gambling addiction. Four options have been set out in the consultation paper—£50, £30, £20 and £2—and separate impact assessments have been published alongside.

[Fiona Bruce (Congleton) (Con)]

I am pleased to hear the Minister speak about protecting the vulnerable from harm. The Centre for Social Justice report, “Lowering the Stake on Fixed Odds Betting Terminals” says that

“the high stakes of FOBTs have compounded the social issues perpetuated by gambling.”

As the Minister says, the harm of FOBTs goes way beyond addicted gamblers to affect many families and children disastrously. I implore the Minister to consider that a reduction of £50 will not resolve the issue for those people.

[Tracey Crouch]

It is clear that we have listened to all the public concerns about the risks of high-stake gambling, which is why we have published this overall package of measures. I encourage my hon. Friend and others to make their views clear on the individual stake options as part of the consultation.

[Christine Jardine (Edinburgh West) (LD)]

Given the danger that people who want to make large bets will be pushed online to the less regulated area, would the Government consider extending the consultation to address stakes in online equivalents such as blackjack, in which thousands of pounds can be bet on one hand and lost?

[Tracey Crouch]

The consultation addresses online gambling, in which there has been huge growth. We have announced as part of today’s package that we expect to see stricter protections as part of the licensing conditions for online gambling operators. I hope that the hon. Lady will look at those measures and respond accordingly.

[Mr Laurence Robertson (Tewkesbury) (Con)]

I am the other co-chair of the all-party group on racing and bloodstock industries. I also have the honour of representing the constituency that is home to Cheltenham racecourse, which I would say is the best racecourse in the world.

I am a little bit concerned by the Minister’s suggestion that bookmakers might be able to transfer bets to racing from FOBTs. I do not think there is any evidence that that would happen, although I very much hope that it would. I stress the importance to horse-racing of the support of bookmakers. That is not unique to the United Kingdom; it is the same across the world. When the Minister takes her decision, will she consult fully with all strands of horse-racing, so that we do not end up throwing the baby out with the bathwater?

[Tracey Crouch]

There is no intention to damage the horse-racing sector with this consultation. I encourage my hon. Friend and other hon. Members to look at the letter that was sent to me by Paddy Power’s chief executive, who recognises that the issue has become toxic for the industry and may well be driving punters away from the shops. Members of the bookmaking industry are keen to get involved with this, and there is certainly no intention to damage horse-racing or any other sporting industry.

[Ian Paisley (North Antrim) (DUP)]

I thank the Minister for the consultation paper, which we will study with interest. Before she makes her final decision, will she carry out an impact assessment of whether these measures will result in job losses in betting shops across the United Kingdom? Also, there are five-and-a-half lines on television broadcasting in this document, yet everyone knows that gambling adverts are doing more damage than FOBTs.

[Tracey Crouch]

We will assess all the evidence that we receive as part of the consultation. The impact assessment has also been published today alongside the consultation document. Advertising regulations are in place. We have announced today, as part of the package of measures, that there will be a responsible gambling campaign funded by the broadcasting industry of a scale that is larger than any Government public awareness campaign. We expect that to be prevalent within the parameters in which gambling adverts are allowed. It is a fact that people can see gambling adverts during live sporting events, and we are addressing some issues around their tone and content. I think it is fair to say that, although such adverts might be annoying, the content is not beyond what is allowed by regulation. We will keep a close eye on that situation.

[Mr Bob Seely (Isle of Wight) (Con)]

Is the Minister aware that many people in the Isle of Wight would like to see the limit of FOBTs dropped as soon as possible, preferably to £2. There are 55 such machines in my constituency, and they have taken £19 million out of our economy since 2008. That money would frankly be best spent elsewhere. Will she comment on the gambling industry’s irresponsible and deeply selfish attitude? It has become addicted to the profits that these machines generate. That addiction to those profits comes from getting people—generally at the poorer end of the spectrum—addicted to this style of gambling. It is deeply troubling.

[Tracey Crouch]

I hope that my hon. Friend and many other people across the Isle of Wight who have been affected by these machines take a look at the consultation paper and reply. This is an opportunity for the gambling industry to take a long hard look at itself and reassess what it offers the British punter. We shall see what happens over the next 12 weeks.

[Ronnie Cowan (Inverclyde) (SNP)]

I recently visited the National Problem Gambling Clinic, and commend the work being done by Dr Henrietta Bowden-Jones in supporting people affected by gambling-related harm. However, this is the only such clinic in the entire United Kingdom. Does the Minister agree that more help needs to be provided for individuals and families who have been affected by problem gambling? One way of doing this would be to put a statutory levy on bookmakers, so that they contribute more than the £8 million that they currently contribute on the back of the hundreds of millions of pounds of profit that they make annually.

[Tracey Crouch]

I agree. We certainly mention some issues around the levy in the consultation document. At the moment, bookmakers have to contribute 0.1% of their profits. If they did that, it would amount to somewhere in the region of £13 million to £14 million, but that is currently not happening across the board. We have made it very clear in the consultation that we want that to happen. If it does not happen, we will certainly consider the introduction of a mandatory levy.

[Alex Burghart (Brentwood and Ongar) (Con)]

I strongly welcome the consultation. Many of us remember the disastrous legislation on FOBTs under the last Labour Government, and their intention to bring forward a generation of super-casinos. I urge the Minister to look at online gambling where people can gamble repeatedly through the night on online casinos while drinking.

[Tracey Crouch]

We are looking at the issue of online gambling. As it stands, about 10% of the adult population participate in online gambling and betting, and 5.1% of those players are problem gamblers. That compares to 11.5% of FOBT users who are problem gamblers. We are addressing both issues, but, although we have seen a growth in online gambling, we know where the current issues lie.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

On Thursday, I visited a residential gambling rehabilitation centre in my constituency, which provides a 14-week programme for about half a dozen residents at any one time. It is run by the Gordon Moody Association, and demand for the service outstrips what it can offer. Will the Minister commend the vital work of the Gordon Moody Association and commit to a compulsory levy on the industry to fund such vital work?

[Tracey Crouch]

I am happy to commend the work being done in the hon. Lady’s constituency. There is a shortage of places dealing specifically with gambling addiction. We would like to see the situation vastly improved, and we are talking to colleagues in the Department of Health to ensure that that happens. I hope the hon. Lady heard my answer to the previous question, which was that the industry should contribute more on a voluntary basis, but if it does not, we will consider a mandatory levy.

[Sir Peter Bottomley (Worthing West) (Con)]

I commend to the Minister the “Victoria Derbyshire” programme this morning. At 9.15 am the hon. Member for Swansea East (Carolyn Harris) spoke, and at 10.15 am a man called Terry spoke about how, if the stakes were £2, he would not have lost everything. We ought to bring in Terry’s law. My prediction is that, on a free vote, £2 would get through and that, on a whipped vote, it would also get through.

[Tracey Crouch]

I am grateful to my hon. Friend for that television and whipping advice. We are looking at all these issues, and the different options are there. The £2 figure is in the consultation paper, and that is something there has been great public demand for. We are going through a consultation process; everybody will be able to submit their views to it, and we will make a decision during the next year.

[Carolyn Harris (Swansea East) (Lab)]

May I first thank the Minister for the helpful way she has worked with me as chair of the all-party group on FOBTs to get us to the point we are at now? She will be well aware of my concerns about the addiction to FOBTs and the consequences of that addiction. There is insufficient treatment for addicts and no residential treatment at all for women. There is the potential for criminal activity to feed the habit and for vandalism as a result of frustration about the habit, and there is a worrying opportunity for money laundering. Addicts also often put pressure on the benefits system because of their chaotic lives, and mental health issues often prevent them from working. Before the final decision is made, I urge the Minister to consider all those social consequences of this dreadful addiction to these dreadful machines.

[Tracey Crouch]

May I first congratulate the hon. Lady on the work that she and many others on both sides of the House and in both Houses have done on this issue in the all-party group? Many of the issues she has raised are precisely why the Government are taking action and why we have published the consultation today. It is important to emphasise that we recognise that this is about not just the gambler—whether they are a problem gambler or a harmful gambler—but the associated consequences for their family and friends and for the communities in which they live.

[Bob Stewart (Beckenham) (Con)]

Does my hon. Friend agree that bookmakers provide considerable employment, contribute to the economy and, for the vast majority of gamblers, provide a bit of enjoyment and light fun? We should not forget that.

[Tracey Crouch]

That is why we are taking the balanced approach of making sure that we continue to support a socially responsible sector while protecting the most vulnerable in society.

[Nick Smith (Blaenau Gwent) (Lab)]

In just one borough—Blaenau Gwent—nearly £1.5 million was lost to FOBTs last year, so I ask the Minister not to bow to industry pressure and to cap the top stake at £2.

[Tracey Crouch]

I am grateful to the hon. Gentleman for his views. I encourage him to make those points, particularly as they relate to his constituency, as part of the consultation. We are looking at a whole variety of options when it comes to the stake, and I urge him and others to make their views known as part of the call for responses in the next 12 weeks.

[Wendy Morton (Aldridge-Brownhills) (Con)]

It is so important that we have the right, strong protections in place around online gambling, particularly where young people and some of the most vulnerable people are concerned, so I welcome the Minister’s announcement today. Will she provide further details to the House about the responsible gambling advertising campaign her Department has announced today?

[Tracey Crouch]

GambleAware, the Advertising Association, broadcasters and the gambling industry will come together to draw up a multimillion-pound, two-year responsible advertising campaign. It will have a budget of between £5 million and £7 million in each year, and it will include television ads, including around live sport, as well as ads for radio, cinema and print online.

[Mr David Lammy (Tottenham) (Lab)]

I consider the Minister a friend, not least because we support the same football team—Tottenham Hotspur, the best in the premiership—but she will know that I have campaigned for over seven years on this issue, and in my view it was a complete mistake to introduce these machines to the high street. This is not just about a reduction in the stake, so will she say a little more about reducing the proliferation of betting shops across our country and our high streets?

[Tracey Crouch]

Mr Speaker, I am not sure that the reference to my supporting Tottenham Hotspur endears me to you, but I thank the right hon. Gentleman for his comments. We looked at the proliferation of bookmakers in our high streets as part of our call for evidence. We concluded that local authorities do have the powers to address the issue. However, taking the whole package of measures, I am sure there will be a reduction if the stakes are reduced significantly in the future.

[Mr Speaker]

I call Mr Peter Bone.

[Mr Peter Bone (Wellingborough) (Con)]

Thank you, Mr Speaker, for calling another Spurs fan immediately. Your neutrality in the Chair, of course, would not prevent you from intervening. This excellent Minister is bringing forward a really sensible consultation. What worries me is that if we make the wrong decision, we may make the situation worse by driving problem gamblers out of betting shops, which are a controlled environment, and towards online gambling. The consultation is right, but we should look at that issue as part of it.

[Tracey Crouch]

Online gambling has, in many respects, a better opportunity to protect players, because sites have all the details of players’ practices. Obviously, as part of the consultation, we are going to look at how we can protect online gamblers, but we definitely have more opportunity to do that than we do to protect somebody going in and out of different bookmakers.

[Stephen Timms (East Ham) (Lab)]

The Minister will know that the scale of harm being inflicted by these appalling machines in my area prompted Newham Council to lead calls for a £2 maximum stake. We have heard fears today that, if that happens, the number of betting shops could be almost halved around the country. May I reassure the Minister that if the number of betting shops in East Ham’s high street was halved, there would still be too many? Will she please get on and introduce the £2 maximum stake as quickly as possible?

[Tracey Crouch]

I thank the right hon. Gentleman for his question, because it gives me an opportunity to thank Newham Council for the work it has done. I have met the leader of the council as part of the call for evidence and as part of his representation of other local authorities, including my own, which has signed up to the issues around stakes. This is all part of the consultation process, and I encourage Newham and all the other local authorities to let their views be known.

[Andrew Selous (South West Bedfordshire) (Con)]

Will the consultation look at the costs that fixed odds betting terminals put on the police, mental health services and the families of vulnerable gamblers—especially the children?

[Tracey Crouch]

That is exactly what we are doing. As part of the call for evidence, a lot of those issues came through. My hon. Friend is a member of the Health Committee, which took evidence from a professor with expertise in this issue, who, sadly, related some of the facts around suicides related to gambling. It is really important that we remember that it is not just the person who is gambling who faces the consequences of harm but the families and the communities they live in. That is why we are trying to take a balanced approach and having a full, open consultation about ensuring we have a socially responsible sector that protects those most at risk of harm.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for her statement. In discussions I have had with her, she has shared the concern many of us in the House have about the need to have drastic and clear changes in the management of FOBTs. My hon. Friend the Member for North Antrim (Ian Paisley) referred to online gambling, and perhaps I could urge the Minister to take more cognisance of that issue. None the less, the consultation is important, and 450,000 addicts cannot be ignored. The Minister mentioned the figure of between £2 and £50 for a stake. I urge her to make sure the stake is closer to the lower figure than the higher figure and to reduce the harmful addiction we have to gambling in this country.

[Tracey Crouch]

I am grateful to the hon. Gentleman for his question, and I hope he and many others will respond to the consultation with their views. We are trying to ensure that we take all people’s views into account before we make a decision on what the stake is.

[Mr Philip Hollobone (Kettering) (Con)]

My constituents will be shocked by the figures the deputy Leader of the Opposition shared with the House. He said there were 430,000 problem gamblers and that the number had gone up by a third in recent years. Are those numbers that the Government recognise? What do the Government say are the causes of this? Were the Minister to limit the stakes on FOBTs to £2, how many fewer problem gamblers would there be?

[Tracey Crouch]

The deputy Leader of the Opposition was absolutely correct—those are Government figures. There are 430,000 problem gamblers in Great Britain and a further 2 million who might be at risk. About 50,000 call the national helpline on gambling addiction every year, and about 8,000 are getting treatment—but that figure does not include those who get treatment under the NHS system. We are looking at all the areas of harm around this. It is not just about problem gamblers: it is also about those at risk of harmful gambling, and the consequences for and impact on those individuals and their families. I encourage my hon. Friend to look at the consultation and the impact assessment and come to a view on which will be the best stake, and encourage his constituents to do the same.

[David Linden (Glasgow East) (SNP)]

Given that £35 million was frittered away in one year in Glasgow on fixed odds betting terminals, I am disappointed that we are going for another consultation on this and not getting action on it. If the Government are in listening mode, may I make a plea that we do move to cutting the stake to £2, and will the Minister come to Baillieston’s Main Street, which is littered with betting terminals? People are obsessed with and actually addicted to these machines, so we can take action sooner rather than later?

[Tracey Crouch]

We are following due process on this issue. It is really important that we do not rush measures through, because we have seen that hastily made legislation in this area can cause great impact and great harm, as with the Gambling Act 2005.

Points of Order

Tuesday 31st October 2017 Commons Chamber

13:11

[Mr Ben Bradshaw (Exeter) (Lab)]

On a point of order, Mr Speaker. Have you had any indication from the Government on whether they intend coming to this House to make a statement about the British connection in the Robert Mueller investigation into Russian subversion of the American presidential election, and in particular, the apparent role of an academic, a Professor Mifsud, who met in London more than once, we understand, George Papadopolous, who has already pleaded guilty to misleading the FBI in connection with Russian help in the presidential election?

[Mr Speaker]

I am grateful to the right hon. Gentleman for his point of order and for his notice a few moments ago of his intention to raise it. The short answer is that I have received no indication from any Minister of an intention to come to the House to make a statement on that matter. However, not being unconscious of the indefatigability of the right hon. Gentleman, I am confident that if the matter is not brought to the House, he will try to ensure, by one means or t’other, that it is.

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

On a point of order, Mr Speaker. I seek the advice of the Chair on a situation that has arisen with a constituency matter. Constituents bought tickets from an organisation known as Viagogo, and then wanted a refund for those tickets. They were unsuccessful in that, and sought the advice of my office. My office has been unsuccessful in contacting the organisation, whether via email, telephone call, or even being able to find an address to write to. I seek your advice, Mr Speaker, on what can be done to encourage this organisation to respond to my constituency office in standing up for my constituents.

[Mr Speaker]

Whether it is incompetence or discourtesy, one knows not, but I think that most people would be interested to know, because of course it could happen to the constituent of any Member. The Minister is poised ready like a panther to pounce, and it would be a pity to disappoint the right hon. Gentleman. Let’s hear the fella.

[The Minister for Digital (Matt Hancock)]

Thank you, Mr Speaker. As the Minister responsible for this policy area, I would be very happy to meet the hon. Member for Torfaen (Nick Thomas-Symonds) and see what we could do to ensure that he gets the appropriate response to his constituents’ concerns.

[Mr Speaker]

Ordinarily I find that if one is sufficiently persistent and demonstrates by one’s behaviour—entirely lawfully, I hasten to add—that there is no question of one’s going away, an institution will, in the end, tend to think that it is best to respond. I have had some modest experience of these matters in the past when seeking to secure a refund for a very elderly constituent in relation, I think, to a satellite dish. In the first instance, the company thought it proper simply to ignore my representations, but I made approaches with notable and perhaps spectacular regularity, as a consequence of which, in the end—this was probably 15 years ago—my constituent was able to seek redress. I never secured anything remotely approximating an apology from the company, but in a sense that mattered not. My constituent got his refund, and I rather doubt that the company would have tried to play the same game, at any rate in relation to any of my constituents, again. If I was able to succeed, I am confident that the hon. Member for Torfaen (Nick Thomas-Symonds), with due persistence, will also be able to do so.

[Mr Dennis Skinner (Bolsover) (Lab)]

Ah yes, I remember it well.

[Mr Speaker]

I am always grateful to the hon. Member for Bolsover (Mr Skinner) for his encouragement from a sedentary position.

Tyres (Buses and Coaches)

1st reading: House of Commons
Tuesday 31st October 2017 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:15

[Maria Eagle (Garston and Halewood) (Lab)]

I beg to move,

That leave be given to bring in a Bill to introduce limits on the age of tyres on buses and coaches; and for connected purposes.

I heard your homily, Mr Speaker, about the benefits of persistence, and I hope that the coach and bus industry has heard it too.

This Bill would make it unlawful to operate a public service vehicle with tyres that exceed the age of 10 years, require the annual MOT to check and record the age of the tyres, and give traffic commissioners powers of enforcement to sanction any public service vehicle operators found to be using tyres more than 10 years old.

Late on 10 September 2012, just over five years ago, my constituent Frances Molloy lost her 18-year-old son, Michael. He was killed when he was returning home as a passenger on a coach from Bestival, an annual music festival on the Isle of Wight. Two other people, Kerry Ogden, who was 23, and the coach driver Colin Daulby, who was 63, also lost their lives. Others were seriously injured, some in life-changing ways. The crash was caused when the front nearside tyre of the coach burst on the northbound A3, causing the vehicle to swerve out of control, mount an embankment and strike a tree.

The Surrey coroner, Richard Travers, found on 16 July 2013 that the crash was caused by a 19 and a half-year-old tyre that had recently been fitted to the coach. It had 40% of its tread intact and was thus being used entirely lawfully. The coroner found, on the basis of the evidence before him, that it had burst catastrophically because it had perished by reason of its age. I say again that this tyre was being lawfully used. It had no outward sign to show the perilous condition that it was in fact in. It was older than my 18-year-old constituent, Michael Molloy.

The Surrey coroner was so concerned about the facts as he found them that he wrote to the then Secretary of State for Transport under rule 43 of the coroners’ rules to raise:

“A concern by which, in his opinion, there is a risk that future deaths could occur unless action is taken.”

He went on to express his concern that:

“Public Service Vehicles carrying passengers are able perfectly legally to drive on tyres that have no restriction as to their age and which, by reason of their age may be in a perilously dangerous condition which there is no realistic means of detecting”.

This was not the first such rule 43 letter received by the Secretary of State for Transport concerning the dangers of ageing tyres. The Gloucester coroner had written, following an inquest he conducted in July 2010, concerning the dangers of ageing tyres causing death.

When I discussed all this with Michael’s mother, Frances Molloy, following the inquest verdicts at that time, I found it hard to believe that the use of such a potentially dangerous old tyre was in fact lawful. The fact that it was lawful represents a lacuna in our road safety legislation. I quickly became convinced that this gap can and should be closed. I took Frances Molloy and David Price, an expert forensic accident investigator who had given evidence at Michael’s inquest, to see the right hon. Member for Derbyshire Dales (Sir Patrick McLoughlin), who was then the Transport Secretary, to ask him to ban such potentially dangerous old tyres from our roads.

Banning such tyres would cost the Government nothing, because the date of manufacture is printed on the side of each tyre and can be easily checked at an MOT or whenever a vehicle is stopped by the authorities. It is not as though one would have to take a sample from the tyre and test it in a laboratory. The date is printed on the side of the tyre. Such a measure would save lives, because it would remove dangerous old tyres from our roads. I believe that had such a measure been in place before the Bestival crash, the deaths that resulted from it could have been prevented.

I thought then, and I think now, that the case for doing this is compelling. It was disappointing, then, that the Government at the time simply produced guidance that

“strongly recommends that tyres over 10 years old should not be fitted to the front axles of buses and coaches.”

The guidance goes on to state:

“Such tyres should be fitted only to the rear axles of vehicles as part of a twin tyre combination.”

Although doing so would certainly improve safety and perhaps stop accidents of the catastrophic nature of the Bestival crash, the guidance does not exactly send a clear signal. I had hoped that, following my representations, the signal that the Government sent would be much clearer. I believe that my constituent Frances Molloy, and the campaign that she fronts, also expects more to be done. Making the use of such dangerous old tyres unlawful is the only clear signal that will have the desired effect.

New Ministers are now in post, so I say to the Government: can we just get on and do this? The Government will find widespread support if they back this measure. My constituent Frances Molloy has campaigned for improved tyre safety non-stop since her son Michael’s death. This summer, she launched the Tyred campaign to ban the fitting of tyres that are more than 10 years old to public service vehicles. Merseyside is clearly behind the campaign. Liverpool City Council and Mayor Anderson, Liverpool city region and Mayor Rotheram, Knowsley Metropolitan Borough Council, Sefton Metropolitan Borough Council and Wirral Metropolitan Borough Council have all passed motions backing the campaign. In September, Mayor Rotheram and Merseytravel announced that they had secured agreement from all their operators to ban old tyres from all public service vehicles operating on their network across Merseyside.

Across our nation, bus and coach operators such as National Express and Big Green Coach are signed up. Smaller regional operators such as Liverpool City Sights have come on board, and more councils and companies will back this effort. The change will be made area by area and company by company, but it would be so much better if the Government would simply accept that these old tyres kill and agree to ban them by supporting the proposed legislation.

Michael Molloy was a talented and creative young writer and musician, who was just making his way in that exciting world. His life was full of enjoyment, love, hope and promise, but it was needlessly cut short, tragically, in a totally avoidable crash. His mother Frances is heartbroken. She thought that coach travel was a safe form of public transport, but the coach to which she entrusted her son turned out to be a death trap because of a 19 and a half-year-old tyre that no one could see was going to burst as a result of the deterioration caused by its age. Let those of us who are now in this House take steps to ensure that no other family has to endure what Frances has endured. Old tyres kill, so let us get them off our coaches and buses, and let us get them off our roads. I commend the motion to the House.

Question put and agreed to.

Ordered,

That Maria Eagle, Mr George Howarth, Mrs Louise Ellman, Luciana Berger, Stephen Twigg, Ms Angela Eagle, Alison McGovern, Dan Carden, Bill Esterson, Ms Marie Rimmer, Jack Dromey and Naz Shah present the Bill.

Maria Eagle accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 1 December, and to be printed (Bill 119).

Finance Bill (Programme ) (No. 2)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the Order of 12 September 2017 (Finance Bill (Programme)) be varied as follows:

(1) Paragraphs (10) and (11) of the Order shall be omitted.

(2) Proceedings on Consideration shall be taken in the order shown in the first column of the following Table.

(3) Each part of the proceedings shall (so far as not previously concluded) be brought to a conclusion at the times specified in the second column of the Table.

TABLE

Finance Bill

Tuesday 31st October 2017 Commons Chamber

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1

Deemed domicile: review of protection of overseas trusts

‘(1) Within fifteen months of the passing of this Act, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review about the operation of the provisions for the protection of overseas trusts in relation to deemed domicile.

(2) The review shall in particular consider—

(a) the effects of those provisions on the Exchequer,

(b) the behavioural effects of those provisions, and

(c) the effects on the matters specified in paragraphs (a) and (b) if those provisions were repealed.

(3) For the purposes of this section, “the provisions for the protection of overseas trusts” means the provisions inserted 18 to 38 and 40 of Schedule 8 to this Act.

(4) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons within three months of its completion.’—(Peter Dowd.)

This new clause requires a review to be undertaken of the effects of the provisions for protecting overseas trusts from the new provisions in relation to deemed domicile.

Brought up, and read the First time.

13:26

[Peter Dowd (Bootle) (Lab)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to consider Government amendment 17.

[Peter Dowd]

Proceedings on this Bill started in March, but we are now drawing to a close. The Bill’s progress was interrupted by the general election. Not much happened to it in the post-election period, but it was brought back in September, and now we are moving, to use the Minister’s phrase, towards the denouement of the debate.

To solve a problem, it is first important to recognise that there is a problem. I think that that sums up the debate surrounding the Government’s deemed domicile measures—the Government cannot see that there is a problem. Non-dom status is a hangover from the days of the British Empire. Non-dom tax status was introduced in 1799 to allow British colonialists with foreign property to shelter it from wartime taxes. These days, non-doms are individuals who live in the UK but claim to have a permanent home in another country. There is no statutory definition of a non-dom; the status depends on circumstantial evidence.

Her Majesty’s Revenue and Customs says that 121,000 individuals claimed non-domiciled taxpayer status via their self-assessment returns in 2014-15. Non-domiciled UK-resident taxpayers accounted for about 85,000 of those individuals, and the remaining 35,000 or so were non-UK residents. Famous examples of non-doms include the directors of Lloyds, HSBC and RBS, the billionaire Chelsea owner Roman Abramovich, the steel magnate Lakshmi Mittal, the media baron Viscount Rothermere, and numerous footballers.

Non-doms are allowed to avoid tax on overseas investment income if that does not exceed £2,000 a year. All non-doms are required to pay income tax on their UK earnings, but they can avoid income tax and capital gains tax on assets held elsewhere as long as the amounts are not remitted to the UK. The Treasury’s proposals to reform non-dom status would mean that an individual who had been resident in the UK for 15 of the last 20 years would be considered UK-domiciled for the purposes of income tax, capital gains tax and inheritance tax.

[Charlie Elphicke (Dover) (Con)]

I am listening to the hon. Gentleman’s case with interest. I am curious why, in their first 12 years in power, the last Labour Government did nothing whatsoever about non-domiciled individuals, and then reacted reluctantly only when they were humiliated and forced to take action by the then Conservative Opposition. Why is he not praising the Conservative Government for taking further action on this matter?

[Peter Dowd]

If it takes a Labour Government to sort out a problem after more than 200 years, we will sort out the problem.

On paper, this idea seems to be reasonable and sensible —in fact, even progressive—until, metaphorically speaking, someone starts to scratch away at the very thin veneer. In reality, the Government have purposefully and deliberately exempted offshore trusts, thereby undermining their own reforms, even though offshore trusts have been identified by the OECD, the European Parliament and the International Monetary Fund as among the main vehicles for tax avoidance across the globe.

13:30

The Panama papers and now the Bermuda leak have brought offshore trusts to the forefront of debate on international tax avoidance. The Panama papers provided us with an abundance of evidence showing that offshore trusts have been used for tax avoidance over the years. Many well-known people have set up offshore trusts to ensure that paying inheritance tax, for example, is a mug’s game. It is not unknown that high-level politicians and business leaders are embroiled in the Panama papers scandal. The Government of one European country were brought down when it emerged that their then Prime Minister’s family had hidden millions offshore.

The use of offshore trusts is not restricted only to inheritance tax; it is also relevant to income tax, as was shown by a recent case involving one of the Scottish football teams. We have also seen in Spain the rising problem of tax avoidance relating to football image rights, with a number of high-profile players convicted for shifting profits from image rights offshore, as has been raised by Opposition Front Benchers and the hon. Member for Dover (Charlie Elphicke).

There are also reports of the banks in the City of London using offshore trusts. In 2011, for example, following advice from Deloitte, Deutsche Bank set up trusts to enable bankers to dodge income tax on their bonuses. HMRC successfully managed to defeat that scheme, but others are still in use today. The truth is that HMRC, the staffing levels of which have reduced by 17% since 2010, is woefully understaffed and under-resourced to tackle such schemes. HMRC insiders believe that as much as £1 billion a year is lost to wealthy individuals hiding money in offshore trusts.

The House should be clear that offshore trusts continue to operate outside the law and with impunity. They remain one of the last bastions for international tax dodgers. The value of the assets hidden in these trusts remains unknown, and they continue to operate under a veil of secrecy. None the less, a conservative estimate made by the economist Gabriel Zucman suggests that at least 8% of the world’s wealth is illegally unreported, although other estimates actually put the figure higher. In short, it is impossible to know how much money the UK Treasury is forgoing in tax, as this Government continue to stonewall any attempt by the Opposition to introduce a public register for offshore trusts.

[John Redwood (Wokingham) (Con)]

Does not the hon. Gentleman think that his well-intentioned proposal might actually backfire, as it would mean that fewer rich people would come here and pay us any tax at all?

[Peter Dowd]

The problem is that that has been a persistent argument for years, but there does not actually appear to be any evidence to back up such an assertion.

I understand that HMRC is responding to EU directives on money laundering and has started the process of registering new trusts and that those already operating must provide additional information by 31 January 2018. However, HMRC has also confirmed that it will not penalise anyone as long as they register before 5 December 2017. The rules state that all trusts with UK tax liabilities must be registered, but the process is conveniently silent about trusts registered in Crown dependencies and overseas territories. The information provided to HMRC will not be made publicly available.

The Minister and Government Members have made much of the claim that the Conservative party has been clamping down on tax avoidance. In fact, that was considered such a priority in the general election that the Prime Minister—at her most imperious, at that stage—gave the subject a grand total of eight lines in the Conservative party manifesto. However, after seven years in power, the Government’s record is still there to see. The measures in the Bill are another example of how the Government wish to be seen to be doing something, but in fact their proposals are artificial and will amount to little while the exemption for offshore trusts remains intact.

[The Financial Secretary to the Treasury (Mel Stride)]

On bearing down on tax avoidance, evasion and non-compliance, does the hon. Gentleman recognise that we have brought in £160 billion since 2010 by clamping down on avoidance? It was announced just last week that the tax gap—the difference between what we should be bringing in and what we are bringing in—is now at just 6%, which is much lower than it was in any year under the previous Labour Government.

[Peter Dowd]

I am pleased that the Minister raises that point because we will no doubt have another debate about it in the future. I have an interesting assertion that I shall make when we debate the tax gap, but that is for another day. I am happy to debate that subject with the Minister in due course.

[Vicky Ford (Chelmsford) (Con)]

Does not the hon. Gentleman agree that a tax gap that is one of the lowest in the world is something that we should celebrate while we are debating a Bill about taxation? We should be thanking the Government for making sure that the taxes we approve are collected.

[Peter Dowd]

This does not actually include the multinationals, but I was trying to make the point that I am happy to return to that point in another debate, if the Government so wish.

[Mel Stride]

The hon. Gentleman is being extremely generous in giving way. On this very important question, does he not recognise that the tax gap is currently 6%? In 2005, under the previous Labour Government, it was about 8%. If the tax gap was 8% today, we would be bringing in £11.8 billion less in tax, which is the equivalent of the funding for every single police officer in England and Wales. The tax gap really does matter, so I think that the hon. Gentleman should address the questions that are being put to him.

[Peter Dowd]

The tax gap fell in every year between 2005 and 2010. The Minister brings my attention to his record, but I am bringing his attention to Labour’s record. As I have said, if we want to have a debate about the tax gap, we can do that. I am more than happy to do so, as are my colleagues, but as I have said many times, this is also about trying to look forward. We can all talk about our record—how good or bad it might have been—but let us move on and try to deal with the issues we are facing, not those we used to face.

[Ms Nusrat Ghani (Wealden) (Con)]

I accept that you do not want to talk about the tax gap and want to move forward, but if you want to move forward, will you at the very least welcome the fact that we have collected more than £1 billion—

[Mr Speaker]

Order. I am not doing anything. It is not that I do not want to talk about this or I do not want to do that. That is simply not germane. The debate goes through the Chair, as the hon. Lady knows on her best days.

[Ms Ghani]

I am sorry, Mr Speaker.

The hon. Gentleman might not want to talk about the tax gap, but will he at the very least acknowledge that an extra £1 billion has been collected under this Government compared with under Labour? Surely he wants to take this opportunity to welcome that.

[Peter Dowd]

As much as I would like to debate the tax gap with the hon. Lady, I think that shows an ignorance of the issues involved in the nature of the tax gap. As far as I am concerned, I am quite happy—more than happy—to debate this issue in due course, but I am simply making the point that we must move on.

[Lucy Frazer (South East Cambridgeshire) (Con)]

Will the hon. Gentleman give way?

[Peter Dowd]

I want to make a little progress, but I will come back to the hon. and learned Lady in a few moments.

In the past month alone, the Government have faced a barrage of criticism from the European Union for their poor record on tackling tax avoidance. The European Parliament’s report on money laundering, tax avoidance and tax evasion has accused the Government of directly obstructing the fight against tax avoidance, while the European Commission has opened an investigation into the Government’s changes to controlled foreign company rules, which made it easier for multinational companies to shift their taxable income offshore and reduced last year’s tax take by £805 million. That goes to the heart of the point I am making about the tax gap and some of its intricacies.

[Lucy Frazer]

The hon. Gentleman is being very generous with his time. He has made it clear that he wants to talk about the issue before us rather than others. Labour Members say in new clause 1 that they want a review after 15 months. Despite speaking for more than 10 minutes, he has not addressed that. Has Labour assessed how much a review would cost and whether it would divert resources from the Treasury?

[Peter Dowd]

I thank the hon. and learned Lady for that intervention. Government Members have taken up about seven minutes of the time I have been on my feet—[Interruption.] Six and a half minutes, the Minister says.

I am quite happy to debate these issues, but that is the point of a review. Why not have a review? It is a perfectly reasonable and legitimate proposal, given the nature of what we are considering. If there is nothing to hide, and if the Government are quite happy to be open and transparent and to tell everybody how wonderfully they are doing, let us have a review. No doubt the hon. and learned Lady will support the new clause in due course.

[Lucy Frazer]

Forgive me for intervening again, but I do not think the hon. Gentleman heard my question: how much would the review cost?

[Peter Dowd]

If we had a review and identified areas of non-compliance, I suspect we would bring in far more money than that review would cost. That is why we have reviews. Again, I am sure that the hon. and learned Lady will support the new clause.

The Government’s opposition to any action to crack down on offshore trusts is not new. In 2013, while G8 leaders attempted to push forward new measures to deal with tax evasion, the previous Prime Minister was busy undermining them by writing personal letters to the President of the European Council, Herman Van Rompuy, begging him to stop the inclusion of offshore trusts. By contrast, the last Labour Prime Minister, Gordon Brown, to his credit, spent his last year in office attempting to get world leaders to agree to strict measures on offshore tax havens. That is all the more reason for a review, so let us have that review. I am speaking directly to our proposal. As I have said, if there is nothing to be fearful of, let us have the review.

Our opposition to the exemption of offshore trusts from these measures is well noted. We have been calling for the exemption’s removal since March. I called for its removal in the debate on the Ways and Means resolutions for this Bill, on Second Reading and in the Public Bill Committee, as the Minister knows, and I now call for its removal once again. I am happy to give the Minister an opportunity to reconsider, because the British public are no fools. They are more educated than ever about what an offshore trust is and what it is used for.

[Mel Stride]

The hon. Gentleman is being exceptionally generous in letting us intervene so many times. To bottom out one point that came up in Committee, even though he may feel that our proposals are imperfect, does he accept that we have made more progress than any previous Government and that we are going further than before in raising fair taxes from non-doms?

[Peter Dowd]

I recognise any progress that anybody makes. If the Government have brought about progress, that is fine—I think it is wonderful—but I think there should be more progress. Under the stewardship of the Minister, I am convinced that we will have even more progress on this matter.

While the Minister might be able to use arcane rules of the House to prevent the Opposition from removing the offshore trusts exemption and introducing a public register, he cannot hide from the fact that his Government have a pretty poor record in this area. The heart of our disagreement with the Government is simple: it is about whether all UK citizens are to be treated equally in the eyes of the law and for the purposes of taxation. Throughout the passage of the Bill, it has been clear that the Government are actively content to ensure that we have a tax system that favours a wealthy few at the expense of the many.

The Government could act to close this tax avoidance measure. They could act to send a message to those who want to dodge taxes that the UK will not tolerate it. They could send a message to those who do not avoid their taxes that the Government are on their side. They could even send a message of support to hard-pressed public services by taking up the suggestion of the right hon. Member for West Dorset (Sir Oliver Letwin) and hypothecating any taxes raised by clamping down on the dodgers.

13:45

[Ms Ghani]

The hon. Gentleman has been very generous in giving way. I am a little concerned about the messages he wants to send out, but one message that we most definitely should send out is that the Government proposals will bring in an additional £1.6 billion over five years. That is money that will support all our public services for everyone.

[Peter Dowd]

That is a starter and I am sure that much more could be brought in. Again, I am sure that in an effort to get that figure up, the hon. Lady will support the new clause. I am really pleased that she agrees with us on that matter.

The only message this Government want to send is one of supine support for tax dodgers. The dodgers may want to hear that message, but public sector workers who have not had a pay rise for years do not want to hear it, the people waiting months for an operation do not want to hear it, and the police and firefighters do not want to hear it. I assure Government Members that at the next general election, the public certainly will hear that message loud and clear, because Labour will be there to remind them of a Government in chaos and disarray that is beginning to have a putrefying decay about it.

[John Redwood]

I think that we all agree in this House that we need to collect substantial revenues to have decent public services and that we all condemn people who break tax law, evade taxes and commit crimes against the tax code. However, tax avoidance—the legal avoidance of taxation—is a more difficult issue.

Many Labour MPs trotted through the Lobbies under a Labour Government to make sure that individual savings accounts had tax advantages, and to support tax breaks for Members of Parliament who choose to save for their retirement through the pension scheme. That is a kind of tax avoidance. Is the hon. Gentleman saying that the Labour party no longer agrees with that kind of avoidance, which was recommended by previous Labour Governments in the interests of spreading saving? Is he of the view that there are certain kinds of avoidance that are perfectly reasonable, such as those undertaken by Labour MPs and others, and other types of tax avoidance that are also perfectly legal but of which he does not approve?

[Peter Dowd]

Does the right hon. Gentleman agree that there is a difference between an ISA and institutional, systematic avoidance and abuse of the tax system?

[John Redwood]

There is a huge difference between breaking the law and living within the law. However, where Governments of both persuasions and the coalition have put provisions into the tax code that encourage people to save or invest in a certain way to pay less tax, that surely is the will of Parliament and the will of those parties, and we cannot object if people and institutions take advantage of it. The right thing to do—as I think the Labour party is now trying to do in some ways—in respect of rich people who come to our country to undertake part of their affairs but not all of their affairs, is to ensure that we have settled on a law that we think is fair and then to enforce it. Obviously we should take a tough line were any of them to break our law, but we cannot object if they take advantage of measures that have been put into the tax code to encourage certain kinds of investing or saving behaviour, in exactly the same way that most MPs take advantage of the avoidance provisions to save through a pension scheme or an ISA.

The subject of this debate is whether the assets of very rich people—often productive assets that they have saved for, earned and accumulated before they came to the UK—are a suitable object of taxation if they choose to do some things in the UK in respect of which they are clearly subject to our law codes and have to pay our taxes. In the past, Labour Governments as well as Conservative Governments have taken the pragmatic view that there is an advantage in very rich entrepreneurial successful people coming to our country setting up businesses, making investments here and committing part of their capital to our country; that we will tax that fairly in exactly the same way that you or I would be taxed, Mr Speaker, if we were making such investments on a much smaller scale; and that that is fair to us as taxpayers and investors, but that it is not our business to try to tax their assets and income accumulated or earned elsewhere that they have established by other means before, which are presumably being taxed in those other countries and would normally be governed as well by some kind of double taxation arrangement or agreement.

I would therefore just say to Labour Members who think there is a huge crock of gold here, which for some unknown reason successive Labour, coalition and Conservative Governments have been reluctant to pluck, that maybe they did not do it in the past because there is not, and that maybe we are quite close to that point. If we go further and further encroach on the legitimate income and assets of foreigners coming here, which are asset and income not actually in this country, we might get to the point where more of them say, “I’d rather go somewhere else. Plenty of other countries around the world would actually welcome the money, investment and income I wish to spend, which is going to be taxable in that country. If they are prepared to not tax my other income and assets elsewhere, then they will have the benefit of me rather than not.”

The art of taxation is finding the right balance, so the host country gets enough out of it and where there is obviously a fair imposition of tax on anything they do in that country alongside fellow residents of that country, while not deterring so many that we are no longer a great centre for people with money, investment and talent who would otherwise come here.

[Robert Jenrick (Newark) (Con)]

Does my right hon. Friend agree that we do not make these decisions in isolation? We are competing with other countries, which might also like to host very rich individuals and investors. While we in the UK are making the climate more hostile and difficult to raise more money for our public services, the opposite is true in many other countries. In the EU, Malta, Portugal and, most prominently, Italy are moving in the other direction and creating their own non-dom regimes to draw away such individuals from the United Kingdom.

[John Redwood]

My hon. Friend anticipates my next point. We live in a global world. The richer people are, the more footloose they can be, and the better the tax and legal advice they can get. Most of them want to obey the law in the country they choose to live in and the countries they choose to operate in—they usually operate in several countries not just one, which creates genuine definitional problems about where they are truly resident and where is their main centre—and they will compare all the time, on good advice, the different regimes available. It is quite obvious that in the EU there is a lot of jealousy of London and the wider UK’s success in attracting talent and investment from around the world. As my hon. Friend says, regimes are being created in to tempt people away by giving them a better deal in other European countries.

I was about to draw the attention of the House to hugely important debates about to be undertaken in both the Senate and the House of Representatives in the United States of America. New York and other great centres are already very attractive magnets for rich people and large-scale investors. They are suggesting that they might take their top rate of tax down from 39.6% to 35%, simplify their income tax brackets from seven to just three, and take their corporation tax rate down from a very high headline 35% to an effective rather lower rate of 20% or even lower, because they are very serious about becoming tax competitive again. They will be a lure, just as surely as some European countries on the continent are trying to be more of a lure.

The Opposition would be well advised to understand how global the world is, how dynamic it is, and how, to maximise tax revenue, there is a need to set ways of taxing and rates of taxation that enable people to stay and pay.

[Charlie Elphicke]

Does my right hon. Friend agree that the greatest threat to tax havens is not the blustering of the Labour party, but countries such as the United States of America reducing their tax rates so much that it does not become in any way effective to be using these kinds of places for any function and business?

[John Redwood]

That is correct. Tax havens have helped to drive down tax rates in other centres. We only have to look across to Ireland to see how attractive it can be if a mainstream country decides to take its corporation tax rate down to very low levels. Ireland attracts a lot of company-based investment. Each country has to decide where it wishes to be on that spectrum. A high enough rate is required to collect serious money, but a low enough rate is needed to not deter some of the best prospects for coming, staying and paying taxes. In the light of what America is about to do and what some of the smaller European countries are doing, this country is in danger of becoming uncompetitive on taxation.

[Robert Courts (Witney) (Con)]

My right hon. Friend makes a very important point: how important it is that this country does not deter people who bring in money, which in turn funds our public services. Does he agree that if we were to take the course of action urged upon us by the Labour party, we would put at risk the £9 billion of investment into our coffers brought in each year by those who are not domiciled in this country?

[John Redwood]

That is exactly the kind of sum of money I am talking about. That is a serious sum of money for our economy and it is a nice balance. All of us want to collect serious revenues. We are here because we want good-quality public services, but we also want a productive, growing and exciting economy. We need to have realistic tax rates and tax rules. All the evidence is that every time the coalition and Conservative Governments have had the courage to cut rates, they have raised more revenue. That shows that our rates have been on the high side for optimising the revenue.

[Sammy Wilson (East Antrim) (DUP)]

Does the right hon. Gentleman accept that the Opposition probably fully understand and acknowledge the arguments he is making? The fact is that when they were in power they did not take the steps they are recommending now because they recognised the reality. It is very easy to argue that in opposition; it is a bit different in government.

[John Redwood]

I entirely agree. I pointed out at the beginning that Labour in office was probably more gentle on this group of people than the Conservative party in office has been. I think Labour came to that judgment for good reasons. Labour Members disagree with their previous Governments, but they will discover that that is the luxury of opposition and that Governments are responsible for sustaining as well as growing the revenues. It is very easy to get rid of revenue by annoying people and companies. It is far more difficult to systematically build up a good tax base by promoting economic growth.

[Mel Stride]

Does my right hon. Friend agree that when the Opposition refer to non-doms as tax dodgers, they are referring not just to the super wealthy, but to many tens of thousands of individuals who come over here who do not have overseas assets on which to draw, who make a contribution to our economy and who pay all their taxes in the normal manner in this country?

[John Redwood]

Yes, it is very offensive language to call people tax dodgers. If they willingly come to our country, make a big investment in our country, spend a lot of their money in our country and pay all legal dues that this Parliament requires of them, I do not think calling them tax dodgers is wise, friendly or helpful. That is why I began my remarks by asking the hon. Member for Bootle (Peter Dowd) if he could draw a distinction between a non-dom who came here, paid all legal taxes but was, in his terms, dodging taxes on wealth legally held elsewhere, and a Labour MP who deliberately puts their savings money into an ISA or the pension fund to avoid paying tax. It seems to me that they are very comparable and I do not regard either as tax dodgers.

I do not think my Labour colleagues are tax dodgers because they take advantage of the savings breaks that both Conservative and Labour Governments offer UK taxpayers. Similarly, I do not regard a rich person from abroad who pays all legal dues here with no questions over their tax affairs as a tax dodger. I think they are a welcome contributor to greater growth and prosperity in our country, and we could think of a nicer way to sum them up.

I urge the House to resist the blandishments of the Labour party in opposition, to remember the stance of the Labour party in government, which was rather wiser, and to unite behind what I hope my colleague on the Front Bench will be saying, which is that we welcome talent, industry, enterprise and money into this country and that we want to have a fair basis for taxation that does not deter them from coming.

14:00

[Kirsty Blackman (Aberdeen North) (SNP)]

I start by telling the House of the sad death of my predecessor, Frank Doran, who was the MP for Aberdeen North and other Aberdeen seats during a career of about 30 years in Parliament. Mr Doran was incredibly well respected across the House. People who worked with him will remember him and will have respected his work. He was a principled man. He helped a lot of people who are now my constituents, and they often talk fondly about him. In particular, he worked incredibly hard in the aftermath of the Piper Alpha tragedy; he did a huge amount of work on that. Our thoughts are with his wife Joan, his family, and his friends and colleagues from across the House. I pass on the Scottish National party’s condolences to his family.

I do not want to talk at length about offshore trusts. The SNP has consistently been critical of the situation around non-domiciled individuals and offshore trusts and of the complicated nature of the UK tax code. It is regularly said that the tax code used to be a book but now someone would need a van to cart it around. The problem with that is the potential for loopholes. In addition, the more complicated it is, the more difficult it is for people to comply and for Government agencies to ensure compliance. We have raised those issues.

The right hon. Member for Wokingham (John Redwood) talked about not conflating tax dodging with non-doms. I am not attempting to do that, but the more complicated the tax code is, the greater the likelihood of loopholes that people can exploit. We have concerns about that; we raised them last year in the context of the Criminal Finances Act 2017 and we will continue to raise our concerns around non-domicileds and offshore trusts more generally.

There are occasional suggestions from Conservative Back Benchers that we move the UK towards being some sort of tax haven, post Brexit. We completely reject that, as do some in the Conservative party.

[Charlie Elphicke]

Is the hon. Lady saying that she would not like people in Britain to enjoy lower taxes, if they were possible?

[Kirsty Blackman]

I was talking about tax havens; I think people have a good understanding of the difference between a tax haven and a country with lower taxes. It is completely reasonable to say, as individuals across the House do, that if we want excellent public services that best serve our population, we need a tax system in which people pay for those excellent public services. I am not in any way trying to dodge that; I think that we should have a tax system that ensures that we have excellent public services.

[Charlie Elphicke]

Does the hon. Lady not see the opportunity with Brexit to stop large businesses using European laws to game our tax system, and instead to get them to pay a fair share of taxes and give the hard- working people of modern Britain a tax cut?

[Kirsty Blackman]

As for the opportunity with Brexit, Scotland will be £30 billion worse off as a result of it. My city will be the worst off place in the UK outside the City of London—that is according to work done by London School of Economics and Political Science on the cost of Brexit; it is not a biased point of view. I do not see positive outcomes for the UK from Brexit. On the tax code, I want to make it clear that we reject moving towards a tax haven Britain and anything that could increase the number of loopholes. We are pleased about the Government’s anti-avoidance changes; we would like them to go further, but that will always be the case, and we will always say that to the Government. We are pleased that they are making positive moves, and pleased with some of their anti-avoidance measures. I agreed with almost everything that the shadow Minister, the hon. Member for Bootle (Peter Dowd), said about non-domiciled people and offshore trusts. We will support the Labour party if it pushes new clause 1 to a vote.

[James Cleverly (Braintree) (Con)]

As I am sure you agree, Mr Speaker, we all love a familiar tune that we can hum or whistle along to, the bars and notes of which come effortlessly to mind, so I imagine that a warm feeling of familiarity washed over all Members when they heard the tune being played by the Labour Front Bencher, the hon. Member for Bootle (Peter Dowd). It was the familiar one about the Conservatives not taking tax seriously, being on the side of tax dodgers and so on. We have heard it so many times.

It is nice to see the hon. Gentleman using this gargantuan Finance Bill as a stage from which to play that tune. It brought to mind that wonderful 1970s Morecambe and Wise sketch with André Previn; I do not know whether you are familiar with it, Mr Speaker. Eric Morecambe is at the piano; discordant notes are flooding from it, and André Previn says, “Stop, stop! You’re playing all the wrong notes.” Eric Morecambe replies, “No, sweetheart; I’m playing all the right notes, but not necessarily in the right order.” That was an awful accent; I apologise. The hon. Gentleman was not playing the right notes, and definitely not in the right order. Some of the claims made by Labour Front Benchers are built on sand. Far from being on the side of tax dodgers and tax avoiders, this party in government has put measures in place that have generated an additional £160 billion of tax revenue since 2010, and the Bill will, if enacted, bring in additional billions of pounds to the Treasury, so the hon. Gentleman was singing the wrong notes.

Yes, moves to close the tax gap were initiated by a Labour Government—it would be churlish not to concede that—but far from preventing or rowing back on the closing of the tax gap, this Government have continued the pressure to make sure that the gap between the taxes that should be collected and the taxes that are collected continues to decrease. As a Conservative, I am proud of this Conservative Government’s role in ensuring that the people who should pay taxes do, and pay at the appropriate level.

My right hon. Friend the Member for Wokingham (John Redwood) was absolutely spot on when he said that it is corrosive when we start blurring the definitions of tax avoidance and tax evasion. When we talk about people who act in a financially pragmatic way, completely within the law, in the same way that we talk about conmen and criminals, it sends a massively corrosive message, at a time when the world is getting smaller, in terms of where people can base themselves and their business.

While it is perhaps fun for Opposition Members to vilify people who transact their business internationally and can choose where in the world to rest their head at night and to make them sound like—to be topical—a Halloween villain, that is counterproductive. Although each individual utterance will make little difference, they combine and build to create the background music of intolerance of international business and successful people that will ultimately mean their locating somewhere else. Rather than getting the tax income from them that this country deserves, a different country will generate those tax revenues. A pound—or a euro or dollar—that is taxed somewhere else in the world is a pound that cannot be used by this Government to pay for the public services that we value and the public servants who deserve our thanks and reward.

It may feel superficially pleasant to see an international business, an international business person or a non-domicile flee from these shores. People may say, “If they do not want to be here, let them go.” It is a nice soundbite but ultimately it is massively counterproductive to the job that we should be doing as parliamentarians and that the Government should be doing in office.

[Anna Soubry (Broxtowe) (Con)]

I am enjoying the very good speech that my hon. Friend is making. Obviously, I do not want to get into a Brexit debate. Heaven forbid that he and I fall out in some way, or even worse do our impersonations of bygone sketches, which he clearly could not remember because he was not born then, but, on a serious point, does he share my concern that we are already seeing great businesses looking at relocating as the time comes for us to leave the EU, along with individuals who do not feel welcome in our great country?

[James Cleverly]

I thank my right hon. Friend for her intervention. We may not necessarily agree on the Brexit decision or on its impact on international businesses and British businesses that might be international, but it is fair for her to highlight the fact that we should do nothing that gives businesses cause for concern. It would be unfair to suggest that the decision to leave the EU has no impact on business decisions. As someone who campaigned for Brexit, I have an additional duty to prove her wrong. I know that she is of such a generous nature that, if in our dotage we are sharing a glass of wine, looking back at the events in the immediate aftermath of Brexit and I were to be proved right, she would be more than willing to concede that point. However, we have a duty to give businesses as much confidence as possible about being based in the UK. Having a tax regime that supports business and enterprise is an important part of doing that.

[Charlie Elphicke]

Does my hon. Friend agree that the Bank of England and the Treasury have a duty to talk this country up, not talk it down, and to ensure that, when they talk about investment versus disinvestment, they do not make up terrible numbers, as a continuity of “Project Fear”, when the Bank said that Brexit would mean a loss of jobs, growth and tax revenue, particularly non-domicile tax revenue? We have seen that that is not the case, with the lowest unemployment for 40 years and continued strong growth. It is wrong for the Bank to carry on saying such things, as it has today.

[James Cleverly]

I will be more than happy to invite Treasury officials and Mark Carney to the end of days party that it seems I will be throwing for my hon. Friend and my right hon. Friend the Member for Broxtowe (Anna Soubry). We can sit down to discuss such things, sharing my beautifully aged claret—[Interruption.]. Or indeed some wine from the constituency of my hon. Friend the Member for Wealden (Ms Ghani), which produces some fantastic wine. We will discuss the implications for the British economy of fear-mongering.

[Vicky Ford]

We are debating a new clause that suggests that, within 15 months of passing the Bill, there should be another review. Fifteen months would be February 2019, a month before Brexit. Financial services companies are already having to rethink their operations to cope with Brexit. Does my hon. Friend agree that the new clause is a distraction that the sector does not need and that the sector contributes more than £70 billion in tax to the UK economy, which we want to keep?

14:15

[James Cleverly]

My hon. Friend is spot on. I cannot help but think that new clause 1 is more to do with Labour Members feeling that they need to table revised clauses because they do not know what to say. A call for a review of this kind invariably occurs when people are not sure what to say.

Mr Speaker, you will be disheartened to hear that I am about to conclude my comments. I strongly urge Members on both sides of the House to reject the new clause. We should do everything we can to send a positive message to businesses currently in the UK, to businesses that may think about coming to the UK and to business people who are deciding where they will domicile and to pay tax. We need to let them know that the UK is open, ready to do business and welcomes business people, as long as they pay their fair share in tax and help to support the public services that we value.

[Bim Afolami (Hitchin and Harpenden) (Con)]

I felt that, as I was going to speak this afternoon, I should listen to speeches by colleagues in the House.

[David Linden (Glasgow East) (SNP)]

Controversial.

[Bim Afolami]

I know that is a controversial view that many have. In particular, I listened very carefully to the speech by the hon. Member for Bootle (Peter Dowd) from the Opposition Front Bench.

[Peter Dowd]

Quite right.

[Bim Afolami]

I am. The hon. Gentleman made some interesting remarks, but I am going to pick him up on one phrase, which we should think about and bear in mind as we look not only at the implications of new clause 1 but at the Bill as a whole. He said that the British public are no fools. As I listened to him expound on that, I thought to myself, “The British public in the public gallery and the many millions undoubtedly watching the debate at this moment are no fools and will realise that this Conservative Government, since 2010, have brought in more than £160 billion-worth of anti-avoidance and tax evasion measures.” The British public are no fools. They will realise that the Conservative Government, since 2010. have reduced the tax gap—the gap between what should be collected in tax and what actually is collected—to 6.5%, the lowest that has been recorded. The British public are no fools and will see that this Government, a Conservative Government, will abolish permanent non-dom status for the first time. Those are the practical achievements that the Bill helps to build on.

On the precise nature of new clause 1, I can do no better than agree with my dear and honourable Friend the Member for Chelmsford (Vicky Ford), who suggested entirely accurately that the timing of such a review may cause disruption. It may be a significant disincentive and difficult from a business perspective because of the Brexit negotiations and the situation at that time. It is also important for us, whatever party we represent, to recognise that this Government are making the case for a sustainable fiscal policy that makes sense in the modern world.

We have heard from many Members on both sides of the House about the international context in which we operate. We are in a smaller world; we all know the impact that technology and ease of travel are having on every aspect of life. Bearing that international context in mind, things are more competitive. We cannot rest on our laurels.

[John Redwood]

On that point, would my hon. Friend care to reflect on the issue of footballers? The Labour Front-Bench team was saying that footballers often got away with things under this heading, whereas I thought many people in Britain like the idea that very talented footballers could come to our country for a limited period of time under sensible arrangements for their tax affairs. Does my hon. Friend think that is reasonable?

[Bim Afolami]

Not only do I agree with my right hon. Friend about footballers, but I think that most people—among the millions watching this debate, as I have said—will recognise, because they see and enjoy the top-quality premier league football in this country, the impact that top foreign players make. It is not just footballers but music stars, artists, creatives, writers, financiers, businesspeople, entrepreneurs—all of them can be such an asset to this country. Footballers are a very visible example, but we should not forget the more hidden, less public face of that. Britain is good at attracting such people, and we should continue to be good at it, and be proud of that fact in this House.

On the Bill, the Government are making the case for a sustainable fiscal policy, and we must bear in mind the case for the simplification of taxes. The hon. Member for Aberdeen North (Kirsty Blackman) always makes good speeches, and made the point that simplifying taxes is a good aim that we should always think about. The Minister, the Government and everybody in this House should always be thinking of ways in which we can make things simpler. We should also always be thinking about ways in which we can make things fairer, and ensure there is a genuinely level playing field for all businesses that seek to work in this country. That is not only fair from an ethical perspective, but having a level playing field is an integral part of what makes Britain a good place to do business. We should focus on both simplifying our tax code and on making it fairer.

[Charlie Elphicke]

My hon. Friend is being generous in taking interventions. He served on the Finance Bill Committee so will have seen the size of the Bill; it resembles a doorstop. Does he think that we should shrink our Finance Bills and have simpler tax laws?

[Bim Afolami]

Yes, I did have the huge pleasure of serving on the Finance Bill Committee and it was fascinating. The Finance Bill is undoubtedly a whopper; it is huge. There is a good case—I am sure the Minister will come to this in his remarks—for saying that we need to think more actively about ways to make measures shorter and more easily digestible for hon. Members. I say that without detracting from the substance of what the Government are doing, which I completely support.

[Craig Mackinlay (South Thanet) (Con)]

The UK tax code is now 22,000 pages long and involves 10 million words. Does my hon. Friend agree that we need to lessen that level of complexity if we are to be globally competitive in the future?

[Bim Afolami]

I agree with my hon. Friend. Being in government is a complicated matter, and Rome was not built in a day. This Bill can continue the work that Treasury Ministers have already begun on how we address the difficulty involved in making things fairer and simpler, while also making sure that we have the right incentives for businesses to come to our country, and grappling with that in the context of trying to make sure that the tax code is simpler.

[Charlie Elphicke]

Does my hon. Friend agree that leaving the EU presents a great opportunity for us to take back control of our tax system and make it a lot simpler—and that, perhaps, all the EU rules are part of the reason why it has got so long and complex?

[Bim Afolami]

I hugely respect my hon. Friend. It is worth mentioning for the benefit of those who do not know it that he was a top tax lawyer, so he knows the value that complexity brings to tax lawyers in the City of London. On his point about the EU, I am no expert on these matters and defer to the Minister and other Members, but my view is that we must be more realistic and accept that a lot of things are of our own making; and with the advent of our leaving the EU we have the opportunity to make ourselves even better as a place to do business. I am sure that my hon. Friend and the Minister would support that.

[John Redwood]

The problem with the comments of the hon. Member for Aberdeen North (Kirsty Blackman) is that she wanted both a simpler tax code and to close loopholes. As I understand it, a great deal of its complexity and length has come from adding detailed ways of trying to close the loopholes, so there is a conflict there. Genuinely simpler tax codes have fewer taxes, which would be a great start, as would having lower rates with a common tax base. At present, however, we have too much complication, partly because of trying to close loopholes.

[Bim Afolami]

I accept that point. Members present appear to be reaching consensus that the Government should always be thinking of how to balance the need for fairness and simplicity with closing loopholes so that people do not take advantage of the fair laws in this country.

Many Members have discussed in the speeches made so far—I told you, Mr Speaker, that I was listening—the importance of businesses bringing in money to fund our public services. We all recognise that that is important; indeed, it is the reason why many, if not all, of us became Members of Parliament. However, it is also worth making the point that having a thriving economy in which individuals, on their own merit and through their own effort and time, can make the most of themselves is in and of itself a good thing. We should not always revert to thinking about business as something simply to be milked for the Exchequer; the Exchequer, the Government and Parliament should set, and are setting, a clear, simple, as-low-as-possible framework in which individuals and corporations can thrive. That is the sort of fiscal and economic policy that I support.

[Vicky Ford]

I thank my hon. Friend for the work he has done on the detail of this Bill. Does he agree that clauses 29 to 32 remove the loophole of permanent non-dom status, but clause 8 means that the UK can continue to benefit from the approximately £9 billion a year from overseas investments, yet if we accept the Labour amendment we put that £9 billion at risk?

[Bim Afolami]

My hon. Friend is expert in these matters and knows about them in immense detail, having served in the European Parliament. When both serving on the Finance Bill Committee and during this debate, I have been struck by the keenness of this Government to be fair at the same time as promoting competitiveness. Fairness and competitiveness together are what make Britain the best place in the world to do business.

[Alex Burghart (Brentwood and Ongar) (Con)]

It is an honour and a privilege to be speaking during the Report stage of the Finance Bill. You will know, Mr Speaker, although some Opposition Members might have forgotten, that I am the MP for Brentwood and Ongar. Today is a great day in the history of Brentwood, because “Woman’s Hour” has announced that it is the best place in the UK for women to live and work. That is something for us all to celebrate. Underpinning that achievement is the fact that Brentwood is a fantastic place to work and do business, and our sense of business acumen is itself underpinned by hard-headed pragmatism. When I bring my constituents complex pieces of legislation, including Finance Bills, they always ask me two things. They ask me whether the legislation is fair, and if they are going to get a good deal out of it. The measures that we are discussing are indeed fair, and I believe that taxpayers in my constituency will get a good deal from them.

14:31

As a number of my hon. Friends have mentioned, people who have offshore trusts are not breaking the law. Indeed, it is wholly unfair to suggest that they are. We should recognise the fact that they are reputable business people who are bringing wealth to our country in a totally legitimate way. In Committee, the Minister pointed out that many people had put their affairs in order by setting up overseas trusts before they moved to the UK and it would be wrong for us to go after money that had been secured in that fashion.

[Anna Soubry]

My hon. Friend is making an excellent speech, although I would be intrigued to find out, perhaps after the debate, why Brentwood—I nearly said “of all places”, but I am sure that it is a wonderful place—was judged to be so favourable for women. But we are getting away from the Finance Bill and the important points that he is making about the economy. Does he agree that it is critical in any tax system that the balance is right? Yes, taxpayers need to pay the right and proper amount, but we know that if we start to be too onerous, people will exploit loopholes, meaning that tax revenues will begin to drop. Does he agree that it is under this Conservative Government that we have begun to get that balance absolutely right? People do not resent paying their taxes and revenues are rising because we have a good and fair system.

[Alex Burghart]

I could not agree more with my right hon. Friend. She can rest assured that she is always welcome in Brentwood. There will always be a place next to me in the teashop where we can sit down to discuss exactly why Brentwood is such a wonderful place for women to work, raise their families and be part of the community.

My right hon. Friend is absolutely correct that we have to get the balance right if we are to maximise the tax take for the Treasury, and it is only through that tax take that we will be able to fund our world-class public services. An attempt to do anything more would undoubtedly mean that less would be available for our police services, health service and education system. Our constituents—our citizens—would then all suffer, so it is absolutely essential that we get the balance right. I do not believe that we do that if we actively discourage successful, wealthy business people from bringing their money here so that they can invest in our country. As my right hon. Friend points out, it is by getting the balance right that the Treasury, under the great guidance of my right hon. Friend the Financial Secretary and his predecessors, has managed to bring in an extra £160 billion since 2010 and to narrow the tax gap to an historically low level. That is a great achievement.

[Robert Jenrick]

I would like to put this into perspective so that our constituents can appreciate our achievements on the tax gap. Our tax gap is 6%, but the gap is 34% in Italy. If the European Union wants to tackle any tax gaps, it should look at other European countries. The tax gap in the United States is 19%, so a 6% tax gap here represents a huge achievement by this Government.

[Alex Burghart]

I am grateful to my hon. Friend for bringing those figures to the House. Our extraordinarily impressive figure illustrates the achievements of successive Conservative Chancellors in their work to improve the situation that they inherited in 2010.

My hon. Friend the Member for Chelmsford (Vicky Ford) raised an extremely important point about timing. Do we really want a review to kick in just as the Brexit process is reaching its climax? With all due respect to Opposition Members, I do not think that they have really thought about that.

This has been my first Finance Bill and I have enjoyed everything about it immensely. I have even enjoyed the speeches made by the shadow Minister, the hon. Member for Bootle (Peter Dowd). I have enjoyed his panache, his dapper dress sense and his ties, which make me feel slightly underdressed. In Committee, he enlightened us with his knowledge of Plutarch and made reference to the Beatles. I believe that he referred to Plutarch’s discussion of Pyrrhus’s victory over the Romans, which led to Pyrrhus saying, “One more such victory and we are lost.” Were new clause 1 to be agreed to, it would be a pyrrhic victory of great consequence. It would put billions of pounds of Treasury revenue at risk, which would in turn put our public services at risk. That would make my constituents very angry.

I know that the hon. Member for Bootle is fond of the Beatles, as am I. We have already had a comic turn from one Essex MP today. The House might recall that, once upon a time, John Lennon was asked why the Beatles were the greatest band in the world. He said it was because Paul McCartney was the greatest singer-songwriter in the world and because George Harrison was the greatest guitarist in the world. The interviewer said, “What about Ringo? Isn’t he the greatest drummer in the world?” Mr Lennon replied, “He’s not even the greatest drummer in the Beatles.”

[Eddie Hughes (Walsall North) (Con)]

I rise because it is dreadful to hear this wrong story being perpetuated in the House of Commons. It is a myth that that conversation ever took place, in my opinion—people can check it now on Google. We have in Birmingham a fine comedian called Jasper Carrott who once told that story as a joke. Such is the way that Google works these days that when someone tells a joke like that, it finds its way on to a website somewhere and a myth is perpetuated. We are hearing that story told again in the House of Commons today. I am concerned that it will be recorded inappropriately, so I hope that my hon. Friend will consider that.

[Alex Burghart]

rose—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I am sure that when the hon. Member for Brentwood and Ongar (Alex Burghart) responds, he will ensure that his words are directly relevant to new clause 1. This is an important issue and I am sure that Members would not want people to think that we were treating it light-heartedly. We should be taking it very seriously.

[Alex Burghart]

You are quite right, Madam Deputy Speaker. I assure you that my comment was directly relevant to the Bill, but my peroration was cruelly interrupted by my hon. Friend the Member for Walsall North (Eddie Hughes). He has now set the record straight but, in the process, destroyed one of the great anecdotes about the Beatles. I was going on to say that new clause 1 is not even the best amendment that the Opposition have put up.

The Minister made it clear in Committee that with

“regard to a review of the legislation, as stated in the tax information and impact note published in December 2016, HMRC will monitor the effects of the provisions through information collected in tax returns. I therefore urge the Opposition not to press new clause 3.” ––[Official Report, Finance Public Bill Committee, 19 October 2017; c. 97.]

A form of review is therefore already under way. This Bill is fair and will get a good deal for all our constituents.

[Eddie Hughes]

My hon. Friend is making a great speech. Another vital factor that we must consider is the element of trust, which will come up repeatedly as we discuss further amendments. It is important that taxpayers can trust this Government to ensure that we collect the maximum amount of tax and then deploy that tax appropriately to provide excellent public services. My hon. Friend suggests that it is important that the Bill is fair, but it is also important that it is trustworthy and that the people watching this debate on telly at home—millions of them—have faith that the Government are firm, fair and trustworthy.

[Alex Burghart]

I thank my hon. Friend for that wonderful speech. He is of course entirely right that these measures are fair. They get a good deal for the British taxpayer and will help to underpin future investment in our fine public services.

[Colin Clark (Gordon) (Con)]

Clarifying non-dom status is absolutely the right thing to do, but it is also crucial to ensure that our tax regime is fair. We have heard from other Members that non-dom status contributes £9 billion. My constituency—this is also relevant to the constituency of the hon. Member for Aberdeen North (Kirsty Blackman)—has seen a lot of mergers and acquisitions activity, and it is important that this country’s tax regime is clear, simple and straightforward, with people encouraged. The Wood Group and Amec merger will create a FTSE 100 company that will be headquartered in Aberdeen, and Baker Hughes and GE, another huge oil company, has a lot of influence on the UK’s continental shelf. Does my hon. Friend agree that unless we keep this country’s tax regime attractive to inward investment and non-doms, we could lose some of that investment, which would damage my constituency and that of the hon. Member for Aberdeen North?

[Alex Burghart]

I entirely agree with my hon. Friend. It is crucial, perhaps now more than ever, that this country is entirely open to money, to investment and to good business practice from around the world. It is incumbent on the Government to ensure that they create an environment that will bring jobs and investment into his constituency and mine, and indeed into all parts of our country. I also want to voice my wholehearted support for Government amendment 17—a fine amendment if ever there was one—which sets the Treasury record straight, as ever it should be.

[Mel Stride]

I begin by thanking the hon. Member for Bootle (Peter Dowd) for his interesting and informative contribution. Alas, I am going to have to disappoint him and say that I will urge the House to reject new clause 1, but I thank him most sincerely for the generosity with which he gave way to the wave upon wave of Government Members who wanted to challenge him—it was a veritable intervention-fest. My hon. Friend the Member for Braintree (James Cleverly) mentioned the “The Morecambe & Wise Show” but in the hon. Gentleman’s case, I was reminded more of the 1980s show “Game for a Laugh”—[Interruption.] Perhaps that was unkind, but we had some fun along the way.

14:44

Before replying to the hon. Gentleman’s opening remarks, I will speak briefly about some of the fine contributions made by Members on both side of the House, who took the matter in hand with due seriousness, as you exhorted us to do, Madam Deputy Speaker. The arguments were put extremely powerfully by my right hon. Friend the Member for Wokingham (John Redwood), who talked about the importance of recognising that many of the tax activities of individuals in this country are not driven by evasion or a desire to cheat the system or bend the rules, but by sensible tax planning and using the rules precisely as they were designed to be used. He also rightly pointed out the importance of not driving away the individuals who bring great wealth and business investment to our country—we heard about the record £9 billion a year from non-domiciled individuals. The hon. Member for Bootle will recall our lengthy debates about business investment relief.

We must not drive away the additional moneys that will come to our country to fund our doctors, nurses, paramedics, the Army, police and all the other wonderful public services that we expect to be supported. An extra £1.6 billion will come as a consequence of the changes proposed in the Bill. My right hon. Friend also spoke well about the importance of our tax system being competitive, and we briefly touched on an important point that was raised by many other Members: how do we term these individuals?

[Anna Soubry]

Does my right hon. Friend agree that an important point to make about non-doms is that the idea that they are all multimillionaires, if not billionaires, is an absolute fallacy? Many non-doms quite properly have that status, but the idea that they are fat cats or rich people with oodles of money who are up to dodgy dealings is an absolute myth. Many of them are actually of modest means, but invariably those of more substantial means are great entrepreneurs and we need them in our country arguably more than ever before.

[Mel Stride]

My right hon. Friend is entirely right and pre-empts the point that I was about to make, which is that it is quite wrong of the Opposition to castigate all non-domiciled individuals in this country and to characterise them as tax dodgers. In fact, the hon. Member for Bootle made the point that there are over 100,000 non-doms in the United Kingdom. The vast majority of them do not have lots of overseas assets or may have no overseas assets; they are not opening up trusts and putting assets in them. They simply come over here, sometimes for a couple of years or so, to work and contribute to our economy.

[Geraint Davies (Swansea West) (Lab/Co-op)]

What the Minister says is true so far as it goes, but I recently met representatives of Man, with which the Minister will be familiar. At £100 billion, Man runs the biggest hedge fund across Europe. They want robust, predictable and understandable regulation to provide certainty for investors, rather than slackness that allows people to creep through holes and exploit loopholes. They want to know where they are. They do not necessarily want a race to the bottom; they just want a reliable system for investing over the long term.

[Mel Stride]

Certainty for the future is precisely what the proposals deliver, and they were extensively consulted on for a couple of years before coming into effect. We are providing exactly the certainty that the hon. Gentleman wants.

As is characteristic of the hon. Member for Aberdeen North (Kirsty Blackman), she made some fairly thoughtful comments about the importance of ensuring that the tax code is not overly-complicated. She will be aware of the work that we are doing with the Office of Tax Simplification. I was grateful for her at least partial welcome for some of our anti-avoidance measures which, as many Members rightly pointed out this afternoon, have brought in £160 billion since 2010.

My hon. Friend the Member for Braintree referred to the Bill as “gargantuan.” Having spent what feels like most of my life reading every syllable of it, I think that is a rather polite description of this colossus of a Bill, which has 760-odd pages. He mentioned Morecambe and Wise, and it was a nice touch to characterise the way in which the Opposition play the same old tunes. For the Government, of course, the tune is “Bring Me Sunshine”. We believe in an economy that works for everybody; we believe in bright, sunny uplands; we believe in possibilities, we believe in the future; and, above all, while I am a Treasury Minister, we believe in fair taxation.

My hon. Friend was also right to mention the £160 billion. He particularly stressed the importance of getting away from the corrosive message of always beating up those who are an apparently easy target. We need to talk our country up, not do our country down.

[Geraint Davies]

Does the Minister understand the deep concern about the need for transparency, legitimacy and fair returns in the aftermath of the Panama papers? What specific actions have the Government taken, or are they just saying, “Oh, well. It doesn’t matter. We’ll just get on as normal.”?

[Mel Stride]

We are right in the vanguard, as the hon. Gentleman knows. The OECD’s initiative to address base erosion and profit shifting has, among other things, brought in the transfer of information between countries on the very issues he raises. We are no slouch when it comes to addressing such issues.

My hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) also talked about tax avoidance. He confessed to the “novelty” of listening to the hon. Member for Bootle, which is perhaps a little harsh as I often learn a lot from listening to him. My hon. Friend also talked about the importance of attracting the best people to our country from all walks of life, and he is right.

My hon. Friend the Member for Brentwood and Ongar (Alex Burghart) made an important point about the setting up of trusts. The trusts of those who become deemed domiciled under the Bill will have to have been in place before that particular moment in time. It is worth stressing that taxation falls due, in the normal manner, only when income in taken out of a trust. My hon. Friend also got us tangled up in a debate about the Beatles and Ringo Starr, but then my hon. Friend the Member for Walsall North (Eddie Hughes) told us that it was Jasper Carrott all along, and we are grateful to him for that.

I begin my response to the hon. Member for Bootle by reminding the House of the significant changes that the Bill introduces to the way in which non-domiciled people are treated in the United Kingdom for tax purposes. The new rules that the Government are introducing fundamentally change the way non-doms pay tax in the UK by ending permanent non-dom status. Under the Bill, non-doms who have been resident in the UK for 15 of the last 20 years will no longer be treated as non-domiciled by the tax authorities. Instead, they will pay tax in the same way as everyone else, bringing £1.6 billion in much-needed extra revenue for our public services.

To maintain fairness and to keep our tax system competitive, the Bill protects non-residents’ trusts from being wholly introduced to the UK tax system. New clause 1 would impose an obligation on HMRC to review the operation of those protections for non-resident trusts. The review would consider the cost of the protections and the effects they have on taxpayer behaviour, including the effect of removing the protections. Although I understand the intention behind the new clause, I do not think it is necessary to legislate for such a review to take place. HMRC and Her Majesty’s Treasury have hundreds of officials monitoring the tax system and assessing the risks, which is right and proper given the Government’s responsibility to ensure that the tax system delivers value for money for the UK taxpayer.

There is a more fundamental case against the new clause—a case about fairness and unintended consequences. The trusts that the Bill seeks to protect are those created before an individual is deemed to be UK domiciled. Many of these complex trust structures will have been set up long before the individual even thought about moving to the United Kingdom and will not have been set up to comply with the UK’s tax rules. In the circumstances, it is not unreasonable that the new domicile rules are introduced in a way that protects trusts from unintended consequences. It would be unfair to ask a non-dom to pay tax on money they never intended to bring into contact with the British tax system in that way.

[Geraint Davies]

Is the Minister saying it is fair for someone to tax plan to leave the country, make a load of money and hide it in various places where tax is not charged before coming back to live in the British environment, where they always wanted to live, and avoid all that tax?

[Mel Stride]

I am not saying that at all. What I am saying is that, where a non-dom has a family trust or some other perfectly legitimate arrangement—they might not have been to this country at all when the trust or arrangement was set up—and is subsequently deemed to be domiciled in this country, it is not unreasonable that the contents of that trust should be protected, with the important caveat that tax is due to the UK tax authorities as soon as income is taken out of the trust.

[Geraint Davies]

In terms of tax planning, a merchant banker or whatever in their twenties could plan to leave Britain for a number of years, make a lot of money and protect that money in a tax haven before coming back and receiving all the benefits—sending their kids to public school and all the rest of it—without paying tax in Britain.

[Mel Stride]

I think I have answered that question. It is probably time to move on.

Even with these protections in place, non-doms who become deemed UK domiciled will be protected from tax, as I have said, only on income and gains that remain in the trust. Any moneys withdrawn or benefits provided will lead to a tax charge on the individual. This is a fair system that has been carefully considered and consulted on since it was announced more than two years ago. It is simply unnecessary to introduce legislation to place additional bureaucracy and additional reporting burdens on HMRC, which already scrutinises non-doms’ compliance with the UK tax regime.

Government amendment 17 will remove and correct a minor inaccuracy in schedule 8 to ensure that the policy is delivered as intended. The change applies to part 4 of the schedule, on the cleansing of mixed funds. For the purpose of these rules, a qualifying individual is one who was not born in the United Kingdom and whose domicile of origin is not in the United Kingdom. The amendment simply corrects the Bill by replacing “or” with “and” when defining a qualifying individual. I therefore urge the House to accept the amendment.

These reforms have been carefully drawn up to ensure that we get the right balance between protecting the public finances, remaining internationally competitive and showing how much we value the contribution of non-doms in the UK. I therefore urge the House to reject new clause 1.

[Peter Dowd]

I thank the hon. Member for Brentwood and Ongar (Alex Burghart) for referring to Plutarch, a Greek citizen who became a Roman citizen—but not a non-dom in that country. Our new clause would require a review to be undertaken on the effects of

“the provisions for the protection of overseas trusts in relation to deemed domicile.”

Like Queen Gertrude in “Hamlet”, Conservative Members protest too much. Why can we not have a review? That is all the new clause asks for: a review. What is wrong with a review?

Question put, That the clause be read a Second time.

14:59

Division 27

Ayes: 279

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Labour: 230
Scottish National Party: 33
Liberal Democrat: 10
Plaid Cymru: 4
Independent: 1
Green Party: 1

Noes: 309

---

Conservative: 300
Democratic Unionist Party: 8
Independent: 1

Schedule 8

Deemed Domicile: Income Tax and Capital Gains Tax

Amendment made: 17, page 521, line 18, leave out “or” and insert “and”—(Mel Stride.)

Clause 5

Termination Payments Etc: Amounts Chargeable on Employment Income

15:17

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I beg to move amendment 1, page 14, line 15, leave out “different” and insert “higher”.

This amendment removes the power for the Treasury to reduce the £30,000 threshold in connection with the taxation of termination payments by regulations.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 2, page 14, leave out lines 20 to 23.

This amendment is consequential upon Amendment 1.

Amendment 3, page 14, leave out lines 27 and 28 and insert—

“(2) “Injury” in subsection (1) includes—

(a) psychiatric injury, and

(b) injured feelings.”

This amendment explicitly includes (rather than excludes) injured feelings within the definition of “injury” for the purposes of payments which are excluded from the provisions of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits on termination of employment).

[Anneliese Dodds]

Labour’s amendments on redundancy payments focus, first, on ensuring that there is proper democratic scrutiny of any attempt to reduce the £30,000 threshold for the taxation of termination payments, rather than the power to do so residing merely in regulations and, secondly, on ensuring that injured feelings are included in, rather than removed from, the definition of injury for the purpose of tax-excluded payments.

It is frustrating to be back in the Chamber to debate these issues again, with, again, no indication from the Government of any change in their position. The discussions in the Bill’s previous stages, including in Committee, detailed many ways in which provisions against aggressive tax avoidance and evasion could be tightened. Yet, rather than heed those reasonable suggestions for the removal of loopholes, the Government seem keen to target those made redundant as a potential source of revenue.

The changes in clause 5 are occurring in the context of the Government being determined to rush headlong into reducing corporation tax rates, despite the Institute for Fiscal Studies and others being clear that there is no automatic link between lowering rates and increasing revenue. In fact, I would hazard to suggest that in this case the opposite might be true. The Government’s previous cuts to corporation tax have manifestly not increased business investment.

The changes in the clause are also occurring when, as we have discussed, many loopholes have been retained for non-doms and, furthermore, while new measures for corporations exempt some of those firms that appear to have the most labyrinthine business arrangements, designed for tax purposes—not least some public infrastructure companies.

One might, then, wonder exactly why the Government have decided to stick to their guns and focus tax increases on those who are made redundant, which is effectively the idea that the provisions in the clause promote. We have been told by the Minister repeatedly that there are no immediate plans to reduce the threshold beyond which termination payments are taxable. If that is the case, why create the power to reduce it?

[Mel Stride]

rose—

[Anneliese Dodds]

If I may finish, I will be more than happy to take an intervention.

To use an appropriate analogy on Halloween, I would not have bought a pumpkin last weekend if I expected it to sit on the shelf when I brought it home. I would have bought it because I expected to carve it, although not very artistically, for my children. I would not purchase something if I did not think I was going to use it, so why are we spending valuable parliamentary time debating a measure that will never be used?

[Mel Stride]

I simply wish to point out that, as I think the hon. Lady will know, the statutory instrument on changing the £30,000 threshold would have to be passed by the House under the affirmative procedure. It would be an affirmative SI, so it would have to be voted on by the House.

[Anneliese Dodds]

The Minister’s point exemplifies exactly what I anticipated might happen. I was just about to say that the second line of defence from the Government, after proclaiming that they would abstain from using the powers that they are so keen to give themselves, is that, in any case, they would have to bring any change to the House for a vote. Indeed, that is what has occurred just now. We are all aware of the difference between passing a measure through the ordinary legislative procedure, with the amount of scrutiny that that receives, and passing a measure through the type of approach that the Minister has mentioned just now. I regret that this appears to be part of a piece, with a broader trend to exempt new policies from the parliamentary scrutiny that they deserve and that the British public have rightly come to expect from its elected representatives.

Arrangements for those facing redundancy are not, and should not be, a matter of purely technocratic interest. The Government’s failure to raise the tax-free threshold for statutory redundancy pay has meant that it has already lost much of its original real value. That perhaps explains why, when the Government consulted on this issue, there was no conclusive evidence in the consultation either of widespread abuse in this area or of a clamour for a reduction in the threshold.

We are also asking the Government to reconsider their plans on injury to feelings payments as part of termination payments.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that the watering down of injury to feelings compensation is just another part of this Government’s plans to undermine and erode workers’ rights?

[Anneliese Dodds]

The concern is that this could be part of a piece of a broader movement to erode some rights that have existed for working people in the past.

[Antoinette Sandbach (Eddisbury) (Con)]

Some 85% of payments under the £30,000 threshold are not touched by these changes. Where there is the potential for manipulation of amounts above £30,000, does the hon. Lady not agree that that potential tax avoidance loophole should be closed?

[Anneliese Dodds]

I am grateful to the hon. Lady for her comments, but I must tell her that the consultation on the measure did not reveal widespread evidence of such manipulation of the rules. It was quite clear in that regard. Indeed, when advice was sought about appropriate measures in this area in the future, a range of different views came from stakeholders and consultees about the way forward. She is right to say that we are not talking about these changes affecting everyone who is made redundant. They apply to a minority of people, but it could be people who have had a very difficult time and who really rely on that redundancy payment for sustaining some kind of quality of life into the future. It is absolutely important that we have a proper debate about, and parliamentary scrutiny of, any changes, which is exactly what our amendments are intended to do.

I was talking about the new plans for injury to feelings payments as part of termination payments. I noted that there were many claims from the Government on this topic on First and Second Readings of the Bill, not least that payments allotted via tribunals would not be affected by these measures, but it is not the case that employment tribunals can decide whether payments are subject to tax or otherwise. That is not within their power. Yes, in some cases, some types of employment tribunal award are “grossed up” to take account of the tax that will be due, but that is very different from deciding whether an award is in and of itself taxable, which seemed to be implied in some of the previous debates on this issue.

In addition, the measures proposed in the Bill would cover the far more common payments made directly by an employer to settle discrimination complaints as part of a redundancy or other dismissal.

[Mel Stride]

The hon. Lady asserts that those awards made by tribunals are not necessarily non-taxable, but those made for discrimination, for example, are completely non-taxable.

[Anneliese Dodds]

If we are talking about payments made for discrimination in the context of a redundancy payment, yes, they are. That is our exact point, which is why we are discussing this matter about injury to feelings. We have had some comments in this House which appear to misunderstand the nature of injury to feelings payments. In some cases, these have been trivialised, almost suggesting that these payments are made because an employees’ nose has been put out of joint rather than something potentially more serious. But “injury to feelings” is a substantive legal category. Where there is genuine evidence of misuse of this category, that should be stamped out, but we have not been provided with such evidence as part of our deliberations on the Bill. Injury to feelings is related directly to discrimination experienced by a person because of their characteristics as an individual—their age, gender, sexual orientation, disability status or ethnicity. This should be taken seriously and it should not be a focus for penalising individuals, as is the case under these proposals. Again, as my hon. Friend suggested, this appears to be part of a piece, with more general measures watering down the protection to individuals suffering from discrimination at work, whether or not they take that discrimination to a tribunal. Clearly, tribunal fees have been struck down because of their discriminatory impact. Now measures are popping up that water down individuals’ protections in other ways.

[Robert Jenrick]

Just so that our constituents appreciate what is happening in the broader context, does the hon. Lady welcome the announcement that was made in September by the presidents of the employment tribunals of England and Wales that, in each of the three bands for injury to feelings, the maximum award is rising?

[Anneliese Dodds]

Again, I would be very careful to separate out tribunal awards that are made in the context of discrimination at work, which is not what we are talking about, from awards that might relate to redundancy, which is what we are focused on. In relation to discrimination generally, there has been a long-running discussion about what the rates should be for different bands. If one looks at the average award, or, even better, the median award, we are not talking about massive sums of money. It is very important that the public receive that message. For example, someone who has experienced discrimination on the basis of sexual orientation is generally receiving much less than £10,000—I regret that I cannot recall the exact figure. It is very important that we do not give the impression that people are somehow holding companies to ransom in this area. Indeed, that is perhaps underlying some of the change that has been forced on the Government through the court decision that we should not have tribunal fees, because these tribunals are being used not vexatiously, but purposely for people to protect their rights at work.

In conclusion, Labour’s message on this Finance Bill is clear. We felt that it offered an opportunity to reboot our economy, to deal with our massive productivity challenges and our cost of living crisis, and to shore up public finances by sealing loopholes for the very best-off people and biggest multinational companies. Instead, we have a series of missed opportunities and measures focused on soft targets, rather than on those who can afford expensive accountants and engage in complex schemes to avoid tax.

[Kirsty Blackman]

The House will be delighted to know that I do not intend to speak for very long. We have discussed this matter a number of times before. It is important to note that this measure is a revenue-raising one; the aim is to make £430 million for the Government. However we paint it, these workers are facing redundancy. They are receiving the pay-out at the same time as losing their jobs, so they are vulnerable by their very nature, and are having to think carefully and reassess how they go forward. This additional money will go to the Government, rather than to these workers who are being made redundant. For that reason, the Scottish National party will support the Labour party’s calls, particularly those regarding termination payments.

[Antoinette Sandbach]

Does the hon. Lady put in that category, for example, Fred Goodwin, who received a £2.7 million advance on his pension as part of the package he received when he left the Royal Bank of Scotland?

15:30

[Kirsty Blackman]

I am not sure that that was a redundancy payment that would be counted in this category. I do not know the tax status of the gentleman, or how much tax he would have paid on that or any other payments he received. It does not appear as though the Government are looking to pursue such people. It seems that they are looking to make tax changes.

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

The coalition had the chance to do something about Sir Fred Goodwin. Does the hon. Lady agree?

[Kirsty Blackman]

That was before my time in this House. I am not sure what power Parliament would have had regarding the payments. I obviously do not think that somebody who has demonstrably not behaved very well should get huge sums of money as a result.

The SNP has been clear about our position. We feel that the measure does not offer the protection we would like for workers who are being made redundant. The Government understand that this is our position, and we ask them to make moves on the matter.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

I am grateful for the opportunity to speak once again in the debate about the taxation of termination payments.

Before entering this place, I was an employment rights lawyer for more than decade, so this issue is very important to me. I have represented employees who had been dismissed and discriminated against day in, day out. Very often, this would involve negotiating termination packages or settlement agreements for them. The Bill seems to make it harder for people to get proper compensation for their ill treatment. Having seen at first hand the devastating effect that dismissal and discrimination can have on someone’s life, I am deeply concerned that the Bill seeks to narrow the scope of termination payments.

An employee can currently receive up to £30,000 in tax-free compensation as part of a settlement package. The figure already excludes from the tax-free amount things that would generally be considered as pay, such as accrued but untaken holiday pay, any unpaid wages or bonuses due, and pay in lieu of notice that is provided for in the contract of employment. However, sums for future loss of earnings or for injury to feelings are generally not subject to tax, provided they do not exceed £30,000.

Far from this being about tax avoidance, it is about properly compensating people who have been wrongly treated rather than treating them as a means to top up the coffers. Despite this, the Government wants to give themselves the power to decrease the tax-free amount that can be paid to an employee upon termination. Under the proposals, the threshold could be reduced using secondary legislation, without the full and proper scrutiny of parliament. The Minister says that the Government have no intention to reduce the threshold.

[Mr Jim Cunningham]

The previous Conservative Government changed the redundancy legislation. The purpose of redundancy money is to tide people over until they can get another job, so it should not be taxed at all.

[Ellie Reeves]

We know that redundancy payments and the way in which they are capped means that they often do not adequately compensate people after they have been dismissed from work. The fact that the Government want to give themselves the power to decrease the threshold prompts a question: why do they want to do it if they do not want to exercise that power? It seems that they would treat those who have suffered wrong treatment in the workplace as a source of revenue rather than as victims worthy of support. This is all the more important when taking into account the fact that the tax-free threshold has not increased since 1988.

[Eddie Hughes]

Even given the fact that, as the hon. Lady said, the threshold has not increased for some time, it still covers 85% of payments made in this country. Surely that is an acceptable amount.

[Ellie Reeves]

The amount should reflect someone’s loss of earnings, their ability to get back on their feet and the injury they have suffered after redundancy, so it is not good enough to tell 15% of these people, “We don’t care about you.”

If the threshold had risen in line with prices, it would be £71,000 today. Surely the Government should be going after the billions hidden in tax havens and the corporations that avoid paying tax, as well as properly resourcing HMRC, rather than going after those who have been treated badly at work. Being dismissed or discriminated against at work can have a catastrophic effect on someone’s life, so the Government should not be attacking those who might be at their most vulnerable.

[Vicky Ford]

Will the hon. Lady give way?

[Ellie Reeves]

I will make some progress.

It seems curious that the Government want to make it a priority to enshrine it in statute that compensation for injury to feelings awards connected to the termination of employment should be taxed as earnings. This is yet another example of how the Government, rather than going after the big corporations that are avoiding tax, would penalise those who have been unlawfully discriminated against at work.

When we last debated the Bill in Committee on 11 October, it was suggested by Government Members that injury to feelings was some sort of new concept that Labour was trying to introduce to create a tax loophole. Yet injury to feelings is a well-established head of damage, enshrined in the Equality Act 2010 and in the various pieces of anti-discrimination legislation that preceded it, including the Sex Discrimination Act 1975. Guidance on the level of awards was given in the case of Vento some years ago, and it has just been upgraded. The highest award is £42,000 for the most serious acts of discrimination, which usually involves a course of conduct over many years, and the lowest award is £800—usually for a one-off comment. That is established legal principle.

Under these proposals, however, such awards would be taxed as a matter of routine when the £30,000 threshold is exceeded. Not only does that seem inherently unfair to victims of discrimination, but in practical terms it will lead to all sorts of litigation and drafting issues about whether an award is in connection with the termination or a previous act of discrimination unconnected to the termination. For example, a woman is subjected to sexual harassment at work over a sustained period. She subsequently tells her employer she is pregnant and is dismissed as a result. She pursues a claim for sexual harassment, unfair dismissal and maternity discrimination. She is awarded £30,000 for loss of earnings, which takes her up to the tax-free threshold. She is awarded another £10,000 for injury to feelings. Who determines what part of the award is for the harassment, which is unconnected to the termination of her employment and therefore not taxable, and what part is in relation to the pregnancy-related dismissal and therefore taxable?

Moreover, because personal injury claims will be exempt from tax but injury to feelings will not be, we are likely to see more employment tribunal claims pleading personal injury—for example, psychiatric damage—which will inevitably lead to complex medical evidence and longer hearings. With strains already on the employment tribunal system and on HMRC, that is surely not the route we should be going down. Or is this just the start of a slippery slope, with the Government ultimately wanting to tax all injury to feelings awards and all personal injury awards?

For those reasons, I urge the Government to accept our amendments and to go after the real tax avoiders, not hard-working individuals who have been treated unlawfully at work.

[Mel Stride]

Following our vigorous and constructive debate during the Committee of the whole House last month, I welcome the opportunity to reiterate the importance of the changes we are making to the taxation of termination payments today. In doing so, I thank the hon. Members for Oxford East (Anneliese Dodds), for Lewisham West and Penge (Ellie Reeves) and for Aberdeen North (Kirsty Blackman) and acknowledge their contributions.

Before I respond to some of the detailed points raised, let me begin by briefly reiterating the objectives of the changes we are making. As I have outlined previously, the current rules on the taxation of termination payments can be unclear and complicated. Unfortunately, this complexity has led to a small minority of individuals and employers—particularly those with the most generous pay-offs—seeking to manipulate the rules to avoid paying the tax that is owed. They do so by characterising large pay-offs as termination payments rather than earnings, so that they qualify for the £30,000 tax exemption and an unlimited employee national insurance contributions exemption. As Members on both sides of the House have agreed, this situation is clearly unfair for the vast majority of employees, who are unable to manipulate their payments in this way. The purpose of this clause is to tighten and clarify the tax treatment of termination payments to make the rules fairer and prevent manipulation.

As we have heard, amendments 1 and 2 would remove the power to reduce the £30,000 tax exemption threshold for termination payments by regulations. As I have said several times in this House, the Government have no intention of reducing this tax-free amount, despite the best efforts of Labour Members to suggest otherwise. Let me assure the House again: any reduction in the threshold would be subject to a statutory instrument and the affirmative procedure, so the House would have to approve any such proposal. The House rejected this amendment in Committee of the whole House, and I urge it to do so again.

Amendment 3 would exempt from taxation all termination payments for injured feelings. As the House heard earlier this month, this amendment would present further opportunities for those seeking to manipulate the system by opening a large loophole for payments to be routinely reclassified on account of an injury to feelings, without any medical evidence, simply to pay no tax. This is hard to prove or disprove, and it would be very difficult for HMRC to regulate. In any case, payments for injured feelings will of course continue to qualify for the £30,000 tax exemption like any other normal termination payment. The House wisely rejected this amendment earlier this month, and I urge it to do so again.

The changes being made by clause 5 are a fair and proportionate way to close a loophole in the rules that has unfortunately been open to manipulation in the past. The Government have repeatedly shown that many of the concerns raised by Labour Members are unfounded —and, frankly, give the appearance, at least, of misconstruing an important tax avoidance measure as some kind of attack on those losing their jobs. This politicking is unworthy of the Opposition. I have heard no new arguments or evidence today to convince me of the need to reconsider this clause. I therefore urge the House to reject the amendment.

Question put, That the amendment be made.

15:41

Division 28

Ayes: 274

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Labour: 226
Scottish National Party: 32
Liberal Democrat: 10
Plaid Cymru: 4
Independent: 1
Green Party: 1

Noes: 308

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Conservative: 297
Democratic Unionist Party: 8
Independent: 1

Clause 60

Digital reporting and record-keeping for income tax etc

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I beg to move amendment 7, page 78, line 19, after “day”, insert

“no earlier than 1 January 2022”.

This amendment provides that the provisions for digital reporting in Clause 60 may not be brought into force before 2022.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 8, page 78, line 20, at end insert—

“(4A) No regulations may be made under subsection (4) until 90 days after the Chancellor of the Exchequer has laid a report before the House of Commons which sets out—

(a) the steps which HMRC has undertaken to establish that suitable software is available;

(b) the results of the testing by HMRC and others of that software, and

(c) the reasons why mandatory use of the software is in the interest of HMRC and taxpayers.”

This amendment would require the Chancellor of the Exchequer to report on software suitability and testing before giving effect to the provisions of Clause 60.

Amendment 9, in clause 61, page 78, line 34, after “day” insert

“no earlier than 1 January 2022”.

This amendment provides that the provisions for digital reporting in Schedule 14 and Clause 61 may not be brought into force before 2022.

Amendment 10, in clause 62, page 79, line 12, at end insert—

“(5A) No regulations may be made under sub-paragraph (5) on a day prior to 1 January 2022.”

This amendment provides that the provisions for digital reporting in Clause 62 may not be brought into force before 2022.

Amendment 11, page 79, line 19, at end insert—

“(6A) Regulations under sub-paragraph (5) may not impose mandatory requirements for businesses to generate quarterly updates.”

This amendment provides that any system for quarterly updates to be generated must not be mandatory.

New clause 2—Taxation of chargeable gains: review of treatment of commercial property held by persons with foreign domicile—

“(1) The Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) After section 14 (non-resident groups of companies), insert—

“Review of treatment of commercial property held by persons with foreign domicile

(1) Within three months of the passing of the Finance (No. 2) Act 2017, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review about the taxation of chargeable gains held by persons with foreign domicile.

(2) The review shall consider in particular the implications if the treatment of commercial property were to be the same as the treatment of residential property under section 4BB(2).

(3) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons within three months of its completion.””

This new clause requires a review to be undertaken of the treatment of capital gains on commercial property disposed of by UK taxpayers with a foreign domicile.

New clause 3—Income provided through third parties: review of effects generally and in relation to sports image rights—

“(1) The Chancellor of the Exchequer shall, no later than 21 July 2019, undertake a review of the effects of the changes made in relation to income provided through third parties.

(2) The review under subsection (1) shall consider in particular the effects in relation to sports image rights.

(3) The Chancellor of the Exchequer shall lay before the House of Commons a report of the review under this section no later than 15 October 2019.

(4) In this section—

“the changes made in relation to income provided through third parties” means the provisions of sections 34 and 35 of and Schedule 11 to this Act,

“sports image rights” means the rights or purported rights, whether or not protected or capable of protection under any relevant laws, associated with the identity or activities of a person where those rights or purported rights are associated with their participation or former participation in a sport.”

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of provisions for disguised remuneration in relation to income provided through third parties, including particularly the effects in relation to sports image rights.

New clause 4—Impact analyses of provisions of this Act—

“(1) The Chancellor of the Exchequer must review the impact of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the impact of those provisions on households at different levels of income,

(b) the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010), and

(c) the impact of those provisions on different parts of the United Kingdom and different regions of England.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of the provisions of the Bill on households with different levels of income, people with protected characteristics and on a regional basis.

New clause 5—Review of the conditions of registration for third country goods fulfilment businesses and traders using their services—

“(1) Within six months of the passing of this Act, the Chancellor of the Exchequer shall complete a review of the conditions of registration for third country goods fulfilment businesses and the traders using their services.

(2) The review shall consider in particular—

(a) an automatic joint and several liability for VAT between registered fulfilment businesses and the traders using their services, and

(b) a requirement that registered fulfilment businesses should charge VAT to customers on behalf of traders using their services.

(3) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons within one month of its completion.”

This new clause requires a review to be undertaken of the conditions of registration for third country goods fulfilment businesses and the traders using their services.

Government amendments 12 to 16.

[Jonathan Reynolds]

I rise to speak to amendments 7 to 11, which relate to the Government’s Making Tax Digital proposals. I do not think I will be able to get in any references to ancient Rome or Greece, unlike my colleagues, because of the subject matter.

Given that the debate on this package of measures has been ongoing since the first version of the Finance Bill, Labour’s many concerns have been well rehearsed at every stage of the discussions. However, they are not our concerns alone. They echo the worries of businesses, service providers and the trade associations that represent them, including the Institute of Chartered Accountants, the Chartered Institute of Taxation and the Federation of Small Businesses.

We recognise that Labour’s repetition of and emphasis on the potential damage that the measures might have had has led to a number of concessions over the summer. The Government had to concede that the timeline for implementation was not feasible and undertook a U-turn to delay the implementation of digital reporting for VAT until 2019. The Federation of Small Businesses described that change to the timetable as a “lifeline for small firms”. Labour has also ensured that there is an exemption for small businesses operating under the VAT threshold of £85,000.

However, we do not believe that those changes are enough. That is why Labour proposes this package of amendments today. To be clear, we support the principle of digitising tax returns, as we would any measure that purported to simplify the compliance and reporting burden on UK businesses and that might help HMRC efficiently and accurately to collect the amount of tax it is owed. That does not change the fact that the Government have made a chaotic mess of implementing Making Tax Digital. This significant and important change to the system needs to be approached with due care and attention.

If the Government’s measures are carried out as currently proposed, there is a risk that added costs and unintended consequences will be passed on to small and medium-sized businesses, as tax experts and accountants have warned. The Government’s target implementation date is unrealistic and unworkable. What is more, it will coincide with the uncertainty created by Britain’s departure from the EU, which is already creating a significantly tougher operating climate for small businesses. I note the comments made by Conservative Members during the debate on the first group of amendments about not wanting a review of any measure in the Finance Bill to coincide with Brexit. I am sure that they will apply that view consistently to this package of measures.

To be frank, nobody is sure whether HMRC or business can be ready for the implementation date. At present, the plans are rushed and poorly thought through. This is why our amendment proposes that the date is put back to 2022 to allow time for consideration and compliance and to avoid a clash with our exit from the European Union.

15:59

We need to see robust evidence and proof that the software for Making Tax Digital is effective, not least if the Government want to keep to their 2019 implementation timetable. So far, that has not been forthcoming. We have not heard feedback on the pilot schemes for this software and nor have we heard details of how HMRC proposes to train its staff in time for implementation. Businesses need time to accustom themselves to using the new system, and we cannot see how there is sufficient time to pilot, test and run the software in time for 2019, while allowing for that to occur. We therefore propose in amendment 8 that the Chancellor must report on the suitability of the software before full implementation is rolled out.

The final issue on the Making Tax Digital proposals that we wish to raise today is quarterly reporting. As outlined in Labour’s 2017 election manifesto, we believe small businesses underneath the VAT threshold should be permanently exempted from mandatory quarterly reporting. It presents an unnecessary compliance burden and risks adding costs and administration to small businesses with insufficient evidence of benefit. It is Labour’s belief that the Treasury, having made the mistake of already accounting for the revenue they believe they will raise from these measures, is now ill-advisedly committing to rushing them through so as to avoid creating a further black hole in the public finances, but these are enormous changes that must be implemented with due care and attention. We urge the Government to give them more time.

Too often, the Government have exercised a sloppy approach to policymaking, with disasters such as universal credit a direct result of ignoring the evidence available from pathfinder schemes and the testimony of stakeholders. Britain’s small businesses cannot afford a similar disaster in the implementation of Making Tax Digital. We therefore ask the House to listen to us and to the warnings of independent experts outside this building, and support this pragmatic and sensible package of amendments today.

[Mel Stride]

Government amendments 12 to 16 fix a small technical error that could otherwise result in an outcome that was not intended. They will ensure that landlords who stop renting out a property and move in rather than sell it are not unintentionally disadvantaged when using the cash basis.

I now turn to the Opposition’s amendments. New clause 4 requires the Chancellor to review the impact of the provisions on households at different levels of income, the impact on people with protected characteristics, and regional impacts. The Treasury considers carefully the impacts of its decisions on individuals and groups with protected characteristics in line with both its legal obligations and its strong commitment to promoting fairness. The Government have published distributional analysis of measures contained in the Finance Bill in the “impact on households” document which accompanied spring Budget 2017. The Treasury and HMRC also published tax information and impact notes for individual tax measures that include an assessment of expected equalities impacts. I therefore urge the House to reject new clause 4.

The Bill includes provisions for the introduction of Making Tax Digital programme. The tax gap resulting from errant carelessness currently stands at £9.4 billion. The Government’s plans for Making Tax Digital aim to address the tax gap and provide a more modern digital service that will help businesses to get their tax right. However, as discussed in Committee, it is also important to do this in a way that works for business. My announcement of 13 July allows a small business more time through a phased implementation of Making Tax Digital. This change has been widely welcomed and stakeholders are now working hard to prepare for MTD.

Opposition Members have, as we have heard, proposed amendments that would make three changes to the implementation of Making Tax Digital. First, they propose that the programme should be delayed until 2022 at the earliest. As I have said, I have already made changes to the timetable of Making Tax Digital, so that businesses have longer to prepare. Secondly, Opposition Members are seeking to prevent mandatory quarterly updates for VAT under MTD. Most businesses paying VAT already report quarterly. Businesses that are mandated to use MTD for VAT will not be required to provide updates to HMRC more frequently than they do currently, or to provide any more information. Finally, the Opposition have pressed for a report on the suitability of software at least 90 days before MTD for income tax is mandated. The Government are already committed to ensuring that a full range of software is available for MTD and that these have been tested thoroughly. I therefore urge the House to reject the amendments tabled on these clauses.

[Nigel Mills (Amber Valley) (Con)]

At a Public Accounts Committee sitting last week on the future customs border and the software upgrade for that, the permanent secretary appeared to suggest that Making Tax Digital was the highest priority IT programme for Her Majesty’s Revenue and Customs. Would the Minister agree with that, or does he think that we should prioritise making sure that our systems can cope with the many changes that may come about through Brexit?

[Mel Stride]

Of course there are a number of HMRC-led IT programmes; Making Tax Digital is but one of them. A new system for customs, the customs declaration service system, will replace CHIEF—the customs handling of import and export freight system—and that has very high priority. We are on target for full roll-out in January 2019; we will begin the CDS pilot in August next year. I am satisfied that the balance is correct at the moment.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

Has the Minister spoken to his colleagues in the Department for Work and Pensions, who are embarking on a £13 billion IT contract for universal credit, on the lessons to be learned and the impact on people who are trying to use a system that is evidently not fit for purpose?

[Mel Stride]

As that programme relates to DWP, the question would be best directed in that direction, but I assure the hon. Gentleman that, to the extent that the Treasury and HMRC impinge on the programme, it is for us a very high priority.

I turn to new clause 2, which, although not debated, was tabled by the hon. Member for Walthamstow (Stella Creasy). I would like to deal with it, because I know that from her perspective it was a very important new clause. I understand why she suggests extending the rules on the taxation of capital gains from commercial property disposals by UK taxpayers with a foreign domicile, but I fear that the new clause and the discussion it has prompted have fallen foul of the complexity inherent in this area. I would like to clarify some of the issues.

First, contrary to the new clause, it is residence and not domicile that determines whether the disposal of an asset in the UK is within the charge of capital gains tax. UK residents, including non-doms, will always be liable for CGT on the profits from selling UK land, whether that land is residential or commercial. Also, it does not appear that the change that the hon. Lady proposes would apply to foreign companies owning UK commercial property, as domicile does not apply to companies.

These elements of confusion mean that it is far from clear that the review proposed would work. I remind the hon. Lady that this Government in 2015 started taxing non-residents on their gains from UK real estate—something that previous Governments had ducked. Those changes give a sense of the amount of revenue that an extension of them to the commercial property market would raise. The Office for Budget Responsibility certified that the 2015 changes will raise £40 million this financial year and £70 million in the next. That gives a more realistic sense of the order of magnitude of the amount that this change could raise than the figures suggested in previous debates.

The hon. Lady has also suggested that taxpayers are designating residential property as commercial property to avoid paying the residential charge. Let me be clear: if residential property is being designated as commercial property, that is a matter of tax avoidance or evasion, not of the scope of CGT. HMRC has not seen any evidence of this practice.

The hon. Lady has provoked a good debate on this issue. Although I urge the House to reject new clause 2, which confuses too many of the issues at stake, I recognise that a number of points in this area are worth consideration, and we will certainly continue to look closely at the issue of non-residence and CGT on commercial property.

New clause 3 seeks to commit the Government to carrying out and publishing a review of the tax treatment of income provided through third parties, in particular in relation to sports image rights. Image rights payments have long been taxable. There have been cases where employers have tried to inflate payments for image rights and to reduce salaries accordingly, to deliver a tax saving to both employers and employees. I thank my hon. Friend the Member for Dover (Charlie Elphicke), whom I see in his place, for the insights, advice and support that he has given me on this issue.

The courts have ruled that genuine image rights payments to an employee are not taxable as earnings. It is therefore for HMRC to ensure that image rights payments are genuine and taxed in the right way. At spring Budget 2017, this Government committed HMRC to publishing clear guidelines for employers who make image rights payments for the use of an employee’s image, and HMRC has done that. HMRC undertakes extensive compliance activity to ensure that employers play by the rules and image rights payments are taxed in the right way. The new clause is not necessary, so I urge the House to reject it.

New clause 5 asks for a review of the conditions of registration for third country goods fulfilment businesses. The review would also need to consider the case for imposing either joint and several liability or direct liability on third country goods fulfilment businesses for the unpaid VAT of their overseas clients.

The Government are proud of their record in tackling online VAT fraud, a complex international problem. The UK has led the way with a package of measures that Government first announced at Budget 2016. It includes the fulfilment house due diligence scheme provided for in the Bill and powers for HMRC to hold online marketplaces jointly and severally liable for the unpaid VAT of overseas traders.

The Government have already undertaken extensive consultation on the scheme in the past 18 months. I assure hon. Members that we will continue to monitor the impact of the legislation. I therefore urge the House to reject new clause 5.

[Nigel Mills]

I commend to the Minister the better solution to this issue: making the online marketplaces themselves liable for the VAT on sales outside the EU. In the Public Accounts Committee, Amazon thought that that was a better solution and it would be happy to implement it. The EU wants to do it. The Government have consulted on split payment. Is it not time to push ahead to ensure that we get all the revenue we deserve and need?

[Mel Stride]

My hon. Friend rightly raises one of the approaches that could be deployed to ensure that VAT is paid: the split payment system, whereby the platform itself is responsible for collecting the VAT and passing it on. That is certainly something, along with other measures, that we are considering.

It has been a pleasure debating this group of amendments. I hope that hon. Members are satisfied on the points we have discussed and I urge the House to reject the amendments and new clauses tabled by Opposition Members.

[Kirsty Blackman]

I think we are all slightly bamboozled by the order in which this part of the debate has happened. None the less, I am thankful for the opportunity to speak.

We have raised concerns about Making Tax Digital and we will carry on doing so because we have issues with the way in which some of these things are being implemented. I appreciate the fact that in Committee the Minister took the time to answer questions about lack of internet access. I am still not 100% clear about the position for those people who have only intermittent access to the internet. I understand what he was saying about those people being able to make a case to HMRC about why they cannot, through the Making Tax Digital scheme, do quarterly reporting. However, I am still not convinced that the language on that was robust enough to protect any of my constituents who, because of their internet connection, are unable, for example, to reasonably undertake the quarterly reporting that is being asked of them. If he is able to come back on that and clarify the position, I will be grateful. The point he made in Committee was useful, but possibly not strong enough in that regard.

The other issues we have about Making Tax Digital concern those people who are in particularly rural areas and who therefore struggle with lack of access to technology and the internet and with doing the quarterly reporting. There are also people who do not have access to HMRC offices in the way they used to. We have raised all those concerns. I have said that I am pleased that the Government have changed the way and the order in which the implementation is going to happen. The SNP is not against Making Tax Digital and quarterly reporting, but we have concerns and we want to ensure that our constituents and businesses in our constituency are protected.

On that note, we said in our manifesto this year that we would support the phased introduction of Making Tax Digital. I want to be clear that we will not, therefore, support Labour’s amendment 11, which is the tack that we also took in Committee. We would not want to vote against something that is a manifesto commitment.

New clause 2 is on commercial property and non-doms. The statements that I made earlier about the issue of non-doms and about the concerns regarding the complexity of the tax code and possible loopholes in relation to that, apply exactly in this regard. I am pleased that the new clause has been tabled by the Labour party, including the hon. Member for Walthamstow (Stella Creasy), I think. I say that quietly in the hope that I have got the constituency right. I am pleased that this has been put forward. Constituents have got in touch with me and several of my colleagues about this. The Scottish National party has previously raised concerns about the taxation of non-domiciles, and we will continue to do so, in particular around some of the loopholes. We will support new clause 2—many of the constituents who wrote to me will be delighted about that—and I am pleased that this matter is on the table and being debated today.

16:15

[Stella Creasy (Walthamstow) (Lab/Co-op)]

As it is Halloween, I rise to give the Minister a fright, because if he thinks he is going to get away without properly examining new clause 2 and the benefits that it could bring to our country and British business, he is in for a trick-or-treat moment. There are certainly ghosts that haunt our politics—[Interruption.] I am disappointed to see you being so slow, Mr Deputy Speaker—[Interruption.] That is certainly very spooky.

As I said, there are ghosts that haunt our politics, so I start my speech by putting on record my thanks to the former Member for Tatton, George Osborne, for inspiring new clause 2. Indeed, I noted that the Minister referred to his work, too. These were the words of the former Member for Tatton in 2015 when the then Government brought in the first rules around tax and non-doms:

“It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax.”—[Official Report, 8 July 2015; Vol. 598, c. 325.]

By using those words, the former Chancellor raised two important issues: first, the fairness of our taxation system and, secondly, how it extends to foreign ownership. He was absolutely right to introduce those measures, but what we are talking about today is the necessary and inevitable conclusion of that debate: what we do when people raise issues about fairness and foreign ownership. The new clause answers that call because, frankly, it is not fair that British businesses have to pay corporation tax on their capital gains when they sell commercial properties, but overseas businesses trading in the UK in UK-based property do not.

It is not fair that we are one of the few countries in the world to treat its businesses in this way and let foreign companies off the hook—all those real estate investors who some might feel donate so much else to some in this country, but who do not pay their taxes. As the previous Chancellor argued, people can put property into an offshore company to avoid tax.

If the Minister’s main objection to the new clause is the way in which I have described the domicile of these people, he ought to think again. Certainly, he ought to do as I did today and google the term “tax efficient Jersey UK real estate”, because when he does and he sees the advice being offered to non-resident companies, I suspect he will find it galling. He will find companies including BNP Paribas Real Estate, Ogier, Bedell Cristin and Hawksford boasting about how UK real estate investment trusts based in Jersey but listed on the international stock exchange do not pay the same rates of stamp duty as those resident in the UK, and do not pay capital gains tax. Indeed, the International Stock Exchange itself states:

“we have pragmatic listing requirements for this product”.

That simply means that the businesses involved get to avoid the same charges that our British businesses have to pay. We as British taxpayers should be asking why any company is using such a model—why such companies are given these listings and are able to buy and sell UK property in this way—because it is very hard to see what the justification is, and why we make it so easy to exploit this loophole when there is tax on residential property sales, but not on commercial properties.

The former Chancellor boasted in 2015 that making non-UK-based people pay capital gains tax on their residential property sales would raise £1.5 billion over the course of this Parliament. The purpose of the new clause is to tell us just how much closing this loophole would raise, and just how much these companies are making through such behaviour.

Sadly, because the Minister was so determined to get through his speech so quickly, I did not hear the number he came up with. I certainly find it striking that HMRC does not know how much money is missing, but in the spirit of this cross-party measure, let me offer the House some of my own figures.

The British Property Federation says that there is about £871 billion of commercial real estate in the UK, which represents 10% of our nation’s entire wealth. That is a hugely important market in its own right, but how we buy and sell commercial property also affects our residential property market, as it has an impact on the price of land. For those of us who represent constituencies where house prices are exorbitant, to say the least, tackling the overheating in our property market would be a very noble thing to do. I believe that we would get support for that from both sides of the House.

We know that about 20% of commercial real estate is sold every year, and that it was worth an eye-watering £115 billion in 2015—that is the figure the taxman knows about. We also know that about 30% of commercial property in the UK is held in these offshore trusts and companies. For those who are fans of “Countdown” and want to see how I have done my homework, I have done my sums assuming an 8% increase as the long-term trend rate for commercial property prices. Working on that assumption, if about 20% of that property is sold and the current 19% rate of corporation tax is used, there would be about £11 billion of taxable gains every year. It is therefore not unrealistic to expect that around £6 billion of taxation could be collected.

[Jim McMahon]

We are told time after time that we should live within our means and that our public services will pay the price if we do not, so is it not the case that the first thing we should do is to maximise our means?

[Stella Creasy]

Spoken like a true former local authority leader who has had to deal with the consequences of Government cuts!

This is about the question of fairness that was put forward by the former Chancellor. None of this is illegal. We might consider it immoral, but it is certainly not illegal, and none of it is captured by UK anti-avoidance rules. The Minister is not being open about companies that might include UK residents who have their properties held offshore. This is unfair to UK businesses. I understand that at present there is concern about economic policies and a dangerous air of radicalism in British politics. Let me reassure Conservative Members who might feel frightened about supporting this measure to close the loophole, and fear that it could be a radical socialist policy—I happen to think that it could be—that this is simply a question of fairness.

This is also something that most other countries do. Canada, Australia and the rest of Europe do it, so the new clause would bring us into line with them. Indeed, the OECD model double tax treaty explicitly preserves the right of countries to tax non-residents on their capital gains from the disposal of local real estate.

The Bill itself brings in anti-avoidance measures relating to inheritance tax and to holding property through non-UK companies. That is why it is difficult, having listened to the Minister in Committee, to understand why this particular proposal has been put into the “too complex” category. In Committee, he voted against a similar provision because he argued that it was just too complex, while admitting that the rules introduced in 2015 were designed to catch individuals holding a title over a dwelling in a trust or a closely held company. He argued against the proposal because he said that it would require what he considered to be a whole tax code. My problem with the Minister’s saying that this is too complicated is that it places him and the British Government in a special category. If most other countries can get their heads around how to tax non-resident companies’ capital gains on commercial properties, I simply fail to understand why it is beyond the wit and wisdom of the UK Treasury to do so.

My hon. Friend the Member for Oldham West and Royton (Jim McMahon) has mentioned the human impact of this situation. The Institute for Fiscal Studies tells us that the Chancellor has black hole in his budget of £20 billion and rising, and that is before we even consider the cost and impact of Brexit. If my estimate is right that closing the loophole would raise £6 billion every year, that money would pay for the entire public health budget helping people with diabetes and heart disease. It would cover restoring nursing bursaries and keeping open our police stations that are currently destined for closure. It would entirely cover the cost of a public sector pay rise in line with inflation—that is according to the IFS’s figures, not mine. When reports tell us that the Government are so short of money at a time when a Budget is coming up, “Is it fair?” and “Can we afford not to do this?” are two important questions for British taxpayers.

I disagree with the Minister, but if he is worried about the drafting of new clause 2, I would support his tabling an amendment to address the use of the term “domicile”. Even if Government Members are worried about the detail, new clause 2 simply looks at the numbers, so it would give us some information. HMRC does not know the amount that we are missing out on as a result of this loophole. The Minister mumbled something about OBR figures, but I have done my own calculations and we are not talking about small change. This money could have a tangible impact on our public finances now.

I am sad that the hon. Member for Dover (Charlie Elphicke) is not in the Chamber because he chided my hon. Friend the Member for High Peak (Ruth George) in September about a lack of action on loopholes. This proposal has cross-party support, so I would love Members from both sides of the House to recognise that when we see something that is unfair and costs us billions of pounds, we can act quickly. I am sure that the Minister will be given an opportunity to respond to the debate, so if other countries can do this, if British businesses are suffering unfairness, and if our public services desperately need the cash, will he think again? He says that he keeps the tax situation under review, so if he will pledge to publish a specific review of capital gains tax on commercial properties, I will happily not press the new clause to a Division.

British taxpayers have a right to know how much money is leaking out of our system as a result of the loophole. I would wager that many MPs will be lobbied by their constituents about closures in their community, public service cuts and struggling businesses, and by people who cannot afford their own home due to the overheated property market. Those people will want answers, so I look forward to what the Minister has to say. When we were young, we were all told that money does not grow on trees, but in this instance the roots are overseas, and it is up to the Minister to pull them up.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the Minister.

[Mel Stride]

It is pleasure to appear before you for my second appearance, Madam Deputy Speaker.

To pick up quickly on a point made by the hon. Member for Aberdeen North (Kirsty Blackman), digital exclusion is covered in clause 62, which provides that the digital exclusion condition is met if

“for any reason (including age, disability or location) it is not reasonably practicable for the person or partner to use electronic communications or to keep electronic records.”

That is the test, and the Bill contains powers to allow HMRC’s commissioners to bring in further grounds for exclusion as the measure is rolled out and we see how it operates.

I see that the hon. Member for Walthamstow (Stella Creasy) has been on her phone and has already tweeted that I have rejected her advances in this debate, but I am now at the Dispatch Box trying to make my points. She makes her points powerfully and raises an important issue, as I signalled earlier, but she has to accept that new clause 2 would not actually do what she would intend it to do. It confuses non-doms with residents, which is the critical distinction, and would classify companies as being non-domiciled, which they cannot technically be. This is a complicated area about which we had an extended debate in Committee, but I have made it clear that we will continue to consider it. We take on board the general thrust of what the hon. Lady wants to achieve.

[Stella Creasy]

I make it clear that I am not making advances to the Minister; I am making arguments to him. Let me ask him one simple question: if this is so complicated—if it seems that the UK Treasury cannot do it—why can most other countries operate without a loophole?

16:30

[Mel Stride]

I have already conceded that point. We are looking at this, which rather trumps any questions about why we are not. We are considering it very seriously, and I said earlier that we are looking closely at the issue of non-residents and capital gains tax on commercial property.

[Jim McMahon]

I am pleased to hear that the Government are looking at this important issue, and I congratulate my hon. Friend the Member for Walthamstow (Stella Creasy) on her significant work. When will the Government publish their findings?

[Mel Stride]

It is not a question of publishing information on every area we look into, but I have made it clear that we are seriously considering the issues that have been raised. I have also made it clear that new clause 2 would not do what the hon. Member for Walthamstow describes.

[Stella Creasy]

Will the Minister give way?

[Mel Stride]

I will give way one last time. We went through this at considerable length in Committee.

[Stella Creasy]

I disagree with the words “at considerable length.” I am grateful to the Minister for trying to explain what I am attempting to do. For the avoidance of doubt, the Opposition are asking that British taxpayers and businesses who are paying this charge know exactly what other companies are getting off paying. He tried to mention something from the Office for Budget Responsibility and he clearly has some figures in his head for how much the loophole is potentially costing the British taxpayer. Will he repeat loudly and clearly what he thinks the number is and where he got his evidence?

[Mel Stride]

As I have said, we are looking at this and we will continue to do so. I have carefully considered the points raised by the hon. Lady both on Report and in Committee, and I think I have a clear understanding, as she does, of what she wishes to achieve.

New clause 2 would not do what the hon. Lady intends. I hope that she will take some comfort from my assurances about our looking at this matter and that she will not press the new clause to a Division. Whether or not she does, I urge the House to reject the Opposition amendments and new clauses.

[Jonathan Reynolds]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 62

Digital reporting and record-keeping for VAT

Amendment proposed: 11, page 79, line 19, at end insert—

‘(6A) Regulations under sub-paragraph (5) may not impose mandatory requirements for businesses to generate quarterly updates.”—(Jonathan Reynolds.)

This amendment provides that any system for quarterly updates to be generated must not be mandatory.

Question put, That the amendment be made.

16:33

Division 29

Ayes: 243

---

Labour: 230
Liberal Democrat: 9
Plaid Cymru: 3
Green Party: 1

Noes: 309

---

Conservative: 297
Democratic Unionist Party: 9
Independent: 2

New Clause 2

Taxation of chargeable gains: review of treatment of commercial property held by persons with foreign domicile

“(1) The Taxation of Chargeable Gains Act 1992 is amended as follows.

(2) After section 14 (non-resident groups of companies), insert—

‘Review of treatment of commercial property held by persons with foreign domicile

(1) Within three months of the passing of the Finance (No. 2) Act 2017, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review about the taxation of chargeable gains held by persons with foreign domicile.

(2) The review shall consider in particular the implications if the treatment of commercial property were to be the same as the treatment of residential property under section 4BB(2).

(3) The Chancellor of the Exchequer shall lay a report of the review under this section before the House of Commons within three months of its completion.’”.—(Stella Creasy.)

This new clause requires a review to be undertaken of the treatment of capital gains on commercial property disposed of by UK taxpayers with a foreign domicile.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

16:48

Division 30

Ayes: 279

---

Labour: 231
Scottish National Party: 33
Liberal Democrat: 9
Plaid Cymru: 4
Independent: 1
Green Party: 1

Noes: 309

---

Conservative: 299
Democratic Unionist Party: 9
Independent: 1

Schedule 2

Trades and property businesses: calculation of profits

Amendments made: 12, page 121, line 40, leave out

“on the last day of the tax year”

and insert “at the end time”.

Amendment 13, page 121, line 41, leave out “on that day” and insert “at the end time”.

Amendment 14, page 122, leave out line 13 and insert “at the end time,”.

Amendment 15, page 122, line 21, leave out from “if” to end of line 22 and insert “—

(a) it is involved in the property business at the end time, or

(b) although it is not involved in the business at the end time—

(i) it was last involved in the business at an earlier time in the tax year, and

(ii) the person carrying on the business holds the property throughout the period beginning with that earlier time and ending with the end time.”

Amendment 16, page 122, line 32, at end insert—

( ) The “end time” is—

(a) the time immediately before the end of the tax year, or

(b) if in the tax year the person carrying on the business permanently ceases to carry it on, the time immediately before the person permanently ceases to carry on the business.”—(Mel Stride.)

Third Reading

17:03

[Mel Stride]

I beg to move, That the Bill be now read the Third time.

The work of HMRC, though typically not seen as the most glamorous aspect of government, is arguably the most important. If we do not collect tax, we cannot pay for our public services. Every time a new loophole opens up in the tax code, that is another school we cannot afford or another nurse we cannot employ. That is why since 2010 we have significantly improved HMRC’s ability to fight tax avoidance and evasion, and we have raised £160 billion in so doing. That is a far stronger record than in the 13 years during which Labour was in government, but the work is never over.

In this Finance Bill, we are going further than ever to make sure that people pay their fair share. First, we are tackling disguised remuneration schemes by introducing new charges on those artificial loans. Secondly, we are updating the rules on how large companies account for the cost of interest, bringing to an end excessive interest expenses claims. Finally, we are giving HMRC the greater powers it needs to punish avoidance enablers effectively. Taken together, the changes will advance our fight against aggressive tax avoidance.

Alongside our avoidance and evasion work, the Government are committed to making the tax system fairer as a whole. In the Bill, we are bringing to an end permanent non-dom status. There can and should be no denying that non-doms have made a great contribution to our prosperity, but permanent non-dom status can be unfair to UK-domiciled citizens. From now on, with the abolition of non-dom status, those who have lived in the UK for years will pay UK tax in the same way as everybody else does.

The Government recognise that we need to move with the times, and part of that is our work on making tax digital. Every year, the Exchequer loses more than £8 billion in avoidable errors. By making tax digital and easing communications between HMRC, businesses and the self-employed, that loss will be significantly reduced. To help businesses to adjust, we will go forward with a gradual process, as I set out in my written statement. We are confident that the timetable is the right one.

I would like to take a moment to thank Members on both sides of the House for their scrutiny of the Bill on Second Reading and in Committee. The debate has been broad and thorough, and I am particularly grateful to the Labour and Scottish National party Front Benchers for the courtesy and consideration that they have shown me and for their contributions to the debate.

I would like to make one or two final observations. It is, of course, the duty of the Opposition to oppose, to scrutinise and to hold the Government to account, and there has been much good, positive scrutiny from the Opposition—some of it of the highest quality—during proceedings on the Bill. But it is, surely, also the duty of the Opposition to do so responsibly and without taking us too far from the facts or too deep into the politics. Where that occurs—for example, with the branding of all non-doms as tax dodgers, when many are far from wealthy and always pay their tax in the UK—it corrodes this country’s competitiveness and our reputation for fair play. If our clamping down on tax abuse around termination payments—typically for those who receive the largest payments of all—is presented as punishing those who have lost their jobs, it just frightens people. That approach is wrong. The Government stand squarely behind positively supporting our economy and all who work in it, and we always will. I commend the Bill to the House.

17:07

[Peter Dowd (Bootle) (Lab)]

The Finance Bill that is before the House is nothing short of a wasted opportunity. It is indicative of a Government who wish to serve the interests of a wealthy few at the expense of the many. That is a fact. Rather than introducing measures to bolster people in their daily lives, such as sensible proposals on investment, fair taxation, raising the UK’s woeful productivity and improving the terrible productivity in many of the regions, the Finance Bill will, if it is enacted, water down workers’ rights, bring added financial burdens to small and medium-sized businesses and exempt offshore trusts from any reform of non-dom status. It is telling that Conservative Members spent more time on the latter than they did on redundancy payments or digital taxation, which affects many of our small businesses.

This Government are enveloped in atrophy. They have done nothing to tackle falling wages, deal with rising levels of personal debt, or tackle poor productivity. They have overseen an economy in which women are paid, on average, 14% less than men, and in which there are large race and disability income gaps. They refuse to invest in the nation’s infrastructure or in the British people. Under Tory rule, Britain has become one of the most unequal countries in Europe. UK Government investment is lower than that of every other major economy. That is a fact.

Inflation is outstripping wage rises, while housing and energy bills are rising once more and our productivity is lower than in the rest of the G7. What a record after seven years. The public sector pay cap has driven down wages, and cuts to in-work benefits are leading to more people than ever using food banks, with 1 million food parcels having been given out. Meanwhile, the Chancellor boasts of high levels of employment, but is in absolute denial about the rising numbers of people in insecure, low-paid work that does not meet their needs and those of their families.

The Government have managed to stitch up Public Bill Committees, despite not having a majority, and they are using arcane rules to deny this House the ability to amend and scrutinise legislation. The younger generation feel betrayed after seven years of Tory austerity. The Government have trebled tuition fees to over £9,000 and abolished maintenance grants, ensuring that the average working-class student leaves university heavily in debt and with little prospect of relieving it. The bottom line is that the Tory Government are in complete and utter decay. The housing market is entrenching and extending inequality between regions, classes and generations. Quite frankly, we cannot support a Bill that does not put any of that right, so we will not support it.

17:10

[Kirsty Blackman]

I am delighted to be in the Chamber to talk about the second of the three Finance Bills we will have this year. When the Chancellor stood up and said we would move to having fewer fiscal events a year, I am not sure that this is what he had in mind. I am particularly excited about the third one, which will be coming along soon, and I really hope that it takes account of Brexit because the Government’s Finance Bills have so far failed to do so. I hope we will have a Budget that takes account of the economic shock that will happen as a result of Brexit, puts in place the infrastructure spend that we particularly need and makes it clear that we should stay in the single market.

On our specific concerns about this Finance Bill— I saw you getting a bit edgy, Mr Deputy Speaker, but I will get on to it—I agree with Labour Front Benchers that there have been a number of missed opportunities, and we still have concerns. We have previously mentioned these concerns, but they bear repeating because this place is good like that.

The first issue is VAT on police and fire services. This Finance Bill should have taken the opportunity to remove the VAT paid by Scottish police and fire services. We have made this case time and again and we will continue to do so. I hope that the Chancellor will listen and make changes in the Budget. We would like the VAT that police and fire services have paid to be paid back, and we would like the VAT bill to be got rid of in the future. There is a precedent for doing so—other organisations do not have a VAT bill—and we will carry on making this case very strongly.

[Stewart Hosie (Dundee East) (SNP)]

My hon. Friend makes the interesting point that this is not simply about making a change for the future, but about repaying the money that has been overpaid for some years. Will she re-emphasise to the UK Government the message that we are not simply looking for such a change, but want paid back that which should never have been paid in the first place?

[Kirsty Blackman]

That is absolutely the case, and I thank my hon. Friend for highlighting this point. It is very important that the Government recognise that Scottish police and fire services never needed to pay this money and that they give us back the overpayments that have been made. Frontline police and fire services are losing out as a result of those organisations having to pay VAT.

I have a couple of other points specifically about the Bill. We have already raised the issues involving termination payments, which Labour Front Benchers did a very good job of highlighting. I am very concerned about the impact on vulnerable people and those who have lost their jobs and about the fact that this £430 million tax take for the Treasury means there is £430 million less for people who are made redundant.

I say again that I am pleased by the moves the Minister has made in relation to changing the implementation and phasing in of digital reporting. I appreciate his making it clear that tax measures put in place by the Treasury and implemented by HMRC are constantly under review. My concern is that even though it is said that these things are constantly under review—that is always said during the passage of Finance Bills—there is very little evidence of any reviews actually happening. Certainly, the majority of the reviews that do take place are not made public, so we cannot see the impact of those tax measures. I have done some digging and asked the Library about these matters, but as I say, very few of the reviews have been made public. It would therefore be good if the things the Minister has said will be under constant review were actually under constant review and if that could be shared with Members across the House and not just, for example, people working within HMRC.

I gather that the changes to elections for removing fields from petroleum revenue tax have widely been welcomed by the industry. In two successive Finance Bills, successive Chancellors have committed to changing the tax regime for decommissioning assets, so that it will be easier to transfer late-life assets to a new clearing in the market, which is very important in maximising the economic recovery of the North sea fields. I say again that Chancellors have promised that twice, yet action has not been forthcoming.

The Chancellor has said that the results of the review will be in the Budget. I do not want him to back away from the commitment that he has made. It is very important for the oil industry, not just in Aberdeen and the north-east of Scotland, but for the hundreds of thousands of people who are employed in the industry across the United Kingdom. It is very important that it does happen to maintain confidence in the industry. We have had a period in which things have not been great in the industry. Confidence is beginning to build again and this change would make a huge difference.

Something that we voted against in Committee and that we disagree with is the change to the dividend nil rate. It is being reduced from £5,000 to £2,000. The SNP has argued against that not only because it is the wrong way to go, but because it is being brought in too quickly. People who have set up a small business or become self-employed in the recent past may not know that this change will be coming in and hitting them very shortly, so they will not have built it into their business plan. I am concerned not that it will reduce entrepreneurship, but that it will affect people who have made finely balanced financial decisions about the future fairly soon. We raised those concerns in Committee. For me, this is the worst proposal in the Finance Bill—the one that I disagree with the most and that I would argue against the most strongly.

I have made the key point that the Bill ignores Brexit. I agree with those on the Labour Front Bench that the Bill ignores productivity. Every day, more statistics come out and more issues are raised about the lack of productivity growth in the UK and the ripples that that causes. The Conservatives keep saying how great it is that we have so many people in employment. The problem is that those people are not getting wage rises that even keep pace with inflation. People are getting poorer, even though they are working hard, sometimes in low-paid jobs, simply because wages are not keeping pace with inflation. That is a big concern for us.

When she came to office, the Prime Minister was very clear that she would try to do things for people who are just about managing. Over the past year or so, it has become clear that life for those people has been getting significantly worse. I would like this year’s Budget to take account of that, to take account of the fact that austerity has failed and to take account of the fact that people are poorer as a result of this Government’s policies and make moves to change that.

Question put, That the Bill be now read the Third time.

17:19

Division 31

Ayes: 302

---

Conservative: 292
Democratic Unionist Party: 9
Independent: 2

Noes: 276

---

Labour: 229
Scottish National Party: 31
Liberal Democrat: 10
Plaid Cymru: 4
Green Party: 1

Bill read the Third time and passed.

INDEPENDENT PARLIAMENTARY STANDARDS AUTHORITY

Ordered,

That Kirsty Blackman, Chris Bryant, Mrs Cheryl Gillan, Valerie Vaz and Mr Charles Walker be appointed to the Speaker’s Committee for the Independent Parliamentary Standards Authority until the end of the present Parliament, in pursuance of paragraph 1(d) of Schedule 3 to the Parliamentary Standards Act 2009, as amended. —(Michael Ellis.)

Petitions

Tuesday 31st October 2017 Commons Chamber

17:34

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

The petition is about a free school site in Hackney that is designated for 630 pupils. We have strong concerns locally that it is not suitable for those pupils. It would not create a suitable modern school facility. It has a complete lack of play space for children and will cause undue stress on the local area, particularly with traffic because of the breadth of the catchment area. The petition states:

The petitioners therefore request that the House of Commons urges the Secretary of State to refuse the appeal against Hackney Council’s decision to refuse planning permission.

Following is the full text of the petition:

[The petition of residents of Hackney,

Declares that the former police station in Lower Clapton Road is not a suitable building for a new school of 630 pupils due to its size, as there are access issues which are fundamental to the success of the school; further that these issues make it an inadequate learning environment; further that there is almost a complete lack of play space for young children; further that there is a complete lack of play space for young children; further to there being an unacceptable burden on the local area due to likely car use for pupil drop off/pick up and further to over intensive use of local facilities due to inadequacies of school site.

The petitioners therefore request that the House of Commons urges the Secretary of State to refuse the appeal against Hackney Council’s decision to refuse planning permission.

And the petitioners remain, etc.]

[P002070]

17:35

[Nic Dakin (Scunthorpe) (Lab)]

I rise to present a petition on behalf of my constituents. There are 19,000 names on this petition, all gathered within four weeks, which demonstrates the determination of Scunthorpe market traders and their customers to stand up for the market in the face of the threat posed to its future by North Lincolnshire Council.

The petition states:

The petition of residents of Scunthorpe County Constituency,

Declares that Scunthorpe Market has been trading on the same site for over a century serving generations of local people; further that North Lincolnshire Council may split the market over two sites; and further object to the North Lincolnshire Council’s plan to move traders to an outdoor market on the grounds of: impracticality, hygiene considerations and concerns around stock.

The petitioners therefore request that the House of Commons urges the Government to reach out to North Lincolnshire Council to encourage them to keep Scunthorpe Market together in the current location.

And the petitioners remain, etc.

[P002071]

17:36

[Sarah Champion (Rotherham) (Lab)]

I rise to present a petition of the residents of the United Kingdom to request that this House urges the Government to hold a public inquiry into the so-called “battle of Orgreave”. The Government argued a year ago that no lessons could be learned from an inquiry and that, because no one had died, justice could go unserved. But, in the words of the Prime Minister, historical inquiries are not archaeological excavations. They are not purely exercises in truth and reconciliation. They do not just pursue resolution. They are about ensuring justice is done.

The petition states:

The petition of residents of the United Kingdom,

Declares that the events of Orgreave Coking Plant in June 1984 and the aftermath, had a huge and lasting impact upon coal field communities; and further to public suspicion surrounding the actions of the South Yorkshire Police a deep mistrust in the community remains as a result.

The petitioners therefore request that the House of Commons urges the Government to commit to a full public inquiry into policing at Orgreave, and its aftermath to finally authoritatively establish the truth

And the petitioners remain, etc.

[P002072]

Pompe Disease

Tuesday 31st October 2017 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Rebecca Harris.)

17:38

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

I am delighted to have secured this debate to raise awareness of the very rare condition known as Pompe disease. I hope that the very holding of this debate will contribute to that, and I look forward to the Minister’s response, and hope that he will set out some constructive suggestions on what we will do going forward to deepen knowledge and understanding of this awful disease.

My journey towards an involvement with Pompe disease and securing this debate began when I was visited in my constituency surgery by my constituent John Foxwell. He is a polymath. He is an award-winning author and publisher, specialising in communication technology. He worked for his community, too. He lives in my constituency at present, but he previously lived in Devon where he was both an elected councillor and served as mayor, and was also a trustee and director of his local food bank.

Drawing widely on his experience as a teacher and headteacher, John Foxwell has contributed to UK Government policy over the past 20 years. He has managed national educational projects including the first education action zone and the Building Schools for the Future project, and contributed to education White Papers. His reports on education have been drawn on by international companies. Prior to that, he worked in buying and merchandising for a multinational cycle and auto retailer. Knowing the importance of communication, he also founded companies that assisted those who come to the UK from other countries, developing translation tools and assisting community cohesion.

Now, however, John Foxwell has had to leave that remarkable career behind him. He has to spend up to 15 hours a day on a mechanical ventilator to enable him to breathe, as his diaphragm is paralysed. He cannot walk far, or lift or bend or lie flat—if he did, he would struggle to breathe—and he falls easily. A common cold could cause him to go into respiratory failure and die. His life expectancy is significantly reduced. His wife has had to give up her own job to look after him. She is one of an army of carers across the country whose work needs to be recognised right across the House.

John Foxwell is one of only about 150 people in the UK who have Pompe disease. The condition is named after a Dutch medic called Joannes Cassianus Pompe. Given that he was Dutch, his surname was probably pronounced “Pompa”, but the disease has become known as “Pompey” disease. He was born in Utrecht in September 1901, and later studied medicine at the city’s university. His breakthrough came in December 1930, when he carried out a post-mortem on a baby girl who had died at the age of just seven months. He discovered that her heart had become enlarged and that the muscle tissue in the heart had become like a mesh. He thought that a substance build-up was causing that to happen to the heart muscle and came to the conclusion that that substance was glycogen. In other words, the sugar strings that store energy in cells had not broken down as they should have done, due to a faulty gene inherited from the little girl’s parents.

Dr Pompe became a pathologist at the Hospital of Our Lady in Amsterdam in June 1939, and after the German invasion of the low countries in the second world war, he became a part of the Dutch resistance. He was involved in finding places for Jewish people to hide from Nazi persecution. His laboratory at the hospital housed a radio transmitter that was used to send messages from the Dutch resistance to the United Kingdom. He was eventually arrested by the Nazis in February 1945, after the transmitter was detected. On 15 April 1945, he was executed as part of a reprisal for the Dutch resistance blowing up a railway bridge. The discoverer of this disease seems to have been a very brave man indeed.

Dr Pompe had discovered what came to be known as the first category of the disease, the infantile variety that presents in small babies who fail to thrive, and that often leads to death from heart failure in the first year of life. Life expectancy in those case is, alas, less than two years. The second category is “late onset” where, as the name suggests, symptoms do not become apparent until later on in life. As is the case with my constituent John Foxwell, progression is generally slower, but it is characterised by skeletal muscle wasting that causes mobility issues and breathing problems.

Those who suffer from the disease receive support from Muscular Dystrophy UK—I put on the record my thanks to it for sending a briefing in advance of this debate—and the Association for Glycogen Storage Disease (UK), which also provides support to sufferers here. The standard treatment for Pompe disease is enzyme replacement therapy. The faulty gene that is inherited from sufferers’ parents stops the creation of an enzyme called acid alpha-glucosidase—I will refer to it as GAA from here on—that breaks down the sugar strings of energy in muscle cells. The enzyme replacement therapy involves a genetically engineered enzyme that assists with regulating glycogen—the sugar strings— and is received into the body by regular infusions. The trade name for the enzyme is Myozyme, which is available from the pharmaceutical company Sanofi Genzyme.

The availability of Myozyme differs slightly around the country. In England, it is directly commissioned by NHS England under specialised criteria. In Wales, where my constituent lives, the All Wales Medicines Strategy Group recommended to the Welsh Government that Myozyme should be endorsed within the NHS in Wales for the treatment of Pompe disease, but there is a specific restriction in that it is not endorsed for late-onset Pompe disease on grounds of insufficient evidence of clinical effectiveness.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on presenting such a wonderful account of the gentleman involved in the history of the disease. Like others, I have been contacted by Muscular Dystrophy UK, and rare diseases come up here often and are a particular interest of mine. This is ultimately a question for the Minister, but does the hon. Gentleman agree that the Department of Health must ensure that there is adequate support for the centres across the UK that provide highly specialised care for patients with this rare muscle-wasting disease? I think the Minister will respond to that, but the hon. Gentleman’s speech encapsulates what we are all trying to achieve here.

[Nick Thomas-Symonds]

I am grateful to the hon. Gentleman. I entirely agree that support for the different centres across the country is absolutely vital. While we all know that health is a devolved matter, awareness is so important and is something that we can still promote across the United Kingdom.

My constituent’s particular issue with accessing treatment is that he falls into a category that does not have general commissioning for late-onset Pompe disease, meaning that he would be left having to make an individual funding request, only some of which are successful. However, the reality is that nobody has a chance of accessing the treatment if the disease is not diagnosed in the first place, which was the real challenge facing John Foxwell. His diagnosis took over seven years. Many consultants told him that his diaphragm was paralysed—that was pretty obvious—but they made no link to the disease that was causing the paralysis. John went through some incredibly difficult periods of low appetite, when he was living only on jelly and milkshakes. Unable to function and to continue with the wonderful career that I described, he moved back to Wales, where he was originally from, to die.

Then the diagnostic break came. Nevill Hall Hospital, Abergavenny, is in the constituency of the hon. Member for Monmouth (David T. C. Davies), but none the less it serves a number of my constituents in Torfaen. A respiratory consultant at the hospital gave my constituent a mechanical respirator, which helped him significantly. In addition, he was advised to see a neurologist, who conducted a series of tests, including a genetic test that finally identified late-onset Pompe disease.

Pompe disease is incredibly complex, and it requires a multi-disciplinary approach. The medical disciplines required include geneticists, pulmonologists, neurologists, cardiologists, respiratory therapists, physiotherapists, dieticians and clinical psychologists. Conditions that cross the medical disciplines in that way are, of course, a challenge for our NHS across the country, but it is a challenge that we can and must meet.

I will conclude with an email that my constituent sent to me, which shows where he is at the moment:

“Now I am almost a recluse as I find that leaving the house is extremely challenging. I don’t know the future, but I do know, from statistical testing in other countries, that there are many more people with Pompe Disease out there that are needing to be diagnosed and that I want to be able to assist…in understanding the disease and supporting them when they need help. I am creating Pompe Wales, a Pompe Disease specific charity, to be able to help others who have Pompe, to be able to make the medical professionals aware of Pompe and its symptoms and to link with other Pompe organisations around the world”.

That shows that those who suffer from the disease, named after Dr Pompe, share characteristics with him—they are determined and courageous. But, for them to be able to fight this disease, it must first be identified. The only way to do that is to raise awareness across the medical professions. Nobody should suffer unduly because of falling victim to a disease that is extraordinarily rare.

17:52

[The Parliamentary Under-Secretary of State for Health (Steve Brine)]

I congratulate the hon. Member for Torfaen (Nick Thomas-Symonds) on securing this debate. I often think this about Adjournment debates, but this shows how excellent the House of Commons is in that it can debate a Finance Bill and then discuss a condition like Pompe disease.

I read the hon. Gentleman’s article in The Times this morning. The article was well written, and it set out very clearly the heart-breaking impact that this disease has had on his constituent’s health. I am sure his constituent appreciates very much the way he has taken up the issue. Well done for getting an article in The Times!

I hope my response will go some way to reassuring the hon. Gentleman and his constituent that the importance of understanding how to recognise and treat rare diseases such as Pompe disease is increasingly recognised by policy makers and healthcare service providers, not just in England but across the UK and internationally.

The hon. Gentleman spoke movingly about the subject, and he is of course right to praise the army of carers in our country. Carers Week is a big deal in my constituency, as I am sure it is in his, and he is absolutely right to praise the work of Muscular Dystrophy UK. When I was a Back-Bench MP, I was a member of the all-party parliamentary group on muscular dystrophy, which was chaired by a now former Member. Having grown up with friends who suffered with muscular dystrophy, and who ultimately lost their fight, I have a lot of time and respect for Muscular Dystrophy UK.

The number of rare disease patients can be very small. For example, Pompe disease has an estimated prevalence of one in every 40,000 births, but collectively some 3.5 million people in the UK alone are affected by what we term, in policy terms, rare diseases. To put this in context, one in 17 people will therefore suffer from a rare disease at some point in their lives. As we have heard, patients with Pompe disease are deficient in or completely lacking the activity of an enzyme that affects the ability of cells to degrade glycogen, causing its build-up in the body cells, which impairs their ability to function normally. Pompe disease often affects neonates—newborn children—and becomes apparent from within a few days to a few months after they have been born. Sadly, affected infants often require long periods in paediatric intensive care units, with many going on to require long-term mechanical ventilation, as the hon. Gentleman said.

[Nick Thomas-Symonds]

I thank the Minister for that positive introduction to his speech. One issue that my constituent raised with me was that because this disease is genetic it can be picked up by a blood test from birth. He has asked whether such testing could be done on a more regular basis. I understand that this is difficult because the disease is so extraordinarily rare, but I flag it up for the Minister’s attention.

[Steve Brine]

The hon. Gentleman makes a good point, and I know my officials will be listening carefully to what he says. I may come to touch on that point, if I do not deal with it specifically, but I am sure he will remind me.

Some patients with Pompe disease are treated with an enzyme replacement therapy called Myozyme, which is a direct replacement of the missing enzyme via infusion therapy. Myozyme dramatically alters the natural history of the disease in infants, but many patients still require complex long-term follow-up, as the hon. Gentleman’s constituent does.

NHS England commissions its service for patients with Pompe disease from eight national centres; five of these are for adults and three are for children. The centres provide an inclusive, holistic, multi-disciplinary service—the point the hon. Gentleman rightly makes—for patients with lysosomal storage disorders. That is the wider term for these conditions, including Pompe disease. The centres provide rapid diagnosis, an assessment of disease burden, provision of disease-specific therapy, advice on symptom control and palliative care, where this is, sadly, necessary for patients with untreatable disorders. In conjunction with patient advocacy groups, the centres also provide support for affected families. We of course support these centres utterly—that point was put on the record so well, as usual, by the hon. Member for Strangford (Jim Shannon).

As the hon. Member for Torfaen says, late-onset Pompe disease may not become apparent until later in childhood, adolescence or most commonly, as in the case of his constituent, Mr Foxwell, in adulthood. Although late-onset Pompe disease is usually milder than the infant forms of the condition, patients can experience progressive muscle weakness in the legs and trunk—the main body—and it can affect the muscles that control breathing, which is why the mechanical ventilation becomes necessary. As we have heard, as the condition progresses, breathing problems can become more serious and often prove fatal.

We know more can be done to diagnose rare conditions earlier. Currently, the average rare-disease patient consults five doctors, can receive up to three misdiagnoses and waits four years before receiving their final diagnosis. These delays in diagnosis often mean that opportunities for timely interventions can be missed and/or that patients may be given unsuitable or harmful treatments to treat their misdiagnosed condition; more than half of patients wait for more than one year after the first symptoms and some have waited over 20 years. Although not a great term, I am reliably informed that this is called a “diagnostic odyssey”, which causes uncertainty and distress for those affected, as well as considerable costs for health and social care budgets. We should remember that.

The 100,000 Genomes Project—

[Nick Thomas-Symonds]

rose—

[Steve Brine]

I was going to touch on that project, but before I do I shall give way to the hon. Gentleman again.

[Nick Thomas-Symonds]

I am grateful to the Minister for giving way again. Before he moves on to the genomes project, I just wanted to touch on the issue of the diagnostic odyssey. My constituent’s diagnostic odyssey was seven years, and clearly although the symptoms, particularly the issue involving the diaphragm, were very apparent and were picked up, this was about making the link from there to the rare disease. Clearly, one always has to take into account statistical probabilities—there is no direct criticism of any medic or anything like that here—but part of trying to reduce that diagnostic time must be about increasing awareness among the medical profession of many of these rare diseases.

[Steve Brine]

Yes, I absolutely agree. I also have ministerial responsibility for cancer—if only I had a pound for every time I heard early diagnosis mentioned in the office. I shall explain how I think the rare diseases strategy can help with that. Of course, it is important not just for rare diseases, but what the hon. Gentleman says is absolutely right.

The 100,000 Genomes Project addresses parts of the unmet diagnostic need I have described. It focuses on patients with a rare disease and their families and on patients with cancer. The sequencing of an individual’s genome is increasingly utilised as a diagnostic tool in cases where an individual has unrecognised signs and symptoms and to support the diagnosis of a rare disease. I am pleased to say that around 25% of patients whose genome is sequenced through the project now receive a diagnosis for the first time. In addition, despite their often chronic and progressive nature, the associated long-term complications of some rare diseases can be targeted and addressed early if they are diagnosed as such. That is clearly the holy grail. The UK rare diseases policy board has been tasked with looking at the diagnostic issues—the odyssey that I mentioned—and I look forward to it reporting its initial findings to me. I am told that they will come in early 2018, so I shall look out for them.

I assure the hon. Gentleman that the Government are and remain dedicated to improving the lives of all patients with rare diseases. The publication of the UK strategy for rare diseases in 2013 represented a significant milestone for all patients with rare diseases, and it is now being implemented throughout the country. The strategy set out our strategic vision and contains 51 commitments, concentrating on raising awareness, better diagnosis, which has been touched on, and patient care. It also has a strong emphasis on the importance of research in our quest to better understand and treat rare diseases. Research is so important. The Government are committed to implementing the strategy in full by 2020, and we know that the real test of success will be when patients and families affected by rare diseases experience real improvements.

The Minister of State, Department of Health, my hon. Friend the Member for Ludlow (Mr Dunne), announced in a 28 March Westminster Hall debate on the implementation of the strategy that NHS England will produce an implementation plan for the commitments in the strategy that it has lead responsibility for, and I shall hold NHS England to account ministerially. The Department of Health is now working collaboratively across stakeholders to produce the implementation plan for all those commitments that fall outside NHS England’s remit. Both NHS England and the Department are aligning the publication of those complementary plans, and I want them on my desk by the end of the year.

We appreciate the fact that any specific rare disease is, by its nature, very rare, so we should be honest about the fact that there is often a scarcity of patients and expertise in any single country. The diagnosis, treatment and management of rare diseases strongly benefit from cross-border collaboration. Through an EU initiative on patients’ rights in cross-border healthcare, European reference networks were set up throughout European countries earlier this year. These virtual networks act as centres of knowledge, skills and expertise in the field of rare diseases and complex conditions, and provide a platform to create partnerships between healthcare providers here in the UK and throughout Europe.

The UK is already a key player, leading six ERNs—more than any other member state—and participating in 23 of 24 networks, including what is known as the Metab ERN, which covers rare hereditary metabolic disorders such as Pompe disease. Six NHS trusts participate in the Metab ERN, which aims to ensure a joined-up approach to care by bringing together paediatric and adult metabolic physicians throughout the EU. That is really important. The ERNs are a cornerstone of the UK rare diseases strategy, and the Government are committed to ensuring that no patient should be put at a disadvantage through the UK’s exit from the EU—and that is a priority for me. Therefore, an important element of our future plan will be to continue to play a leading role in promoting and ensuring public health—I am also the Public Health Minister—both in Europe and around the world. Hopefully, that will further strengthen the long tradition of international collaboration, which our clinicians and scientific community have in this country, and often lead across Europe and the world.

Let me touch further on research. The full potential for improving our knowledge of rare diseases and our work towards better treatment and, hopefully, prevention can only be realised by continued research into rare diseases. That is why the National Institute for Health Research has established 20 biomedical research centres that develop new groundbreaking treatments, diagnostics and care for patients with a wide range of diseases.

The centres enrolled patients across 60 NHS trusts and, in partnership with Genomics England, led a pilot for the rare diseases element of the 100,000 Genomes Project that has delivered the sequencing of whole genomes of more than 12,000 bioresource participants.

[Nick Thomas-Symonds]

rose—

[Steve Brine]

I think that I can anticipate the hon. Gentleman’s intervention. Go for it.

[Nick Thomas-Symonds]

I am very grateful to the Minister for his generosity in giving way. My constituent has been unable to demonstrate the exceptionality required to access the treatment through an individual funding request. In reality, there is only this one standard treatment. One thing about the research into rare diseases that the Minister has referred to is the need to discover more options for treatment rather than having only one realistic one, as is the case so much of the time.

[Steve Brine]

I completely agree with the hon. Gentleman. That is why I said that research is absolutely central to this. Let us be honest: this country has led the world in this field. We have an absolutely fantastic record and long may that continue, because people’s lives benefit and depend on that. Once again, he is spot on. Let me conclude my point. In 2016-17, the NHIR research infrastructure supported studies into Pompe disease across nine of its centres and facilities.

The hon. Gentleman referred to national variations in access to Myozyme treatment for Pompe disease across the UK. In England, NHS England funds this treatment for all patients, regardless of age or the form of the disease. In Scotland, the Scottish Medicines Consortium does not accept Myozyme for routine use, but it is funded for children and adults by its ultra-orphan drugs risk scheme. NHS Scotland also provides any patients with particularly complex needs access to highly specialised services in England. In Wales, I understand that the treatment is funded for children and adults with late onset of the juvenile form of the disease, but not the adult form where the symptoms are less severe.

As the hon. Gentleman will be aware, healthcare in Wales is a devolved matter, but I am sure that he will raise any concerns with the Welsh Government. I was delighted to hear about the setting up of Pompe Wales, which he talked about in his speech. It sounds really interesting. Obviously, it is in Wales, so perhaps he could send me details of it when it becomes available.

[Nick Thomas-Symonds]

The Minister is entirely right. It is commissioned in Wales for the infantile aspect. There is no general commissioning for late onset. There has to be what is called an individual patient funding request, where a patient has to demonstrate certain things, including exceptionality.

[Steve Brine]

The hon. Gentleman has put that clearly on the record.

Finally, it is worth noting that the rare disease landscape has been greatly transformed since the UK strategy was published in 2013, especially considering Brexit, the evolving legacy of the 100,000 Genomes Project and new emerging technologies such as genome editing. The recent independent chief medical officer’s report “Generation Genome”, which I said at Health questions was a landmark piece of work, and the “Life Sciences: Industrial Strategy” make it clear that genomics has an important role to play in future healthcare delivery, including the treatment of rare diseases. The House of Commons Science and Technology Committee is also currently engaged in an inquiry into genomics and genome editing in the NHS, and I look forward to seeing its report in due course. I can assure the hon. Gentleman that we will harness the remarkable prospects that these new developments present for the benefit of our rare diseases patients. The NHS has always harnessed new technology to lead the world, and it will continue to do so in this field.

I thank the hon. Gentleman once again for highlighting these issues in this debate and in today’s media for his constituent and for all those who suffer from Pompe disease and other rare diseases. I hope that I have helped to reassure them a little that the Government and the NHS are working hard to tackle these conditions and to help to improve the lives of people suffering from Pompe disease and other rare diseases because, ultimately, that is what we are here for.

Question put and agreed to.

18:09

House adjourned.

Automated and Electric Vehicles Bill (First sitting)

Committee Debate: 1st sitting: House of Commons
Tuesday 31st October 2017 Public Bill Committees

The Committee consisted of the following Members:

Chairs: † Mr Adrian Bailey, Sir Edward Leigh

† Argar, Edward (Charnwood) (Con)

† Brown, Alan (Kilmarnock and Loudoun) (SNP)

† Duffield, Rosie (Canterbury) (Lab)

† Efford, Clive (Eltham) (Lab)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† Hayes, Mr John (Minister for Transport Legislation and Maritime)

† Jones, Graham P. (Hyndburn) (Lab)

† Kerr, Stephen (Stirling) (Con)

† Knight, Sir Greg (East Yorkshire) (Con)

† Letwin, Sir Oliver (West Dorset) (Con)

† Mann, Scott (North Cornwall) (Con)

† Rodda, Matt (Reading East) (Lab)

† Stephenson, Andrew (Pendle) (Con)

† Stewart, Iain (Milton Keynes South) (Con)

† Tracey, Craig (North Warwickshire) (Con)

† Turner, Karl (Kingston upon Hull East) (Lab)

† Western, Matt (Warwick and Leamington) (Lab)

Farrah Bhatti, Mike Everett, Committee Clerks

† attended the Committee

Witnesses

David Williams, Technical Director, AXA Insurance, and Chair, Autonomous Driving Insurance Group

Iwan Parry, Head of Connected and Autonomous Vehicles, Transport Research Laboratory

Ben Howarth, Senior Policy Advisor, Motoring Liability Insurance, Association of British Insurers

Diana Holland, Assistant General Secretary for Transport, Unite Union

Adrian Jones, National Officer for Road Transport, Unite Union

Rob Johnston, Assistant General Secretary, ITF

Robert Llewellyn, TV Presenter, Fully Charged

Public Bill Committee

Tuesday 31 October 2017

(Morning)

[Mr Adrian Bailey in the Chair]

Automated and Electric Vehicles Bill

09:25

[The Chair]

Before we begin, I have a few preliminary announcements. Please switch any electronic devices off or to silent. Tea and coffee are not allowed during sittings, but there is an adequate supply of water. Today we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope we can take those matters formally, without debate.

Ordered,

That—

(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 31 October) meet—

(a) at 2.00 pm on Tuesday 31 October;

(b) at 11.30 am and 2.00 pm on Thursday 2 November;

(c) at 9.25 am and 2.00 pm on Tuesday 14 November;

(d) at 11.30 am and 2.00 pm on Thursday 16 November;

(2) the Committee shall hear oral evidence on Tuesday 31 October in accordance with the following Table:

TABLE

[The Chair]

The deadline for amendments to be considered at the first line-by-line sitting of the Committee was the rise of the House yesterday, and the next deadline will be the rise of the House on Thursday for the Committee’s meeting a week today. [Interruption.] I have just been informed that the deadline will in fact be one week on Thursday.

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Mr Hayes.)

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room.

Resolved,

That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Mr Hayes.)

[The Chair]

We will now go into a private session to discuss the questioning.

09:27

The Committee deliberated in private.

Examination of Witnesses

David Williams, Iwan Parry and Ben Howarth gave evidence.

09:35

[The Chair]

Q We now resume our public sitting and will hear evidence from the autonomous driving insurance group, TRL—the transport research laboratory—and the Association of British Insurers. I remind all hon. Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the sittings motion agreed by the Committee. For this session we only have until 10.30 am. Will the witnesses please introduce themselves?

David Williams: I am David Williams. I am technical director at AXA Insurance and chair of the Autonomous Driving Insurance Group.

Iwan Parry: I am Iwan Parry, the head of connected and autonomous vehicles at TRL, the Transport Research Laboratory.

Ben Howarth: I am Ben Howarth. I am senior policy advisor for motoring liability insurance at the Association of British Insurers.

[The Chair]

The first question is from Clive Efford.

[Clive Efford (Eltham) (Lab)]

Q This is a question about insurance, but it is open to any of the witnesses to answer. When automated vehicles and conventional vehicles share our roads, will questions of who is liable for accidents become more complicated?

David Williams: I do not think they will become more complicated, because I think the information that should be made available from the autonomous vehicle will make it much easier to establish what has happened. If you think of the sensors that are involved in getting the vehicle around safely, there are traditional cameras, lidar, radar, ultrasound and all those sorts of things; that will give a much more complete picture than we currently have. A lot of insurance claims at the current time are based on different opinions with very little evidence to substantiate them. We still send people out to measure skid marks in the road, for instance; so we will be moving to a much clearer but more granular position. There will be a lot more data, so I suppose it will be more complex in that way, but I think, in terms of establishing who is responsible, things should be clearer.

Iwan Parry: I would add that it is quite important that we establish with these technologies that that capture of the data that David has described is a requirement of the vehicles. That really builds on the kinds of data that are captured by vehicles today but which are not necessarily available for investigators when it comes to investigating road traffic accidents, which could be very useful for in-depth investigations, in some cases. Therefore, as vehicles become more complex, with a greater ability to capture external data in the moments before a collision, we believe that it is very important that those vehicles are able to preserve that information and make it available to the appropriate and authorised investigators, in terms of understanding what has happened during that incident sequence.

[Clive Efford]

Q Should the Bill actually specify what information should be retained and recorded?

Iwan Parry: It could do. There is a mechanism in the Bill, in terms of the list of vehicles that would be approved as an automated vehicle, and potentially part of qualifying for that list might be that a vehicle would fulfil certain required criteria.

[Clive Efford]

Q Will vehicles continue to record driver performance, for instance, and collect data when it transitions to being driven manually?

David Williams: The capability is there. I think we are then drifting into data that motor manufacturers would not necessarily want to share with third parties. They would argue that maybe that driving information is something that they could use for different business purposes. There is currently a big debate in the telematics market about whether there will still be a future for separate telematics boxes being fitted in these vehicles to provide insurance and other solutions when the vehicles are being driven manually; but certainly there would be the capability to record that information.

[Clive Efford]

Q Can I ask about the transition from an automated vehicle to manual? There is a time lag; research has been done into that. At what point is the driver responsible, therefore becoming the insured party, during the transition from automated vehicle to the driver taking over?

Ben Howarth: My view on that would be that when the transition is from the driver to the car, the driver has to be responsible for what is happening to some degree throughout the whole of that transition phase. Once they have actually got confirmation that the car is in autonomous mode, that is the point when they are no longer responsible. In reverse, when the car is transitioning back to the driver, the same applies, but the driver is not responsible until they have taken full control of the vehicle. I think that is the easiest way to deal with that.

[Clive Efford]

Q You started your answer by saying, “In my view,” and that suggests that there are other views.

Ben Howarth: I do not know whether other people dispute that. That would need to be consulted on in the process of—

[Clive Efford]

Q So in all the data we collect it is possible to pinpoint the moment when the car transitions from manual to automated and back again.

David Williams: We are involved in a number of the Government-backed consortia. There is Venturer in Bristol; the first trials that were carried out with the Venturer vehicles and in the simulator were with regard to the handover. There are two elements that need to be decided on. I agree with Ben that you should not make somebody responsible until they have fully taken control, whether that is the machine or a human being, but nobody has really worked through that. The other aspect is about making sure that the vehicle has controls that do not try to hand over too quickly. As insurers, one of the things we are very concerned about is that handover. People may be surprised at how long it actually takes a human who has been disengaged to get up to speed, so to speak, so that they are alert enough to be able to drive the vehicle safely. That is why it will take a while for European vehicle manufacturing regulations to catch up, but there will be regulations that require minimum periods and indicators and signalling during that handover phase, because that is essential for keeping these safe.

Ben Howarth: A key point is that while there are lots of data that other parties—police, investigators—might want, insurers are clear that we only want the data when a collision has occurred to confirm whether the car was in automated mode or not. I do not think we are looking to use the Bill as a way of grabbing loads and loads of data and tracking cars from A to B.

[Clive Efford]

Q I have one last question. If you have all your data from an accident from the software in the vehicle, which tells you that the vehicle performed perfectly, but there was an accident with a driver who is driving the vehicle manually, is the assumption from the insurance company that you are not going to pay out because everything functioned perfectly with the machine?

David Williams: No, that is the opposite of what the Bill is trying to achieve. There will be accidents on the roads where nobody is to blame, as there are now. If you can have an accident with a human driver where nobody is to blame, you can have that with an automated vehicle. For instance, a vehicle is driving carefully down a road but there is some black ice and it skids off and takes out a bus queue—I know that is a bit of a dramatic scenario—but everything has functioned perfectly. The Bill makes it clear that is an accident—injury has been caused by the autonomous vehicle—and it would be paid for by the insurer. In that circumstance there is unlikely to be any recovery from the motor manufacturer, but the whole point of the Bill is to give the general public the confidence that if somebody is injured, we do not have to worry about whether we are going to claim that the software was defective. If somebody is injured by an automated vehicle, there will be virtually a strict liability on the insurer and we will deal with that claim.

[The Chair]

I have had Graham Jones, Karl Turner, the Minister, Iain Stewart, Oliver Letwin and Craig Tracey indicate that they want to ask supplementary questions. Is there anybody else? I will take the Minister next.

[The Minister for Transport Legislation and Maritime (Mr John Hayes)]

Q Ben, some of us have obviously been round this track before with the previous incarnation of the Bill, and you will know that since then we have made some changes to it. One of the changes was the agreement to define a list of automated vehicles to create clarity. One of the criticisms of the earlier incarnation of the Bill was that that was not clear enough. Do you think we have made progress there?

Ben Howarth: Yes, I think so. I think the definition that you have used in the Bill is clear. To me, it is pretty unambiguous that we are talking about cars that are being entirely driven themselves. I anticipate that there will be a pretty detailed consultation on how you actually draw up the list of vehicles and define what is and is not an automated vehicle. We are obviously very keen to be involved in that and to provide views. Within the industry and within the Association of British Insurers’ work, we have made a bit of progress in working out what we think the criteria for an automated car are, and those are views that we definitely want to feed in. So, yes.

[Mr Hayes]

May I ask another, Chairman? Would that be allowed?

[The Chair]

Yes.

[Mr Hayes]

I do not want to hog the questioning.

[The Chair]

I will see that you do not.

[Mr Hayes]

Q I take that as read, Chairman. There was a lot of debate on Second Reading about the possible safety benefits of automated vehicles, and questions were asked about what that meant for insurance premiums, for example. What is your view on that? Clearly it is early days, but do you anticipate that safer vehicles will lead to easier insurance and lower premiums?

Ben Howarth: Yes, I think it is very clear. We have a very competitive market for insurance. If we see claims costs coming down, which much safer vehicles would definitely do, we would be looking at a similar effect on insurance premiums. We cannot say exactly what will happen until we have seen the cars in real life.

[Mr Hayes]

Q So the legislation is welcomed by the industry.

Ben Howarth: Yes, it is very welcomed by the industry. I think it is very clear that the legislation and broadly the development of automated driving are something that insurers are genuinely enthusiastic about. In terms of the work we do in the ABI, it is one of the areas where we get the most engagement and interest from our members.

[Karl Turner (Kingston upon Hull East) (Lab)]

Q Off the back of the Minister’s question, clause 1(1) defines “autonomous”, or rather the vehicles that could be classed as “safely driving themselves”. That does not seem very tight to me. Does the definition not need to be tighter? Does it not give the Secretary of State an awful lot of power? I do not know whether you have a copy of the Bill in front of you. Clause 1(1) states that autonomous vehicles

“are in the Secretary of State’s opinion designed or adapted to be capable, in at least some circumstances or situations, of safely driving themselves.”

The clause allows the Secretary of State to come up with a list of vehicles that he or she thinks are capable of being driven safely without being operated manually at all. The definition does not seem tight to me.

Ben Howarth: I would make two points on that. On the one hand, we would obviously want to see robust and good consultation on how that list is put together. We would want it to be transparent and we would want the opportunity as an industry to feed into that. The wording does have an advantage in that it clearly states “safely driving themselves”. One of our views is that we want a clear and unambiguous distinction between cars that are completely hands-off—maybe not for the whole of the journey, but for parts of the journey—versus cars where the manufacturer might be saying, “You can do a lot with the automated functions, but you need to be there hovering over the steering wheel as a backstop.” We do not want those things to be blurred, and the definition in the Bill does that.

If I can make one further point, being on the list is clear—there is a definition—but there will also be a role for insurers to play in thinking about, “We have a claims history and car A is brilliant and has a really good safety record, while car B might not be a very good functioning car, but it has got itself on to the list.” Insurers will want to take a view on that in terms of how they approach those vehicles in offering products.

[Karl Turner]

Q Thank you very much for that answer. Clause 4 describes vehicle software updates. It concerns me that—if this is a vehicle that is completely autonomous—the onus is put on the passenger, if you will, to update the software. They have to agree manually to update software. Is that the right position? Should it not be automatically updated?

Ben Howarth: I think the onus to do those software updates should definitely be on the manufacturer. They should ensure that the system works, and I think that links back to part 1. The Bill says that where a wilfully negligent person deliberately ignores what the manufacturer wants them to do and finds a way around the manufacturer’s systems and still takes the car on the road, it would be unreasonable to say that that person is still a victim. I think you need this protection in the Bill, but you also need robust measures to ensure that people cannot override the safety-critical updates.

I think “safety-critical” is the key phrase. That places a strong incentive on the manufacturer to say, “If the update is safety-critical, you have to ensure that the driver knows.” We have got to be absolutely clear that there is a distinction between “nice to have” upgrades, that perhaps involve a slight improvement in the maps functionality or something like that, and an upgrade where if you do not have it, the car is potentially unsafe and we have a problem.

[Karl Turner]

Q Finally, while I have you here, the current situation for vehicle insurance is driver-centric. The driver of the vehicle is the insured person. The Bill provides for a situation where the vehicle is insured. Is that definitely the way we should be going? Should there be some more provisions?

Ben Howarth: I think what we have in the Bill is the right way. When these cars first come to road, most users/drivers will probably use the automated function for 10% or 20% of the journey. That is why we want to keep to a system with an all-in-one approach. The Government have described this as

“a rolling programme of regulatory reform”,

so if we really move to having cars without steering wheels or genuinely A-to-B autonomous cars we probably need to look again at what the right approach to insurance is, but I think the technology is a long way from that.

[Karl Turner]

Q What would happen with an uninsured vehicle, then? At the moment, the Motor Insurers Bureau compensation scheme kicks in. Would that apply to automated vehicles? If not, should that be stated in the Bill?

Ben Howarth: We think it definitely should apply. I know that there have been discussions between the MIB and Department officials about the correct way to do that, and it will be interesting to see how the Committee approaches it. My understanding is that the reason for not having the MIB scheme in the Bill is that it is not in the Road Traffic Act 1988 either, so the existing system is not directly in primary legislation. I think the MIB will be assured so long as the Government confirm that it is still the ultimate fund of last resort, which it definitely should be. It does not necessarily need to be in the Bill, but we would like absolute clarity on how it will work.

[Iain Stewart (Milton Keynes South) (Con)]

Q I would like to follow up on Mr Turner’s point about clause 4 and the respective obligations of the manufacturer and the driver to update software. Clause 4(1)(b) refers to

“updates that the insured person knows, or ought reasonably to know, are safety-critical.”

That strikes me as very woolly. I would be grateful for your opinion on where the balance should lie. I accept that if someone has wilfully not installed updates or overwritten them, or something, they become liable. However, if the manufacturer has sent through an update, but the person has not taken it to the garage or downloaded the software—or whatever—at what point do they become liable? I have an update waiting for my iPhone, but I have not got round to doing it. That is not safety-critical, but is there a parallel? Do we need a tighter definition than “ought reasonably to know”?

David Williams: It is interesting that you mention the iPhone, because that is exactly the debate that we had in our early discussions. Currently, for most things you buy, you have the right to refuse a software update. You are allowed not to get round to doing your iPhone update; you can continue to bypass it. Our view was that when we are talking about a tonne of metal travelling at high speed on the road, people should lose that right, because it would enable them to take risks with other people’s lives. We think the updates should be implemented straight away, because we see them as being improvements. As for whether they are safety-critical or not, it would be a damn sight easier if all updates had to be implemented immediately and the responsibility fell on the manufacturer, but then you are drifting into trying to impose something in UK legislation that some European territories and motor manufacturers have probably not really thought through yet.

The idea of saying that people have to install safety-critical updates immediately is something that we recommend. As for the detail of how it should be dealt with in the Bill, I have to plead ignorance, but the reason for pushing for it is that we honestly believe that if a manufacturer has updated the software, it is to make the vehicle perform better. These are not iPhones that can only annoy other people; these are vehicles that can kill other people. Those updates should be mandatory in whatever way we can make them so.

[Iain Stewart]

Q Forgive me, but I am not clear how these updates would actually happen—whether you would have to take the vehicle into a dealership or garage.

David Williams: Tesla currently does them over the air.

[Iain Stewart]

Q If you were rushing out of the house at 9 o’clock and you got an email from the manufacturer that said, “Version 1.7 is now available and you need to install it”, and you thought, “I’m running late for a meeting—I’ll do it at the end of the day”, would that fall foul?

David Williams: I think the Bill is trying to allow for some delay, but a reasonable delay, and does not want people to deliberately and unnecessarily stall. If an update is coming through—if they have found a fatal flaw in the software that is likely to make your vehicle veer off the road—my view is that that vehicle should be immobile until the software update is implemented. The motor manufacturers would be able to build that into their technology and machines if they wanted to.

[Iain Stewart]

Q If the upgrade is so safety-critical that the car will not function without it having been installed, is that something we should put in the Bill?

David Williams: My understanding is that that sounds very good in principle, but how do you define that extent? Many upgrades might have a degree of safety- critical improvements in their nature. How would you define the seriousness of the upgrade?

Ben Howarth: Clause 4(6)(b) is a definition—that feels to me like it means that it is unsafe to use. If you started saying at this stage a car must be immobilised, we would potentially be legislating for things that we do not know the manufacturers will do in every circumstance. There might be times when the car could move. It might be safe to move it at 20 miles per hour or so—I am just speculating. Is it right to put it in the Bill at this stage? I would definitely say that it is something that needs to be carefully defined and thought about when you create the list of automated vehicles. I know we keep coming back to “the list is everything”, but I think the list is the mechanism by which many of the potential problems of the Bill will get solved.

[Graham P. Jones (Hyndburn) (Lab)]

Q I am interested in the collection, retention and distribution of data and also the issue that has just been raised by my colleagues about the software prescription; whether it will be prescribed that software must be updated and all the problems that might ensue from that.

Let me lay out an example and ask your view of the Bill. If somebody switches to manual from automated and is involved in an accident while in excess of 30 miles per hour. What happens next? How much of that data becomes available in the case that ensues? For instance, I presume that speed would be used, but what about the on-board cameras or anything else? How much of this data will be kept, retained and used from the functions of the vehicle for a case in which there is an accident with a driver in manual mode? Does the Bill provide a robust framework for accidents and insurance claims and what about road safety? Will it enhance road safety or are we stopping at legitimate information for insurance companies? Should the Bill also include data made available so that road safety is improved?

Iwan Parry: The basis of the question is around the availability of data. My technical background is in forensic accident investigation and in order to investigate accidents—to get to the root cause—we need to start at the before-accident period and understand as much as we can. We are limited today to things such as skid marks, as David referred to earlier, as the tools to reconstruct those accidents. The kinds of data that are potentially available from electronic vehicles increase the amount of data significantly. With the cameras, radar, lidar—light detection and ranging—and ultrasonic sensors we can get a very clear picture of what was going on around the vehicle at the time of an incident. When we look at the consequences of an incident, we can put the two together and have a very clear understanding from establishing liability and whether that indicates that the vehicle in some way behaved unreasonably—or that the driver, pedestrian or cyclist that it was interacting with behaved unreasonably given the context of the situation. That gives us the information that would allow us to make a determination on liability. I think that is critical to insurers, to police investigating such incidents and to road safety in the future.

To advance the future legislation on autonomous vehicles, we will need a method to understand what is going wrong in the real world. We will also need a method to use that information to improve our understanding of vehicle functioning in the real world and how that can be improved by manufacturers or by legislators applying the right tools to ensure that vehicle performance is improved over time.

Ben Howarth: If I could add the insurance perspective on that, for what we need to do for this Bill—to establish whether the car was in automated or manual mode—we need a fairly limited amount of data. You mentioned speed, but we do not necessarily need speed to do that. We just need to know whether it was in automated mode. There are potentially lots of other uses for car data for the police and for accident investigators. In a disputed claim with contradictory evidence in court, you could find it a lot easier to solve cases with data, but I would draw a distinction between the data that insurers need to make this Bill operational and the data from cars that would be useful to understand claims. That might be a valid concern for vehicles not covered by this Bill; as cars get more technically sophisticated with more assisted functions, you might want to understand more about how it works for any car. I think whether it is reasonable to ask for data is still best managed via a judge.

It is also important, if we want the data, that manufacturers record it. My understanding is that at the moment, if you hit a pedestrian in an accident, you will not necessarily trigger an airbag so the data that the car keeps on a rolling basis are not automatically recorded or stored and they would not be available. As part of the work to define an automated car, we need more clarity about what data are recorded and stored and about the process to ensure that the data are sent to the right people at the right time. An insurer is one party that would want some of the data.

[Graham P. Jones]

Q I am interested in your final comment that there needs to be discussion about what data are kept—perhaps the Bill does not go into that in detail. Road safety is important, and some of the data could be used to improve it. I have concerns, therefore, and I ask the question again that you partially answered: does the Bill provide a robust framework for improved road safety through data retention, collection and distribution, particularly with insurance companies? You answered by saying that perhaps it does not, but I wonder what the other two think.

David Williams: My view is that the Bill undoubtedly aids road safety because it will encourage the use of safer vehicles on the roads, but in terms of data, no—the Bill does not have a robust framework for provision, storage and transmission of those data. I think that is partly because of the stage that we are at. Some things are contentious and some are not. Data sharing is really contentious, whether because of general data protection regulation or because motor manufacturers are concerned about infringement of their intellectual property. We are very keen for there to be some clarity about the storage and transmission of data, the form that data are transmitted in so that they are useful, and the speed of transmission—there is no point us getting the data three months later. That is not in the Bill.

When we had the original discussions, we talked about data. We were still forming our opinions about what data would be required—as I say, that is very contentious. Our view was that it was better to support a Bill that would be part of a rolling programme of legislation and acknowledge that more needed to be done on that data piece than to delay it. We feel that delaying connected and autonomous vehicles hitting our roads would have a negative impact on road safety.

[The Chair]

Waiting to ask questions, I have Sir Oliver Letwin, Craig Tracey, Alan Brown, Edward Argar, Scott Mann and Sir Greg Knight. Is there anybody else? Clive Efford, you wish to come in with another?

[Clive Efford]

If we have time.

[The Chair]

If the questioners and the panellists could be very pithy and pointed, that would be helpful.

[Sir Oliver Letwin (West Dorset) (Con)]

Q My first question requires just a yes or no answer, and I am interested to know whether the answer is the same from all of you. As has been mentioned, in clause 2(1)(b) there is a reference to the vehicle being insured, which is a new concept, and at the end of clause 2(1), as David Williams said, strict liability of the insurer is established. Do you read that combination as meaning that strict liability attaches to the insurer of the vehicle?

David Williams: Yes.

Iwan Parry: I am not an insurance professional, so I will not answer that question.

Ben Howarth: Yes.

[Sir Oliver Letwin]

Q My second question: do you agree that it is perfectly possible that the person who is the passenger/driver, who is in the vehicle, might have a different insurer?

David Williams: They may have another motor policy that would cover them for driving other vehicles. That is common practice in the UK but not every policy provides that.

[Sir Oliver Letwin]

Q No, but it could happen.

David Williams: There is a chance, I suppose, but I do not think that we would have a dual insurance situation, because the other insurance would insure the actions of that individual, whereas the autonomous policy would cover the actions of the autonomous vehicle. If the vehicle is operating autonomously, it is not being controlled by that driver and therefore they would have no liability.

[Sir Oliver Letwin]

Q I understand that logic, but if I have understood you, both of you are accepting that the driver/passenger—the person—could have a different insurer.

David Williams: They may have, but it may not apply in the event of an accident.

[Sir Oliver Letwin]

Q Indeed. My third question: do you accept that strict liability would operate for the insurer of the vehicle, even if the driver had inappropriately transferred control of the vehicle to the vehicle?

David Williams: Transferred control of the vehicle to the—

[Sir Oliver Letwin]

Q Yes, so the driver is sitting there driving the vehicle, and he does whatever it is that you do to switch it to automated use, but does so under inappropriate circumstances. Do you accept that under clause 2(1), as it is written at the moment, strict liability would nevertheless attach to the insurer of the vehicle and not to the insurer of the driver?

David Williams: I think so, because if the vehicle is operating autonomously, strict liability applies. If it is about to crash into a wall and he has flicked the vehicle into autonomous mode, but it has not had the opportunity to take control, we come back to one of the earlier questions—

[Sir Oliver Letwin]

Q No, I am assuming that it has had the opportunity to take control.

David Williams: So it has taken control.

[Sir Oliver Letwin]

It has taken control, so strict liability attaches to the—

David Williams: That is my take on it, but I would say that it is difficult for me to imagine circumstances where doing that would be inappropriate and where someone would still be able to switch a car into autonomous mode.

Iwan Parry: I think it is unlikely that an autonomous system engaged in that kind of transfer would accept control in a situation where it was then unable to avoid a high-risk scenario of some type, resulting in some kind of incident.

[Sir Oliver Letwin]

Q But if I have understood you, that would entirely rely on whether, as a matter of fact, the technology had that effect. In other words, there is nothing in the Bill to prevent that situation.

David Williams: But we want the man in the street to know that if a vehicle is operating autonomously, compensation will be available. That is why there is strict liability. We might not like the particular scenario, if we can think of one that might happen, but I agree: my interpretation is that strict liability would apply.

Ben Howarth: The difference being that the driver might not have the same rights.

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

Q If we go back to control of data, Ben, you said that more clarity is needed on what data will be kept and shared. David, you said that the Bill does not look like a robust enough framework, but that you would not want it to be held up. Surely if it is believed that the Bill does not provide a robust enough framework we should look at making amendments, rather than holding the Bill up. Are there amendments that we as parliamentarians should consider?

David Williams: I am not aware of the planned timetable. There are two aspects: first, the vehicle has to get on the list and insurers then need to decide whether they will insure those vehicles. If, for some reason, a motor manufacturer decides they are either not capable of making or are not going to make any of that information available even if it ends up on the list, it will struggle to get insurance in the UK market.

There are lots of things that do need further discussion. These vehicles are not really going to be on the road for a number of years, so setting out the UK’s intention from a headline regulatory view and commenting that data need to be available while we work on that is one thing. I am not fussed as to whether or not it is an amendment, but it would be sad if the amendment took two years to get through because the motor manufacturers’ lobby blocked it.

Ben Howarth: I would also point out that a lot of the technical side will be taken up at a UN/ECO global level, so it might not be feasible to define it in the Bill and then have to change it. The more sensible route might be to see how the technical discussions go at global level and ensure that the way the list operates is robust, rather than put it in the Bill.

Iwan Parry: There are also a number of projects going on right now that will be helping insurers and safety experts to define what those kinds of criteria should be, and the data that should be retained. It would be worth giving those projects time to report on those requirements.

Ben Howarth: If you are interested, we have put a report out and defined what data we think we would want as part of this Bill for the insurance industry, and we have published that.

[Alan Brown]

Q The hon. Member for Hyndburn has talked about safety in relation to these projects looking at data protocols. Should that also encompass looking at safety and how the car was being driven or controlled, whether manually or in automatic mode? It has been said that insurance companies would only want data in the event of a collision, but it would be very tempting for insurance companies to want a lot more data. Even now, you can get an insurance policy for young drivers that involves fitting a black box into the car. The insurance company is obviously monitoring the operation of that car to keep the premiums down. Surely there is temptation to want more data and to do more. It may seem hypothetical, but if you use the internet then your history is used as an advertising and promotion tool. Therefore should there not be strict controls in terms of data control in the future, so that the data are not used?

Ben Howarth: I think there is a distinction to be made in relation to the data that the insurers would need as a condition of this Bill. The industry would love more data, as that helps with pricing. However, it is appropriate to ask what the insurance company needs and then to regulate that in order to make this Bill work. I refer to insurance companies, but actually it concerns what information the claimant would need for the purposes of verifying whether or not they have the right to make a claim. That is a key distinction. The more data that the insurers can potentially get on a commercial basis the better, but we recognise that there have to be controls on that.

Iwan Parry: I would add to that: as mentioned earlier, there is a difference between the limited amount of information that an insurer might require to understand whether the vehicle was being controlled by the vehicle or controlled by a driver, and information that could be beneficial from a road safety point of view that could also act as evidence from a capture and perspective point of view. This information will inform future policy at governmental level and potentially at legislative level. That is a more detailed source of data, and it would also be of the type that would assist more detailed investigations of what went wrong if an automated vehicle had an accident.

[Craig Tracey (North Warwickshire) (Con)]

Q I declare an interest as chair of the all-party group on insurance and financial services. I would like to pick up on two points. Coming back to data: obviously, claims prices hinge on the quick sharing of data. In order to pay a claim, it will be necessary to know whether or not the car was in automated mode. Are there any current technical barriers between insurers and manufacturers that are going to delay that? Are there issues that you foresee causing problems?

Ben Howarth: We probably do not yet know enough about getting the data from the car to the insurance industry. Some work has started to be done via the Motor Insurance Bureau: as well as being the guarantee fund, they do a lot of data-sharing for the industry. We are confident that once we have data from a car, then the process of getting it to the insurer and settling the claim will be efficient. We would want confirmation that we can get it from the vehicle, but we have already started discussing that with the Society of Motor Manufacturers and Traders. That is something that can definitely be achieved within the timescales required.

[Craig Tracey]

Q May I make just one quick point? I echo some of the concerns colleagues have raised about clause 4(4)(b). The Bill talks about the damage suffered by an insured person arising from an accident occurring as a direct result of failure to install safety-critical updates. How would it be assessed whether the accident was a result of an installation not being made? Who would resolve those disputes? Can you see any problems around the insured potentially not seeing it as being a contributory factor to the accident? How would those disputes be resolved?

Iwan Parry: That relates directly to the point I have just made about the detail of the data. In that scenario, in order to resolve the question you would require a more detailed amount of data than purely who was in charge of the vehicle. It would be a question of what the variety of contributory factors to that collision were, what the vehicle systems saw and what they did in response to what they saw, and whether that can be related back to the functionality of the piece of software that was due for install. You would require a much more detailed set of data to resolve that question.

[Craig Tracey]

Q Would you envisage disputes going through the same channels as they currently do for disputes on liability?

Ben Howarth: In that kind of event, yes, I would.

[Edward Argar (Charnwood) (Con)]

Q I have a very quick question, following on, I think, from the answers that were given to the Minister’s question, in which you all said you anticipated that, if this goes to plan, it will see safer vehicles and therefore a reduction in accidents, leading to a reduction in premiums, which is clearly a positive for all those paying them. What assessment has been made, or what is your view of, any likely impact of that on the insurance market and industry? As I understand it, car and vehicle insurance premiums to a degree underwrite other insurance policies across the industry—that is the way it is structured. What impact do you think significant reductions in premiums would have in terms of disruption of the insurance market?

David Williams: Lots of work has been done on this by insurance companies and by market consultants, and they predict substantial reductions in the total premium pot. A couple of statistics—we think that 93% or 94% of accidents are caused by human error. I have driven in these machines; they are already much better drivers than most human beings. When we look at things like automated emergency braking systems—that is just one component of what will be the autonomous vehicle of the future—we know that they reduce accidents by 15% and injuries by 18%. So even if they cannot prevent the accident completely and absolutely, because they are braking better and faster there are fewer injuries.

We see a substantial impact. There will probably be a slight increase initially because you will have more expensive gadgets strapped around the periphery of vehicles, but once we see a higher proportion of these vehicles on the road, consultants predict a 50%-plus reduction in the total motor premium market. From our perspective, we are planning in that regard. The good thing is that it will not happen overnight, and therefore as we see motor premiums reduce we can move our staff and our capital on to other lines of business.

[Scott Mann (North Cornwall) (Con)]

Q According to some of the figures I have seen, 63% of the adult population hold a valid driving licence, so by definition 37% of people currently do not. Of the 63% who do, many are precluded from driving because of health conditions or because they have lost confidence behind the wheel. My question is, first, do you think that this Bill will increase social mobility? Secondly, do you think it will increase car insurance volumes in your marketplace? Thirdly, you mentioned to my colleague that premiums will be lower for automated vehicles, so I want to seek reassurances about whether you think the Bill will reduce premiums for people who have mobility problems.

David Williams: One of the consortia we are involved with, Flourish, is looking at cyber-risks and also at mobility, at segments of society that currently feel cut off—people, who perhaps are disabled, living in a rural area and not able to get out and about. That is one of the reasons we want this Bill to go ahead and are keen to support it. Absolutely, it will support that.

In terms of volumes of cars on the road, there are numerous different models. Overall, the view is that there would be fewer vehicles, because this will enable car sharing on a scale that has not previously been seen, but in terms of number of miles covered, there are diverging opinions. One thing that might happen is that, because it will be as easy to get a car even if you do not own one as it is to get a train or similar, more people will move to transport on the road, which will drive up the number of miles. There are other views that there will be an integrated transport network, meaning that more people use public transport because they are much more able to link into it than they are now. I think the jury is out in that regard.

It will absolutely reduce premiums. The other aspect is that even when we have a mixed car park of manual and automated vehicles, because 50% of those vehicles will be safer, although the premiums on manual vehicles will decrease less, they will be less exposed and involved in fewer accidents, so overall that will have a positive impact from a premiums perspective, even on manual vehicles, as the number of automated vehicles increases.

[Sir Greg Knight (East Yorkshire) (Con)]

Q So what you are saying is that if the owner of a vehicle that is capable of being fully automated updates his or her software, has a vehicle with no warning lights displaying that there is something wrong and uses the vehicle in fully automatic mode in circumstances where it is proper to do so, there should be no liability on the owner, who is actually travelling as a passenger?

Ben Howarth: Yes.

[Sir Greg Knight]

Q So you are saying that in a scenario where a vehicle is in fully automated mode on a smart motorway, the Highways Agency suddenly drops the speed limit from 70 to 50 and the car in automated mode is slow enough in responding to be clocked by a police speed camera on a bridge, in those circumstances, the insurers of the vehicle should pay the speeding fine?

David Williams: No.

[Sir Greg Knight]

Q Why?

Ben Howarth: We are covering the liabilities. I think they are already there in the Road Traffic Act 1988, on insurers, but it would be extending those existing liabilities to the vehicle. I do not think we are responsible for criminal offences such as speeding now. I think you would have to find another way of—

[Sir Greg Knight]

Q But surely the passenger cannot be held responsible if he is relying on the car to drive him safely to his destination.

Ben Howarth: You may need to look at whether or not there are additional criminal offences associated with automated cars. Certainly, this Bill does not compel insurers to pay speeding fines or any other. Ditto if an autonomous car parked illegally in a parking space. If it injured someone or damaged property, that would be the insurer’s responsibility; if it parked and received a parking fine, that would be the responsibility of the owner of the vehicle or another party. You may need to look at that in legislation, but I definitely do not think the Bill does that at the moment, and we would not support it if it did.

[Sir Greg Knight]

Q But you agree that it would be wholly unjust for the passenger in those circumstances to have his licence endorsed and be fined when he is relying on the vehicle, which is slow to respond?

David Williams: But in all honesty, if someone was on a smart motorway and had connected an autonomous vehicle, they would be more likely to notice the reduction in speed than you or I would. It is a hypothetical question. I think the point, from our perspective, is that the Bill does not compel insurers to pay these sorts of fines. Yes, there are some other legal aspects that need to be debated, but this is about extending the Road Traffic Act 1988 to provide protection in line with the RTA, not about other criminal offences.

[Sir Greg Knight]

Q So do you think it is fair in those circumstances that the passenger gets a fine?

David Williams: I think the vehicle will be more likely to notice the reduction in speed than a manual driver.

[Sir Greg Knight]

Q As far as the data are concerned, you are saying, I think, that you would prefer clarity. You would prefer some rules to be laid down about what data should be kept and who has access to them. Is that right?

Iwan Parry: Yes.

[Sir Greg Knight]

Q Rather than a free-for-all before the courts, with the court deciding in each case who gets what.

Iwan Parry: Yes. I think there should certainly be some clarity around the types of data that we would regard as beneficial and that could qualify for the list that will be established. The vehicle’s ability to make available those data would potentially be a qualification criterion.

[Clive Efford]

Q Mr Parry, following on from the questions from the right hon. Member for West Dorset, can you clarify how the vehicle knows when it is not appropriate to be in automated mode and therefore prevents the driver from flipping over to that?

Iwan Parry: This is very much part of the research and development that industry is doing right now, but the expectation on manufacturers providing access to an automated control system would be that, in that handover situation, the vehicle would be assessing the circumstances of the traffic and the road conditions surrounding it and would accept the handover only if it was able to respond appropriately to that traffic scenario.

[Clive Efford]

Q So the vehicle is constantly taking in data on its environment—the surrounding area—and therefore is switching itself off, making it impossible for the driver to switch over to automated mode.

Iwan Parry: The vehicle would be expected to be aware of what is around it at all times, and during a process—as it was described earlier—of handover, whereby the person or the vehicle that is in control at a particular time will remain in control until the other half of the equation is ready to assume control, that readiness to assume control can be determined only by sensing what is around it in the specific scenario that the vehicle is driving in, and accepting that it is now able to assume that control in a safe manner.

David Williams: This is a key point, because there will be many vehicles that can operate autonomously—initially, at least, only in certain environments, certain designed domains. For instance, I would imagine that the first ones that come to market will be able to operate on motorways and dual carriageways. [Interruption.] Exactly. Therefore, if you are travelling down Clapham High Street and you want to flick the vehicle into autonomous mode, it will not accept control.

[Clive Efford]

Q Let me ask about transition, because the studies in Bristol suggested that vehicles slowed down significantly after the transition from automated mode to driver mode, because the driver was being excessively cautious or very cautious, which can lead to more dangerous circumstances. Is that an issue for insurers?

David Williams: It is something we need to be aware of, which is why we asked Venturer to do handover first of all; I think guidance needs to be provided. I think it is less likely to be a safety risk and more likely to be a congestion risk, but the other aspect is that when we are doing these tests, we are deliberating doing on, off, on, off. In my vision of the future and, I think, the way motor manufacturers are designing vehicles, it will not be like that. It might be that you drive on the country roads because you enjoy that and then you hit the motorway and flick the vehicle into autonomous mode for the next couple of hours. But yes, we need to understand and provide appropriate training and guidance on the handover; that is something we still need to understand more about.

[Alan Brown]

Q As insurance premiums come down, as predicted, in the future, is there a concern or risk that the Chancellor of the Exchequer will increase the Government’s take from insurance premiums, so that all the savings are not passed on to the driver?

David Williams: We always worry about insurance premium tax increasing.

[Mr Hayes]

Q You talked, in relation to the question from my hon. Friend the Member for North Cornwall about people who are disadvantaged not currently being able to access transport and so on, and subsequently, in answer to the question from the hon. Member for Eltham, dealt with predictable, standard routes. Where an autonomous vehicle is acting more like a bus in effect—it is on a standard journey—presumably it will be particularly appealing to those who currently cannot access transport of their own, because it will be, as you put it, in straightforward mode; even in a straightforward mode, many people currently cannot drive a car, because a visual impairment or a disability prevents their doing so. Is that a future you envisage?

David Williams: I think there will be, in the same way as there are many variations even to the Uber model now, many variations to autonomous vehicles. I think the advantage will be that you will not have to stick your hand out to stop a bus; the vehicle could potentially come into your drive and then go back out and continue its journey.

[Mr Hayes]

Precisely. A journey to a hospital where there is not currently a bus route would be a good example.

[The Chair]

Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions. I thank our witnesses on behalf of the Committee for their evidence and I also thank Members for their admirable self-control and brevity.

Examination of Witnesses

Diana Holland, Adrian Jones and Rob Johnston gave evidence.

10:30

[The Chair]

We will now hear evidence from Unite and ITF. We have until only 11 am for this session. Will the witnesses please introduce themselves for the record?

Adrian Jones: I am Adrian Jones. I am Unite union’s national officer for road transport.

Diana Holland: I am Diana Holland, Unite’s assistant general secretary for transport.

Rob Johnston: I am Rob Johnston, assistant general secretary at the ITF.

[The Chair]

I am going to start again with Clive Efford.

[Clive Efford]

Q I do not know if I need to declare an interest: I am a member of Unite and the GMB. When automated and conventional vehicles share our roads, will questions of who is liable for accidents become more complicated?

Diana Holland: I think that is the crux of the matter. Obviously, while the Bill covers a very limited aspect of what the important role of these changes can mean, we are particularly concerned, as the previous discussion demonstrated, that the only concentration is assuming issues around private drivers, whereas the implications of this go into all modes of transport where automation will apply.

We are particularly concerned about the current methods of employment, particularly within certain parts of the road transport industry. That means that liability will be very unclear. There are all sorts of drivers who are accounted as owner-drivers but, actually, in the way in which the contract has been established they are workers to all intents and purposes.

We are very concerned, for example, about bogus self-employment contracts and leasing of vehicles: all those things that will mean that all kinds of people could end up being held liable when they should not be in those circumstances.

[Clive Efford]

Q So should the Bill address those issues more directly and in more detail?

Diana Holland: We have two areas of concern. One is about issues that are not addressed by the Bill but have implications for the impact of driverless technology on the transport industry and on transport policy in our communities. I think there are problems and the House of Lords report is extremely clear about all the outlying issues: job losses, job creation, job shifts. We would want that to be part of the discussion that goes on around this.

We are very concerned about some of the wording, specifically in clause 3(2) and clause 4(4), (5) and (6) around the software engineers. All sorts of people could be encompassed within that or it could lead to knock-on effects on people who work in the transport industry or in software engineering. They could be implicated either by the employer concerned or by the policies of the insurance company. We would want that to be addressed.

[Clive Efford]

Q We have just heard from insurance companies that for many years to come automated vehicles will not operate in many areas but mainly on major routes such as smart motorways, which clearly has an implication for people who drive long distances. There is the issue about transition from being automated to manual and vice versa. Is that an issue of concern for you and the people you represent: the delays in transition and the impact that taking over a vehicle has on the behaviour of a driver?

Adrian Jones: It absolutely is. As was said in the previous session, when a driver is not concentrating on driving, their attention is elsewhere and the transition back to driving is a slower process. The agreed trials for platooning are part of the debate and should not be forgotten. If you have three vehicles in a platoon, you have a driver in the front vehicle that is controlling the other two vehicles, what are the other two drivers doing? When they come to the end of the motorway or road where the platoon is taking place, what do they then do?

We also have the concern raised in this very room about 18 months ago. The report from AXA suggested over £5 billion a year savings in labour costs, due to the introduction of automated vehicles. That clearly says to me that there is either a downgrading or lack of recognition of professional drivers who are carrying freight, passengers or anything else. I think there is a real concern that the Bill does not cover any of those aspects at all. If it is not covered in this Bill, it needs to be covered somewhere.

[Mr Hayes]

Q Dealing with your point, Diana, I think you are right. Perhaps I can provide some reassurance. I do think you should contextualise this debate in a bigger debate. I do not think it is something you can do in legislation. You are absolutely right that the implications over the longer term oblige a proper lateral discussion—quite a serious discussion—about our transport future. If I can briefly make a case for the Bill, Chairman, it tries to steer a way between being too prescriptive about what that future looks like and putting enough of a framework in place not to inhibit research and development and further technological change. There is a big contextual discussion to be had, and I hope the Bill might stimulate that in the time we have here and in Committee, but it is going to take place over a longer time in a bigger forum, I suspect.

On the specific point about job growth and job shift—you made a very balanced point about how some jobs will change, some will grow and some will shift—I want to come back to the issue raised by previous witnesses about people who currently cannot or do not drive. In rural areas, for example, in many places in Cornwall, Lincolnshire, Dorset and similar places, half the parishes do not have access to public transport. Can you imagine a future where autonomous vehicles will fill that void and provide a link to public transport, perhaps buses, trains and so on, and therefore boost the use of that transport for people who currently cannot get there. They will have access to autonomous vehicles because they are straightforward things to drive.

Diana Holland: Cards on the table: Unite is not opposed to technological advances, autonomous vehicles or anything in this area. It is about how it is done, the basis on which it is done and making sure that safety is absolutely critical. We are slightly concerned about the current moves. We believe that risk-based health and safety management needs to be properly built into this and we are slightly concerned that that is not recognised. We are not opposed to this in any way—it provides all sorts of opportunities—but because the overall approach is about private individualised driving rather than about the implications for the whole road transport industry of passengers, as Adrian was saying, with road haulage and taxis, it is also going to operate on a marine basis, in agriculture and all those other things. The concentration on private vehicles is going to advance this in such a way that I think there is a danger that it skews the potential for developments by concentrating on one aspect to the exclusion of the others. Does Rob want to mention your wider point about the commissioners?

Rob Johnston: To pick up on a couple of points, I think some of the challenges are about the definition of automation, which is at the root. We work with a number of global institutions, employers’ bodies and manufacturers. We have developed a framework of five layers of automation. When you look at what we are discussing, at least three or four of those layers need to be included. On the point just made about people who cannot drive potentially being able to drive, there is also a question about the definition of the amount of automation needed to give them that mobility. It is very difficult not to consider the whole piece. In the end, it will not be a journey from where we are today to suddenly having fully automated vehicles. It will be a process as technology slowly comes through. In particular, platooning, which is one of the areas that we are likely to see in a relatively short time period, would not be covered under the Bill in its current format.

[Mr Hayes]

Q May I add a quick point? I am grateful for your welcome—I am not surprised; I have worked very closely with Unite—and I take your point on that. Would it be fair to say that you hope, as I do, that as well as this necessary legislation we can have a bigger debate to ensure that this fits into the broader narrative about the transport future?

Diana Holland: Absolutely. We believe that representatives of the workforce need to be part of that discussion but, as trade unions, we are often not included in those kinds of debates. We have discussions with employers where we have recognition, but plenty of people operate in the industry and there are areas where our voices are not heard. We think it is essential that they are.

[Mr Hayes]

Q Wherever my ministerial footprint touches, the unions are always involved.

Diana Holland: We are, and we will place on record that that is the case.

[Karl Turner]

Q I declare my interest as a member of Unite, the GMB and the RMT. I wonder whether you have any concerns about the skills gap and training. Should there be something in the Bill about forcing or encouraging manufacturers to train people?

Diana Holland: I think it is absolutely essential that there is the transport skills infrastructure body that exists at the moment. I was looking at its terms of reference—

[Karl Turner]

I am grateful that the Minister is nodding very enthusiastically.

[Mr Hayes]

It is a good point.

Diana Holland: I was quite concerned when I looked at those terms. Although there is some implication about developments in technology, it seemed that we would need to look at the way it is worded to ensure that it properly reflects this. Otherwise, the Bill will not provide the opportunities that it needs to. So yes, that is a really important point.

[Clive Efford]

Q On the issue of vehicles being connected in convoy on the motorway, are you saying that there should be a specific reference or clause in the Bill about connected vehicles and how they behave?

Rob Johnston: There is a definition that the ITF and a number of organisations such as the European Automobile Manufacturers Association and the International Transport Forum at the OECD have worked to establish. It sets out five layers of automation. We believe that will be a useful reference point for looking at how to define what automation really means. In those five layers are different degrees of automation. The previous evidence alluded to that in some ways.

[Clive Efford]

Q So those layers go from driver assisted right through to full automation?

Rob Johnston: Yes, absolutely.

[Clive Efford]

Q Are you satisfied that that is covered in the Bill or should there be reference to those five?

Rob Johnston: No, we believe that the Bill should be expanded to cover those five areas. If you look at technological development, it is likely that those layers will come to fruition in their current format.

[Clive Efford]

Q Would those five layers cover all forms of transport as time goes on, not just lorries on smart motorways but vehicles that are passing one another, approaching one another in built-up areas and communicating with one another? Would it cover all those areas of automation?

Rob Johnston: Yes, it would. The layers run from driver assistance at the lowest level to full automation at the highest level, and everything in between.

[Clive Efford]

Q Is it your understanding that automation governs all aspects of the vehicle, so they cannot speed and will obey the speed limit at all times?

Rob Johnston: I think that there is a question, which the Bill tries to deal with, on regulation. In order to accept the fully automated vehicle, you would have to accept a number of criteria around the algorithms that would do that, and they pose some questions. Essentially, the vehicle would need to be able to make choices between certain decisions. For example, if the vehicle was involved in an accident or there was a crash, it would need to have an algorithm that would define which course of action it took. I think that area really needs further regulation. In Germany, for example, they have established a body to deal with that: High-Tech Strategy. In September 2017, they came up with some guidance on how they believe these algorithms should be programmed, and that is a useful reference point.

[Clive Efford]

Thank you. That is very interesting.

[The Chair]

I have Scott Mann and the Minister. Does anybody else want to ask this particular panel a question?

[Graham P. Jones]

Yes.

[The Chair]

I have got Graham as well. I will take you next, Scott.

[Scott Mann]

Q Briefly, in the last session I talked about some of the conditions and the loss of confidence that people have. Do you accept that the Bill increases social mobility?

Diana Holland: On the face of it—

[Scott Mann]

Just a simple yes or no.

Diana Holland: The potential is there, but it is not automatic unless a range of other things are followed up at the same time. It would be fantastic to find ways of developing this so that there is social inclusion for both rural areas and for disabled people, who are currently denied opportunities, but it has to be part of an overall approach to an integrated transport policy. Otherwise there is a danger that we just end up replicating congestion of one kind with another, with different insurance. However, there is a way of using this to develop a whole range of things, including much broader social inclusion.

Rob Johnston: I would add, as I did earlier, that if we are providing transport mechanisms, whatever they look like, for individuals who cannot drive for whatever reason, we need to provide a transport mechanism that allows the transport method to make decisions for them. That needs to be regulated and we need to be confident that the decisions being made by that vehicle, whatever type it is, are the right ones. That is determined by the algorithms and software behind it, so we need to have confidence that those are right. That is because you could potentially take vulnerable people and put them into a vehicle they are not in control of.

[Graham P. Jones]

Q What impact will the Bill have on employment if it goes through?

Diana Holland: Again, it does not have to have any impact on employment in terms of the two relatively minor areas that it could be argued that it covers; but the potential is there to enable a wholesale change to a different method, and ultimately saying that the professional driver no longer has a role. There are extremes in approaching this. We would say that it does not have to do away with employment, but plenty of estimates have shown that if it is introduced in one way, that is the effect it will have.

Our immediate concerns regarding the phrasing of the Bill are on the impact on those people currently employed, or under a range of contracts, and responsible for a vehicle, who would find themselves potentially liable in a way that we hope is not the intention. We really think that needs to be looked at to ensure that it does not encompass all kinds of people who we do not think should be liable in those circumstances. There are specific concerns around taxi drivers who own their own vehicles. There are issues around road haulage, where certain people are required to establish themselves as a limited company or to be self-employed to have jobs, but the definition bears questions. We need to ensure that we are not extending liability here beyond where it ought to be, when the operation is run and owned by a third party.

Rob Johnston: If I can briefly add to that answer, KPMG produced a report that said there are potentially 25,000 additional jobs directly working in the automation industry by 2030. A potential 320,000 jobs that could be created, but there is a caveat to that: Government policy is needed to address the growing skills gap, otherwise there is a risk of losing more than £50 billion in GDP per annum. Those are statistics provided by the transport systems Catapult.

[Mr Hayes]

Q Finally, I want to return to Mr Turner’s point on skills, which I nodded vigorously at, as he noted. Presumably to facilitate the discussion you are suggesting—the bigger debate about the transport future—it would be helpful now to begin dialogue with the FE sector and with manufacturers on apprenticeship frameworks. That is beginning. As you described, Rob, you are having those kind of discussions, but I am of a mind that the Government should now facilitate some more of that. Would you welcome that? I am inclined to take the view that while it is true that we cannot exactly predict either the character or timing of the technology, initial discussions of the kind that you proposed would be helpful. Is that about right?

Adrian Jones: Yes, I would certainly say that we would welcome the opportunity. While the date for roads full of fully automated vehicles is an unknown, as is the impact, our members already have concerns. In manufacturing, the apprentices needed are not engineering apprentices in the traditional sense; they are software engineer apprentices. In road transport, we have fitters and engineers who are up to their elbows in grease, but in just a few years’ time they will be up to their elbows in keyboards, iPads and screens, which is a completely different skillset.

We also need to recognise that there is concern about skills. As you know, Minister, there is a widespread acknowledgement of a driver shortage in the UK. You already know my views on that. Our members already have concerns that the technology is being used as a smokescreen in effect to say, “We can use this technology to address that skills shortage”, but it will not do that, because employers will see it as a way of reducing cost, rather than filling the skills gap.

One expert that I heard on the venerable Radio 4 was asked about the job shift of a bus driver when that bus was fully automated. The expert said, “Jobs will be created. There may be a café on the bus and they could work in the café.” That is not comparable work. Yes, it is a job, but going from a skilled position to working in a café—no disrespect to any café workers—is not maintaining a standard of living or the same income to that family or the Treasury. There has to be a real debate now, not only on the future, but on the impact that new technologies are having on the transport industry and workers today.

[Mr Hayes]

Q So you would welcome an initiative, if I launched one, to have that kind of dialogue.

Diana Holland: We would, very much.

Adrian Jones: Yes.

[Mr Hayes]

Q While you acknowledge, reasonably so, that we cannot be definitive about exactly where this will lead, we need to start engaging with all the partner organisations that can make the skills you describe a reality.

Diana Holland: I think the approach we see all too often is the race to the bottom that means that even those employers that want to invest are forced to undercut in order to win contracts. There is an opportunity here for Government to say that nobody can undercut on the basis of the standards we think should be set and operating in this industry. If we are approaching skill levels in that positive way, that can be extremely helpful, because it means we are saying that people are recognised for the skills they have, and having those skills will mean we get the kind of industry we want.

[Clive Efford]

Q If, under clause 4, an employer were to compel a driver to take a vehicle on the road that does not comply or have all the safety-critical software downloaded, should that be a criminal offence on the part of the employer? What should be included in the Bill to deal with that?

Adrian Jones: I am not sure if it would be included in this Bill. There are already regulations in force through the Traffic Commissioners’ office for operators who infringe on maintenance, for example. The key, for this Bill, is how the driver would know whether or not that vehicle is fit. At the moment, a driver is expected to carry out a daily check to ensure that the mechanical aspects of the vehicle are fit for road use. How can they check that the software has been updated appropriately, and who will be held responsible if it is not? The Bill does not cover that, and it would be helpful, certainly for drivers and for the confidence of other road users, if, when I see an automated vehicle on the road, I know that it has been properly updated and the vehicle has a professional driver or worker who has ensured that the updates have been made.

[The Chair]

If there are no further questions, I will move on. I thank the witnesses for their evidence.

Examination of Witness

Robert Llewellyn gave evidence.

10:57

[The Chair]

We will now hear oral evidence from Robert Llewellyn. We have until 11.25 am for this session. Can you introduce yourself for the record?

Robert Llewellyn: Hello. My name is Robert Llewellyn; I am a writer, TV presenter and electric vehicle driver.

[Stephen Kerr (Stirling) (Con)]

Q The Bill addresses fundamental issues involving electric and automated vehicles that are revolutionising how drivers and we as a society see driving. Do you think that the Bill as it stands will address the issue of public confidence in new technologies?

Robert Llewellyn: It starts to go towards that. I am doing many public appearances to discuss the impact of electric vehicles. It is effectively a disruptive technology, in the same way as cell phones and the internet. It has elements of those disruptive aspects, which are never all positive. There are some positives, but there are definitely some negatives. One of the things that it highlights is the ownership model. That is certainly something that motor manufacturers are very focused on: the way we use cars at the moment.

It is the 90:90 dilemma; I have never heard anyone dispute that. At the moment, 90% of the cars we own are idle 90% of the time. When you look at it from that point of view, any other business or industry that kept 90% of its assets idle for 90% of the time would not be in business. It is a really difficult challenge, and I do not have an answer. One of the answers that is emerging, as you have just been hearing, is autonomous vehicles. There are so many complexities, as you have listed wonderfully in the Bill so far. When I started to read it, I got a bit of a fuzzy brain, but that is the actor side of me; it is not an enormous intellect.

The challenges that it raises are fascinating. I fuel my own cars with my own fuel, which I make in my house. That has never been possible before. It is conceivable that, if I lived in the right part of the world, I could have drilled down, extracted oil, built a small refinery and filled my car, but that is pushing it a bit. This technology allows you to do that, although not all year round and not 100% of the time. How do you legislate for that? How do you tax that fuel? All those things are thrown up in the air. It feels a bit wild west at the moment.

That is one aspect of it. The other aspect is the charging infrastructure. Anyone who has an electric car will talk to you about it for a year, because it is such an emerging area. When I first started driving electric cars in 2010, there was one rapid charger in the country. That belonged to Mitsubishi in Cirencester and you had to arrange to go and visit it, so it was like a day out to go down to Cirencester and use a rapid charger. For 90% of the time it did not work; all the instructions were in Japanese; and no one understood Japanese at Mitsubishi, so it was not very reliable.

However, now, if you are stupid enough—I have done it in the winter—you can drive from London to Edinburgh in a Nissan Leaf. It takes a long time, it is a miserable trip, and it is quicker on the train, but it can be done. I have driven all over the country in various electric cars, now relatively easily, so there has been a dramatic change in the infrastructure, but there are very few electric cars on the road. If you doubled the numbers overnight, there would be issues with that. I think 40% of the people in this country do not have somewhere off the street to park their car, so where do they charge them? I will not go on too long.

[Stephen Kerr]

Q So is there anything that needs to be addressed in the Bill?

Robert Llewellyn: Sorry, yes, that was your question. There is one crucial thing that I think could be addressed. It has been addressed in other countries. Ireland and California are two places that I know about where there is one system for paying for electricity. Everyone who uses an electric car is happy to pay for the electricity, but the system is so complex. I could get the collection of cards out of my wallet that I need to be able to use all the chargers, and very often I do not have the specific card for that charger. In Ireland there is one system, an app that you have, and you can use any charger. It is operated by many different companies. They all get paid for it, but you just have one thing. A combination of either that or touch to pay should be addressed.

You can buy a bag of crisps with touch to pay, but you cannot buy electricity from a charger. I know there are complexities and legal difficulties and expense, but that would really make a huge difference. The most common complaint I hear is, “I haven’t got a wallet big enough to hold all the cards.” And you need membership and subscriptions. All that needs to go so that you literally go up to a charger, pay for the electricity you are using and move on. You do not have to join a club to use a Shell petrol pump. You just pay for it. That is a really essential thing.

[Karl Turner]

Q You have described very well the problems that we have. I declare an interest as the owner of an electric vehicle. Finding somewhere to charge it is often extremely difficult. One of the other problems is home charging and the requirement for off-street parking. I noticed very recently Hackney Council’s lamppost charging. What do you think about that? Do local authorities need to do more to support councils to provide charging points?

Robert Llewellyn: That is a very good system by Ubitricity, a German company. My primary enthusiasm about it is that it is incredibly easy to use. You drive up to it and plug your wire in. The wire has a box that communicates and tells the company how much electricity you use. You plug the other end into your car and it starts charging. You do nothing. We need that frictionless ability to do that.

I cannot remember the figures, but there are many hundreds of thousands of suitable lampposts. One of the aspects of the technological change we are seeing is when a lamppost is converted to LED lights. It has extra juice—electricity—that you can take off it without blowing anything up. It does not need any other infrastructure changes. It is a very simple system. It requires lampposts that are on the kerb side of a pavement, which not all lampposts are, but there are certainly hundreds of thousands of them. They have fitted a great deal of them and they have been very popular.

[Karl Turner]

Q I suppose my point is that the cost to install this will be reduced. It will probably be a lot less costly.

Robert Llewellyn: It is in the hundreds rather than thousands.

[Karl Turner]

Q It is, but we have a situation where local authorities are cash-strapped. Not every local authority has a lot of electric vehicles; I think Hull City Council has two charging points. They are hoping to get to the dizzying heights of 70 at some point before 2020, and they are doing their best. Should we not encourage local authorities with incentives—crudely, I mean cash incentives—to ensure that the equipment is available for everybody?

Robert Llewellyn: That would be ideal. One of the other problems is that the technology is changing so fast. I recently drove over a strip of road just outside Paris that has an induction-charging strip set in it. I do not think that is going to happen, because I cannot imagine the cost of putting that in the M1—it would be in the billions—but these induction plates for static charging, so when you are parked the car starts charging, are quite common now. That technology is getting cheaper.

It is really difficult—I would feel nervous suggesting that anybody invest an enormous amount. There have been failures in public-invested charging points: they are in the wrong place, they break down, they are not maintained or they are not run by the company that set them up. There have been plenty of examples of that. This is a rapidly emerging technology that keeps changing. Take even the wire you use. Finally, a bit like phones, there is a standardised type 2 connector that goes in every socket and goes in every car, but even that was a mystery a while ago. I would have a certain reluctance in saying, “Yes. Make all councils install thousands of chargers,” because they might be the wrong ones in the wrong place.

An organic development is happening with private companies, including supermarkets, that are starting to put them in car parks. Shell is now putting rapid chargers in its forecourts. It is happening, but quite slowly. I think it is probably chicken and egging like that—so there are more cars, then more chargers, then more cars, then more chargers. I would not know how to suggest where to put them.

[Karl Turner]

Q Finally, the Bill makes it mandatory for fuel stations to provide charging points. Does that need to be in the Bill?

Robert Llewellyn: I think that is a really good idea. If there is one group of fuel suppliers that could probably afford it without too much stress, it is the garage chains. They seem quite keen to do it. I think they can sense a change in public attitudes, which is why Shell has gone ahead and has done what it is doing. I know BP is doing the same. I do not know about any other companies, but it makes sense. All I would beg them to do is to put in nice chairs, wi-fi and reasonable coffee, because you tend to be in the garage a bit longer with an electric car than you are with a petrol car.

[The Chair]

Before I call the Minister, I have him, Graham Jones, Iain Stewart, Matt Western, Scott Mann and Matt Rodda indicating that they wish to ask questions. Are there any more? No. Well, you can do the maths as well as I can. Will Members be as brief as possible with their questions? And Robert, we really enjoy your eloquence and insight, but if you could be as pithy as possible in responding, that would be helpful.

[Mr Hayes]

Q Robert, I will try to be pithy too. Broadly, from what you have told us so far, you welcome the Bill. Your journey to Edinburgh will be helped by the fact that the Bill suggests that fuel retailers should have charging points, because you could access them on the way, but you also say that we need to do more on the spread of charging points. Is that a fair summary?

Robert Llewellyn: Yes, I think so—I am trying to be pithy.

[Mr Hayes]

Q I have one other point—an old chestnut that I make no apology for roasting one more time—about the look and feel of charging points. I am keen that they should have some familiarity, so that people see a charging point and know what it is. Is that a good idea?

Robert Llewellyn: Yes, very much so. That has certainly been discussed a lot. If nothing else, like at a garage forecourt, if a row of charging points are under a canopy—say, at a motorway services or at a garage forecourt—with a specific kind of colouring to attract you to it, that would be nice. I do not know whether you can legislate for that, but it would be a great benefit so that you are not standing in the rain when you plug your car in.

[Mr Hayes]

Q And you hope that Her Majesty’s Opposition will move an amendment on the provision of coffee, do you?

Robert Llewellyn: A bit of coffee. Or a herbal tea.

[Graham P. Jones]

Q Robert, you are a great enthusiast for automated and electric vehicles, so the Bill must please you no end. I have just a broad question and then a specific question. Broadly, what is missing from the Bill? We heard from Unite about integrated transport, rather than this just being about the relationship between the driver and the vehicle via the insurance company, as well as some other small matters. So on the bigger issue, what do you think is missing? What would you like to see if you were the Minister in charge?

I want to ask a particular question at the end about vehicle variations. Does the Bill accommodate what we will see in the future? I believe we will see different types of vehicle variation, because there will be electric vehicles instead of just the four-seater saloon car.

Robert Llewellyn: There are three things that would be wonderful. I am definitely not an expert, but when you have seen this you can see how popular it is: community electric car sharing/ownership/use. When those little systems organised by local communities appear, they are very popular with the local community. I have seen this in small towns rather than big cities.

[Graham P. Jones]

Q Boris bikes for villages.

Robert Llewellyn: Almost, yes. Also, they would have a dedicated place where you would park and charge them, so you would remove that problem. There are a lot of benefits to that.

The thing I have not seen in the Bill, which is a vitally important part of this, is vehicle-to-grid technology, which is appearing rapidly. It has an enormous impact, potentially, not on vehicles but on the grid. Say there were 3 million electric cars plugged in overnight, that would be a staggering amount of electricity—a very large power station’s worth of stored energy. You only need take a small amount from each vehicle. That technology is available now, not much in this country but it is certainly being used. I have been—I am trying to keep this pithy—to an office in Tokyo that is run by 100 Nissan Leafs that are plugged in outside. They do not use electricity from anywhere else. Those cars are discharging and charging all day, with a guaranteed amount for the owner to get home at night. So that technology already exists.

On fast charging, from my experience of driving many hundreds of thousands of miles in electric cars, slow charging is really good. Destination charging is really good. When you go to a car park and you are there for two hours topping up, it is not rapid charging, not “Gotta fill it in 10 seconds”. That, in a way, is a petrol or diesel mentality: “I’m driving a really long way. I need to fill it really fast”. You do do that, but way less than you might expect—way less. I use a rapid charger 15 or 20 times a year.

But if I can go to a car park where I can just plug the car in while I am in a meeting, or have gone to the movies or to a restaurant, and I add 20, 30 or 40 miles, that is an enormous benefit. Having more places where you can do that, more car parks with chargers fitted—that you ping your card on to pay for the electricity—would be a fantastic change. Those are emerging, and every time I can use one it is an enormous benefit. Two or three hours gives you 20 or 30 miles. You think, “That’s not very much”—well, it is 20 or 30 miles.

[The Chair]

I think we have got the message.

[Iain Stewart]

Q This is just a supplementary question on your earlier point about Ireland and California having a harmonised payment mechanism. Did that come about just from the industry creating it or was there Government regulation or legislation?

Robert Llewellyn: Absolutely from legislation, yes. The system in California, which I am more familiar with, was chaotic. I do not know quite what happened in Ireland, but it was catastrophic. It was a simple bit of Government legislation from the Californian state legislature that insisted that there was one system, that you could use all public chargers. I believe it is a dongle rather than an app. That might have changed—I have not been there for a while—but it certainly was that.

[Iain Stewart]

Q So that is something you would like this Bill, or another piece of legislation, to do.

Robert Llewellyn: That would be an amazing change, and I think it would ease in a lot of people who have not adopted electric cars: “How do I charge it?” “You just walk up there and it charges.” That would be a big change.

[Matt Western (Warwick and Leamington) (Lab)]

Q It is great to be in the company of someone so evangelical about EVs. You have probably seen the ambition for the introduction of electric vehicles and the replacement of petrol and diesel by 2040, and an outright ban by 2050. Do you think we are being ambitious enough compared with other nations, and what it is that other nations are doing that perhaps we could learn from?

Robert Llewellyn: I was very pleased when I heard that announcement. Technology might overtake it. There is a strong argument for that among the evangelical electric vehicle users, from whom I try to stand one step back and be a little more objective. But it is such a hard thing to do. I have seen so many graphs to describe the uptake of new technologies and how this will be what happens with electric vehicles—the S-curve of adoption.

Our emotional relationship with cars is really complicated. It is deeper than our emotional relationship was with landline telephones or how television is viewed—all those things. It is more complex than that; I do not think it is quite as simple. I think you could be more ambitious. You could go with 2030, the technology is advancing so much.

The simple fact is that the car I have had the longest—a Nissan Leaf—has a 24kWh battery. There is now the new Nissan Leaf and the battery pack is exactly the same size and it is a 40kWh battery. That more than doubles the range of my very battered dirty old Nissan Leaf that I drove to the train station today. Sorry, no more piffle.

[Scott Mann]

Q I just wanted to ask briefly about your experience of driving in very rural areas. We have a lot of energy generation around the country happening in rural areas, through solar and wind. I just wanted to know whether there are enough charging points in rural areas and whether we could do something to decouple the national grid in some of those areas, so that some of the farmers producing that energy could effectively provide charging points.

Robert Llewellyn: There is a whole other area of fascinating stuff going on with micro-grids and local community-owned generation. That is something that I am involved with in my village. I think it is actually in many ways easier to have an electric vehicle in a rural area—I live in one—because you have generally got, even if it is a muddy drive or field entrance, somewhere you can park the car off the road. Far more people in a rural area have that ability.

You also generally have a bit more space to install solar panels or wind turbines. There is certainly a lot of that activity happening on a community level, of people generating their own power—they own the assets that do that—and they also install electric car chargers. A farmer local to me who is putting 20kW of solar on his barn roof wants to open a café with car chargers. You would have to drive miles to go there—I do not know why anyone would—though he has some nice cows.

[Matt Rodda (Reading East) (Lab)]

Q My question is similar, but from an urban perspective. What would you see as the most effective way to encourage urban residents, particularly those who do not have off-street parking, to convert to electric vehicles? Secondly, how would you incentivise landowners who have car parks, such as large employers, railway stations and supermarkets, to have chargers?

Robert Llewellyn: I feel more confident in answering the second part. When people do install destination chargers—the common term for it—they all notice an increase in time spent by individual customers, because they are there a bit longer, and repeat visitors. Convincing supermarkets that, if they put chargers in their car parks, they will get more customers is the argument that I always try to use.

Certainly, hotels and restaurants have noticed a marked increase of a specific type of customer, particularly if it is a high-end electric vehicle. If they put those chargers in, they appear on the map on the satnav and they get more business like that. That is an argument. I do not know whether you could legislate for that but that is certainly an argument in favour of doing it. As more electric vehicles appear, I feel that will kind of roll itself out in a way.

[Matt Rodda]

Q Do you feel there is a need to look at the way the planning system could incentivise that, to get the market started?

Robert Llewellyn: I would hope that there would be. It would be wonderful if there were encouragements and nudging pressure to say, “When you build this new supermarket with a car park, can you put in 40 car chargers? Not two or four down the far end but to have one whole side for electrical vehicle charging.” It is not that expensive to do low-cost top-up charges; that is not a big expense.

[Alan Brown]

Q Past UK Government policy led to an increase in uptake of diesel vehicles, which we now know are huge contributors to problems of air pollution. Therefore, to achieve future deadlines, would it make sense for the UK Government directly to incentivise the purchase of EVs or low-emission vehicles, through scrappage schemes and so on?

Robert Llewellyn: I am very uncomfortable about pressuring people in that sense. We should encourage them, certainly, but not pressure them, because of the result of the misinformation that we all suffered from. I had a diesel car, as did a lot of people. I think that is a really difficult area. I feel very unqualified to know how to do that. I work on encouragement and enthusiasm; I would not know how to instigate legislation that would insist on people buying electric cars.

[Alan Brown]

Q Incentivise, rather than insist.

Robert Llewellyn: Yes—incentivise, certainly.

[The Chair]

If there are no further questions from Members, I thank the witness for his evidence.

Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)

11:20

Adjourned till this day at Two o’clock.

Automated and Electric Vehicles Bill (Second sitting)

Committee Debate: 2nd sitting: House of Commons
Tuesday 31st October 2017 Public Bill Committees

The Committee consisted of the following Members:

Chairs: Mr Adrian Bailey, † Sir Edward Leigh

† Argar, Edward (Charnwood) (Con)

† Brown, Alan (Kilmarnock and Loudoun) (SNP)

† Duffield, Rosie (Canterbury) (Lab)

† Efford, Clive (Eltham) (Lab)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† Hayes, Mr John (Minister for Transport Legislation and Maritime)

† Jones, Graham P. (Hyndburn) (Lab)

† Kerr, Stephen (Stirling) (Con)

† Knight, Sir Greg (East Yorkshire) (Con)

† Letwin, Sir Oliver (West Dorset) (Con)

† Mann, Scott (North Cornwall) (Con)

† Rodda, Matt (Reading East) (Lab)

† Stephenson, Andrew (Pendle) (Con)

† Stewart, Iain (Milton Keynes South) (Con)

† Tracey, Craig (North Warwickshire) (Con)

† Turner, Karl (Kingston upon Hull East) (Lab)

† Western, Matt (Warwick and Leamington) (Lab)

Farrah Bhatti, Mike Everett, Committee Clerks

† attended the Committee

Witnesses

Steve Nash, Chief Executive, Institute of the Motor Industry

Brian Madderson, Chairman, Petrol Retailers Association

Steve Gooding, Director, RAC Foundation

David Wong, Senior Technology and Innovation Manager, Society of Motor Manufacturers and Traders

Robert Evans, Chief Executive Officer, Cenex, and Chair, UK Electric Vehicle Supply Equipment Association

Suleman Alli, Director of Strategy, UK Power Networks

Marcus Stewart, Head of Energy Insights, National Grid

Quentin Willson, Journalist and TV Presenter

Stan Boland, Chief Executive Officer, FiveAI

Denis Naberezhnykh, Head of Ultra Low Emission Vehicles and Energy, Transport Research Laboratory

Public Bill Committee

Tuesday 31 October 2017

(Afternoon)

[Sir Edward Leigh in the Chair]

Automated and Electric Vehicles Bill

Examination of Witnesses

David Wong, Steve Gooding, Brian Madderson and Steve Nash gave evidence.

14:00

[The Chair]

Welcome to our afternoon session. We will now hear oral evidence from the Society of Motor Manufacturers and Traders, the RAC Foundation, the Petrol Retailers Association and the Institute of the Motor Industry. We have until 3 pm, when there may be votes. Would the witnesses please introduce themselves for the record?

Steve Nash: I am Steve Nash, chief executive of the Institute of the Motor Industry.

Brian Madderson: I am Brian Madderson, chairman of the Petrol Retailers Association, which is part of the Retail Motor Industry Federation.

Steve Gooding: I am Steve Gooding, director of the RAC Foundation.

David Wong: I am David Wong, senior technology and innovation manager of the Society of Motor Manufacturers and Traders.

[Karl Turner (Kingston upon Hull East) (Lab)]

Q 87 Thank you very much indeed for attending. The Minister suggested on Second Reading that the Bill would deliver a cost saving to people who are insured on automated and autonomous vehicles, because they will be safer. Do you think that that is correct? Will insurance be cheaper?

Steve Nash: I will kick off, if you like. Right now, electric vehicles can cost anything up to 50% more to insure than comparable vehicles that are not electric. There are couple of reasons for that. An element of that is the cost of the vehicle, but a large part of it is the relative lack of skilled people to work on them. The insurers, naturally, load the premium because they expect to pay a higher cost to get the vehicles repaired, but provided the right mechanisms are in place to ensure a competitive market to service and maintain those cars, there is no reason they should be more expensive. In fact, if you take it to its logical conclusion, with sufficient fully autonomous cars on the road, accidents should go down.

Steve Gooding: May I echo that? It is a question of penetration—the number of autonomous vehicles out there. In the transition, when there are still a lot of conventional vehicles, someone in a driverless car might be a lot safer but will still face the risk of someone colliding with them. In the early stages, because of the technology built into the vehicle, that might be quite an expensive accident, which might put premiums up. In the longer term, however, as Steve says, as we see greater penetration, a lot of the human error that is the cause of crashes on the roads today will be ironed out by the technology.

David Wong: On the basis that 94% of all crashes involving a fatality are put down to human error, and that the modelling we published two years ago suggests that connected and autonomous vehicles are expected to save 2,500 lives and contribute to the avoidance of 25,000 serious crashes between 2014 and 2030, we certainly hope that with autonomous vehicles, insurance premiums will go down.

[Karl Turner]

Q Thank you. Do you think that there is a necessity for licensing and accreditation for technicians? Should that be in the Bill?

Steve Nash: I feel very strongly that there should be, on a number of counts. First, we have electricity at work legislation that was put in place at a time when electric vehicles were virtually non-existent, although it does refer to electric vehicles—believe it or not, it actually tells people to talk to my organisation about them. But it is patently obvious that there is an inconsistency in regulating people who work on mains electricity, which is 240 V, while being happy for anybody to work on a vehicle that could be between 600 V and 1,000 V if we include commercial vehicles. To be really clear and specific, I am not talking about general licensing. I am talking about regulating people to work on the high voltage elements of these cars, not to change the tyres or to do the mundane stuff. These vehicles are wholly different to internal combustion engine vehicles. In the fullness of time, and it will not be that long, quite large numbers of them will start to come out of warranty and find their way into the open market. Right now, only 1% of those who work on the maintenance of vehicles in the whole country are actually qualified to work on the high voltage electrics and they pretty much all work for franchised dealers. Putting a regulation in place would open up the market to the wider industry and provide a standard that everybody could recognise.

[Karl Turner]

Q Why can you not just let the industry get on with it? Why does it need to be in the Bill?

Steve Nash: Because it will not happen. I have been in the industry for 40 years. We have a great deal of support for this from huge independents such as Halfords, from a lot of manufacturers and a great many independent garages. When we talk about the independent sector, it is an indeterminate number, roughly 40,000 businesses, we estimate, but we do not know exactly who is working on cars, because they do not belong to a body. It could be anyone; there is nothing to stop anybody setting themselves up to service and repair these things tomorrow. It will only be when somebody kills themselves—there have been incidents outside this country already of people being killed or seriously electrocuted working on these things. Don’t get me wrong, they are perfectly safe to ride in and operate, but once you get under the skin, if you do not know what you are doing, you are in just as much danger as you ever would be playing around with mains electricity without knowing what you are doing, except that it is potentially more fatal, because it is direct current and it will not throw you off, it will just keep electrocuting you.

It would definitely help the market, because manufacturers will do what they have to do to sell the cars and make sure that their own people are competent, but it will not automatically happen. It is a coin-operated business outside the main dealers. We have investigated what happened when Corgi or Gas Safe were put into place, similarly with the electricity at work legislation. Very quickly you would undoubtedly have had a lot of practitioners who should not have been doing what they were doing back in those days, but very quickly the industry raises to that level and it becomes a competitive market again and you do not get unreasonable costs introduced. We believe that is the right thing to do here. It establishes a common currency across the industry for knowing what competence means.

[Karl Turner]

With Sir Edward’s permission, does any other witness want to comment?

[The Chair]

It is not necessary for all the witnesses to answer all the questions. I am anxious as many colleagues as possible get in. I know the Minister is anxious for his voice to be heard, which we await with alacrity.

[The Minister for Transport Legislation and Maritime (Mr John Hayes)]

Q Thank you, Sir Edward. Steve, you were previously very supportive of the Vehicle Technology and Aviation Bill, the forerunner of this Bill, particularly of the measures on AVs. Can you tell me why and why you think it is right that the Government bring this kind of legislation forward now? How important is it that in order to encourage further development we establish a legislative framework?

Steve Nash: We are going through what is the biggest change in the industry—

[Mr Hayes]

Sorry, I directed the question to Mr Gooding

Steve Nash: Sorry, I beg your pardon.

Steve Gooding: There are two Steves.

[Mr Hayes]

That is the trouble with two Steves. I do apologise.

Steve Gooding: I am sure Steve will come in in a second. Yes, the foundation has been very supportive of both aspects of the Bill before you today. Specifically on the electric vehicle side, we think that while there have been significant percentage increases in the take up of ultra-low emission vehicles, they are still a tiny fraction of the overall vehicle park. There are many reasons why the ordinary consumer could get confused by what is on offer to them with various different charging packages for how to pay; with big uncertainties about the availability of different charge plants and on-street charging. We think that if the Government are serious—and we know that you are—about rapidly increasing the take-up of ultra low emission vehicles, something needs to be done to make the world of those low emission vehicles easier for consumers.

The Bill takes the perspective of asking, “What are the things that may currently cause a consumer to think twice or just to think, ‘Not now’?” There is concern about range. Well, the auto companies are dealing with that, because the range of the vehicles is getting longer, but there is also concern about the complexity and ease of recharging, about whether a particular charge point will be available and working when someone pulls up, and about whether it will be the right sort for the vehicle that they have. If we are able to clarify those things and make them simpler, the market will be a lot more attractive.

[Mr Hayes]

Q I want to pick up a point that Mr Wong made about safety. Is it your estimation that there will be a graph, if you like, and that as vehicles become automated in part they will become safer, and as they become safer accidents will fall? We now have assisted parking, for example, and my wife tells me that that means I am less likely to bump the car, because I get a bit of help with reversing. Could we develop an understanding of a growing level of safety as a result of partial automation?

David Wong: The best way to answer that question is to look at what is already available today in terms of automation. We do not have autonomous vehicles yet, just to be clear—we are unlikely to have autonomous vehicles until around 2020 or 2021—but what we do have is increasing levels of automation. The best example to quote is autonomous emergency braking, which is essentially level 1 or level 2 technology, using SAE International’s definition. AEB has already been shown to have contributed to the reduction in real-world rear-end crashes by 38%.

[Mr Hayes]

How very interesting.

David Wong: That is an empirical study.

[Sir Oliver Letwin (West Dorset) (Con)]

Q We heard earlier from the insurance industry that they had been led to believe that autonomous vehicles, as they evolved and eventually came to market, would inevitably contain software that would enable the vehicle to reject a transfer from the driver to the autonomous system if it was in a location that made it unsafe for the autonomous system to operate. I am talking about the period during which we do not have cars without any steering wheels but we have ones that are sometimes autonomous and sometimes used by drivers. Do you share their confidence that vehicles will always be manufactured with software that prevents handover to the autonomous system except where it is totally safe?

David Wong: I think it is more likely to be the other way around. That is, it will be a question not of whether the system rejects a request from the driver to hand control over to the vehicle, but of whether the system serves up the offer of automation to the driver, given the right and safe conditions.

[Sir Oliver Letwin]

Q Does that mean that if the system does not make the offer, the driver will not be able to give it control?

David Wong: Correct, and I can give you an example. It is not autonomous yet, but it is level 3, which is very close to autonomous; this is the next step towards autonomy. Audi is the first vehicle manufacturer in the world to launch a level 3-capable vehicle. It launched it in the summer, and it will be available on the market, all being well, next year. Its system, which is called traffic jam pilot, is designed to operate at speeds of no more than 38 mph, on dual carriageways with clearly marked road signs as well as lane markings, and where the vehicle is hemmed in by other vehicles on the left and right, and front and back. If the system detects that all those conditions are met and the weather is sufficiently good for the operation of traffic jam pilot, it will offer the driver the option of giving the system control during that use case. Once one of those conditions is no longer in place, no longer valid—perhaps traffic has dispersed and the vehicle is able to travel at more than 38 mph—then the vehicle will ask the driver to take back control. So it is the system that will detect and serve up the offer; it is not the driver requesting.

[Sir Oliver Letwin]

Q Thank you. A question about charging points, which you were talking about: how important do you think it is that there should be a charging point in every place where there is a lawful parking space by a pavement in a city or town? What kind of timescale would you envisage for needing that level of penetration?

Steve Gooding: I doubt whether we would need precisely that level of penetration. A report that we recently published—and thinking about how the Bill’s powers might be used if the House grants them—draws out the important point which is to think about the sort of trips that people actually make. For example, in large parts of London, in residential areas where there is no off-street parking, if we are to see a wide-scale move to plug-in electric vehicles, we would need to see quite a lot of roadside recharging capacity, because lots of people would be charging overnight, because that is what is most convenient for them. Elsewhere, if people are charging overnight at their homes and perhaps looking to top up the charge at their destination, it is probably more likely that that destination might be their place of work where there is off-street parking, or it might be a shopping centre or a multi-storey car park. So we are probably not talking about universal coverage but certainly more than we have today.

Quite how fast that needs to happen, I am afraid I could not give you a figure for now. All I can say is that at the moment there are various figures. Research by Addison Lee, for example, suggests that a very intense increase in on-street presence would be needed if we were to have the sort of ramp-up of vehicles that it would be willing to engage in. I would probably focus on making sure that the grant scheme for home charging carries on, so that we encourage more people to have the facility to charge at home. Then I would probably focus on motorway service areas, which will be very important for short and rapid top-up for people making a longer journey but who are possibly anxious about managing the whole journey there and back.

David Wong: If I can quickly echo what Steve said, it is no longer about the number of charge points, because we have around 14,000 in the UK at the moment, which is one of the highest numbers in Europe, if not the highest; it is about where these charge points are—being in the right place to serve particular needs, so it is not every charge point in every corner of a neighbourhood. First and foremost, what the Bill will provide is actually a step in the right direction, and so this is something we totally support in terms of the infrastructure. This calls for a co-ordinated approach involving the Government, the SMMT, the industry, vehicle manufacturers, charge point operators, energy companies and local authorities to come together, convened by Government of course, using the Government’s convening power, to determine and plot where the right charge points ought to be, depending on usage, the likely needs of people to charge and the type of charge points, because they might be fast chargers—rapid chargers—as Steve hinted.

[Sir Oliver Letwin]

Q Do you think that there needs to be, in effect, a national plan for the location of the charge points as we approach 2040?

David Wong: We would suggest a nationally co-ordinated approach.

Brian Madderson: I speak for 75% of the motorway service areas and the one thing that they are really against is any form of mandating, because they want the market to be able to choose what is the best form of charging at the time for them. This is in a great state of flux. Some of them have already entered into agreements that are more binding than perhaps they would have wished with the knowledge that they have just 12 months on. The mandating process seems to be all stick and no carrot. These motorway service areas fully recognise the need and, in fact, many now have both Tesla charging and other forms of charging, so they are working towards that but they think mandating is not appropriate in this case.

One of the other issues the motorway service areas have is that there does not seem to be joined-up government, which I think David was probably referring to. There are planning difficulties in getting car park extensions to put in extra parking bays for Tesla charging, for example. One of the things the Government should perhaps be mandating is not where the charging points go, but that where there are planning applications for charging points, local authorities must deal with them quickly, efficiently and sympathetically.

[Clive Efford (Eltham) (Lab)]

Q What is the incentive to develop the automated car technology? Is it large fleet owners who employ a lot of drivers wanting to cut down on their overhead staff costs? Or is it the private car industry?

Steve Gooding: From a consumer perspective, I would have to say that we do not really know yet, but there is a broad spectrum of what might happen next. For example, there is a clear incentive for a fleet operator who is counting every penny to be thinking, “How could I reduce my costs of operation?” Whether that is a fleet of vans or trucks, the operator would be looking at automation as a way of, first, saving money, and secondly, sweating the asset of that truck for longer hours. In turn, we are seeing a huge amount of investment in the auto sector in vehicles for the private market.

If I were to bet my money, I would say that the guys who are counting every penny will probably be the first in—people running fleets and large numbers of vehicles—but some people are clearly very attracted to the thought of having driverless capability. That could be from time to time, or it could mean freedom and independence for people who are currently denied that by the fact that they cannot drive, and we have just been engaged in a report on what it means for people with disabilities.

[Clive Efford]

Q Are we not a long way off from those sort of automated vehicles?

Steve Gooding: I think David would say we are four years off. Personally I think it is probably nearer 10.

Steve Nash: Ten.

[Clive Efford]

Q There is a difference between an automated vehicle that can undertake a journey on a motorway and a vehicle that would have to drive around the roads here in Westminster. If it is going to provide that sort of access for someone who cannot drive at the moment because of a physical disability, it has to be that high level—level 5—of automation.

David Wong: Correct. In the first instance, when I referred to 2020-21, I was referring to level 4—vehicles that will still have a steering wheel. That means under the right conditions, in the right use cases—for example, from junction to junction on a motorway—someone could let the system drive the vehicle, but could take back control outside that use case. If level 5, which is without a steering wheel, is not going to be as far off as 10 years, it is likely to be deployed in the first instance for first and last-mile journeys, perhaps even in pedestrianised areas—on pavements—as we have seen with some of the trials in Greenwich, as well as in Milton Keynes. As to when those level 5 vehicles without steering wheels are capable of performing end-to-end journeys—from my house in the village to my office in the city—that is anybody’s guess. That will probably be some time in the 2030s. It is quite complex.

[Clive Efford]

Q Can I ask about the figure of 95% of accidents caused by human error? Who else can drive a car and cause an error? At the moment we do not have automated vehicles. Is that not a bit of an obvious point—most accidents are caused by humans because cars, de facto, are driven by humans?

David Wong: I suppose you could—

[Clive Efford]

Q Can we expect that figure to go down as a proportion of the accidents, as we increase the level of automation?

David Wong: Yes. In principle, one would not argue that a computer is less safe than a human being. Obviously, the capability of a human being to perceive and perform the driving of a car is limited and depends on the human being’s condition and the road conditions, as well as the environment in which the human being has been conditioned to perform the dynamic driving task. Lots of evidence has been published. The figures range from 90%; some are at 97%. We are taking the average figure, which is that 94% of all serious road accidents involving fatalities are caused by the human being. I mean that in the sense that it is not mechanical fault, lack of road markings or slippery roads, but the human being that caused the accident, perhaps by being inattentive or sometimes even perhaps by doing things that they are not supposed to do.

[Clive Efford]

But even the slow-moving vehicle in Greenwich hit a plastic chair when it was put in front of it, did it not? We are going to see accidents during a journey where the vehicle is being driven by software. Those accidents are going to happen. The periods when a vehicle is not driven by a human are going to increase, so we are likely to see an increase in the number of accidents that are not human error. Is that right?

David Wong: We think that overall the number of accidents will fall, but if anything can be learned from one of the trailblazers of the self-driving car experiments and trials—Google—it is that the earliest accidents that they encountered a number of years ago when the car was being trialled were the result of the cars being rear-ended by manually driven vehicles. The learning from that was that Google had to tweak the algorithms to ensure that the self-driving vehicle—the computer—behaved a little bit more like the human being. They succeeded in doing that, and today you do not get so many of the rear-ending accidents.

Steve Nash: It is also important to say that these vehicles will be connected. When one experiences something, the knowledge is passed to all of them, which does not happen today.

[Clive Efford]

Q I was going to come to that, if the Chair indulges me. You touched on the issue of the vehicles making decisions. In an incident where a vehicle is being driven by software on an automated journey and a child runs out in the road in front of the vehicle, the vehicle can either veer to the left into oncoming traffic or to the right on to the pavement, or it can knock down the child, because the child is too close for it to be able to stop. How do we make a moral judgment about how a vehicle should behave in those circumstances?

David Wong: This is the classic trolley problem question that we get asked almost at every single conference that we attend—

[Clive Efford]

Q Yes, but we have to legislate.

David Wong: Not at this point, but at some point certainly. First, if you take a cue from the ethics commission report that was published in Germany just a few months ago, it suggested that in any case, human life should always be prioritised. If it is a decision between a human and non-human, obviously the human life would have to be prioritised. That is No. 1. Secondly, we should not expect the car to do anything massively different from how a human being would behave. The car should perform a minimal risk manoeuvre to stop and brake in such a way that the impact will be minimal. To expect the car to make an ethical decision to kill A or B is probably not the right approach. I would suggest that none of us has the divine power to decide who to kill. At the end of the day, someone who writes the algorithm will have to decide. If you insist that the car must decide, it is incumbent on the engineers to programme that into the algorithm.

[Clive Efford]

Q So no evasive action would be taken. The vehicle would just—

David Wong: There would be a minimal risk manoeuvre, depending on the situation. There may be evasive action in such a way that it would be the safest possible option. If it needs to stop, it will brake and stop. May I point something out? I mentioned autonomous emergency braking. It has been demonstrated that the technology is improving all the time. Previously, autonomous emergency braking worked perfectly at 30 mph, which is urban speed, but it is becoming increasingly sophisticated. AEB can work well even at 50 mph. It would not surprise me if the technology improved in years to come to the stage where autonomous emergency braking could kick in at motorway speeds of 70 mph to prevent an accident or lessen the impact of an accident.

[The Chair]

I have a growing list of people who want to ask questions, and I want to try to get everyone in. We want brisk questions and brisk answers. It is not necessary for every witness to answer every question.

[Edward Argar (Charnwood) (Con)]

Q This is probably more to Mr Madderson. You touched on mandating or not mandating particular solutions. Do you have any assessment, either anecdotal or based on research, from your members? The big retailers may well be able to adapt over time and have different types of fuel supply, charging points, conventional fuels and so on. What is your assessment of the ability to adapt of smaller local retailers of fuel, or your feeling about the impact?

Brian Madderson: They are all extremely interested in this new technology and we, in fact, are providing a route to market for many of the charging point suppliers. They come to our regional forums—Northern Ireland, Scotland, England and Wales—and they appear in our market review book, so there is a thirst for knowledge.

The real problem with the Bill as it is currently written is that in mandating motorway service areas and, indeed, large fuel retailers there is a key missing ingredient, and that is the carrot I referred to before. There is funding for charging points at home, on the street, in the workplace and in other public areas but there is no funding available for the fuel retailers who would like to embrace this technology in order to provide a diverse range of refuelling options for their customers. It is the big rump of the medium to small-sized filling stations right across the country that will find this more difficult, because the investment decision at the present time is not something that banks would support. There is almost no money to come back on a perceived return-on-investment basis. So they are the ones who will be holding back the growth of charging points right across the country—it is not just city-centric.

[Karl Turner]

Q To be honest, I think Mr Madderson has answered the question I was about to ask: what are the carrots? He said it was all stick and no carrot.

Brian Madderson: It does have to be some form of funding, because if you go to your bank and say that you want to put in a charging point that might cost you a lot of money, you will immediately be asked, “What do you see as the return on investment? I’ve got to get my interest back.” They have no idea at the moment, because the market is in such a state of flux. New systems are coming on. I heard of one relatively recently called ZapGo. I do not know whether it is a big runner, but it is looking at putting storage tanks into a traditional forecourt with charging posts, and being able to meter out the electricity on a basis that I am told Her Majesty’s Revenue and Customs would enjoy because you might be able to get fuel duty back on it. This is relatively new. There are all kinds of development in the marketplace, and I think it would be precipitous to ask them to invest 100% of the money now—they could not do it.

[Karl Turner]

Q Could I ask what the average cost is? Am I right to say £50,000?

Brian Madderson: It can be up to £50,000 per instalment. What has been happening is that certain companies have gone along and said, “Look, we will take over that cost but we want from you two parking bays for 30 years on a lease basis.” If you are thinking about 30 years, that is a very long time. It precludes you, as the owner of that freehold property, from perhaps expanding your shop or putting up a new car wash— indeed, from perhaps even selling the property to someone else. So most of them have opted away from that style of investment.

[Mr Hayes]

Q To jump back to your point, Brian—it is nice to see you again, by the way—you will know how supportive I am of small and medium-sized business of the kind you represent. Is it fair to say that the Bill begins a process of spreading the number of charging points by picking on and mandating those larger retailers, but that to get the coverage we all seek there will need to be other mechanisms, because in rural areas, for example, where many of you are based, there might be no large retailer conveniently situated? Can you see the Bill as a welcome start?

Brian Madderson: First, I do not agree at all with any form of mandating because this is interventionist by the Government in a market that is so new and in such a state of flux that there should not be mandating. This is a perfect example of where market conditions should encourage investors to invest in the product that is right for them at the time. Mandating may make them make a false decision, which would prove very costly and certainly not be beneficial for the consumer.

[Mr Hayes]

Q So Mr Wong thinks we should have a co-ordinated national strategy, whereas you think that the market should prevail. Is that the difference between you?

Brian Madderson: Yes, I think it is good to have a market strategy, but you would certainly need to have proper funding available to not only small retailers but large retailers as well. By this, I mean the independents, certainly. The big oil companies today count for relatively few of the total number of filling stations—less than 15%—across the UK.

[Graham P. Jones (Hyndburn) (Lab)]

Q Obviously, you represent the motor manufacturers, and I am concerned about the shape and size of vehicles going forward and the adequacy of the legislation. My hon. Friend the Member for Kingston upon Hull here has, I think, a Twingo—do you have a Twingo?

[Karl Turner]

A Twizy.

[Graham P. Jones]

Twizy—that is it. I notice even on the continent, particularly in urban areas, we are getting smaller and smaller electric vehicles and cars driving around. Is the legislation adequate for the type and size of electric vehicle that might come on to the market? What changes do you see, for example? How will an automated vehicle work when you add a trailer to it or make some other changes to it? The shape, size and form of vehicles is probably going to change, as you are well aware, so will the legislation be adequate for those vehicles to be on the road when they are automated—of course, when they are operated by an individual manually, there is a human choice—and the automation is making choices?

Steve Gooding: I will start with a very short answer, as the Chairman seeks, which is no. But that is because this is a very immature market. We do not even have the vehicles in the marketplace yet. Having also driven a Twizy, which is great fun, I think the construction and use standards, based on a mechanical testing of roadworthiness, should be sufficient for most of the concerns you are voicing, but they are certainly not sufficient for guaranteeing the roadworthiness of the autonomous software systems; you are going to need something new for that.

When it comes to the size of the vehicle, again, their crash-worthiness, for example, needs to be tested in the circumstances in which the vehicle will be used. Maybe then there will need to be something in addition either to prevent or constrain what other purposes—whether it be towing a trailer, a caravan or whatever—are appropriate for that vehicle.

[Graham P. Jones]

Q It is not just that. What if I set off with a trailer in manual mode but I suddenly decide to be sneaky and switch it over to automated and go to sleep? There are a whole bunch of issues around the change in form, shape and size of vehicle and going between manual and automated.

Steve Gooding: I would say a similar thing as to Mr Efford: as a consumer, if I am being invited either to travel in one of these vehicles because it is the equivalent of private hire, or to buy one, I expect to buy something that has been certified as safe for the use to which it is going to be put. If it is inappropriate for me to hitch a trailer to it and use it in autonomous mode, that had better be made clear to me at the point when I buy it.

[Mr Hayes]

Q I have one further question, on a slightly different subject. This morning, we talked about how these developments will change the nature of the skills required. Steve 1, if I may call you that, mentioned that earlier. Presumably you will also acknowledge that it will give rise to new skills. There will be a shift in skills and new kinds of jobs and skills will develop. Is there not an exciting prospect of a whole range of new competences coming as a direct result of this technology? Is that fair?

Steve Nash: Absolutely, yes. There is probably more opportunity than threat from the new technologies. We are interested in ensuring that those skills develop in the right way. If you look at autonomous vehicles—I mentioned electric vehicles earlier—we only know as yet what manufacturers have said about their plans in the future. It may well be, for example, that when we get to level 5, or even level 4, a lot of those vehicles are not sold in the way that they are sold today. A new electric vehicle was launched a couple of weeks ago by a new brand called Polestar, which is owned by the same people who own Volvo. They say that the car will be sold on a subscription model, so it would remain within the possession of the manufacturer.

There is a lot of road to cover between now and then. Whoever is looking after those cars—I have already talked about electric cars, but when we get to autonomous cars as well—they will still have accidents. Things will drop on them and things will happen to them that are not caused by the car. When they are repaired, we have to be assured that they are repaired to a standard that returns them to exactly the same capability they had before the accident, which means we need people who are certifiably competent to do that. That is where we are interested in seeing some clarity.

We have cars with quite substantial autonomous capabilities already—Tesla is a good example—and I have seen second-hand examples of them that have gone beyond the dealer network. You have to wonder about the competence of the people who will work on that car—I am not saying that they are incompetent, but I do not know that they are competent. When someone next engages the autonomous capabilities of that car, will they do the things they are supposed to do? We cannot just leave that to chance. We have to be sure that there is some way of assuring ourselves about the people who work on them. This is not like the days when there was somebody who was “a bit handy”, as I think the phrase used to be, and you could give your car to them and they could look after it. This is a paradigm shift. We need to move with that and recognise that these cars, even though they have four wheels and look a bit like the cars that we have today, are entirely different. The skills base needs to be elevated to deal with them because they are an entirely different prospect.

[Rosie Duffield (Canterbury) (Lab)]

Q If there was one aspect of the Bill that members of the panel could change, what would it be?

Brian Madderson: The mandating of motorway service areas and large fuel retailers should be taken out at this stage because the market is just developing far too rapidly. We have even asked the Department for Transport what the definition of a large fuel retailer is, and it has said that it does not know yet and it will consult on that. Is it the size of the plot of a single one? Is it a multi-site organisation that might have filling stations all over the UK? Is it the amount of existing fossil fuel that a retailer is supplying? There is no definition, so I do not think it is reasonable or fair to mandate a large fuel retailer when you do not know what that is.

For similar reasons, I do not think that is fair and reasonable for motorway service areas either. There is just no money in it at the moment to justify huge investments, but there will be at some stage in the future and that is when the market will be able to say, “Let’s move on this now, and quickly too”. Hence my plea that the planning authorities are fully engaged to be able to allow effective planning applications as and when they are required for charge points.

Steve Gooding: Rather than changing something in the Bill, I think we would say that the powers—particularly in relation to electric vehicles—are drawn quite broadly. We would like to see how they are going to be used in succeeding regulations. We published some suggestions on how they might be crafted. There will obviously be some concerns—Brian’s perhaps first among them—about the implications for the operators of service areas, for local authorities and for householders. We would like to see the detail and to be confident—as I am sure we are—that the Department will get it right.

Brian Madderson: I would come back to that and say that the RAC’s report suggests that forecourts—filling stations, as they are at the moment—are probably one of the least best places to put a bank of charging points because of constrained space and alternative use, and because the few that we have today are all pretty busy selling diesel and petrol.

Steve Gooding: Apart from motorway service areas.

[Craig Tracey (North Warwickshire) (Con)]

Q Could I just follow up an answer you gave earlier, Mr Wong? You talked about the Audi model of traffic jams, where a car will offer to take over when a series of conditions are met. Is that how you see this working in the short term? Is it phase four?

David Wong: Level 3.

[Craig Tracey]

Q My question is: if one of those conditions is not met, then you said that it will invite the driver to take back control. What happens if the driver either does not or cannot take back control? How quickly would that process need to happen? Given that, why does that not give the potential for there to be more accidents in the short term?

David Wong: In the first place, the limiting conditions are such that the vehicle can only operate under the traffic jam pilot functionality at 38 mph, so that is a relatively low speed. If the driver is required to take back control at that low speed, Audi has said that there will be a minimum period of 10 seconds for the hand back to take place at 38 mph. This is completely different from some of the things that may have been heard in the press, where people were saying, “Oh, at 70 mph there is a three to five second hand back, it’s impossible to do that.” It is perhaps impossible. Audi will have a minimum hand back period of 10 seconds at 38 mph.

If the driver still fails to react within those 10 seconds, then a minimum risk manoeuvre will be performed whereby the car will slow down and grind to a halt in the lane safely, flashing the emergency indicators and strapping the seatbelt tight across the driver. The driver might have passed out, or may have become incapacitated. That is the assumption. In the intervening period, there would be a series of warnings within those 10 seconds including visual, acoustic and eventually haptic warnings. So there will be lots of measures that Audi has in fact built in. In any case it is travelling at 38 mph, so it is perfectly possible for the car to gradually grind to a halt in the lane with those measures in place.

Steve Gooding: Some of us are entirely unpersuaded that level 3 makes any sense at all. I accept all of the reassurances set out by David, but you should consider for a moment the Department for Transport’s own research showing that you are much more likely to kill someone when travelling at 30 mph than at 20 mph. I wonder if, at 38 mph, the window being created by Audi in which its system can operate is going to be too narrow. I am not sure that I have ever seen a dual carriageway in an urban area that is free-flowing with clear signs in this country. I think, personally, that we ought to say that level 3 is something that we do not want.

[Stephen Kerr (Stirling) (Con)]

Q In connection with what has been discussed today in relation to these five levels from manual to automated: in the context of the Bill, is the definition of “automated” in the Bill adequate for the purposes of the Bill at this point?

David Wong: We are informed that the policy intent behind the Bill is to do with the new insurance framework —the single insurer model framework—to cover level 4 and above. Insofar as that is reflected in the spirit and letter of the Bill, then that is adequate because it is at level four that the human being is—technically speaking—out of the loop, to use engineering parlance. The human being has surrendered control to the vehicle. At anything below level 4, the human being is still technically responsible and in the loop. So for these purposes the Bill is adequate.

[Stephen Kerr]

Q So there is no need to delineate the different levels and so forth within the Bill.

David Wong: From an industry perspective it is always helpful if the levels are spelled out very clearly in the Bill. Our understanding is that it is rather unhelpful to spell out levels.

Steve Gooding indicated dissent.

[Stephen Kerr]

You are shaking your head.

Steve Gooding: I would say that the definition in the Bill is adequate because of what David has said. It contemplates a world in which the vehicle can operate in autonomous mode without the driver being responsible. That is fine. It does not facilitate level three and that is fine too.

[Sir Greg Knight (East Yorkshire) (Con)]

Q Do you think that there is a case for the Government to introduce rules requiring the providers of these electric charging points to have to advertise the price they are going to charge the motorist, with the price visible before the vehicle actually parks up to the charging unit, as it has done for autogas, petrol and diesel sales?

Brian Madderson: I have no problems with that.

[Sir Greg Knight]

Q It is necessary really, is it not?

Brian Madderson: Yes. It is definitely a good idea. We do that all round—on autogas, diesel, petrol, super-unleaded or whatever it might be—at the present time. The price is displayed, and I think it is a fine idea to do that with electric charging as well. It must be said, however, that since April 2016, when some of the charging point providers moved to pay as you go, the demand on motorway service areas for those chargers has dropped by 50%.

[Matt Western (Warwick and Leamington) (Lab)]

Q I was interested in Mr Madderson’s point about not mandating. The car industry has often reacted well when it has been mandated to do things; when things such as Euro NCAP were introduced, it followed suit and made dramatic improvements. Given the ambition of the Government and across all parties to see more adoption of ultra low emission vehicles, and given that markets such as Norway’s are much further ahead than ours, what should we be doing to ensure that we are in a leadership position in electric vehicle technology?

Brian Madderson: It is also about providing the carrot by way of funding. That is going to be the big spur to encourage firms, in a rapidly changing market, to take that investment decision and to ensure that such decisions are supported by their banks, lenders, shareholders and others. At the moment, you do not appear to be mandating hotels, leisure centres or workplaces, all of which are admirably fine locations for charging points; you just seem to be mandating motorway service areas and large fuel retailers, whatever that description means. We do not think that is fair, reasonable or necessary.

[Sir Oliver Letwin]

Q I just want to clarify something that Steve Gooding said. Why do you think that it is clear that clause 2(1), which refers to

“an automated vehicle when driving itself”,

applies only to level 4? Why does it not apply to level 3?

Steve Gooding: I am not a parliamentary draftsman, so I would have to be reassured about this, but to me “when driving itself” means that the driver of the vehicle is not legally responsible for the vehicle; the vehicle is driving itself. That is what I intended to convey.

[The Chair]

Thank you very much for your attendance today and for your answers. We are very grateful.

Examination of Witnesses

Marcus Stewart, Robert Evans and Suleman Alli gave evidence.

14:54

[The Chair]

Q We will continue our session by hearing oral evidence from National Grid, the UK Electric Vehicle Supply Equipment Association and UK Power Networks. Will you please introduce yourselves and say where you are from?

Robert Evans: I am Robert Evans. I am chief executive officer of Cenex and chair of the UK Electric Vehicle Supply Equipment Association.

Suleman Alli: Good afternoon. My name is Suleman Alli. I am director of strategy for UK Power Networks. We distribute electricity to 8.2 million homes and businesses in the east of England, London and the south-east.

Marcus Stewart: Hello. My name is Marcus Stewart. I am head of energy insights for National Grid. We are responsible for the balancing of the electricity and gas networks, and for managing all the energy across the UK.

[Karl Turner]

Q On charging infrastructure, we have just heard evidence from the Petrol Retailers Association, which is very worried about being mandated to have charging points on the forecourts of its members. What is your prediction of what would happen if we did not mandate them to do that? If it was not required by law physically to invest and have them on their forecourts, would they bother?

Marcus Stewart: At the moment, the majority of people who own electric vehicles charge them at home, but there is a limit to how many houses have off-street parking. About 43% of properties do not have access to off-street parking, therefore other forms of charging facilities need to be available. They could be a mixture of charging types at destinations, workplaces, supermarkets, and so on.

From the evidence that we have gathered when we have talked to and interviewed people, key locations on the motorway and strategic network are seen as key enablers for the roll-out of electric vehicles and will help to remove some of the concerns around range anxiety which is seen as one of the main barriers to the take-up of electric vehicles at the moment. Charging and plus charging in particular at key locations across the country will facilitate the roll-out. If you do not have that, it is likely that the roll-out will be slower.

Suleman Alli: I support that. I would say that there is going to be a paradigm shift. It is a bit like when we used to get water from a well and we now get it from a tap in our home. In the same way, I do not think that petrol forecourts will be the only place where we will recharge our vehicles in the future. In our engagement with the marketplace, we are seeing major supermarkets looking at how they can offer fast charging to be a key differentiator for their customers. We are seeing hotels considering the same and local authorities looking to explore how on-street charging can be part of the solution. Based on the engagement we have done, I believe that it will be a much more diversified charging environment: it will not just be petrol forecourts.

Robert Evans: We have members who are very interested to install charge points at these locations. They see them as locations where there will be high utilisation rate and a good economic case for those charge points to be used. We are also talking here about an insurance policy—it is not a mandating per se. If the market does not deliver, the Act gives Government the ability to step in. It is not by definition a mandating until you pass additional legislation.

The members are very interested in installing in these locations, but they are other people’s land. Part of the issue here is the ability to encourage landowners to install charge points at their locations. In some cases it is a fuel supplier, in other cases it is one of the three main companies that operate motorway service areas. You have to recognise that there is a desire to install in those locations, but you cannot put your asset on someone else’s land.

[Sir Oliver Letwin]

Q I am delighted to hear what you say and absolutely agree with you. If the problem of range anxiety is addressed or partially addressed by fast charging at service stations and so on, we are still left with—I think you said—40% of homes that do not have off-street car parking. Have you done any assessment of the kinds of costs involved for the distribution network operators if over the period between now and 2040 there was a roll-out of universal charge points on the street in towns and cities—probably not all areas—where there is lawful parking?

14:59

Sitting suspended for a Division in the House.

15:12

On resuming—

[The Chair]

We are now quorate. Sir Oliver Letwin asked a question, which you of course have remembered exactly, and you may now answer it.

Robert Evans: I think your question related to the aspect of there not being so many people with off-road parking, so how do you make provision available for them? Certainly in this city, in London, that is an issue. It is also an issue in many cities across the UK. The availability of charging infrastructure in supermarkets, shopping areas in market towns and leisure facilities is certainly helpful, but obviously if you do not have home parking you are at a disadvantage compared with other motorists. So it is partially self-selecting, in a way, but certainly in London and other locations if you have a certain amount of public infrastructure it will help those people who want to buy an EV to have one.

[Sir Oliver Letwin]

Q Have you looked at the cost associated for a DNO in London, say?

Robert Evans: From our perspective, no, we have not. We know that UK Power Networks have done extensive study work in their projects, and we know from dialogue with Western Power Distribution that they have also looked at the same. Some of the councils here in London—for example, Hammersmith has a scheme that is looking to leverage the street lighting—

[The Chair]

Will you speak up a bit, please?

Robert Evans: Sorry. Hammersmith has a scheme that is looking to leverage the street lighting in order to provide charging for residents on the street. Part of that is largely around civil works and some of it is around the electrical works. The DNOs will be able to advise in these cases whether the low-voltage network needs reinforcing, but otherwise it is predominantly a matter of civils and equipment. Members are developing charge points, and have charge points, that can charge from street lighting, albeit that the power supply to that lighting is limited.

[Sir Oliver Letwin]

Q Has UKPN done an analysis?

Suleman Alli: Yes. It is very difficult to give you a definitive answer on the exact cost. The reason why it is so difficult to do that is that in order to come up with a cost, you have to understand the impact that it is going to have on the network. To understand the impact on the network, you have to understand when people are likely to charge, where they are likely to charge, the amount they are going to charge and the type of charger they are going to use. There are multiple permutations of that.

The only approach that we thought was appropriate to consider was to look at scenarios. Our peak demand across our three networks is around 15 GW. We think that up to 2030, when we might have between 1.2 million and 2 million vehicles, their peak demand could be between 2 GW and 5 GW—so between 10% and 30%. If you think of our track record over the last five years, we have connected 5 GW of distributed generation on our grid. That is equivalent to one and a half Hinkley Point Cs, without much fuss or bother. We have until about 2030 to work out how we are going to do this. My view would be that we are not complacent, but we are confident that we are going to come up with some solutions.

We think the Bill as it is currently presented provides us with a lot of help. In order for us to understand the impact, you need the visibility and the smart charging functionality. If you have the smart charging functionality combined with smart tariffs, you can start actually to deliver the infrastructure at lowest cost. I am sorry that I do not have an exact number for you. Anyway, if I did give you a number, it would 100% be wrong—but we are doing a lot of modelling and work to understand what the permutations are.

[Sir Oliver Letwin]

Q Have you looked at the other side of the coin—the peak locked-in capacity of the cars that are attached at a given time of day, say in the mornings or evenings, that could be used as a sort of battery resource?

Suleman Alli: That is a really exciting area of development at the moment. We are looking at it. As part of the Innovate UK funding, we are going to be supporting five EV trials, one of which is including a vehicle to be trialled with Nissan.

If you look at where distributed generation is connected in the UK today, it has mainly been at grid scale. A lot of our research on storage has been focused on grid-scale storage. We commissioned the largest battery in the UK at the time, 6 MW or 10 MWh, and we are very clear that storage can help peak shaving for the distribution networks at grid scale. We think that same concept can be applied to vehicles, but the trials need to take place for us to understand it fully. That is happening at the moment.

[Sir Oliver Letwin]

Q When do you anticipate results from those trials?

Suleman Alli: I believe within the next 12 to 24 months. We are looking abroad as well at other countries to see how we can generate learnings from those trials. Certainly, in the next 24 months we will start to see concrete evidence that we could present.

[Mr Hayes]

Q I wanted to bring up two or three things. The first is that you presumably agree with the changes we made from the first Bill, which was the forerunner of this Bill—the Bill that did not make the cut before the election. You will remember that what we have done this time is clarify the definition of automated vehicles, as a result of previous scrutiny. We have tightened that definition. How important do you think that is in providing confidence to the industry in respect of further developments?

Robert Evans: Automated vehicles are not strictly my area of operation, so I find that that is something that I cannot strictly answer.

Marcus Stewart: In some of the work that we have done when we have projected forward and looked at various energy scenarios, we see automated vehicles as having an impact on total energy usage. More automated vehicles, and clarity around the question, will allow different business models to come forward. Car sharing is more likely as part of that, and that will reduce the overall demand on the energy system, but we believe that it is still quite a long way out—maybe 2030-plus—before we start seeing any significant impact from that.

[Mr Hayes]

Q In terms of electric vehicles, I take it that the availability of a robust charging infrastructure is critical to the further take-up of those vehicles. I know there are other barriers to entry—market price, reliable battery technology and so on—but presumably in your view the charging infrastructure is an important part of encouraging more people to buy electric.

Robert Evans: Yes, absolutely. This is part of a process that the Government have played a key role in seeding—the introduction of charging in key locations and providing support to Plugged-in Places and now to the Go Ultra Low cities and others, to create exemplar projects and to encourage the roll-out of infrastructure. Making that infrastructure visible is a key part of reassuring people that owning an electric vehicle is a good thing. Being able to have a home charger, with support from the Government, that meets very high technical standards is also really important, so that people are not charging their electric vehicle from an extension cable or similar on a three-pin plug, which we would not advise.

The Government have played a very important part in dialogue with industry about the process of seeding. Now we are in a situation where we have more than 100,000 electric vehicles on the road, and the car industry is committing to introduce the vehicles, and so the roll-out of infrastructure is occurring largely with market forces, in the sense that businesses and locations are realising that they need to have charging as part of their offer. If it is a tourist destination, it wants to have electric vehicle drivers come to its location rather than another one, and so on.

We have good momentum, but it is still really important that where there is workplace charging, for example, we get conversion of people who work at that location because they see that there is charging that they could use, they start to think and then they buy electric vehicles. We thoroughly commend the Government’s workplace scheme, because we can see the catalytic effect that it is having.

[Mr Hayes]

Q Finally, we heard a lot earlier about the development of skills. The point was made across the Committee that we need a co-ordinated process by which we encourage the further development of relevant skills as the technology moves on. What is your thinking about that? Clearly, the industry is doing a lot of work on skills, but how can we more effectively accelerate the acquisition of the necessary skills so that we are not left in a situation where this technology can be serviced at only a very limited number of places?

Robert Evans: Skills is one of those challenging areas where we have a plethora of schemes. I was told that there are currently about 220 different skills initiatives for the motor industry. The challenge is not necessarily to create another skills initiative, but to work out how best to blend the relevant content into existing initiatives. Certainly on the garage side of the motor industry, greater skills or a spreading of skills for mechanics and engineers in terms of them being familiar with and able to operate on electric vehicles would be helpful. There is a general skills shortage in the motor industry, and that is something that training and development at a local level can assist.

[Mr Hayes]

Thank you.

[Iain Stewart (Milton Keynes South) (Con)]

Q Following up on the question asked by my right hon. Friend the Member for West Dorset, I have a question about the capacity of the grid to cope with the expected increase in demand, and in particular the timing of that demand. While researching for the Second Reading debate, I came across an Atkins report that draws on findings from the Energy Technology Institute that peak demand is likely to be in the early evenings—particularly Sunday evenings—and that that could increase demand on the grid by 10 GW, or 20%, at the time when it is least able to cope. Is that a finding that you recognise?

Marcus Stewart: One of the key things that affects the impact on the grid is people charging their cars. Smart charging is absolutely key to mitigating that. I will give you some examples from the work that we have published. We published our “Future Energy Scenarios” report in July. In a high-growth scenario that aligns with the Government’s target to ban sales of diesel and petrol engines in 2040, we would expect to see around 9 million electric vehicles in 2030. That would add something like 17% to peak demand, which occurs on a Monday or Tuesday evening in the winter, if there was not smart charging. If there was smart charging and people responded to that through time of use tariffs or other incentives, that could be reduced to around 6%. How people charge and how they are incentivised to do it has a real impact.

At the moment, the technology exists—the charging posts that have been put in have that technology—and we support the measures in the Bill to ensure that all charging points have that capability, which would make a significant difference to how easily electric vehicles are accommodated by the network nationally and locally. Smart charging is absolutely key, and we support the approach in the Bill.

[Iain Stewart]

Q Are you content, given the content of the Bill, that the industry will come up with those incentives itself, or will there be a requirement for further guidance or direction?

Marcus Stewart: I believe that the industry, in terms of energy suppliers, will offer smart tariffs. We have already seen that; OVO has published a proposed smart tariff that will actually support vehicle-to-grid when that becomes available. The market is likely to respond. There are also changes in the electricity market around billing for half-hourly meter reconciliation, which will drive the supplier to optimise their portfolio and to offer similar types of tariff. The mechanisms are there to make that happen. At the moment there are only 100,000 to 120,000 electric vehicles, so there is a very small impact, but when we get to millions of cars, we need to have that smart charging capability. People in the market are seeing that opportunity already and want to participate in that. Having the framework and rules that facilitate that and mandate the technology and infrastructure will go a long way to facilitating that.

Robert Evans: I would just like to add that on the one hand I am very reassured by my colleague’s contribution, which recognises that this is a market opportunity and that we have members who are very keen to provide the charging technology and the market mechanisms that would allow a motorist to make their electric energy—their battery—available, so that they do not charge at night, but they can provide power back to the grid when it is needed and manage those smart services.

We are concerned about mandating a specific technology. There is a context around the Bill that says it will mandate a certain technology or approach. We would like to see a recognition of the need to create a market rather than have a situation where, for example, a DNO can effectively turn off charging for somebody because they feel that that is necessary under certain conditions without involving the motorist or without market mechanisms coming in in the first place. We are particularly keen that this paves the way for a market-based approach. We welcome variable tariffs and vehicle-to-grid technology and we see the storage of electric vehicles as exactly what you need in an energy system with a high element of intermittency, as we add more and more renewables. The storage element is going to be a lot more valuable and there need to be market mechanisms to unlock that, rather than a mandated approach that is purely a situation where someone can turn off as they choose to, without the motorist or business—

[The Chair]

Thank you very much. Alan Brown.

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

Q On the smart grid that we are aspiring to, the panel has already alluded to the fact that they think smart charging will come by market, but there is a lot more that the Government need to think about in the wider energy mix, because there is also decarbonisation of heat and further decarbonisation of electricity. There is the future scenario of an influx of electric vehicles, but a whole lot else is going on in the energy mix as well. The point is to make sure that is all captured to get the smart grid we need.

Marcus Stewart: We see smart charging for electric vehicles as a key starting point for that. You can get smart technology in your home today—smart thermostats, for example. Commercial premises have smart air conditioning and smart lighting that help to balance their load and can provide services back to the grid today. An electric car will be the biggest asset in the home that uses energy, unless you convert to heat as well, and that will have a big impact on the system. Making that smart at the start is the right thing to do.

Suleman Alli: It is a bit like the concept of offset mortgages in the financial services sector, where you pay your salary into an account and that offsets against the mortgage interest you pay. We are starting to see a new business model emerge where people say, “We can give you price certainty or reduced energy bills if you plug your vehicle in and allow us to provide services to the wider network operators or the system operators.”

I think the market will innovate and start to provide those services. We are already seeing that in the internet market, for example. Some of the trials we are doing will look exactly at that area. It is intuitive for us to think that if you have an electric vehicle you are going to go home and plug it in straightaway. The research that we have undertaken shows there is a diversity. When you have a large population of EVs, not everybody goes home and charges at the same time. In fact, we have seen about 30% of the impact materialise—of the capacity of charge that has been installed. There is an element of diversity that we incorporate into our planning that is based on evidence from the trials we have undertaken.

[Alan Brown]

Q Can I ask one more question about the model scenarios? You are modelling how many vehicles might be coming in, among other things. Is that based on mass volume modelling, or does it look at existing restrictions in the network and at where the uptake might be? Clearly, uptake depends on the roll-out of the charging system and some local authorities in some areas are much more at the forefront of that than others. That potentially impacts their work as well.

Marcus Stewart: I could talk about how we would do that. The primary reason to do it is to understand what network capacity expansions and reinforcements are needed on a national level. We will have different assumptions for different locations, where we have evidence. For example, there may be clustering in cities that we will make assumptions around. I imagine that the DNOs will look at similar things for their networks as well. We look at it on a spatial basis; it is not just a single-number basis.

Suleman Alli: What we are looking to do, particularly with electric vehicles, because there is a lot of data available out there, is try to apply much more advanced analytic techniques. For example, how can we marry up Land Registry data, which gives an indication of people who might have driveways, together with Acorn data about people who might be more able to buy an electric vehicle, together with data on charge points, in order to get a better and more granular view of our network? That is what we are doing at the moment to improve our planning.

[Alan Brown]

Q So it is a live, ongoing process.

Suleman Alli: Absolutely. I do not think we can ever say we are done.

[The Chair]

Thank you. We have a lengthening list, so let us have one question and one answer.

[Stephen Kerr]

Q Are there global standards within the industry for the connections between the cars and the charging equipment? Is there a global standard for the charging equipment? Should there be a universal way of connecting, so that you do not travel somewhere and find you cannot plug your car in? Should there be a railways gauge Act for electric cars, so that we get that uniformity?

Robert Evans: There are standards. There has been a difference between a Japanese product coming to a Japanese standard versus a European product coming to a European standard. Charge points typically have several connectors to accommodate different vehicles. That has been the simple solution.

[Stephen Kerr]

Q Should there eventually be one?

Robert Evans: I do not know that we in the UK can necessarily say that this is the charger that is required for the global motor industry to produce. In the past, the Office for Low Emission Vehicles has set grant funding regimes that encourage particular types of charger because they are better for safety and for the motorists’ general use. That is to be commended.

[Stephen Kerr]

Q You do not see legislation playing a part in this?

Robert Evans: At this stage I would say that was not necessary.

[Scott Mann (North Cornwall) (Con)]

Q A couple of my questions have already been answered. One was on the car-to-grid technology and the other one was on peak capacity. I want to ask the National Grid this: does your grid mirror some of the main arterial roads that run through the country? How effectively could you put your grid capacity into locations? I am firmly of the view that we should not necessarily assume that we want all the charging points to be in current service stations—there might be opportunities outside the existing ones—so how easy will it be for you to deliver that with your current grid locations?

Marcus Stewart: The high voltage network does mirror parts of the motorway network, but not all of it. There will be locations where there is a clear opportunity to build a connection for high voltage to supply charging, and there will be other locations where it is just not that simple. It has to be looked at on a case-by-case basis. Some of the options around that are maybe connecting at a lower voltage tier but using onsite storage, so you are not taking too much stress from the grid in one go. You are managing exactly the same as a petrol station does today, where it fills up a tank of petrol under the ground and feeds it to the cars as they need it.

We have talked to different developers and people who are looking at those kinds of options, and we describe it as a sort of mosaic of different charging routes out there. One of them could be high voltage input, with 350 kV of charging, backed up with a megawatt-scale battery to minimise the connection to the grid and that impact.

[Scott Mann]

Q I have one small supplementary question, if I may. Do you see yourselves as being an end-to-end provider or do you see other companies coming in to fill that middle gap?

Marcus Stewart: From a national grid point of view, my role is to balance the network and ensure that the energy is balanced. We have a transmission owner part that would own the high voltage network, and certainly the element up to a connection. Anything beyond the connection is available for third party competition. Any service provider could put that in. A deregulated version of the National Grid or another third party could put that in. Our primary role is the reinforcement element upstream to support that.

[Mr Hayes]

Q On the back of that, between you there is immense expertise in managing complex systems—I have read your CVs. On the issue of grid management, earlier today we heard a call for some kind of co-ordinated approach on where charge points were located to ensure their spread, and to ensure that there were no areas that would become black holes where there were not enough charging points. Presumably, any such co-ordinated plan would need to be married to the supply of electricity via the grid. The Bill does not yet do this. It is a first step down this road, and it simply increases the number of charging points. Do you see the sense of putting together a co-ordinated national strategy that ties together the provision of the charging points with the provision of the power?

Marcus Stewart: I think it would have some merits. I am not sure whether it needs to be mandated or not.

[Mr Hayes]

Q I was not necessarily suggesting that it ought to be mandated; I was simply arguing that it might be facilitated. There could be a co-ordinated approach that might facilitate—this is the word that was used earlier—both the provision of charging points and the other considerations.

Marcus Stewart: It certainly makes sense to look at where there is good capability on the local or national network, and to consider that in respect of good accessibility for people; for them to be able to come in, connect and charge up their cars. I would expect those to be offering the early take-up points. Effectively there would be a least cost route to getting fast charging points delivered, in particular. A number of parties would have to come together and look at those opportunities: the National Grid, local network operators, charge point owners, service station owners and people like that. That would make sense.

[Matt Western]

Q I was interested in what you were saying about the workplace uptake, the conversion and how it switches people. Do you think we are doing enough—with all the housing developments and the local plans being put in place across the country—either to mandate or to encourage a rapid and widespread adoption of electric vehicles?

Robert Evans: The answer is no. We are not doing enough.

[Matt Western]

Q What could we do?

Robert Evans: Two different things. One is that the size of the power cables running into new developments is typically capped by the developer or by processes, so it is not built to add further capacity at later dates. That is what charging would require, so that is one part of the equation. The second part would involve effectively putting wiring in new homes in such a way as to ensure that a charge point could easily be added. We have repeatedly asked about this but been told that even putting a smoke alarm in some houses is too much for some developers. Any additional input in that area would be very welcome.

[Matt Rodda (Reading East) (Lab)]

Q Air quality is a huge issue, particularly in many urban areas and some other parts of the country. What do you believe could be done to increase the roll-out and take-up of electric vehicles in urban areas to help tackle the problem of air quality?

Suleman Alli: From our market, first we need to engage with people to talk about range anxiety. It is down to motor manufacturers to produce vehicles with a longer range. The second thing is availability of charging infrastructure. We have certainly seen an increase in activity from both TfL and local authorities in wanting to understand that more effectively, and we have done a lot of engagement with local authorities to demystify the process and explain what the costs are likely to be. The third thing is just the up-front cost—the capital cost—of buying a vehicle. There is no silver bullet; we would need to do a range of things to increase adoption.

[Matt Rodda]

Q If you do not mind, I will ask a brief supplementary question. Those points all sound very valid, but they may apply to the whole country. Are there specific measures that you would suggest the Government ought to be considering for urban areas?

Suleman Alli: In urban areas, where people do not necessarily have a driveway and perhaps live in flats, they have to have provision of charge points on the street for on-the-go charging and destination charging—at railway stations, supermarkets and so on. In urban areas you would need to identify those locations—car parks and so on—that have the space to provide destination charging. In that case, it would probably have to be rapid charging to provide the charge that you would need.

Robert Evans: We would be very keen as an industry to work more closely with the DNOs for the roll-out of the charge points, but also the grid reinforcement needed to get charge points in strategic city locations. For example, London, with UK Power Networks, has provided support that has effectively created locations where the power is available for rapid chargers to be deployed. The same is happening in other Go Ultra Low cities. We would like to have a partnership approach whereby we could work with the DNOs in particular cities to make sure that we could get infrastructure in strategic locations. [Interruption.]

[The Chair]

Given that there is now a Division, I think we can let you go, because it would be unfair to keep you. We will start straightaway in 10 minutes with our new set of witnesses. Thank you.

15:41

Sitting suspended for a Division in the House.

Examination of Witness

Quentin Willson gave evidence.

15:53

[The Chair]

We are now quorate, so we can hear from Clive Efford, but first I should say to our witness, as I do not want to be rude, that perhaps you should introduce yourself.

Quentin Willson: I am Quentin Willson, motoring journalist and television presenter, who has been an electric car advocate for the last seven years. I advise and help OLEV and Go Ultra Low, promoting electric car use among the public. I have done 50,000 miles under the wheels of electric cars over the last seven years, and my day-to-day car is a Nissan Leaf.

[Clive Efford]

You certainly look good for having done 50,000 miles “under” the wheels.

Quentin Willson: Absolutely!

[Clive Efford]

Q Anyhow, this is about automated vehicles. When automated vehicles and conventional vehicles share the roads, will the question of who is liable for accidents become more complicated?

Quentin Willson: Enormously complicated. It is not my area of expertise, but the question I would ask is: can they co-exist peacefully? Can the connected and the unconnected in the UK’s very limited road space exist? Can those cars that drive themselves be allowed to co-exist with the cars that are driven by human beings? Will there necessarily be some friction during that period? I think that in the short to medium term, it is going to take some time.

[Clive Efford]

Q Do you think that the legislation goes far enough on that? Do you think that there should be more in the Bill?

Quentin Willson: I think we need to be very careful that we know exactly who is liable, because there will be quite a few accidents, whether it is the manufacturer, driver, network provider or road provider. It has to be established very early on.

[Clive Efford]

Q Can I move on to this issue about the transition from automated vehicle to a person taking over? We have heard various descriptions about the length of time that might take. You say that we need to be clear about the moment that the driver becomes responsible and the software is not, but is there an issue around safety caused by that transition?

Quentin Willson: Inevitably you will get a feeling of complacency, of reliance on the technology, and if there is an emergency situation or you leave the automated road system to the non-automated road system, you will have to have that moment of what we call extreme alertness. Consumers need to be trained for that and we need to be ready. If that is a legal transitional moment, where you take the wheel having been driven autonomously, that could be an issue as well.

[Clive Efford]

Q On the moral issues that are raised by algorithms that control these vehicles at a time when there is an accident, a scenario I used earlier on was that of a child stepping out in front of an automated vehicle, and to the left there is oncoming traffic and to the right there are pedestrians on the pavement. How do you legislate what you require of the vehicle in those circumstances?

Quentin Willson: I do not think that artificial intelligence will ever be trained to be able to make those moral decisions, and when we take a driving test we are not trained to make them either, so it is a difficult area to think we can resolve. Can we ever expect artificial intelligence in an automated car to make that split-second moral decision between the child in the pushchair or the old people in the Nissan Micra? I do not think we can. We are not trained to do that and we cannot. It is a split-second thing that happens and legislating for it would be enormously difficult.

[Clive Efford]

Q So what will happen?

Quentin Willson: I am not an expert on artificial intelligence in cars at the moment, but it will be, depending on the sensors, the object that has the least resistance.

[Clive Efford]

Q I will leave it there. One last question on what is driving this forward—that was not an intentional pun. Is it the desire of companies that employ large workforces that drive vehicles which are striving for automated vehicles, or is it the demand from the public, which wants to sit comfortably behind the wheel and not have to think too much for long journeys?

Quentin Willson: It is driven, I guess, by the fact that there is a huge world of opportunity here and that is predicated on the fact that people do not like driving anymore—there is congestion, it is expensive and it is difficult—and on the rent economy, whereby you summon an automated car on your smartphone and it comes to your door. When you look at the research, that is very attractive to the public. The golden era of getting pleasure from driving cars has gone, and I say that with some regret, but it is a fact. There was a survey by Catapult in Milton Keynes which asked this question: if you were to replace your current car with an autonomous car—we are not going to tell you what it is or what it looks like—would you be prepared to change to that autonomous car? Some 58% said that they would change to the autonomous car without knowing what it was, simply because of the liberation of not having to make those decisions and sit impotently in snarling traffic. It is partly driven by commerce and partly by the public.

[Alan Brown]

Q Is the Government’s target of 2044 for zero-carbon new cars ambitious enough?

Quentin Willson: I sat before this Committee a year ago and was broadly optimistic about the short and medium-term future of electric cars. I think Michael Gove’s announcement in July, coupled with Sadiq Khan’s T-zones and ClientEarth’s relentless pushing on air quality issues, has terrified consumers. It has wiped probably £30 billion off the value of diesel cars. Lease companies are now looking at a collapse in the residual values of the cars that they lease to consumers on personal contract purchase. We are looking at a real issue in the short to medium term.

The consumer now feels that he or she cannot buy a diesel car; we have seen sales of diesel cars absolutely collapse over the last quarter. They are feeling, “Right, I’ve got to buy an electric car.” We need to manage their expectations. I am quite concerned that people who rely on one car as the family vehicle will go out and buy, like me, a second-hand Nissan Leaf for £10,000. That is great, but we must understand that those cars’ ranges are nowhere near viable for an everyday, use-it-all-the-time car. They are a wonderful urban solution, but long journeys—anything more than 100 miles—are really difficult. I came down here in an alternative car; I had to leave my Nissan Leaf at home, because getting here would have required three stops to charge.

It is about managing consumer expectations. Otherwise, this whole thing will go horribly wrong. The new Nissan Leaf, which I saw in Oslo last week on its launch, has a quoted official figure of 235 miles to one charge, but the Nissan engineers tell me that in reality, it is 175 miles for everyday driving. If you drive that car on the motorway at 70 mph, that will fall to about 130 or 140 miles. The technology of the lithium ion battery still has some considerable work to do.

Again, it is all predicated—the mass adoption of electrification in the short to medium term—on having better battery density, maybe of alternative materials such as graphene, and a very robust charging infrastructure network. I am not talking about on-street chargers; I am talking about charging hubs like petrol stations, with 20 rapid chargers that can charge 20 cars in 40 minutes. That is the only way that mainstream consumers will be able to do any form of distance. They are wonderful for town work, but if you are doing more than 100 miles, you are still compromised.

[Alan Brown]

Q To follow on from that, it is interesting what you say about the conundrum of managing consumer expectations so that people do not buy a vehicle that might not suit their purposes. Going forward, when the technology allows, given that it was UK Government policy that drove the flux of diesel vehicles, does there come a point when the Government should incentivise a diesel scrappage scheme to get that mass ownership?

Quentin Willson: I would rather spend that money on the NHS. Here is an irony: we talk constantly about air quality, but in the MOT, there is no proper smoke test, although it is called a smoke test. The particulates come out the back, and the MOT examiner will fail the car if it loses rearward visibility. If you cannot see out the back when the car is accelerating, it fails. That is why you see all these cars puffing out black particulates. If we stiffened up the MOT with a proper particulate test and then automatically scrapped these cars, a lot of which are old and worn out and pollute much more than we realise, we would not have to finance a scrappage scheme. Consumers would realise, “This car is knackered; it’s got to go anyway.” But at the moment, there is no mandate against either petrol or diesel cars that really pollute.

Again, on the air quality debate, I am not sure that we will solve urban air quality with electrification alone. Even though we get massive amounts of people driving electric cars in cities, we still have 30% of particulate and NOx from industrial combustion, 20% from domestic combustion, 14% from ground machinery such as diggers, trucks, dumpers and cranes—these are London Assembly figures—5% from HGVs, 8% from vans and 9% from buses. We do not know the contributions from aviation and shipping. Certainly in London, with 20 million tonnes of stuff coming in on the Thames tidal, the fact that that is not even quantified worries me greatly. We do not want the unintended consequences of this not to affect air quality significantly and, in the meantime, blow the GDP of a generation while doing it. That is my worry. The fact that we do not know enough about this, and that it is being pushed and pushed and terrifying consumers, is of great concern to me.

[The Chair]

Thank you for that admirably clear answer.

[Rosie Duffield]

Q You talked about getting drivers behind this because they know it is the right thing to do, and that drivers are frightened. We are also trying to meet the environmental targets that the Government have set. Knowing car enthusiasts as you do, do you think that people will ever feel as enthusiastic and fanatical about electric vehicles as they do about Ferraris or other exciting cars?

Quentin Willson: That group of car enthusiasts is quite small now. It is a very small percentage of the market. Most of us just see the grim business of getting from A to B as a necessity. As I said earlier, the idea of the open road with your Porsche 911 is a golden age that has passed. The Tesla P100D is the fastest accelerating car in the world. It does nought to 60 in 2.4 seconds. It is faster than a Ferrari, which is great. But in terms of mainstream electric cars, I think it will be a while before your hardcore car enthusiast really likes them. We have a big Clarksonesque blockage here—he does not like electric cars or the people who drive them—but I think he is an irrelevance and so are those car enthusiasts.

Our concern should be mainstream consumers who have to get to work, to school, to the shops and to hospitals. We have to make it easy, effective and inexpensive for them but also give them that range. Until we get rid of range anxiety through better infrastructure and battery technology, that will not happen. What will happen is that they will buy hybrids that will do 20 or 30 miles on electric but the rest on petrol. That does not really solve the problem, does it? The people in the Mitsubishi Outlanders who hog all the charging stations will do maybe 20 miles on electricity and the rest on petrol. Again, that is something we need to manage. We need to look at the far reaching, perhaps unintended, consequences of the decisions that we are making now.

[Mr Hayes]

Q Thank you for coming again; you will remember that we had an exchange when you came to the evidence session on the previous Bill. One would accept your view that we will not switch to electric vehicles overnight. Clearly, we do not want to eliminate the use of older classic vintage vehicles—my right hon. Friend the Member for East Yorkshire challenged me on that on Second Reading—but surely there is a good case for taking advantage of the improved battery technology, the greater affordability of electric cars as volume grows, the smoother ride that they give, and their many other virtues. I do not claim that electric cars are nirvana, but given that this will not happen just like that and some allowance will need to be made for the older vehicles that my right hon. Friend champions, surely you acknowledge that it is likely to happen and in the end it is quite a good thing?

Quentin Willson: I agree. The older classic cars are a tiny proportion and their emissions are a raindrop echoing in an ocean because they are used so seldom—some for only 200 miles a year. We should not worry about them.

Mass electrification is coming, but until I see a step change in battery technology, we will not be able to give consumers the beatific vision of 300 to 350 miles to one 40-minute charge. Will that come by 2040? I do not know. You have heard from the car manufacturers. Will we be able to accelerate that technology? It is good that the Secretary of State for Environment, Food and Rural Affairs has given the 2040 cut-off date, because up to now they have broadly been compliance cars made to keep emissions down for EU regulations. Manufacturers will be throwing everything they can at developing batteries, but someone like Jaguar Land Rover does not really have any electric product at all, and Mini has only just scrambled together one electric Mini that does not have a brilliant range. They have a lot of work to do to get to that level. It has taken us 100 years to get to the efficiency of the combustion engine as we have it now. I know innovation is not linear and it will start to climb up, but we need to understand that if we do not give consumers that 300 to 350 mile range, it is going to be very difficult. You see Teslas strolling down the motorways, because they do 250 miles to one charge. That is great, but you never see a Nissan Leaf—think about it.

[Mr Hayes]

Q Let us follow the logic of your argument. I agree the battery technology is a key determinant of take-up, as you described. Clearly, capital prices are a big issue too, and we have supported that over some time, but we acknowledge that until we get volumes up, prices are unlikely to fall significantly, in the way you describe. The third thing is the charging infrastructure. Confidence about being able to recharge on long journeys is critical to people’s acceptance of the technology. We have agreed that the move to electric is rather a good thing and we excluded the tiny number of vintage vehicles and classics. Do you acknowledge that the Bill is at least a step towards that? It begins to put together a framework of legislation when it takes account of infrastructure that will at least deal with one of our three shared perceptions about barriers to entry.

Quentin Willson: Completely. We have a lot more consumer awareness to do. I will be doing events with a shopping centre group across the country where we have consumers coming and they have test drives of all these electric cars, plus everything you ever wanted to know about electric cars but never dared to ask, on stage. Go Ultra Low and OLEV do great work; I think we could do even more, but we could also incentivise universities to come up with technology. Danny Alexander and I talked about a battery prize of £10 million. Let us make it £50 million for the real world-class development of a battery that is lightweight and not dependent on rare earth metals. Half the cobalt in the world is in the Democratic Republic of Congo—that terrifies me.

If you can come up with the technology that creates this new, wonderful, miracle battery, then we lead the world and a lot of these problems just disappear, but we need to accelerate that process. The two things—the infrastructure and the battery technology—really need to run, because at the moment we are running too fast with this, because the technology is lagging behind. It is absolutely laudable that we do what we do and put the legislation in place and prepare consumers, but we have to make sure that that technology can support long journeys.

I am afraid you cannot expect consumers just to charge at home at night. They cannot do it. They will want to make journeys. This morning I got into my Nissan Leaf; I had 80 miles on the charge after an overnight charge. It was cold, so I had to defrost the windscreen and put the heater on. I took my daughter to school. The charge went down to 55 miles. If I wanted to go anywhere else, I would have to stop at the end of the 55 miles and charge for 40 minutes, if I could find a rapid charger. If I could not, I would have to do two or three hours. Realistically, we cannot expect consumers to do this in the short to medium term.

[The Chair]

Thank you very much for your evidence, Mr Willson. As the owner of a beloved 25 year-old BMW, I am grateful that classic cars have a future. Sir Greg Knight will be even more grateful as he is the owner of several vintage cars.

Examination of Witnesses

Denis Naberezhnykh and Stan Boland gave evidence.

16:14

[The Chair]

Welcome. Would you like to introduce yourselves, please?

Stan Boland: I am Stan Boland. I am the CEO of a start-up company called FiveAI. We are building a driverless car system, which we hope to trial in London by the end of 2019.

Denis Naberezhnykh: My name is Denis Naberezhnykh. I am head of ultra low emission vehicles and energy at the Transport Research Laboratory. We work with industry and Government to help to introduce new technologies such as electric and automated vehicles.

[Karl Turner]

Q I have one really quick question on safety. What are the safety implications for blind pedestrians, runners and people of that nature?

Stan Boland: Safety is the start and finish of whether we can bring these cars on to the streets. A huge amount of attention will be focused on making these vehicles safe, in our case, for use in urban environments, where we will have all sorts of obstacles and agents with all sorts of different behaviours. That really centres on having systems that are able to perceive what is in the scene accurately in 360° and three dimensions and classify what those objects are.

This also talks to predicting what will happen next. We actually have to predict human behaviour, and we have to learn what those behaviours might be ahead of time. Our vehicles will certainly have to be state of the art for perception, but they will also have to be very good at predicting human behaviours. In the case where we identify an object and can tell, just like a human can, that this person, cyclist or whatever it turns out to be has a certain type of behaviour, we will have learnt those ahead of time, and if we are not sure, we will have to propagate that uncertainty through our software and slow down.

The behaviour of these vehicles will be slightly different to that of human drivers, but it will be possible to attain the levels of human safety, and in the long term surpass them, by applying technology. Our systems can pay attention in 360° all the time, and that makes it a bit different to human drivers.

[Clive Efford]

Q What will be the limit of the speed that your vehicles can travel at in an urban area?

Stan Boland: We are kind of hoping that we can operate at normal driving speeds. To be able to do that, it is important that we can predict behaviours. We cannot have a system that is collision-avoidance only, because that would result in frozen robots all over the city and would make congestion worse. What we humans do is anticipate human action. We actually run more than one world in our heads, and are constantly looking to see whether that world is turning into reality or some other world is going to happen. That allows us to merge on to full lanes of traffic, for instance. We cannot just have a system that is collision-avoidance only, because we would make traffic worse. The idea is that we are operating in normal streets with normal road signs at normal road speeds and obtaining and exceeding human levels of safety.

[Clive Efford]

Q In 2019, your vehicles would be the only automated vehicles on the road.

Stan Boland: At that point it is a trial, so there is a safety driver in the car. The safety driver is able to take control of the vehicle immediately.

[Clive Efford]

Q Immediately?

Stan Boland: Yes. The safety driver has to be there, literally able to take control of the car instantly.

[Clive Efford]

Q All the research that I have seen in preparing for this Committee shows that there is a time lag in the transition from the vehicle being under automated control to being under driver control. Your vehicles will not have that.

Stan Boland: You are describing what is called level 3 autonomy, which is a system where the car is under automated control and then there is a warning to give a human driver time—there is a debate about what that warning time should be—and then the human is meant to take over. We think that system is intrinsically unsafe. It is much better if either the human is in control or the system is in control—that is a fully automated, level 4 or level 5 system. We are building a system where the cognitive capability of the car is in control, but for the purpose of testing, until it is actually legal to offer that service, there will always be a driver in the car who can take over instantly.

[Clive Efford]

Q But there is an issue about when drivers take over from automated vehicles: they are over-cautious and slow down. There are concerns about whether that is dangerous at that moment in time and also it increases congestion because you suddenly have loads of slow-moving vehicles. You seem to be suggesting a flick of a switch and that it goes from driver to automated.

Stan Boland: While we are testing it. We are talking about a period when we are testing the capability of the vehicle in our existing cities. It is level 4—a highly automated or fully autonomous system—but for the period between now and a regulatory capability of doing this and, moreover, underwriting the risk of it, we have to have a driver in the car to take over.

[Clive Efford]

Q As the legislation is drafted, as long as somebody insures you, there is nothing stopping you putting that vehicle on the road for an experimental period in 2019.

Stan Boland: As long as there is a safety driver who can take over the car. That is not the same as somebody watching a Harry Potter movie while the car is self-driving. We are talking about a qualified driver who is paying full attention to the road scene all the time and can take over.

[Clive Efford]

To test—

Stan Boland: To test the vehicle.

[Sir Oliver Letwin]

Q To follow on from the hon. Member for Eltham, you are talking about level 4 rather than 3. Do you envisage that the machine’s design will be able to engage in autonomous conduct on every kind of road from the very first moment that they are launched?

Stan Boland: No, that would be a definition of level 5 in our parlance: something that could literally drive anywhere on the planet and be able to work out what every object was, what the semantics of every scene was, and the human behaviour in that part of the world, so we are definitely not saying that.

[Sir Oliver Letwin]

Q So a level 4 vehicle has some of the aspects of a level 3 vehicle, in the sense that there will be certain road conditions and certain kinds of roads where it needs to hand back to the human driver.

Stan Boland: No, I think it would stop in that case. In the behavioural model, we were able to bring up a system that works in a defined geography and in defined driving conditions, but if one day the place is completely wiped out with snow, we probably would not drive on that day. Our business model is to deliver a service. It is a service model.

[Sir Oliver Letwin]

Q So I am driving along a motorway where your system is happy. I diverge on to a trunk road where your system is happy. I move from the trunk road on to a B road where your system is happy. It is a somewhat rainy or snowy day. I get on to a one-track road in my constituency and your machine suddenly decides it is not going to get me to my home.

Stan Boland: No, that is not the model at all. First, you would not buy one of these cars. This is a shared form of mobility that is offered in cities. You would not buy it because the sensors and the compute you have to put in that car make that prohibitively expensive. It adds some £30,000 to the car.

[Sir Oliver Letwin]

Q So these are city-only cars.

Stan Boland: City-only vehicles.

[Sir Oliver Letwin]

Q And they are available to drivers not as a vehicle, so to speak, but as a service on certain days of the year under certain conditions.

Stan Boland: Probably all days of the year, but there may be times when humans probably should not be driving, frankly. In those conditions our vehicles would not stop just like that, because that would be unsafe, but they would be able to be carefully brought to a slowdown to stop safely.

[Sir Oliver Letwin]

Q It is basically like not being able to get a cab.

Stan Boland: If you like, yes. We think there will in any case be remote supervision so that it would be possible for a control centre to be able to monitor any cars that are stopped and then perhaps carefully move them to some other place. We are expecting a remote control room with perhaps one per 30 cars or something that would be able to take over and carefully manage the car. We are also expecting the cars to have a limp-home system, so if there is a catastrophic failure there would be a limited amount of capability where the vehicles could—at quite a low speed and with warnings—find their way back to a service centre.

[Mr Hayes]

Q I have three questions. First, you made an interesting case in response to questions from my right hon. Friend the Member for West Dorset and the hon. Member for Eltham about what you see as the likely development in autonomous vehicles. I will put two scenarios to you, and I would ask you to describe the most likely one. There is an instinctive, intuitive view that autonomy will grow gradually, partly because that is more likely to lead to public acceptance. So rather in the way that assisted parking or sat nav or cruise control have become increasingly routine, other aspects of autonomy will be added to that. Autonomous vehicles will sort of creep on us.

There is another view that we may go straight to a kind of autonomous vehicle. Indeed I have looked at some of the R and D on that. As you may know, there is an entirely autonomous vehicle at Greenwich supported by Greenwich council, with some Government funding too. That is a vehicle that travels on a straight run of road that is entirely autonomous. You get into it, and it does what it says on the tin. Which of the two scenarios is the most likely, in your view? Or are they most likely to develop in parallel?

Stan Boland: They are developing in parallel today, so I think that is the state of affairs. The first of those can be characterised as the view of the German car industry, which is that these things will happen, but in 2035 or 2040. In the meantime we can just keep adding these features, keep selling people more features, and keep selling cars that people buy. However, I think the world was really shaken up by the challenges we saw in the 2000s and the emergency of Google cars and so on, as well as the idea that it was within touching distance for science to deliver fully autonomous capability in a relatively meaningful timeframe.

That really is the difference between level 2 and level 3 autonomy and what is really a huge jump to level 4 and level 5. Our entire business is predicated on level 4 and level 5 being the dominant model. We think that that is the dominant model for getting to a situation of safety in an urban environment. Significant amounts of algorithms, computer models, training data and sensors are involved in achieving this, which will considerably increase the cost of the car. We estimate that getting the car to human levels of safety will add a further £30,000 to £40,000 to its cost. That is not a car that people buy. That is definitely a service, and if it is a service then it is fully autonomous.

[Mr Hayes]

Q My second question is about software. We debated this to some degree today. Presumably, the challenge is to develop sufficiently sophisticated software to anticipate scenarios encompassing all kinds of different eventualities. An interesting question was put earlier by the hon. Member for Eltham about the element of human judgment in driving when faced with a dilemma, where you would hit traffic rather than a child, or you might swerve and possibly cause a more serious accident. The way that scenario planning is written into software would require hundreds of thousands of scenarios being tested. I know there is R and D being undertaken in this area. Would you briefly describe that to us?

Stan Boland: It is impossible to test all of that in the real world, and it would not be safe to do so. It has to be done as a simulation, which is the key to getting to the point where we have safe systems that can operate in our cities. We have to be able to simulate all the sensors on the car and all the different failure modes and so on. We have to simulate all the cases where our predicted models break down, or where somebody in the distance who is wearing a green pullover against a green wall with a reflective window near it cannot, for whatever reason, be seen in our systems. We have to be able to simulate those kinds of things—perception failures. We also have to simulate the extent to which we may not be able to predict human behaviours. We may never have seen a particular behavioural type before, and it may be dissimilar to anything we have seen before.

We have to do all that in simulations, so the money is invested in creating a simulated world that may be like the whole of London, photo-accurate for example, and it may be that we create generative models that allow us to create every angle of a road—instead of 43 degrees, it is 44, 45 or 46. Instead of five objects, there are six; instead of a certain kind of road markings, they are slightly different. We can basically generate all that in simulations, so we can drive potentially billions of miles in simulation ahead of that software actually going in a vehicle and being sent out on the road. That is the way we can really assure the safety of those vehicles—a heavy investment in simulation. It turns out that the UK is good at that. The UK is good at artificial intelligence, gaming and simulation, so we are in a good position to do that.

[Mr Hayes]

Q So you are not simulating what is, as I put it, a tens of thousands scenario; it is millions. It is the whole of London, in all weather conditions, in all circumstances, for all vehicles, in all eventualities.

Stan Boland: Exactly. We will find real cases in the real world which we will codify. We are working with TRL to do that, to deliver a curated set of regression test cases.

[Mr Hayes]

Q Thank you for that; that was fascinating. My final question is about skills. We debated skills earlier; Mr Turner raised the issue and I then amplified it. From what you are describing, and I discovered this in my early research, the car mechanic of the future will be a software engineer as much as he is a mechanic, and that is going to require a step change in skills. Are we ready for that, and if not, what are we going to do about it?

[The Chair]

We will have to have Ministers with proper skills in future too. Sorry, Mr Boland, please answer the question—that was just a facetious remark. This must be the last answer, because we might have multiple Divisions.

Stan Boland: We definitely need more software engineers as a nation anyway, so we are probably not ready for any of this in terms of the total number of skills that we need to go alongside companies the size of Silicon Valley companies, but I think there is a kind of rarity about what—[Interruption.]

[The Chair]

Order. Thank you. I apologise, but we have been interrupted.

Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)

16:33

Adjourned till Thursday 2 November at half-past Eleven o’clock.

Written evidence reported to the House

AEVB 01 Anthony Beken

AEVB 02 Simon Canfer

AEVB 03 S Richards

AEVB 04 Professor James Davey

AEVB 05 International Transport Workers’ Federation (ITF)

AEVB 06 RAC

Nuclear Safeguards Bill (First sitting)

Committee Debate: 1st sitting: House of Commons
Tuesday 31st October 2017 Public Bill Committees

The Committee consisted of the following Members:

Chairs: † James Gray, Steve McCabe

† Blomfield, Paul (Sheffield Central) (Lab)

† Bradley, Ben (Mansfield) (Con)

† Carden, Dan (Liverpool, Walton) (Lab)

† Debbonaire, Thangam (Bristol West) (Lab)

Gibson, Patricia (North Ayrshire and Arran) (SNP)

† Gill, Preet Kaur (Birmingham, Edgbaston) (Lab/Co-op)

† Harrington, Richard (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Harris, Rebecca (Castle Point) (Con)

† Harrison, Trudy (Copeland) (Con)

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

† Lewer, Andrew (Northampton South) (Con)

† Maclean, Rachel (Redditch) (Con)

† Norris, Alex (Nottingham North) (Lab/Co-op)

† Robinson, Mary (Cheadle) (Con)

† Smith, Eleanor (Wolverhampton South West) (Lab)

† Sunak, Rishi (Richmond (Yorks)) (Con)

† Syms, Sir Robert (Poole) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

† Wragg, Mr William (Hazel Grove) (Con)

Kenneth Fox, Rob Cope, Committee Clerks

† attended the Committee

Witnesses

Dr Mina Golshan, Deputy Chief Inspector and Director Sellafield, Decommissioning, Fuel and Waste Programme, Office for Nuclear Regulation (ONR)

Tom Greatrex, CEO, Nuclear Industry Association

Rupert Cowan, Senior Commercial and Nuclear Energy Lawyer, Prospect Law

Jonathan Leech, Senior Commercial and Nuclear Energy Lawyer, Prospect Law

Public Bill Committee

Tuesday 31 October 2017

(Morning)

[James Gray in the Chair]

Nuclear Safeguards Bill

09:25

[The Chair]

Before we begin, I have a few little parish notices. First, for all the activities that we indulge in when considering the Bill, both here and in the Committee Room, the orders of procedure are precisely the same as in the main Chamber—for example, no eating and drinking; preferably jackets on, unless it is extremely warm, in which case Members may consider taking them off; ties, of course, are now optional, but I always wear mine; and I tend to be a little on the conservative side and maintain standards.

We will talk through the procedure later. This stage, for those who have not done it before, is rather like a Select Committee. You are bringing witnesses in front of you to inquire of them their expert knowledge about what is in the Bill. It is different from a Select Committee in the sense that you are not quizzing them, holding them to account or giving them a tough time; you are seeking to extract the maximum benefit from their evidence. This is not party political; it is like a consensual Select Committee.

The Bill is very narrowly drafted. It is about a particular subject, not the entire spectrum of what Euratom does or stands for. We will be reasonably strict about trying to keep people within the terms of the Bill, so that they do not ramble widely. We now have a couple of formalities to deal with.

Ordered,

That—

(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 31 October) meet—

(a) at 2.00 pm on Tuesday 31 October;

(b) at 11.30 am and 2.00 pm on Thursday 2 November;

(c) at 9.25 am and 2.00 pm on Tuesday 7 November;

(d) at 9.25 am and 2.00 pm on Tuesday 14 November;

(e) at 11.30 am and 2.00 pm on Thursday 16 November;

(2) the Committee shall hear oral evidence on Tuesday 31 October in accordance with the following Table:

TABLE

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room, and all the papers are on the table behind you.

Ordered,

That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Richard Harrington.)

[The Chair]

We will now discuss the general line of questioning during this sitting. Let us try to do that reasonably briefly, because we do not have much time. As soon as we have agreed what questions we want to ask, we will have the witnesses and the public in to start the sitting.

09:27

The Committee deliberated in private.

09:29

On resuming—

[The Chair]

If Members of the Committee have interests to declare, they should please do so now.

[Dan Carden (Liverpool, Walton) (Lab)]

I am a member of Unite the union.

[Trudy Harrison (Copeland) (Con)]

My husband, father and brother work at Sellafield, as well as many other family members.

[Paul Blomfield (Sheffield Central) (Lab)]

I am a member of Unite.

Examination of Witness

Dr Mina Golshan gave evidence.

09:30

[The Chair]

Q I welcome our first witness, Dr Mina Golshan, who represents the Office for Nuclear Regulation. Dr Golshan, thank you very much for coming. Perhaps you can kick off our considerations with a brief statement about who you are, what you do and what you think about the Bill.

Dr Golshan: Thank you for that introduction. I am director and deputy chief inspector at the Office for Nuclear Regulation. My main responsibilities are Sellafield, decommissioning fuel and waste, but I am also senior responsible owner for ONR’s work in relation to establishing a state system of nuclear materials accounting and control.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

Q Dr Golshan, thank you for appearing today. I know that you are a regular at these things. From your point of view, how critical are safeguards in underpinning the UK nuclear industry?

Dr Golshan: Establishing a domestic safeguards regime, now that the policy decision has been made that the UK will be leaving the Euratom treaty, is fundamental to the industry in the UK. It is the cornerstone of establishing nuclear co-operation agreements. It is essential for the industry to operate. Without a domestic safeguards regime in the UK that works in line with the International Atomic Energy Agency requirements, the industry simply will not be able to operate.

[Paul Blomfield]

Q I want to ask you about the Office for Nuclear Regulation’s capacity to take on the additional responsibilities implicit in the Bill, given your current staffing levels and the large number of people employed by Euratom to fulfil these roles.

Dr Golshan: Perhaps I should start by saying that, given our membership of Euratom, it has not been necessary for the UK and ONR to build capacity and resilience in this area. Now that we are in a different position, we have started to recruit. The first phase of recruitment is complete. We successfully recruited four individuals, three of whom have already started with us. An area of shortage for us was subject matter expertise. That was a worry for me, but I am pleased to say that we will hopefully be in a position to rectify that by the middle of this month.

Broadly, we need to continue with our recruitment if we are to staff ourselves in order to deliver the new safeguards function. In the first instance we need an additional 10 to 12 inspectors, which will bring us to a level that allows the UK to fulfil its international obligations, but we have already heard from the Secretary of State that the intention is to put in place a regime that is equivalent to Euratom. That will require ONR to recruit further and will mean around 20 additional inspectors. We know that we are dealing with a limited pool of expertise, and our success so far, although encouraging, is by no means the end of the story.

[The Chair]

Dr Golshan, can I ask you to speak up slightly, because this is a very large room and we are having trouble hearing you. I am getting older—you know how it is.

[Trudy Harrison]

Q Thank you for coming here this morning, Dr Golshan. I understand that the ONR currently has the responsibility for safety and security at the Civil Nuclear Constabulary. I am keen to understand how the relationship would work with safeguards.

Dr Golshan: May I start by saying that we do not have the responsibility for CNC; we regulate civil nuclear security. We currently have a safeguards function, as set out in the Energy Act 2013, but it is not a regulatory function. The main purpose of that function is to facilitate the work of the International Atomic Energy Agency and Euratom in the UK, among other things. The Bill will give us the powers, on a par with safety and security, to regulate nuclear safeguards on civil nuclear sites.

[Alex Norris (Nottingham North) (Lab/Co-op)]

Q Dr Golshan, you have mentioned the sort of headcount you will need for inspectors. What is your current total establishment, and by how much do you think you will need to grow?

Dr Golshan: We have a small project team that helps us deliver this function. I have a project manager and a project lead, and we have interactions with our human resources department and our IT department, which in itself is a small group. We need to grow this project team in the first instance to enable the project to deliver and go forward. All in all, we have five key people in the project team—project manager, delivery lead, policy lead, myself and a subject matter expert—and the team overall has links with the HR department and so on, as I described. We will need to grow this project team to help us deliver when we come to 29 March 2019, and we are in the process of doing so.

[Ben Bradley (Mansfield) (Con)]

Q Can you tell us a bit about the ONR’s track record of delivering new regulation previously? Do you feel that you have the right relationships within the industry to deliver this new programme?

Dr Golshan: It is fair to say that this is unprecedented territory for us as far as the size of the job is concerned. In the past we have not had to establish a new function from afresh to this extent, but we have got experience of setting out and working with officials from the Department for Business, Energy and Industrial Strategy—and previously the Department for Energy and Climate Change—to bring forward new regulation.

We are working closely with officials at the Department for Business, Energy and Industrial Strategy and we have engaged with the industry—I have had a number of meetings with the industry. We are explaining what we are doing, how far we have gone down this route and what there is left to do. We are working with all our stakeholders to make a success of this.

[Paul Blomfield]

Q May I follow up on your earlier answer, Dr Golshan? You have been clear and helpful. From what I understood, you said that you were recruiting an additional 10 to 12 inspectors now, with the potential of a further 20. Is that the whole size of the establishment you might be looking for? I might be wrong, but I understand that Euratom employs about 40 people on nuclear safeguarding in relation to UK establishments.

Dr Golshan: Let me break it into two bits. Our intention is to start recruiting in the new year for the additional 10 to 12 people we will require. The reason is that we were waiting for the Second Reading of the Bill to give us some certainty in relation to the people we are going to take on permanently. That process will start. In relation to your next question, on Euratom’s numbers, for its own purposes, Euratom carries out activities in the UK that, as a state delivering an equivalent regime, we would not need to deliver. The order of 20 to 25 is not far from what we need to staff ourselves to deliver this function.

[Paul Blomfield]

Q This is a sector with which most of us are—with some exceptions—relatively unfamiliar.

[The Chair]

Mr Blomfield, could you speak up? Not all of us can hear you.

[Paul Blomfield]

Can you give us a little more understanding of the talent pool from which you are drawing, the recruitment opportunities and the training needs there might be to fulfil the skills needs you anticipate?

Dr Golshan: As I mentioned at the beginning, although these do not seem like large numbers, we are dealing with a limited talent pool here: the expertise is unique. As I said, the UK as a whole has not had to focus on developing resilience in this area, so we are limited in what and who we can recruit.

The next step, if we are getting the right expertise in these people, is to turn them into regulators and inspectors. That means that our training function—training materials and expertise in training these individuals—needs to develop. We have started that process, but it is a long road and I am not going to sit here and pretend that it is all going to be a smooth run.

[Paul Blomfield]

Q Could you give us a sense of the length of that road? How long will it take you to get from A to B?

Dr Golshan: Our aim, currently, is to have a system in place that enables the UK to fulfil its international obligations by March 2019, which is when we intend to leave Euratom. I have been very clear in the past—I will repeat it here—that we will not be able to replicate Euratom standards on day one. That is unrealistic, and given the scale of what needs to be put in place, I fear that if we go that way, the best will become the enemy of the good. So it is important that we focus our efforts on delivering a regime that enables the UK to meet its international obligations.

[Mary Robinson (Cheadle) (Con)]

Q Now that the Bill has been introduced, what in your view is the main priority in developing a new nuclear safeguards regime for the UK?

Dr Golshan: There are a number of aspects. The first one is to ensure that the secondary legislation is in place at the right time, because that provides us with the mechanisms to exercise our powers. The Bill itself is an enabling part—it gives us the fundamental powers—and the secondary legislation gives us the mechanisms to deliver. Secondary legislation will also give us some certainty in relation to what guidance and standards we need to develop to make this happen.

For us, we need to have an IT system; a safeguards information management system. It is a live system that enables us to get data from our licensees, to process those data and to put them into a reporting format that the IAEA currently receives from Euratom. We are working on that; it is at proof of concept stage at the moment. Once we have established that we are able to do it, we will need to move into a phase that determines whether we are going to do it in-house, tender it out, or have a combination of the two.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Q You mentioned that you were clear that we could not have a complete regime up and running by March 2019, and that the right way to proceed was to get the basics in place, as it were. However, as far as I understand, we are going to have to undertake a series of additional activities in order to get ourselves to a position that would have been equivalent to Euratom in the first place—nuclear co-operation agreements, negotiations with the IAEA, and so on. What do you think is the realistic timetable for getting those agreements in place, so that we actually have a final replication of everything that we were previously doing under Euratom as far as safeguarding is concerned?

Dr Golshan: I should say that, on negotiating nuclear co-operation agreements and completing the discussions with IAEA and Euratom, although we provide advice to the Government, it is not for me to sit here and determine or estimate a timetable. It is really strictly for the Government to conduct those negotiations, and I think that it is perhaps a question better answered by them.

[Dr Whitehead]

Q But to what extent do you think that the achievement or otherwise of those wider agreements impinges on the basic work that you indicated would be necessary to put in place by March 2019?

Dr Golshan: It is fundamental to it. We need to have a basic safeguards regime—a domestic safeguards regime—in place that enables the UK to demonstrate that it is fulfilling its international obligations under various treaties. Once that is in place we will be able to demonstrate that we have a rectified domestic safeguard arrangement in place.

[Dr Whitehead]

Q Right, but as far as I understand it, we need to have, not a concept of theory but a practical safeguards regime in place—

Dr Golshan: Yes.

[Dr Whitehead]

In order to demonstrate to the IAEA that we are able to fulfil a function relating to nuclear safeguards outside Euratom.

Dr Golshan: Absolutely.

[Dr Whitehead]

And those discussions, I understand, are proceeding at the moment but have by no means reached any conclusion. Are you confident that in terms of replicating the UK’s safeguarding function, the basic structure you have outlined to us this morning that needs to be in place will be able to fulfil its functions and, in particular, assure and satisfy the IAEA that it can safely proceed with new treaty arrangements with the UK?

Dr Golshan: Yes is the short answer. We do not have to have a regime equivalent to Euratom in order to be able to proceed with concluding those agreements and negotiations, so what the IAEA needs the UK to have in place is a domestic safeguards regime that meets its international obligations under the non-proliferation treaty and others. So although there are risks here for us to complete the work we are doing, I think it is a much more achievable objective for us to aim for, rather than replicating Euratom in the first instance. I should again emphasise that having a regime that is equivalent to Euratom is not a prerequisite to complete those agreements and negotiations.

[Trudy Harrison]

Q Assuming that the Bill goes ahead as written, what will be possible on day one and what will not be possible, and how will that impact on our 17 nuclear sites? I ask with specific regard to my constituency of Copeland, which has Sellafield, the low level waste repository and the national nuclear laboratory.

Dr Golshan: The Bill is an enabling Bill. It gives us the broad powers in parallel with nuclear safety and security. It gives the Secretary of State the powers to make nuclear safeguards regulations. That is the secondary legislation that I referred to. In relation to what is possible at our nuclear sites—

[Trudy Harrison]

Q In terms of moving fissile material, exchange of knowledge and those kinds of practical aspects of work that need to happen?

Dr Golshan: There is a nuclear co-operation agreement and there are a number of states that, as a matter of policy, will not engage with a third country that does not have a safeguards regime in place. So our aim, and the Government’s aim, is to establish a nuclear co-operation agreement with these states as a matter of priority. We are advising the Government and providing subject matter expertise. As to what will be possible on nuclear sites, we will continue to provide reports to the IAEA; that is a fundamental aspect of what a safeguards regime needs to deliver. As I said, the safeguards information management system that we will be putting in place is fundamental to achieve that.

[Trudy Harrison]

Q I just wonder about the benefits of the transition period, once we have gone through this stage, to enable those bilateral agreements—the 123 agreement and others—with the States and the many other countries outwith the European Union that we work with daily. How necessary is that and how long should it be?

Dr Golshan: I cannot comment on how long it should be; I think that depends on the scope of the negotiations and what can be achieved within the timescales we have left. From our perspective, a transitional arrangement will be extremely helpful. It will enable us to have parallel working arrangements in place with Euratom to conclude the discussions that we need to have with it, first, to understand what activities it currently undertakes on nuclear sites, but also the Secretary of State has mentioned that there should not be any weakening of standards in the UK following our departure from Euratom. The transitional period, as I see it, will seek to achieve that.

[Dan Carden]

Q The Bill does not cover other aspects of the UK’s relationship with Euratom, such as research funding, and if you were making a plea to the Minister here today, or—

[The Chair]

As a very tough Chairman, I am going to say that we are not allowed to discuss things that are not in the Bill; we can only discuss those things that are in the Bill. Therefore, no matter what your thoughts on that subject may be, I am very sorry, but you will have to raise them in another Bill Committee at some other time. I am sorry—I hope people do not mind—but we have got to keep to what is actually in the Bill itself.

[Andrew Lewer (Northampton South) (Con)]

Q Are there any other examples around the world of where national regulators are responsible for safeguarding in the way that this Bill proposes?

Dr Golshan: Numerous examples—a Canadian regulator, the US regulator, the Swiss regulator, and even though Finland is out of the European Union and part of the Euratom treaty, given that safeguarding is the responsibility of state, the Finnish regulator sees itself as being responsible for providing assurance to the state in that regard.

[Dr Whitehead]

Q You mentioned the different relationships that different countries have, both internationally and with Euratom. This Bill, as has already been set out on Second Reading, is very much a contingency Bill, in the event that—effectively—no other relationship with Euratom is possible after March 2019. How would you see a possible future relationship with Euratom that might assist in any way with lessening the burden that you clearly have on you at the moment to establish a completely new regime, and indeed a completely independent set of inspection and reporting arrangements? Should it be an association similar to that of Switzerland, or would you envisage something rather closer to Euratom for the future, if that can be achieved?

Dr Golshan: I think that is probably a question better answered by our legal colleagues, but that aside, I am aware that the Euratom treaty provides for associate memberships, either as a whole or in particular aspects, and that article 206 of the treaty in particular facilitates that. However, I am not an expert on that and I think it would be inappropriate to comment as to whether an association membership is possible or on how it would be possible.

[Dr Whitehead]

Q A final thought for you, rather more for my curiosity than anything else. My understanding at the moment is that the inspection regime under Euratom means that there are effectively inspectors who are domiciled in the UK but working for Euratom. What happens to those inspectors in March 2019? Can we, as it were, steal them for the UK, or do they get exported back to Euratom at that point?

Dr Golshan: I think that is primarily probably a question for those individuals, and more broadly for the Government, to negotiate with Euratom. As far as I understand it, however, the number of these inspectors is no more than a handful and we will need significantly more than that, as I explained earlier. It is a matter of choice for them. If they wish to join the regulator—ONR—then I am sure that we will be more than happy to absorb them.

[The Chair]

Unless there are further questions from colleagues, I thank you very much, Dr Golshan, for your excellent and most interesting information, and indeed for expressing it in such careful, precise and brief terms, which gives us an extra five or 10 minutes for the following panel. So thank you very much indeed for coming.

Dr Golshan: It was a pleasure to be here. Thank you.

Examination of Witnesses

Tom Greatrex, Jonathan Leech and Rupert Cowan gave evidence.

09:54

[The Chair]

I welcome the next panel to give evidence, and—without meaning any disrespect to the other two gentlemen—I particularly welcome back our former colleague, Tom Greatrex. Good to see you back here. You probably remember the tough time that you gave me at various times—you are going to get a tough time, too. Welcome to the other members of the panel, from Prospect Law. We have until 11.25 am, which is a reasonable time; but we will have to stop at 11.25 even if we are speaking, so I will try to wrap up a little bit before. First, I ask the three witnesses to introduce yourselves and, if you wish, to give a brief introduction to your thoughts on the Bill.

Rupert Cowan: I am Rupert Cowan, with Prospect Law. My background is advising, as a lawyer, the nuclear industry, providers of services, operators and generators. I am a very worried lawyer at the moment, having seen the Second Reading debate, and I am concerned that, despite the obvious excellent progress that ONR is making towards introducing a safeguards regime, that regime on its own will not enable the industry to continue to operate without interruption.

Jonathan Leech: I am also a lawyer specialising in nuclear law and regulation, working with industry. In terms of my initial views on the Bill, as far as it goes it is, of course, merely an enabling power. One thing I did want to lay out, though, is that it is emphatically not a contingency. Unless we have a radical change in direction of travel now, we will need it; it is not something that can be set aside. I am sure we will come back to discuss that in further detail. I also have some views on the scope of the powers that the Bill confers. But the real task will lie in the secondary legislation, how that is implemented, and how that relates to the nuclear co-operation agreements that we will need before any exit from Euratom, if we are not to disrupt the industry.

Tom Greatrex: Tom Greatrex. I am not a lawyer; I am the chief executive of the Nuclear Industry Association, which is the trade body for the UK civil nuclear industry, representing 260-plus companies across the supply chain. The industry concern is very similar to that just expressed by my two colleagues—namely, that the Bill does one small part of a whole range of things that need to be done to ensure there is not disruption as a process of leaving Euratom. I am, similarly, intrigued by the ministerial comments in the Second Reading debate, particularly around this being a contingency, because that is something different from what we have been discussing to date. My overall concern is that we need to do a whole range of different things, not just what is in the Bill, to ensure that we have a position that avoids any disruption to activity in the civil nuclear industry.

[Richard Harrington]

Q I am very happy to ask this question of any of the witnesses, but it is particularly addressed to you, Tom. You have all made comments at different stages about, in effect, your own case, Tom—that you hope the decision to leave Euratom can be reversed. I am aware of the different points made; but may we for the moment leave aside these hypothetical points? I am not entering into their validity or otherwise for the purpose of this question. Do you believe it is necessary for Parliament to pass this Nuclear Safeguards Bill?

Tom Greatrex: If we are to have a domestic safeguarding arrangement and system, we will need to have the power conveyed to the ONR to undertake that role. I have described the Bill before as being a necessary legislative step. It is; but obviously, a whole range of other steps need to come after that, which are contingent upon it. That is where the majority of the concern lies.

Rupert Cowan: May I add to that? Emphatically yes, it is necessary to pass a Bill that puts in place a domestic safeguards regime. The Bill is a step towards achieving that. But what needs not to be lost is that the terms of that Bill, and the secondary legislation that it creates the opportunity to provide, must also be in terms that do not prevent those that we currently have nuclear co-operation agreements with courtesy of Euratom, continuing to co-operate with us. There is a very substantial concern among those that want to be our friends and continue to co-operate with us, and those that may not—who, for slightly more opaque reasons, do not want to make it easy to continue to co-operate with us—that the Bill, as it stands, will not allow a safeguards regime that is neutral in its application to the commercial parties that are participating in the industry. We have given you a note; if you read the end of it you will see that, although we are not entitled to, we are suggesting a possible amendment that you might consider to achieve that neutrality. It is in paragraph 4.

[The Chair]

Q Perhaps you could expand on what that proposal is.

Jonathan Leech: Obviously, the Government’s stated intent appears to be to replicate, as far as possible, the current safeguarding regulatory regime that we have in place with Euratom. In a sense, all we should be looking for in the Bill, as a piece of enabling legislation, is to see wording that allows that to happen. Our concern around the way that power is expressed is that it appears currently to be written more from the perspective of the IAEA voluntary offer safeguarding agreement text than the Euratom treaty text. You might argue it is a fairly subtle distinction, but if we are seeking to replicate what we have, I would suggest that a good place to start is the high-level requirements of the treaty, which talk in terms of not diverting from declared use, and those at least should be considered as an additional scope that would be brought within the power, rather than purely focusing on material being diverted from civil activities. Hence the wording that we have proposed in the note is rooted in the treaty and would not take anything away from current scope, but would merely ensure that it is within the power to replicate.

[Alex Norris]

Q This is probably a question to Rupert or Jonathan. You said that you watched the Second Reading with interest. You will have heard in that session that if we leave the EU, which we will, we will by definition have to leave Euratom. If Parliament was your client, would that be the guidance you would give it—that one decision necessitates the other?

Jonathan Leech: No.

Rupert Cowan: Absolutely not.

Jonathan Leech: There are obviously links between the two. There are statements in the treaty that article 50 does apply to the Euratom treaty, but there are sound legal arguments available that it is not an automatic consequence and in fact you have to follow a separate but similar process to exit Euratom. In a sense we have moved beyond that, to the extent that the withdrawal notice makes express reference to Euratom, so to the extent that there are two separate processes, we have already triggered both of them. That has maybe put us in a more difficult position in negotiating a potential extension period or remainder within Euratom, which would alleviate a lot of the concerns around the current two-year timetable, which creates some serious problems for the industry. The advice would be that you do not have to accept this and it may not be in your interests to do so.

Rupert Cowan: I would add, the Minister has made statements—

[The Chair]

Briefly, as we are starting to get outside the scope of the Bill.

Rupert Cowan: Fair enough.

[The Chair]

By all means comment briefly if you wish to—I would not want to be declared a tyrant—but I would stick to the terms of the Bill, which is nuclear safeguards, rather than the extempore bits.

Rupert Cowan: Fine. The point that lies within the Bill and should be connected to the question is that the next step chronologically is to renegotiate the nuclear co-operation agreements. Unless the Bill provides a basis for safeguards, which gives reasons to those that do not wish to co-operate easily with us to co-operate, then you will find renegotiation very difficult.

[The Chair]

That will be a matter for another day. I tend to be quite strict with the Committee because it is a topic that can spread its wings in a whole variety of different areas. We are tasked by the House of Commons simply with discussing the terms and the wording of the Bill, rather than the wider consequences or circumstances.

[Trudy Harrison]

Q With regard to the ownership of fissile material, I understand that Euratom actually owns the plutonium at Sellafield. Therefore is it not in the European Union’s interests to be co-operative, because would it really want that material sent back to it?

Rupert Cowan: Not necessarily.

Jonathan Leech: There is no question of that material being sent back.

[Trudy Harrison]

Q Because it would be practically impossible to do so?

Jonathan Leech: It is the UK’s responsibility.

[Trudy Harrison]

Q Who owns it?

Jonathan Leech: Ownership will transfer to the UK on exit from Euratom.

[Trudy Harrison]

Q But who currently owns the material?

Jonathan Leech: I think technically that material belongs to Euratom at the moment.

[Trudy Harrison]

Q That is certainly my understanding: that Euratom owns all of the fissile material in the UK in the civil nuclear industry.

Rupert Cowan: That is the effect of the treaty.

[Trudy Harrison]

Q Rupert, you mentioned interruptions to the industry. Could you be more specific? What interruptions? What needs to happen to avoid those interruptions? What are the consequences?

Rupert Cowan: It is difficult to answer that question and remain entirely within the Bill, so I expect that James Gray will jump at me.

[The Chair]

You may digress very slightly, but don’t get too carried away.

Rupert Cowan: Essentially, the safeguards regime is the first step. The second step is the replacement of the existing nuclear co-operation agreements with the jurisdictions that have them with us, notably the European Union, the United States, Korea and Japan. If Euratom is no longer included in our safeguards regime, each of those agreements must be renegotiated, and each of them will require a substantial resource to achieve that. For example, America requires a section 123 agreement under the US Atomic Energy Act. If there are any members that—for their own reasons—do not immediately wish to agree, they can rely on the fact that the safeguards are different from the Euratom safeguards, and say, “We are not able to agree a nuclear co-operation agreement with you yet,” or “in the future,” depending on what is driving them.

[Trudy Harrison]

Q So I understand, but it is a first point of getting this Bill through.

Rupert Cowan: Absolutely.

[Trudy Harrison]

Q Which will then give us the opportunity to progress those bilateral agreements.

Rupert Cowan: Correct, and nothing that we are saying suggests that this Bill should not go forward, save for the amendment we suggested, which would make those negotiations more straightforward.

[Dr Whitehead]

Q You mentioned that the Bill is first a contingency Bill and secondly an enabling Bill, and that the main work will be putting in place secondary legislation to get us to a basic safeguarding regime that by March 2019 will operate pretty much as Euratom does at the moment. How realistic do you think that process is, in respect not of the Bill but of what needs to be done to get to that position, on the basis of the Bill?

Jonathan Leech: May I first go back to the point about the Bill being a contingency? It is very important that the Bill is no sense a contingency.

[The Chair]

Perhaps you could speak up a little. We are having slight difficulty hearing you.

Jonathan Leech: The Bill is in no sense a contingency, unless we get into a position where we simply do not need our own domestic safeguards regime. Otherwise, it is necessary—it is essential. We have to have it, and we have to have it now. We need the secondary legislation on the table as soon as possible, if not now, and then we need the resource within ONR that we heard about earlier. Critically, it is not just that we need all that in place at the end of the two-year period; we also need to be able to demonstrate that to all those we seek to negotiate replacement nuclear co-operation agreements with, so that we can also have those agreements in place seamlessly at the end of the two-year period.

There is another point to clarify in relation to the role of the IAEA. We are not negotiating nuclear co-operation agreements with the IAEA; we have to negotiate with them on the voluntary offer agreement. Those negotiations are progressing, but I suspect that they are not negotiations that will be critical from a time perspective; it will be the negotiations of the nuclear co-operation agreements, and there we are at the mercy of political will in any number of counterpart states. That is where it becomes extremely uncertain as to whether it is even possible to have those things in place within that timescale. Certainly, to stand any chance of that, we should be in a position today to say, “These are our proposed regulations, this is our resource, this is where we are with IAEA. Can we start talking to you seriously about an NCA?” It is not enough to be able to say, “This is our enabling legislation.” We need to be a long way ahead of this if we are going to have any chance of meeting that two-year timescale.

[Dr Whitehead]

Q A first question on that statement: are there any individual bilateral agreements that one might think ought to be a priority for negotiation as opposed to others? Secondly, if one did engineer some kind of transitional arrangements with Euratom, would it be satisfactory for continued membership, effectively, of Euratom while those negotiations took place? Would that effective transitional membership of Euratom after March 2019 provide the sort of facilitation for those individual agreements to be satisfactorily concluded that would actually give comfort as far as the overall picture of those agreements was concerned?

Tom Greatrex: It could do. You heard from the ONR earlier about the attractiveness of having a period of parallel working. That is in relation to the safeguarding activity and carrying out that function. It is a similar position with relation to co-operation agreements which currently exist under the Euratom umbrella. So the nuclear co-operation agreement we currently have with the US is as a member of Euratom. We will need to have a bilaterally negotiated nuclear co-operation agreement in the future, because it is a legislative requirement in the US and I am sure you will hear from others in evidence about why that is so critically important to particular power stations and projects. Enabling there to be a position where you are covered by the Euratom nuclear co-operation agreement while a bilateral nuclear co-operation agreement is finalised, agreed and put in place is exactly the kind of transitional arrangement or contingency or parallel working—whichever choice of words you want to use for broadly the same thing—is something that the industry has said is very desirable. You have also heard from the ONR that this will help them in the work they will be tasked to do as a result of the provisions of this Bill.

Jonathan Leech: May I add a thought on the concept of associate membership and the extent to which we can rely on that? Of course, the nuclear co-operation agreements we are talking about are agreements with Euratom for the benefit of Euratom members, who are fully subscribed to all the obligations and commitments that entails, including acceptance of all Euratom regulation, including acceptance of European Court of Justice jurisdiction. When we come to look at the transitional phase, we should certainly not assume that all counterparts of those co-operation agreements with Euratom would accept that they should somehow continue to apply to the UK if the UK is something other than a fully subscribed Euratom member. So when we talk about associate membership or a third state of some sort and other examples around, that we can see where others have relationships with Euratom, that in itself would not solve the immediate need to ensure that we have the co-operation agreements in place that we need.

[Dr Whitehead]

Q Could you perhaps expand on that a little, because there are a number of potential lines that one can move down in this process? One, presumably, is to seek some kind of long-term associate membership of Euratom. We have two models in place for associate membership of Euratom at the moment, but I understand that they do not provide fully for the sort of arrangement that we might want to consider, which would cover all the issues of the transfer of responsibility to the UK jurisdiction.

Secondly, we might move down the line of a transitional arrangement, in order to get to the position—not at a more leisurely pace, but at a rather more possible pace —of possible complete rupture with Euratom, but in circumstances in which we might have got NCAs in place in a reasonably orderly way. What, in your view, are the realistic prospects of going down one or other of those routes in the sort of time that we have in front of us?

[The Chair]

Again, we need a brief answer, because we are drifting slightly wide of the terms of the Bill. We have plenty of time, but even so.

Rupert Cowan: Let me bring it within the terms of the Bill, to make you feel happy, Mr Gray. Obviously the Bill enables those discussions, as has been described, but the chances of being able to follow either of those routes successfully before March 2018 are zero. The possibility of associate membership is not zero but that possibility, having been fulfilled if counterparties are willing to allow it, would not allow us either the opportunity or the time to negotiate the necessary co-operation agreements with the important counterparty jurisdictions that we need.

The second alternative that you suggest is of maintaining full membership for a period, so maybe it could be extended by two years with a sudden cut-off being agreed, and being able during that two-year extension to renegotiate NCAs. That is probably the most practical and preferable solution, but whether or not members of Euratom would be prepared to allow the UK to do that is a very different question.

Unfortunately, it is inevitable that we will be faced with discussions about renegotiating our NCAs with key counterparties who are neither motivated to agree quickly nor able to, because of their own international obligations of recognising the adequacy of our safeguarding arrangements, and there will be a point at which they cease to apply under Euratom, with consequences that remain to be seen.

I mean, I cannot imagine the United States immediately withdrawing its expertise from the various sites, but it may choose to. Similarly, Korea is a very important counterparty. Once the agreement comes to an end, the opportunity of persuading Korea to invest in Moorside goes away from us.

[Mary Robinson]

Q This question is actually a continuation of that line of thought. How far does UK participation in Euratom enable access for nuclear research funding?

Rupert Cowan: In terms of research, which is a separate issue, it is fundamental. All the joint research—the Joint European Torus and so forth—is predicated on membership of Euratom, and the funding arrangements are a subset of the arrangements of the Euratom members. At the moment, it will stop, and unless central Government funding is made available people will return home.

[Dr Whitehead]

Q I think this is a question about an issue that we were both concerned about. Mr Cowan, you mentioned the date of March 2018. That presumably is because you feel that that is the point at which—?

Rupert Cowan: Well, it is the article 50 notice. [Interruption.] Did I say 2018? I meant 2019—apologies.

[Dr Whitehead]

Okay. Assuming we did mean 2019, if we are not in a position—even if we are reasonably close to a position—where we have done all the secondary legislation arrangements for nuclear safeguarding, but we have not made too much progress in a number of other areas relating to transposing Euratom responsibilities to the UK, and/or a number of those NCAs are in a difficult position as far as their conclusion is concerned, what would be the effect on the nuclear industry at that point?

Rupert Cowan: It is very difficult to project, but it does mean that, unlike other industries, trade has to stop—trade in materials, in intellectual property and in people, as in intellectual property. For example, you can imagine that the French, if they were in a bad mood, might choose to drag their feet, because in consequence they would be able to take a monopoly of fuel retreatment from Japan, which currently sends some to the UK and some to France. Who is to know that that will not happen? The European Union will not see us as friends and will not seek to bend over backwards to find accommodation for a nuclear co-operation agreement. It is probably going to be a very slow and difficult arrangement.

One thing that needs to be in place to achieve any progress is a safeguards arrangement that is at least as good as Euratom’s. Currently, the Bill as drafted insinuates that there is a window for it to be less than Euratom, because it goes to IAEA rather than Euratom guidance. Hence the words that we are offering for someone to propose as an amendment, so that in those negotiations you can say, hand on heart, that there will be no dilution, and therefore no commercial advantage to the UK, as a result of our having a domestic safeguards arrangement rather than a Euratom safeguards arrangement.

Tom Greatrex: Let me add that if, as has been stated, the Government’s intention is to replicate the Euratom standards and arrangements, you will have heard from the ONR earlier that it will not be possible to implement that at the end of March 2019. That is the crux of the industry’s concern about there being sufficient time to enable the new UK regime to be in place. The Bill does just the very first part of enabling that to start to happen. It does not solve the issue; there are a whole range of things that have to happen as a consequence of the Bill and other remits that need to be struck, which is why people are concerned about a very real-time pressure.

Jonathan Leech: The very first step would be to make absolutely certain that the Bill gives the power to create the regulatory regime that is equivalent to Euratom. The second step, which needs to follow that very closely, is to ensure, by whatever means necessary, that ONR is given the resource to do what needs to be done, so that we do not face any hiatus, if indeed that is possible.

Rupert Cowan: In the safeguards regime.

Jonathan Leech: Yes, in the safeguards regime.

Rupert Cowan: Which then allows the discussions to go forward from a position of fairness and honesty; that we are not trying to dilute or change the obligations we have under Euratom, which is what others might suspect.

Jonathan Leech: When you have both of those things, you can go and speak to counterparties to the co-operation agreements you need and say, “This is what we are doing. We can lay it out on the table for you. This is the investment we are making and these are the regulations we will have in place.” If we cannot do that, they simply will not take us seriously.

[Dr Whitehead]

Q The Bill, as we have heard and as you have set out this morning, is very much an enabling Bill. As the Bill stands, the process of getting us to where we need to be by March 2019 is entirely in the hands of secondary legislation, which does what secondary legislation does and is accountable in the way that secondary legislation is. One of my concerns is the extent to which the Bill therefore places in the hands of somebody—obviously, present company are entirely absolved from this criticism—the ability to do the various things to get us to that position by March 2019 but without further reference to Parliament. Do you have any views on the legal position relating to that, and on whether Parliament ought to have some kind of scrutiny role to ensure that we do get to that position by March 2019, bearing in mind that the current arrangements in the Bill appear not to allow that to happen?

Jonathan Leech: As a matter of general political process, yes, there needs to be scrutiny so that these regulations are developed now—not over the next two years, but over the next month—so that we are then in a position to take the steps that follow. In terms of the broader position, if what we are seeking to do is to replicate and preserve what is, at the moment, effectively EU regulation, then that is but one of many areas where a similar approach may be taken. It is a little more complex here because you have to untangle it from the resource of Euratom and the enforcement processes and the ECJ jurisdiction. Nevertheless, if the statement is that it is to replicate, then the objective should be just that.

In terms of the fine detail of the regulation, it is an intensely technical thing, and some sort of secondary legislation is probably the right place for it. My biggest concern would be around scrutiny of the timetable to ensure that it is not delayed in any way that will jeopardise our position at the end of the two-year process.

Tom Greatrex: I would have thought that, as Members of Parliament, you would want to be satisfied and confident that everything is in place in the timeframe in which it needs to be in place. It is obviously open to you to seek to amend the Bill in order to put that to the test.

A subsequent related point is that the industry also thinks that it is important that the Bill could be amended to ensure that the nuclear sector is consulted on the detail of that new regulation. You have to bear in mind that there will be people who will need to make sure that they can comply with that regulation, so understanding its content is vital. Getting that right—given the timeframe and the time pressures we face—is going to be critical. So there is another route to pursue to ensure not only that Parliament is satisfied, but that the industry has an opportunity to be consulted on the detail of that new regulation so that it is right first time.

Jonathan Leech: In a sense what is needed is the highest degree of openness and the widest consultation possible in the development of that regulation.

[Dr Whitehead]

Q On a scale of one to 10, how much of a scare story position is there on what would happen to the nuclear industry if we do not have those arrangements in place by March 2019, or if we do not have a transition period in which we could get those arrangements in place on a more leisurely basis? Some stories have been circulating that the nuclear industry will essentially cease to function, when it comes to the transfer of fissile material, supply chains and so on. Do you take that completely seriously or partly seriously, or are you not worried about it at all?

Rupert Cowan: Completely seriously. The reason for that is that each of the counterparties with whom we trade in fissile material, components, or anything else listed as sensitive and nuclear, have their own international treaty obligations. One of those obligations is that they should not trade with people who do not have safeguard arrangements in place that are at least equal to the IAEA safeguards. Unless that is complete and in place, we will not trade, and so they will not be able to continue business with us—full stop. If any members will be participating tomorrow in the Business, Energy and Industrial Strategy Committee on the economic implications for the industry, that is what will be said to you.

[The Chair]

I am keen to move on. Minister.

[Richard Harrington]

Q Thank you, Mr Cowan, Mr Leech and Tom, for your support for the Bill. Everything you have said is the reason why we are introducing the Bill, and I thank you very much for your support for it. I have read your opinions and amendments and have taken them into consideration. Thank you very much for the work that you have done. Please do not think that the evidence that you have given is taken lightly, but I must underpin that by confirming your answer to a previous question, which was that you do support the Bill. I accept fully the reasons why you do.

Rupert Cowan: We support the Bill completely. We suggest the amendments for the reasons described.

[Paul Blomfield]

Q I want to explore the concerns about the gap between the existing safeguarding regime and that envisaged by the Bill. Dr Golshan said that the new regime that she was seeking to establish would not replicate the functions undertaken by Euratom in relation to safeguarding. I am also conscious that the NIA’s evidence talked about the importance of leaving without any gap, but that you were worried about the gaps provided. I wonder whether you could elaborate on that a little more, Tom.

Tom Greatrex: As the ONR said earlier this morning, it will not be possible to replicate the safeguarding regime on day one. If the Government have said that they intend to replicate the standards that we currently have as a member of Euratom, there is obviously a concern that we will not be in the position where we will be meeting the same standards at the point at which we leave Euratom. That is the crucial point about the need for a transitional arrangement or parallel working—there are different ways of describing what is broadly the same thing—which is to avoid that gap.

If you do not have the correct arrangements in place, as you have heard from others on the panel, the series of other arrangements that are effectively contingent on the safeguarding regime will not be able to be in place. That is why it affects absolutely everything to do with the functioning of the industry as it currently functions and has functioned for the past 40 years or more.

We can take a practical example. Because of the international nature of the nuclear industry, the Sizewell reactor currently generating power in Suffolk is based on Westinghouse technology. That technology is therefore US technology. Because of the legal requirement to have a nuclear co-operation agreement in place, there are very real—these are not scare stories—and legitimate concerns that even the ability to exchange information between the operators of the site, EDF and where the technology originates from will potentially be illegal at the point when we come out of Euratom, if we do not have successor arrangements in place or a period of time to enable the transition to be finalised and for the new regime to be put in the place.

It is not about being against the Bill. The Bill does the first step, but there are many more subsequent steps that have to be taken. The ability to do that in a very limited timeframe is the cause of the majority of the concern.

[The Chair]

We will discuss that in this room when we are considering subsequent Bills, no doubt.

[Trudy Harrison]

Q I am hearing that the legislation should be descriptive of Euratom—almost a cut-and-paste job. That differs from the way that ONR currently deals with safety and security, which is outcome-based. While ONR has responsibility for safety and regulates for security, do you see benefits in ONR also having responsibility for safeguarding? Could there be cost or knowledge and skills benefits in ONR having all three strands of the nuclear industry in one building and within one organisation?

Tom Greatrex: The question is probably better addressed to the ONR, but I think the skillsets that would give the ability to move between those different things may be limited to some extent. However, as you heard earlier, it is not unusual for domestic regulators to have responsibilities for safeguarding inspection. That happens in a number of different countries already, but Euratom effectively does that on our behalf. I do not think that in itself is particularly an issue. It is about the process of being able to move from the current situation to the new one.

In the fullness of time, if we get all these arrangements in place and there is not an interruption, and all those concerns are addressed, I do not think there is anything to suggest that the ONR would not be fully capable of doing this alongside the other things it is currently required to do. I am not sure to what extent there would be the economies of scale benefits that you suggest, because the skills involved in safeguarding inspections are quite different from assessing new reactor designs or the routine safety inspections that happen at sites around the country, such as Sellafield and others.

[Trudy Harrison]

Q I am going to come back to the waste issue. I understand that we have waste from the United States and also, I think, from Tokaimura in Japan at Sellafield. What would happen to that waste—waste owned by either other countries or Euratom—if we do not get this in place?

Rupert Cowan: They rub their hands with glee and say, “You keep it; your problem.”

[Trudy Harrison]

But it already is our problem.

Rupert Cowan: No, because it goes back to Japan when it has been re-cleaned. They will just say it is our problem, and that they cannot take it because they are not allowed to. You should not get the impression from what we are saying that we are in any way opposed to the Bill. It is probably correct that, ultimately, ONR being responsible for safeguarding is a positive outcome. It is the disruption that frightens us. That disruption is not a scare story, it is a very real possibility in terms of electricity generation and the ownership, safeguarding and storage of spent fuels, which would be going back to their home base—or not, depending on the particular arrangement; it is all going to stop if we do not get this organised. That is the danger.

I am not saying that we will not have resolved it in 10 years’ time, but the next two or three years look pretty bleak. That is the worry.

Jonathan Leech: We have to keep in mind that international nuclear trade depends upon international acceptability; it is very much a compliance-driven culture. It is not the case that there is a fall-back that might involve a higher tariff or whatever; it would simply be unlawful, so it would simply stop until such time as we have resolved the impasse.

[The Chair]

We are testing the edges of the Bill. Maybe because I want to say “sir”, I call Sir Robert Syms.

[Sir Robert Syms]

Q May I ask you this, Mr Leech? You are saying that this is a good first start, but the key thing is the regulations. From your point of view, would you like to see as many of the regulations published as early as possible, so that you can see the overarching regulatory regime, which would build confidence for the industry?

Jonathan Leech: Correct. We should see those published as soon as possible and consulted on as widely and as soon as possible. That should happen alongside the development of the resource to deliver them.

[Sir Robert Syms]

Good.

[The Chair]

I am being fairly relaxed, but I want to bring it back to what is in the Bill, rather than what is not. With that in mind, I call Dr Whitehead.

[Dr Whitehead]

Q What is in the Bill is, among other things in the schedule, some possible route by which nuclear inspection might be made compatible with what the process of safeguarding inspection consists of, so far as what those Euratom inspectors who undertake it in this country on behalf of Euratom do. In the Energy Act 2013, there is a substantial appendix that sets out in detail the responsibilities, powers and intervention arrangements of nuclear inspectors for the whole nuclear industry, except for safeguarding, which is specifically removed from inspectors’ responsibilities by that piece of legislation. What would be necessary to make sure that those powers in the 2013 Act for nuclear inspectors are mirrored exactly, to integrate what the Euratom inspectors did and what UK inspectors would be required to do in the future?

Jonathan Leech: You are right into the detail of the technical regulation there. The first thing is that you need to expand the scope of those powers within the legislation, and the Bill seeks to do that. Then you need the regulation to set out exactly what is to be done, how and where, and take into account the point, which we have not really gone into, about the outcomes-based approach that the rest of our domestic nuclear regulation is based on. That will present a challenge in transcribing the regulations for use in UK law. We are probably straying from the Bill there. However, provided that we set out in the Bill an expansion of those enforcement powers, which will be an essential component of the expansion of ONR’s role, we are starting to put in place what we need to have. We need the regulation to go with it.

[Dr Whitehead]

Q Would it be necessary, for example, to bring into the Bill the entire range of powers and intervention possibilities that inspectors have, to ensure that they are identical to those that would have been undertaken by Euratom inspectors? Or would it be necessary perhaps just to switch off those bits of the 2013 Act that meant that inspectors could not inspect and issue prohibition notices and other things relating to nuclear safeguarding, whereas they could do everything else? Is it not the case that, in the 2013 Act, there are sufficient powers for those inspectors to enable them to do what they need to do as far as a successor regime to Euratom is concerned simply by turning off what they are not able to do?

Jonathan Leech: In terms of how it is presented, I suggest that it is preferable to have our law on this matter collected together in one place and so to proceed by amendment, rather than by replication. If we create a whole new regime in the Bill, then we introduce the possibility of discrepancies between two similar but possibly slightly different regimes, that is generally unhelpful. To proceed by amendment to and expansion of the Energy Act 2013 is probably the right way to go.

Rupert Cowan: I see the people who are negotiating the nuclear co-operation agreements. They want to be able to refer to a clear set of guidelines, which is clearly at least as effective in safeguarding, and therefore allowing the counterparty to fulfil its international obligation, as the existing Euratom system. It needs to be easily referable to, so that you can sell it and get your deal as quickly as possible, without them taking points about the way your safeguards are drafted or presented. That should be very much in the minds of the draftsmen—that there is a commercial and pressing need to get this agreed with seven or eight foreign jurisdictions as quickly as possible, some of whom will be willing, and some of whom will be less willing, to agree your safeguards regime as adequate to fulfil their obligations. It needs to be clear, clean and saleable. That is the secondary legislation that follows from the Bill, which is why we have suggested only one amendment. The objective of the amendment is to do that, so you can go and talk to somebody in Korea or the United States and say, “This works,” and they cannot see a reason quickly why it should not. You are resourced, the regulations are clear, they apply and you can have your discussion over in months, rather than years.

[The Chair]

My instinct is that the Committee has found your evidence extremely useful. Unless there are any further questions, I thank you all for your extremely helpful, useful, well-informed and wide-ranging evidence. We are most grateful to you.

Ordered, That further consideration be now adjourned. —(Rebecca Harris.)

10:45

Adjourned till this day at Two o’clock.

Nuclear Safeguards Bill (Second sitting)

Committee Debate: 2nd sitting: House of Commons
Tuesday 31st October 2017 Public Bill Committees

The Committee consisted of the following Members:

Chairs: † James Gray, Steve McCabe

† Blomfield, Paul (Sheffield Central) (Lab)

† Bradley, Ben (Mansfield) (Con)

† Carden, Dan (Liverpool, Walton) (Lab)

† Debbonaire, Thangam (Bristol West) (Lab)

Gibson, Patricia (North Ayrshire and Arran) (SNP)

† Gill, Preet Kaur (Birmingham, Edgbaston) (Lab/Co-op)

† Harrington, Richard (Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy)

† Harris, Rebecca (Castle Point) (Con)

† Harrison, Trudy (Copeland) (Con)

† Hendry, Drew (Inverness, Nairn, Badenoch and Strathspey) (SNP)

† Lewer, Andrew (Northampton South) (Con)

† Maclean, Rachel (Redditch) (Con)

† Norris, Alex (Nottingham North) (Lab/Co-op)

† Robinson, Mary (Cheadle) (Con)

† Smith, Eleanor (Wolverhampton South West) (Lab)

† Sunak, Rishi (Richmond (Yorks)) (Con)

† Syms, Sir Robert (Poole) (Con)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

† Wragg, Mr William (Hazel Grove) (Con)

Kenneth Fox, Rob Cope, Committee Clerks

† attended the Committee

Witnesses

Angela Hepworth, Corporate Policey and Regulations Director, EDF Energy

Sue Ferns, Deputy General Secretary, Prospect

Kevin Coyne, National Officer for the Energy & Utilities Sector, Unite the Union

Professor Juan Matthews, Visiting Professor, Dalton Nuclear Institute

Public Bill Committee

Tuesday 31 October 2017

(Afternoon)

[James Gray in the Chair]

Nuclear Safeguards Bill

Examination of Witness

Angela Hepworth gave evidence.

14:00

[The Chair]

I welcome our witness for the first session this afternoon, which can last for half an hour. Angela Hepworth is the corporate policy and regulation director at EDF. Perhaps, for the record, you would be kind enough to introduce yourself. If you want to say anything about the Bill by way of introductory remarks, please do so.

Angela Hepworth: I am Angela Hepworth. I am the corporate policy and regulation director for EDF Energy. I look after our interaction with Government and with regulators in the UK, and I am also managing the company’s work on Brexit, and in particular Euratom.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

Q 46 Good afternoon, Angela. I would like to ask you a general question, if I may. Do you agree that a nuclear safeguards Bill is an essential step for the UK in preparing for its exit from Euratom?

Angela Hepworth: I do agree. Maybe I can say something about our industrial perspective and what it means to us in the UK.

As I am sure you know, we own and operate the eight existing nuclear power stations in the UK, which provide 20% of the UK’s electricity-generating capacity. We also have plans to build a new nuclear power station at Hinkley Point C and then follow-on nuclear power stations. As part of that, it is vital for the existing nuclear fleet and for our new build projects that we are able to import fuel, components, services and information for the nuclear power stations. That is absolutely essential. We have a supply chain that depends on having access to those things from Europe and further afield.

In order to do that, it is essential that there is a functioning safeguards regime in place that is approved by the International Atomic Energy Agency. At the moment, as you know, that is provided by Euratom. When Euratom is no longer providing that, it is essential that we have a domestic regime that will support our ability to import those things. We see it as essential to have a safeguarding regime and therefore essential to have the Bill, to give the necessary powers to put that regime in place.

[Alex Norris (Nottingham North) (Lab/Co-op)]

Q Obviously EDF works beyond our borders. If your business ends up having to work across multiple safeguarding regimes, what likely complications will that cause for you? Do you do that already?

Angela Hepworth: In terms of our UK operations, we will be operating within a UK safeguarding regime. We understand that the Government’s intention is to keep the arrangements from an industry perspective quite similar to the existing arrangements that apply with Euratom. The Bill provides powers to put that regime in place. We have not seen the detail of how those arrangements will operate, but we are very keen to. We are happy, in principle, working under a domestic safeguards regime in the UK, as we have been happy working under a Euratom safeguards regime.

[Mary Robinson (Cheadle) (Con)]

Q What do you see as the biggest risks to the industry of leaving Euratom?

Angela Hepworth: On the safeguards regime first, our concern is about the amount that has to be done to have the safeguarding regime in place in time. As I say, in principle we are very happy with the idea that a domestic regime should be established, rather than the Euratom safeguards regime, but we are conscious that there is a lot to do in the time available to get that regime in place. It is not the principle of it; it is the timing and the implementation.

Likewise, we are conscious that the other key components that we need to have in place include a replacement agreement with Euratom, which would cover issues relating to the ownership of nuclear material, and our future trading relations with Europe for nuclear materials. Obviously, that is subject to the negotiations that are going on in Brussels at the moment. I have regular contact with the officials who are leading those negotiations, and we are fully aligned with the objectives they are perusing. Again, it is subject to the success of those negotiations.

There are other key things that have to be put in place. We will need nuclear co-operation agreements with key third countries. I have been told that the negotiations are under way and are progressing well. Again, our concern is the timing and how it fits with the timing of putting a safeguards regime in place. Those agreements cannot be finalised until there is certainty about the domestic safeguards regime, so it is about the timing of getting all of that done.

The other key issue for us is the movement of people. We are an international business, and the nuclear industry is an international industry. We rely on having access to experts from Europe and further afield. The roles in the company that most draw on skills from overseas are engineering roles—we are reliant on being able to draw in engineers. Building Hinkley Point will require a workforce of 25,000 people. We are doing an awful lot to try to build up skills in the UK, but we expect that, to deliver Hinkley, we will need to be able to draw on workers from overseas. I would not expect that to be solved within the Euratom arena, but that is a key issue for us as a nuclear operator.

We also have to ensure that we have got an export control regime in place and support for nuclear R and D. Those are the key issues for us relating to Euratom.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

May I ask you about the Euratom costs relating to safeguarding, which may not go to Euratom but to the Office for Nuclear Regulation as a result of the transfer of responsibility for safeguarding from Euratom to ONR? I understand that EDF Energy already pays into ONR as a contribution to its general costs, but does not pay anything to Euratom for safeguarding. Is that right?

Angela Hepworth: That is right. We have to distinguish what we pay for from the ONR at the moment. As a nuclear operator, we are required to comply with certain safety and security regulations, and we pay for the ONR’s role in inspecting our stations to ensure we comply with our obligations. That is absolutely right, and we expect that to continue. There is a distinction to be drawn between that and compliance with the safeguarding regime, which is the responsibility of a member state. At the moment, the UK Government pays for that to be done via its contributions to the EU budget. As that is a member state responsibility, it is clear to us that it should be the UK Government who meet those costs in the future, rather than look to the industry to cover them.

[Dr Whitehead]

Q At present, the UK Government’s responsibility is absorbed into the £14 billion per annum net rebate that goes to the annual overall EU budget.

Angela Hepworth: As I understand it, it is funded via the EU budget contribution. That is how it is funded at the moment.

[Dr Whitehead]

Q So, given the fact that it will be a contribution to ONR in the future for that new purpose, which, as we have heard, will require additional inspectors and other things, you would anticipate, or hope, that it would be separated out in practice among the various moneys that go to ONR generally at the moment.

Angela Hepworth: I think the cost should be met by the UK Government, given that it is discharging a UK Government responsibility.

[Dr Whitehead]

Q Do you think that that separation out ought to be in legislation? Obviously, in this Bill we are trying to make sure we have got absolutely everything right, as far as transition is concerned. Is that something you think can be dealt with by discussion, or do you think it perhaps ought to be laid down?

Angela Hepworth: I think we would welcome the assurance; whether that is provided on the face of the Bill or separately is less of a concern to us.

[Rachel Maclean (Redditch) (Con)]

Q You mentioned some of the things that need to happen after the Bill is introduced to make sure that we have a safeguarding regime for the UK. Can you prioritise those for us, once the Bill has been introduced?

Angela Hepworth: It would be first and foremost the responsibility of the ONR to put the safeguarding arrangements in place—if that is the element that you are particularly concerned about. I know that one of the early activities they are undertaking is recruitment of the experts that they need in order to do that. They need to be able to do that and to put in place the processes and systems that they need to be able to discharge those responsibilities. What we would welcome as an operator is a timetable from the Government and the ONR that sets out exactly what steps need to be taken and when, in order to have a regime operational at the point where the UK leaves Euratom.

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

Q You laid out your concerns about the pace and timescale for the replacement requirements for leaving Euratom. You said there was a lot to be done to discover what ownership details were there, their future trading relationships and the nuclear co-operation agreements with third parties and, obviously, workers from the EU. Assuming a date of leaving Euratom of March 2019, when is the latest date that you would say would be required for you to have clarity on those agreements going forward?

Angela Hepworth: I think it is really a process of increasing confidence. It is not so much that there is a particular date where you need to have everything signed and sealed, but we need to have a process between now and the exit date where we have confidence about the regime that will be in place at that date. We would very much support having a transitional or implementation phase, with as much continuity in the existing arrangements as possible. If that could be confirmed early, that would be a great benefit to the nuclear industry, to give them the confidence that they will have continuity in the existing arrangements for a period after the exit date.

[Drew Hendry]

Q So first of all, give them that confirmation of continuity, and also how long would you like to see that transition period last?

Angela Hepworth: I do not think that is a question I can answer. We would like a period of transition. I think that is probably a question for the Government—what they think is appropriate in the circumstances, given what needs to be done within that timeframe.

[Drew Hendry]

I am surprised that you do not have an idea of what you might require as part of the industry—that you might not have an idea of how long you might need as a run-in time to adjust to new regulations.

Angela Hepworth: I think it is more a question of understanding the timeline from the Government and the ONR that they need to have these arrangements in place. Speaking from an industry perspective, we welcome certainty and stability. An early signal that there would be a period of continuity after the Euratom exit date where the arrangements for trade would continue to apply would be very reassuring.

[Trudy Harrison (Copeland) (Con)]

Q To declare my interest, my husband and various other family members work at Sellafield in my constituency of Copeland. I have heard loud and clear that there is a need for a critical path for us all to have sight of, to understand how this process is running, and also the transition period. I think it would be helpful to understand what outcomes we would need from that transition period from other countries outwith Europe, but also for us to understand how it is necessary for other countries to have this in place. How do other countries rely upon the UK to continue with their business in the nuclear industry?

Angela Hepworth: If we are thinking about countries outside the EU, there are a number of countries where it is either illegal or a policy requirement that they have a nuclear co-operation agreement in place if they are going to export nuclear material. The countries that the UK Government have rightly prioritised for negotiating agreements are the US, Canada, Japan and Australia. In each case the UK Government will need to negotiate a nuclear co-operation agreement with that country to enable the trade.

Why does it matter? For example, our Sizewell B power station relies on Westinghouse technology, so we rely on our links with the US in order to be able to operate and maintain that power station. If we wanted to import a part from America, or to draw on expertise and services from America for that power station, there has to be a nuclear co-operation agreement in place between the UK and the US in order to do that. As we understand it, the US will not agree a nuclear co-operation agreement unless the UK has a safeguards regime in place, which is one reason we see the Nuclear Safeguards Bill as a key priority, to put that in place. Each of those countries will have its own internal processes in order to agree nuclear co-operation agreements.

As I understand it, for example, in the US it will have to be agreed by the President and it will have to go through Congress. We have been telling Government we would like to see, as an industry, a timeline that sets out for our benefit the steps that need to be taken in order to put a safeguards regime in place, to get it approved by the IAEA, to conclude the negotiations with third countries, but also the ratification processes for those countries, in order to understand the end-to-end process and how those various components interact, so that we can have the safeguards regime in place and also the nuclear co-operation agreements with those third countries. Then, as I said, we need a future agreement with Euratom: there needs to be an agreement in place, negotiated between the UK and Euratom, which explains the framework for nuclear trade going forward once we have left Euratom.

[Trudy Harrison]

Q We have heard examples of how we need it; are there examples of why other countries need it in place, for their own benefit?

Angela Hepworth: Yes; there is a nuclear supply chain across the EU and the UK is a great opportunity for those countries. For example, two-thirds of the value of the construction of Hinkley Point will go to companies in the UK but that leaves one-third of the value of the construction going to countries from further afield. Many of those are companies in Europe but, for example, there are companies in the US and Japan which are also involved in the Hinkley Point supply chain. It is in the interests of those companies and countries to have future co-operation agreements which enable them to participate in the supply chain. The UK has great opportunities for international companies: there is supporting the operation of the existing nuclear fleet; there is the nuclear new build programme; there is decommissioning coming up. So there should be real opportunities for other companies to be involved in the UK supply chain if we can get those agreements in place.

[Paul Blomfield (Sheffield Central) (Lab)]

Q On the same theme, in your evidence you very diplomatically describe the challenge that we face, even if the Bill proceeds in a timely manner. The legal and practical challenges to the Government and the ONR to put the necessary arrangements and resources in place remain significant. I guess that what you are trying to say, in code, is that that is not really very doable by March 2019.

Angela Hepworth: I am not saying it is not doable; I am saying it is challenging. You heard first-hand from Dr Mina Golshan of the ONR this morning about the practical steps that need to be taken. There is an awful lot that it needs to do in terms of recruitment and having systems and processes set up. We are mindful of the fact that that is a challenge in the time available. That is one reason we support an implementation or transitional phase.

[Paul Blomfield]

Q You would find it helpful to have that in the Bill?

Angela Hepworth: Again, we are looking for assurance and clarity. I am less concerned about whether that is set out in the Bill or not; it is assurance and clarity that the industry is looking for.

[Dr Whitehead]

Q From the point of view of EDF’s operations across the world, what is your view on whether, and in what form, association with Euratom might be a reasonable proposition for the future, and on whether the associations already in existence might fit the bill as possible models for UK association with Euratom?

Angela Hepworth: In terms of a future relationship, EDF Energy has been clear from the outset that far and away the best outcome for the UK nuclear industry would be to remain in Euratom. That remains, we think, the right answer for the UK nuclear industry. Assuming that that is not possible and that we have to look at a future agreement, the models of association agreements in place now are limited to engagement in research and development programmes. That is valuable, but it does not address the key issue that we are concerned about, which is the movement of nuclear materials. What we are most concerned about in all of this is our ability to move nuclear fuel, nuclear components, information and services. The current framework of association agreements would not meet that need. If that were going to solve the key issues, we would need to think of some different model of association.

[Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)]

Q You say under “Issues to be addressed”:

“The UK Safeguards Bill says little about what a new regime will look like.”

You also say that if there were any changes or amendments to regulation,

“Neither EDF nor the wider UK nuclear industry are…included as statutory consultees”.

Do you think that the current consultees include the wider sector, or are they quite limited?

Angela Hepworth: As I understand it, the Bill says that the ONR and such other people as are deemed appropriate must be consulted. We would welcome consultation with the broader nuclear industry.

[The Chair]

Unless there are any other questions from colleagues, I will say thank you very much indeed for your time. You have been extremely helpful and clear, and have added a lot to our deliberations over the next couple of weeks.

Examination of Witnesses

Sue Ferns and Kevin Coyne gave evidence.

14:22

[The Chair]

Q I welcome Sue Ferns, Deputy General Secretary of Prospect Union, and Kevin Coyne, National Officer for the Energy and Utilities Sector at Unite the Union. Having introduced you, I will none the less ask you to introduce yourselves for the record and, if you wish, say a word or two in general about the Bill.

Sue Ferns: I am Sue Ferns. I work for Prospect, a politically independent trade union representing thousands of members across the nuclear industry, from research to generation and decommissioning. We also represent members who work at the Joint European Torus facility in Culham.

We have set out our key concerns about the Bill, one of which is to ensure that the powers of the inspectors are included in the Bill, consistent with the Health and Safety at Work Act 1974 and the Energy Act 2013. We would also like to see in the Bill a consultation on what associate membership of Euratom would look like, because we feel that that would be better than exiting Euratom. From the discussion that has just taken place I understand, and agree, that there is no off-the-peg answer to that, and that we would have to write something specifically for the UK’s circumstances. Those are a couple of our key concerns.

[The Chair]

Q Before I ask Mr Coyne, I will just pick up on that particular point. We are restricted by parliamentary procedure to discussing what is in the Bill. Associate membership of Euratom is not, and therefore we are not permitted to discuss it even should we wish to do so. We must discuss only what is in the Bill and not what, presumably, we would have liked to be in it.

Kevin Coyne: What a pity. I am Kevin Coyne, national officer for Unite. Unite represents skilled workers in the nuclear industry, from decommissioning and generation to huge swathes of the electricity industry. Our position on the Bill, and I understand that you will be asking supplementary questions about whether we support it, is that we have concerns, principally about the impact on workers in the industry, as you would expect from us. We also have concerns about the timescale, and whether that will be in place and have ramifications for jobs in the future. We have concerns about JET in particular, the jobs based at JET, and the freedom of movement of those jobs throughout Europe and the attention to detail in the Bill about that. Those are our three main concerns.

[Richard Harrington]

Welcome this afternoon. I accept your point, Kevin, and the Chair has quite rightly ruled about our discussing what is in the Bill, but my door is always open to both you and Sue to discuss other matters on another occasion.

Kevin Coyne: That is very kind of you.

[Richard Harrington]

Q I know you know that, but I wanted to confirm it, although it is not relevant to this afternoon’s session.

I would like to ask you a leading question—something which of course we do. I understand your views on Euratom and what Sue said about associate membership. She is quite right that there is no actual definition of associate membership. However, given that the Government decided to serve the article 50 notice on Euratom and we are leaving subject to negotiations, which is a statement of fact, would you accept that we are doing the right thing in having nuclear safeguards built? I accept that you do not think that the Bill covers everything, but would you still support it?

Kevin Coyne: The important point is that there is a safeguarding mechanism in place by 2019. You have seen my paper, in which we indicate as a union that we wished that Euratom had been left in place for a series of reasons, including the continuity of various bits at a high level. We do not believe that we can hope to progress to that level by 2019, so we believe that the safeguarding mechanisms outlined in the Bill are important to safeguard the industry as it goes into a phase which we do not yet know about.

Sue Ferns: Just to add to that, having read the Second Reading debate, there was a lot of talk about this being a contingency measure. I would agree; it is an essential contingency measure. It is not our first preference, but it needs to be there as a contingency.

[The Chair]

I call shadow Minister, Dr Alan Whitehead.

[Dr Whitehead]

Q I think it was made clear verbally on Second Reading that the Bill is certainly intended to be a contingency measure—a Bill that would come into operation only if having any other arrangement following Euratom proved not to be possible. I imagine that is what is meant by contingency.

I wonder if you might briefly share with us what you think might be possible so that the Bill is not a contingency, and whether you think the timescale that we have in front of us over the next period is sufficient to bring in either associate membership, perhaps, or similar arrangements with Euratom. Alternatively, if the Bill is to be used as a contingency, do you think that the timescale in front of us—bearing in mind all the detail of the secondary legislation that we need to get through as far as the Bill is concerned—will be sufficient to make that happen?

Sue Ferns: I think the answer is that we do not feel confident that the timescale is sufficient. From speaking to members in the ONR who essentially have to deliver the key provisions of the Bill, it is clear that they need to build an IT system to log the data properly. They need to have resources to deliver what is required, bearing in mind that we are a heavy utiliser of Euratom resources in the UK. As the previous witness said, we need to make sure that there are inspectors in place to be able to police the regime.

It is easy to say that; it is much more difficult to deliver it. Nuclear inspectors are thin on the ground at the best of times. Absolutely, ONR is doing its very best to try to ensure that it can expand its inspector resources, but I think even ONR feels that it is a challenge. The question is where will these people come from? The only obvious source is from elsewhere in the industry, because there are not qualified nuclear inspectors who are currently out of the labour market. That is absolutely a major challenge. The honest answer to the question is that I do not know whether the timescale is sufficient, but at this stage we certainly do not feel confident about it.

Kevin Coyne: I would answer that question with two responses. First, as I said, we as a union hoped that we would have remained in Euratom. We do that because we believe there is not a necessity to leave Euratom in effecting Brexit under article 50 and through article 160a. It was possible, I understand, to remain. That is important, because of the uncertainty that we now believe is cast over that.

As I said before, our concern is mainly with our members’ interests and with jobs. Sizewell B, for instance, will be in operation until 2034, and it relies extensively on components from the United States. It is very important that the co-operation agreements that the previous witness talked about are in place by 2019, and there must be serious doubt with the inspectorate in its current state. I believe that the numbers are 160 inspectors, and the ONR has fewer than 10 in place currently. So, there is the training and the programme and—importantly—all of that must cast doubt upon our ability, and if that is the case it will affect the smooth operation of nuclear plants in future, until there is a regime in place that equally matches the plants.

Secondly, I would argue that there is an impact on new nuclear development for the regime. For instance, there is the whole fuel cycle in Britain, which is gearing up to be a serious and important new operator of new nuclear build. We want within that the whole fuel cycle—the whole of the nuclear operation. As you know, in Preston we have a factory—Springfields—that produces fuel, which is wholly dependent on mixed fuels from other nations, co-operation agreements and the operation of Euratom in ensuring that that fuel supply is there and available.

There is a real threat, because of the problems with Westinghouse, that that plant in Preston would suffer as a result of the safeguards not being in place in time. That would result not only in the loss of jobs but in issues for the fuel cycle itself, for Britain’s ability to recreate the whole of the nuclear cycle for the export orders for the industry, and for the jobs that that entails.

[Eleanor Smith (Wolverhampton South West) (Lab)]

Q I noted that you talked about training and wanting personnel to do work. How long would these individuals need for training?

Kevin Coyne: I will defer to my colleague, who is from the union that represents these people.

Sue Ferns: How long to train a nuclear inspector?

[Eleanor Smith]

Q Yes, and other people you require, because you said there are numbers that you need. I just wondered how long training would take.

Sue Ferns: It takes quite a number of years to train a nuclear inspector. Obviously, if you get people from the industry, they have a level of experience, but not in that context. I believe that ONR is considering whether it can provide additional training to some of its other staff, to enable them to take this role. They are people who inspect, but don’t inspect for safeguarding. However, none of that happens overnight. This is a highly skilled, very specialist area, which is why there is such a premium on this source of labour, so it will take a period of time to be able to do that.

Kevin Coyne: The reputation of the UK nuclear industry and its attendant skills and safety record are things that we, including the trade unions, are very proud of. I would argue that it is important that Euratom inspectors are highly regarded and renowned throughout the world, but that takes time. It is very important to have that reputation, so that people in the rest of the world believe the reports and the regulations that emanate from that.

[Trudy Harrison]

Q I absolutely share your pride in our nuclear industry, and I am certainly looking forward to the future. In terms of the expertise that we already have in this country, my constituency alone has 14,500 Nuclear Industry Association members and 10,000 staff working at Sellafield, many with the skills to lend themselves to being nuclear inspectors. Indeed, the 17 Nuclear Decommissioning Authority sites across Britain are already compliant, which means that they must have staff in place to ensure that compliance, regardless of inspection. Sue, you mentioned not being confident, but what specific steps should we take to provide that confidence?

Sue Ferns: I think that there are a couple of things. First, as the previous witness said, there should be a clearer timetable for various steps. At the moment there is a deadline and then there are two years. How will we get there? The path is unclear.

[Trudy Harrison]

Q So that critical path when there is project management talk about what steps need to be taken on what date and by whom.

Sue Ferns: Indeed, and what the risks are at each stage, so that they can be known and are transparent. I am sure that various stakeholders are working on them at the moment, but I do not think that the critical path with the risks at each stage is a transparent timeline at the moment.

Another thing that would build confidence is making it clear that everyone will work to achieve this, but if we do not achieve it, we must have a longer transition period. For the sake of the industry, we absolutely cannot afford to step out of the regime that we have now until it is absolutely clear that there are equivalent standards in place and that they are operating. It is quite difficult to impose an arbitrary timescale on that because, as I said, there are a number of risk factors: specifying, procuring and getting new IT systems up and running—there is not always a great track record on that—and making sure that we have appropriately qualified and skilled inspectors.

Reflecting on the previous question, Kevin is absolutely right: the UK has a first-class reputation. We all know how easily reputations can be lost. They take years to win, but they do not take years to lose. There should be a combination of having the critical path, which is transparent about the risks at each stage, and being clear that if we need a longer transition in this sphere, we should have a longer transition because that is in the interests of the industry.

[Paul Blomfield]

Q I want to pursue the issue of the time that it will take to get the necessary staff in place. Sue, you said that you were uncertain about the training period. Prior to this Committee, it had been suggested that it could take up to five years to train safeguards inspectors. Is that a reasonable period?

Sue Ferns: I think that that is a reasonable assumption. The reason I said I was a bit uncertain is that it depends on where you get these people from and what their previous experience is. A reasonable approximation is several years—it is not a matter of months but years for people to be able to do that job. Yes, it is about knowledge and skills—and there are a lot of knowledge and skills in the industry—but there are specific aspects of an inspector’s role. This is a warranted role; this is not just working in the industry. It is not just about knowledge, but experience and commanding the confidence of the companies and the organisations that you deal with, so there are very specific aspects to that role. I think that it is a period of years. Of all the things that worry ONR, this is probably one of the key ones, if not the key one. As I say, I think it is doing the absolute best it can, but this is one of the things that keeps them awake at night.

[Paul Blomfield]

Q That comment probably reflects the very helpful conversation we had with Dr Golshan this morning. I think we all formed the impression that it is doing its very best, but that there is a real worry about the size of the talent pool from which it could draw. Do you want to reflect on that?

Sue Ferns: Absolutely. It is a small talent pool, and it is a challenging talent pool even in the best of times. To use what may or may not be an appropriate analogy, it is fishing in a defined and restricted pool, and we are now saying it has to increase its catch from that pool. That is a hard and really difficult thing to do. Also bear in mind that ONR is subject to public sector constraints in its recruitment and payment practices. If it has to compete with the commercial sector, something will have to give in that regard. How can the catch from that limited pool be increased under the constraints it is operating in? The job is getting tougher and bigger, and there are multiple challenges.

[Paul Blomfield]

Q You said in your evidence, Sue, that you were concerned that the powers of the inspectors were not set out in the Bill. Can you elaborate on exactly what your concerns are?

Sue Ferns: The concerns are set out in our evidence. If you look at sections 20 to 22 of the Health and Safety at Work etc Act 1974 and schedule 8 to the Energy Act 2013, they set out in some detail what the powers of the inspectors will be. I know there is reference to that in the schedule to the Bill. These concerns come directly from people who will have to do this job. As warranted inspectors, they feel that it is important to have those powers in the Bill. It is important for purposes of parity, to ensure continuity—these things should not be left to the discretion of future Ministers—and also, as we have discussed, for external confidence in the way the job will be done. That is why we believe very strongly that those powers should be specified. I have not heard an argument to say why, if it is good enough for the 1974 Act and the 2013 Act, we should contemplate a change in practice for this piece of legislation.

[Dr Whitehead]

Q May I briefly follow up on that thought? As you say, schedule 8 to the Energy Act 2013 looks like a comprehensive range of powers and definitions for what inspectors can and cannot do, except it excludes nuclear safeguarding from that definition. If nuclear safeguarding were included among those powers for inspectors, would it be the case in your view that what is in the 2013 Act—provided you switched off those prohibitions—would be sufficient to give the inspectors the powers and the arrangements they felt would be necessary for the transfer of inspection from Euratom to ONR? Or are there other matters that you think should perhaps be included in the schedule to the Bill that would comprehensively do the job, as far as those inspectors were concerned?

Sue Ferns: I think achieving that would be an important step forward. However, as we have set out in our evidence, we have identified three other matters, because you would then have to be clear about what safeguarding means in law. The three bullet points in paragraph 5 of our evidence are points where we think that specific clarity is required in relation to what that would mean in a safeguarding regime. Is that clear?

[Dr Whitehead]

Q One of the problems with schedule 8 to the 2013 Act is that it refers to a number of other bits of legislation. I am not sure whether inspectors’ current powers that are switched off in relation to nuclear safeguarding could simply be transposed into being switched on, bearing in mind what the 2013 Act says about other constraints on inspectors relating to other Acts. I do not know whether that coincides with your concerns about what might or might not be in the legislation, or whether it needs to be achieved by physically placing all of what is in the 2013 Act plus anything else necessary in the Bill or whether that could be achieved by other means. I still have some doubt in my mind. Do you share that doubt, or do you have a better idea about how to do it?

Sue Ferns: I am not an expert on how to draft legislation, but I understand you are asking whether we should take the schedule from the Energy Act 2013 and put it in the Bill, along with any other points that may need to be included. That is certainly our preference, and it is certainly the preference of the members we represent in these roles.

Kevin Coyne: In addition, we would indicate that your knowledge is greater than ours at the moment on the 2013 Act. The importance of the inspectorate is its neutrality and independence. If you are saying that there is an element in there that is currently switched off that can be switched on, that would be an important contribution, but you must ensure that it has that neutrality and independence, because that is what gives status and quality to the current inspectorate through Euratom. I do not go to bed at night reading the 2013 Act, but I cannot remember it addressing the independence issue, which I think would be an important element.

[Dr Whitehead]

Q I want to get a better understanding of the duties and responsibilities—and, indeed, appointment and placement—of inspectors when we exit the EU. What view might the IAEA take about the readiness or otherwise of the regime when it considers the voluntary agreement that we will have to make with the IAEA when we exit Euratom? Is it your understanding that one of the things that the IAEA will consider is whether we are genuinely ready to undertake the additional work and reporting back to the IAEA rather than Euratom that the voluntary agreement would entail? The IAEA will either come to an agreement based on the fact that we look ready or, alternatively, say that more work is needed before we can come to an agreement. Presumably, however, an agreement will have to be reached by the time we exit the EU.

Sue Ferns: My understanding is that the IAEA will require certain standards to have been met before anything else can happen. What I understand, though, is that during the Second Reading debate on the Bill, there was a lot of talk about replicating the Euratom powers. My understanding is that that is not necessarily the IAEA hurdle, because I think the IAEA hurdle is slightly lower than replicating the Euratom powers. Certainly, there will be a requirement to meet IAEA standards.

[Trudy Harrison]

Q Just changing tone slightly, I notice, Kevin, that you have a reference to concern around radioactive isotopes. I do not share that concern. I do not understand why you think this is relevant to Euratom, because they are not fissile material. I have not heard of anyone using plutonium or uranium in medical practice. I wonder, if they have not been risk-assessed by the IAEA, why you would feel there is a concern about their falling under the realms of Euratom.

Kevin Coyne: I think that is an area which is of serious consequence. I think it is generally not well known—the fact that Euratom covers the transportation of materials—or that isotopes that are used in the NHS, for instance, come from Holland and other countries. We do not have the reactors in this country to produce them. I understand what you say about the registration. We highlighted that as a concern because there is a two-day, three-day shelf-life; this comes from us as a union that operates within the NHS at quite an extensive level. In terms of the delivery and transportation of that, there are sometimes delays. So our point is that the change of regimes and the difference in what might occur may cause that to be delayed even further and therefore impact upon the NHS itself. We make no stronger point than that we ought to look at the impact upon isotopes in hospitals.

[Richard Harrington]

Q On that point, if I may clarify, given that that has been brought to my attention—I have agreed to see the Royal College and other people who are interested. Is your point that the movement of the isotopes is perhaps to do with what happens with Brexit—that is, the movement of any foreign goods—or is it a Euratom point? We think on the former you have a point, but on the latter you are mistaken.

Kevin Coyne: A Euratom point—and you think I am mistaken about that?

[Richard Harrington]

Well, because I can quite understand the point that they have got to be overnight, or very quickly, and all that kind of thing—would that be affected by a change of law when we Brexit. My advice, though, is very clear; I have asked a lot of people, as you might imagine. It is very much Trudy’s point, which is that, whatever one thinks about Euratom and so on, the medical isotopes are not covered within the fissile definition of Euratom. Do you feel that we are wrong on that, or was your point, “Yes, we’ve got to get them quickly and without paperwork and all that kind of delay”—which may or may not happen afterwards?

Kevin Coyne: Our information, as I said, was simply that upon the basis of the delays in transportation, due to the change in regime, we thought we ought to have in place a cast-iron security, as we do now, to make sure that those delays do not unnecessarily happen.

[The Chair]

Finally, Alex Norris, before we break for a vote.

[Alex Norris]

Q Thank you. We have heard the Bill characterised in lots of ways—whether it is a place-holder, a contingency. We have heard from yourself and previous speakers about the fear of a lack of clarity about what is on the face of the Bill. What impact is this uncertainty having on staff?

Kevin Coyne: Generally, among staff in the nuclear industry?

[Alex Norris]

Yes.

Kevin Coyne: If the truth be said, I would imagine that a majority of staff still are not aware of the massive ramifications—certainly among my members. Sue is much closer to the issues in terms of the roles that they take. It is becoming more widely known. That certainly was not an issue, as you recall, within the Brexit discussions, so the general knowledge of it is not that great. What is important is that those organisations that do know—you heard from EDF earlier—are now briefing very widely on the impact that it may have, particularly in terms of the items I listed. For instance, the people at Springfields are acutely aware, because of the impact upon that nuclear new build and on nuclear new build projects for the future. There is concern—it is important to say that—but as for whether it is widespread across all the staff, I do not think I could lead you to that view currently, but clearly it will affect all staff that work within the nuclear industry.

Sue Ferns: Among our members there is quite an awareness of this now. We recently did a survey of all our members in the industry, and well over 80% wanted either to stay in Euratom or in some form of associate membership of Euratom because of the concerns or the uncertainty they had about leaving. I would say that in the research areas, concerns are very high. JET, for example, is already finding it more difficult to recruit because of the uncertainty about the future of the organisation. Of course, the issue there is very much one of the free movement of people. It has a workforce that is 60% EU nationals, so it is a major priority, but across the rest of the industry there are levels of 80% or more expressing a preference for an alternative future.

[The Chair]

On behalf of the entire Committee, I thank both our witnesses, Kevin Coyne and Sue Ferns, for their extremely interesting and useful evidence, which added to our understanding and will be useful in the debates that lie ahead in the next couple of weeks. The Committee will know that there is to be a vote which has to be by 3 pm. Rather than starting the next session, I think we should stop now and do our best to get back by 3.10 pm.

14:56

Sitting suspended for a Division in the House.

15:12

On resuming—

Examination of Witness

Professor Juan Matthews gave evidence.

[The Chair]

I welcome Professor Juan Matthews, a visiting professor at the Dalton Nuclear Institute. I am told that another Division is due within half an hour, so I would like to conclude our discussions by that time and keep remarks brief. Will you start, Professor, by introducing yourself and giving some brief comments on the Bill?

Professor Matthews: My name is Juan Matthews. I currently work with the Dalton Nuclear Institute of the University of Manchester as a postgraduate teacher of nuclear technology, and I also advise on government and international relations. My previous role was with UK Trade and Investment, which is now the Department for International Trade, where I was a nuclear specialist for a number of years. Prior to that I had a very long career in the nuclear industry, starting as a laboratory assistant in 1962 at the age of 16, working in a fuel development lab, so I have practical experience of coming up against nuclear safeguards.

As far as I am concerned, the Bill is very clear and uncontroversial. The things associated with the Bill are more problematic, as several people who are much better qualified than me have already commented. I would like to point out a couple of things that came up in the recent discussion.

The term “inspector” as it is being used is not clear, in the respect that nuclear inspectors are normally people who look at the safety of facilities; nuclear safeguards are quite different because they require a different set of skills and a different stance. The personnel cannot be interchanged; one cannot just take staff from the Office for Nuclear Regulation and say, “Next week you start doing nuclear safeguards.” It is not as easy as that. There was also a brief mention of isotopes. Of course, that is not at all relevant to the Nuclear Safeguards Bill, but I point out that chapter 9 of the Euratom treaty guarantees the unimpeded transport and tariff-free trade not only of nuclear materials but also of radioactive isotopes used in medicine and industry.

[The Chair]

As you correctly say, that is beyond the scope of the Bill. I did not interrupt earlier but if it comes up again, I will.

Professor Matthews: I thought I would clarify.

[The Chair]

It is most kind of you. The Minister may want to clarify the difference between inspectors and safeguarders.

[Richard Harrington]

I do not feel able fully to clarify the point at this juncture, Mr Gray. Usually the mistake is made—not that Professor Matthews would—between safety and safeguarders, but we are looking at the safeguards regime here, which includes physical inspection, mentioned today by quite a few of the people giving evidence, and, though I do not quite know how to use the expression, remote inspection by cameras and other sets of kit, which at the moment belong to Euratom but I am sure will be part of the new safeguards regime.

Professor Matthews: There are three components in nuclear safeguards. One is nuclear materials accountancy— that is, keeping track of nuclear materials. Then there are two skills that go along with that. One is assaying, determining the amount of nuclear materials—

[Richard Harrington]

That is laboratory testing the quality and the content.

Professor Matthews: And observing and recording movements of nuclear materials, without both of which you cannot do the accountancy.

[Richard Harrington]

I would accept that.

Professor Matthews: That is quite different from proving a safety case for the operation of a nuclear installation.

[Richard Harrington]

I would accept that.

[The Chair]

Exceeding my role as Chairman, it might be something you would ask your officials to look into for later consideration during the Bill?

[Richard Harrington]

They already are.

[The Chair]

They already are. That has answered the point; good.

[Trudy Harrison]

Q May I ask for clarification? You say they already are: will there be some kind of appraisal of the staff skills, knowledge and qualifications required to carry out the function of Euratom in the UK, to determine what skills are required?

[Richard Harrington]

Is it acceptable for me to answer?

[The Chair]

Why not? It is slightly unusual, but why not?

[Richard Harrington]

Why not? I am quite happy to. That function, currently done by Euratom, will be done by the new safeguards regime. It will be responsible for examination and testing and making sure there are suitably qualified inspectors, in the same way that Euratom does now.

[Dr Whitehead]

Q I think you were in the session when we heard evidence from our previous witnesses this afternoon concerning what is in the Energy Act 2013 and in other Acts concerning the responsibilities and powers of and prohibitions on nuclear inspectors in general. You have made the very precise point that the role of an inspector relating to nuclear safeguarding is certainly not the same as the role of an inspector relating to nuclear safety: they will have different skills and responsibilities. Is it your understanding, however, that what is in the legislation at the moment concerning the overall powers and responsibilities of inspectors is sufficient for the purpose of bringing under the regulation of ONR a number of inspectors who previously would not have been covered by that area of responsibility but would have been reporting to Euratom and covered by whatever Euratom decided was necessary as far as that inspection and safeguarding is concerned?

Professor Matthews: Clearly, the operation of the Office for Nuclear Regulation requires a range of different roles. I would see no problem with adding an additional role to the range of roles that are already in the organisation. It is just the physical people are different people who do these different things. Indeed, nuclear inspectors themselves have different backgrounds and specialisations, and diverse education as well. I suppose it is extending the range of what the Office for Nuclear Regulation does.

[Dr Whitehead]

Q From your point of view, there is nothing that you might think needs to be added, over and above what general powers inspectors have, when we are in a situation where inspectors are reporting to ONR—and, presumably, it would then be sufficient simply to add them to the club of the powers of inspectors as they presently stand in legislation?

Professor Matthews: I would have to look at the documents and examine them in detail to be able to answer that question fully. It is a different role. I would expect it not to be covered within the current definitions in the documents, but I do not have access to them and cannot check that now. But I would be very surprised if it was covered. It would need something added.

[Alex Norris]

Q Professor Matthews, you are responsible for training and teaching the next generation of nuclear engineers—no pressure. How ready and willing are they to take up the roles that they are going to need in order to replicate Euratom in this country, and how soon might we be able to think that they may be able and willing to do that?

Professor Matthews: The young people that I am encountering in my current activities are ready to take on responsibility and do things. I am very impressed by them. I am sure there are people who are capable of taking on these roles. The only problem is that there is competition. Those same people are valuable and can be used in all sorts of ways. Whether it is possible to assemble the right people quickly to be able to avoid any hiatus in the operation of our industry is another matter. Certainly, at the moment, the people that we train have no problems finding jobs.

[Alex Norris]

Q The cohort you teach at the moment in Manchester—where are they from?

Professor Matthews: There are two main programmes I teach on. One is the new generation centre for doctoral training. That is a collaboration between five universities in the north of England and we have a cohort of about 25 a year. That has been going on for the last five years. Almost all of them are British nationals from diverse backgrounds. We have one or two foreign nationals in there, but they are the exception. The other programme I teach on is the nuclear professional development programme, which is a master’s degree for people working part time who are managers in the nuclear industry in the UK. We have had one or two foreign students on that—I even had a commander in the Brazilian navy—but most of the people are British nationals working in our nuclear industry.

[Mary Robinson]

Q It is great to know that in Manchester you train up these great future scientists; they are the technical, highly skilled jobs that we need. One of your issues and concerns seems to be about having sufficient staff to man the safeguarding progress at a time of high build, because we are building new power stations—so there is that to factor in, as well. To what extent is this an exciting time in the industry for jobs and high-skilled jobs, as well as a challenging one?

Professor Matthews: It has been a difficult time for us, because there was such a long delay in the announcement of the final investment decision for Hinkley Point C. That made people relax, so it has proved easier to recruit good engineers to join our nuclear programmes at the university as a result. Certainly, the prospect of building 16 GW of nuclear reactors is stimulating the people moving into the industry. But it is not only that. We have to cope with the problems of legacy, decommissioning and radwaste management. There are nuclear fuel cycle industries, very likely with both fuel manufacture and enrichment. All these things require the nuclear safeguards to be operating, and any interruption in that—we are talking about something like £10 billion a year in UK activity that would be interrupted.

[Mary Robinson (Cheadle) (Con)]

Q When you say £10 billion, what is that related to?

Professor Matthews: That is related to the operation of nuclear power stations in the fuel cycle industry, which consists of processing and manufacturing nuclear fuels, manufacturing the nuclear fuel elements, and enrichment of uranium. The work still going on at Sellafield on reprocessing will stop shortly, but there is the handling of materials from Sellafield for decommissioning and radwaste management, all of which contain higher actinides and uranium, which are covered by the Nuclear Safeguards Act 2000. We need to know what is going into the waste to ensure that we are not making a plutonium mine or something that someone could tap in the future.

[Mary Robinson]

Q So the training that you are doing and undertaking with the students in Manchester is crucial to the future.

Professor Matthews: Yes, but it is not enough, even at the rate that we are going. We have two major doctoral programmes in the UK that we co-operate with—one in the south with Imperial College, Cambridge, and the Open University, and one that we have with five universities in the north. That is only about 50 students a year. We need to bring into the industry hundreds of students a year, which means that we must be able to bring in people from around the world, mainly from Europe, but also from more widely around the world.

There is an opportunity from Germany at the moment—its industry is contracting because it is shutting down plants. It does not seem to be managing the decommissioning problem very well, so people are leaving Germany very rapidly.

[Mary Robinson]

Q Are they being attracted here?

Professor Matthews: They were, but they are not any more.

[Paul Blomfield]

Q Professor, could we return to your primary concern, which we have also exercised with previous witnesses? It concerns the ability of the ONR to recruit sufficient inspectors by March 2019—you helpfully clarified the difference between safeguarding inspectors and safety inspectors. How likely is it that the ONR could meet the staffing levels necessary to take over the Euratom function in safeguarding by that date?

Professor Matthews: I heard the recording this morning of the ONR representative. It looks unlikely that it will be fully functioning by March in two years’ time. The question is: how can we bridge the gap until everything is working properly?

[Paul Blomfield]

Q I guess in lots of other areas, having got close and being not quite but almost fully functioning might be satisfactory. In this specific area, what are the consequences of not having a fully functioning safeguarding regime in place?

Professor Matthews: Springfields, which produces nuclear fuel, will stop working. The Urenco plant at Capenhurst, which is part of three plants in the Netherlands, Germany and the UK, will stop working because it will not be able to move uranium around. We in the UK no longer do conversion, which is changing uranium into uranium hexafluoride, which then goes to the enrichment plant and is converted back to oxide or metal for application. That requires movement, and all of that would stop.

It would be difficult for Sellafield and other decommissioning sites, such as the old research sites at Dounreay, Harwell or Winfrith; some of the work there would grind to a halt as well. Eventually, when the fuel charges were removed from reactors operating in EDF Energy’s plant, those would all stop, which would take something like 9 GW of power out of our network at a time when we are perilously close to blackouts. It would be a very serious measure indeed if there was a hiatus.

[Richard Harrington]

Thank you for that, Professor Matthews. You are of course using my argument for why we need the Bill; thank you for supporting it. Dr Mina Golshan, whose organisation is responsible for recruiting the 15 people we are talking about, said that recruitment had already started. Once the Bill proceeded beyond Second Reading—I thank everyone, including Opposition Members, for voting for that—it meant that the financial resources needed for the IT and recruitment are provided. We are very well aware of that.

I thank you for your de facto support for the Bill. I have of course noted the points you have made, and I will be very happy to chat about them on another occasion. The purpose of the Bill is precisely to get over some of the obstacles that you are talking about and prevent what you have explained would happen—as we accept would happen—if we did not have a safeguards regime in place.

[Dr Whitehead]

Q May I come back briefly on the question of finance? I think we all know that, as a contingency, we need the safeguarding regime that is set out in the Bill. What I think we do not know is what will happen with the various finances involved in the whole process. I characterise that in two ways. First, what will happen to what we previously paid to Euratom, and presumably would have to pay and then recover —as is mentioned in the Bill—via ONR, for the cost of the inspectors, who would previously have been part of our contribution to Euratom but will now be a UK contribution?

Secondly, I understand that the Torus fusion project at Culham will be a subject of safeguarding inspection. Will that be financed, subsequent to our leaving Euratom, in a way that is commensurate with its present level of assistance, which largely comes, as you are aware, from EU funding? Do you have any comment on that?

Professor Matthews: There is a difficulty here and I do not know if it is recognised in the Bill; it perhaps needs scrutinising. The only mention in the Bill and in these discussions is of our fissile materials. We are talking about uranium, plutonium and other axinite isotopes, and precursors such as thorium, which can be converted into fissile materials. In the case of Culham and the fusion programme, they use tritium. Tritium is a material that comes under safeguards, which is not a fissile material. It is a material that is a component in hydrogen bombs, and it is controlled. I remember getting into trouble as a young scientist. I was asked to assess the use of lithium-6 as an absorber for a fast reactor project. I phoned up a French supplier of lithium-6, and next thing I had security down on me, because tritium is produced from lithium-6 and is a controlled material. I do not know whether any consideration is being made of the control of tritium with respect to Culham and nuclear safeguards.

[Dr Whitehead]

Would there be other materials that are not fissile but would also be controlled and inspected under safeguards?

Professor Matthews: We are getting into areas that we cannot really discuss here.

[The Chair]

Yes. Perhaps fissile materials are slightly beyond the scope of the Bill.

[Richard Harrington]

That is beyond the scope of the Bill, but perhaps we could discuss it, although not necessarily now, in the evidence session. I am happy to discuss it, but I suspect that your interpretation is correct, Mr Gray, and it is beyond the narrower scope of the Bill. I am happy to discuss it with the Shadow Minister.

[Dr Whitehead]

One might argue that the scope of the Bill is too narrow for the safeguarding that we need to undertake.

[The Chair]

It does not matter. The scope of the Bill is the scope of the Bill. Let us not get into a chat among ourselves. The reality is that the Bill is as printed, and it is the Bill as printed that we have to discuss, under the long title and the short title. Of course, within that we can amend it as much as we like. My instinct is that the Committee have done our work for the day. Thank you very much, Professor Matthews, for your very useful evidence, both written and in person. I assure you that it will be taken note of in the discussions that lie ahead, starting on Thursday, when my colleague Mr McCabe will be in the Chair. The Committee will see me again, assuming that we sit—we will no doubt sort that out—next Tuesday.

Ordered, That further consideration be now adjourned. —(Rebecca Harris.)

15:36

Adjourned till Thursday 2 November at half-past Eleven o’clock.

Written evidence reported to the House

NS 01 Prospect

NS 02 Professor R J Barry Jones

NS 03 Nuclear Industry Association

NS 04 Prospect Law

Westminster Hall

Tuesday 31st October 2017 Westminster Hall

Tuesday 31 October 2017

[Mr Peter Bone in the Chair]

Children’s Oral Health

Tuesday 31st October 2017 Westminster Hall

11:05

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I beg to move,

That this House has considered childhood oral health.

Good morning, Mr Bone; it is a pleasure to serve under your chairmanship today. I am glad that we have been granted this debate by the Backbench Business Committee, because child tooth decay represents a much bigger public health issue than appears to have been recognised so far. It is a problem affecting millions of children, including some of the most vulnerable. It should be a real concern to us all.

As well as thanking the various parties for their help in raising this matter, I also want to thank the Faculty of Dental Surgery at the Royal College of Surgeons and the British Dental Association for their efforts in helping to bring this issue to Parliament’s and the public’s attention.

Public Health England reports that 25% of all five-year-olds in England experience tooth decay in at least three to four of their teeth, and that in some parts of the country it can affect as many as 50% of all five-year-olds. Perhaps not surprisingly, there is a link between deprivation and childhood tooth decay, with the poorest areas suffering the worst levels of oral health and the least contact with dentists. A report, shortly to be published by the Nuffield Trust and the Health Foundation, shows that five-year-olds eligible for free school meals are significantly less likely to attend dental check-ups and have more difficulty in finding an NHS dentist.

If we look at the scale of the problem, we will see that more than 45,000 children and young people aged 0 to 19 were admitted to hospital in England over the past year because of tooth decay. They included 26,000 five to nine-year-olds, making tooth decay the leading cause of hospital admissions and emergency operations for that group. Last year more than 40,000 hospital operations for tooth extractions were performed on children and young people, which is the equivalent of about 160 operations every single day.

[Catherine West (Hornsey and Wood Green) (Lab)]

My hon. Friend is making an excellent speech. Does he agree that it is extraordinary that it appears that more children go into hospital because of poor oral health than because of broken arms, whereas when we were children it was definitely the other way around?

[Steve McCabe]

I absolutely agree with my hon .Friend. That gives us some sense of the scale of the problem.

Those 160 operations every single day are not only detrimental to the health and wellbeing of the children; they are also costly to the NHS. In the financial year 2015-16, more than £50 million was spent on tooth extractions for those aged 0 to 19. The average cost of a tooth extraction for a child up to the age of five is approximately £836, and there were some 8,000 such procedures during 2015-16. Dental treatment is a significant cost to the NHS, with spending in England amounting to £3.4 billion on primary and secondary dental care.

In Birmingham, 29% of five-year-olds suffer from tooth decay, which is significantly higher than the national average. Five-year-olds in Birmingham are three and a half times more likely to suffer tooth decay than those in the South West Surrey constituency of the Secretary of State for Health, and yet Birmingham is a city with fluoride in the water. In Manchester, where the water supply is non-fluoridated, the percentage of five-year-olds with tooth decay is 4% higher than in Birmingham. Hospital admissions related to tooth decay for those under the age of 18 in Birmingham have almost doubled in the past four years.

The way in which data are collected and the regional nature of the information sometimes mask the scale of the problems in the same towns and cities. We know that 20% of five-year-olds have tooth decay in south-east England, compared with 34% in north-west England. In Sutton Trinity ward in the Sutton Coldfield constituency, the figure is less than 10%, but the figure for another part of the same city—the Selly Oak ward in my own constituency—is 47%, which is almost twice the national average. Shocking as those figures might be, tooth decay is almost entirely preventable.

Many health experts now agree that early tooth decay can have a broader impact on health and wellbeing, affecting physical and mental health, and impacting on the child’s development and confidence. Poor oral health can also cause children problems with eating and sleeping, which often results in time away from school. Public Health England has conducted research on the number of school days lost due to tooth decay in north-west England. It shows that the average number of days lost per year was three, but many children missed as many as 15 days owing to dental problems.

Some might wonder why childhood tooth decay matters, because children lose their primary teeth which are replaced by new, permanent teeth. The issue is that a high level of disease in primary teeth increases the risk of disease in the permanent teeth. The child’s self-confidence may also be damaged. More than a third of 12-year-olds said in a recent survey that they are embarrassed to smile or laugh because of the condition of their teeth, and that can often make it harder for them to socialise.

So what can we do? There seem to be three crucial steps to addressing the problem: getting children to brush their teeth twice a day; ensuring they see a dentist regularly from a young age; and reducing the amount of sugar that children consume.

Scotland has been running an educational programme called Childsmile since 2001, which has been credited with making a significant improvement to children’s oral health. The programme supports supervised tooth brushing sessions in primary schools and nurseries, as well as providing twice-yearly fluoride varnishes. Perhaps we will hear more about that later.

A similar initiative, Designed to Smile, was introduced in Wales in 2009. Teeth Team, which is supported by Simplyhealth, has invested £137,000 in a dental programme that takes dental education directly to children in local primary schools in the city of Hull.

[Wendy Morton (Aldridge-Brownhills) (Con)]

Teeth Team has visited one of the schools in Brownhills in my constituency. Does the hon. Gentleman agree that we need to further consider such innovative new schemes and other ways to educate children on dental health and tooth-brushing?

[Steve McCabe]

I absolutely agree with the hon. Lady. An education programme for young children and their parents is crucial. I want the Government to play a bigger role, but there are other approaches, too. As I have said, Simplyhealth is supporting the venture in the city of Hull and in East Riding of Yorkshire, as well as in the hon. Lady’s constituency.

A pilot programme called Starting Well is about to commence in 13 areas of England, although none of those pilots will be in Birmingham or the west midlands. I would be grateful for details of the pilot. How long will it run? How will it be evaluated? How were the 13 areas selected? It would also be useful to know exactly how the programme is being funded.

A new initiative by the British Society of Paediatric Dentistry, “Dental Check by One”, is seeking to raise awareness of the importance of getting young children to attend the dentist from an early age. It is supported by organisations across the dental professions. I am pleased to report that it is due to launch in Birmingham tomorrow, despite some torturous negotiations about funding. It seems likely that funding issues will prevent it from being implemented by other regional NHS teams.

What else might be done? Has any consideration been given to proposals from the Faculty of Dental Surgery to use school breakfast clubs to deliver supervised tooth brushing sessions? Analysis by Public Health England has suggested that if public health professionals such as health visitors are involved in supporting oral health improvement programmes, that can lead to significant improvements and long-term savings. Health professionals who have regular contact with children, such as midwives, health visitors, school nurses, pharmacists and early years practitioners, are all ideally placed to help identify children who may be at risk of tooth decay.

Equally, dentists look at all the soft tissues in the mouth and are often able to help identify a number of conditions, from diabetes and Crohn’s disease to oral cancer. According to recent figures on dental attendance, 42% of children aged 0 to 17 did not visit an NHS dentist in the 12 months to 31 March 2017.

[John Grogan (Keighley) (Lab)]

Does my hon. Friend share my concern that a cursory review of the NHS Choices website yesterday showed that there are many areas of the country, including Keighley, where there is no advertising at all of dentists who are available to take on new children as patients? Might one answer to the age-old problem of poorer areas having fewer dentists be an expansion of salaried dentists in the NHS?

[Steve McCabe]

There is certainly an issue with access to dentists in some areas, although it is probably also true that some parents need to realise that visiting the dentist is free for children. There is certainly a question about how we incentivise dentists and provide better coverage.

As I was saying, 42% of children did not see an NHS dentist in the 12 months to 31 March 2017; in Birmingham, that figure is 47%. The Faculty of Dental Surgery has reported that, in the same 12 months, 80% of children aged between one and two did not see a dentist, but official advice recommends that children begin dental check-ups as soon as their first teeth come through, which is usually at around six months.

We may need to reconsider certain elements of existing dental contracts to see if we can better incentivise some dentists to pursue a preventative dental strategy with children. At present, three visits for fluoride treatment equal one unit of dental activity, which is roughly worth about £60 to the dentist. Perhaps we should look at that again. I am sure that both the Minister and local authority public health officials will be keen to remind me about money if I urge greater activity, but I remind hon. Members that parliamentary questions have revealed a clawback of £95 million through undelivered units of dental activity in 2013-14, rising by 36% to £129 million in 2016-17.

Dentistry remains a highly siloed service in the NHS and has been largely neglected from future NHS plans, such as the five year forward view and sustainability and transformation plans. As I have said, education programmes and regular visits to the dentist are needed if we are to begin to tackle the problem, but we also need action to tackle sugar consumption.

There are question marks over how likely the soft drinks industry is to meet the targets agreed under the voluntary reformulation programme. Earlier this year, the Food and Drink Federation announced that it was unlikely to comply with the optional 20% reduction in sugar content by 2020. It has also been revealed that it will be March 2018 before we even know whether the industry has achieved the first target of a 5% reduction by August of this year.

We desperately need to make significant progress towards reducing the amount of sugar in soft drinks and other products. The Government need to look again at their obesity strategy. As luck will have it, it is Sugar Awareness Week. What better time could there be for the Government to seriously consider the suggestion of the Local Government Association and others that we introduce teaspoon labelling on the front of high-sugar products? We should certainly look at advertising, and consider a ban on two-for-one offers and other price promotions on high-sugar products.

Childhood tooth decay is a problem that affects millions of children. It can be extremely painful and it often results in costly tooth extractions under general anaesthetic. Addressing tooth decay is not complicated; we know what works, and the actions I have outlined today could make a real difference. I hope that the Minister will consider those arguments, and that he is in a position to tell us that the Government are considering a series of preventative measures so that good oral health can be enjoyed by all our children.

[Several hon. Members rose—]

[Mr Peter Bone (in the Chair)]

Order. It might help the House to know that the wind-ups should start at about 10.30 am and seven Back Benchers are trying to catch my eye. I do not intend to impose a time limit, but perhaps Members will be aware of that.

09:40

[Sir Paul Beresford (Mole Valley) (Con)]

I congratulate the hon. Member for Birmingham, Selly Oak (Steve McCabe) on going through all the statistics, which means that I can cut my speech down immensely; I will put him up for an honorary degree as a dental therapist.

The hon. Gentleman is right: the statistics on child dental health are horrific. Deciduous teeth, or baby teeth, are particularly susceptible to decay as they have thinner enamel than permanent teeth. That is a contributing factor, but the problem is basically one of education, and it has gone on for decades. When I first practised dentistry in this country, in the NHS in east London in the early ’70s, I was struck by the appalling state of child dental health. Every Thursday afternoon, either I or a principal of the practice, with an anaesthetist, ran general-anaesthetic sessions. When I look back on them I am horrified, because the risks were considerable and such treatment is now banned. The children would all go to hospital now.

Those sessions were packed, and were almost entirely about extracting teeth from little children. It is appalling to think of it, but not as appalling as seeing those little children coming in, in pain after sleepless nights due to dental decay. If one wandered down to the local supermarket in east London, the stacks and racks of biscuits and sweets were considerable; the stacks and racks of what we would call wholesome food were minuscule. It was an education problem.

Prevention must be the way forward, because of the cost reductions. If one realises that Britons eat around 700g of sugar a week—an average of 140 teaspoons—one can see that reduction is needed. The intake is not spread evenly; it is higher in the north, lower in the south-east, and teenagers have the highest intake of all age groups, consuming some 50% more sugar on average than is recommended. That is another education issue.

The hon. Member for Birmingham, Selly Oak mentioned Childsmile—the set of Scottish tactics and methods for teaching kids—and that is very successful: more than 90,000 nursery schoolchildren take part. It is a programme of supervised tooth brushing, which has made some quite staggering gains; it has been mimicked in Wales and now here. England has an enthusiastic new chief dental officer, Sara Hurley. She and I will be arranging for every English MP to be invited, region by region, to meet her and others to discuss tooth decay problems among children and understand how we can move forward.

I have a few suggestions for the Minister, some of which have already been mentioned. We need a national oral health programme, such as that in Scotland, which should target poorer areas and areas of poor health, although this is not about poverty—it is about education. Sara Hurley is well on the way with a number of campaigns and areas where that is working. She, I and others have been working with local health and wellbeing boards to move into schools to run a check system that ensures that children, particularly in primary schools, visit their dentist once a year. If children had a little book, every child could be required by the head of the school to come back with an appointment card signed by a dentist to show that they had been once or twice a year. That should be a standard policy in schools.

Not just dental healthcare professionals but all healthcare professionals, such as midwives, health visitors and pharmacists, need to be given training. I remember an occasion when one of my kids visited a healthcare professional. The child was tiny. My wife had to listen to the healthcare professional say that fluoride and fluoride toothpaste were poisonous. I could not believe the ignorance!

Dental associations and groups should wake up—they are starting to—and should help dentists to help tooth-brushing campaigns and programmes. Such practices could be and sometimes are adopted in schools. The dentist does not have to go, but the hygienist and the nurses can. Toothbrushes and toothpaste can come from providers for free, and education can be linked. Kids—little kids especially—love brushing their teeth. Sara is trying to bring that into primary schools and nurseries, and perhaps to children as young as between one and two.

Far and away the biggest proven method of reducing tooth decay among children, and ultimately adults, is fluoridation of the water supply. As part of the health professional programme, the use of oral fluoride for children should be promoted by health workers. It is not, and it should be, because it makes a dramatic difference. My father was a dentist in New Zealand. I remember him saying that before fluoride arrived, trying to treat children with tooth decay was like trying to fill a bath with the plug out. Fluoride has dramatically changed the situation, and education and tooth brushing will change it even further.

In the United Kingdom, approximately 330,000 people have naturally occurring fluoride in their water supply at the optimum level. In addition, some 5.8 million people in different parts are supplied with artificially fluoridated water. That is about 6 million, out of a total population of 64 million—about 10% of the population. The percentage in the United States is 74%; in Canada, it is 44%; in Australia, it is 80%; and in New Zealand, it is about 70%.

The answer has to be a combination of fluoride in the water supply, fluoride in toothpaste—especially where there is none in the water supply—and, as the hon. Member for Birmingham, Selly Oak has said, using the opportunity to get out into schools and teach the kids. If we teach the kids, we teach the mothers. Dental decay is preventable; let us prevent it.

09:53

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Member for Birmingham, Selly Oak (Steve McCabe) on securing this debate. As always, it is good to have the pleasure of the vast experience and knowledge of the hon. Member for Mole Valley (Sir Paul Beresford) on this subject. I thank him for his contribution.

I am the Democratic Unionist party spokesperson for health, so this issue is very much on my radar. I will give some stats—the hon. Member for Birmingham, Selly Oak gave some, but I will give different ones. That does not make me any more of a statistician or an honorary member of any statistical organisation, but they are important for me because they are from my own region.

I can remember, as a child, my mother taking me to the bathroom and scrubbing the life out of my teeth; we can all probably remember something similar. When I was old enough to brush, but perhaps not old enough to know the importance of brushing, there were mouth checks, which reminded me of checking a horse’s mouth to see the health and age of the horse. Rather than understanding why it was essential that we brushed our teeth, I was probably more afraid of not having my teeth brushed and my mother doing it for me. The hon. Member for Mole Valley mentioned an increase in that among young children, which is good news. I am afraid that we do not see all the stats and realise the importance of that in Northern Ireland.

I believe that we are all fearfully and wonderfully made, as it says in Psalms, and that the intricacy of our body does nothing other than point to our creator God. Why else would we have two sets of teeth—the baby teeth that we probably abuse, which decay and fall out, and then the adult teeth? I know some adults who probably wish that they had a third, and possibly even a fourth, set of teeth.

I commend the previous Health Minister, David Mowat, who launched the new programme in January this year. I look forward to the present Minister’s response, which I know will be equally committed. A briefing I received for the debate made very interesting reading, and it all points to prevention. Tooth decay is the most common reason why five to nine-year-olds are admitted to hospital. In Northern Ireland, some 5,300 children were admitted to hospital for tooth decay and extractions, with 22,000 baby teeth removed. Moving on to 12-year-olds and teenagers, the signs of decay in permanent teeth are significant.

The hon. Members for Birmingham, Selly Oak and for Mole Valley have both referred to the need to control the intake of sugary drinks and foods. As a diabetic, I am well aware of the need to control sugar. Coca-Cola used to be one of my favourite drinks, but it is not any more—not because I dislike it, but because it was doing more harm than good and I had to stop drinking it. We need to have that control, and parents have a role to play.

There are significant regional and socio-economic differences in dental health across England—the numbers of those with tooth decay in the south-east compared with the north-west, for example; the difference is almost double. Perhaps the Minister will reply on that north/south difference. In some areas, seven times as many children are affected than in the best performing areas, where only 8% are affected.

Northern Ireland is at the bottom of the league table for oral health. I am not at all proud to say that, but it is a fact of life. We have a lot to do, in what is a devolved matter in Northern Ireland—at least until we find out where the Assembly is going, in which case the role over here might become greater. The 2013 children’s oral health survey showed that Northern Ireland had the worst oral health outcomes in the UK, and highlighted the difference in the figures compared with outcomes in England. Some 72% of 15-year-olds have signs of decay in Northern Ireland, compared with 44% in England and 63% in Wales. We have a lot to do, and we need to start that in primary school. The hon. Member for Birmingham, Selly Oak suggested education at primary school breakfast groups as a way of doing that. I think that would be excellent.

Of the 4,000 parents questioned in the Simplyhealth professionals oral health survey, 51% said that getting their child to brush his or her teeth for the recommended two minutes twice a day was a challenging task. Well, I think children are always challenging, but that is certainly one of the things that we need to do. The view has been echoed by members of my staff, who said it is as tough to get the seven-year-old grandchildren to do a good job as it is the two-year-old. That is a battle many parents face and they will do many things to try to encourage children. There are even such things as singing toothbrushes, as one method that may encourage children. It may help set the timespan, but the quality of brushing during that time could be questionable. To listen to the sound of a singing toothbrush is one thing, but brushing teeth has a purpose and we need to focus on that.

Children who experience high levels of oral disease, and are treated with fillings and other restorations, will require complex maintenance and treatment of new oral problems as they grow older. We are all aware that dental treatment is a significant cost to the NHS, with spending in England amounting to £3.4 billion. Some £2.3 billion is spent on private dental care. The NHS spends £50 million on tooth extractions for children, the majority of which are due to tooth decay. Shockingly, 42% of children did not visit an NHS dentist in the year ending 31 March 2017, even though such check-ups are free. The National Institute for Health and Care Excellence recommends that children see a dentist at least once a year, but 80% of children between the ages of one and two did not visit a dentist in the 12 months to the end of March. Those statistics are important, because they show us where we need to focus our attention.

I am conscious that other hon. Members wish to speak, so I will conclude with this. Drastic action must be taken, but for that to happen we need a funding regime so we can do more for children in schools and through the healthcare system. More needs to be done in socially deprived areas, because there is a north-south divide when it comes to those affected by tooth decay. We must ensure that parents prioritise oral healthcare and are able to access a dentist for their child easily and without fear that they will be judged or told off. Something needs to be done. We must ensure that there is not another generation of people in agony due to their teeth. Having had toothache, I know my heart goes out to those who suffer from it. Tooth decay is preventable, so we must do all we can to prevent it in our children. We should start as we mean to go on.

[Sir Paul Beresford]

On a point of order, Mr Bone. I was so enthusiastically carried away by the opening speech that I cannot remember whether I declared that I am a very part-time dentist. If I did not, I have now done so.

[Mr Peter Bone (in the Chair)]

I think hon. Members knew that, but thank you for putting it on the record. We have got about half an hour to go, and five Back Benchers wish to speak. I work that out to be roughly six minutes each.

10:01

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

I congratulate the hon. Member for Birmingham, Selly Oak (Steve McCabe) on securing a debate to highlight this important issue.

We cannot overstate the fact that, as the hon. Gentleman said, oral health problems are the most common cause of admission to hospital for children aged five to nine. I am a children’s doctor—a consultant paediatrician—and I am responsible for the children on the children’s ward in Peterborough City Hospital. They often come in not because they are unwell but because they have had too much sugar and have not had their teeth brushed effectively; their teeth have become rotten, painful and uncomfortable and need to be removed.

As my hon. Friend the Member for Mole Valley (Sir Paul Beresford) said, behind the statistics there are children who are in pain and discomfort, and whose teeth are hurting. They may not want to eat—children who have tooth decay are lighter. There are other reasons for that, but in part it is because they do not want to eat because it hurts when they do. They cannot sleep, which affects their educational performance. As they get older, they do not want to smile because of the embarrassment and discomfort it causes, and that has an impact on their ability to socialise with other children. Perhaps most worryingly, more than 8,000 pre-school children are admitted to hospital each year to have teeth removed. Those children are not responsible for brushing their teeth and do not choose what they eat. Their parents or permanent care-givers are entirely responsible for all aspects of their dental health.

There are two ways to tackle this problem. First, we should address the issue of sugar. I welcome the Government’s proposed sugar tax, because it will encourage children to drink water, which in many areas is fluorinated and better for teeth, rather than sugary fizzy pop, which, as well as containing high levels of sugar, is strongly acidic and therefore detrimental for teeth. It would help if the tax were directed towards sugary drinks, and not spread out across the different drinks that the manufacturer makes.

Secondly, schools should educate children about what to eat. Last week, I went to Washingborough Academy in my constituency, which has an innovative programme for improving school meals for its primary school children. It has a vegetable patch and a fruit orchard in the school playing field, where the children grow their own food and learn about where their food comes from.

[Catherine West]

The hon. Lady is making some excellent points. When I was a council leader, I introduced free school meals for all children up to the age of 11 in all of our primary schools. That increased the take-up of free school meals to 90% across the borough and improved oral health.

[Dr Johnson]

That is an interesting point. The hon. Lady is right that it is important that our children’s school meals are high quality and as healthy as possible.

There are other issues relating to the mechanism by which children consume food. In my profession, I have seen pre-school children given Coca-Cola to drink not in a cup but in a sippy cup or even in a baby bottle with a teat. That is particularly harmful for children, and there should be more education about the fact that it damages teeth. Once children get past 12 months, they should be encouraged to move from bottles and sippy cups on to proper open cups, so that sugary drinks are in contact with their teeth for a shorter period.

If the child is of pre-school age and the parents do not take them to a dentist for whatever reason, health visitors can provide some of this education. It should be part of a health visitor’s role to encourage good oral hygiene in children.

I do not whether I am ageing myself here, but I remember being given disclosing tablets at school and rushing off into the school lavatories to brush my teeth to see what the horrible blue dye had done to the inside of my mouth. I was horrified because, although I thought I had done a great job of brushing my teeth, there was quite a lot of blue staining. That powerful tool should be available to all of our children. My children have recently come home with toothbrushes, toothpaste and some of those lovely tablets. Hopefully, they will have a good effect.

In my reading for this debate, I came across some research in health journals that suggests that the strep mutans and streptococcus sobrinus bacteria increase children’s likelihood of getting tooth decay. In families in which the diet and the amount of sugar consumed is the same and the amount of tooth-brushing is similar, some children get more tooth decay than others. Research suggests that that is due to those bacteria, so we should aim to reduce their presence in the mouth. I will be interested to hear the Minister’s thoughts on that point.

I am pleased that the hon. Member for Birmingham, Selly Oak secured this debate. I congratulate him on raising this issue.

10:07

[Judith Cummins (Bradford South) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I recently led a well-attended Adjournment debate on the growing crisis in NHS dentistry, and I was encouraged that that critical topic received such wide-spread support. I thank my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) for securing this important debate.

I believe that momentum is building for a change in Government oral health policy. The injustices in child oral and dental health provision deserve greater prominence in debates about this country’s faltering health services. For too long, oral and dental health has been overshadowed by understandable concerns about other areas of the NHS, but addressing wider issues in our NHS should not mean that we forget to take action elsewhere. For too long, oral and dental health has been the Cinderella service of our NHS. That must end.

During my Adjournment debate, I spent considerable time setting out the growing crisis in NHS dentistry for our children and young people. I highlighted the BBC’s recent investigation, which laid bare the scale of the challenges. Shockingly, two in five of the 2,500 dental practices registered on the NHS Choices website were unwilling to accept children as new patients.

NHS treatment is so important. For our children and young people, it can be life-defining. It can be a springboard to a life marked by enduring oral health and wellbeing. It can be the bedrock of successful, healthy and prosperous lives through childhood and into old age.

The unnecessary financial cost of our children’s poor oral health to the NHS is staggering. At a time of huge pressure on our NHS, the Government are wasting a forecast £50 million each year on tooth extractions for our children and young people. The average cost of a tooth extraction is £834. Last year alone, almost 40,000 children were admitted to hospital for multiple tooth extractions, which is shocking as it is an entirely preventable condition. Sadly, that situation is getting worse and tooth extractions are up by 25% in recent years. Across the country, tooth decay is the No. 1 reason for children being admitted to hospital.

Following my Adjournment debate, I was grateful to meet the Minister. I felt that we had a constructive meeting and that there was a good chance that at least some progress would be made to improve the availability of NHS dentistry in my constituency and the surrounding areas, where the need is so clear. Three weeks on from that meeting, however, and some six months on from the conclusion of an NHS pilot in Bradford designed to improve the availability of NHS dentists to the people I represent, I am still waiting to see the official assessment of the pilot.

I asked about the report on the pilot in a recent written question, and yet it remains elusive. I suspect that the official report remains so because it confirms more than a few inconvenient truths: that the take-up of the additional NHS dentistry appointments under the pilot was overwhelming—I understand from the previous Minister that take-up was 92%, even on an unadvertised pilot—and that there is therefore overwhelming evidence that NHS dentistry provision in my constituency is abysmal and requires a huge funding uplift. Indeed, a freedom of information request submitted to the Bradford hospitals trust revealed that, in the short period of April to December 2016, 190 of our children were admitted to hospital to undergo multiple tooth extractions.

I ask the Minister again to reflect on such disturbing figures and, as I have his attention, I reiterate my request that he shares with me the official assessment of the recent pilot in Bradford as a matter of urgency. Once again, therefore—twice in a few short months—I am urging the Government to act, because each year 40,000 of our children are undergoing multiple tooth extractions in our overstretched NHS. I urge the Minister to take action; it is long overdue, and inaction is not an option. Our children and young people frankly deserve better.

10:11

[Andrew Selous (South West Bedfordshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Bone.

As several speakers have said, this issue really matters, and it matters throughout people’s lives. A poor set of teeth can affect confidence, which can affect life chances significantly. It is shocking that the most common cause of hospital admission among five to nine-year-olds is tooth decay. According to a recent parliamentary answer, in 2015-16 some 917,346 tooth extractions were performed on children.

I note that in a recent publication the Royal College of Paediatrics and Child Health called for a child’s first dental check-up to be recorded in their personal child health record—that is supposed to happen by the age of one—and for paediatricians to include oral health in the assessment of all-round children’s health. If the first check-up happens by the time the child is one, we can set good habits in place and parents will carry on, knowing that dentistry is free for children.

On fluoridation of the water, which the hon. Member for Birmingham, Selly Oak (Steve McCabe) and my hon. Friend the Member for Mole Valley (Sir Paul Beresford) talked about, I will quote from a Public Health England document published on 14 June 2017. It says:

“An authority considering fluoridation will be met with claims that it does not work and that it causes harm. Both statements are untrue. PHE’s Water fluoridation: health monitoring report for England 2014 concluded that fluoridation is an effective community-wide public health intervention.”

We must be guided by the science in this issue. Many years ago, when I stood for election in Sunderland North, my Labour opponent came out with totally unscientific and untrue statements. We must be guided by the evidence, and I am pleased with what the hon. Gentleman and my hon. Friend said. The evidence seems to be clear that fluoridation is effective. Given the scale of the problem, we should do something about it.

Schools should be sugar-free zones as much as possible. I back banning the advertising of sugar products before 9 pm and would like to see an accelerated product reformulation programme. It is concerning that the reformulation data from August this year will not be made available until March next year. That is an area the Select Committee on Health is taking a close interest in.

As a nation, we have to wake up to the importance of child oral health and not be leisurely about it. It is a public health emergency and there is a degree of urgency to the issue that I want to see reflected in the Department of Health. We could ensure that all sports, education and health settings refused to put sugary drinks in vending machines.

[Catherine West]

The hon. Gentleman is making some excellent points. Does he agree with me that the amount of sugary drinks and products for sale in leisure centres and hospitals seems to send a mixed message?

[Andrew Selous]

I agree with that. Some of the food companies set a lot of store by their links with sport. Of course sport is a good thing—we should all take more exercise—but the key is good oral preventive hygiene and consuming less sugar. When we consider that five-year-olds are consuming their own weight in sugar, we begin to see the scale of the problem. I agree with the point made by the hon. Lady.

I have the pleasure of serving on the Health Committee with the hon. Member for Central Ayrshire (Dr Whitford), who will shortly be speaking for the Scottish National party. She has often told us that Scotland has got certain things better than England, and some of the time she may have been right. On this issue, we can learn from what is happening in Scotland, as my hon. Friend the Member for Mole Valley said as well.

Chapter 3 of the report from the Royal College of Paediatrics and Child Health, which I quoted from earlier, includes some graphs that show improvement in children’s oral hygiene. Somewhat irritatingly, the graphs end in 2013, but the rate of improvement in Scotland is clearly shown to be superior to the rate in England, Wales or Northern Ireland, as a result of the Childsmile programme, which I understand costs £17 per child. Set that cost against the £836 average cost of a child tooth extraction and, for my money, I would rather put more focus on prevention. I want to see the English treated as well as other parts of the United Kingdom.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

The hon. Gentleman cites a figure of £17. That is an average and is obviously not how the money is spent. It is very much targeted at children in areas of deprivation.

[Andrew Selous]

I am grateful to the hon. Lady for that clarification.

We now have a number of breakfast clubs before school, and the introduction of tooth brushing in them would be a good idea. I was pleased to hear my hon. Friend the Member for Mole Valley talk about the importance of education. Only a few years ago my own dentist told me about the importance of interdental brushes, which I do not think any other Member has mentioned yet. I do not know how effective they are for children—perhaps the Minister’s officials know and he will tell us when he winds up. Mouthwash is also important. Just getting the best possible prevention practice out there, including what we and in particular children should do, is really important if we are to make progress.

10:19

[Colleen Fletcher (Coventry North East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone.

I congratulate my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) on securing this debate on child oral health and tooth decay. I agree with all his comments, in particular those about sugar consumption and supermarket offers on high-sugar products. Anyone who has been in a supermarket over the past couple of weeks will have seen the huge amount of Halloween offers on sugar products for children for trick or treating—“two for one” or “buy one and get four free” and so on.

Poor oral health is an extremely important yet too often ignored issue that represents a major public health challenge, both in relation to its adverse impact on our children’s health and wellbeing and to the NHS budget and wider resources. We have already heard that when it comes to oral health, too many of our children quite literally have nothing whatever to smile about. Every area of the country is affected by poor childhood oral health to varying degrees, including Coventry, the city that I represent. The proportion of five-year-olds in Coventry with tooth decay stands at almost 30%, which is considerably higher than the England national average of 25%. Worryingly, the proportion of hospital admissions for tooth extractions in the city has increased by a massive 60% since 2010.

Children with poor oral health are likely to have decayed, missing and filled teeth that can cause severe pain, infection, sleepless nights, weight loss and developmental problems. But not just their physical health is adversely affected; they also often experience psychological problems such as low self-esteem, a lack of confidence, conduct disorders, reduced school performance and social functioning, and an increase in bullying. These physical and psychological problems combined are likely to have a huge impact on a child’s life and even on their long-term life chances, as we have heard.

There are significant pressures on NHS services and finances. Tooth decay is the leading cause of hospital admissions for young children and the NHS wastes hundreds of hours and millions of pounds each year dealing with the consequences of the problem through tooth extractions that range from a single tooth to full mouth clearances—a dreadful thought in children so young. All that proves that the economic costs of childhood tooth decay are as unsustainable for the NHS as the human costs are unacceptable for the child.

We can stop tooth decay in its tracks, because it is almost entirely preventable, as we have heard. We can tackle the problem by providing better oral health education, by improving public awareness of and access to children’s dental services and by addressing poor diet—particularly excessive sugar consumption. I agree with all the measures to prevent tooth decay that have been mentioned. But clearly, the statistics show that more needs to be done. Simple preventive steps and accessible information can mitigate the impact of poor oral health both on the individual and on our health services. Surely we can all get behind that.

10:22

[Maggie Throup (Erewash) (Con)]

It is a pleasure to share my thoughts and experiences under your chairmanship, Mr Bone. I congratulate the hon. Member for Birmingham, Selly Oak (Steve McCabe) on securing this debate. As he said, it is Sugar Awareness Week, so this debate on tooth decay is timely.

It is well recognised and accepted that the amount of sugar that children eat has an impact on both oral health and obesity rates, and that there is a link between poor oral health and some of the most deprived parts of the country. Poor oral health and obesity are both issues of health inequality. Tooth decay and obesity also represent major public health issues. If we put measures in place to tackle one, we will tackle the other at the same time.

Tooth decay is the leading cause of hospital admissions for young children. Local data show that one in five children in Erewash suffers from tooth decay by the time they are five years old. That is better than the national average of one in four, but children in my constituency are still twice more likely to have tooth decay than their peers in the parts of the country with better performing local authorities; even though the data are better than the average, they are still not good enough.

In the last five years, 170 children in Erewash have been admitted to hospital to have their teeth extracted under general anaesthetic. That is 170 too many. Nationally, about two thirds of such hospital extractions are due to extensive tooth decay. When I looked further into local data, I found that almost half of children in Derbyshire did not see an NHS dentist in the year to April 2017. I find that extremely disturbing because children should have check-ups at least once a year. Tooth decay is 90% preventable; as has already been said, NHS dentistry is free for under-18s, so there is no excuse. Stopping tooth decay would prevent a great deal of pain and stress for children and the potential for bullying. If tooth decay was made a priority for the NHS, a great deal of money would be saved.

I am extremely concerned about the impact of sugar on our nation’s teeth, but I want to expand a little about the impact of sugar generally. Almost a year ago, Cancer Research UK revealed that, on average, teenagers drink almost a bathtub full of sugary drinks a year. Hopefully, such a visualisation—a bathtub full of sugary drinks—will shock some teenagers into changing their habits rather than suffering the consequences that we have heard about. The average five-year-old consumes their own weight in sugar every year. That is horrendous. There is no doubt that such sugar consumption will have an impact on dental health, but also it will have an adverse effect on the current and future health of our nation.

Sugar, tooth decay and obesity are linked. Obesity is now recognised as a major cause of type 2 diabetes, which is now a disease seen in teenagers rather than just the elderly. Obesity is also a major cause of cardiovascular disease and cancer. If young people’s sugar consumption continues and our young people manage to escape tooth decay, there are other health issues waiting for them down the road.

As a member of the Health Committee and chair of the all-party parliamentary group on adult and childhood obesity, I was disappointed by the “Childhood obesity: a plan for action”, published by the Government in August last year. The Committee asked for bold and brave action, but sadly we did not get that. Tackling obesity also tackles tooth decay, so I welcome the sugary drinks levy and the ring-fencing of the moneys raised from that for children, but I want to go one step further. Could some of that money be dedicated to teaching children how to clean their teeth—perhaps through the breakfast clubs some of that money will be dedicated to?

The levy is only a drop in the ocean. I want to take the opportunity to ask the Minister, first, to work with retailers to limit price promotions on high-sugar food and drinks and to encourage the removal of those products from the point of sale—to consider legislation if necessary. Secondly, will the Government update broadcasting regulations, to ensure that high-sugar products cannot be advertised on TV before the 9 pm watershed? Thirdly, will the Government build on the new rules from the committee of advertising practice, to prevent high-sugar products from being advertised in non-broadcast children’s media and to close the loopholes?

Let us really show that we care about both the dental health and the general health of our future generations, and take action now.

10:28

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

Let us admit that, before Childsmile, Scotland’s children started with much worse teeth than those in England and Wales—seeing people in Glasgow with no teeth at all was a common sight. I was quite shocked when I attended a dental health meeting in Parliament after being elected: I met a dentist carrying a bag of more than 100 children’s teeth that she had removed that day. That was when I first realised the difference between the approaches in Scotland and in England and Wales.

Although there were some pilots and proposals in 2005-06, the Childsmile programme kicked off in December 2007, so we are coming up to the end of the first decade. It has transformed dental health in Scotland, although there is no question but that we have further work to do. Overall, extractions have gone down by a quarter, while extractions in England have gone up by a quarter in the past decade. That has to be looked at. Children losing their teeth must be seen as a health failure.

The core Childsmile programme consists of all nursery school children undergoing education about cleaning their teeth, and undergoing supervised teeth cleaning every single day. Provision of 30 hours’ childcare in Scotland is being rolled out to all children, not just the children of working parents, and that gives us access to even more children, including vulnerable two-year-olds.

The core programme, which, as was mentioned, includes 90,000 children, is the main driver, but we also have a practice programme, which involves all NHS dentists in Scotland. That programme links dentists with health visitors and public health nurses. If a health visitor is aware that a family is not registered with a dentist and is not active in preserving its dental health, they can refer that family and its children to a dental health support worker, who will follow a child up from the age of three months and ensure that they attend a Childsmile-registered dentist. That is crucial.

We hear that 80% of one to two-year-olds and 42% of children aged 16 and 17 in England do not attend a dentist, even though the advice is that children must have attended by the age of one and that they should get an annual check. It is crucial that that changes. It is also important that, as well as their dental check, children access twice-yearly fluoride varnishing, which makes a key difference.

Glasgow, which had the worst teeth in Scotland and probably the worst teeth in the UK, has improved dramatically. We still have more work to do—there is still inequality, and there are still more caries-free five-year-olds in England than in Scotland—but the proportion of caries-free five-year-olds in Scotland has improved by 50%, from 45% to 69%. There has been a one-third improvement among primary 7 children, who have their second teeth, from 59% to 77%. Inequality has reduced. Some 56%—more than half—of children in the most deprived areas of England have caries at the age of five. That just is not acceptable, and it needs to change.

It is important to drive education and to improve dental health, but the underlying problem is the difference in contracts. Since 2006, dentists in England have been paid for units of dental activity. There are three bands, from simple activity such as examinations, cleaning and advice, up to complex work at band 3, but dentists get only one payment for a band 1 unit of dental activity no matter how much they do. They are paid the same rate for doing an examination, providing advice and doing fluoride varnishing as they are for doing only a check-up. That means that they are not rewarded for prevention, whereas dentists in Scotland are paid for doing fluoride varnishing and fissure sealants. That situation in England undermines the basic principle.

In Scotland, there are also additional payments for children with disabilities or learning difficulties, because we know that they take dentists more time. Those payments mean that dentists invest in those children to try to prevent future dental ill health. Children with learning difficulties in particular tend to have very poor teeth, because we cannot just educate them to clean their teeth; the people around them need to commit to doing that.

Lack of registration is another issue. In England, people are not registered with a dentist for the long term, so why should a dentist invest in someone? Children turn up and try to access a dentist when they have problems. Recent BBC articles suggest that 40% of children in England are unable to access a dentist. If a dentist is paid the same for one filling as they are for 10 fillings, they will not want to take a child who clearly already has very poor dental health. Again, there is no sense of investing in the future.

[Sir Paul Beresford]

I hear what the hon. Lady says. The success in Scotland has been dramatic, and the importance of dentists is dramatic—I would have barbs in my back if I said anything else, as she can imagine—but the biggest success has been the prevention programme with schools, nurseries and so forth. That outweighs everything else. That has been the reason for the Scottish success.

[Dr Whitford]

I thank the hon. Gentleman for that intervention. I was not trying to give any other impression. I said that the core programme is the education of 90,000 children about how to clean their teeth and discussions with their parents about that. The problem is that we waste an opportunity if we stop there. There needs to be a link between health visitors, nurseries and dental practices, and there certainly needs not to be a contract that punishes and penalises dentists for investing in patients. The fact that dentists do not have long-term registered patients means that they do not look at patients with a long-term view and say, “If I do more work now, they will have better dental health later.”

In Scotland, 92% of the population is registered; the number of people who are registered has risen from 2.6 million to 4.9 million. Registration is actually higher in deprived areas than in rich areas. Unfortunately, attendance is not always higher, but people are at least already registered with a practice.

[Steve McCabe]

The hon. Lady is making an excellent speech. I am conscious that this debate is about children’s oral health, but does she accept that, given the growth in the elderly population, the problems that she has indicated will only get worse if we do not have better registration and intervention?

[Dr Whitford]

I totally agree. In so many areas, the health of an adult—even an elderly adult—is actually laid down in their first five years. That is nowhere clearer than in dental health. Laying down good foundations in childhood is critical to allowing many more older people to have healthy teeth and, in particular, healthy gums—in the end, more tooth loss is due to gum disease—and to hang on to their teeth. Registration is important, because it gives people a relationship with a dentist. For people who are frightened of the dentist, knowing their dentist and having access to extra support such as hypnosis, if that helps, is valuable.

Childsmile costs £12 million a year in Scotland in terms of total dental health, but it has saved £5 million in dental treatments and extractions. We heard from the hon. Member for Birmingham, Selly Oak (Steve McCabe) about the money that is coming back. That could be used to set up a programme in England. I welcome the pilots, but those are in only 13 of the 23 worst areas in England. Why do the UK Government feel that they need to pilot? The evidence is there from 10 years of Childsmile in Scotland. If they just looked at the data and designed a national programme for England, in the end they would save not just money but children’s dental health.

10:38

[Julie Cooper (Burnley) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Bone. I am grateful to my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) for bringing this important issue to the House’s attention. This debate is long overdue, as has been said by Members on both sides of the House. There is much agreement, and it has been really useful to hear from experts in the field—our dental and paediatric colleagues in particular.

We cannot say too loudly or too often how shocking the current state of affairs is. The hon. Member for South West Bedfordshire (Andrew Selous) quite rightly said that we have a health emergency. We cannot stress too often the truly shocking statistics that have been touched on. The biggest cause of hospitalisation for five to 10-year-olds in England—bigger than broken arms, asthma, appendicitis and all the other things that we think about children being taken to hospital for—is teeth extractions. Up to 160 children a day are undergoing general anaesthetics in our hospitals for what is preventable, and a quarter of all our five-year-olds have decaying primary teeth. In some areas of the country the situation is far worse. Deprived children are seven times more likely to suffer from tooth decay than their peers. Indeed, in some areas of Lancashire, 56% of children are affected.

Another shocking statistic I came across in preparation for the debate relates to the shortage of dentists. The hon. Member for Erewash (Maggie Throup) rightly said that NHS dental checks are free for under-18s, but accessing an NHS dentist is not easy in many parts of the country. Only this week, Cornwall has reported a backlog of 14,000 people waiting to access an NHS dentist. Some people are having to travel 70 miles to see a dentist.

What effect is that having? We have heard extensively from Members of all parties about the effect on children. There is obviously suffering in terms of the pain of dental decay, and we have heard about the effects on childhood confidence. We have also heard about time lost from school. This goes beyond the suffering of children. We cannot afford to ignore the issue, given its effect on our economy. Even if we wanted to ignore the effect on our children—I am sure none of us does—all the evidence suggests that last year 1.2 million working days were lost as parents took time out of work to care for children who had oral health issues.

Of course, we cannot ignore the pressures on the NHS. We hear every week in this House about funding issues in the NHS and how it does not have the funding it so desperately needs. This preventable issue costs the NHS £5 million a year. That cannot go on—it makes no sense.

What are the answers? There are no quick fixes. Many Members have raised interesting ideas, and I think the answer lies in a combination of them. I hope the Minister will talk about his plans to reform the dental contract and that that will result in a dental contract in England that has prevention and public health at its heart and that builds in an element of sustainability for dental practices. I hope we will adequately fund more dentists. There is a massive shortage of NHS dentists, and Health Education England has cut funding to train dentists by 10%. Dentists have raised concerns with me about that this week. In particular, 17% of our NHS dentists come from the EU, and agencies that supply them to our NHS are already reporting a 90% fall in EU-citizen dentists willing to sign up to support our NHS.

As has been said, we desperately need a public health education programme. It was heart-warming to hear about the work done in Scotland through the Childsmile programme. I would like to see us go further in England, and I hope the Minister will assure us on that. It could be done in an affordable fashion by reinvesting the savings and ensuring that every health professional—everyone who comes into contact with a child from their earliest days, such as the midwife—plays a part in making sure that parents fully understand the oral needs of their children. We must ensure that every nursery schoolteacher is reinforcing that message. And, yes, in the same way as has happened in Scotland, and in some cases in Wales, toothbrushes and toothpaste, as well as fluoride washing, should be provided in the more deprived areas. We have heard about the positive impacts that fluoridisation can have, but that in itself is not an answer.

The wider benefits are hard to measure, but the impact on the NHS and on child wellbeing is crucial. As the chair of the British Dental Association said:

“These shocking statistics are rooted in an abject failure by government to tackle a preventable disease.”

I look to the Minister to assure us on those points and to tell us that we will go beyond pilots. As many Members have said, the evidence is there. This is an urgent situation. For the sake of our children, our NHS and the wellbeing of future generations, we need to tackle this as a matter of urgency.

[Mr Peter Bone (in the Chair)]

Before I call the Minister, I remind him that the convention is to let Mr McCabe wind up at the end.

10:45

[The Parliamentary Under-Secretary of State for Health (Steve Brine)]

I thank everyone who has spoken and the hon. Member for Birmingham, Selly Oak (Steve McCabe) for securing the debate via the Backbench Business Committee. He has proved once again that he is on his mettle. There are a number of things I want to get on the record and there are lots of things I want to respond to. We know that, as many Members have set out, poor oral health for children can lead to pain, poor sleep, days missed at school—the hon. Gentleman said that three days are missed on average, but the figures can be much higher—and impaired nutrition and growth. It is a serious business and we take it seriously.

The shadow Minister spoke passionately about the subject and the risk to our economy. I am glad that she recognises that there are no quick fixes. If there were, I suspect many of my predecessors would have quick-fixed.

It is a fact that the two main dental diseases of decay and gum disease—dental caries and periodontal disease—can be almost eliminated by a combination of good diet and correct tooth brushing, backed up by regular examinations by a dentist. They are preventable. It is worth putting it on the record—it is not all doom and gloom—that children’s oral health is in fact better than it has been for years. The most recent data from 2015 show that 75% of five-year-old children in England are now decay-free. That is good, but it clearly leaves 25% who are not. Between 2008 and 2012, the numbers of five-year-old children who showed signs of decay fell by approximately 10%. Improving children’s oral health and that of the adult population is a priority for the Government. Indeed, our manifesto earlier this year set out our commitment to improve coverage and achieve better outcomes, especially for children in deprived areas.

[Dr Whitford]

Will the Minister give way?

[Steve Brine]

I will once, but with the time I have got I am going to have to press on.

[Dr Whitford]

Does the Minister recognise that total dental clearances in children, of which there are approximately 25,000, have seen an 11% increase in the past five years, so it is not possible to claim that dental health in England is getting better?

[Steve Brine]

I said that there is clearly a long way to go, and the hon. Lady also said that about Scotland. I am just putting it on the record that there are some positive stats; it is not a counsel of despair.

In explaining what I started to say, let me talk about the extensive work being led by Public Health England as well the wide range of activity nationally in reforming the dental contract, which a number of Members asked about, and locally, in initiatives such as “starting well” run by NHS England, which a number of people referred to. First, it is important that I, as the Minister, acknowledge the vital role that dentists play in this. They are a brilliant part of the NHS. There are just over 24,000 dentists currently providing NHS dental care and their commitment and contribution is vital to delivering our wider health and public health aims. Overall, access to NHS dentists continues to increase in England. In the latest figures for patients seen by NHS dentists, 6.8 million children were seen in the 12-month period ending 30 June this year, which equates to just over 58% of the child population. Looking at adults, this year’s January-to-March GP patient survey results showed that, of those adults trying to get an NHS dental appointment, 95% were successful.

Although those numbers are an encouraging start, clearly more needs to be done—I am not pretending that it does not—to reduce the inequalities in access and oral health that remain as a result. Nationally, Public Health England has an extensive work programme to improve oral health, particularly of children. Improving that and reducing inequalities in oral health is a priority for PHE, which I meet regularly. It was in the office just last week, when we discussed this subject. So many Members have mentioned the sugar levy, which addresses some of the root causes of dental disease.

[Catherine West]

Will the Minister give way?

[Steve Brine]

Yes—because she is smiling nicely.

[Catherine West]

May I make a brief intervention on the sugar levy? Will the Minister at least undertake to look at health trusts—that is directly in the gift of the Department of Health—and at what they are promoting by means of cabinets that sell sugary drinks and products?

[Steve Brine]

Yes, and I will write to the hon. Lady about that. That is a good point well made.

The sugar levy addresses some of the root causes of dental disease, and other action has included ensuring that the “red book” that all parents receive after the birth of a child has clear messages about the importance of good oral hygiene and early dental attendance—that point was made by my hon. Friend the Member for South West Bedfordshire (Andrew Selous). All new parents will therefore receive clear messages about the importance of oral hygiene and early dental attendance, and I will follow up his point about recording that first appointment in the book. That should be happening; I will follow that up. I thank him for raising it. Public Health England is working alongside local authorities in all our constituencies that are responsible for commissioning oral health improvement programmes.

The hon. Member for Birmingham, Selly Oak, the hon. Member for Central Ayrshire (Dr Whitford), and the hon. Member for Burnley (Julie Cooper) mentioned contract reform. Our manifesto sets out the Government’s continued commitment to introducing a new NHS dental contract that will improve the oral health of the population and increase access to NHS dentistry. That change will provide the foundation on which we will support other improvement activities.

A new way of delivering care and paying dentists is currently being trialled in 75 high-street dental practices. At the heart of that new approach is a prevention-focused pathway that includes offering all patients an oral health assessment and advice on diet and good oral hygiene, with follow-up appointments where necessary to support patients’ self-care and carry out further preventive treatments. That new approach aims to increase patient access by paying dentists for the number of patients cared for, and not just for treatment delivered, as per the current NHS dental contract—a number of Members raised that point. An evaluation of the prototype agreement scheme is due by the end of this year, and it will set out detailed findings from the first full year of testing that new system.

However, we feel that a single year is too short a period in which to make final decisions about whether the new system, when combined with the revised clinical approach, is viable for wider adoption as a new NHS contract. We have therefore decided to extend the prototype agreement scheme to allow it to run for a further two years, to allow for further testing. The prototypes will continue to be subject to evaluation to determine whether they can maintain access and improve oral health, including that of children, in a way that is sustainable for practices, patients and commissioners, before any decisions are taken on wider national adoption.

The important Starting Well initiative was recently launched for children under five, and as a number of Members have mentioned, the programme will work in 13 high-priority areas, with the aim of supporting dentists to see extra children under the age of five who do not currently visit a dentist. It will provide a model that ensures that when they are seen, the focus is on reducing their risk of future disease, as well as treating existing problems. The aim of Starting Well is to reduce the unacceptable oral health inequalities that exist for those children. The hon. Member for Birmingham, Selly Oak asked how long it would run, how areas will be selected and how it will be funded. It will run for as long as is needed locally—that is a decision for local commissioners. I will give him a bit of detail about how the areas will be selected. Selection of the 13 areas was based on 2015 oral health survey results that identified the number of decayed, missing or filled teeth—DMFT, as it is known in the trade—in those under five. To select the areas for Starting Well, a cut-off of 1.6 DMFT was the established marker, and that identified 13 upper-tier local authorities that would benefit from the Starting Well approach. Areas that scored below 1.6 DMFT were not selected, as it was agreed that those resources should be directed to areas where oral health had either declined or remained static. NHS England is funding the programme locally in those areas through underspends and, where the NHS chooses, the prioritisation of funds. I hope that that answers the hon. Gentleman’s questions on Starting Well.

Alongside that, NHS England, together with the chief dental officer—she has been mentioned a number of times; I have worked closely with her and she is excellent—is looking at ways to make the principles of that approach more widely available to all commissioners, and I want to talk to her about that in more detail. The aim is to ensure that commissioners have a clear framework within which to work when considering ways to increase access to dental services for very young children.

The hon. Gentleman was disappointed that Birmingham was not selected for the Starting Well programme, and I set out some of the reasons why we selected the areas that we did. I am, however, happy to say that NHS England is taking forward its own oral health initiative to raise awareness of the importance of early dental attendance, and that will be linked with wider NHS England national work, which I know is particularly championed by the chief dental officer, to encourage greater attendance.

I wanted to touch on so many other points. My hon. Friend the Member for Erewash (Maggie Throup) gave us the charming image of a bath tub full of sugary drinks. What an image—horrendous! That is why our sugary drinks levy is so important. We know that sugar is the leading cause of tooth decay, and the sugary drinks industry levy and the sugar reduction programme will reduce the amount of sugar consumed by children. We keep the childhood obesity plan under constant review. That is important to me, and something I am responsible for.

I did not know that this was sugar awareness week until that was mentioned by the hon. Member for Birmingham, Selly Oak—indeed, the irony of that, with tonight being Halloween, and the children with buckets of sweets, is not lost on me. My children will be attending an altogether different event this evening that does not involve buckets of sweets. It is a “let in the light and shut out the darkness” event—that is something that my wife likes to champion, so she will be pleased with the mention.

The hon. Gentleman also mentioned school dental clubs, as did the chair of the all-party group for dentistry and oral health, my hon. Friend the Member for Mole Valley (Sir Paul Beresford). Outreach, including to schools, is important for reaching children who do not normally attend a dentist, as part of Starting Well and other initiatives being taken forward to reach children in schools. Sure Start centres will also be commissioned locally to be part of the Starting Well programme.

My hon. Friend said that kids love brushing their teeth, but that is not entirely my experience at home. The hon. Member for Strangford (Jim Shannon) mentioned singing toothbrushes. I am not aware of them, although I am aware of singing while brushing. My children are encouraged to hum “Happy Birthday” twice while brushing, so that they brush for longer, and they love me for it. I responded to the hon. Member for Bradford South (Judith Cummins) in an Adjournment debate on this subject. She has been to see me, and I understand that she is meeting the NHS in her area on 9 November. I urge the NHS to share the findings of the pilot with her, and if it does not, she should let me know. My hon. Friend the Member for South West Bedfordshire made a point about the first dental check being placed on the record, and I take his point and will follow it up. On schools being sugar free zones and the advertising ban before 9 pm, I said that we would keep the childhood obesity strategy and the measures within it under constant review. My hon. Friend should continue to work with me on that; it is important that Members vocalise their support to go further on that strategy.

In closing, we have had a good debate. I hope that in setting out some of the work done by Public Health England, the Department of Health and NHS England, I can reassure Members about our commitment to improving children’s oral health for the future. There is an awful lot of good news, but an awful long way to go. I am happy to learn from anywhere in the United Kingdom where such work is going well, and conversations with the hon. Member for Central Ayrshire (Dr Whitford) are always illuminating and useful.

10:58

[Steve McCabe]

I thank the Minister and all Members who have taken part in a thoughtful and well-informed debate. I think that £130 million a year clawed back by the Treasury in unused units of dental activity could be put to much better use, and I wish the Minister well in his battle with the Treasury on that.

I was pleased to hear what he said about the dental contract, although I think that two years is a bit long when so much more coverage is required. Obviously, I would like education programmes to be rolled out as quickly as possible across the country, because that is key to what we are trying to achieve. I personally think that we need an even bigger push on sugar, and particularly sugar promotion, as that will make a massive difference to all children.

Question put and agreed to.

Resolved,

That this House has considered children’s oral health.

Scotch Whisky Industry

Tuesday 31st October 2017 Westminster Hall

10:59

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

I beg to move,

That this House has considered the future of the Scotch whisky industry.

It is a pleasure, as ever, to serve under your chairmanship, Mr Bone. I am delighted that the Exchequer Secretary is almost in his place. I also acknowledge the presence of, and support from, hon. Members from other parties. I shall take some interventions if time permits but, if colleagues will permit, I shall ration myself, in view of the constraints of time.

The Scotch whisky industry, like just about every other one, has a sense of uncertainty about its future at the moment. Given the wider political context, that is hardly surprising; but there is much positive to be said about the industry, especially for the medium to long term, if we get the big decisions right now. For Scotland, and especially rural Scotland, the industry is enormously important. It is also an important part of the UK economy as a whole. It is a massive exporter and earns in the region of £4 billion a year for us—20% of our food and drink exports are from that one industry. The export performance is crucial, as it underpins a market providing about 40,000 jobs, including about 10,000 directly in the industry. Of those, 7,000 are in the rural economy. Beyond that direct employment there is the supply chain and, of course, the burgeoning question of whisky tourism.

[James Cartlidge (South Suffolk) (Con)]

On the supply chain, it is important to emphasise that the jobs are not just in Scotland. A company called Erben in Hadleigh in my constituency provides much of the bottling technology, and bottle caps, to some of the biggest brands in the whisky industry.

[Mr Carmichael]

Indeed. The Scotch Whisky Association and the Wine and Spirit Trade Association would make that point: there is an industry and supply chain across the country. That includes the fact that the grain comes from farms throughout the country. The impact of the industry is particularly acute, however, in rural Scotland. The growth of whisky tourism, in particular, has been phenomenal in recent years, and has been transformative for the most economically fragile communities in Scotland.

[David Linden (Glasgow East) (SNP)]

There is an impact on the urban economy, as well as on the rural economy. Dewar’s whisky is produced on London Road in Glasgow. I do not know whether the right hon. Gentleman has had the pleasure of drinking it; I am more than happy to share it. His point about the wider supply chain is important. Having visited the bottling plant, I know the impact on Carntyne Transport, which provides many jobs in my constituency.

[Mr Peter Bone (in the Chair)]

Order. It is always good to have props—but it is wholly unallowed.

[Mr Carmichael]

I anticipated that that might be your reaction, Mr Bone. I thank the hon. Member for Glasgow East (David Linden) for his intervention—he made a good point—and for his offer, but even by my standards it is a little early at the moment.

As I have said, many of the most economically fragile communities are sustained by the whisky industry and many are flourishing as a consequence of its recent growth. In recent weeks there has been welcome news from Diageo that it will reopen Port Ellen and Brora. That is part of a continuing pattern that has emerged over years. The Highland Park distillery in my constituency has been going from strength to strength for years. It also has a smaller cousin in Scapa, which has emerged not from mothballs—it does not like that term, for obvious reasons—but from a quiet period and grown such that production is now in the region of 1.1 million litres a year. There were three full-time jobs in production, and that number has now gone up to five. It has also expanded into a visitor centre and shop. That all brings money and employment into the community and allows it to stay there. That is a fairly modest but significant increase, and its replication in communities across the highlands and islands highlights the social importance of its economic impact.

Seven new distilleries opened in Scotland last year alone, and many others are still in production. In anticipation of today’s debate I had a brief conversation yesterday with Stewart Laing, of Hunter Laing, one of the people behind the construction, from the foundations up, of a new distillery on Islay, at Ardnahoe. He described it to me as a lifetime commitment, and the Treasury should understand that: those who are part of the industry are not in it just for a quick buck in the here and now. Long-term planning and stability are of exceptional importance. Another Islay distillery that provides a great example for others to follow is that at Kilchoman. It was set up 10 years ago by the Wills family and now employs 25 to 30 full-time employees. It has a turnover of £4.6 million and it is still a family business. Of course Diageo, Pernod Ricard, Chivas and so on—the big players in the industry—are very important, but a pattern is emerging of a much more diverse range of business models. For them in particular, the medium to long-term future of the industry and its stability are of absolute importance.

As the Minister may have anticipated, I want to concentrate for a few minutes on the shorter term. We all know the rules on Budgets, and we know that one is coming up on 22 November, so I have realistic expectations about what the Minister will say now, but I want to test him on a few of the issues arising from the March Budget. That, of course, affects spirits producers in general, not just Scotch whisky producers. For the second part of today’s parliamentary happy hour, the Minister will doubtless return to this Chamber for the afternoon debate on beer and pub taxation.

The spring Budget delivered, somewhat out of the blue, an increase of 3.9% in the level of spirits duty. It is anticipated that the escalator will now produce a 3.4% increase at the end of this month, with a further 3% per annum thereafter. It is something of a supertax, which I suggest is ill conceived and misguided. It requires urgent consideration; otherwise the pattern that I have described of a growing, diverse whisky industry will be under threat.

[Douglas Ross (Moray) (Con)]

Moray has 47 of Scotland’s 119 Scotch whisky distilleries, so I could not do as the hon. Member for Glasgow East (David Linden) did during his intervention. I could not possibly afford a bottle from each one.

On taxation, does the right hon. Gentleman agree that the Treasury should consider the benefits of reducing taxation? The Scotch Whisky Association, with the independent back-up of KPMG, has shown that reducing the duty on Scotch whisky would increase revenues to the Treasury.

[Mr Carmichael]

The hon. Gentleman tees up my next point for me beautifully. I promise that is the last time there will be a reference to “tee” this morning. The work in question was done for the Scotch Whisky Association by KPMG, an organisation that is not just going to tell clients what they want to hear. The work is underpinned and supported by the Treasury’s own figures. The increase in March damaged confidence and led to a sharp decrease in sales—1 million fewer bottles were sold in the first two quarters of this year, compared with last year. That can be tested against the experience of 2015.

I was a Cabinet Minister in 2015 and was proud of the fact that that Government delivered a 2% cut in the level of whisky duty. I cannot remember exactly, but I recall that the expectation in the Government at the time was that a 2% cut would cost in the region of £600 million. That was what we thought we would lose in revenue. In fact, however, a significant increase in revenue was delivered as a result of lower taxation.

[Ian Murray (Edinburgh South) (Lab)]

The right hon. Gentleman is a massive defender of the whisky industry and I am sure he likes a tipple himself. Will he comment on the way in which the Treasury is set up? Perhaps the problem is that the Red Book would have to determine a minus figure when the reality might be positive. The Treasury should look more imaginatively at how it taxes not only Scotch whisky but spirits in general.

[Mr Carmichael]

I am keen to encourage creativity within the Treasury. I must say that that message is not always well received in that particular Department and change is often slow in coming, but I encourage the Minister to pursue that agenda, because—to return to the experience of 2015—having anticipated a £600 million decrease, there was an increase of £124 million in revenue to the Exchequer. Although I obviously have some concerns about the Chancellor, I do not believe that he put the rate of duty up in March believing that he would take in less money. The underlying problem is that the elasticities that underpin the modelling used by the Treasury are clearly out of date. They have not been updated since 2013 and they have been wrong at least twice. They were wrong in a good way in 2015, when the cut in duty delivered an increase in revenues, but they were also wrong in March, when the increase in duties delivered lower revenues.

My essential message to the Minister is that to embark on a progressive increase of the sort planned, with a year-on-year 3% increase on the basis of Treasury modelling that is at best flawed and in need of updating, is ill conceived and risks the emerging growth not just in whisky but in other spirits. It is difficult to go on any social media platform these days without seeing an advert for yet another craft gin. Gin is another emerging spirit and important part of our export portfolio. From the outside, as the industry sees it, it looks as if one of our most successful industries is being punished by the Treasury at a time when, frankly, we are going to need the contribution it makes to our economy.

I say to the Minister that it is now time to be bold. The Chancellor could use 22 November as an opportunity to cut duty, as was done in 2015. If he is not prepared to do so, there is a good business case for at least a freeze or for walking away from the escalator effect. If he continues with the escalator, he must come up with some justification for it, because all the indications go in the opposite direction.

Turning briefly to the question of the medium to long term, there is an opportunity to recalibrate the way in which the Treasury engages with the industry. During my time in Parliament, the successful PILOT partnership scheme between Government and the oil and gas industry has allowed the Government to better understand what is happening in the industry and allowed industry to engage, see the direction of travel and plan accordingly. The Scotch Whisky Association now talks about a sectoral deal, perhaps for the whisky industry but more likely for spirits or alcohol manufacturers as a whole. I encourage the Minister to take that suggestion seriously. We have seen tremendous success as a result of the city and regional deals, a model that has worked well. Taking that to a sector such as spirits production or the whisky industry would be a new iteration of the model. Given the opportunities that exist, the model is well worth considering. Those are the medium to long-term opportunities. In the medium to long term, the Government can do good to help the industry and, most importantly, the communities that depend on it. In the short term, on 22 November, the very least they can do is stop doing damage.

11:16

[The Exchequer Secretary to the Treasury (Andrew Jones)]

It is always a pleasure to serve under your chairmanship, Mr Bone. I congratulate the right hon. Member for Orkney and Shetland (Mr Carmichael) on securing this debate. I understand his passion for the subject, given his constituency’s long-standing tradition of producing fine whiskies. He mentioned the Highland Park and Scarpa distilleries; I have been fortunate enough to visit his constituency and those places on my holidays and I entirely agree with his basic point. I also agree with his underlying point that producing whisky is a lifetime commitment. People cannot enter into it for the short term. It takes a long time to produce the product, particularly in the premium sector. It is a proper, significant long-term commitment. We are seeing huge innovation and people entering the marketplace—both signs of a good, strong sector.

I will try to answer as many of the issues raised as I can, but in particular I must comment on the duty rates—a key element of the right hon. Gentleman’s speech. However, as one might expect, I am unable in discussing that to pre-empt what my right hon. Friend the Chancellor may or may not do in the forthcoming Budget. That is only three weeks tomorrow, so there is not long to wait. Before I discuss the duties, I reassure the House that the Government recognise the important contribution that the Scotch whisky industry makes to both the UK economy and local communities.

I met with the Scotch Whisky Association and with large and small distillers in the run-up to and preparation of the Budget. The Scotch Whisky Association estimates that the industry adds over £5 billion to the UK economy and supports over 40,000 jobs, 7,000 of which are in the rural economy. Its footprint extends beyond those fortunate enough to have a distillery in their immediate constituency. As my hon. Friend the Member for South Suffolk (James Cartlidge) says, the industry creates jobs throughout the UK, whether in the agricultural sector in East Anglia or, in this case, the bottling technology, but primarily it is a great Scottish industry. Distilleries are also increasingly significant tourist attractions in their own right. Some 1.6 million tourists visited distilleries in 2015, an increase of more than 20% in visitor numbers since 2010.

The Government also recognise that Scotch whisky is a UK export success story. Exports account for about 93% of total production. More Scotch whisky is sold in France in one month than cognac in an entire year—an enjoyable stat to consider. In 2015, we exported 1.2 billion bottles of whisky worldwide. The industry estimates that whisky exports were worth nearly £4 billion last year. That is over £7,500 of Scotch whisky sold every minute, accounting for around a quarter of all UK food and drink exports. It is a fantastic success story for the UK to be proud of.

The reach is equally impressive. In 2016, whisky was exported to 184 countries—that means that over 90% of countries have a taste for whisky. South-east Asia in particular has grown as an export market, with Singapore alone importing £224 million of Scotch whisky last year.

We are seeing an increasing premiumisation of some exports, which reflects a broader food and drink trend within the UK, and Scotch whisky is poised to take advantage of the appetite for premium British products in this area.

[Mr Carmichael]

I agree with everything the Minister is saying, but two things are worth consideration. First, although we are seeing that growth in premiumisation, it is on the basis of a shrinking market share globally in a very competitive market. Secondly, when opening up new market opportunities, Governments in other countries look here to how we treat our own industry. That is why the domestic market and taxation of it cannot be divorced completely from the export market.

[Andrew Jones]

The right hon. Gentleman makes points that I broadly agree with. The signal that the UK supports the industry and recognises its impact on our economy and our exports particularly is entirely understood. In recognition of the quality of the product, Scotch whisky was one of the first food and drink products to feature in the Government’s GREAT campaign, which gave it high international visibility in key markets. I assure Members that we will continue to support the Scotch whisky industry, so that it continues to thrive and prosper.

[Kirstene Hair (Angus) (Con)]

I welcome all the export trends the Minister has outlined, but we have the fourth highest excise duty rate in the EU. Other EU countries support their home industries and we need to follow suit—even more so, now. Does he agree?

[Andrew Jones]

That tempts me towards Budget comments, which I cannot make at this moment. I need to rewind a little bit from that question and make a quick point before coming on to duty rates.

The protected food name scheme remains in place while we are still a member of the EU. The European Union (Withdrawal) Bill, which is currently passing through this place, will ensure that all EU law passes into UK law when we leave the EU. That will include the legal definition of whisky, which is a significant point for the protection of the sector in the long term.

[Ian Murray]

I am grateful to the Minister for giving way; I know he has limited time. I wonder whether the Treasury and the Department for International Trade would talk to the industry in Scotland, which is such a successful exporter. In the post-Brexit world, the Government could learn a lot from the industry and how it has been able to export so successfully. That could happen to other sectors when we leave the EU.

[Andrew Jones]

The hon. Gentleman makes an important point. I have to say, though, that I have been talking to the industry and will continue to do so. One thing I have learned in the preparation of Budgets is that a significant number of representations are made either for Government spending or relating to duty. My door is open. I want to hear from the industry and ensure it understands that it can access the Treasury, which will be entirely supportive of British companies developing, investing and exporting. I particularly include the Scotch whisky industry. I have been trying to get across my support for it, and my door will be open for future meetings.

Let us get to the issue of duty rates. The actions taken by this Government are estimated to have reduced all alcohol duty receipts by around £2 billion since 2013. That is a significant duty cut. The actions taken to freeze or cut spirits duty at Budgets in 2014, 2015 and 2016 mean that the tax on a bottle of Scotch is now 90p lower than it would otherwise have been. I understand the point made by the right hon. Member for Orkney and Shetland about price elasticity within the marketplace. The £4 billion of exports per year are unaffected by duty changes as no duty is paid on exported spirits. No UK duty is paid therefore on around 93% of all Scotch whisky produced.

As we approach the Budget, the Government face some pretty tough choices. As I said, I cannot pre-empt what my right hon. Friend the Chancellor of the Exchequer may announce. However, it is the Government’s policy for our public finances to assume that alcohol duties will rise by retail prices index inflation each year.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

We had a success in reducing corporation tax, which increased the tax take, and we are minded to further reduce corporation tax to achieve the same goal. Does the Minister think that that would also apply to a reduction in the duty on spirits? Would that generate an increased tax take, as per the corporation tax?

[Andrew Jones]

That is a very interesting question, and it slightly tempts me into a Budget thought, which I am sure was entirely my hon. Friend’s intention. While not commenting on the Budget, I assure him that I am instinctively a low-tax Conservative. That is my principle when dealing with the industry, and I think that can be said of my predecessors in the Treasury, otherwise we would not have had the £2 billion reduction in duty rates over the past few years.

[Douglas Ross]

I know the Minister does not want to be dragged into questions about future Budgets, but does he accept the scenarios that have been painted since previous Budgets? As the right hon. Member for Orkney and Shetland (Mr Carmichael) said, a 2% reduction increased revenue by £124 million, yet the increase of 3.9% on spirits in March this year reduced the revenues going to the Treasury in the first quarter by 7%. That is looking not at the future but at the impact these decisions have had in the past.

[Andrew Jones]

That is an important question, and it has certainly been considered within the Treasury. There is a general view that if we cut duties, we can increase growth and therefore revenue, as the evidence suggested in 2015. However, sales of some drinks have increased after duty cuts, and sales of some drinks have increased after duty increases. It is very hard to evidence that the sales growth my hon. Friend talks about is directly caused by that duty cut.

The principle of supporting a sector in a competitive way through a fiscal and regulatory regime, with support for infrastructure and skills, is exactly what the Government are about: creating the most benign environment in which to do business. I reinforce to the House that our public finances are under some significant pressures. The Government estimates of costs to the Exchequer are scrutinised by the Office for Budget Responsibility before they are certified, so they have independent scrutiny.

I would like to emphasise in the last moments that we will carefully consider all Members’ representations this morning as part of the representations for the forthcoming Budget. I want nobody to leave the debate without a clear understanding that this Government support the Scotch whisky industry. We recognise its importance and are utterly committed to ensuring that this great British success story maintains its global pre-eminence and global growth. The passion for the sector is clearly shared by colleagues here today. When we look at recent trends within the industry and the new entrants into the marketplace, new products becoming available, innovation and export growth, I think we can all say that the future for the Scotch whisky industry is bright.

Question put and agreed to.

11:29

Sitting suspended.

Taxation: Beer and Pubs

Tuesday 31st October 2017 Westminster Hall

[Albert Owen in the Chair]

14:30

[Mike Wood (Dudley South) (Con)]

I beg to move,

That this House has considered taxation of the beer and pubs sector.

It is a pleasure to serve under your chairmanship, Mr Owen, for what I think is the first time and particularly for this important debate on taxation of the beer and pubs sector. It takes place just three weeks before crucial decisions are made in next month’s Budget. It was pointed out to me this morning that seven years ago an Adjournment debate on this subject was initiated by my constituency neighbour, my right hon. Friend the Member for South Staffordshire (Gavin Williamson). I only hope that my hon. Friend the Exchequer Secretary to the Treasury is as keen to please the Government Chief Whip as I clearly am in repeating his initiative today.

This debate is taking place on Halloween, and pubs up and down the country are decorated with a wide range of ghouls, monsters, skeletons and witches. However, the scariest prospect for our pubs and brewers is surely that they could face a second duty rise this year after next month’s Budget and enormous rises in business rate bills over this revaluation period. I hope to set out, in the short time available to me, why the Minister should avoid that course of action.

In the UK, 30 million adults drink beer each year and 15 million of us visit the pub each week. Representing the Black country, the spiritual home of British brewing, and as chairman of the all-party parliamentary beer group, the largest Back-Bench group in the House, I know how important this issue is for so many of our constituents.

If the midlands is the engine of the British economy, beer is surely the fuel that helps to power that engine, and like all fuel, it needs to be well looked after. My Dudley South constituency is home to four brewers—Bathams, Black Country Ales, Ma Pardoes and the Pig Iron brewery—and no fewer than 75 pubs. The beer and pub sector is vital to our country. Nearly 1 million people across the UK rely on the industry for work. About 46% of them are young people under the age of 25, and just over half are women.

[Chris Green (Bolton West) (Con)]

Does my hon. Friend agree that having a healthy pub environment will do two things, namely promote healthy drinking and help to revitalise our high streets?

[Mike Wood]

Absolutely, and I will come on to the specific role of pubs later. Supporting the pub trade has a more direct economic role in helping further to reduce youth unemployment and the number of young people not in education, employment or training.

[Gloria De Piero (Ashfield) (Lab)]

I thank the hon. Gentleman for securing this important debate. May I place on the record my praise for the many microbreweries that have opened in Ashfield? They have totally transformed the high streets in my constituency. Does he agree that the tax break introduced for smaller breweries by the last Labour Government should remain intact to ensure that they continue to prosper?

[Mike Wood]

Partly because of the small breweries’ relief scheme, we now have a greater variety and, I would argue, greater quality of beer than we have had in the past. It is important that smaller brewers enjoy support that reflects the higher marginal cost of brewing on that scale. However, we also need to look at whether the relief scheme as currently framed is preventing brewers from expanding, or even causing some to scale down.

[Graham Stringer (Blackley and Broughton) (Lab)]

rose—

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

rose—

[Mike Wood]

I will give way just one last time and then I must make some progress.

[Mr Cunningham]

In the last Parliament, there was a Bill on this subject; I think that a Liberal Democrat introduced it. Certainly the landlords of Coventry’s pubs are voicing a lot of concern about this matter. There is a big effect on pubs—many are now closing—but also a big effect on high streets. Coventry has universities, and sometimes the students have jobs in the pubs, so they subsidise their—

[Albert Owen (in the Chair)]

Order. I call Mike Wood.

[Mike Wood]

The hon. Member for Coventry South (Mr Cunningham) of course makes an important and valid point in talking about the role not only of students but of young people more widely in employment, because the pub sector can generate an extremely fulfilling and constructive career for many that goes much wider than the stereotypical picture of students working in a pub until they are in full-time work.

[Graham Stringer]

Will the hon. Gentleman give way?

[Mike Wood]

I must continue because a lot of colleagues are waiting to get in.

The beer industry is a true success story for home-grown British manufacturing. A staggering 82% of all beer consumed in this country is made in the UK. The UK now has more than 2,000 breweries, producing 25 million barrels of beer a year. With 923 million pints exported to 110 different countries, beer is the third largest food and drink export sector in the UK and it is worth £550 million to the UK economy. In my constituency alone, the sector accounts for 1,156 jobs, of which 313 are held by under-25s. It also contributes more than £37 million to our local economy.

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

I congratulate my hon. Friend on securing the debate. Shepherd Neame, the pub and brewing company, is the largest employer in my constituency, so let me support the case he is making. Given the importance of these companies as employers, and the role of pubs in our villages, we must have a tax regime that supports this part of the economy.

[Mike Wood]

I thank my hon. Friend, who represents our oldest brewery. It is important that we support established breweries as well as more recent entries into the market. The beer and pub sector adds more than £23 billion to the UK economy, and I know that the Minister will be very grateful for the £13 billion of taxes that it contributes to the Treasury.

There has been a suggestion that duty changes have little or no impact on beer sales in pubs. That is simply not true and is not consistent with the available evidence. The last Labour Government introduced the hated beer duty escalator in 2008. It was hated because the escalator saw beer duty increase by a staggering 42%, hitting beer sales, making pints less affordable and closing pubs at a faster rate than ever. Beer sales have been falling for many years. However, we saw that trend accelerate sharply under the escalator. In the six years before the duty escalator, on-trade beer sales fell by about 3% a year. During the escalator years, on-trade sales fell by more than a quarter, which was about 5.4% a year on average. Almost 7,000 pubs called time for good, and more than 58,000 beer-dependent jobs were lost. However, although beer duty increased by 42%, beer duty revenues rose by only 12%. It was a very expensive failure of a policy and one that I hope the Labour party has put firmly in the past.

Beer duty is now 20% lower than it would have been with tax rises previously planned under the escalator. In the years between 2013 and 2016, when duty was cut or frozen, the annual decline in on-trade beer sales was not 5.4%, but 2%, which year on year makes a significant difference to the number of jobs and the size of the industry. However, the return to a retail prices index-linked rise in this March’s Budget was disappointing. Announcing a second duty rise in the same calendar year would in effect take us back to the days of the beer duty escalator through the back door.

As the price difference between sales in pubs and supermarkets has widened, consumers have become increasingly price sensitive, especially pub-goers. A respected consultancy, Oxford Economics, which has consistently and accurately forecast the impact of duty changes in recent years, calculates that even a freeze in beer duty in next month’s Budget, rather than the planned increase, would boost pub sales by about 33 million pints per year against the current baseline and that that would mean more than 2,000 additional jobs.

The Exchequer Secretary will remember the front-page headlines praising the previous Chancellor for cutting beer duty. I cannot promise the Exchequer Secretary the front page of the Evening Standard—maybe he knows a man who can—but I have no doubt that if the current Chancellor freezes beer duty, the whole Treasury team would be carried shoulder high across Whitehall.

The financial benefits of the beer and brewing industry are clear, but just as great is the social impact of pubs and the detrimental effect that pub closures have on the fabric of our society, because pubs are a great addition to the social make-up of our country, at the heart of our local communities. They offer a safe environment in which drinking can be supervised and highly regulated, which is in stark contrast to much street drinking.

[Damien Moore (Southport) (Con)]

Does my hon. Friend agree that at a time when we are becoming more digitised and people are spending more time alone, the social interaction that pubs create is really important, particularly when loneliness is a major problem, not just for older people, but for younger people as well?

[Mike Wood]

My hon. Friend goes right to the heart of this issue. Friends are made and communities come together in pubs. Research at Oxford University by Professor Robin Dunbar concluded that pubs play exactly that kind of vital role in tackling social isolation and contributing to wellbeing. People with a local are likely to be better off financially, physically and socially. They are likely to have a wider circle of friends. In a week when researchers have shown again the clear link between strength of social networks and resilience to conditions such as dementia, the social value to which my hon. Friend refers could not be more important.

People who drink in moderation in a pub are more likely to be healthier and register higher levels of happiness than people who do not drink at all. They are also likely to be better fed, with almost 1 billion pub meals sold annually.

We should not forget that pubs play a key role in tourism, being one of the attractions that tourists most want to visit when they are in the UK. Last year there were 600 million day visits to pubs by tourists, and more than half of all holiday visits to Britain included at least one visit to a pub.

[Giles Watling (Clacton) (Con)]

Does my hon. Friend agree that it is a terrible shame that we lost some 10,000 pubs between 2003 and 2013, ripping the hearts out of many of our villages and communities? Does he also agree that pubs represent part of our British way of life that other people come here to see?

[Mike Wood]

Absolutely. That is as true in our towns as it is in our villages. About 80% of pubs are community or rural pubs. They bring not just jobs, but a community focus, often in areas of the country where other traditional providers of jobs and community coming-togetherness might have been lost.

[Graham Stringer (Blackley and Broughton) (Lab)]

The hon. Gentleman makes a profound point about the importance of pubs to rural villages, but does he agree that pubs in inner-city areas are just as important to the local community? There has been a migration of licences from inner-city areas into city centres, which has denuded our inner cities of many of the benefits of public houses.

[Mike Wood]

The hon. Gentleman is absolutely right. It is particularly troubling that those pubs that close in our towns and city centres are often housed in large buildings that are very difficult to fill and that remain as decaying monuments to the changing nature of consumer behaviour.

[Stephanie Peacock (Barnsley East) (Lab)]

Pubs and breweries in Barnsley East contribute more than £12 million to the local economy, but on the particular issue of pub closures, does the hon. Gentleman agree that we need to consider updating the compulsory purchase powers and the planning system, which would give more powers to local communities?

[Mike Wood]

I think that is exactly what the Government have done over the past 12 months in changing the rules on permitted development in particular. Obviously, now we have to go through planning processes before pubs can be converted.

The licensees and customers at many of our pubs contribute in both a financial and practical manner to their communities, by funding and running sporting and other activities, such as football, darts, dominoes and cribbage, but also through community activities, a large number of which are run through our pubs. Of course, because pub customers are extremely generous people, initiatives such as PubAid are able to generate about £100 million each and every year for good causes in communities in all of our constituencies.

For all these pubs to flourish and remain at the beating heart of their communities, they need a transfusion of investment and custom that will come with a freeze in beer duty and a reduction in their business rate burden. I have set out why our beer and pub industry is so important economically and socially, but it faces the twin threats that I referred to earlier: the increases in business rates and in beer duty. The three duty cuts, last year’s freeze and the ending of the escalator secured about 20,000 jobs, boosted confidence in our brewing and pub businesses and meant that more beer was sold than would otherwise have been the case, boosting the Treasury’s total tax take, if we include both direct and indirect taxation. On business rates, the Chancellor has already recognised the pain caused to pubs by the disproportionate burden caused by valuation based on turnover; about half of that turnover may be beer duty and VAT that the pub is collecting on behalf of the Government.

The £1,000 pub relief announced in the March Budget is extremely welcome, particularly for smaller and medium-sized pubs. However, it is particularly important that that relief is now expanded and extended, because our pub sector pays nearly 3% of all business rates despite making up just under 0.5% of business turnover. It is hugely, disproportionately overtaxed through business rates.

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

Does the hon. Gentleman agree that it is ludicrous that pubs in Stoke-on-Trent pay more in business rates—in fact, more in total—to the Exchequer than Amazon does in its entirety? Stoke is paying more than Amazon.

[Mike Wood]

I could not agree more. The revaluation of business rates was often seen as an issue that affected only businesses in London or the south-east. As for everyone else, it was thought that some gained and some lost out, but that is completely untrue when it comes to pubs, which have experienced huge increases in every part of the country. The 27 pubs run by Black Country Ales across the west midlands and neighbouring counties will have experienced an increase in their rateable value of, on average, 40% by the time the transitional period is over.

[Anne Marie Morris (Newton Abbot) (Ind)]

My hon. Friend makes a very good point. A pub in my constituency has seen its rates go up 83%. Does he agree that it is completely inappropriate for pubs to be measured by turnover? They get measured on their actual turnover, not the perceived turnover for the square footage, so there is no fair comparison with the way in which rates are levied and measured in other industries in our country.

[Mike Wood]

That is right. As well as a large part of that turnover being just business tax, it is a huge disincentive to invest in and improve the property.

We supported the Chancellor when he suggested he would look at business rates in the light of the increase in online businesses and the harm that could cause our beloved high streets. The message that has come from Members on both sides of the House is that the sooner that can be done, the better. We want to ensure that our community pubs, high street pubs and village pubs are properly considered when any new system is put together, so that we can all get together to protect the great British pub.

I applaud the Government’s work in reducing the deficit, and the measures that the Exchequer Secretary and his colleagues are taking to reinvigorate the economy, but I ask him to urge the Chancellor to go further. Hard-pressed UK beer drinkers still pay 40% of all Europe’s beer duty, despite drinking only 12% of the beer consumed in Europe. Some colleagues may think that means we need to drink more beer to keep up, but let us just focus on the duty. As a Yorkshire MP, the Exchequer Secretary will know that the Black Sheep brewery employs more than 100 people in the Yorkshire dales, but he might not know that it pays more in beer duty each year than it does on the combined costs of employing those 100 staff, buying all the raw materials to produce its beer and then distributing it around the country. Beer duty that is more than four and a half times as high as eBay’s UK corporation tax liability seems an undue burden.

[Julie Cooper (Burnley) (Lab)]

Does the hon. Gentleman agree that it is unfair that in this country, compared with other EU nations, we drink 12% of all the beer consumed in the EU, but pay 40% of the duty across it?

[Mike Wood]

As I have indicated, I think that situation is not sustainable in even the medium term, and certainly not in the long term.

Britain’s growing ranks of brewers have much more growth potential, which would mean more investment and more jobs to underpin the economy. The Treasury needs to look at whether the way in which beer duty is structured is appropriate for the 21st century. In particular, there is a growing consensus in the industry that the small breweries’ relief scheme, which has done so much to allow new breweries and microbreweries to become established, is now preventing breweries from growing, and in some cases means that they are downsizing to receive the lower duty rates. I know that the Exchequer Secretary has already received representations on that issue.

To look further ahead, as we leave the European Union in 2019 there are also opportunities to consider whether it is appropriate that beer sold in pubs is taxed at the same duty rate as beer sold in supermarkets or other off-sales, and the role that a differential tax rate could play in supporting our pubs, helping keep more of them open, and the social benefits that come with that. The Treasury should also look at supporting reduced-strength beers by expanding the current bracket to cover beers between 1.2% and 3.5%, instead of just up to 2.8% as at present. I have written to the Exchequer Secretary on this subject. Britain has a strong tradition of brewing 3% to 3.5% beers, and if we can incentivise the industry to develop, produce and market beers at that end of the market, there will be an advantage to the industry and to our health. However, while all those areas for reform are important, none of them should distract us from the immediate need to freeze beer duty and tackle business rates in the Budget in three weeks’ time.

If the Exchequer Secretary is not already persuaded by the economic case against a further rise in beer duty, the social case for helping pubs and reducing their business rates, or the political case for doing something that is genuinely popular across the country, he might want to reflect on the personal-political benefits of backing beer. I have already mentioned that a previous proponent of this cause is now the Government Chief Whip. However, it might be even more pertinent for me to point out to the Exchequer Secretary that the three previous holders of his post who presided over recent cuts to beer duty—my right hon. Friends the Members for Bromsgrove (Sajid Javid), for Witham (Priti Patel) and for Loughborough (Nicky Morgan)—all went on to reach the giddy heights of Cabinet office. As a canny Yorkshireman, the Exchequer Secretary may want to reflect on the fact that cutting beer tax is clearly not a bad career move. In all seriousness, I ask him to do the right thing for the longer term: encourage the Chancellor to freeze beer duty in his autumn Budget, act on the disproportionate burden of business rates on pubs around the country, and invest in and support these great sectors, which do so much economically and socially in every part of Britain.

[Several hon. Members rose—]

[Albert Owen (in the Chair)]

Order. A number of hon. Members have indicated that they wish to speak, so I am going to start with a four-minute limit on Back-Bench speeches, starting with Mr Toby Perkins. Bear in mind that we may have votes shortly.

14:56

[Toby Perkins (Chesterfield) (Lab)]

It is a great pleasure to serve under your chairmanship, Mr Owen. I congratulate the hon. Member for Dudley South (Mike Wood) on securing this incredibly important debate and the vigour with which he is going about his role as chair of the all-party parliamentary beer group. As chair of the all-party parliamentary group on pubs, I also feel very strongly about the issues that have been raised.

I am not going to repeat all the statistics that the hon. Gentleman laid out. We have already heard many of the financial arguments as to why pubs matter, but the community point is also important. I support the point made by my hon. Friend the Member for Blackley and Broughton (Graham Stringer) about the importance of inner-city pubs. We are seeing so many of them close. We often think about village pubs, but too little is said about those pubs in our communities and on our estates that have really struggled.

It is definitely the case that the pub is the safest place to drink, because there are other things to do there, people do not drink as fast, they have other people around and it is a much more self-regulating environment. That was brought home to me strongly at a meeting I had with a publican who runs the Harley’s bar in Staveley in my constituency. One of his customers had been a regular attender, but stopped going. The publican met him outside the pub as the man was coming back from Morrison’s with bottles of whisky in his bag, and asked him why he was not coming into the pub any more. The man said, “I can’t afford to come in the pub any more.” The publican said that within six months the guy had drunk himself to death, because all those regulating forces were no longer there. The story that we need to get out there is that the pub is by far the safest place for us to drink.

The point about pubs being a big employer of both the young and women has been well made, as has the point about the importance of the pub for tax revenues. I welcome the fact that the campaigning of a wide range of groups finally persuaded the Chancellor to end the beer duty escalator and to cut beer duty between 2013 and 2015. I take issue slightly with what the hon. Member for Dudley South said, because this is a story that I like to tell. The truth of the matter is that the Chancellor who raised most through the beer duty escalator was not Ed Balls but George Osborne. George Osborne took the escalator that Ed Balls had introduced in 2008 and 2009 and escalated it again in 2010, again in 2011 and again in 2012. I support the fact that he ultimately got rid of it, but he milked that cow just as much as Ed Balls did—let us not be in any doubt about that. There was also the big increase in VAT, which has a big impact on our tourism businesses.

The point made by my hon. Friend the Member for Ashfield (Gloria De Piero), and repeated by the hon. Gentleman, about the importance of small breweries’ relief is incredibly important. I really support the fact that the Government have kept that relief.

14:59

Sitting suspended for a Division in the House.

15:14

On resuming—

[Albert Owen (in the Chair)]

Order. We now resume the debate. Mr Perkins has 41 seconds left, but I will be generous and give him a minute to gather his thoughts. Mrs Anne Main will follow and will have four minutes.

[Toby Perkins]

I will finish with this. We have spoken a lot about beer duty and VAT, but it is crucial that the issue of business rates is addressed in the Budget. Every member of the Conservative party who stood in the 2015 election stood on a manifesto of a comprehensive review of business rates. That seemed to disappear from the 2017 manifesto, but the issue of business rates is crucial. We have the most expensive corporate property tax in all of Europe, and no Government who theoretically profess to be a low-tax Government can continue to see business rates going up in the way that they have. I urge the Government to get away from an over-reliance on business rates at the expense of corporation tax cuts and bring down business rates for our pubs instead.

15:15

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

It is a pleasure to serve under your chairmanship, Mr Owen. This is an excellent debate, which is timely, coming just before the Budget, as my hon. Friend the Member for Dudley South (Mike Wood) has said.

St Albans is an extremely high property value area. It is a desirable area and its proximity to London makes it a destination for many families fleeing London for a better quality of life. That puts pressure on pubs in St Albans. Many of them are in small listed premises, in heritage buildings. The pubs struggle to survive in a world where big is beautiful and they generate footfall. St Albans is where the Campaign for Real Ale has its headquarters and it has a strong voice within the pub industry. I pay tribute to the landlords and owners of historic public houses in St Albans for the work that they do to keep their brand alive. It is not enough to say that pubs can survive in this day and age without considering the strains put on them. The historic Boot in French Row is a small, quaint, gorgeous pub that went through trials and tribulations trying to expand its kitchen because it has historic listing.

Similarly, we have the Fighting Cocks, one of the oldest pubs whose name derives from the history that encompassed it. Seeing historic pubs with historic pub names is what draws tourists into St Albans.

[Sir Henry Bellingham (North West Norfolk) (Con)]

In my constituency, King’s Lynn also has a historic heart. CAMRA has been really proactive in driving forward all the issues, not least the issue around business rates and the impact on older buildings, which are much more expensive to maintain.

[Mrs Main]

My hon. Friend is absolutely right. Indeed, CAMRA provided me with statistics. There are 62 pubs in St Albans supporting 1,651 jobs with an estimated £32.6 million in gross value added. That is a huge amount put into the local economy. I wrote to the Chancellor about this matter pre-2016 because the rateable value for many of the pubs is enormous. I pay tribute to Sean Hughes of the Boot in St Albans, who is busy collecting signatures. I can do no better in the short time that I have than to read what the petition calls for, because I fully support it. As the hon. Member for Chesterfield (Toby Perkins) said, those who stood in 2015 stood on a manifesto of speaking up on pub business rates. I am afraid I did not read the 2017 manifesto because, like many, I was caught on the hop, so I do not know whether a review of business rates was in it. However, in principle I support that. The petition calls for an interim pub cap

“and a full review of the business rate system.”

It states:

“Pubs in St Albans and parts of England have been hit with extortionate business rate increases due to property values increasing over the past decade. We believe there needs to be a fundamental review on the business rate system to stop pubs disappearing from our villages, towns and cities. We are calling for an immediate interim "Pub Cap" limiting increases in rates bills to 12.5% in England (currently operating in Scotland) and a fundamental review of the whole system to ensure that pubs can survive and this British community asset will not be lost forever.”

I wholeheartedly agree with that.

Warm words will not save our pubs. Anything we say today about how important they are, how much they do for charities and how much they are a part of our constituencies will do absolutely nothing unless we have something along the lines of what that petition suggests. I know we are under pressure in St Albans, with an average house price of more than £500,000, but other areas are equally affected. We do not want to be lamenting the loss of our pubs because we did not take the issue seriously and do something about it when we had time to. Now is the time to take action, and I hope the Chancellor is listening. [Interruption.]

[Albert Owen (in the Chair)]

Order. A mobile phone is being picked up by the microphone, which we can hear loudly up here.

15:19

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in this debate; I congratulate the hon. Member for Dudley South (Mike Wood) on securing it. The Northern Ireland hospitality industry sustains some 60,000 jobs, including more than 45,000 in food and drink. I advocate drinking responsibly, and many of the public houses in my area have a reputation for removing keys from locals if they have ordered enough drinks to be approaching the limit, even if the drinks are not completely drained. I am thankful for that. I ask more people and businesses to take that step, to ensure that people never drive at or close to the limit.

[Norman Lamb (North Norfolk) (LD)]

Does the hon. Gentleman agree with me and other hon. Members who have spoken that there is a need for a comprehensive review of the business rate, which puts pubs and other small businesses at a disadvantage—particularly in comparison with cheap booze from supermarkets and other larger businesses?

[Jim Shannon]

No one in the Chamber today would disagree with that.

The Government rightly tried to incentivise the production of lower strength beers, up to 2.8% ABV, in order to encourage moderate drinking. Unfortunately, because of the taste of 2.8% beer, that has not stimulated the relevant part of the market. Current HMRC duty receipts show that those lower strength beers make up only 0.15% of total UK volumes. However, the industry has provided concrete evidence that the consumer will drink lower strength beers at 3.5% ABV, which is still significantly below the UK average strength. Legal advice has also been provided, which shows that the Treasury can indeed add another duty band between 2.8% and 3.5%, which would enable the Government to incentivise the production and consumption of lower strength products, in the interests of moderation. There no excuse for that change not to happen now; the current advice is compliant with the EU structures directive, but the Government have so far chosen not to act, or to ignore it. We should not be prevented by the EU, when we are trying to bring in a progressive policy that would benefit the UK.

The contribution of the hospitality industry in Northern Ireland in wages alone is £653.4 million. Tourism in Northern Ireland provides 58,000 jobs; the wider tourism economy contributes £1.6 billion to Northern Ireland’s GDP; and food and drink account for more than 30% of visitor spending. Those are significant figures, on which we can build.

[Giles Watling]

Tourism is vital to my constituency, but does the hon. Gentleman agree that the issue is also communities, and talking to each other? It is a question of talking to each other eye to eye and having a proper discourse—maybe, God forbid, about politics—instead of being on Facebook and Twitter.

[Jim Shannon]

Yes, I do hold with that. We all agree—it is very much a part of what we are about.

In Northern Ireland we are happy that we offer world-class shopping, spa facilities, eateries that are second to none, scenic views, and the friendliness of the local populace, but there is a need for Government to keep us competitive. The Republic of Ireland has much lower tax, and we need to address that. The Northern Ireland Assembly has set a target for the number of tourism jobs to grow by an additional 8,000 by 2025. As the House will know, the Assembly is in some disarray at the moment—it is not functioning, so it may fall to us in this place to help the industry. One step would be reducing taxation, something I want to support by taking part in the debate.

Tourism is an export generator—the value was £545 million in 2015. There is no point in being able to get a hotel room for £67 per night if a meal will cost £100; we must address the issue, and take action on what is a false economy. Previous attempts to increase Government revenue through duty rises proved ineffective. As a result of the beer duty escalator, from 2008 to 2013 duty increased by more than 42%, but Government revenues increased by only 11.5%. During that time beer sales in pubs fell by 24%, total beer consumption fell by 16%, 75,000 jobs were lost and 3,700 pubs closed.

Conversely, the Centre for Economics and Business Research found that an additional 750 million pints were sold in 2013-14 as a result of the first cut in duty after the escalator was stopped. It is necessary to spend money to make money. We may believe that increasing tax will help bring income to depleted coffers, but it has been shown that that is not the case. People simply drink at home, as has been said—or in a friend’s home, where no one is watching the limits, counting how many drinks have been had, or considering how safe it is for them to be in control of a vehicle.

In my constituency there are 39 pubs and two breweries—670 jobs and £7 million in wages, with a £14 million contribution to GDP and £5.4 million in tax paid. The issue is about more than a couple of people complaining about the price of beer in their local; it has the potential to be a factor in increasing tourism and helping local businesses. I ask the Minister seriously to consider what is being proposed.

15:25

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this important debate. I am delighted to be speaking, and to stand up for the beer and pub sector, which supports about 800 jobs in my constituency. It gives me the opportunity to promote some of the great produce that can be found in the borders. There are certainly some excellent examples, such as Tempest Brewing Company, from Tweedbank, which recently cleaned up at the Scottish Beer Awards, picking up six awards; and multi-award-winning Born in the Borders Brewery, near Jedburgh, which has recently expanded its bottling plant, creating new jobs in my constituency.

As well as award-winning brewers, there are some fantastic pubs in the borders. They make our towns lively, and in villages they are often a focal point for the community. At a time when banks and post offices are closing, often the only community facility left in a village or community is the pub. We cannot kid ourselves that taxation of the beer and pub sector is not necessary. Excessive alcohol consumption is bad for our health, and often causes antisocial behaviour, so it is right that businesses contribute. A certain level of taxation also reduces consumption, so targeting the problem areas, such as drinks with higher alcohol content, is appropriate. However, the burden on the sector is clearly having an impact, and tax now makes up a third of the price of a pub pint. The beer duty is one of the highest in Europe and I support calls for it to be reconsidered.

We must recognise the positive impact that pubs and brewers have on jobs and the communities that they serve. We must also recognise that the problem of excessive drinking is not the sole responsibility of pubs; it not even primarily a problem caused by the sector. Pubs encourage sociable and responsible drinking in a regulated environment where the purpose is to socialise and enjoy a drink, rather than just to get drunk. By making beer unaffordable in pubs we are only promoting a shift in consumption to the off-trade market, which would not be a good thing in terms of reducing alcohol consumption.

On the issue of business rates relief, my hon. Friend the Member for St Albans (Mrs Main) mentioned the 12.5% cap scheme in Scotland. That has not necessarily been welcomed there. Certainly, in my constituency a number of pubs and hotels face a huge one-year increase. It is capped at 12.5% but, given what went before, and what they were previously paying, many pubs have not welcomed it.

I want finally to make a point that, although not directly related to taxation, is relevant to the challenges that pubs face—the reduction in the drink-driving limit. In Scotland it was reduced a few years ago. I supported the move and do not advocate changing the law. However, there has been a fairly profound impact on pubs— particularly rural pubs. In fact, a third of rural pubs in Scotland have reported a drop in sales of more than 10% since the limit was reduced. I do not think that enough was done to support the sector when the change was made, and I hope that lessons can be learned, particularly if there is a debate as to whether the law should change in England and Wales.

15:28

[John Grogan (Keighley) (Lab)]

I think that the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) has tempted many of us to renew our acquaintance with pubs in the borders. It is a particular pleasure to take part in the debate, as it was secured by a true champion of the pub—the hon. Member for Dudley South (Mike Wood).

Having retired in 2010 from chairmanship of the all-party group on beer and from Parliament, I might have thought that my days of speaking in such debates were long gone; so I am delighted to say a few words today. In those days I represented the constituency of Selby, which included Tadcaster—still the only town in England that can boast three major brewers. In Keighley, which I now represent, there is one major brewer—Timothy Taylor’s, which dates back to 1858. It is a byword for quality in the beer industry, with brewers who trained at that icon of higher education in brewing, Heriot- Watt University—perhaps the leading university in the field. There was a minor hiccup in relations between Timothy Taylor’s and the all-party group when I voted—it seems so long ago—to ban fox hunting. The then managing director, Charles Dent, promptly resigned his involvement with the group. I can assure the House that this summer in typical Yorkshire fashion, over a pint at Headingley, we let bygones be bygones. I am very much in dialogue with Timothy Taylor’s. There are also breweries such as Wharfedale, Bridgehouse, Wishbone, Haworth steam brewery, Ilkley and, just outside the constituency, Goose Eye.

There has been a lot of talk about statistics; I want to underline just two. One in seven of all the jobs created since 2010 have been in this sector. What has not so far been expressed is how quickly people can rise up this industry; it is, if not unique, then certainly renowned for that. Some £1 billion from Yorkshire goes in taxation from the pubs and brewing industry to the Exchequer—about the same amount that goes from Northern Ireland, as the hon. Member for Strangford (Jim Shannon) said. If only we had a Yorkshire Mayor spending that money! We truly would have devolution.

I want to make four quick points. We should encourage beer exports, and there has been quite a movement towards that from the industry. Some have suggested that export sales should be excluded from the brewers’ volume for duty purposes, as a way of encouraging exports. That should be considered.

The hon. Member for Dudley South was right that under the Labour Government and under the coalition, the beer duty escalator did a great deal of harm. It is good to see the hon. Member for Burton (Andrew Griffiths) in his place, because he achieved what I certainly did not, and I hope that future chairs of the all-party beer group will achieve similar things. He got rid of the beer duty escalator. This is a crucial year for the reputation of the Conservative party and its relationship to the beer industry. Will those three years be known as the Burton interregnum or will we have not just beer duty relief, but rate relief? We clearly need an extension of £1,000 to £5,000 on rate relief this year.

Turning to small breweries’ duty relief, Gordon Brown has been agonising in recent days about his lack of empathy. Whatever the truth of that, he will always be known as the friend of small brewers—it is one of his great legacies—because of that massive change to our economy. At some stage, we will have to look at whether that can be extended. Many family brewers are losing out. They feel that they do not have the advantage of the duty rate relief and do not have the economies of scale that big brewers have.

[Toby Perkins]

Will my hon. Friend give way?

[John Grogan]

I will, in order to gain another minute.

[Toby Perkins]

And because my hon. Friend wants to hear what I have to say, I am sure. On the important point about the relief for small breweries, does he agree that although the policy is excellent, its impact sometimes means that brewers cannot grow any more as they will no longer come under it? Perhaps some kind of tapering to allow brewers to go from small to big would be helpful.

[Albert Owen (in the Chair)]

The hon. Gentleman does not have to take the full minute.

[John Grogan]

As you have assured me that your favourite brewery in Yorkshire is Black Sheep brewery, I will take only 45 seconds, Mr Owen.

I urge the brewing industry, which has a great number of good leaders—including Mike Benner at the Society of Independent Brewers, Brigid Simmonds at the British Beer and Pub Association, Kate Nicholls at the Association of Licensed Multiple Retailers and Tim Page at CAMRA—to address this issue. The industry needs a consensus to put to Government about reform of the progressive beer duty. That would be the ideal situation.

Finally, I urge the pub industry not to absent itself from the debate about minimum pricing. If the Supreme Court upholds the Scottish Government’s decision to introduce minimum pricing, this issue will be back on the political agenda. A decade ago there was a strong alliance between the health lobby and many in the pub sector. That led to the smoking ban, and I think there could be considerable scope for renewing that alliance.

15:34

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

It is an honour to follow the hon. Member for Keighley (John Grogan), who is such a champion of the pub and beer industry, and to serve under your chairmanship, Mr Owen. During the last vote, I bumped into the Chancellor of the Exchequer. I said, “Chancellor, come down to Westminster Hall and listen to the debate on the beer duty,” and he smiled. I assume he is not here because he has rushed back to No. 11 Downing Street to pore over a spreadsheet and work out how much extra he can earn for the industry by reducing the taxation on beer—and also how popular he can become with each 1p reduction.

It is also a pleasure to be here with the former chairman of the all-party beer group, my hon. Friend the Member for Burton (Andrew Griffiths), who managed to have three successive 1p beer cuts and a freeze under his chairmanship—no pressure, then, on my hon. Friend the Member for Dudley South (Mike Wood), the current chairman of the beer group!

I get criticised for always prattling on about the pub that I live next door to, the Swan with Two Necks. In an emergency, I can be in that pub in three seconds. I will correct that today by mentioning three other pubs that serve the community that I represent. Alex Coward, the landlord of those pubs, is with us today and has lobbied me about the importance of cutting the beer duty. There is the White Bull at Alston, the White Bull at Gisburn and the Alston Arms at Longridge. I have eaten and drunk in all three of those pubs at some stage. Alex told me about all the charities that they support, from the Brittle Bone Society to the Air Ambulance, to Macmillan, as well as Longridge juniors and Longridge town football club and the local Joanne Smith Wareing cancer charity.

We know that pubs are a focal point for a lot of occasions, such as christenings, funerals, birthdays or just for people coming together. That is how important they are. The current chair of the all-party beer group went through a list of reasons why local pubs are important to the community, so I do not need to repeat those, but I want to stress a number of things about how important the local pub and brewing industry happens to be.

I hope that the Government will look at lower taxation on lower gravity beer. They tried an experiment on beer of 2.8% or less, but it has not taken off. People have not flooded to taste that beer, but I believe there is an audience for beer that is between 2.8% and 3.5% in strength. We are told that the Treasury would love to do it but that it cannot because of the European Union. Well, the good news is that we can all rush to our pubs post-March 2019 and celebrate our leaving the EU, but there are things that the Treasury can do, such as introduce a new rate of 2.8% and 3.5% and have a different rate of taxation on it. I have legal advice stating that the Government can do that, so I hope the Treasury will look at that.

We have argued for lowering the taxation rate generally. Every 1p that it was reduced by in the past created 4,000 more jobs in this area. Let us look again at business rates, which are going to clobber a load of pubs. I am a member of CAMRA. Twenty-one pubs are closing every week and that is a huge loss to the community, particularly when the pub is the only one in a community. It can have a savage impact.

[Ruth Smeeth]

As the hon. Gentleman knows, I am a proud representative of the Titanic brewery in my constituency. For the record, there is no better beer, but it also has a small pub estate, and its business rates have gone up by 37%. That is £70,000 a year that it can no longer invest in its estate or in its people. Surely at this point we need to reflect on what is really happening in the beer industry and what is likely to happen to pubs.

[Mr Evans]

The Treasury really has to take this issue on board. Business rates, the living wage and other costs that are heaped on the brewing and pub industry mean that this has to be looked at carefully. Pubs are closing. I mentioned Alex Coward, who employs 45 people in the local community, and we represent a semi-rural, or rural, area. These are vital jobs in those areas.

A lot of pubs play music and pay their licence under the Phonographic Performance Limited licence. A lot of pubs are now receiving a new notification. If they have a TV on the wall and show live TV—not just the sport, but something else—they are being asked to pay a minimum of £100. The larger the pub, the more they will be asked to pay. As a lot of people have mentioned, it is cheaper for someone to buy beer from a supermarket and then sit at home alone watching a big TV. How miserable is that! We need to do more to incentivise people to use pubs. If that means lowering taxation on pump-pulled beer compared with beer that someone buys in a pack—12 bottles or 24 cans—we need to do that. I am told again that that can happen when we leave the EU in March 2019, and I hope the Treasury will look at it.

[Several hon. Members rose—]

[Albert Owen (in the Chair)]

I call Anne Marie Morris to speak for four minutes and I will then reduce the time limit to three minutes, because I want to hear the three next speakers after that. They will be Peter Aldous, Steve Double and Fiona Bruce.

15:39

[Anne Marie Morris (Newton Abbot) (Ind)]

Pubs are a core part of my very rural constituency and provide 2,000 jobs overall. In those rural communities, many pubs are the only community centre. The small shop has gone. The post office has gone, and many of the pubs are now becoming the local store, in addition to being the local pub. We really need them but, despite all that, they are being penalised.

We have discussed a number of taxes, but I will focus on business rates. The challenge for pubs, as I said earlier, is that their business rates are based on turnover. As I understand it, the original intent was to base the tax on the turnover that could be generated given the square footage of the public house. In reality, the actual turnover is taxed. Not only does that mean that it is not comparable with how business rates in other sectors are calculated, but it also penalises successful pubs with rises in business rates and effectively gives handouts to unsuccessful pubs. That does not seem right.

The Smugglers Inn, a successful pub in my constituency, is a case in point. Before the revaluation, its rateable value was £66,500, and it paid £33,000 in business rates. After the revaluation, its rateable value was £125,000, and its business rates £60,000—a rise of 87%. The advice that the landlords received when they complained was to reduce their turnover. I thought that we as the Government of this country wanted to increase productivity, not cut it.

The rate relief provided in the 2017 Budget was welcome, but the £1,000 for pubs and the discretionary amounts available were not distributed quickly; the guidance from Government was slow. I am pleased to say that much of it has now been distributed, but the Government should look at it again. If the same happens again, we need to ensure that the money needed is distributed.

Fundamentally, the problem is that the system is unfair. If we want our pubs to survive, we absolutely must do more to assist them. As has been said, many of them are rural, meaning that their costs are high: pensions, living wage, tax. Burst water mains and power failures, which are common, cost money. They have to use kerosene and LPG, which are much more expensive and must be bought in bulk in advance—

15:41

Sitting suspended for a Division in the House.

15:56

On resuming—

[Anne Marie Morris]

I will give an example of the costs I mentioned. One of my publicans told me about the cost of Bombardier. In July 2012, a nine gallon barrel cost him £42.99 plus VAT and he sold it at £2.20 a pint. In July 2017, the same barrel cost him £120 plus VAT and he sold it at £3.80 a pint—not the £6.60 that would have reflected the cost.

We need to properly address the burdens that our pubs face. My focus is on business rates. I endorse other hon. Members’ calls for a thorough review of the whole business rates system. The valuation office often gets valuations wrong because it is no longer staffed by local people and does not visit sites. My local council often pays refunds to schools and doctors’ surgeries, but they are the last types of organisation that should be getting refunds after overpaying.

We need to review the appeals system. If pubs have got it wrong, the appeal system is not fit for purpose—it is slow and hard to afford. We should also look at the turnover methodology for pubs, which clearly does not work. What is supposed to happen, and what happens, penalises the good and gives a subsidy to the not so good. That is not fair and not fit for purpose. Because of these circumstances and their importance, we need to look at a permanent rate relief system for all our pubs.

15:57

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Owen. I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this debate. I will focus on the specific issue of small breweries’ relief. I ask that the Government consider removing export volumes from the relief’s calculations.

There is clear evidence that the current arrangements hold breweries back from increasing exports, investing in buildings and equipment, and creating new jobs. St Peter’s Brewery near Bungay in my constituency was established in 1996 and set out specifically to target the export market. Its exports to 50 countries make up 42% of its turnover. St Peter’s is a great British success story, but it is constrained from doing better by the current structure of small breweries’ relief. Although the relief is generous to microbusinesses, it discourages exports by breweries looking to grow and it significantly disadvantages small and medium-sized brewers above the threshold that have export potential. St Peter’s advises that removing the duty on exports would enable it to invest in new buildings and equipment and to increase their workforce by five from 18.

St Peter’s is not alone in making the case for removing export volume from the SBR calculations. That case is also supported by the Society of Independent Brewers, which describes it as a “no brainer”, and by the British Beer and Pub Association, which includes it in its compelling eight-point export strategy. As Brexit approaches, it is vital that we realise the full export potential of an industry that is a fundamental part of the British brand. A relatively small fiscal change in next month’s Budget would enable breweries such as St Peter’s to realise their full potential, be part of a great British success story and create new, much needed jobs in their local communities.

[Several hon. Members rose—]

[Albert Owen (in the Chair)]

Order. Before I call Fiona Bruce, let me say to Iain Duncan Smith that his debate will start at approximately 4.30 pm.

16:00

[Fiona Bruce (Congleton) (Con)]

Pubs are indeed great community assets, but many face challenges because of the availability of cheap alcohol in supermarkets and off-licences. Cheap alcohol carries tremendous costs to health, too. One particular product, high-strength white cider, causes disproportionate levels of harm and perpetuates deprivation and health inequalities. It is often called the drink of choice for the homeless, the lonely and vulnerable young people, many of whom are on the streets, underage or drinking simply to blot out their problems. It results in death for many who drink it, but it is people’s drink of choice because it is so very cheap.

High-strength cider has developed largely because, as a result of anomalies in the tax system, it has the lowest cost per alcohol unit of any product on the market. A 3-litre bottle of white cider contains 22 units—the equivalent of 22 shots of vodka—and can be bought for just £3.59. The homelessness charity Thames Reach says:

“Super-strength drinks have become one of the biggest causes of premature death of homeless people in the UK, and…are doing more damage than both heroin and crack cocaine”.

Some 78% of the deaths in Thames Reach’s hostels are attributed to high-strength alcohol.

Before I speak about how the Treasury can address this problem, I would like to mention the touching story of one mother, Joanne Good, who came to Parliament in February to tell us about her young daughter, Megan, who went out to a new year’s eve party aged 16 and drank half a bottle—1.5 litres—of Frosty Jack’s. She died in her sleep. These high-strength products should not be available for pocket-money prices. In the light of the Government’s commitment to put social justice at the heart of all they do, introducing a new higher band of duty in the forthcoming Budget that applied to cider with an alcoholic strength by volume of between 5.5% and 7.5% would be a targeted and proportionate response. It would leave the majority of ciders completely unaffected; the vast majority of products subject to the new rate would be white ciders.

There is compelling evidence that altering duty bands can influence consumer behaviour, so I ask the Government to consider increasing the rate for this band of drinks. I am offering them a healthier option. With an increase in tax take, what is not to like?

16:03

[Steve Double (St Austell and Newquay) (Con)]

It is a pleasure to speak in this debate; I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing it and on his excellent opening speech.

I have the incredible honour and privilege of representing the constituency that contains St Austell Brewery, which since 1851 has been brewing high-quality beer in the centre of St Austell under the ownership of the same family. It now enjoys incredible success and exports a number of its brands around the world.

The three years of beer duty cuts and the subsequent freeze were incredibly positive, not just because of the money they saved on the cost of a pint of beer, but because they sent the brewing industry the clear message that the Government backed it and were behind it. That gave brewers the confidence to plan for the future and invest in products, plant and machinery to grow their businesses and the market. Unfortunately, the rise in the retail prices index earlier this year has undone virtually all the good work of the cut and freeze years and has sent a negative message to the industry.

I encourage the Minister to take back to the Chancellor and the Treasury the strong message that this year we really need at least a freeze in the beer duty, to restore confidence in the industry. We are a Conservative Government, after all; we believe in low taxes, and we know that punitive taxes do not work. Cutting, or at least freezing, the beer duty will allow the sector to continue to grow, with more and more jobs being created.

I must also mention the small breweries’ relief scheme for brewers who produce up to 60,000 hectolitres a year—I did not know what a hectolitre was until a couple of days ago, but there we go. That threshold is clearly acting as a brake on small breweries that prevents them from investing and growing beyond it. Some form of tapering would be very welcome, because we have created a squeezed middle—brewers who are just above the threshold but are paying much higher rates of beer duty. I believe it is time for a review, and I ask the Government to work with the industry to get an overall view of small breweries’ relief and see whether the limit can be increased.

[Fiona Bruce]

Does my hon. Friend support my request that the Minister consider applying small breweries’ relief to cider producers, who do not enjoy that advantage at present?

[Steve Double]

I absolutely agree that cider should be considered for the relief as well.

The Budget gives us an opportunity to send the clear message to the brewing industry and our pubs that we back them, we understand how essential they are and we need to take action to support them.

[Albert Owen (in the Chair)]

I thank the Labour and Scottish National party Front Benchers for agreeing to shave some time from their speeches, to allow all Back Benchers time to get their points across.

16:06

[Joanna Cherry (Edinburgh South West) (SNP)]

I congratulate the hon. Member for Dudley South (Mike Wood) on securing this debate and on his excellent and thorough opening speech. There has been great cross-party agreement today about the important role that pubs play as employers and as the hearts of our community. We have also heard heartfelt pleas for freezing the duty on beer and for assistance with business rates.

The Scottish National party is proud of the substantial economic contribution made by pubs, breweries and microbreweries to the Scottish economy. The brewing and pub industry supports the employment of 60,000 people in Scotland, some 72% of whom are directly employed in it. Individuals who work in these jobs earn a combined £767 million per year; the industry contributes £1.6 billion to the Scottish economy and generates £972 million in tax revenues for an annual investment of only £69 million.

The SNP has long supported a wider evidence-led overhaul of the alcohol duty regime. We believe that evidence-based decision making that levies alcohol duty based on alcohol content is fairer, more equitable and more in line with encouraging a healthier approach to drinking. That is what the Scottish Government’s minimum alcohol pricing policy seeks to do; it will not attack the price of a pint in a pub, but it will affect supermarket cheap alcohol promotions.

The Scottish Government are encouraging new small businesses in the drink industry with the small business bonus, which provides 100% rate relief on business property up to a rateable value of £15,000. As the hon. Members for St Albans (Mrs Main) and for Berwickshire, Roxburgh and Selkirk (John Lamont) mentioned, the Scottish Government also introduced a 12.5% cap on business rate rises for the hospitality trade. The national chairman of CAMRA, Colin Valentine—a constituent of mine—said that the cap

“has made a big difference and in some cases it has been, and will be, a life saver”

for pubs, so the policy has clearly been of some assistance, although I am sure he and others would say that there is much more to be done.

The Scottish Government are working closely with public bodies and industry to support jobs, infrastructure and the thriving sector. I am happy to say that start-ups have helped the Scottish brewery sector to double in size since 2010. In 2016, 115 breweries were up and running in Scotland, compared with 55 just six years earlier. I am very proud that my constituency of Edinburgh South West hosts one of Scotland’s most iconic breweries: the Caledonian Brewery in Slateford Road. Edinburgh South West also boasts one of Scotland’s most successful microbreweries, the Edinburgh Beer Factory, which is located on the Sighthill industrial estate.

As the hon. Member for Keighley (John Grogan) said earlier, Heriot-Watt University in my constituency has an International Centre for Brewing and Distilling—a unique facility devoted to teaching and research, and meeting the needs of brewing, distilling and malting industries worldwide. I applaud Heriot-Watt University, which of course recently won International University of the Year from The Sunday Times.

The Caledonian Brewery, which is in the heart of Edinburgh and close to my constituency office, opened in 1869 and it has been preserved by Heineken UK, which now owns it, as a working masterpiece of manufacture, utilising many of the more old-fashioned methods of brewing but in a modernised setting. Heineken’s UK headquarters is in my constituency at South Gyle, employing around 550 people. Of course, Heineken is one of the UK’s leading pub, cider and beer companies, and more than 90% of the beer it sells in the UK is brewed here. It is also a major supporter of British agriculture, sourcing 100% of its malt and barley for its UK-brewed beer from UK farms and maltsters.

Heineken is also a passionate supporter of the great Scottish pub, through its Star Pubs and Bars business. I am proud to say that I have visited several of its pubs in my constituency, including the Jolly Botanist; the Athletic Arms, which is a very old Edinburgh pub known as “the Diggers”, where I held my victory party after the SNP tsunami in 2015; and the Spylaw Tavern. These are all thriving, local, community pubs.

I also applaud Heineken for what it puts back into the community in Edinburgh. In the summer of 2016, I joined Heineken employees, in collaboration with the Edinburgh Festival Fringe Society, in a volunteering project to regenerate the Broomhouse Centre in Broomhouse in my constituency, which is a charity that provides personal, social and community development opportunities. At the end of a day of hard work, we celebrated by enjoying performances from Edinburgh festival artists.

Earlier, I mentioned the Edinburgh Beer Factory, which is also in my constituency. It was founded just over two years ago and is an independent, family-run brewery that is going from strength to strength. It has won multiple awards, including the award for the UK’s best Helles lager two years running and the award for the world’s best American brown ale in 2017. The company’s products are really quite outstanding and 2018 will be an exciting time for it, as it launches two new products and starts to export its beers. However, like many other companies, the Edinburgh Beer Factory would like to see a freeze in beer duty in the next Budget, as well as measures to encourage exports. Beer is in the top three British food and drink exports, and, like all parts of the British food and drink industry, brewers fear the consequences of Brexit and require more reassurance on that front.

[Albert Owen (in the Chair)]

I am very grateful to the hon. and learned Lady; if the next Front-Bench spokesperson takes the same amount of time, we will get a good response from the Minister.

16:13

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

We hope, Mr Owen. It is a pleasure to serve under your chairmanship. I congratulate the hon. Member for Dudley South (Mike Wood) on securing this debate. It was in his company and that of my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) that last week I tasted and enjoyed many UK beers with the Titanic Brewery.

I will comment briefly on some of the contributions. My hon. Friend the Member for Ashfield (Gloria De Piero) made very astute references to microbreweries and the tax break provided for them by the last Labour Government; I hope the Minister will tell her that that will be retained. My hon. Friend the Member for Coventry South (Mr Cunningham) made an interesting point about the valuable work that young people and students can get in the hospitality industry, including in pubs.

It is worth mentioning at this stage some of the worries of brewers and pubs in the city of London about their requirements for European labour after Brexit. We also need to look at the planning issues, which my hon. Friend the Member for Barnsley East (Stephanie Peacock) mentioned, including permitted development rights.

The British pub is renowned around the world. Since the oldest one was established in the 11th century, the pub has continued to be a central feature of British life—a unique social hub for meetings, discussion and debate. Since then, of course, the world has drastically changed, but the continuity provided by the presence of a pub in the community remains. It is important that we work to preserve and encourage the growth of our pub industry; it makes both economic and social sense to do so.

According to the British Beer and Pub Association, the sector supports 900,000 jobs, with 42% of them held by under-25s; generates £23 billion in economic value; and provides £13 billion in tax revenues. On top of all that, 30 million adults visit the pub every month, which is proof that the British pub is not only a business but is at the heart of our communities. It brings people together and continues to be on the “to-do” list of almost every tourist visiting the UK.

Yet drinking establishments across the UK continue to be under severe threat. We have all seen the boarded-up pubs in our constituencies, not least because of the burden of the business rates evaluations but also because of the unequal relationships between large pub-owning businesses and pub tenants. Unfortunately, the pubs code as it currently stands has failed to deliver effectively what it was set up to do, but that is a debate for another time.

I return to beer taxation. As colleagues have already said, it was announced in the 2016 Budget that the duty on beer, spirits and most ciders would be frozen in the year 2016-17. That freeze on a typical pint of beer followed three consecutive years of beer duty cuts. On the other hand, duties on other alcoholic drinks, including wine at or below 22% alcohol by volume and high-strength sparkling cider, rose by retail prices index inflation. However, in March 2017 the Chancellor announced an RPI increase for beer too, which beer groups have called a “setback”, especially given the fragile environment that pubs find themselves in.

Can the Minister confirm what the beer duty RPI increase has meant in prices for customers and what mechanisms are in place to monitor the effectiveness of any such measure? When the beer duty freezes were introduced, Labour did not oppose them, but we asked questions about what the tax freeze meant in distributional terms. For example, the freeze favoured those who consume more of the relevant types of drinks. The equalities impact statement relating to last year’s freeze noted that

“any changes to alcohol duties will have an equalities impact that reflects consumption trends across the adult population”.

However, it failed to outline the specific equalities impact with respect to gender.

Although men are more likely to drink excessively than women, statistics from the Office for National Statistics show that wine, the tax on which was not frozen, is the most popular drink among women, while the most popular type of drink among all ages of male drinkers was normal-strength beer, lager, cider or shandy. Additionally, many trade bodies questioned why wine was singled out for a duty rise. Any future decision about alcohol levies should take that point into consideration.

Underlying this debate is a recognition of the importance of the pub as a local community hub and of the need to ensure that we do what we can to support it. That is why Labour is committed to securing the long-term future of pubs and the hospitality sector. Action must be taken to ensure that pubs are profitable and worth running as independent small businesses.

The Conservatives have neglected the needs of small business in favour of introducing tax breaks for big business that have failed to stimulate investment or create the high-skilled, well-paid jobs the country needs. Their cliff-edge approach to Brexit risks our access to the single market, and risks damaging all business by prioritising an economically damaging, undeliverable and unworkable cap on immigration at all costs.

Labour is the party of small business. We know that small businesses are the backbone of our economy, accounting at the start of 2016 for 99.3% of all private-sector businesses and 60% of all private-sector employment in the UK, or 15.7 million people. That is why we will end the Conservative attacks on small businesses by reforming business rates, scrapping quarterly reporting, ending the scourge of late payments and reforming employment allowance. Under a Labour Government, pubs will have the support necessary to thrive and grow.

[Albert Owen (in the Chair)]

I am grateful to the hon. Lady for her remarks and for allowing the Minister a full 10 minutes, unless he wishes to allow the sponsor of the debate to finish. Either way, I will call time at 4.30 pm.

14:00

[The Exchequer Secretary to the Treasury (Andrew Jones)]

It is always a pleasure to serve under your chairmanship, Mr Owen. I congratulate my hon. Friend the Member for Dudley South (Mike Wood) on securing this well attended and enthusiastic debate. I participated in the Adjournment debate seven years ago—I remember it well. I take this opportunity to commend the work of both the all-party parliamentary beer group, which my hon. Friend the Member for Dudley South chairs so effectively, and of which my hon. Friend the Member for Burton (Andrew Griffiths) is a distinguished former chair, and the all-party parliamentary save the pub group. No one in the pubs and brewing sector across our country can be in any doubt that they have some enthusiastic and eloquent champions within Parliament.

I will try to respond to as many of the issues as I can, but I am sure that hon. Members will appreciate that I am not able to pre-empt what my right hon. Friend the Chancellor may or may not say in three weeks and one day’s time. The requests to do so have been very tempting, but I am afraid that those making them will be disappointed. Before commenting on duty, let me just say that the Government recognise the importance of the UK beer and pubs sector. We hugely value the industry and its contribution to employment, to promoting responsible drinking and to community life. The sector’s footprint covers every single constituency in the country.

As colleagues across the House have said, pubs play a central role in our communities, whether in urban areas, in villages or on the high street. They are often far more than just a social venue; they double as restaurants and I can think of somewhere where they are also the village shop and, indeed, the post office. In my constituency we have a very good not-for-profit organisation called Pub is The Hub, led by John Longden, which does fantastic work helping pubs to diversify their offering.

Colleagues have also mentioned the charitable work in which pubs are involved. Pubs raise more than £120 million per year for charity, so there is a significant impact. The British Beer and Pub Association estimates that the sector as a whole invests more than £2 billion per year in its pubs and breweries, which in turn has an impact on employment; the sector is estimated to employ nearly 900,000 people throughout its supply chain, generating £23 billion in economic value. The very good points made by colleagues about the sector’s employment record have been powerful, and I entirely agree with them. In the run-up to preparing the Budget, I have met the British Beer and Pub Association and other businesses from the industry, including pubs and brewers of all sizes, and we recognise the contribution they make to economies and to the wider beer market—I have made that very clear to them.

The number of breweries in the UK has risen by 64% in just the past five years, to more than 2,000. The growth in the number of small breweries in recent years has increased the diversity and choice in the beer market, and has promoted consumer interest in a much larger range of beers, which has benefited the entire sector. My hon. Friend the Member for Dudley South commented on export, and I can provide some further information about that. More than 1 billion pints of beer are exported from Britain every year and reach 184 countries. Beer is one of the top three food and drink exports, generating nearly £700 million in sales—nearly £2 million, therefore, every day.

Colleagues have spoken about beer duty. I must say, first, that since ending the escalation of the beer duty in 2013, we have demonstrated clear Government support for this industry. After ending the duty escalator, the Government proceeded to cut beer duty in the 2013, 2014 and 2015 Budgets, before freezing it in 2016. It is worth noting that, as has been the Government’s policy since 2013, the public finances assume that alcohol duties will rise with the retail prices index each year. That means that there is a cost. If we choose to cut or freeze duties, there is an impact on the amount of money taken into our Treasury, which affects other areas of public expenditure or perhaps means that we have to seek to raise tax elsewhere. We just need to balance all those points; colleagues must remember that we are still running a giant deficit, which we inherited from the Labour party.

I know that hon. Members will want to reiterate the point made here this afternoon, that cutting duty supports growth and increases revenue. We have seen some evidence of that. I am, instinctively, a low-tax Conservative and I recognise that the lower the tax environment, the more businesses have to invest. It is not as straightforward to see direct cause and effect where we have had cuts, but the principle is, I think, understood. We, therefore, had to take the difficult decision last March that beer duty, along with other alcohol duty rates, needed to rise in line with RPI, but it is worth noting that in light of all the cuts and freezes to beer duty since 2013, a pint of beer costs 11p less than it would otherwise.

Some hon. Members have mentioned the price difference between the on-trade and the off-trade. That issue is raised regularly, and people would like to see the Government applying higher duty rates in the off-trade. Currently, however, that is not legal. European Union law requires member states to charge excise duty on all alcohol and alcoholic beverages, which prevents the UK from selectively charging excise duty on particular products, such as off-trade alcohol, or relieving other sectors, such as on-trade. I need to be clear about that so that we can manage expectations here. I cannot say what is in the forthcoming Budget, but I can say that I will take to it all the representations from today’s debate and share them with my right hon. Friend the Chancellor.

A number of colleagues have raised the issue of business rates, recognising that they are a high fixed cost for some businesses, including pubs. We fully recognise that, and that is why in last March’s spring Budget the Chancellor announced a £1,000 business rates discount for pubs with a rateable value of less than £100,000. To put that into context, that is 90% of all pubs, which basically means that the pubs that do not qualify are more likely to be managed by the much larger chains and are therefore able to manage business rates much more easily. Having said that, I can assure colleagues that we are aware of the request made both here and by the sector to extend the discount, and I can confirm that we will include it within our Budget representations, as we will the comments on business rates overall. However, I should just note that the cuts in business rates announced in the 2016 Budget will cost nearly £9 billion over the next five years, so we are out there helping businesses.

I turn finally to small brewers relief. We know that the number of small brewers has increased significantly over the years, from 400 in 2002 to 2,000 now. I mentioned earlier that the Government recognise that that diversification has added to the sector and the small brewers relief has really helped the growth of the industry. However, we are aware of the concerns about small brewers relief that many have raised with me. When I consider what we need to do, I want to ensure that we work with the whole sector. I want to work with the sector, not against the sector, to support growth, and I would like to see what evidence can be produced to suggest that we can have some uniformity of opinion before moving anywhere forward.

We have heard the points that my hon. Friend the Member for Congleton (Fiona Bruce) made about white cider and will respond in due course. We have had a consultation on that; there is no doubt that it is a problem area.

I finish the debate by saying that it has been a great, constructive and positive one. We have clearly demonstrated support for the sector and the Government are clearly a part of that, with all the actions we have been taking, for all the excellent reasons that have been presented throughout the debate. I assure everyone here that I have listened keenly and that we will take the contributions to be Budget representations. It is only three weeks and one day until we all get to hear what the Budget says—not very far away. I thank hon. Members once more for their contributions and for raising the issue.

[Albert Owen (in the Chair)]

I thank the Minister. I call Mike Wood to make the concluding remarks.

16:30

[Mike Wood]

I thank the Minister for making a generally positive response and for the many meetings he has had with colleagues and industry groups over the past few weeks, and will have over the next few weeks. I thank the many industry groups that have contributed to support Members in this event: CAMRA, the British Beer and Pub Association, the Society of Independent Brewers, the Association of Licensed Multiple Retailers and the Small Brewer Duty Reform Coalition. I also thank the many hon. and right hon. Members—

[Albert Owen (in the Chair)]

Order.

Motion lapsed (Standing Order No. 10(6)).

South Woodford Post Office

Tuesday 31st October 2017 Westminster Hall

[Mr Nigel Evans in the Chair]

16:30

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

I beg to move,

That this House has considered the proposed closure of South Woodford post office.

It is a privilege, as ever, to serve under your chairmanship, Mr Evans. I will try to take interventions from colleagues who also have a direct interest in the subject of this debate: the proposed closure and removal of South Woodford Crown post office in my constituency. In 2016, the Post Office announced the closure of 31 Crown post office branches. In January this year, a further 37 Crown post offices were identified for closure, putting approximately 300 jobs at risk, including at the South Woodford Crown post office. That has caused huge and legitimate concern among many of my constituents.

I want to go back to 2008—

[Mr Nigel Evans (in the Chair)]

Order. Before the right hon. Gentleman warms up, I suspend the sitting for 15 minutes while a Division takes place in the House.

16:30

Sitting suspended for Divisions in the House.

16:58

On resuming—

[Mr Duncan Smith]

It is a privilege to take so long to read about 35 words—that would normally be called a filibuster, I think, worthy only of my great hon. Friend the Member for Stone (Sir William Cash)—but I will now endeavour to proceed.

The debate is about the closure of the Crown post office in South Woodford. I want to go back to 2008, when I opposed the closure of Woodford post office on the High Road, a small sub-post office. At the time, the Post Office promised me that the Crown branch in George Lane could take the extra trade and it would not be a problem. I argued that it was still a bit of a walk and so on for some of the older residents, but none the less, there was at least the Crown post office there. Now, less than 10 years later, it has reneged completely on that guarantee and will leave the whole area without a post office. I find myself yet again campaigning—only this time I am campaigning against the reassurances and assurance that the Post Office gave me, to show that it cannot be trusted at any time on these issues in any community.

With the latest round of closures and franchising, the Crown post office network will have just 214 branches, a fall of more than 40% since the start of 2014, when it stood at 373. The Post Office has looked for a franchise partner—another high street retailer that would be willing to incorporate a post office counter into its premises—but there is evidence that fewer people use such outlets. I put that point to members of the management, who came to see me a few days ago. They said that they did not recognise my figures, but I maintain that most of the evidence from colleagues suggests that fewer people use such outlets. For example, a post office was closed in Maidenhead, and when the service was relocated to a WHSmith unit, it saw a 40% drop in business.

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

On the issue of footfall, does the right hon. Gentleman agree that if we remove the Crown post office, which a lot of my constituents use, it will affect the surrounding businesses? Therefore, the Post Office’s figures could be proved wrong.

[Mr Duncan Smith]

The hon. Gentleman is correct. Such figures are often used to justify things, but they are never returned to after the event and it is never recognised that they did not stack up. I know for a fact that many elderly people will not use a post office in a store—I think the Post Office wants to use an electrical retail store—because they feel intimidated and pressured to buy goods. It is unfair to do that, and it will only create further problems for those who have grown used to the services.

Following the announcement, I met Clive Tickner and Peter Meech—local representatives of the Communication Workers Union, whom I congratulate on their steadfast determination to work with anyone, regardless of their political party, to try to save the post office. They explained that the staff at the George Lane branch are worried about their jobs, and there is good evidence why they should be. Despite the Post Office’s assurances, until an agreement is made with a franchise partner, the staff will not know whether they have a future with the Post Office. They also informed me last year that when branches are moved, most staff—many of whom have years of knowledge about post office service provision—leave the service altogether. They explained to me that, in 2014-15, only 10 out of 400 staff from the Crown offices that were closed were TUPE-ed over to a new retailer, and only six staff out of more than 200 were TUPE-ed over in 2006. There is a genuine concern. In fact, when I talked to the Post Office management, it became clear that the Crown post office is being shut for that very reason: they will employ people on lower rates with less understanding of the service. I found that peculiar for anybody who wants to provide a good service.

[Wes Streeting (Ilford North) (Lab)]

rose—

[Mr Duncan Smith]

I give way to my constituency neighbour.

[Wes Streeting]

I am grateful to the right hon. Gentleman for securing this really important debate. I join him in congratulating the Communication Workers Union on its campaign to save Crown post offices. He correctly described the impact on staff, but I warn him, from our experience of the closure of the Crown post office on Barkingside High Street, that the Post Office often closes Crown post offices with no care or consideration for what will follow. That premise remains vacant and is an eyesore on Barkingside High Street. Many of my Barkingside residents are concerned, and my constituents who use the post office on George Lane are also concerned about what the future holds for that part of the high street.

[Mr Duncan Smith]

I have been looking at that issue, and the hon. Gentleman is absolutely right. He backs up everything I have been saying about the likely consequences for the Crown post office we are debating.

As previously suggested by my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) in his debate on the Post Office, which many people took part in, the Post Office should use its premises better. I know of no business that goes around reducing its outlets solely as a way of lowering its costs to the point at which it somehow breaks even. Why is it in business at all if its sole purpose is to make sure it has as few premises to do business from so that it can say it has managed to meet the challenge?

As an illustration of the point that the Post Office does not use its outlets properly, its financial services, which should be a key generator of revenue for the business, are diminishing. Earlier this year, 150 financial specialists were made redundant. The Post Office is locked into its partnership for financial services provision with the Bank of Ireland until 2023, which prevents it from creating a more profitable arrangement. The Cass business school at City, University of London produced a report for the Communication Workers Union entitled “Making the Case for a Post Bank”. I want to share some of the points it raises, because I think it is relevant to the reason why the Post Office is embarked on the wrong route.

If the Post Office were to establish a post bank, it could ensure its long-term profitability by expanding its services and increasing its revenues. In addition, a post bank would probably offer other benefits to users, such as better access to finance for small and medium-sized enterprises, and improved financial inclusion for those who struggle to access services with the traditional banks. It would also align the Post Office with the successful strategy of other postal operators around the world. We seem to be almost unique in not using that concept to drive revenue and not having qualified staff. The Cass business school states that the amount of initial capital needed to create a post bank is equal to the investment that the Government have put into the Post Office in the past seven years. Interestingly, it also estimates that the profits that a post bank would generate would eliminate the need for an ongoing annual subsidy, putting the Post Office on a sustainable footing for the future.

It is worth reminding the Minister, who I know will respond to this point, of the figures for the Metro Bank. The way it has succeeded is really quite startling. The banking authorisation process to set up that challenger bank began in 2009, and in 2010 it launched its first branch. What is interesting is that its asset growth is 64% year on year and its revenues are up 62% year on year. It has strong common equity tier 1 capital ratio of 18.1%, and has seen a record 260,000 increase in customer accounts to a total of 915,000. While that is going on, it is also increasing its representation in the community and has opened about 41 stores in the past six years. On the one hand we have an organisation opening up in and serving the community, and on the other we have a well-established organisation retreating from the community and determined not to serve it in the way it could and should.

The Cass business school report also points out that the Post Office is currently suffering from a weak financial performance and lacks a clear plan to ensure long-term sustainability, which is true. The partnership with the Bank of Ireland has not delivered the expected results—I think it is a bad deal. One of the main drawbacks of the current partnership model, in terms of revenue generation, is the strong dependence on the partner’s will and ability to expand the business. As we know, the Bank of Ireland has struggled since the crash of 2007 and is not really interested in expanding its business. Being locked to it is a bad deal for the Post Office, and yet it shows no determination to try to change that.

The Post Office’s overall commercial revenue has therefore been virtually stagnant for the past few years. Compared with what overseas post offices are doing, it is really poor and verging on the pathetic. Even in places such as Italy, revenues in the postal area are predominantly driven by the financial sector, which secures post offices in high streets. Other countries do the same, but here in the UK the proportion of revenues that the financial sector is likely to drive is next to nil.

The Post Office possesses a positive public perception, compared with traditional financial institutions. Creating a post bank is one way of helping it to increase its revenues. My question to the Minister, therefore, is, why is the Post Office not making more of banking, financial services and other areas—particularly given that it is a trusted presence on the high street while most conventional banks have sunk in the public’s estimation?

It is also worth reminding the Minister, the Post Office and the Government that post offices are not just meant to sit there; they are an integral element of high streets, which, bit by bit, are being removed. The banks have disappeared, and in many areas, including my own, there is real pressure to get rid of small industrial estates and start building on them. Those industrial estates, however, are vital to the life of communities, because people who work on the high street during the day or use it to shop for food and so on and so forth would otherwise be out of work and not in that area. That post office is like that, an integral element.

The absence of any sense of innovation in the Post Office is remarkable, given that it owns prime sites that could be used flexibly. When I was at the Department for Work and Pensions, I wanted to persuade the Government to allow post offices to be used for outreach, for identification. The Post Office was utterly negative about the idea and made no effort to entertain it, but I hope that the Government will press it again. Post offices with terminals where people, the elderly in particular, could receive good, reasonable advice about benefit claims might easily be utilised for further Government activity, beyond all the other existing work, especially with identity checks becoming more necessary and vital for the Home Office, and with the roll-out of universal credit. People might feel more comfortable going to a post office than to a jobcentre, so that is a perfect role for post offices and one that would enhance Government programmes. The Post Office has a unique and highly identifiable position as a high street brand, and I cannot understand why it is insisting on backing away from it, as with my Crown post office on the corner of the very road that leads 300 yards down to the tube station, which daily has big footfall because many people are going to the station and coming back past the post office.

In summary, local residents want the Crown branch in South Woodford to remain open. I ask the Post Office, through the Minister, to think again. We have spoken to a number of residents and local businesses and none of them, not one single one, wanted the post office to move. The complete unanimity was interesting. The response that we gave to the Post Office’s public consultation consisted of just under 2,000 signatures, which took us no time at all to gather—people were queuing up to sign our petition to keep the post office where it should be.

I have my concerns about the Post Office consultation process, however, because when we handed in the petition I realised that it was not in the slightest bit interested in consulting us on whether the branch should close. The consultation was solely about where the post office should move to, which in itself was a breach of trust of the local community. After all, the post office is a community asset; the Post Office management at least needs to put forward proposals and ask the community whether they agree that it needs to move. It was not until I badgered the Post Office again, writing twice to ask, “I hope this petition is being taken into consideration and that you are prepared to look at whether this post office should move again”, that it said that it had not at that point closed the door to further considerations. I therefore urge the Post Office to use this opportunity to ensure that the branch does not close.

I hope that the Minister will recognise that, as a political party and a Government, we have a responsibility beyond just letting organisations be run by people who have the sole idea that they need to break even. In reality, we have an investment and a vested interest in a post office system that works. More importantly, it should work not only as a stand-alone financial organisation but in support of the community. That is the most important part. We bleat a lot about high streets, but we do nothing when things such as local post offices disappear.

I have to say that this is the one thing that unites political parties on the Back Benches, the absence of that asset on the high street. It is high time for—I hope—the Minister to be very hard on the Post Office management. I do not understand why it has been so hopeless at finding ways to use post offices so that other services can be delivered at the same time, which would bring the Post Office extra revenue. Instead of being an organisation that seems to think that its job is to get rid of all its main customer-facing areas on the high street, it would turn into an organisation that was flexible, sensible and highly profitable. Furthermore, we have seen post offices in other countries do that. I therefore urge the Minister to do her level best to drive the Post Office management to common sense and allow us at least to retain our excellent Crown post office, which has served my community incredibly well for all these years.

17:14

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

I congratulate my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) on securing this important debate about the Post Office’s proposal to franchise its South Woodford branch. He clearly set out his concerns about the plans and about the local consultation process that the Post Office follows. He rightly recognises the crucial community role that post offices play throughout the country.

Between 2010 and 2018, the Government will have provided nearly £2 billion of taxpayers’ money to maintain, modernise and protect a network of at least 11,500 branches across the country. Contrary to the impression that I gained from my right hon. Friend’s remarks, far from closing branches and retreating the Post Office is acting in line with the manifesto commitments given in both 2015 and 2017: to protect the post office network in terms of the loss-making branches in rural and some poorer urban areas.

Today there are more than 11,600 post office branches across the country, and the network is at its most stable for decades. That is because the Post Office is transforming and modernising its network, thanks to investment from the taxpayer and to the hard work and dedication of Post Office staff throughout the country.

Government support has enabled the modernisation and transformation of more than 7,000 branches; more than 4,400 branches are now open on Sundays; and nearly 1 million additional opening hours per month have been added to the network through the modernisation programme. Financial losses reduced from more than £120 million to £24 million by 2015-16, which allowed the Government subsidy to be reduced by more than 60% from its peak in 2012.

That the network is at its most stable in a generation might be one of the reasons why customer satisfaction has remained consistently high. I understand that in my right hon. Friend’s constituency people have benefited from more than 200 additional opening hours per month, and at least one of their branches is now open on a Sunday.

[Mr Duncan Smith]

I do not mean to take up much time, but I want to make the point that I made to the management: although they say that only by franchising can they have longer opening hours, there was never any reason why that could not happen in the existing post offices and Crown post offices. Longer opening hours is an illustration of something working right, but it could always have been done through the existing post office network—there was nothing to stop that.

[Margot James]

One of the reasons why it is difficult to extend the opening hours in some Crown post office operations is that those branches are already making losses. Extending the hours has an additional cost—even if doing so was possible given existing staff working arrangements in the Crown post offices. There would without doubt have been additional costs, which might have worsened the losses of most of the Crown post offices, including the one we are discussing. Additional hours are open to question.

The Post Office is offering more to customers by having operations in retail premises that are used to working to a model of longer opening hours, including Sundays. That is more efficient for the taxpayer and ensures that post office services remain on our high streets throughout the country.

I fully appreciate that there can be disappointment and uncertainty in communities where a change to post office services is proposed. Those communities can hold strong views and concerns regarding any planned change, as witnessed by the petition mentioned by my right hon. Friend—[Interruption.]

[Mr Nigel Evans (in the Chair)]

Order. There is another Division, but this will be the final one.

17:19

Sitting suspended for a Division in the House.

17:29

On resuming—

[Margot James]

By looking for a franchise partner in South Woodford, the Post Office seeks to ensure continued access to post office services for customers in the area in a way that is sustainable for the long term, keeping post offices on our high streets and in our communities.

My right hon. Friend’s community is not losing its post office service; it will be relocated to the convenience store operated by the proposed new partner, approximately 85 metres from the current location. I understand that the new partner plans to refurbish the premises, and that the Post Office will install a new modern post office in the convenience store. The Post Office recognises the importance of providing good access for all customers, including wide aisles and low-level counters for people with disabilities. It has high standards to ensure that, and that will remain the case in the new branch.

Working with a retail partner really is a sensible response to the challenges facing high street retailers. It has the benefit that overheads, including property and staff costs, can be shared across the combined post office and retail business. The host retailer also benefits from increased footfall and income from Post Office products. The vast majority—more than 97%—of post offices across the UK are operated by independent businesses and retail partners. Moving directly managed Crown post offices to retail partners has proved successful elsewhere and has helped to reduce losses in that part of the network from £45 million of taxpayers’ money per year as recently as four years ago to near break-even today.

Of course, the Post Office needs to continue to take steps to ensure that the network remains sustainable for the future, as it is doing in South Woodford. It does not propose such changes if it does not consider them necessary to secure the long-term sustainability of post office services in communities in my right hon. Friend’s constituency and across the country.

I know that my right hon. Friend has been disappointed by the consultation exercise. The Post Office welcomes and values feedback from customers, which is why it runs local consultation processes. He is absolutely right that such consultations are not designed to elicit views about whether Crown post offices should be franchised, but they generate a lot of data about how they should be franchised and about what services customers are particularly interested in, and the Post Office organises local customers’ forums when proposing relocation, as it did in his constituency.

I know that my right hon. Friend considers that the Post Office should consult on the decision to franchise the current branch before it consults on any potential new location, but it must be for the business to take such commercial decisions, within the parameters set by the Government, to ensure that we protect our valued national network. Post offices operate in a competitive retail environment, and we should allow the business to assess how best to respond to the challenges it faces and to secure post office services for communities for the future.

The Post Office consults, in line with its code of practice, on changes to the network, and that has been agreed with the consumer body. Citizens Advice recently reported that that process has become increasingly effective, and that in most cases improvements are agreed or reassurances provided in response to customer feedback received during the consultation process. That has happened after nine out of 10 of the Post Office’s similar consultations in the past year, demonstrating that the process is effective.

My right hon. Friend rightly mentioned the need for post offices to focus not just on reducing cost but on improving footfall by improving the quality and range of their services. He drew attention to the Cass business school report commissioned by the Communication Workers Union, which I commend for its efforts to assist Post Office to broaden its service offer. The state-backed post bank explored in that paper was actually assessed back in 2010, when the cost of instituting such a bank was put at approximately £2 billion. It was felt at the time that that money would be better invested in badly needed transformation and modernisation of the network, and that was the decision made.

The good news is that banking is now an increasing part of the Post Office’s offer. I am delighted to say that the Post Office announced today that it has secured a deal with Lloyds bank that will enable it to offer a banking service to small and medium-sized enterprises across the country. That service will meet 95% of SMEs’ banking requirements and 99% of retail banking requirements. That really is a step change. The Post Office is also a market leader in identity services; it now has a 40% share of that growing market.

I reassure my right hon. Friend that the Post Office is absolutely not resting on its laurels or just focusing on managing its cost base; it is actively seeking growth in the products and services that it offers. I commend Post Office’s management, and its workers and staff, on the great progress that they are making.

Question put and agreed to.

Education Funding: Wirral

Tuesday 31st October 2017 Westminster Hall

17:36

[Ms Angela Eagle (Wallasey) (Lab)]

I beg to move,

That this House has considered education funding in Wirral.

I am grateful to have obtained this debate about such a critical issue for my constituents ahead of the Chancellor’s crucial autumn Budget on 22 November. I trust that the Minister, who represents the Government, will listen to what I have to say and convey to the Chancellor as he deliberates on the content of his Budget the anxiety of so many people who are involved in education at all levels. The reality is that the overall funding pot for schools is too small. Whatever claims the Minister may make, the lived experience of my constituents—parents, teachers, support staff and pupils—is that school budgets are not enough to keep up with rising running costs. The consequences are huge pressures and deteriorating education opportunities for Wallasey’s kids.

In the 25 years that I have represented Wallasey in this place, I have paid regular visits to local schools and met many teachers, support staff, pupils and parents, and I have to tell the Minister that the warning lights are flashing. In all my time in Parliament, I have never heard expressed such wide-ranging concern about funding pressure as I hear now about the pressure that all Wallasey’s schools are experiencing. That pressure extends right across the Wirral. It came up forcefully during the general election, and the Government subsequently had to find extra funding. Although that is to be welcomed as a good start, it is not enough to alleviate existing pressures, and the Government’s decisions about how to distribute it disadvantaged further those who were already struggling from significant disadvantage.

This funding crisis hits the most vulnerable hardest. This crisis is happening now; schools in Wallasey are being forced now to cut back on staff, on the curriculum and on teaching materials. A National Audit Office report last year concluded that schools will need to reduce spending by an average of 8% per pupil by 2020. That would be the largest real-terms cut since the 1970s. School budgets have been cut by £2.8 billion since 2015 at a time of rising and additional costs, and schools are struggling to cope.

[Frank Field (Birkenhead) (Lab)]

I very much endorse what my hon. Friend is saying about the crisis we are facing. Thanks to Feeding Birkenhead, Wirral adopted a policy of using its housing benefit data to identify those pupils who are eligible for free school meals and the pupil premium, resulting in another £750,000 for Wirral schools. However, despite that additional funding, which the council activated by using its IT sensibly, everything my hon. Friend says stands.

[Ms Eagle]

My right hon. Friend points out the layers of disadvantage that are often not taken into account by the Government’s distributive mechanisms. The proposed new national funding formula is one such mechanism, and it will do nothing to alleviate the crisis in Wirral schools.

What is particularly insulting is the Government’s persistent claim that the national funding formula is based on the principle of fairness and the frankly ludicrous claim that schools will see an increase in funding as a result of it. No one believes that there are no flaws in the current system—we all recognise that—but, rather than rectifying them, the new national funding formula simply creates new ones. It shifts an already inadequate sum of money from one area of the country to another, with some of the most deprived areas losing out. I do not know about the Minister, but that is not my definition of fairness.

I have no doubt that we will be told by the Minister about the additional £1.3 billion over two years announced in September by the Education Secretary. First, that is not new money but rather a sum that has been assumed to be available from unrealistic, so-called efficiency savings and cannibalised from other parts of the budget. Secondly, it will do little to compensate for the £2.8 billion of cuts schools have suffered since 2015. Ask any teacher in my constituency, or any school governor, and they will talk about the cutbacks that schools are already having to make as a result of the real-terms reductions in their budgets at a time of spiralling costs.

Lord Harris of Peckham, a Conservative party donor who runs a large academy chain, let the cat out of the bag recently. He said that the schools he runs are facing a 20% cut in funding by 2020 and that the Government should put more funding into schools. I agree with him.

I turn to the specific impact that the funding pressures are having on schools in the Wirral. As I mentioned at the outset, I have maintained a frequent dialogue with schools in my constituency throughout my time as an MP. Everyone I speak to tells me the same story: funding from the Government has failed to keep pace with running costs in schools. According to figures from the National Education Union, my constituency is set to lose an average of £149 per pupil in real terms between 2015-16 and 2019-20, with a total loss of 29 teachers. Wirral as a whole will lose on average £111 per pupil and 108 teachers.

The cuts come at a time of additional pressures on school budgets such as rises in national insurance contributions and pension contributions and, most recently, the apprentice levy. There are also growing demands on schools to offer social services support and family support and to deal with increasingly complex mental health issues. Meanwhile, cuts to local authority budgets have made matters even worse, because they have decimated the support that the local authority used to provide to our local schools.

Wirral Metropolitan Borough Council has lost £150 million since 2010 and is set to lose a further £132 million by 2020-21. That amounts to a 40% cut in its budget. As a consequence, local authority support for schools has been cut drastically. In Wirral, cuts to the education services grant have left the council with a £1 million shortfall. That grant funds areas such as mental health support, fire safety and the maintenance of school buildings and playing fields. Likewise, social services and family support have been decimated by the huge cuts to local authority budgets. To make up for the shortfall, the council will have to absorb it into its already shrinking budget, cut services or force schools to pay up themselves, heaping more pressure on their already stretched finances.

Adrian Whitely, headteacher at The Mosslands School in my constituency, told me about the impact of funding cuts on his school. His quote is worth reading out in full, and I do so with his permission. He says:

“Five years ago, The Mosslands School, an 11-to-19 boys school with approximately 1000 pupils on roll, had 79 teaching staff and 18 teaching assistants. Due to budget reduction and rises in running costs, today it has 60 teachers and 8 teaching assistants. Average class size has risen with the majority of pupils now taught in classes of over 30. Over 40% of its pupils are entitled to free school meals at some stage; 26% of the students are identified as having additional special education needs; the number of children meeting the threshold for social services intervention has doubled in 24 months; and there are a further 20 pupils who are in the care of a Local Authority. It is a popular school and was deemed to be a good school when it was inspected last year. This year, it had to make a further 6 redundancies to balance its budget. This clearly cannot continue.”

Cuts such as those cannot simply be dismissed by the Government as efficiency savings. I note that the Government are increasingly fond of claiming, despite all the evidence to the contrary, that the cuts are actually increases. I intend to deal with that argument in detail a little later in my speech, but the fact is that the cuts are having a tangible effect on the breadth and standard of education that schools in Wallasey can provide.

I recently visited Birkenhead Sixth Form College, which as its name suggests sits just outside Wallasey in the constituency of my right hon. Friend the Member for Birkenhead (Frank Field), but it is attended by many of my constituents. In advance of the meeting, the principal, Mike Kilbride, wrote to me to outline the funding shortage faced by the college. He stated:

“At Birkenhead Sixth Form College we currently educate over 1,300 young people and passionately believe that every student deserves a first class education. Unfortunately, funding cuts and cost increases are making this increasingly difficult to provide. In the last year we have had to make many tough decisions including the withdrawal of some provision.”

Birkenhead Sixth Form College has had to reduce its curriculum in areas such as performance art and music. Perhaps the Government believe that such subjects are surplus to requirements, but I believe they are an integral part of a well-rounded education. The UK performs particularly well in music and the arts, and that success earns the country worldwide recognition and plenty of economic benefits. Those benefits are being put in jeopardy by short-sighted policies.

One headteacher of another school told me that funding for special educational needs children was becoming a cause for concern. There are statistically a high number of special needs pupils in the Wirral, and many of those needs are very complex. Many pupils have needs that require one-to-one attention from teachers with specific expertise. The funding that schools receive per SEN child does not always provide for that. The headteacher said that SEN funding “disappears in an instant”.

The vast majority of school spending goes on staff. With pay progression, the best teachers receive pay rises and older teachers tend to be paid more. However, as one headteacher pointed out to me, the national funding system takes no account of that. Schools are therefore struggling to fund pay increases as well as significant increases in national insurance contributions. One headteacher told me that

“teachers are teaching bigger and bigger classes”.

Not only does that create more work in the classroom; it also leads to more marking and more admin, and it is putting a bigger strain on them.

As figures from the National Education Union reveal, the pattern of funding cuts is being replicated in schools all over Wallasey and the Wirral. Most worryingly of all, some of the most deprived areas are being hit the hardest. To be clear, the figures I use take 2015 as their base year and reveal that, despite the Government’s attempted sleight of hand with what they like to call new money for schools, the funding given to schools has been cut by 4.6% overall between 2015 and 2020.

I will now deal with how that reality affects schools in Wallasey. The Oldershaw Academy, a school where 64% of pupils are on free school meals, is set to lose £233,000 in total by 2020, or £455 per pupil. St Mary’s Catholic College, where 53% of pupils are on free school meals, will lose £224,000, the equivalent of £186 per pupil. Primary schools in Wallasey are also being hit, and small schools, which can least afford to absorb huge funding reductions, are among the worst affected. Kingsway Primary School, where 53% of pupils receive free school meals, will see a real-terms cut of 19% per pupil. Eastway Primary School, where 52% of pupils are on free school meals, will see a cut of 10%.

As I outlined earlier, these figures do not tell the full story. They are accompanied by rising costs and additional sources of expenditure, such as the apprenticeship levy and national insurance contributions. There have been numerous press reports of state schools asking parents for donations to keep their school afloat—a double disadvantage for those schools that serve poor communities, where the parents simply cannot afford to fork out the extra money that schools now routinely ask for.

Many parts of Wallasey and the Wirral have high levels of deprivation. In Wallasey, a total of 41% of pupils are in receipt of free school meals, but we will lose £149 of funding per pupil by 2020. I do not call that an increase, even if the Minister is going to claim in his reply that it is. By contrast, the constituency of Bournemouth East will gain £36 per pupil, despite only having 19% of pupils on free school meals. North East Hampshire will see a small gain, despite only having 10% of pupils on free school meals. How can the Minister possibly justify that?

Another of the Government’s flagship education policies is multi-academy trusts, which have implications for, and give rise to questions about, funding and accountability. In June this year, just after the general election, the Government took the decision to close the Kingsway Academy in Leasowe, in my constituency. The school will close on a phased basis by the end of the 2017-18 academic year, and many pupils have already been forced to move on to neighbouring schools. The school, formerly known as the Wallasey School, has a long and proud history, and provided an education for pupils in Wirral for generations. It is astonishing that the multi-academy trust, the Northern Schools Trust, was allowed to walk away as soon as it became clear that it could no longer turn a profit, just three years after taking over the school. That was after it had summarily closed down the sixth form a couple of years ago, leaving 80 pupils high and dry.

I cannot stress enough how much anxiety the announcement caused parents, pupils and staff when it appeared out of the blue just four weeks before the end of the academic year, but that was par for the course with the Northern Schools Trust. The decision was taken behind everyone’s back and the local community was kept in the dark throughout the process. As soon as I heard rumours of the school’s closure, I asked the Minister to meet me. By the time he had agreed to do so, he had already taken the decision to close the school. I believe that the episode exposed a worrying lack of transparency and accountability at the heart of the Government’s policy on multi-academy trusts. Had Kingsway been a maintained school, it would have been obliged to conduct a 12 to 18-month consultation, involving parents, trade unions and the local community, before a closure; yet there is no such obligation on academies to consult.

When we look at the list of income allocated to schools, we find that the only school in Wallasey that has had an increase, at £524 per pupil, and a 9% uplift in its funding, was the Kingsway Academy, which is now being closed. The Northern Schools Trust essentially announced closure within four weeks, having left council officials, unions and other stakeholders in the dark. The multi-academy trust seems to be free to walk away from the school, leaving the local authority to pick up the pieces, with the future of pupils’ education left in the balance.

The lack of accountability was highlighted in the Education Committee’s report on multi-academy trusts, published in February this year. With a multi-academy trust, the accountability is transferred from local governing boards to a central trustee board that holds the decision-making responsibilities. The report noted:

“We were told by parents that MATs are not sufficiently accountable to their local community and they feel disconnected from decision making at trustee board level. There is too much emphasis on ‘upward’ accountability and not enough on local engagement.”

The report went on to recommend:

“MATs should demonstrate a sincere commitment to outreach and engagement with the local community.”

In my experience, they are a long way from doing so. That is certainly advice that the Northern Schools Trust should have heeded during the Kingsway debacle.

Multi-academy trusts are recipients of huge amounts of public money, but they do not seem to be subject to the same standards of accountability. When school budgets are being squeezed as they are, and when schools are having to reduce staff numbers and are struggling to purchase equipment, is it right for MATs to pay their chief executive officers an annual salary of £160,000, as the Northern Schools Trust does? If multi-academy trusts were an unrivalled success, there might be at least a case for it, but when they are allowed to take over a school, fail to turn it around and walk away with no public consultation and little in the way of repercussions, the Government should ask themselves whether the policy is acceptable.

I have no doubt that the Minister has come armed with the Government’s own figures, giving the impression that Wirral schools will receive funding increases as part of the new national funding formula. After all, he has been going round claiming that cash increases are actually real increases, and hoping that nobody would notice the huge rise in running costs that all schools have to cope with, which more than wipe out any of the so-called gains for which the Minister is spuriously claiming credit. If the claim of increases were remotely true, does the Minister imagine that Wallasey’s headteachers, staff, parents and pupils would be complaining so much about the funding pressures that are causing them to cut back on the curriculum, sack teachers and increase class sizes?

Let us take a moment to interrogate these figures before the Minister brandishes them about in his reply. The Government’s figures show that in 2018-19, Wirral schools will receive, on average, a 1.6% increase in cash terms. Government figures also show that they will then receive a further 0.8% cash-terms increase in 2019-20. Schools in my own constituency in Wallasey will receive a 1.5% cash-terms increase—slightly less than the average for Wirral—in the first year, and an additional 0.6% the following year. Again, that is slightly below average. I note, however, that revealing ministerial phrase, “cash terms”. It does not take an economic genius to work out that, with inflation running close to 3%, that amounts to a significant real-terms cut.

The Government’s wilful and convenient confusion between a cash-terms and real-terms increase is only part of the story. The Minister’s figures show modest cash-terms rises from 2017-18, using that year as a baseline. By choosing that baseline, the Government are entirely and deliberately ignoring the cuts that took place before that—cuts that even as I speak are already being felt in classrooms across the country. That is pretty shoddy, but there is even more bad practice to come. The Minister’s figures also overlook the additional pressures on school budgets that I outlined earlier: the apprenticeship levy, national insurance contributions, pension contributions, any increases in staff pay, loss of education services provided by local authorities and any additional help on issues such as mental health and social services support, which used to be provided by local authorities but have now been decimated by the swingeing cuts this Government have made to local authority budgets.

Despite this accumulation of budget cuts and cost increases, the Government insist on perpetuating the ridiculous and false claim that schools are actually receiving more money. I suppose they are, but only in the most meaningless, technical sense. Actually, they are not really. I hope that the Minister will be reasonable enough to not treat us to another bout of that nonsense. How can he claim that schools are getting more money when they are sacking staff, increasing class sizes and cutting subjects from the curriculum? Frankly, Ministers are living in a parallel universe if they think that their farcical claims bear any relation to the situation confronting headteachers and staff on the ground, where the effects of austerity are being felt in classrooms all over Wallasey and all over Wirral.

I encourage the Minister to visit the schools in my constituency and across the Wirral to observe the real-terms cuts that schools are having to make, and the very real consequences that those cuts are having on our schools’ capacity to provide an outstanding education for all. Perhaps he may then see the error of his ways and realise that he has to persuade the Chancellor to put our children first and finally agree to the real-terms increases needed to give the next generation the educational chances they really deserve.

18:00

[Margaret Greenwood (Wirral West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Wallasey (Ms Eagle) on securing this important debate.

According to the Government’s own figures, funding for schools in Wirral under the new formula will rise from £194.7 million in 2017-18 to £197.8 million in 2018-19, and then £199.3 million in 2019-20. Funding in Wirral in 2019-20 is scheduled to be 2.4% higher than in 2017-18. However, the average national increase for that period is 3.2%, so it is clear, even from the Government’s own figures, that Wirral is set to miss out.

Figures from the National Education Union tell a different story, showing that funding for schools in Wirral is to fall by nearly £4.8 million between 2015-16 and 2019-20, and revealing a loss in per-pupil funding of 2%—£111 per pupil. It predicts that, as a result, schools in Wirral will lose more than 100 teachers overall. It has also pointed out that school cuts have not been reversed, and that the vast majority of schools will have less money per pupil next year and in 2020 than when the Government took office in 2015. As a former schoolteacher college lecturer myself, the quality of education we provide to our young people is a subject very close to my heart. I know only too well, from first-hand experience, what happens when schools struggle with cuts by Conservative Governments, because, of course, we have been here before.

The loss of 100 teachers from Wirral schools will have huge implications for pupils and teachers. Cuts are likely to lead to increased class sizes, the loss of subject choice and curriculum areas—especially in the arts, which are so important to ensure the development of a rounded education—and increased pressure on the remaining staff, who will have to teach the same number of pupils. All of that matters because education is vital to the development of the next generation and to the future of our country, and I believe there really can be no shortcuts. The National Education Union has said that high-needs, early years and post-16 education have suffered the biggest cuts and are not being fairly funded.

Headteachers of schools in my constituency have told me that they face a real challenge in supporting children with special educational needs. In one school, Fender Primary School, 39% of pupils have special educational needs, compared with the national average of 13.5% for primary schools, while more than 50% of its pupils are eligible for free school meals. That presents particular challenges, but the school’s most recent Ofsted report noted that

“The school’s commitment to ensuring all pupils equally succeed is strong. All pupils achieve well, and some outstandingly so, including disabled pupils and those with special educational needs.”

I pay tribute to the school’s staff, its pupils and their parents. The report also said:

“The headteacher has high ambitions for pupils’ personal development and academic achievement”,

and that she is “driving improvements”. High levels of support are important for children with special educational needs, whether provided by teachers or classrooms assistants, who of course can often be very highly qualified.

In some cases in which a child is experiencing special difficulties, one-to-one support may be necessary; for other pupils, smaller class sizes may be sufficient. It can take considerable time for an education, health and care plan for a pupil to be approved. During that time, schools have to fund that extra support themselves and are not compensated for it, even though some pupils may actually have moved to another school by the time the plan is in place. In 2017-18, 145 pupils out of 244 at Fender Primary School qualified for the pupil premium. It is clear that extra funding, whether through the pupil premium or SEN funding, is vital.

Fender Primary School works hard for the community it serves. It remains open for four weeks in summer and all of Easter to support the families of its children in a range of ways that go beyond the purely educational, such as emergency food parcels and furniture for families who need it. However, despite the clear high level of need, according to the School Cuts website, Fender Primary School is predicted to lose £109,500 per year by 2020—amounting to £452 per pupil and the loss of two teachers. I will be grateful if the Minister sets out what action he will take to ensure that Fender Primary School and others like it get the funding they need, particularly for SEN, and what he will do to drop the planned cuts to Wirral’s schools as a whole.

Staff in schools across Wirral show immense dedication to their pupils. One such school, which works with children in their early years, which we all know are so important for everything that happens in the rest of their lives, is Ganneys Meadow Nursery School. Around 20% of the children there have special educational needs and/or a disability, including autism, epilepsy or mobility problems. The families of a number of the children are on low incomes, and some children may be quite vulnerable. The Ofsted report published this month judged it “outstanding” in every respect, and said of the children:

“Their joy at being at Ganneys Meadow is evident from the moment they walk through the door with happy, smiley faces.”

Ganneys Meadow’s chair of governors even voluntarily teaches GCSE maths to mothers, such is the level of commitment at the school. However, like many other maintained nursery schools, it is under extreme financial pressure. We all know how important the early years are, and it is essential that the Government give the sector the funding it needs to give children the very best start in life; the Government should match the immense dedication shown by teachers by giving them the funding needed.

Post-16 education has also received severe cuts. In his March Budget, the Chancellor announced an extra £500 million a year in funding for technical education reforms. Wirral Metropolitan College, which sits in the constituency of my right hon. Friend the Member for Birkenhead (Frank Field), has provided technical education for people in Wirral for more than 160 years, but it, too, has been hit hard by a severe squeeze in funding, like so many colleges. The National Education Union’s website reports that funding for 16 to 19-year-olds fell by 14 % in real terms between 2010-11 and 2014-15. The Government announced in November 2015 that 16-to-19 funding would be protected in cash terms between 2016 and 2020. However, taking inflation into account, that is still likely to mean a real-terms cut of around 8%.

There is also the introduction of adult loans. Since their introduction in 2013-14 for students aged 24 and above, and their extension to 19 to 23-year-olds in 2016-17, 58% of the total budget—£910 million—has been left unspent, according to the Student Loans Company. In other words, people have not been taking out loans. I used to work in a further education college, and although the sector can often be overlooked, it has to be recognised just how hugely important these colleges are for people as they progress from their school years through to their workplace—particularly for people who may have struggled during their time at school, due to something happening in their family, such as a bereavement, or because they were ill. It is a massively important sector, and the Government should look at it very closely.

Wirral Met serves a diverse population in Wirral, including many people from deprived backgrounds, who may be less likely to take out loans because they are already at higher risk of being in debt, which the head of the Financial Conduct Authority recently stressed as an issue. There has also been a fall of nearly 40% in the number of levels 3 and 4 learners since the loans were introduced, which the then Department for Business, Innovation and Skills actually predicted back in 2012. I will be grateful if the Minister outlines his plans to address the clearly detrimental impact that cuts to post-16 education and the introduction of loans is having on the education and training of young people in Wirral.

14:39

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

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Wallasey (Ms Eagle) on securing this very timely debate on funding in the Wirral and on her excellent speech. It appears that both her and her sister, my hon. Friend the Member for Garston and Halewood (Maria Eagle), have impeccable timing when it comes to winning Westminster Hall debates.

My hon. Friend the Member for Wallasey rightly spoke about the Government’s sleight of hand in announcing further funding for education to appease their Back Benchers that never seems to materialise, and we have no idea where it comes from. As she said, it is not enough to alleviate current pressures, and the most vulnerable are the hardest hit. In the Wirral alone, the figures are stark: £5.1 million is being taken out of the system by 2020, which equates to 108 teachers.

Just last week, hundreds of teachers and school leaders descended on Westminster to do what is their democratic right: to lobby this place and the Government on school funding. Unfortunately, the Minister took a different view and took the opportunity to label those parents, teachers, school leaders and trade unionists as scaremongers. He has the opportunity today to apologise for using that language to ordinary working people who have come to this place to exercise their democratic right by protesting about school budgets being cut up and down the land.

Let us assess the facts. As my hon. Friend the Member for Wallasey said, £2.8 billion has been taken out of the schools budget. That means 88% of schools still face real-terms budget cuts per pupil. For the average primary school, there will be a loss of around £50,000 a year. For the average secondary school, it will be a loss of £178,000 a year. It gets worse. As Members have outlined, the primary schools with the neediest intake are set to lose £324 per pupil, per year, while the least needy primary schools will lose £116 per pupil, per year. For the secondary schools with the neediest intake, the figure is £343 per pupil, per year, while the least needy secondary schools lose £62 per pupil, per year. That certainly does not sound like scaremongering to me.

There may be more money going into education than ever before, as the Minister will point out—that is the Government’s mantra—but that is because of the simple mathematics: there are more children in schools than ever before. Both my hon. Friend the Member for Wallasey and my hon. Friend the Member for Wirral West (Margaret Greenwood) made the point that the Minister will come back to us by talking about increases in cash terms, but that does not take into account inflation, the apprenticeship levy, changes to national insurance and all the other pressures currently placed on schools.

As my hon. Friend the Member for Wallasey pointed out, there are more and more cases of multi-academy trusts siphoning money out of the education system—another issue that the Secretary of State and the Minister are failing to acknowledge. My hon. Friend mentioned the disaster that happened in the Wirral with the Northern Schools Trust. We saw a few weeks ago a multi-academy trust collapsing in Wakefield, affecting a whole city and 21 schools, on this Minister’s watch. It does terrible reputational damage to Government when that type of thing happens. As The Guardian pointed out, there is now an investigation into that trust, with hundreds of thousands of pounds allegedly siphoned off before it collapsed and walked away from the children of Wakefield.

The fact is that the £1.3 billion of additional funding announced by the Secretary of State is nowhere near enough to reverse the £2.8 billion in cuts that schools have suffered since 2015. We also know that none of the money announced so far is actually new money for education. I take this opportunity to ask the Minister again—I have asked in writing and in this place before, and I will do it again—whether he will confirm, in the interests of transparency and accountability, where the cuts to funding in the Department for Education budget will fall in order to fill the black hole that the Secretary of State has created.

As has been eloquently outlined, the overall level of education funding is totally inadequate and is resulting in devastating cuts to our schools, sixth forms and colleges as we speak. When will the Minister wake up to the fact that the Government need to invest more so that our children’s education is not sacrificed? The impact of these real-terms cuts in school funding are there for all to see. It means that schools are having to cut subjects and children are being taught in supersize classes, as my hon. Friend the Member for Wirral West pointed out.

Schools are cutting staffing, and we have a crisis in teacher recruitment and retention. Since 2011, a third of teachers who have trained have left the profession. We have 24,000 unqualified teachers working in our state schools and reductions in support for vulnerable children. Schools are once more beginning to crumble, and teachers are even having to pay out of their own pocket for supplies, let alone what is happening to our special educational needs system, where children’s needs are not being met. We have a crisis in our schools that the Minister is simply not willing to acknowledge.

Our key education unions—“the scaremongers”, as the Minister likes to refer to them, or the “truth-sayers”, as I prefer to call them—have set out five tests of what is required of a new fair funding settlement for schools to ensure that the education of our children and young people does not continue to suffer. The fact is that the Minister has failed on every one of them. School cuts have not been reversed; 88% of schools still face real-terms budget cuts per pupil. There is no new money in the education budget, and we are yet to discover where cuts will be made to fill the funding shortfall. High needs, early years and post-16 education will not, as promised, be fairly funded under the proposed new formula.

The Minister has made no long-term funding commitments, so schools are still in limbo. What happens beyond 2020? When can our schools expect the information they need about longer-term funding so that they can plan their budgets effectively? Yet again, historic underfunding of schools is not being addressed. We have teachers leaving the profession in record numbers, more than half a million students now crammed in supersized classes and there are more than 24,000 unqualified teachers, as I just pointed out. If I were still a teacher, I would not be able to say that the Minister has managed a passing grade.

While I of course support the principle that all schools should receive fair funding, the answer is not to take money away from existing schools and redistribute it when budgets all across the country are being cut. A fair approach would be to apply the lessons from schools in the best-performing areas in the country everywhere. It would look objectively at the level of funding required to deliver in the best-performing schools, particularly in areas of high deprivation, and use that as the basis for a formula to be applied across the whole country.

Goodness knows, we have had enough Westminster Hall debates over the last few months where Members from every area of the country have expressed concerns about school funding cuts in their area. When will the Secretary of State and the Minister remove their heads from the sand and begin to truly hear the voices of schools, teachers and parents across the country? If they do not do that soon, it is our children’s education in the Wirral and right across the country that will continue to lose out.

18:18

[The Minister for School Standards (Nick Gibb)]

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate the hon. Member for Wallasey (Ms Eagle) on securing the debate and on her excellent speech.

I am delighted to be able to address this issue at a time when the Government have recently announced the outcome of our consultation on the national funding formula—an historic and necessary reform that will, for the first time, distribute funding on the individual needs and characteristics of every school in the country. This Government believe that all children should have an education that unlocks their potential and allows them to go as far as their talents and hard work will take them.

We are making significant progress. More schools than ever before are rated good or outstanding by Ofsted, and 1.8 million more children are in good or outstanding schools today compared with 2010, including 90% of schools in the Wirral. The attainment gap between poorer children and their wealthier peers is closing; it has not closed totally. We have launched 12 opportunity areas to drive improvements in parts of the country that we know need to and can do better.

Those improvements have been made against a backdrop of an unfair and arbitrary funding system. Similar schools across the country get markedly different levels of funding for no good reason and resources are not reaching the schools that need it most. The funding system has acted as a barrier to improvement, when we need it to be a support. That is why we are delivering on our promise to reform the unfair, opaque and outdated school and high needs funding system, and introducing a national funding formula.

[Frank Field]

A prime way in which the Government have tried to direct resources to the poorest pupils, sometimes to schools in the poorest areas, has been through the pupil premium. As I said in my intervention on my hon. Friend the Member for Wallasey (Ms Eagle), the data from housing benefit will be lost as universal credit is being rolled out. I ask the Minister to take away the idea, and talk with the Department for Work and Pensions, so that the data that is in universal credit will be made available on housing circumstances to councils, so that they can automatically offer registration for the school premium and free school dinners.

[Nick Gibb]

The right hon. Gentleman raises an important point. All these issues are being considered as we move to universal credit, to ensure that children who need to be funded through the pupil premium continue to be funded.

[Frank Field]

Will the Minister take the issue away and, when he has consulted his colleagues in the other Department, write to me please?

[Nick Gibb]

I am happy to write to the right hon. Gentleman, but these issues are being considered as we speak.

Given the significance of this reform, it was vital that we took into account as many views as possible, and the consultation process generated over 26,000 individual responses and responses from representative organisations, and we considered all of those views. The existing system is out of date. It is based on data and decisions from over a decade ago. Funding for each area has been determined by simply rolling forward the previous years’ allocation, adjusting only for changes in the total number of pupils in each area and ignoring all the other changes.

[Ms Angela Eagle]

I have read some of the right hon. Gentleman’s responses to other debates like this and he spends a great deal of time not responding to the actual questions that have been raised, by telling us in great technical detail about what the national funding formula is meant to do. Will he address some of the issues that I raised about the unfairness of Kingsway Primary School, which has 53% of pupils on free school meals, having a 19% cut in its funding, under the system that he is praising? How can that kind of result possibly be right or fair?

[Nick Gibb]

If the hon. Lady will be patient, I will come to each of those issues and specifically talk about the funding position of Kingsway Primary School, among the other schools that she mentioned, but I want to put this debate in the context of the reality of the situation that we are seeking to address.

When the proportion of secondary school pupils eligible for free school meals in London fell by more than 5% between 2007 and 2017, more than 25 times the decline nationally, the funding system did not respond to that change in the wealth level of London as the capital city. Addressing these damaging inequalities in the current system represents the biggest improvement in the school funding system for a decade, and from April 2018 we will introduce a national funding formula, which will, for the first time, put the funding system firmly on track to deliver resources on a consistent and transparent basis to every school in the country.

In September we published full details of the school and high needs national funding formula and the impact that it will have for every local authority. We have also published notional school-level allocations showing what each school would attract through the formula. This means that for the first time everyone can see what the national funding formula will mean for them and understand why. Alongside addressing these historical injustices, the importance of ensuring stability for all schools was also a consistent message throughout the consultation process. In recognition of that, over the next two years local authorities will continue to set their own local formula in consultation with the schools in their areas, which will determine each individual school’s budget. This will provide a small but important element of flexibility for local authorities, to allow them to respond to the changes as they come through.

School funding, as the hon. Member for Wallasey acknowledged, is at a record high because of the choices we have made to protect and increase school funding, even as we faced difficult decisions elsewhere, across Whitehall, to restore our country’s finances, and to address the historic budget deficit that we inherited in 2010. We understand that just like other public services, schools are facing cost pressures, and in recognition of this we announced in July an additional £1.3 billion for schools and high needs across 2018-19 and 2019-20—over and above the funding confirmed at the 2015 spending review. This additional funding means that the total schools budget will increase by over 6% between this year and 2019-20. As the independent Institute for Fiscal Studies has confirmed, that will mean that funding per pupil for schools and high needs will now be maintained in real terms for the remaining two years of the spending review.

[Ms Angela Eagle]

Will the right hon. Gentleman give way?

[Nick Gibb]

I will give way briefly, but I want to come in a moment to Kingsway.

[Ms Eagle]

The right hon. Gentleman is taking as his baseline this financial year, yet there have been real terms cuts in schools for the last two years, as I thought I had explained, so he is trying to claim that there has been an increase, when in fact he is discounting the cuts that have already happened. He knows that it is not an accurate way of talking about what happened. Why doesn’t he just admit it?

[Nick Gibb]

There have been no cuts in funding to schools. There have been cost pressures, as I have acknowledged time and time again, that schools have absorbed, as have other parts of the public sector and parts of the private sector. There have been cost pressures of higher taxes, higher employer’s national insurance contributions and higher employer’s contribution to the teachers’ pension scheme, because we believe it is right that teachers’ pensions are properly funded, but I am telling the hon. Lady and this House that spending will rise in real terms on a per pupil basis.

I will now come to the issue she raised about her schools. As a consequence of the consultation process, we introduced a de minimis funding level for the very lowest funded schools. We introduced a de minimis funding level of £4,800 per pupil for the very lowest funded secondary schools in the country. St Mary’s College in the hon. Lady’s constituency received £5,625 per pupil, and that will rise by 1% to £5,680 according to the national funding formula. The national average under the national funding formula for a secondary school is £5,389. On top of that, the school will also receive £935 per pupil for every pupil who qualifies or has ever qualified for free school meals over the past six years.

[Margaret Greenwood]

Will the Minister clarify which school he is talking about?

[Nick Gibb]

I am sorry. I am talking about St Mary’s Catholic College in the constituency of the hon. Member for Wallasey. That school’s funding per pupil will rise from £5,625 to £5,680.

We also introduced a de minimis figure of £3,500 per pupil for the very lowest funded primary schools. Kingsway Primary School receives £5,376 per pupil, and that figure will rise to £5,422. On top of that, the school will receive £1,320 per pupil for every pupil who has ever qualified in the past six years for free school meals. The hon. Lady referred to 53% of pupils as qualifying at some point for free school meals—all those pupils will bring the school an additional £1,320 on top of the £5,376.

[Mike Kane]

Kingsway Primary School will face a cut of £39,400 by 2020. That is £233 per pupil. It has already lost one teacher.

[Nick Gibb]

No, it is not receiving any cuts in funding at all. Its funding will increase from £5,376 per pupil to £5,422 per pupil. That is an increase of 0.8%. It is an increase in funding, not a cut. I acknowledge there are cost pressures facing schools, but to go around saying that schools have had their funding cut is simply not true. If I can refer to Eastway Primary School—

[Ms Angela Eagle]

They have had it cut.

[Nick Gibb]

They have not had their funding cut.

[Ms Eagle]

In real terms, they have had it cut.

[Mr Nigel Evans (in the Chair)]

Order.

[Nick Gibb]

Eastway Primary School is having its funding increased from £4,495 per pupil to £4,604 per pupil—an increase in funding of 2.5%. On top of that, it will receive £1,320 for every child eligible for free school meals—on top of the £4,604.

[Mike Kane]

Will the Minister give way on Eastway Primary School?

[Nick Gibb]

I will not give way again because we are running out of time. The hon. Gentleman seeks to cite the National Education Union’s schools cuts campaigning website, which says that schools are facing a cut in funding. Schools are not facing a cut in funding. Every single school across this country will get an increase in funding.

[Mike Kane]

Will the Minister give way?

[Nick Gibb]

No, I will not give way. I have only four minutes left. Every school in this country will see an increase in funding to it.

[Mike Kane]

A £101,000 cut—

[Nick Gibb]

The hon. Gentleman cannot cite a website that claims there are cuts in funding when every school in this country will receive an increase in funding. There are costs that schools face, whether those be national insurance in 2015-16 or pension contributions, and there will be salary increases to pay in the future, but those are cost pressures that are being incurred right across the system.

I have put the record straight on these matters so that we can have an honest debate about the issues. Opposition Members would acknowledge that every school, including those in the constituencies of the hon. Member for Wallasey and the hon. Member for Wirral West (Margaret Greenwood), who cited Fender Primary School, will, like that school, see its funding increase. There is no cut in funding to Fender Primary School. The funding will rise from £4,649 per pupil to £4,690 per pupil.

[Mike Kane]

Will the Minister give way on Fender Primary School?

[Nick Gibb]

I will not give way. [Interruption.]

[Mr Nigel Evans (in the Chair)]

Order. I remind Angela Eagle that she does have a minute or so at the end to wind up, so she has an opportunity

[Nick Gibb]

There is no cut in funding at Fender Primary School. The funding will increase, on top of which it will receive £1,320 per pupil in pupil premium.

We will also be able to go further than our manifesto commitment that no school would lose funding as a result of the national funding formula. Now, every school in the country will attract at least 0.5% more per pupil in 2018-19 and 1% more per pupil in 2019-20. Thirty five of the 111 schools in the Wirral will attract funding increases as a result of this decision to raise the funding floor, but all schools in Wirral will see an increase in their funding over the next two years.

Our formula will also rightly result in a significant boost directed towards the schools that are currently the least well-funded. I have said that the formula will provide for all secondary schools to have a de minimis per pupil funding of £4,820 in 2019-20 and for primary schools to have £3,500. My consultation confirmed the importance of funding for additional needs such as deprivation and low prior attainment. The consultation found that those factors were the best way to identify the children most likely to fall behind and to remain behind their peers. It is only right that we provide the greatest resources to the schools that are educating the greatest numbers of those children. In the Wirral, more students on average face these additional barriers, with greater than average percentages of children eligible for free school meals and living in the most deprived areas. Nationally, the formula will allocate £5.9 billion to additional needs funding and will distribute that funding more fairly. We have also protected the high needs budget, and there will be an increase in high needs spending in the Wirral.

In view of time, I will just say that for this Government, social mobility and education are a priority. The additional funding that we have announced, together with the introduction of a national funding formula, will provide schools with the investment that they need to offer a world-class education to every child in the country.

18:34

[Ms Angela Eagle]

The Minister is living in a parallel universe. He says that schools are getting increases. Kingsway Primary School is going to lose £131,306—a 19% fall in what it would have expected—and three teachers. St Mary’s College will lose £223,778—a 3% fall in funding—and four teachers. Fender Primary School, in the constituency of my hon. Friend the Member for Wirral West (Margaret Greenwood), will lose £109,000 on what it could have expected by 2020—that is £452 per pupil—and two teachers. If the Minister insists on calling those “increases”, I do not think that he is fit to be in the job that he is in.

Question put and agreed to.

Resolved,

That this House has considered education funding in Wirral.

18:35

Sitting adjourned.

Written Statements

Tuesday 31st October 2017 Written Statements

Tuesday 31 October 2017

Cabinet Committees and Implementation Taskforces

Tuesday 31st October 2017 Written Statements

[The First Secretary of State and Minister for the Cabinet Office (Damian Green)]

Today the Government are publishing an updated list of Cabinet Committees and implementation taskforces. The new list includes a new Sub-Committee and changes to an existing Sub-Committee.

The new EU Exit and Trade (Domestic Preparedness, Legislation and Devolution) Sub-Committee will oversee domestic policy preparations and implementation of the UK’s withdrawal from the European Union. The new Sub-Committee will be chaired by the First Secretary of State.

The EU Exit and Trade (Negotiations) Sub-Committee will be extended to become the EU Exit and Trade (Strategy and Negotiations) Sub-Committee. It will oversee the negotiations on the UK’s withdrawal from, and future relationship with, the European Union.

These will sit alongside the EU Exit and Trade Committee and the EU Exit and Trade (International Trade) Sub-Committee which will continue to serve the same purpose as previously.

Copies of the associated documents will be placed in the Libraries of both Houses and published on gov.uk.

[HCWS210]

Supported Housing: Funding

Tuesday 31st October 2017 Written Statements

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

Supported housing is a lifeline for vulnerable older people, for individuals with learning and physical disabilities, for those at risk of domestic abuse, and for many others. It is an investment in our society and our economy, with the savings it brings to other parts of the public sector, such as health and social care. The Government have been clear that they are committed to protecting these homes and the people who live in them. Reforming the funding model for supported housing costs and putting it on a sustainable and stable footing is therefore vital.

In the autumn statement 2015, we announced our intention to apply the local housing allowance rates to social rents, including supported housing, with effect from 2018. The implementation date was subsequently deferred to April 2019.

Since then, we have listened carefully to the concerns raised by the supported housing sector and other key stakeholders about the issues that this measure would present, because supporting the most vulnerable people in our society is a priority for the Government. We value the important role that supported housing plays and we are committed to protecting and boosting the supply of supported housing, and ensuring tenants are able to enjoy the best quality of life.

In response to those concerns the Prime Minister announced last week that the Government will not apply the local housing allowance rates to tenants in supported housing, nor to the wider social rented sector.

Last year we also committed to reform the funding model for supported housing costs, in order to ensure it provides good outcomes for tenants, better oversight and cost control, and compatibility with the modernised welfare system. This covers the funding for housing costs only, as the support costs are funded separately: there will be no change to how these are provided. We have worked with the sector since then to develop a workable funding model, and we have heard their views and concerns. We are therefore bringing forward a flexible funding model that works for this very diverse sector, as set out in more detail in our policy statement published today.

All long-term supported housing will be retained in the welfare system. We heard calls for a separate model for older people’s housing to ensure we are building more of these vital homes. We will therefore be introducing a “sheltered rent” for sheltered and extra care housing, a type of social rent that will see the social housing regulator use existing powers to control rent inclusive of eligible service charges. This approach means that we will set an overall limit on the amount that providers can charge in sheltered rent—rent inclusive of eligible service charges—on each unit of sheltered or extra care provision. It will also, as we currently do for net rents, limit annual increases. We will work closely with the sector to set these limits at an appropriate level.

The rest of long-term supported housing, such as housing for people with learning or physical disabilities or mental ill health, will remain in the welfare system as it currently is. We will be working with the sector in England to develop and deliver an approach that will ensure greater cost control across the sector while driving up outcomes for vulnerable people.

We recognise the need for a distinct model for short-term supported housing. Funding for this part of the sector will be provided through locally administered ring-fenced grants. This means that all the funding that was previously provided by housing benefit will instead be allocated to local authorities to fund and commission services at a local level. An individual’s entitlement for help with their housing costs—though housing benefit or the housing cost element of universal credit—will be unchanged. In Wales and Scotland, an equivalent amount will be provided for short-term supported housing, and it will be for those Administrations to decide how best to allocate funding. We intend to retain this ring-fence in the long term to protect this important provision and the vulnerable people it supports. The amount of short-term supported housing grant funding will continue to take account of the costs of provision and also our current understanding of future need.

We are also seeking to improve local planning for supported housing and commissioning across service areas. Our policy announcement sets out proposals for a national statement of expectation and local level strategic planning to underpin the new funding regime.

These important and necessary changes will take time to implement and it is crucial that the support provided to people is not interrupted or put in doubt, which is why these changes will now commence from April 2020 rather than April 2019.

Alongside our policy statement, we are launching two consultations on specific elements of the model, and a draft national statement of expectation. We have today published the independent reports of our task and finish groups, which were instrumental in helping us design a new model that will work for the sector. We have also published our response to the November 2016 consultation “Funding for supported housing”, and our response to the joint Select Committee report “Future of supported housing”.

We have also considered the important role of refuges and calls from some of the sector to nationalise the funding and commissioning of this. The Government were clear in their violence against women and girls (VAWG) strategy that refuges provide a vital service. We believe that local authorities are best placed to deliver the better outcomes for vulnerable renters in crisis and emergency supported housing as they understand local needs and can take a holistic view on both housing and support provision. They will be funded as set out in the model above, on a local basis, protected by a ring-fence on the grant funding. The supporting oversight regime will also set out our expectations, including on supporting those without a local connection. The Government have already committed—in the 2016 to 2020 violence against woman and girls strategy—to review the current approach to refuge provision in England by November 2018. We will need to pay particular attention to the funding of care and support costs as we do this, and will continue to work closely with this sector to make good our commitment to the victims of these terrible crimes.

It is our aim through making these changes to provide funding security to the sector, allowing them to make long-term investment and therefore secure future supply. It will also ensure value for money for the taxpayer, and enable councils to have a stronger role in providing appropriately for their local areas. Most importantly, it will support positive outcomes for some of the most vulnerable people in this country.

I am placing copies of our policy announcement made today—comprising a policy statement, two consultations, and a draft national statement of expectation—and the Government response to the joint Select Committee inquiry in the Libraries of both Houses.

[HCWS209]

Gambling

Tuesday 31st October 2017 Written Statements

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Tracey Crouch)]

I wish to inform the House that on 31 October 2017, the Department for Digital, Culture, Media and Sport published a consultation on proposals for changes to gaming machines and social responsibility requirements across the gambling industry.

The Government announced a review of gaming machines and social responsibility measures in October 2016. The objective of the review was to ensure we have the right balance between a sector that can grow and contribute to the economy, and one that is socially responsible and doing all it should to protect consumers and communities. The responses to the call for evidence have also been published alongside this consultation so that respondents can see the evidence that we have drawn on in developing these proposals.

We believe that the current regulation of B2 gaming machines is inappropriate to achieve our stated objective of protecting consumers and wider communities. We are therefore consulting on regulatory changes to the maximum stake, looking at options between £50 and £2, in order to reduce the potential for large session losses and therefore to the potentially harmful impact on the player and their wider communities.

While the industry proposes increases to the remaining stakes and prizes, and permitted numbers and allocations across other categories of machine (B1, B3, B3A, B4, C and D gaming machines), we believe retention of the current regulatory environment will better protect players from potential harm than industry’s proposed increases.

We are aware that the factors which influence the extent of harm to the player are wider than one product, or a limited set of parameters such as stakes and prizes, and include factors around the player, the environment and the product. We are therefore also consulting on corresponding social responsibility measures across gaming machines that enable high rates of loss, on player protections in the online sector, on a package of measures on gambling advertising and on current arrangements for the delivery of research, education and treatment (RET). Within this package, we want to see industry, regulator and charities continue to drive the social responsibility agenda, to ensure all is being done to protect players without the need for further Government intervention, and that those in trouble can access the treatment and support they need.

The consultation will close on 23 January 2018, following which Government will consider its final proposals.

The consultation is available at:

https://www.gov.uk/government/consultations/consultation-on-proposals-for-changes-to-gaming-machines-and-social-responsibility-measures.

A copy will be deposited in the Libraries of both Houses.

[HCWS207]

Underwater Cultural Heritage

Tuesday 31st October 2017 Written Statements

[The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (John Glen)]

In the culture White Paper, published in March 2016, we undertook to review the Government’s position on ratification of the 2001 UNESCO convention on the protection of the underwater cultural heritage. Earlier this year we said we were considering plans for a review, with a view to making an announcement.

Since we published the culture White Paper, we have had to reconsider our priorities and our ability to carry out a review in the light of changing circumstances.

As a result, we have decided to defer the review while we focus our efforts and resources on delivering new and more immediate priorities.

The Government have adopted the principles set out in the annex to the convention as best practice in the management of underwater cultural heritage. There is no change to this.

We remain committed to reviewing the Government’s position on ratification of the convention when priorities and resources permit.

[HCWS208]

Government Asset Sale

Tuesday 31st October 2017 Written Statements

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

Today, I can confirm that the Government are resuming the process required to sell part of the “plan 1” (i.e. pre-2012) English student loan book as previously announced to the House on 6 February 2017. The sale covers loans issued by English local authorities only under the previous (pre-2012) system, specifically those which entered repayment between 2002 and 2006, with a total face value of around £3.7 billion. This is the first sale of the Income Contingent Repayment (ICR) loan book and it is proceeding on the basis that there is a reasonable prospect of achieving value for money. It will only complete subject to market conditions and a final value for money assessment.

As the Government have previously made clear, the position of all graduates, including those whose loans are part of a sale, will not change as a result of the sale. A sale will not alter the mechanisms and terms of repayment and sold loans will continue to be serviced by Her Majesty’s Revenue and Customs (HMRC) and the Student Loans Company (SLC) on the same basis as equivalent unsold loans. These protections mean that purchasers will have no right to change any of the current loan arrangements or to directly contact borrowers. Government have no plans to change, or to consider changing, the terms of pre-2012 loans.

The sale terms are expected to include a number of warranties and indemnities for sale arrangers and investors, which give rise to contingent liabilities for Government. In this case, although there is specific statutory authority for the liability under the Sale of Student Loans Act 2008, in line with HM Treasury rules I believe it is appropriate to notify Parliament before incurring these liabilities. As a matter of record I have placed a Departmental Minute in the Libraries of both Houses describing the contingent liabilities that the Department for Education will hold on behalf of Government as a result of this first sale of the pre-2012 English student loan book. The maximum contingent liability against the Department for Education is unquantifiable and is expected to be in place for as long as there are outstanding securities.

The House will also be informed if and when a sale is completed.

[HCWS205]

Promoting Professionalism, Reforming Regulation

Tuesday 31st October 2017 Written Statements

[The Minister of State, Department of Health (Mr Philip Dunne)]

Today I am publishing a consultation on the reform of the regulation of healthcare professionals in the UK.

This takes forward the manifesto commitment to legislate to reform and rationalise the current outdated system of professional regulation of healthcare professions, based on the advice of professional regulators.

The UK’s model of professional regulation for healthcare professionals has become increasingly complex and outdated. It needs to change to protect patients better, to support our health services and to help the workforce meet future challenges. This consultation is a major step towards developing a modern system of regulation for healthcare professionals.

My Department has worked with the Governments in Scotland, Northern Ireland and Wales as well as the healthcare regulation bodies to develop proposals for reform. We have built on the work of the Law Commissions of England, Wales, Scotland and Northern Ireland.

The UK Governments have five objectives in taking forward reform:

Improve the protection of the public from the risk of harm from poor professional practice;

Support the development of a flexible workforce that is better able to meet the challenges of delivering healthcare in the future;

Deal with concerns about the performance of professionals in a more proportionate and responsive fashion;

Provide greater support to regulated professionals in delivering high quality care; and

Increase the efficiency of the system.

This consultation considers the reforms that are needed in order to maximise public protection while supporting workforce development. We want to design a flexible model of professional regulation that secures public trust, fosters professionalism and improves clinical practice, while also being adaptable to future developments in healthcare.

The responses to this consultation will allow the Government to consider future options for professional regulation. The consultation will run for 12 weeks and close on 23 January 2018. The consultation document has been attached and can be accessed online at: https://consultations.dh.gov.uk/professional-regulation/regulatory-reform.

Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2017-10-31/HCWS206/.

[HCWS206]

House of Lords

Tuesday 31st October 2017 Lords Chamber

Tuesday 31 October 2017

14:30

Prayers—read by the Lord Bishop of Oxford.

Oaths and Affirmations

Tuesday 31st October 2017 Lords Chamber

14:36

Lord Hanningfield took the oath, and signed an undertaking to abide by the Code of Conduct.

Lord Speaker’s Committee on the Size of the House

Tuesday 31st October 2017 Lords Chamber

Announcement

14:37

[The Lord Speaker (Lord Fowler)]

My Lords, I would like to make a short statement. Noble Lords will recall that on 5 December last year, the House debated a Motion in the name of the noble Lord, Lord Cormack, on the size of the House. The Motion sought agreement that the House believes that its size,

“should be reduced, and methods should be explored by which this could be achieved”.

Sixty-one Members spoke during the debate and the Motion was carried unanimously. Shortly after, I established a committee drawn from all three parties and the Cross Benches under the chairmanship of the noble Lord, Lord Burns, to examine how this could be done, and I am pleased to announce that today it has reported.

I thank the noble Lord, Lord Burns, and the other members of the committee for their very hard work and skill over the last year in putting together this report. Copies of the report are now available in the Royal Gallery and online. There will be briefing sessions for Members only in the Queen’s Robing Room at 4 pm today and again at 11 am tomorrow. I will be present and the noble Lord, Lord Burns, and members of the committee will be available to answer questions.

I urge all noble Lords to read the report and give consideration to the recommendations made. My hope is that there will be a general take-note debate before Christmas and more detailed consideration of the specific measures proposed in the new year.

Today’s report presents a challenge, but it also represents an opportunity. We know that the House is too big. A smaller, more effective House will be able to strengthen public confidence and build support for our vital constitutional role. It is now up to us. I commend this report to the House.

Probation Contracts

Tuesday 31st October 2017 Lords Chamber

Question

14:39

Asked by

[Lord Ramsbotham]

To ask Her Majesty’s Government when the review of probation contracts, due for completion in April this year, will be published.

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

My Lords, we undertook an internal review of the probation system and, as a result, made changes to community rehabilitation company contracts in the summer. Details of these changes were contained in a Written Ministerial Statement from Minister Gyimah on 19 July. We are continuing to explore further improvements that could be made to the delivery of probation services and will set out at a later stage any changes that are made as a result of this work.

[Lord Ramsbotham (CB)]

My Lords, I thank the Minister for that reply. Clearly, all is not well with probation. Following a whole series of disappointingly and devastatingly bad reports by the chief inspector, the Justice Select Committee launched an inquiry. Following the bad contracting, during the summer the Ministry of Justice had to bail out community rehabilitation companies to the tune of £277 million, which it can ill afford. Many of the warnings in the official impact assessment that the rushed Transforming Rehabilitation agenda had a higher than average risk of failure have been proved correct. Can the Minister tell the House what the Government are going to do about probation? Will they make time for a debate on the subject before the end of the year?

[Lord Keen of Elie]

On that last point, I cannot say that the Government will be able to make time for a debate on the subject before the end of the year. On the suggestion of bad contracting, I would point out that contracts were entered into with 21 CRCs, and that those contracts encountered some financial difficulty for one particular reason—namely, it was originally anticipated that some 80% of those undertaking probation would be referred to the 21 community rehabilitation companies. In the event, only about 60% of those subject to probation supervision were referred to the companies, and that impacted directly upon their financial model as determined under the original contracts. For that reason, interim arrangements were made with the CRCs in the year 2016-17, and in the current year. However, the figure of £277 million referred to by the noble Lord is not a fixed figure: it may have to be met, depending on the performance of the CRCs.

[Lord Beecham (Lab)]

My Lords, morale in Northumbria’s probation service and CRC is at a low level because of understaffing, with 50% of officers leaving the service, excessive workloads, less supervision and the need to concentrate on high-risk cases at the expense of other cases. This is exemplified by case loads of 40, including four to five high-risk cases, now being replaced by much higher case loads, with a greater proportion of high-risk cases and problems with escalating cases from the CRCs to the National Probation Service. What do the Government regard as a satisfactory case load for officers to manage in terms of overall numbers and the balance between high-risk and other cases?

[Lord Keen of Elie]

There is no fixed proportion as between officers and the number of persons being supervised. That will depend upon the particular CRC and the circumstances in which it is engaged with the individual. The National Probation Service is in the course of recruiting 1,400 additional staff. In addition, the CRC contracts require providers to ensure that they have sufficient adequately trained staff in place. Indeed, results tend to bear that out. Nearly two-thirds of CRCs have reduced the number of people reoffending in the past year, according to statistics up to June 2017.

[Lord Trefgarne (Con)]

My Lords, is it not the case that the probation arrangements relating to those prisoners serving indeterminate sentences need to be brought up to date as a matter of urgency, since many of those prisoners should have been released long ago?

[Lord Keen of Elie]

Clearly, there is an issue over the supervision of those subject to IPP sentences. The circumstances in which they come before the Parole Board are determined under existing rules. Those are always under consideration.

[Lord German (LD)]

My Lords, just last month, the Chief Inspector of Probation laid out two conditions that she thought ought to be in the review: first, the community rehabilitation companies should have their finances put on a stable basis; secondly, these companies should be incentivised for success. Will the Minister heed the advice of his chief inspector, and will the Government meet this requirement as urgently as possible so that these companies can get on with the job of reducing reoffending, getting people into work and making sure that our prisons are not so overcrowded?

[Lord Keen of Elie]

We are of course conscious of the recommendations made by Her Majesty’s Chief Inspector of Probation, which is why we undertook the task in the summer of ensuring that the CRCs were properly financed. As a consequence of that, during the year 2016-17 an additional £37 million was made available, and in contract year four—that is, the first three months of this year—a further £22 million has been made available for the CRCs so that they can meet their commitments. Over and above that, I can confirm that the CRCs are incentivised under the terms of their present contracts to achieve results, and that will remain the position.

[Lord Laming (CB)]

My Lords, the prison population has never been as great as it is today. Is it not therefore a serious matter that the Government should ensure that courts have available to them a robust, rigorous and serious range of non-custodial penalties? The probation service is central to that.

[Lord Keen of Elie]

I agree with the noble Lord’s observations. In that connection, I would observe that, since February 2015, statutory supervision has been extended to a further 40,000 offenders who are otherwise sentenced to a period of imprisonment of less than 12 months—so that has increased the numbers subject to supervision. But clearly, we have regard to the extent to which community sentences and suspended sentence orders operate effectively. It is noted in the statistics published—

[A noble Lord]

Too long.

[Lord Keen of Elie]

I am obliged to the noble Lord.

It is noted in the statistics published on 26 October 2017 that the extent of further offending is lower in the case of community sentences.

Housing: Letting Agents

Tuesday 31st October 2017 Lords Chamber

Question

14:46

Asked by

[Baroness Hayter of Kentish Town]

To ask Her Majesty’s Government whether they are planning to introduce legislation to require letting agents to join a registration scheme.

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, my right honourable friend the Secretary of State recently announced a package of measures better to protect tenants, including that all letting agents will have to register with an appropriate organisation. This will give landlords and tenants confidence that their agent meets minimum standards. On 18 October we published a call for evidence, seeking views on the regulation of letting and managing agents. The Government will consider the feedback and work with the sector to shape the regulatory framework ahead of introducing legislation.

[Baroness Hayter of Kentish Town (Lab)]

I thank the Minister for that Answer. As he knows, I have already welcomed the commitment that letting agents will in the future be required to register. However, I question the phrase “in the future”. As the Minister knows, the Government agreed in March to introduce client money protection for letting agents. It is now the last day in October. Perhaps he can give some reassurance to the House that both client money protection and this new measure will happen without any delay.

[Lord Bourne of Aberystwyth]

I thank the noble Baroness, whom I know has taken an interest in client money protection in particular. She has been very patient; I know that previously I have said “in due course”, “soon” and “very soon”. I can confirm to her that it will be this week. I hope that that pleases her.

[Baroness Gardner of Parkes (Con)]

My Lords, does the Minister realise that although this is a good first step and will certainly do something to control rogue letting agents, there is a great need to control rogue landlords as well? Is it not time to give the power back to local authorities to check more carefully on properties, in order to be sure that they are legally sublet and not just converted for pure commercial gain, thereby risking people losing their housing?

[Lord Bourne of Aberystwyth]

My Lords, my noble friend has raised this issue on occasion; I am grateful to her. She will be aware that there are considerable powers to proscribe bad landlords, which are exercised, and there are powers to fine them. We will bring in additional banning provisions before next April, which I am sure will please her. However, there is already a battery of powers with regard to poor landlords.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for confirming that the measure, which was really an enabling part of the legislation, will be introduced shortly. However, can he and his department also commit to putting real resources into enforcement to ensure that rogue letting agents are driven out of the market? Furthermore, will he take back to the Government the possibility of ring-fencing the fines and compliance costs so that, when those moneys are obtained by local authorities, they can be used for enforcement rather than for other matters?

[Lord Bourne of Aberystwyth]

I am grateful to the noble Lord, whom I know has done a lot of work on client money protection. I reiterate that the consultation will be forthcoming this week, along with the draft Bill on letting agents. The noble Baroness, Lady Grender, who is not in her place at present, has worked hard on that. We are concentrating resources on tackling bad landlords and are doing what we can to improve the market, which is important to us all.

[Lord Maginnis of Drumglass (Ind UU)]

My Lords, the concentration on bad landlords seems to be a precursor to a judgment of all landlords. How will the Minister ensure that good landlords, who serve a vital role in our society, are not so labelled?

[Lord Bourne of Aberystwyth]

My Lords, I am grateful to the noble Lord for that question, as it gives me the opportunity to say that most landlords are good landlords. I do not agree with the hypothesis that, by bringing in legislation to deal with poor landlords, we are saying that all of them are poor, any more than the Theft Act means that everybody is a criminal.

[Lord Campbell-Savours (Lab)]

My Lords, tax evasion by landlords is rife in London. Could a registration scheme be set up in such a way that an agency that registered had to inform HMRC of the tenancies in which it had been involved?

[Lord Bourne of Aberystwyth]

My Lords, if the noble Lord is aware of any tax evasion, I would be very grateful to hear about it and would then pass the information on to the Treasury in the usual way. I am not aware of this being as widespread as he perhaps suggests, but obviously the Government are keen to make sure that everybody pays the appropriate taxation that is due, so I would be glad to see any evidence that he has.

[Lord Clark of Windermere (Lab)]

My Lords, the Minister mentioned that new powers may be coming in for local authorities to tackle errant landlords. Will they include holiday lets, which cause a major problem? Often companies buy up 70% to 80% of villages, causing all sorts of social problems. Can that be brought into the raft of actions that the Government are talking about?

[Lord Bourne of Aberystwyth]

My Lords, I know that the noble Lord speaks with particular feeling about his area of the Lake District, and I am aware of the pressures that sometimes exist there. As he will be aware, there is separate legislation for short-term lets in London. A voluntary code has now been adopted by members of the association relating to short-term holiday lets. I think that that will make a difference and the department is looking at it very closely.

Hamas

Tuesday 31st October 2017 Lords Chamber

Question

14:53

Asked by

[Lord Hylton]

To ask Her Majesty’s Government what consideration they are giving to removing Hamas from their list of terrorist organisations, in the light of its reconciliation agreement with Fatah and reports of its willingness to hold new elections and to recognise the international frontiers of Israel.

[Lord Hylton (CB)]

My Lords, I declare an indirect interest in that since 2007 I have visited many Hamas leaders in both Gaza and the West Bank. I beg leave to ask the Question standing in my name.

[The Minister of State, Home Office (Baroness Williams of Trafford) (Con)]

My Lords, the military wing of Hamas is a proscribed organisation. It is not government policy to provide a running commentary on any proscribed organisation. The Terrorism Act 2000 allows the Home Secretary to consider deproscription by written application.

[Lord Hylton]

My Lords, I thank the Minister for her reply. Of course I did not expect her to say yes immediately. Nevertheless, does she agree that the situation has changed profoundly since Hamas was first listed? Would delisting not help all sides to be rather less intransigent than they have been up to now? Would it not build confidence among all Palestinians and help support their new Government of unity? Will she at least take away this Question and discuss it with her ministerial colleagues, since it crosses departmental boundaries?

[Baroness Williams of Trafford]

I acknowledge that the noble Lord raises a challenging and complex issue. It is difficult to predict the impact that a particular course of action may have as the situation is so complex. The UK remains a strong supporter of promoting peace.

[Lord Anderson of Swansea (Lab)]

My Lords, the reconciliation agreement between the two Palestinian factions is surely to be welcomed and potentially gives Israel a negotiating partner. However, will the Minister confirm that Hamas still calls for the destruction of Israel, that its military wing still builds tunnels to attack Israel, and that it sends rockets into southern Israel?

[Baroness Williams of Trafford]

My Lords, I acknowledge what the noble Lord is saying. However, it is government policy not to provide a running commentary on any proscribed organisation.

[Baroness Northover (LD)]

My Lords, as Britain was a signatory of the Balfour Declaration, and as the Government support a two-state solution, does the Minister think the time has come to recognise the state of Palestine, as more than 130 other countries have done?

[Baroness Williams of Trafford]

My Lords, as we approach the centenary we are conscious of the sensitivities that many people have about the declaration and the protection of political rights of the non-Jewish community in Palestine. We also recognise the continued impediment of the occupation towards securing political rights. We are clear that we want to see the creation of a sovereign, independent, democratic, contiguous and viable Palestinian state living in peace and security side by side with Israel.

[Lord Kirkhope of Harrogate (Con)]

My Lords, while I am sure that we all welcome any indication of a more peaceful approach from what undoubtedly has been a clear terrorist organisation for some time, does my noble friend agree that the very minimum we should require from Hamas and others is that they acknowledge the basic right of the state of Israel to exist and to be fully part of the international community, and to respect its democracy?

[Baroness Williams of Trafford]

My noble friend is right. That is clearly one of the expectations we have in our policy on Hamas.

[Lord Kilclooney (CB)]

My Lords, the Question refers to the international frontiers of Israel. Do those frontiers include the Golan Heights and east Jerusalem?

[Baroness Williams of Trafford]

My Lords, the noble Lord is straying into Foreign Office territory, on which I am not yet an expert. I shall have to get back to him on that, if that is okay.

[Lord Judd (Lab)]

My Lords, while the actions of the military wing of Hamas have been wrong, totally unacceptable and cannot be condoned, is it not important to recognise in political terms that Hamas is a pluralist organisation? Is it not vital to strengthen the more moderate elements within Hamas, particularly at this time of reconciliation between the PLO and Hamas? Should we not remember that in our own history, starting with John Major and pursued by the Labour Government that followed, we began to make progress on a solution in Northern Ireland when it was recognised that we must find ways of talking to the political wing of the IRA?

[Baroness Williams of Trafford]

My Lords, as I said earlier, we will not provide a running commentary on any proscribed organisations. I have already laid out some of what we expect from Hamas.

[Viscount Waverley (CB)]

My Lords, what is the mechanism by which a proscribed organisation becomes delisted? Does it require a court process to achieve that?

[Baroness Williams of Trafford]

My Lords, it does not require a court process but an application to the Home Secretary.

[Lord Polak (Con)]

My Lords, it beggars belief that we are discussing, in the centenary week of Balfour, talk of removing Hamas from the terrorist list. The organisation has not renounced terror and it still calls for killing Jews and the destruction of Israel. Does the Minister agree that any reconciliation deal between Fatah and Hamas, which should be welcomed, should require that Hamas be disarmed, because Israel certainly cannot be expected to negotiate with a terror group that calls for its destruction?

[Baroness Williams of Trafford]

My Lords, our policy on Hamas is very clear. The group must renounce violence, recognise Israel and accept previously signed agreements. We now expect to see credible movement towards these conditions, which remain the benchmark against which its intentions should be judged. We call on those in the region with influence over Hamas to encourage the group to take these steps.

[Lord Rosser (Lab)]

My Lords, I do not wish to pursue the specific issue raised in the Question but to raise a more general point. What reviews have the Government undertaken to establish exactly what impact proscribing an organisation actually has, as opposed to what it is intended to have, on the unacceptable activities of those who were in membership of that organisation as opposed to the impact of proscription on the organisation itself?

[Baroness Williams of Trafford]

My Lords, what I can say about the impact of proscription is that those groups are illegal entities in this country. They are not allowed to promote their policies or to progress some of the things that they want—for example, the destruction of Israel.

European Investment Bank

Tuesday 31st October 2017 Lords Chamber

Question

15:01

Asked by

[Lord Balfe]

To ask Her Majesty’s Government, in the light of the comments by Alexander Stubb, vice-president of the European Investment Bank (EIB), that loans worth €3.5 billion from the United Kingdom to the EIB are not due to be repaid in full until 2054, whether they intend that the United Kingdom will remain a member of the EIB.

[Lord Balfe (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I draw attention to my entry in the register of interests. There has to be a limit to what is set out in the register, but I should add that I have been friends with members of the EIB for almost 40 years. That is probably relevant to this Question.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the UK’s relationship with the European Investment Bank will need to be resolved as part of our withdrawal from the European Union. The Government are going through the UK’s potential rights and obligations line by line and are committed to getting the best deal for this country and a fair settlement for UK taxpayers.

[Lord Balfe]

My Lords, I thank my noble friend for that Answer. It has been made fairly clear in another place that the UK wants continuing access to funding, and indeed the Brexit Secretary has used the phrase, “an ongoing relationship with the EIB”. May I counsel that we should be cautious in how we withdraw? Although there are some people who wish us to cut ourselves off from every European institution, a strong case could be made for us to negotiate our continuing membership of the EIB, or at least access to its machinery.

[Lord Bates]

The Chancellor of the Exchequer would echo those words. He has made it clear that a continued relationship with the EIB may be possible and indeed desirable, but that is a matter to be negotiated because at present the EIB’s constitution and formation does not allow for it to happen. Changes will need to be made, but in the meantime it is important that we make clear that we believe that the full rights and obligations which come to the UK as a member of the EIB and its partner organisation, the European Investment Fund, should remain fully intact and that UK borrowers should have equal access with other members while we are exiting the European Union.

[Lord Davies of Oldham (Lab)]

My Lords, things are already happening. Is the Minister aware that a current project to provide support for businesses in the north-east is now on hold because the European Investment Bank is meant to provide half the resources towards it? Action is already being taken to the disadvantage of a section of the British people, even while the Government are involved in this situation.

[Lord Bates]

That is a fair point. The North East Finance application by seven local authorities was put forward. Following the triggering of Article 50, the EIB took the view that it wanted to undertake an additional level of due diligence to make sure that the UK would stand by its obligations after exiting the European Union. We believe we have confirmed that position by producing our position paper on privileges and immunities. We were delighted to see that the EIB, at its September meeting, had started to approve loans again for after that period. We wish North East Finance well in that.

[Lord Garel-Jones (Con)]

My Lords, the European Investment Bank is a major investor in infrastructure projects in the United Kingdom. For example, in 2016, £8.1 billion was invested in projects ranging from the health service to education and telecommunications. Given all that, does the Minister not think that it would be in the interests of both the United Kingdom and the European Union for Britain to have an ongoing relationship with the EIB?

[Lord Bates]

The UK is a major shareholder of the EIB, with 16.1%. We do well out of the arrangement, which is one reason why we have an interest in the relationship continuing. However, it is not the only mechanism. We have set up the UK Guarantees Scheme, a £40 billion-fund that could be available for infrastructure projects, and we are committed to moving forward in that spirit.

[Lord Beith (LD)]

My Lords, the Minister will be well aware of the need for this kind of investment in small, high-technology business in the north-east. Will he make a personal effort to ensure that any remaining difference between the EIB and the Treasury over the kind of assurances that need to be given will be resolved, and that the Treasury’s attitude will reflect the urgency, given that the north-east does not have the northern powerhouse funds that other regions do?

[Lord Bates]

That is right. In fact, the Chancellor of the Exchequer met the chair of the north-east local enterprise partnership on his visit to Gateshead on 22 September. As a governor of the bank, he has been at the forefront, advocating a speeding up in recognising the equal rights of UK borrowers, which must be respected and must continue.

[Lord Cunningham of Felling (Lab)]

My Lords, is it not clear from the record that the European Investment Bank has invested, and encouraged further investment of, billions of pounds in the United Kingdom economy? If the Government decide that we will leave the EIB, what will they do to replace that level of continuous investment, particularly in the regions of England and the nations of the United Kingdom?

[Lord Bates]

One example is the northern powerhouse fund, in partnership with the EIB, but the British Business Bank is there for precisely that purpose, as are the UK guarantees. As the Chancellor said in his Mansion House speech, we still want to explore, as part of the exiting the European Union negotiations, the possibility of our remaining part of the EIB, for the very reason the noble Lord articulates.

[Lord Leigh of Hurley (Con)]

My Lords, the European Investment Fund supplies finance to the venture capital and seed capital industry. London is widely recognised as a centre of excellence for venture capital and seed capital, but the EIF has suspended finance to a number of venture capitalists based in London. Will the Minister write to the EIF to ask why it is depriving British businesses of what is essentially British money?

[Lord Bates]

We are very clear on this. We believe that UK borrowers and companies seeking investment should continue to have equal access on that basis. That is why the Chancellor announced the establishment of the British Business Bank and that it would be increasing its threshold of ability to lend to venture capital funds as part of that. We are absolutely clear: we should have equal access while we continue to be members and continue to negotiate what the relationship will be thereafter.

Air Travel Organisers’ Licensing Bill

3rd reading (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Third Reading

15:08

Bill passed.

Review of Gaming Machines

Tuesday 31st October 2017 Lords Chamber

Statement

15:10

[The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)]

My Lords, with the leave of the House, I will repeat in the form of a Statement an Answer to an Urgent Question made by my honourable friend the Minister in the other place responsible for gambling. The Statement is as follows:

“I am pleased to inform the House that I published a consultation on proposals for changes to gaming machines and social responsibility requirements across the gambling industry today. The consultation will run for 12 weeks, during which the general public, industry and all other interested parties will be able to voice their views on the questions raised. I appreciate some may not understand why we have to run a consultation, but this is the right process by which to proceed if we are to address this issue thoroughly and properly.

As you know, the Government announced a review of gaming machines and social responsibility measures in October 2016 and I am grateful to all those who responded, including individual former addicts, faith groups, local authorities and the bookmakers. The objective of the review was to ensure we have the right balance between a sector that can grow and contribute to the economy, and one that is socially responsible and doing all it should to protect consumers and communities.

While our consultation sets out a package of measures to protect vulnerable people from harm, the main area of interest has been the stake of B2 gaming machines, known as fixed-odds betting terminals or FOBTs for short. We believe that the current regulation of FOBTs is inappropriate to achieve our stated objective of protecting consumers and wider communities. We are therefore consulting on regulatory changes to the maximum stake, looking at options between £50 and £2 to reduce the potential for large losses and therefore the potentially harmful impact on the player, their families and the wider community.

We are aware that the factors which influence the extent of harm to the player are wider than one product or a limited set of parameters such as stakes and prizes, and include factors around the player, the environment and the product. We are therefore also consulting on corresponding social responsibility measures, on player protections in the online sector and on a package of measures on gambling advertising. Within this package we want to see industry, the regulator and charities continue to drive a social responsibility agenda to ensure all is being done to protect players and that those in trouble can access the treatment and support they need.

The consultation will close on 23 January 2018, following which government will consider their final proposals”.

15:13

[Lord Griffiths of Burry Port (Lab)]

My Lords, while I am grateful to the Minister for repeating that Statement, I confess it leaves me perplexed. The recent review and other sources have yielded facts enough: 430,000 gamblers with an addiction, up by a third in three years; a further 2 million problem gamblers at risk of developing an addiction; £1.8 billion lost on these machines each year, an increase of 79% in the last eight years; and a gambling industry whose yield, or the amounts it wins in bets, has increased to £13.8 billion from £8.36 billion in 2009, having spent a mere £10 million towards a voluntary levy last year on education and treatment. Some 450,000 children gamble at least once a week.

My question is simple: granted that we are armed already with factual and proven information, what is to be gained by having this consultation? Will the Government let us know clearly what they are probing for by holding this further consultation, and can they assure me that, with the grass-cutting season nearly over, it is not an exercise for lobbing things into the long grass?

[Lord Ashton of Hyde]

My Lords, that is not an unexpected question. I can assure the noble Lord that we are not putting this into the long grass. He is absolutely right that there was a six-week evidence-gathering session. The evidence gathered has convinced us of the need to take action and reduce the maximum FOBT stakes. However, it is a complex issue and not about stakes alone. We are therefore publishing today a package of measures to address the concerns. We must strike the right balance between the socially responsible growth of the industry and the protection of consumers and the communities they live in. Our position is that the maximum stake should be between £50 and £2. We are consulting on that specific issue. This has to be done with due process to avoid any further problems which may come in the future with doing it in too rushed a manner.

[Lord Clement-Jones (LD)]

My Lords, Liberal Democrats have been calling for a £2 stake on these highly addictive machines, which have been a catalyst of problem gambling, social breakdown and serious crime in communities, for nearly a decade. We therefore give a qualified welcome to the review, but, rather like the noble Lord, Lord Griffiths, we are disappointed that a range of options rather than a firm recommendation is being given, and that we now have a 12-week consultation rather than action. Reducing the maximum stake to £50 would still mean that you could lose £750 in five minutes, or £300 if the stake was reduced to £20. I urge the Minister and his colleagues to resist Treasury pressure and move to take effective action by focusing on stake reduction to £2, which would put a clear and sensible limit on all high street machines. Can the Minister tell us what the role of the Gambling Commission has been and will be in the consultation? It has a duty to minimise gambling-related harm and protect children and the vulnerable. Will the Government act on that advice? Will the review examine the proliferation of betting shops on the high street and the self-referral or exclusion system, which is so ineffective? As well as reducing the maximum stake, will it look at limiting the spin rate? Finally, will the consultation address stakes in online equivalents to these games, such as blackjack?

[Lord Ashton of Hyde]

My Lords, the noble Lord makes a predictable comment about Treasury pressure, of which there was none. The decision on stakes will come from DCMS and not from the Treasury—although it will take into account fiscal implications, as it does for any government policy. The Gambling Commission is involved in the consultation because it is involved also in the other package of measures covered by it. The consultation is not just on the stakes but on other matters such as tougher licence conditions. The noble Lord referred to spin rates. What one can lose where higher stakes are concerned depends on the spin rate. I can confirm that that will be included in the consultation. I urge the noble Lord and the noble Lord, Lord Griffiths, to contribute to the consultation and make their views known.

[The Lord Bishop of St Albans]

My Lords, last year, there were more than 200,000 occasions when gamblers on FOBTs lost more than £1,000 at a single sitting. All other forms of gambling with stakes of more than £2 are restricted to premises such as casinos, which do not have open access and are not on the high street. Does the Minister agree that the only way to rectify the mistake of the 2005 Act and restore logic and order to the gambling regime is to support a £2 stake?

[Lord Ashton of Hyde]

As I just said, the stake is not the only thing that matters. That is why we are introducing a package of measures. The level of stake is important, obviously, and that is why we are committed to reducing it. But there are economic impacts that must be taken into account, depending on the level of stake that is chosen. The spin rates are important, as are the other measures which may deter people from gambling. I hope the right reverend Prelate will contribute to the consultation.

[Lord Cormack (Con)]

My Lords, does my noble friend accept that it is not just the noble Lord, Lord Griffiths—whom we are delighted to see on the Front Bench—the noble Lord, Lord Clement-Jones, and the right reverend Prelate who have misgivings about this? This is a very disappointing Statement. This is a social issue where we look to the Government to give firm guidance and leadership and not to pussyfoot around. It really is important that the moment this—what I consider unnecessary—period of consultation is over, we have firm action.

[Lord Ashton of Hyde]

I agree with the noble Lord that the Government should provide guidance and leadership. That is why we have said we believe that the stakes should be reduced. But we have also said—sensibly, I think—that these things have to be done in a proper way and if they are not done in a responsible and thoughtful way, according to the evidence, problems may ensue from that. This 12-week consultation is necessary.

[Lord Richard (Lab)]

My Lords, I confess I have almost totally lost the Government’s position on this. At one and the same time they say, “Yes, there is a problem. Yes, we have gathered the evidence. Yes, we know what the evidence is. Yes, it points unmistakably in the direction of doing something about this issue. Yes, we are convinced”—to use the Minister’s own word—“of the need to do something about it”, and what do we get? We get another consultation period. With great respect to the Minister, and indeed to the Government, merely saying something is appropriate does not make it appropriate. It does not make it right to have a consultation period just because the Government say it is. As far as I can see, there is absolutely no need for it. The Government have the evidence, they have the proposals—why on earth do they not do it?

[Lord Ashton of Hyde]

Because there is more to it than just the stake. As I said, there is an impact from the different levels of stake, and we have published an economic impact assessment today. The issue is the right balance between continuing a perfectly legal industry and social protection for consumers. That is why we have decided that the stake should be lowered. The 12-week consultation on this and the package of measures that goes with it will ensure that the decisions are made with due process.

[Lord Porter of Spalding (Con)]

Does the Minister agree that noble Lords are quite right to see this as being not FOBT but fobbed off? The stake is considerably too high, even if it is halved. It should not be possible for somebody to lose more than a week’s wages in a matter of moments. That money is lost to the local economy—it is being wasted—and we need to do something as quickly as possible to make sure that all the benefits of that money are spread across the whole community and not just into the bank accounts of a few businesses.

[Lord Ashton of Hyde]

My Lords, if you do it without the proper consideration and it is judicially reviewed, the result may be that you wait longer.

[Lord Morrow (DUP)]

My Lords, will the Minister give an assurance today that the review and report will include the areas where betting outlets are located? Many of them are located in areas of deprivation and cause great social harm, particularly among families.

[Lord Ashton of Hyde]

My Lords, I agree with the noble Lord. These outlets tend to be in areas of social deprivation. That was included in the review. It is not my area of expertise but I believe that local authorities have been given powers to restrict these outlets, especially new ones.

Financial Guidance and Claims Bill [HL]

Report: 2nd sitting (Hansard): House of Lords
Tuesday 31st October 2017 Lords Chamber

Report (2nd Day)

15:25

Amendment 22

Moved by

[Lord Stevenson of Balmacara]

22: After Clause 2, insert the following new Clause—
“Debt respite scheme
(1) As part of its debt advice function, the single financial guidance body must operate a debt respite scheme (“the scheme”) under which authorised debt advice providers who approach the single financial guidance body for further advice or guidance in relation to a specific case may receive statutory protections for their clients in respect of the relevant debts for the period during which advice or guidance is being sought.(2) The Secretary of State must make regulations by statutory instrument detailing the operation of the scheme by the single financial guidance body under subsection (1).(3) The regulations must limit access to the scheme to persons who have received debt advice from a debt advice provider who has been authorised by the FCA.(4) The regulations must make provision about the length of a period or periods where the protections under the scheme will apply.(5) The regulations must set out the terms of the scheme, including but not limited to—(a) the nature of relevant debts for the purpose of the scheme; (b) the process and conditions of eligibility under which FCA authorised debt advice providers are able to apply for statutory protections for their clients under the scheme;(c) the criteria under which FCA authorised debt advice providers will be authorised to advise persons on the scheme, support applications to the scheme, and operate designated debt management plans for persons while under the statutory protections of the scheme;(d) the limitations to be placed on actions that may be taken by creditors against persons in receipt of statutory protection under the scheme;(e) the method for determining the level and timing of debt repayments by a person while under the statutory protections of the scheme;(f) safeguards to protect the integrity of the scheme;(g) the arrangements to be made to create a central register of persons admitted to the scheme; and(h) the arrangements to be made to ensure that creditors of persons on the scheme are kept informed.(6) A statutory instrument containing regulations under subsection (2) may not be made unless a draft instrument has been laid before, and approved by a resolution of, each House of Parliament.(7) The Secretary of State must make regulations under subsection (2) within 12 months of the commencement of this section, subject to subsection (6).(8) This section commences on the day on which this Act is passed.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, in the film “Groundhog Day”, the same character repeats experiences on a number of occasions until, mercifully, he is eliminated from it. I feel a little like that, not least because people stream out when I stand up to speak. But I gather that there are rival attractions about to start elsewhere and I can understand why people might wish to be present for those. I thought that we had also lost the Minister as well, but she was just temporarily unavailable.

Group 1 today contains a single amendment, Amendment 22, which is in my name and the names of the noble Baroness, Lady Altmann, and the noble Lord, Lord Sharkey. I am grateful to them for their support. One of the good things to come out of the Bill has been the incredible willingness of people from all around the House to work together and seek progress, not only on this important issue but on a much wider range of topics. Before I get into the detail, I will declare my interests. I am a former chair of StepChange Debt Charity and a commissioner on the independent Financial Inclusion Commission. I thank debt charities and in particular the Children’s Society for their support of this amendment.

I also want to mention the water companies. Rae Stewart of Water UK wrote to me recently and gave me permission to quote him, so I would like to set the context for the Bill in the light of this industrial comment. He said:

“I understand that your ‘breathing space’ amendment to the Financial Guidance and Claims Bill may be debated today. I thought that you might like to know that the water industry backs a breathing space for those people struggling to pay bills and who are seeking financial advice. But although we already operate that way as an industry, we believe that such a scheme will only be properly effective if other companies follow suit. After all, any responsible creditor—whether in the private sector or public sector—would support a breathing space. It’s something that’s been talked about for years, so we very much support its introduction soon”.


It is interesting to look back at the progress we have made in realising this vision of a breathing space. It has the support of all the political parties, as evidenced in the manifestos for the recent election. More by accident than by design, we have arrived at a system where a group of charities, including StepChange, Citizens Advice, the Money Advice Trust, Christians Against Poverty and a number of others, have created an effective system of debt counselling, which enables hundreds of thousands of people in need of help to receive advice, support and access to formal mechanisms that enable them to pay off their unmanageable debts. I pause to pay tribute to Malcolm Hurlston CBE, who was largely responsible for much of the current debt-counselling activity and was my predecessor as chair of StepChange.

We have the infrastructure and, with the support of the financial companies, it is free at the point of the use to those who wish to be part of it. However, these organisations have struggled for far too long to do their job properly. Basically, the only solutions that are readily available to people with unmanageable debt—such as payday loans, guarantee loans, logbook loans and the rest—push people further into debt. The additional charges, punitive interest rates and appearance of bailiffs compound the situation. The combination of this with the stress of dealing with making ends meet causes what is estimated to be some £8 billion-worth of social cost to the economy each year through illness, relationship breakdown and suffering to children.

All this impacts on creditors, too. Most banks, credit card companies and other lenders have good systems in place to deal with people who have problems meeting monthly repayments. But these companies cannot cope with the situation that so often arises, when people owe money to several different creditors. That is where the debt charities largely come in. Creditors need certainty; they need a timescale and they are entitled to receive 100% of their borrowing back—although in practice they will and often do settle for a lot less.

In my experience most people with unmanageable debt and sufficient resources, most of whom want to repay their debts, can be brought on to a formal repayment plan which ensures that their creditors will receive more of their outstanding debt—and in a shorter timeframe than if those creditors had had recourse to legal action. But it is abundantly clear that this whole process is enhanced if the person with unmanageable debts can be given some time to sort out what their actual financial situation is; to work out with advice what constitutes a sustainable budget; and to sign up to a formal debt-management plan. This is at the heart of the amendment which I am moving.

What we have in Amendment 22 may not be perfect; it has had to be constructed within the very narrow limits of the Long Title of the Bill. Even so, it would introduce the breathing space that we all want to see. It is based on the Scottish system, which has evolved over the last 15 years and does what is required. The amendment has the following key elements: the Secretary of State will have the power to set up the scheme; a body will be designated which will be able to designate authorised charities to operate the scheme; it establishes a flexible regime with reasonable time limits; it identifies categories of protections to be offered; and it ensures that creditors are kept informed.

There is a case for considering this amendment on its merits, but there are also ways in which it might be expanded in future, particularly in its territorial extension to make sure that England, Wales and Northern Ireland follow what is happening in Scotland. It is unreasonable and unfair to have a differential approach, because this problem is common to the whole of the United Kingdom.

15:30

This amendment would have the great advantage, compared to where the Government currently are, of being able to get something on to the statute book now which creates the powers that will be necessary to bring forward a breathing space when it is required. We would like to see this in reasonable time, so we have set a time limit of a year after Royal Assent. This contrasts with where the Government have got to. I welcome their position, but it would be much slower. It would involve a lot of consultation, no necessary identification of a piece of legislation to carry forward the proposals, and the possibility that other factors might intervene before it could become law.

The advantage with our amendment, in contrast to where the Government are, is that the breathing space, whose time has come, will happen within 12 months. Even though the Government have moved with what some people would call spectacular speed in the last few weeks, with this they will be able to say they have satisfied the commitment in their manifesto and done something that the country wants. I beg to move.

[Lord Sharkey (LD)]

My Lords, we on these Benches very strongly support the amendment, for which the noble Lord, Lord Stevenson, has made such a detailed, eloquent and powerful case. The notion of a breathing space or debt respite scheme has attracted a lot of support both in this Chamber and outside.

The Minister herself has acknowledged the merits of such a scheme. She said at Second Reading:

“A breathing space scheme could help people affected by serious debt by stopping creditor enforcement and freezing further interest and charges on unpaid debt”.—[Official Report, 5/7/17; col. 943.]


There is really no need for the conditional “could” in that assessment. The evidence from the existing scheme in Scotland makes it clear that such a scheme does help people affected by serious debt—and help is very definitely needed.

Last week, the FCA published its detailed study of the financial lives of UK adults. This is a truly remarkable and detailed study and an exceptionally useful piece of work, and I congratulate the FCA on producing it. But it is also a truly worrying piece of work. Among its many findings was the fact that in the case of 400,000 adults who were behind on payments and had contacted their provider, their provider did not encourage seeking free debt advice. Another 300,000 adults in the same position reported that their provider did not allow time to pay. Worst of all, for 100,000 adults in arrears, their providers were unsympathetic, did not encourage seeking free debt advice and did not allow more time to pay.

A debt respite scheme would certainly help the debtor, but Scotland shows that it would also help the creditor, who would recover more of the debt. This is a win-win situation. Both sides gain. The case for a debt respite scheme is clear and compelling. That is why, no doubt, the commitment to such a scheme was contained in the Conservatives’ 2017 general election manifesto. But the Minister seemed to feel, when we discussed this at earlier stages, that the issue was so complex that delay was necessary. She said in Committee:

“The Government’s manifesto … proposed the introduction of a statutory breathing space scheme and statutory debt repayment plan. This is an important and complex issue. It requires thorough preparation and consultation on details, such as who could be eligible, which debts could be in scope and how someone could enter into a breathing space”.—[Official Report, 19/7/17; col. 1683.]


All this is quite right, of course, and includes the important and unresolved question of whether rent and utilities arrears should be included in any such scheme. In that context, it is worth repeating what the noble Lord, Lord Stevenson, mentioned a few moments ago: a debt respite scheme already has the backing of at least part of the utilities sector, Water UK.

But focusing on these undoubtedly important questions avoids the simple question of when. It ignores the fact that primary legislation can establish the framework and leave the details to secondary legislation. However, the noble Lord, Lord Young, said last Friday in this Chamber:

“The legislative programme for this Session is already at full capacity and there is no scope for additional measures”.—[Official Report, 27/10/17; col. 1148.]


So, if the question is when there will be a legislative vehicle that will allow the construction of a breathing space, the noble Lord, Lord Stevenson, has provided the answer. The answer is this Bill and this amendment. I hope that the Minister will see its obvious merit and be able to accept it as an obvious way of making progress without further delay.

[Baroness Altmann (Con)]

My Lords, I too have added my name to the amendment, which I hope my noble friend will be minded seriously to consider and, if necessary, bring back at a later stage still. There is clearly widespread support across the House and indeed the country for such a scheme. There is also rising concern about the level of consumer debt within the economy as a whole. We know that more and more people are falling into debt, having perhaps been enticed into borrowing at teaser loan rates that have then risen. We also know that the trend in interest rates may well start to go up, which again would cause significant difficulties for those who have taken on perhaps unwise levels of debt. In practical terms, just giving this breathing space, which I know the Government support, could help to manage a situation that has gone beyond manageable for many vulnerable people. I hope that noble Lords across the House will support this, and indeed that my noble friends on the Front Bench will be able to as well.

[Baroness Coussins (CB)]

My Lords, I very much welcome the proposal at the heart of the amendment, and indeed the very similar idea of the breathing space on which the Treasury announced its consultation last week. At this stage I have just one question on which I seek clarification from both the noble Lord, Lord Stevenson, and the Minister. I remind the House of my interest as president of the Money Advice Trust. In my view, it is essential that any breathing space scheme covers public sector creditors as well as lenders in the private sector. The noble Lord, Lord Sharkey, touched on this point.

Debts to public bodies are an increasing feature of the UK’s personal debt landscape. The Money Advice Trust, for example, reports that 25% of callers to its national debtline service had council tax arrears last year, up from just 14% a decade ago. Calls about benefit overpayments and other public sector debts have also increased, and so too has scrutiny of the debt collection practices of these public sector organisations. So for any new debt respite or breathing space scheme to be truly effective, it must provide breathing space from all creditors, including local councils, the DWP and HMRC in particular, so as to give people the time they need to seek advice and tackle their debt problems. I would be most grateful if the noble Lord, Lord Stevenson, confirmed that the intention behind his amendment is to include public sector creditors, and if the Minister said whether she expects public sector creditors to be included in the Treasury plans.

[Viscount Brookeborough (CB)]

My Lords, a lot of the time when we talk about debt, it would appear that we are talking about people who may be in debt for a particular item or for a short period of time. These are people who are right down there and close to being in debt, and may be able to manage their finances by only a few pounds every week or month. So this is not just a debt problem overall; it is debt for very vulnerable people. If we do not help them and give them a bridging mechanism, we are creating a big social problem—a problem regarding their characters, the way they live, their friends and how they are seen. It is about much more than just how we keep the debt down and how, one day, they get out of it; it is about their social identity. Many of them have not been in debt before, and consider going into debt at all a crime and a slur on their character. When we have the chance, we must create the means to help protect as many of them as possible. Wherever we have a breathing space or gap whereby we can legislate to avoid them going permanently into debt—such as, dare I say it, in universal credit—we must try to do so. I therefore support the amendment.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I shall make just two quick points in support of the speeches that have already been made. I am very much in favour of the amendment but the timing is really important. I say that because universal credit, as we all know, has some introductory rollout problems, such as establishing debts in a way that can sometimes overwhelm new applicants, given the 42-day waiting period. If some magic process could put in a breathing space immediately, that would give succour, support and some respite to families who will almost certainly now face arrears, particularly rent arrears. Therefore, time is of the essence and I hope that the Government will bear that in mind.

I also agree with the point that has just been made about public sector bodies. The Government should perhaps be able to do that anyway by getting people within the public service to be more reasonable about the way they prosecute the recovery of debt.

My second point, which is really important to me, is that the presence of this opportunity in Scotland completely changes the atmosphere in which negotiations can take place. People start acting a lot more rationally and are not driven by fear into doing things and making undertakings which, in their innermost hearts, they know they cannot fulfil. The circumstances are thereby compounded, which makes everybody’s position worse. In Scotland, the ability to just stop the clock, step back and think rationally about the solutions over a longer timeframe transforms the circumstances of families in distress. It is very important that we get this done quickly and take advantage of the experience north of the border, where such an approach has been demonstrated to be worth while and to work.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank all noble Lords who have taken part in this very important debate—indeed in all the debates that we have had on this crucial issue since Second Reading.

As noble Lords will be aware, the Government’s manifesto contains a commitment to deliver a breathing space scheme that would give heavily indebted consumers a period of respite from creditor enforcement action, further interest and charges for up to six weeks. Where appropriate, they would be offered a statutory repayment plan to help them pay back their debts in a sustainable way.

I am grateful, as I said, for the helpful contributions during all our debates from noble Lords, and from the noble Lord, Lord Stevenson, in particular, on the important topic of protecting heavily indebted consumers. Noble Lords will have seen, just last week, that the Government have taken their crucial first step towards delivering this manifesto commitment by launching an extensive call for evidence. I might just say here, as noble Lords have asked about public sector debts, that the breathing space call for evidence seeks views on that. We want to ensure that the scheme is designed in the best possible way to support consumers.

The noble Lord, Lord Kirkwood, referred to universal credit. It is right that I point out to noble Lords that all those going on to universal credit are entitled to up to 50% in advance payments, and in some cases they can receive it on the same day they sign up. So, there should not be a huge increase in debt because of those early days.

In addition to support from this House, the announcement of the call for evidence has been positively received by a wide cross-section of the debt advice sector. For instance, The Children’s Society has said it is “delighted” with the announcement, the Money Advice Trust agreed this was “good news” and Citizens Advice said:

“It’s good to see the government taking action on problem debt”.


We plan to continue to engage closely with these bodies and other stakeholders over the coming months to develop our policy.

15:45

We all agree that a breathing space scheme must be carefully developed to ensure that it is effective in helping those who most need it. It is a complex area, as I have said in previous debates, and we want to get it right. If designed and implemented properly, it will have benefits for many vulnerable customers.

I thank the noble Lords, Lord Stevenson and Lord Sharkey, and the noble Baroness, Lady Altmann, for their amendment, and the noble Lord, Lord McKenzie, the noble Baroness, Lady Kramer, the noble Earl, Lord Listowel, and others for their hard work in developing the issue further in the House.

We are all in broad agreement with the principle of what this amendment is trying to achieve, I think, and we understand the desire to take the opportunity presented by this legislation to act now. However, we genuinely fear that the amendment might jeopardise both the effectiveness of a breathing space and the operation of the single financial guidance body.

First, under the amendment, the single financial guidance body would administer the breathing space scheme. That would not align with the body’s wider functions or sit well with its broader aims. We all agree that the body’s priority should be to provide easily accessible, targeted, high-quality advice and guidance. With respect, under the amendment those objectives would be confused and the core purpose of the single financial guidance body, which is to improve the customer journey, would be put at risk. Instead of focusing on its core challenge—extending the reach and effectiveness of financial guidance and debt advice—the body would have to divert significant resource and time to administering and enforcing a breathing space scheme.

Secondly, specifying which body should administer a breathing space could have an adverse impact on its delivery. It is a complex policy area and it is important that we take the time, with extensive consultation, to get the framework for the scheme right. We should not pre-empt that work. In particular, it is unclear whether the body is the best organisation to implement a breathing space. None of the body’s predecessors has any experience in administering a regulatory scheme such as this. Indeed, in the Scottish equivalent, the Accountant in Bankruptcy administrates the scheme. As I am sure that noble Lords are aware, that is Scotland’s insolvency service. It is an organisation with a different remit, aims and set-up to the single financial guidance body. The issue of who should administer such a scheme requires careful consideration, and that is why the Government have sought to establish a proper evidence base for discussions through our call for evidence.

There are also questions around the devolution angle to implementing a breathing space and the appropriate geographical extent, to which the noble Lord, Lord Stevenson, made reference and which the amendment is not clear on. Noble Lords know that the scheme would apply in England but, while Scotland already has its own scheme, that is not the case in Wales and Northern Ireland. It is important that we work through these complex issues, and we want to be able to listen to expert views put forward, rather than be constrained by the wording of the amendment.

For that reason, I hope that noble Lords can work with the Government to achieve consensus and ensure that this important scheme can be implemented quickly and effectively, with minimum risk to both the scheme and the single financial guidance body. Therefore, I would like to take the time between now and Third Reading to take this issue away, review it and consider it further. For those reasons, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I am grateful to all noble Lords who spoke in the debate. There was a question about public sector responsibilities. In the Bill, as in the amendment, it was intended that that be subject to further consultation. The Minister made the point that there was no reason to suppose that public sector bodies would be excluded from that; it has to include all the pressures on the families affected, and the answer would be yes. Behind the question was a certain amount of knowledge about the situation affecting those who have public sector debt. The arrangements in local authorities, in particular, but also in central government, are not of the standard that we would wish to see. There is far too easy a recourse to bailiffs and to worse measures, and it is time that this was looked at—and I hope that that will be part of the consultation.

I thank in particular the noble Lord, Lord Kirkwood, for his contribution on the situation in Scotland. He made a point that I should have made—it is absolutely right —that the introduction of the scheme would affect the behaviour of those involved in it. If it changes behaviour for the good and leads to a broader and better discussion and debate, it has to be the right way forward.

The Minister has suggested that the Government want to see a breathing space introduced, and introduced quickly, that it should have as part of its processes a statutory repayment plan—I certainly welcome that—and that she generally wants it to be designed to be the best possible way in which consumers can repay their debts and creditors obtain the benefit of that. I think that she is in agreement with all the principles that I identified in introducing this amendment. She shares our desire that, given that there is a Bill passing through, we should attempt to latch on to it as quickly as we can.

I noted the Minister’s reservations about the drafting. However, we are where we are because the Long Title of the Bill is very tightly worded—and I do not want in any sense an impression to be left that we have deliberately chosen the single financial guidance body because we thought that it was the best fit, because it is not, for all the reasons given. I do not need to repeat them, and there may well be others. Indeed, there was a hint in what the Minister said about what the Government might be thinking, and I would support that. I mentioned making sure that there was parity of action across the country.

We seem to be in a consensus on this, and I would like to work with the Government. Therefore, in answer to the question whether we would work together to try to achieve a resolution, the answer is yes—we would. There is only one condition that I would make, and I would like the Minister to respond so that I can get a nod from the clerk that we are on the right track. She said that she would like time to discuss matters before Third Reading; she did not give the magic formula that she would come back with an amendment or permit us to bring back this amendment for further discussion at Third Reading. I would be grateful if she could signify that so that I can get the necessary assurance from the clerk that we are in the right place.

[Baroness Buscombe]

I have to make it very clear to the noble Lord that I am not in a position to make a firm commitment. All I can do is say that we have worked well together through the passage of the Bill thus far, and it is right that he should feel that he could trust what I have said so far, and trust in me and my team to do everything we can to make sure that we can do what he has asked for. But I cannot make a commitment because of the constraints, which I think that he knows I am under, in terms of how the system works. Given the government amendments that are coming forward today and those that came forward last week on Report, I feel that we have had a considerable degree of consensus thus far, and I would be so sorry if that were to end now, because I think that we can do more.

[Lord Elystan-Morgan (CB)]

The Minister tangentially mentioned devolution here, raising the question as to whether there has been any discussion between Her Majesty’s Government and the Ministers in Wales, for example. It is in the realm of devolved authority, I believe. The Welsh Government would be wholly justified in saying, “This is a matter solely for us”. As she will know, on many occasions such as these, the devolved Administration will say, “We’re quite happy for you to legislate on this matter”. Has any discussion to that end taken place at all?

[Lord Stevenson of Balmacara]

My Lords, during that helpful intervention I was able to glance across to the clerk. I was looking for a nod but I got more than that. I got a small written note which confirms that the Minister has said enough to ensure that this issue can be discussed again at Third Reading. Without any commitment from the Minister to bring forward a particular form of words, the intention to look further and come back is sufficient on this occasion. On that basis, I beg leave to withdraw the amendment.

Amendment 22 withdrawn.

Amendment 23 had been withdrawn from the Marshalled List.

Clause 3: Specific requirements as to the pensions guidance function

Amendment 24

Moved by

[Lord Sharkey]

24: Clause 3, page 3, line 15, at end insert—
“( ) In Schedule 3 to the Pensions Schemes Act 2015 (pensions guidance), after paragraph 6(3) insert—“(3A) In determining what provision to include in the rules, the FCA must include a requirement for the trustees or managers of a relevant pension scheme to ask members of the scheme or survivors of members of the scheme at the point at which they require access to or individual transfer of their pension assets, if they have received the information and guidance available under section 3 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function); and if they have not received such information and guidance the FCA may require the relevant trustee or manager to provide access to such information and guidance before proceeding.””

[Lord Sharkey]

My Lords, I am grateful to the noble Baroness, Lady Altmann, the noble Lord, Lord McKenzie of Luton, and the noble Earl, Lord Kinnoull, for adding their names to Amendment 24. It may look rather complicated, but it addresses a simple problem and proposes a simple partial remedy. When it comes to pension pot access or transfer, the problem with our current financial information and guidance system is not the quality of the information or advice, but the very low level of take-up. In Committee, we spoke about the quality of the information and guidance and noted the exceptionally high levels of user satisfaction with the Pension Wise service, recorded in the first wave of the service evaluation survey published in October 2016. It was very pleasing to see the same exceptionally high levels recorded again in the second wave of evaluation data published last week. It is clear that the information and guidance provided is of real help to pension holders. That is not the issue: what is the issue are the exceptionally low levels of take-up. The FCA reports that, of those over the age of 55 planning to retire in the next two years, only 10% had used TPAS and only 7% had used Pension Wise. I know that these figures are contested, but even if they were out by an unthinkable 50%—as I am sure they are not—then take-up would still be dangerously and unacceptably low. The simple fact is that too many people will be making decisions about their pension assets without information or guidance.

The amendment is aimed at doing something about that. It is designed to be a nudge, rather than any kind of probably unenforceable or counterproductive compulsion. It amends the Pension Scheme Act 2015 in order to amend FSMA 2000. One way or the other, almost every financial amendment ends up amending that Act. The amendment would require the FCA to change its rules to make possible the provision of last-minute information and guidance to those who have not already had it and who are about to access or transfer their pension assets. The FCA would be required to write into its rule book a requirement for trustees or pension managers to ask members, or their survivors, at the point at which they require access to or transfer of their pension assets, if they have received the information and guidance mentioned in Section 3 of this Act. If they say no, the FCA may require the trustee or manager to provide access to such information and guidance before proceeding.

This is a “may”, not a “must”, because the universal application of this requirement would obviously be unduly burdensome and, anyway, unnecessary. The FCA knows very well which categories of consumer are most at risk and can restrict the requirement to take action to those cases. Adopting the amendment would mean that people accessing their pension funds could be given a final nudge. There is no compulsion; simply the provision of a last-minute opportunity to see for the first time—for those who have not seen it already—the excellent information and advice available to them, if the FCA judges them to belong to a category that is particularly at risk. There is no compulsion, just a chance to look at valuable information and guidance before making an important and irrevocable decision.

We know that levels of financial education and financial self-confidence in this country are very low indeed and that levels of ignorance and misunderstanding are very high. We know that the take-up of the services provided by TPAS and Pension Wise is far too low. It is entirely right that we take every opportunity to rectify that situation and that we should have a go at doing this when people are at the point of making a critically important decision about their pension assets. This amendment would provide a last chance for reassessment for those who need it most, when they need it most. I beg to move.

16:00

[Baroness Altmann]

My Lords, I have added my name to this very important amendment. Of course, I welcome this very important Bill. Providing guidance for consumers is absolutely vital, and I congratulate the Government on bringing forward the Bill. However, the intention of this amendment is to make it work better for the public.

I support this amendment wholeheartedly as it would be a major step forward in ensuring that the pension freedoms work better for the public. As the noble Lord, Lord Sharkey, rightly said, too few people are making use of the excellent Pension Wise service, which was set up to help them make well-informed decisions about their pensions. Indeed, when the Government announced the new pension rules, they rightly recognised that the public were not well equipped to understand the important features of their pension savings and the new landscape that would allow them to make the best use of this excellent new policy, so they also announced what they referred to as the guidance guarantee to ensure that everyone could have free impartial support before making decisions about their defined contribution pensions.

Pension Wise has consistently high satisfaction ratings of 90% or more, as the noble Lord has already mentioned, but the majority of people are at risk of poor outcomes and a worse quality of life in retirement than they could otherwise enjoy because they do not get the guidance. So far, pension providers have been left to encourage people to use the guidance by sending a Pension Wise leaflet with all their so-called wake-up packs. These are sent to a customer about six months before their previously chosen pension age. Providers have to mention that Pension Wise is available, but clearly the message is not getting through. Pension Wise is merely presented as an option for customers rather than what it needs to be: a normal part of the pension access process. Too often, the public do not read the materials they are sent or are encouraged also to call the providers’ own hotlines. Once they have done that, people often feel they have already had free help and, even if they do not realise that it is not unbiased or impartial and may not have explained all the issues they need to consider, they do not go on to Pension Wise.

As we are automatically enrolling people into pensions, I believe it is also right to consider automatically encouraging the use of free guidance to help people before they make these irreversible decisions. The two should go hand in hand. Creating the new single financial guidance body, which is warmly welcomed on all sides of the House, could be an excellent opportunity to deliver a new approach to guidance designed to make using the Pension Wise successor body the expected norm. That is what this amendment attempts to achieve, with people automatically being told that they have an appointment waiting for them, perhaps a voucher of some kind that gives them the time of a telephone appointment that has already been made for them but also makes it clear that they can change this if they prefer a different time or have a face-to-face appointment, if they would like.

An ILC-UK survey of consumers found that only half of defined contribution pension customers thought they understood quite well or very well what an annuity is, and that a shockingly low 3% said this about draw -down. Another study by the Pensions and Lifetime Savings Association found that just over half of pension-age customers wrongly thought that draw-down products offer them a guaranteed retirement income, and about a quarter thought that draw-down carried no investment risk at all. Given such findings, it is surely clear that we urgently need better regulatory requirements to help non-advised customers to receive the guidance and fulfil much better the absolutely appropriate promise of this guidance guarantee. The lack of safeguards for pensions seems out of proportion to the known risks of consumer detriment. Research from Just Group, which has also been pushing for this amendment, suggests that defined contribution pension customers aged over 55 who had Pension Wise guidance believe that the investment of time in seeking such guidance was worth while, with 90% saying that all customers should use it.

This amendment would allow the use of similar principles to auto-enrolment and would help to overcome the inertia and lack of engagement with the complexity of pensions. By arranging or directing customers to free guidance rather than just mentioning it to them, take-up is likely to be much higher. Such auto-enrolment into guidance can be organised in a number of ways. However, the current guidance service management with whom I have liaised has already suggested to me that it believes that providers could book appointments for customers who call up with a request to transfer money from their pension or take some money out of it. I point out to noble Lords that guidance for some transfers is important, not just for when people take money out, because the customer could be helped to avoid falling for a scam scheme. Pension Wise has already managed to stop some customers from losing their pension when they responded to a cold call that was urging them to transfer rapidly out of a good scheme to a scam one.

To ensure that people have a guidance session before they engage with their provider about the possible options for their pension is more likely to result in them not taking out money yet, which the provider may not tell them about, or realising that there are many reasons to keep the money in pensions, such as not being taxed or losing the tax benefits of pensions. Of course, financial advisers can help here, but for those who do not have such independent advice the free guidance service is important. I hope that the Government will accept these sensible ideas, which have wide support from across the House, and which would be a major step forward for consumer protection in pensions.

[The Earl of Kinnoull (CB)]

My Lords, my name has also been added to this amendment, and I agree with every word the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann, said. I declare my interests as set out in the register of the House, in particular those which relate to the insurance industry.

It has long been the case that for homes and mortgages considerable protections exist for consumers to prevent them from doing something in a hot-headed fashion. Indeed, this House has helped to shape those protections over many years—I remember studying the Law of Property Act 1922 at Bar school. Those protections have continued to build and generally are considered to work.

The pension asset has in recent times become just as significant. I say that off the back of an Office for National Statistics report, which it produced in December 2015, one chapter of which is called “Private Pension Wealth, Wealth in Great Britain, 2012 to 2014”. It reports that 59% of our fellow citizens now have a private pension and that the median value of the pension pots at June 2014 was £57,000. Obviously, those pots are growing through time. The median value for people between the age of 55 and 64—to the unscrupulous, the target people—was £145,000. To put that in perspective, the last house price index in this country—in June—listed the average value of a house at £220,000 or so, and Savills has helpfully estimated that the average loan-to-value ratio is about 48%. I do not want to prove anything in particular with that spray of statistics, but I want to demonstrate that the pension asset is now as valuable to our fellow citizens as the house asset across the board. Accordingly, in my mind and in logic, it too should enjoy similar protections to try to stop bad things happening.

The problem has been coming up on us and has been exacerbated by two things in recent times: first, the Osborne pension reforms; and, secondly, the very rapid rate of growth of pensions in general. To give my last statistic, the same ONS report said that in the two years to June 2014 private pension pots had grown by a median of 22%. My concern is not the big pot holder—I think that there will be sophisticated people who can look after themselves—but the large number of small pot holders who, to the unscrupulous, must look like very tempting targets.

The amendment serves to protect particularly the vulnerable and it goes some way towards making the pension asset safer, just as the legislation I referred to earlier has done for homes and mortgages. Pension asset security would be improved, without great effort on the part of government or, indeed, cost for someone who is trying legitimately to access or restructure their pension arrangements. Accordingly, I feel that this is a very sensible amendment and I very much hope to hear shortly from the Minister that the Government can do something in this area.

[Lord Deben (Con)]

My Lords, I refer the House to my declaration of interests, particularly as chairman of the Personal Investment Management & Financial Advice Association.

It is very important to take this amendment seriously because of the reforms brought in by George Osborne. There are two halves to giving people freedom: one is giving the freedom and the other is making sure that they have access to the best information in order to make the best choices. I fear that sometimes people find the first easier than the second.

I sat for some time as the representative of financial advisers on a committee of the then regulator looking into the financial understanding of people throughout the country. It was a very salutary experience, not least because many of the leaders of the providers were totally unable to explain what they were providing in language that I—being somewhat of a professional—could understand, let alone anyone else. My concern is that this is an industry that, even with the very best of intentions, is not very good at explaining the details. There are two reasons for that: one is that a special language is spoken by the experts and the second is that these things are very complicated. That is why, in many companies, people who are perfectly capable of being chairman or chief executive soon find somebody else to look after the pensions. It is a very complicated matter.

My concern is that the Bill needs constantly to look at the moments when people are most able and willing to receive advice. If that is also the point at which they most need the advice, it becomes particularly valuable. My noble friend might take note of one of the biggest changes to have happened in a quite different area. We were busy trying to get people to understand how important energy efficiency was. Many of the steps that we took seemed to have very little effect until we started to tell people, when they bought a new appliance under the European Union scheme, how energy efficient the appliance was. From one year to the next, we got rid of most of the GH levels and arrived at a situation where we were talking about A, A+ and A++. This was because we chose the moment when it was best to advise people. That is precisely what the amendment means. Not having it is not having the other half of the reforms.

16:15

It is right to give people choices and allow them to make decisions about their own money. It is not right to say that other people know best. However, it is important to recognise that many of those who have this choice, this opportunity, are not well fitted to make such a choice simply because we have not had an educational system and the like which would give it to them, and because the democratisation of pensions means that many more people have a private pot—I hate the word “pot”—which, small though it may be for some, is very important for them in the future.

This is about the ordinary people who represent an increasing proportion of the public—even more so with auto-enrolment and so on—and therefore we have a particular duty in this House to protect them. It may be that many of our friends and the other people I represent are able to have financial advisers and wealth managers, but we should recognise now that it is a high financial barrier for those people to have that kind of advice. Unless we do something like this, we are denying the very people whom we ought to be protecting the protection which is particularly good at this moment, not only for them but for our society.

[Viscount Brookeborough]

My Lords, I support the amendment and I thank the noble Lord, Lord Deben, for saying half of what I was going to say.

However, I should like to add one other point. Yes, this is about protection of the consumer and, secondly, advice. However, there is another word for advice: education. This is not simply about advice for people who go to the right places—very often they do not know where to go unless the advice is put in front of them—but about educating people. In our report on financial exclusion and in the FCA report, it is absolutely clear that there has to be continued learning and education throughout people’s lives. They are at school and then go to their first job and may not be able to save much money. Then they think of settling down, then they want a mortgage, then they want a car and so on—and then they want a pension.

We must look at the fact that a vast proportion of post-graduates—I do not have the figure in front of me now but we have all heard it recently—say that the most important omission from their education is financial education. It is therefore not a wonder that we have to do this. Taking the amendment in isolation, I can see why the Government may not want to accept it, because it is another addition to the legislation. However, it would not be so important if the Government accepted that education in schools should be not only controlled but monitored to ensure that it takes place. However, other things have been allowed to lapse. There are not the checks and the compulsory education, which should start at school and then continue. If there were, people would automatically want to be more educated in financial affairs as they go through life because they would know of their importance at an early stage. This is why this kind of amendment must be brought in at this stage to educate people and keep them in line for the future part of their lives.

[The Viscount Thurso (LD)]

My Lords, I have followed the passage of this Bill with great interest but I have not felt the need to intervene. However, today I support my noble friend in this amendment based on two experiences.

The first is as a trustee of the Parliamentary Contributory Pension Fund, which, as I am sure many Members know, is a well-run fund and gives a great deal of excellent advice. However, it is always surprising to discover how many well-educated, highly numerate and literate people fail to grasp much of what there is to do with pensions. If those of us who regard ourselves as reasonably well educated, quite numerate and quite literate are having difficulty with pensions, it stands to reason that many people who have not had those advantages will have even greater problems. To my mind, therefore, the need for advice is a case that is clearly made.

The second experience arises from my time on the banking commission of the Treasury Select Committee in another place. We worked extremely hard to ensure that the Financial Conduct Authority had a proper consumer remit. I am delighted that the Government accepted what we had to say because the FCA has proved to have undertaken the remit well and with a degree of teeth. If we want to ensure that a regulation works, we must make sure that the person promulgating it has teeth. It is absolutely right that the FCA should be the body to make the regulations and to follow up on them.

In summary, it would not surprise me if there is considerable resistance from the Treasury, but that is simply a manifestation of its well-known terminal “not invented here” syndrome. Experience shows that where the Treasury is obliged to take on regulation, it comes round to accepting its wisdom in due course. The test of this amendment, therefore, is not “Why should we?” but “Why shouldn’t we”.

[Lord McKenzie of Luton (Lab)]

My Lords, I have added my name to this amendment. We support not only the manner in which it was moved by the noble Lord, Lord Sharkey, and spoken to by the noble Baroness, Lady Altmann, but all other noble Lords who have spoken in support of it. The noble Baroness, Lady Altmann, said that it was about making the system work better, while the noble Lord, Lord Sharkey, reminded us that it is not about making this mandatory. The noble Earl, Lord Kinnoull, talked about the need to look at pensions. We have looked at mortgages in the past, but now is the time to make sure that pensions are fully protected. The noble Lord, Lord Deben, said that having freedoms is one thing, but being able to use those freedoms effectively with financial knowledge is important. The noble Viscount, Lord Brookeborough, reminded us again of the importance of financial education and the noble Viscount, Lord Thurso, outlined the importance of the FCA.

Amendment 24 is clear in its purpose. The FCA must require all trustees and managers of pension schemes to ask people, at the point at which they seek to access or transfer their pensions, whether they have received the information and guidance available to them from the new financial guidance body under Clause 3. If they have not received that guidance, the FCA may require the trustee or the pension scheme manager to provide the individual with access to it before the manager proceeds with the access or transfer request. In effect, the FCA can require that people at risk are defaulted into guidance through their scheme.

Public pension policy is now predicated on, effectively, dividing pensions into two elements: a saving phase and an access phase. In the saving phase, the barriers to individuals’ acting in the face of complexity, which inhibits optimal decision-making, are recognised and regulated defaults have been introduced—auto-enrolment and default investment funds. In the access phase, policy assumes behaviours to be dramatically different, with individuals bearing direct responsibility for making good choices, even though the evidence is clear that they need more support. People are nudged by public policy to save, but they are left to their own devices when accessing or transferring their savings. As the chief economist at the Bank of England, Andy Haldane, commented on 18 May at the annual dinner of the think tank New City Agenda,

“I consider myself moderately financially literate. Yet I confess to not being able to make the remotest sense of pensions. Conversations with countless experts and independent financial advisers have confirmed for me only one thing—that they have no clue either. That is a desperately poor basis for sound financial planning”.


The radical reforms to accessing savings, introduced in the 2014 pension freedom and choice flexibilities, introduced new risks attached to individual decision-making, which will only increase over time as more pensioners become dependent on defined contribution savings. Many people are not well-equipped to make informed decisions. Many of the pension draw-down products do not have the governance and value for money requirements that workplace pensions possess in the savings phase. The prevalence of scams has increased as a direct result of the new freedoms as, increasingly, fraudsters try to get hold of people’s hard-earned savings.

As the FCA observed in the interim report on its retirement market study following the introduction of the new pension freedoms, consumers are poorly placed to drive effective competition. The retirement income market is not working well and the introduction of greater choice and more complex products will reduce consumer confidence and weaken the pressures on providers to offer good value.

The governance of the UK private pension system remains a challenge and the creation of the single financial guidance body is intended, in part, to address market failures and support people to make informed decisions that are in their interest. That will happen only if people access the guidance available—if those at risk of poor decisions use it and are referred to it before they make their decisions or their decisions are implemented. That is precisely what the amendment seeks to achieve, by requiring trustees and scheme managers to ask people whether they have taken the guidance available before they access or transfer their pensions and, if necessary, by requiring the trustees and managers to provide access to that guidance, in line with rules drawn up by the FCA, before proceeding to implement the individual’s decision. Requiring providers to ask people before they make their decision whether they have received guidance from the new body will improve public knowledge of the service and, in some circumstances, address the known barriers put in place by some providers that are reluctant to see their customers access impartial guidance, for fear that they will not buy a product or service from them as a result. Requiring trustees and managers to provide access to that guidance before proceeding to act will directly help to protect savers from making poor decisions.

The case for the amendment is also provided by the FCA’s recent Retirement Outcomes Review: Interim Report. The FCA observed that,

“pension freedoms have made consumer decisions much more complex … consumers struggle to understand their options and to think through the implications of their decisions … leading consumers to choose what … may not be the best decision for them”.

Some consumers cannot, or will not, engage with those decisions. Not all will take advice because of its cost and availability. That is a market gap. Indeed, the FCA expressed concern about whether a competitive market in retirement products can ever develop in the future. It identified four areas of remedy, one of which was to get savers to use the free and impartial guidance. That guidance is currently available from Pension Wise, the Pensions Advisory Service and Citizens Advice, but will transfer to the new body. The FCA explicitly recognises that favouring more guidance will,

“require cooperation across the Government, regulators”,

and industry. The amendment is an important requirement in securing that co-operation and protecting the increasing number of vulnerable savers. For the vast majority of people, a poor financial decision at the point of retirement or on transfer is a mistake for life. It cannot be remedied.

In conclusion, if noble Lords needed further reason to support the amendment, I refer them to the briefing from the Association of British Insurers on the amendment, delivered yesterday evening, which states:

“Enhancing access to advice and guidance is essential, and the SFGB has the potential to play a crucial role in helping more people understand their pension options. This should include exploring with industry and the DWP how we can make the use of guidance a recognised, positive norm when people choose to access their pension savings. The ABI would like to explore how this could work in practice, for example through options such as defaulting or auto-enrolling customers to guidance, earlier retirement communications to prompt people to use guidance, and introducing a Midlife MOT”.


I urge support for the amendment.

16:30

[Baroness Buscombe]

My Lords, the amendment relates to the specific pensions guidance requirements set out in Clause 3 that the single financial guidance body must provide as part of its general pensions guidance function. The amendment seeks to increase the take-up of this particular guidance by members of the public when they wish to access or transfer their pension.

I am grateful for the opportunity to reference the Pension Wise service, which is currently delivering the guidance described in Clause 3. The Pension Wise service evaluation, published last week, shows that the service is incredibly well regarded by its customers, with customer satisfaction at 94%—a figure referred to by several noble Lords.

The amendment is driven in part by figures that suggest that Pension Wise is not reaching enough people. However, our contention, as my noble friend Lord Young set out in Committee, is that assessing take-up volumes is far from straightforward and that the picture is much better than the figures published by the FCA would suggest. In fact, I recently met with Pension Wise and it was very clear to me that a huge number of people are accessing guidance just on the website.

As noble Lords said, the amendment is driven also by the FCA’s recent interim report on the retirement outcomes review. The report raised some issues, which noble Lords have referred to, and the FCA has proposed a number of remedies. These include additional protections and measures to promote competition for consumers who buy draw-down without taking advice.

The FCA is actively engaging with government, regulators, industry and consumer bodies before it delivers its final report in the first half of 2018. We should take decisions about how to proceed in the light of the fullest information possible. This will ensure that we make interventions that go to the heart of addressing any weakness in the system and ensure people make informed choices for their circumstances.

The amendment would oblige the FCA to make rules requiring pension providers to ask individuals with personal or stakeholder pensions whether they have had the specific pensions guidance set out in Clause 3 when they require access to, or individual transfer of, their pension assets. Beginning with individuals requiring access, it would be helpful if I take a moment to remind noble Lords about the retirement risk warning rules, which are in force today and will continue to be in force when the new body is established.

The FCA already requires that when a person has decided in principle to access their personal or stakeholder pension pot, and before the action is concluded, the pension provider must ask the individual whether they have received pensions guidance or regulated advice. If the person says that they have not or if they are unsure, the FCA requires that the firm must explain that the decision is an important one and encourage the individual to use pensions guidance or to take regulated advice. If the person says that they have had their pensions guidance or regulated advice, or if they insist on proceeding, the FCA requires the firm to give the individual appropriate risk warnings.

These warnings must be relevant to the chosen method of access and, where the pot is over £10,000, the provider must ascertain information about the individual’s circumstances to tailor the warnings. Risk factors that should be covered where relevant are: the individual’s health; loss of guarantees; whether the person has a partner or dependants; inflation; whether the person has shopped around; sustainability of income in retirement; tax implications; charges, if a person intends to invest their pension savings; impact on means-tested benefits; debt; and investment scams.

These retirement risk warnings are in addition to other FCA rules that require pension providers to tell people with personal or stakeholder pensions: first, that free and impartial guidance is available from Pension Wise to help them understand their pension options; secondly, how to access the guidance through the internet, over the phone or face to face; and, thirdly, that they should seek guidance and consider taking independent advice to help them decide which option is most suitable for them.

Pension providers must include this information with the wake-up packs that people are sent when they approach retirement or, importantly, when they contact them about accessing their pension—I always smile when I reference the fact that the packs are called “wake-up” when they are for those approaching retirement.

It may also be helpful to remind the House that the FCA also requires pension providers to include the Money Advice Service booklet, Your Pension: It’s Time to Choose, or materially the same information in wake-up packs sent to members with personal or stakeholder pensions. This provides information and guidance on pension options and where to go for more help, including Pension Wise and the Pensions Advisory Service. Again, I say to noble Lords that I was amazed and hugely encouraged by the extraordinary expertise and experience that exists within those organisations, particularly when I visited the Pensions Advisory Service, where there are people with 30 or 40 years’ experience in the financial services industry giving advice to people over the phone—over the counter, as it were—and on their websites and by email. The booklet also covers essential information about tax, the importance of shopping around and avoiding scams. I hope that noble Lords will agree that this existing regime already provides individuals with important information and strong encouragement to take advantage of guidance and advice before accessing a pension pot.

I now turn to individuals requiring a transfer of their pension. Noble Lords will be aware that many transfers have the express aim of accessing the pension freedoms, and they are protected by the measures I have just spoken about. A large proportion of other transfers from one registered scheme to another can be a routine decision to consolidate pension pots to keep financial affairs simple. This can often deliver better value for members, and adding friction to what is essentially an administrative process could directly inhibit member engagement with their pension.

It is also the case that there are existing requirements in relation to transfers from one registered pension scheme to another. In a transfer situation, the Government are keen that members with valuable guarantees are aware that they have them and of the implications of giving them up. Where an individual has safeguarded benefits—for example, a guaranteed annuity rate—the current provider would need to determine the value of those benefits. If that value is more than £30,000, the individual must have received regulated advice from an authorised financial adviser before the transfer can go ahead.

From April 2018, pension providers must give members with guaranteed annuity rates and similar guarantees more personalised information. This should detail the guarantees they hold and their value, and must be sent at the point they risk giving them up, when they seek a transfer or request access to their pension. There is also a legal obligation for trustees to act in members’ best interests, and the FCA requires that providers treat customers fairly. As well as highlighting guarantees, many pension providers encourage members to think about the implications of transferring, particularly in relation to exit fees and charges.

To sum up, pension providers are consistently cited by around half of the people who contact Pension Wise as the place they first heard of the service. Pension Wise is working with pension providers to ensure that signposting is as effective as possible and with employers locally and nationally to encourage take-up of the service. This includes a major pilot project with Tesco, where Pension Wise appointments are delivered in the workplace. This is in addition to national advertising of the Pension Wise service through a variety of media channels, which has been used since the service was launched in 2015. That has clearly contributed to increased awareness of the service, borne out by the significant increase in the number of people using it.

I appreciate the sentiment behind the amendment and agree that more people should take advantage of the excellent service that Pension Wise provides. However, I do not agree that the amendment is the way to achieve it. It is essentially a reimagining of existing obligations that the FCA already places on providers. As I have explained, the FCA has already made rules, in force now, which place strict requirements on providers when engaging with an individual about accessing their pension.

My noble friend Lady Altmann said that this would be a major step forward, but the rules are already in place. There is no problem with the Treasury—this was referenced by the noble Viscount, Lord Thurso. We already have the rules in place. Take-up of Pension Wise guidance is increasing and bringing together all the offers in this area under one roof. The single financial guidance body will make it easier for people to take advantage of the excellent services available.

For the benefit of noble Lords who have just joined us in the Chamber, this is supposed to be a framework Bill to set up the single financial guidance body—without too many additional powers or burdens placed upon it over and above those which are necessary to take this forward. I trust that, with this reassurance, the noble Lord will feel able to withdraw his amendment.

[Lord Sharkey]

I thank all noble Lords who have spoken in the debate. I note the support for the amendment from all sides of the House. I note also that the Government seem to rely in their argument on essentially unsubstantiated claims for the performance of Pension Wise in reaching people. The low level of take-up is the problem we are addressing. No matter what current and elaborate arrangements the Minister may tell us are in place, they are not working.

The amendment sets out at no cost—no downside—a simple proposal. It intervenes at an absolutely critical point in the pension process, as people begin to access or transfer their pension assets. We do not claim that it will prevent all bad or suboptimal decisions but we believe that giving people this last chance for information and advice is sensible, prudent and fair-minded, particularly for the most vulnerable people and those most at risk. It is clear—again, given the low take-up figures for the information and advice services—that this is needed. I do see the point of doing all we can to help people make good decisions about their future financial well-being, especially at this critical point in their lives. I would like to test the opinion of the House.

16:42

Division 1

Ayes: 283

---

Labour: 137
Liberal Democrat: 74
Crossbench: 54
Independent: 9
Conservative: 3
Bishops: 2
Ulster Unionist Party: 1

Noes: 201

---

Conservative: 181
Crossbench: 14
Democratic Unionist Party: 3
Independent: 2
Ulster Unionist Party: 1

17:00

Clause 6: Setting standards

Amendment 25

Moved by

[Baroness Buscombe]

25: Clause 6, page 4, line 32, at end insert—
“( ) In determining whether to approve the standards, the FCA must have regard to the needs of people who are receiving, or who may seek to receive, the information, guidance or advice to which the standards will apply.”

[Baroness Buscombe]

My Lords, during our debates at Second Reading and in Committee, the noble Baroness, Lady Drake, raised a concern about the Financial Conduct Authority’s focus in approving the service standards for the body. The noble Baroness and other Members of the House stressed the need for the body’s standards to be focused on supporting and safeguarding members of the public. The Government agree that it is important that the standards should be designed with the needs of the public in mind. People’s needs should be at the heart of how services are delivered by the body and its delivery partners.

For example, users of the body’s service will need a variety of delivery channels to be available. They will need the people giving guidance or advice to have the required skills to do so, and they will need information to be presented in a clear and fair way that is not misleading. Members of the public should expect needs such as these to be met by the service, and we expect the standards to be designed to make sure that the body’s services meet those needs.

This amendment makes it clear that the FCA, in undertaking its role to approve the body’s standards, must consider the needs that members of the public have in accessing information, guidance and debt advice through the body. This includes not only people who are using the body’s services, but those who are likely to need information, guidance or advice provided by the body in future. I have already stressed the benefits of including the FCA in the standard-setting process for the body. The FCA currently sets the standards for the Pension Wise service. Figures published last week show a 94% customer satisfaction rating, and these standards are firmly centred on customer needs.

For example, Pension Wise standards include that a guidance provider must have the skills, knowledge and expertise necessary for the discharge of the responsibilities allocated to it; people using the service must be able to change to a different delivery channel; the service must be accessible to people under relevant equalities legislation; and the delivery of the service must be consistent across all delivery channels. These are a few among many Pension Wise standards which are focused on ensuring the service meets the needs of the people who use or will use Pension Wise guidance.

This amendment places a clear obligation on the FCA to have regard to the needs of members of the public when approving the single financial guidance body’s standards. By making this explicit, I trust that noble Lords will agree that this addresses any concerns they may have that the FCA would not take seriously people’s needs when approving the body’s service standards.

I shall turn briefly, if I may, to Amendment 26 in this group. As noble Lords will be aware, the activities of the single financial guidance body are funded by a levy which the Financial Conduct Authority collects from sections of the financial services industry. One part of that industry involves a payment service provider. Clause 10(11) defines a “payment service provider” by reference to the Payments Services Regulations 2009. Since the Bill was introduced into your Lordships’ House, those regulations have been replaced by the Payment Services Regulations 2017. This amendment therefore seeks to update that reference so that it refers to the new regulations.

I hope noble Lords will agree that we should keep the Bill up to date and with this minor amendment we will do so. For this reason, I hope that noble Lords will be willing to accept this amendment. I beg to move.

[Baroness Drake (Lab)]

My Lords, I support government Amendment 25, and thank the Minister for her reflections on the issues raised in Committee. The amendment is a very helpful addition to the Bill because it makes it clear that the FCA, which is an economic regulator, authorises the standards of the new financial guidance body and ensures that they are complementary to the objectives of that body—to improve consumers’ financial ability and their ability to make informed decisions. I support the amendment and thank the Minister.

Amendment 25 agreed.

Clause 10: Levy under FSMA 2000 for expenses of single financial guidance body

Amendment 26

Moved by

[Baroness Buscombe]

26: Clause 10, page 7, line 15, leave out from “Regulations” to “of” in line 16 and insert “2017 (S.I. 2017/752) as a result of falling within any of paragraphs (a) to (h)”

Amendment 26 agreed.

Amendment 27

Moved by

[Baroness Buscombe]

27: Before Clause 12, insert the following new Clause—
“False claims about provision of information etc
(1) It is an offence for a person to hold himself or herself out (or where the person is a body, to hold itself out) as providing information, guidance or advice on behalf of the single financial guidance body when that is not in fact the case.(2) It is a defence for a person charged with an offence under this section to prove that the person took all reasonable precautions and exercised all due diligence to avoid committing the offence. (3) A person guilty of an offence under this section is liable on summary conviction—(a) in England and Wales, to imprisonment for a term not exceeding 51 weeks or a fine, or both;(b) in Scotland, to imprisonment for a term not exceeding 12 months or a fine not exceeding level 5 on the standard scale, or both;(c) in Northern Ireland, to imprisonment for a term not exceeding 6 months or a fine not exceeding level 5 on the standard scale, or both. (4) In relation to an offence committed before the commencement of section 281(5) of the Criminal Justice Act 2003, the reference in subsection (3)(a) to 51 weeks is to be read as a reference to 6 months.(5) Proceedings for an offence under this section may be instituted in England and Wales only by or with the consent of the Director of Public Prosecutions.(6) Proceedings for an offence under this section may be instituted in Northern Ireland only by or with the consent of the Director of Public Prosecutions for Northern Ireland.”

[Baroness Buscombe]

My Lords, at Second Reading and in Committee, the noble Baroness, Lady Drake, highlighted the importance of protecting the public and the integrity of the single financial guidance body. I am grateful to her for raising those issues and have considered them carefully. It is essential that people know that they can trust the single financial guidance body, so that they make steps to get the help that they need to make effective financial decisions.

The amendments will make it a criminal offence for someone to hold themselves out as providing information, guidance or advice on behalf of the single financial guidance body when that is not the case. It will prohibit the impersonation of the body itself, in phone calls or via webpages, and of the body’s delivery partners if the impersonator claims to be providing services on behalf of the body. The provisions are designed to make it easier to prosecute individual members of organisations where the offence is committed by an organisation. As with the existing offence for Pension Wise, the new offence is summary only. It proposes a maximum sentence of 51 weeks in England and Wales although, until the commencement of Section 281(5) of the Criminal Justice Act 2003, the maximum sentence is six months. The maximum sentence in Scotland will be 12 months and in Northern Ireland six months. The offence also allows the courts to impose fines—an unlimited fine in England and Wales, and a maximum fine of £5,000 in Scotland and Northern Ireland. Criminal justice is a devolved matter in Scotland and Northern Ireland; that is the reason for the differences in sentences and fines.

The new offence will provide an additional deterrent to existing criminal offences such as fraud. It will send out a strong message that impersonating the new body is illegal and carries significant penalties. In practical terms, the offence will make prosecutions of offenders more likely, because the evidential burden of proving that a person or organisation impersonated the new body is likely to be lower than that required to prove that fraud had been committed. Unlike fraud, there is no need to prove intent to make a gain or to cause a loss for this offence. However, where scams and fraud are particularly serious, the offence does not limit in any way the ability to prosecute the criminals with offences that attract higher sentences—for example, fraud, which carries a maximum custodial sentence of 10 years.

Noble Lords will be interested to know whether the offence will also protect the branding of the existing service providers. The noble Baroness, Lady Drake, suggested in our previous debate that people might continue to recollect the brand names of Pension Wise, TPAS and MAS—the Money Advice Service—before they began to recognise and remember the name of the new body. I reassure noble Lords that we anticipate a controlled transition between the existing services and the new body. The intellectual property of the existing services will transfer to the new body. That will include the brands and website domains of the existing services.

If people search for or telephone the existing services, we expect that they will be automatically transferred to the new service and, where existing brand names are to be discontinued, that would occur only when the new brand had gained sufficient recognition. That will ensure minimal drop-off from people looking for government-sponsored guidance but being unable to find the correct website or telephone number. Ensuring that customer traffic is not lost will be important throughout the transition period.

In that way, the opportunity for scammers to exploit public recognition of the branding of the existing services will be minimised. The protection that the new offence offers extends to the brands that the body uses. If fraudsters and scammers pretended to be MAS, TPAS or Pension Wise and the body was still using those brands to market its services, that would also be an offence under the amendment. This provision therefore ensures that the legacy names of the existing services are protected for as long as those brands are actively used by the new body.

The offence will apply to all the services offered by the new body. I trust that noble Lords agree that the amendments provide comprehensive protection for the body and the public. I beg to move.

[Baroness Drake]

My Lords, I support government Amendments 27 and 28, and thank the Minister for her personal efforts on this matter, which are appreciated because it is very important. The amendments are welcome in making it clear that it is a criminal offence for organisations falsely to present themselves as providing a service on behalf of the new guidance body. They are thorough in addressing the actions of the corporate body and the individual officers in those guilty organisations. I particularly welcome the Minister’s reassurance about handling the TPAS, MAS and Pension Wise brands. That is an excellent statement, which I was not expecting. I compliment the department on having thought through in such detail how it can protect those names—so thank you for that.

However, I shall spend a little time on the issue. Spelling out in the Bill that it is a crime to mimic will act as a powerful deterrent, and a deterrent is certainly needed because of the potential human cost of such fraudulent activity. That is illustrated even now by existing cases, such as the person who received a letter with their details on it, which had not come from their pension administrator, claiming that they wished to leave the company pension scheme. The letter asked them to choose whether to withdraw, transfer or take out the paid-up option and to return all policy documents. The website of the company sending the letter advised that it was legitimate and said to be aware that scammers were imitating it. Then, there was the lady who reported the actual Pensions Advisory Service to the Information Commissioner’s office as she believed that it had rung her and she was registered with the Telephone Preference Service. The number was traced to a company bearing a near identical name to TPAS. There are numerous other cases of people being contacted by companies mimicking the public pension advisory services, offering a pension review and persistently pressing individuals to sign to transfer a DC pot; or offering a free pension review and sending a courier round to collect the documents; or claiming to be part of a post-Brexit government-sponsored pensions review.

These impersonators are ingenious in their hunt to claim fresh victims. The documented work of several government agencies, be they police, the Revenue or the regulators, reveals the extent of organisations implying that they are regulated when they are not, some falsely carrying warning messages against scams. A mechanism designed to protect consumers is now being used to dupe them. The Financial Services Compensation Scheme, further to previous public warnings about fake emails from fraudsters promising compensation payments, has issued a new warning about a scam website using the logos of the FCA and the Prudential Regulation Authority to give it false credibility. The Pensions Regulator has just put out a further release advising that it has launched new online warning messages, using animation, circulated via Facebook, Twitter and YouTube, urging consumers to keep their eyes and ears open for scams.

The new financial guidance body will have a substantial remit and a considerable reach out to the public. The damage that can be done to the body and the interests of consumers by those falsely claiming to be providing its services, be they on finance, debt or pensions, could be considerable if not controlled. I support these amendments, which provide a welcome strengthening of the Bill, and thank the Minister for bringing them forward.

Amendment 27 agreed.

Amendment 28

Moved by

[Baroness Buscombe]

28: Before Clause 12, insert the following new Clause—
“Offences under section (False claims about provision of information etc) committed by bodies corporate etc
(1) If an offence under section (False claims about provision of information etc) committed by a body corporate is proved—(a) to have been committed with the consent or connivance of an officer of the body, or(b) to be attributable to any neglect on the part of such an officer,the officer, as well as the body corporate, is guilty of the offence and liable to be proceeded against and punished accordingly.(2) In subsection (1)“officer”, in relation to a body corporate, means—(a) a director, member of the committee of management, chief executive, manager, secretary or other similar officer of the body, or a person purporting to act in any such capacity;(b) an individual who is a controller of the body.(3) If the affairs of a body corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with the member’s functions of management as if the member were a director of the body corporate. (4) If an offence under section (False claims about provision of information etc) committed by a partnership is proved—(a) to have been committed with the consent or connivance of a partner, or(b) to be attributable to any neglect on the part of the partner,the partner, as well as the partnership, is guilty of the offence and liable to be proceeded against and punished accordingly.(5) In subsection (4) “partner” includes a person purporting to act as a partner.(6) If an offence under section (False claims about provision of information etc) committed by an unincorporated association other than a partnership is proved—(a) to have been committed with the consent or connivance of an officer of the association or a member of its governing body, or(b) to be attributable to any neglect on the part of such an officer or member,the officer or member, as well as the association, is guilty of the offence and liable to be proceeded against and punished accordingly.(7) Proceedings for an offence under section (False claims about provision of information etc) must be brought—(a) where the offence is alleged to have been committed by a partnership, against the partnership in the firm name;(b) where the offence is alleged to have been committed by any other type of unincorporated association, against the association in its own name.(8) Rules of court relating to the service of documents have effect in relation to such proceedings as if the partnership or unincorporated association were a body corporate.”

Amendment 28 agreed.

Amendment 29

Moved by

[Baroness Buscombe]

29: After Clause 12, insert the following new Clause—
“FCA general rules: information about the availability of guidance
After section 137FBB of the Financial Services and Markets Act 2000 insert—
“137FC FCA rules: disclosure of information about the availability of financial guidance(1) The FCA must make general rules requiring specified authorised persons to provide information about the availability of financial guidance to the descriptions of persons specified in the rules.(2) The rules may specify the circumstances in which the duty to provide the information applies.(3) Before the FCA publishes a draft of any rules to be made by virtue of this section, it must consult—(a) the Secretary of State,(b) the Treasury, and(c) the single financial guidance body.(4) In this section—“financial guidance” means information, guidance or advice provided in pursuance of the single financial guidance body’s pensions guidance, debt advice or money guidance function (see section 2 of the Financial Guidance and Claims Act 2017);“specified authorised person” means an authorised person of a description specified in rules made by virtue of this section.””

17:15

[Baroness Buscombe]

My Lords, Amendments 29, 30, 31, 32, 44 and 45 would amend the Financial Services and Markets Act 2000 to require the Financial Conduct Authority to create a new rule requiring specified authorised persons to signpost to the new single financial guidance body. Signposting will help to improve the accessibility of financial guidance and advice to the public. The Government and the Financial Conduct Authority want to see more people seek financial guidance and advice, and at an earlier point so that it can be of most help to them. The new body will place accessibility of guidance and advice at the heart of its services.

The noble Baroness, Lady Drake, tabled an amendment in Committee which would require the FCA to create a new rule requiring all relevant firms regulated by it to signpost their customers to the new single financial guidance body. When she did so, the Government stated their wholehearted agreement that signposting could help to improve public access to guidance. We are grateful to the noble Baroness for raising these matters. We have considered them carefully and, as a result, have tabled this amendment which takes forward the spirit of her earlier one. I hope noble Lords will be satisfied that the Government have heard their concerns, and addressed them through this amendment. The amendment will put a clear duty on the FCA to set rules to secure effective signposting to financial guidance and advice for those most likely to benefit from it.

I also thank the noble Lords, Lords Sharkey and Lord McKenzie, my noble friend Lady Altmann, and the noble Earl, Lord Kinnoull, for tabling Amendment 29A. This would amend the Financial Services and Markets Act 2000 to require the FCA to create a new rule, which would require specified authorised persons to refer persons specified in the rules for financial guidance, and specify the manner and circumstances in which the duty to refer applies. As we understand it, the noble Lord, Lord McKenzie, has indicated that “refer” is a more involved process than providing information about the availability of financial guidance. This amendment would mean that, rather than providing information on where to obtain guidance and advice, and allowing people to make their own decisions, specified authorised persons would have to actively refer persons specified in the rules for financial guidance.

We understand that this amendment is driven by the desire to ensure that the people who need financial guidance, such as vulnerable consumers, actually use the guidance available. We can assure noble Lords that the Government are wholly committed to improving the uptake of guidance and advice for people who are vulnerable. In fact, the FCA has already carried out a great deal of work on how it supports vulnerable consumers. Many Peers recently had a helpful meeting with the FCA, which I hope reassured them that the FCA takes its responsibility for vulnerable consumers very seriously.

As we discussed at that meeting, issues regarding access and vulnerability are at the core of the FCA’s mission and business plan, which were published in April this year. In the debate we had last week, my noble friend Lord Young referred to the FCA’s mission, which states that:

“Understanding vulnerability is central to how we make decisions. Consumers in vulnerable circumstances are more susceptible to harm and generally less able to advance their own interests”.


The FCA is due to undertake a number of further projects to understand better the concerns of vulnerable groups, not least through its forthcoming work to develop a consumer strategy through its consumer approach paper, which will be published in the next few weeks. The consumer approach will provide a means for the FCA to measure outcomes for vulnerable customers. The FCA will also work to develop vulnerability mapping so it can ensure it has captured the needs of vulnerable consumers when finalising its business priorities. We therefore think that the intent behind this amendment will already be covered under the FCA’s work.

When reviewing existing rules and developing new rules in relation to the single financial guidance body, the FCA will consider whether there is a need for referral, in addition to providing information. I hope this will assure noble Lords that the amendment is not necessary. In fact, it would add confusion and reduce the FCA’s flexibility to design the new rules in a way that best serves the needs of particular customers.

Furthermore, there is a concern that expanding the duty to cover referrals for financial guidance could prove unnecessarily costly and burdensome to the industry. The FCA has a duty to carry out a cost-benefit analysis of any new rules under the regulatory principles in the Financial Services and Markets Act 2000. FiSMA outlines the principle that a burden or restriction imposed on a person, or on the carrying on of an activity, should be proportionate to the benefits, considered in general terms, which are expected to result from the imposition of that burden or restriction. The Government are therefore reticent to legislate for a duty to refer before the FCA does the necessary cost-benefit analysis and consultation with industry about the exact impact over and above the existing costs.

On identified costs, existing legislation and FCA rules require pension schemes to provide information to customers such as TPAS and Pension Wise services. The FCA also requires mortgage providers to signpost customers to the Money Advice Service, and debt management firms to make people aware of free-to-client advice funded by the Money Advice Service in their first communication.

These rules will be updated to reference the single financial guidance body rather than TPAS, Pension Wise and the Money Advice Service. The Government’s impact assessment has indicated that this will create an estimated direct cost on business of £5.65 million in the first year of the policy. The requirement to create new rules on signposting would be an additional cost. Therefore, we should give the FCA flexibility through this Bill to better identify which additional costs would be effective. I understand and agree with the desire to ensure that people are receiving the guidance and advice they need to make the right decisions for them. I hope that the FCA’s commitment to consider the need for referral will give noble Lords sufficient reassurance.

I beg to move the amendment standing in my name and urge the noble Lords to withdraw Amendment 29A.

Amendment 29A (to Amendment 29)

Moved by

[Lord Sharkey]

29A: After Clause 12, after subsection (2) insert—
“( ) The FCA must make general rules requiring specified authorised persons to refer persons of a specified description for financial guidance.( ) The rules must specify the manner and circumstances in which the duty to refer applies.”

[Lord Sharkey]

I will speak very briefly to Amendment 29A in this group. I am very grateful for the support of the noble Baroness, Lady Altmann, the noble Lord, Lord McKenzie of Luton, and the noble Earl, Lord Kinnoull, who have added their names to it.

As the Minister said, the amendment would add to government Amendment 29, the case for which she put eloquently and convincingly. If I may paraphrase, Amendment 29 deals essentially with the provision of information about the availability of financial guidance. It is an amendment about signposting, as I think the Minister said. Subsection (1) requires the FCA to,

“make general rules requiring specified authorised persons to provide information about the availability of financial guidance”,

to persons whose descriptions are “specified in the rules”. Actually, the wording says that such information must be provided to the,

“descriptions of persons specified in the rules”.

I am not sure that you can provide information to a description of a person—but the intent is clear even if the wording is rather odd.

Subsection (2) allows the FCA to decide when a duty to provide the information set out in subsection (1) actually applies. We agree with those provisions, but we believe that they should be extended beyond simple signposting. They should be extended to allow the FCA to require persons of a specified description to be referred for financial guidance and so that the FCA has the power to decide in what circumstances and how this duty of referral should apply.

The government amendment deals only with information about the availability of guidance; our amendment has the power to refer for guidance. In both cases the powers are given to the FCA, which has unfettered discretion in deciding how, when and to whom these powers are to be applied, both as to providers and as to customers of these providers. There is no requirement in either case that the FCA acts universally across providers and across customers. Both Amendments 29 and 29A, taken together, require the FCA to make rules requiring the provision of information about the availability of financial guidance and rules requiring specified providers to refer specified customers for financial guidance. How all this might happen is left to the FCA to decide.

The first part—the government part—is a requirement to signpost. The second part—our part—is a requirement to refer. It seems sensible to have both weapons in the armoury. Signposting is a good idea in principle, even if it has a somewhat chequered and contested success rate or even effective compliance rate. Successful reference for guidance is, we know, likely to produce an effect. All the Pension Wise service evaluation data, which we have discussed several times in this House, shows that to be the case. In both cases—signposting and referral—the FCA may, at its discretion, decide which providers and which customers should signpost or refer, or be signposted or be referred.

It has been a constant theme in our debates on the Bill that in this country people are not financially well educated and do not have confidence in their own ability to handle financial matters, and that dangerous financial ignorance and misunderstandings are widespread. Amendments 29 and 29A, taken together, will allow the FCA to make decisive interventions about signposting and referral among groups it sees as most needing this kind of help. I had hoped that the Minister would see that her amendment was complemented and strengthened by ours and would be able to accept it in the spirit in which it was offered. Having listened carefully to the Minister, I now sense that that may be unlikely.

[Baroness Drake]

My Lords, obviously, I welcomed government Amendment 29, because it addresses an issue that I raised in Committee. However, I am also persuaded by the arguments used in Amendment 29A, which gives to the FCA the discretion to define the circumstances in which providers would be required to refer people to the impartial single financial guidance body—a reference probably driven by the characteristics of a vulnerable group at risk of making a poor decision. The FCA would define those circumstances. Because under this amendment it can and does, it would not create a blizzard effect of referrals for financial guidance which overreaches the function of the new body, nor need it undermine the new body’s ability to focus on those most in need of guidance. This amendment clearly gives the FCA the duty and the statutory authority to nudge or default people into impartial financial guidance in those circumstances which the FCA specifies. In specifying the circumstances, it will have consulted with the single financial guidance body.

The recent FCA Financial Lives Survey identified that 50% of adults—25.6 million people—are financially vulnerable on one or more characteristics. The single financial guidance body cannot possibly solve a systemic problem of that scale, nor should we take the risk of trying to overload it so that it cannot effectively discharge its key remit. But it can make a material difference by improving the financial capability of those most in need of support. However, to do that, those most in need of support need to use the guidance, and this amendment would give the FCA the complementary authority to enable those most in need of the guidance to be referred to it.

I know that it is possible to list a whole series of regulatory requirements on information and disclosure but the ever-increasing evidence is that they simply do not work when it comes to protecting vulnerable consumers. They need more—they need guidance or other levels of protection.

17:30

[Lord Hunt of Chesterton (Lab)]

My Lords, I am not an expert on these things, as most people obviously are. A scam was carried out on me in France in the summer, and that was very educational. The point is: would a person in a remote village who is confused and has already been scammed trust the mail or any other form of communication? Surely there needs to be somewhere—perhaps the post office or the bank—where worried people can go. At the moment they have to write to some governmental body far away. We are in a desperate situation and I would be interested to know the Minister’s opinion on this.

[Lord McKenzie of Luton]

My Lords, I can be brief. We welcome the Government’s amendments, which would place in the Bill a duty on the FCA to make rules requiring information to be given to consumers and members of the public by relevant organisations and persons about the availability of impartial financial guidance. This requirement will cover all information, guidance and advice provided by the single financial guidance body.

The substance of our debate on this group has been Amendment 29A, which strengthens the government amendment with the intent of increasing the use of the new financial guidance service by placing a duty on the FCA to make general rules requiring specified persons to refer specified members of the public to the new body for guidance. The FCA must also specify the manner and circumstances in which the duty to refer applies. Therefore, the amendment puts the FCA in the driving seat, which is the thrust of the amendment. The noble Baroness said that this was basically what the FCA was about in any event, in which case I would ask: if we are at one in what we are trying to achieve here on the authority that the FCA should have, why not enshrine it in the Bill?

[Baroness Buscombe]

I have already spoken in detail on Amendment 29A, so I am possibly at risk of repeating everything that I have said. However, I would ask the noble Lord, Lord Hunt of Chesterton, to refer to Hansard, where he will see that since 19 July we have been discussing the very issue about which he is concerned.

The truth is that we are setting up a single financial guidance body which we hope will be even better than the bodies that already exist when it comes to improving people’s financial capability and giving them regulated advice and guidance. That is the purpose of the Bill. I hope that I have persuaded noble Lords that Amendment 29A is not necessary and that the noble Lord will be happy to withdraw it.

[Lord Sharkey]

My Lords, I entirely agree with the noble Lord, Lord McKenzie of Luton, that it would be better to have Amendment 29A on the face of the Bill. I think that it is a perfect complement to the elegantly crafted Amendment 29. However, I hear what the Minister says and I beg leave to withdraw.

Amendment 29A withdrawn.

Amendment 29 agreed.

Schedule 3: Minor and consequential amendments relating to Part 1

Amendments 30 to 32

Moved by

[Baroness Buscombe]

30: Schedule 3, page 24, line 31, at end insert—
“( ) before “, 137SA”(inserted by paragraph (a)), insert “, 137FC”;”

31: Schedule 3, page 24, line 38, at end insert—
“( ) before paragraph (ac)(inserted by paragraph (a)), insert—“(aba) section 137FC;”;”

32: Schedule 3, page 25, line 3, at end insert—
“( ) before “, 137SA”(inserted by paragraph (a)), insert “, 137FC”;”

Amendments 30 to 32 agreed.

Amendment 33 not moved.

Clause 14: Power to dissolve the single financial guidance body

Amendment 34

Moved by

[Baroness Buscombe]

34: Clause 14, page 10, line 16, leave out subsection (1) and insert—
“(1) The Secretary of State must keep under review the question of whether the single financial guidance body should be dissolved.(1A) If the Secretary of State considers that the single financial guidance body should be dissolved, he or she must carry out a public consultation.(1B) If, after the period of 12 weeks beginning with the day on which the consultation began, the Secretary of State still considers dissolution of the single financial guidance body to be appropriate, he or she must lay before Parliament—(a) draft regulations, and(b) an explanatory document.”

[Baroness Buscombe]

Amendments 34, 35, 36, 37, 38 and 39 would revise Clause 14 and insert a new clause into the Bill. Clause 14 makes provision for the winding up of the single financial guidance body and for its functions, property, rights or liabilities to be transferred to the Secretary of State or another body. These amendments would add safeguards to the procedures for dissolving the body should that be necessary in the future.

In drafting these amendments, we have listened carefully to the concerns raised in previous debates by the noble Lord, Lord McKenzie, and the recommendations of the Delegated Powers and Regulatory Reform Committee. As a result, we have studied the approaches taken in both the Public Bodies Act 2011 and the Enterprise Act 2016 to provisions to dissolve arm’s-length bodies.

As I explained in Committee, we would expect stakeholders, the public and other interested parties to have the opportunity to give their views before any decision to dissolve the new body was made. We are now putting that beyond doubt by setting out clearly that a public consultation will be required before the Government can lay any draft regulations to dissolve the body.

The amendments also provide assurance that any draft regulations cannot be laid until at least 12 weeks after the consultation has begun. This allows a suitable period of time for consultation and consideration of the responses to take place. In addition, the amendments require that the Secretary of State must, alongside any draft regulations, lay before Parliament a document to explain the rationale behind dissolving the body.

The amendments also give Members of both Houses the opportunity to request that the period for scrutinising the draft regulations be increased from the usual 40-day period to 60 days. During this time, the Secretary of State must have regard to any representations, resolutions and recommendations made by either House, their Members or committees.

I trust that noble Lords will agree that we have listened carefully and responded fully to the strength of feeling on the need for consultation and parliamentary scrutiny. I trust too that they will agree that these amendments provide those important safeguards. I beg to move.

[Lord McKenzie of Luton]

My Lords, when we debated in Committee an amendment to Clause 14 requiring a more extensive parliamentary process for the dissolution of the SFGB than that set out in the Bill, the Minister promised to reflect on the matter. This she has done and we are grateful for that.

As the Delegated Powers and Regulatory Reform Committee set out in its first report of Session 2017-19, under the Bill as drafted the Minister does not have to be satisfied as to anything before deciding to abolish the body, does not have to consult, does not have to conduct a formal review and does not have to wait a certain time to see whether the new body is working well before deciding to abolish it. Each of those deficiencies appears to have been taken into account in the government amendments. Amendment 39 enables the super-affirmative process to be applied if either House or a relevant committee of either House so determines, and the process is reflected in the detail of the amendment. This requires that the Secretary of State must have regard to the representations received and any recommendations of either House or of a relevant committee. Effectively this means that Parliament can directly influence the terms of the regulations.

We should note that the provisions of Clause 14 have effect not only to dissolve SFGB but to determine where and to whom its functions are to be transferred.

We can support the amendments and I thank the Minister again for addressing the concerns which have been raised.

[Lord Kirkwood of Kirkhope]

My Lords, I welcome the amendments and congratulate the Minister on bringing them forward. It makes a huge difference if Ministers listen carefully to what is said on the Floor of the House and changes are brought forward as a direct result.

I acknowledge also the important work that the Delegated Powers and Regulatory Reform Committee does in its service to this House. In its first report it made clear the comparisons that the Minister has alluded to with the Public Bodies Act and the Enterprise Act and the earlier precedents they contained. We should study carefully the work the Committee does because it provides an important service to the House. The Minister has listened carefully and she deserves credit for that.

As a member of the Secondary Legislation Scrutiny Committee, which assists the Delegated Powers and Regulatory Reform Committee, I welcome these amendments. Both committees enhance the work of the House.

Amendment 34 agreed.

Amendments 35 to 38

Moved by

[Baroness Buscombe]

35: Clause 14, page 10, line 18, after “The” insert “draft”

36: Clause 14, page 10, line 28, after “The” insert “draft”

37: Clause 14, page 10, line 32, after “The” insert “draft”

38: Clause 14, page 11, line 1, leave out subsection (6)

Amendments 35 to 38 agreed.

Amendment 39

Moved by

[Baroness Buscombe]

39: After Clause 14, insert the following new Clause—
“Regulations dissolving the new single financial guidance body: procedure
(1) The 40-day affirmative procedure applies to draft regulations under section 14 unless, within the period of 30 days beginning with the day on which the draft regulations were laid before Parliament— (a) either House of Parliament resolves that the super-affirmative procedure should apply, or(b) a committee of either House charged with reporting on the draft regulations recommends that the super-affirmative procedure should apply and the House to which the recommendation is made does not by resolution reject the recommendation within that 30-day period.In either of those cases the super-affirmative procedure applies.(2) Under the 40-day affirmative procedure, if after the expiry of the period of 40 days beginning with the day on which the regulations were laid before Parliament, the draft regulations are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the draft regulations.(3) Under the super-affirmative procedure, the Secretary of State must—(a) have regard to the matters mentioned in subsection (4), and(b) make the regulations in accordance with subsections (5) to (7).(4) The matters are—(a) any representations,(b) any resolution of either House of Parliament, and(c) any recommendation of a committee of either House of Parliament charged with reporting on the draft regulations,made in relation to the draft regulations during the period of 60 days beginning with the day on which the draft regulations were laid before Parliament.(5) If, after the expiry of that 60-day period, the draft regulations are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the draft regulations.(6) If, after the expiry of that 60-day period, the Secretary of State wishes to proceed with the draft regulations but with material changes, the Secretary of State may lay before Parliament— (a) revised draft regulations, and (b) a statement giving a summary of the changes proposed.(7) If the revised draft regulations are approved by a resolution of each House of Parliament, the Secretary of State may make regulations in the terms of the revised draft regulations.(8) Regulations are made in the terms of draft regulations (including revised draft regulations) if the regulations contain no material changes.(9) In calculating the periods of time referred to in this section, no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.(10) The regulations are to be made by statutory instrument.”

Amendment 39 agreed.

Clause 16: Transfer to FCA of regulation of claims management services

Amendment 39A

Moved by

[Lord Hunt of Wirral]

39A: Clause 16, page 12, line 38, at end insert—
“(ba) arranging the provision of temporary replacement motor vehicles,”

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interests as set out in the register, particularly as a partner in the global legal firm DAC Beachcroft LLP and as chair of the British Insurance Brokers’ Association.

I return to matters I have raised previously. The context for the further concerns about the regulatory framework for claims farmers lies in the Government’s plans for whiplash reform, as outlined in the Queen’s Speech. The aim of that reform package is to crack down on,

“minor, exaggerated and fraudulent road traffic accident related soft tissue injury claims”.

That quote is from my noble and learned friend Lord Keen of Elie in his foreword to the Government’s consultation paper nearly a year ago.

Noble Lords expressed their dismay in Committee at the rich harvest of unsolicited and unwanted nuisance calls and texts, which Members of this House and millions of our fellow citizens continue to receive as I speak. I spoke previously about the need for every loophole to be closed and for a commitment that where there is a claim there is regulation.

17:45

The first two of my amendments seek to close two loopholes: first, by extending the regulation of claims farmers to include those responsible for offering replacement vehicles on so-called credit hire; and, secondly, to those arranging medical reports. In reality, these two beasts of the field are involved in the claims process merely for what they can get out of it. While credit hire companies and medical reporting organisations both provide a service, they do so in an unregulated environment and, in particular, with no control on how much they can charge for their services. It cannot be right or fair that the reporting organisation should receive more remuneration for arranging the provision of a medical report than the doctor who is examining the claimant and then giving his or her professional opinion.

I am afraid that claimants for whiplash are treated as little more than a commodity—an entry ticket for commercial interests to gain access either to the damages they can recover or to the costs available to their lawyers. While I know that the Ministry of Justice’s plans for whiplash reform will go a long way to address that last point, I would welcome any commitments my noble friend the Minister is able to give on what can be done about these regulatory gaps.

My final amendment seeks to require the FCA to impose a cap on the fees claims farmers can charge in personal injury claims. There are real concerns that the Government’s plans will create an environment in which claims farmers offer claim-handling services to the public directly and are not too scrupulous about how much they charge. Of course, the Minister will say that the problem has not materialised yet. In a sense that is correct for we shall not know for certain that consumers are suffering until the whiplash reforms have been introduced, probably at the same time that the measures in Part 2 take effect. We can, however, confidently expect from all precedent that the opportunity to exploit consumers will not be passed up. Opponents of the proposed whiplash reforms will criticise anything that leaves claimants open to any exploitation not strictly controlled by the regulator.

It is far better in my experience to lock the figurative stable door while the horses are still in situ. I beg to move.

[The Earl of Kinnoull]

My Lords, I support these three amendments, to which my name was added after the Marshalled List was printed. I pay tribute to the clear introduction of the noble Lord, Lord Hunt.

In the debate on Amendment 24, the Minister talked about the framework element of the Bill. These amendments are three pieces of Meccano that should be added to the framework for the reasons I am about to deliver.

On the enabling provision in Amendment 39A, I looked at the Competition and Markets Authority private motor insurance report, which came out in September 2014. The data in the report was a year older so it is already four years old. The report suggests that in the sampling year 370,000 credit hires were done. It is a very big business. It estimated in paragraph 36 of the report that the detriment—that is, the overcharging by the credit hire companies—was then £84 million. That, essentially, is profit that goes to these sucking entities, which has to be paid by everyone through their motor insurance policies.

The report goes on at length about whether anything should be done about it. It said that, on balance, it is not quite enough money yet to do anything and, anyway, there is not a convenient Bill travelling through Parliament on which one could hang any framework. However, I can say from my experience in the insurance industry that things have moved on rapidly over the past four years. I do not know what the detriment is today because no one has been calculating it, but it is certainly a heck of a lot more than the £84 million that the CMA measured in 2013. Although the evidence base might not be quite there for the Government to act, certainly the Meccano pieces of the framework should be put in place. That would be greatly to the benefit of us all and I can see no downside to it being done.

My logic is exactly the same when it comes to Amendment 39B. Unfortunately I have not had time to hunt around for some relevant statistics, but this area is also an incredibly profitable business for someone sucking money out of the insurance payments that are made. Ultimately, of course, it means that ordinary citizens have to pay higher insurance premiums. This is also a growing business and it is likely that there would be a strong evidence base for a regulator to do something pretty soon.

Amendment 39C, as the noble Lord, Lord Hunt, said, is slightly different. Some powers are already in place, but the insurance industry is concerned that the small claims track increase will mean that within small claims there is plenty of scope for customer detriment, which again is very bad. This is a free piece of Meccano that can be put in so that at some point in the future, if the evidence base is there, the Government will be able to move very swiftly to sort it out rather than having to wait. I note that it has taken three years since the Competition and Markets Authority report for a suitable Bill to come forward on which to hang these important amendments. I hope to hear good news from the Minister.

[Lord Flight (Con)]

My Lords, I rise briefly to support the amendments in the name of my noble friend Lord Hunt. We all know what they address and we may have experienced these abuses. The existing law and regulations fail to address them, and it is time that they did so. As has just been pointed out by the noble Earl, this is an appropriate piece of legislation in which to include them. I hope very much that the Government will accept the amendments.

[Lord Deben]

My Lords, in the 19th century there were great battles over trying to insist that people properly labelled their products so that the public could make informed choices. I am afraid that our predecessors would put forward arguments that this was interference in one way or another, the time was not ripe and there was no suitable Bill. A series of reasons of that kind were given. When today we talk about physical things like tins of milk or packets of biscuits, we think it perfectly right that there is a framework of regulation which ensures that people are neither misled nor charged for things that are not what they claim to be. The difficulty is that, the moment we move into anything to do with financial matters, we find it hard to apply the same lessons we learnt to apply in the 19th century.

The reason why I beg my noble friend to take these points seriously is that the people now involved form a much larger group than had once been the case. In the past, this was the kind of issue which might have affected only people of substance, but the amendments brought forward by my noble friend would have a real effect on all those for whom this is a serious matter. I do not mean just those who are misled, but all the others who have to pay insurance premiums that have gone up because of those who were misled.

My noble friend knows how disappointed I was that she did not accept what I think was a reasonable amendment to insist that the cold calling which goes on in many of these areas should be made illegal. I know that she is hoping to find a way in which we might come back to the issue, and I hope she will, because the real truth is that these are popular measures. That is why I find it so difficult to understand why there is any pushback at all. It may be that the amendments are not quite right. Perhaps my noble friend Lord Hunt, brilliant though he is and being a lawyer of outstanding ability, has not quite got them right. However, the tenor or burden of the amendments is clearly right. It is important to put in place the Meccano which, although it may be a little out of date—my grandchildren are great putters-together of things, but they have moved on from Meccano—is an image that those of us of a certain age can recognise very clearly.

We should have in this Bill the ability to deal with these infringements of people’s decent rights, and above all, to deal with things that make people lie. The most unhappy aspect of the failure of this Bill to make these protections much more widespread is that they would guard against activities which, in the end, lead people to lie. We have accepted that on whiplash, but we know that the activities will move on. My noble friend has rightly said that we need to put in place something that can be used to stop yet another move by these unscrupulous people. This House has a duty to stop them because of the people who suffer. They are not only those who are led astray; they are the entire public who see prices increasing. There are going to be a lot of price increases because of the Government’s action on Brexit, so let us at least do something about the things that we can actually affect.

[Lord Young of Cookham (Con)]

My Lords, the co-pilot is back in charge. Amendments 39A and 39B, moved by my noble friend Lord Hunt of Wirral, seek to include the arrangement of credit hire agreements and the commissioning of medical reports within the scope of claims management regulation. I am grateful to him for the powerful advocacy he put into moving his amendments and for the support he has received from the noble Earl, Lord Kinnoull, who underwrote—that may be the right expression to use—the amendment with a nostalgic reference to Meccano. I am also grateful to my noble friends Lord Flight and Lord Deben for their support. We will be coming to an amendment on cold calling in due course.

As I explained in Committee, I understand and sympathise with my noble friend’s concerns, and I can see how these issues link with claims management activity. However, I would maintain that credit hire organisations and medical reporting organisations are not claims management companies as such, and therefore it does not automatically follow that they should be regulated in the same way as claims management companies or, indeed, by the same regulator. When the independent review of claims management regulation reported and recommended the transfer of claims management regulation to the FCA, it did not consider an extension of scope to the credit hire and medical reporting organisations which we are debating at the moment.

However, I want to be clear with noble Lords that the Government understand how important these issues are. That is why we are considering what more can be done on credit hire. We have identified this as an area of concern and we have specifically sought the views of stakeholders in the call for evidence in the section of the whiplash reform consultation that closed in January this year. I can assure my noble friend that the Government are actively continuing to work on these issues, and as a result of this debate I will certainly speak to my noble and learned friend Lord Keen of Elie and ask that his department prioritise and publish the second part of its consultation response, which will set out the Government’s position on the issue raised in our debate today.

Similarly, and as I set out in Committee, good-quality medical evidence is central to the Government’s whiplash reform programme. MedCo is working well and is providing both the Government and the relevant regulators with invaluable data on a number of important areas. However, medical reporting is much wider than just the provision of whiplash reports. Reports can be sought from and provided directly by individual specialists as well as by medical reporting organisations, and any regulation of this sector would need to be applied fairly to all those involved in it, not just to one component.

18:00

I assure my noble friend that MedCo has taken, and continues to take, firm enforcement action against those claimant solicitors, medical experts and medical reporting organisations that breach the MedCo rules and the government policy that underpins them. That has resulted in many such organisations being suspended and/or removed from the system entirely because of their attempts to game the system. We will keep this sector under review and continue to work closely with MedCo to promptly identify and tackle any other bad behaviours as they arise.

CMCs are just part of this wider market. The Government agree with my noble friend that there could be scope for more formal regulation of these sectors, but adding the provision of credit hire services and medical evidence to regulated CMC functions is not the way to deal with it. These are specialised sectors and any regulation would need to be grounded in the appropriate expertise to deal with the particular challenges each sector poses. As credit hire organisations and medical reporting organisations are separate issues to those under consideration in the Bill—I identified the action that Government are taking on them—and, as they are being dealt with separately, I would urge my noble friend not to press the amendment.

I turn to my noble friend’s Amendment 39C, which commanded support from all sides of the House. It seeks to extend the duty on the FCA to cap fees to include personal injury claims. I remind noble Lords that the duty on the FCA to cap fees—to protect consumers from being charged excessive fees—is specifically in relation to financial services claims for a good reason. As I explained in Committee, different types of CMCs manage claims in different ways. Those dealing with personal injury claims, such as holiday sickness claims, tend to focus on marketing activities. Those in the financial services claims sector, on the other hand, tend to represent clients all the way through the claim process. It is telling that, in 2015-16, 95% of consumer complaints about CMCs related to financial services claims, compared to only 2% that were related to personal injury.

However, I acknowledge the point made by a number of noble Lords that the market could change, particularly following our reforms in relation to whiplash. We understand that markets can change, which is why the FCA already has a broad power to restrict fees across the range of claims management services that it will regulate. The Government have worked closely with the FCA and relevant regulators in the personal injury sector while developing their whiplash reforms. That collaboration will continue as the work progresses, to ensure effective and appropriate controls are developed to underpin those reforms.

While changes might happen in relation to the personal injury CMC market in the future, it would not be right for the Government to impose now a requirement on the FCA to do something when we do not know the exact nature of the problem we are trying to tackle or, indeed, whether it will definitely exist. The FCA is aware of the Government’s planned changes and the potential impacts they could have on the personal injury CMC market. It will be important for the FCA to consider the impact of government changes on the market and how CMCs operate before deciding whether to use its fee capping power. If, as noble Lords have suggested, further risks to consumers emerge in this market, the FCA already has a range of regulatory tools and powers at its disposal that will enable it to take swift, effective and proportionate action to deal with consumer harms. I will draw the FCA’s attention to points that have been made in the debate.

I hope my noble friend will agree that it is too early to presume that there will need to be a fee cap for CMCs operating in the personal injury market, which has a different business model to financial services. I hope he agrees that the FCA is well placed to monitor and respond to any emerging risks. In light of that, I encourage him to withdraw his amendment.

[Lord Hunt of Wirral]

My Lords, I am very grateful to the noble Earl, Lord Kinnoull. I completely understand his reference to Meccano; I suppose it is easy to pretend that we have moved on, as the noble Lord, Lord Deben, said—advised, no doubt, by his grandchildren. I understand the point that there needs to be a structure; it is that about which I was hoping to persuade the Minister.

I am also very grateful to my noble friends Lord Flight and Lord Deben for their support. I sensed a feeling around the House that something needs to be done. Does the Minister understand that I have been gnawing away at this particular problem for over 10 years? I think it was the noble Baroness, Lady Ashton, who took through a Bill some considerable time ago that recognised the need to regulate claims management companies. Many examples were given then, many years ago, of how that represented a growing market. Looking around us today, particularly at holiday sickness claims, you suddenly realise that a new breed of companies are exploiting the admitted rights of individuals to compensation, but in return are demanding a share of that compensation. That has become the lifeblood of these claims management companies; and they keep changing. One moment, you impose a different form of regulation, then the next, you see that the companies have completely escaped any form of regulation.

It may well be that the Minister is right to look to the future with confidence, knowing that the Financial Conduct Authority will now be dealing with the problem. He is right to point out that the FCA has power under existing legislation. Perhaps we will see at last a reining in of these individuals, who have been feeding on the lifeblood of victims who cannot afford to allow part of their compensation to be siphoned off into a developing, stronger claims management company. In a way, I suppose my noble friend was saying that I have made a serious error of judgment in labelling them all as claims management companies. It may well be that they do not fit that description, but I think we all know what we are talking about when we refer to claims management companies. I call them claims farmers. I recently attended a conference where I was asked why I have this vendetta against claims farmers; I admitted that it is because they have no justification for what they do and for the way in which their business model has developed. The Minister has made a number of commitments—I can see him quickly checking his notes on what commitments I am referring to—and I sensed a considerable amount of sympathy for the point I was making. I want to reflect carefully on all the points.

[The Earl of Kinnoull]

I have here the report I referred to, from the Competition and Markets Authority. Paragraph 2.37 states:

“The range of services provided by CMCs can include … (d)”—


among other things—

“providing credit repair and credit hire for non-fault claimants”.

In other words, as far as the CMA is concerned, claims management companies certainly include credit hire companies. In my bit of the industry—underwriting—we would absolutely think that they are part of the same thing. No one has objected to that. It is very clear throughout that section of the CMA report that they are one and the same.

[Lord Hunt of Wirral]

I am grateful to the noble Earl for making that important point. I do not necessarily want to speak on behalf of the Minister, but I sense that his response may be that other people do that work as well. We need to try to ensure that we fulfil my objective that where there is a claim, there should be regulation. There should be a structure whereby there is some control of the companies seeking to exploit the situations certain people who need to bring a claim find themselves in.

I will reflect carefully on all the points my noble friend the Minister raised, but this problem is not going to go away. I can see it increasing.

As I am already becoming aware, there is other legislation in respect of which claims managers are looking at new areas to fasten on to and exploit. We have to be prepared to deal with that in advance, rather than seek to catch up, as we have tried to do for the last 10 years. Let us move ahead. In the meantime, I thank my noble friend for all he has said and I beg leave to withdraw the amendment.

Amendment 39A withdrawn.

Amendments 39B and 39C not moved.

Amendment 40

Moved by

[Lord Kirkwood of Kirkhope]

40: After Clause 17, insert the following new Clause—
“Interim rules restricting charges for claims management services
(1) The Compensation Act 2006 is amended as follows.(2) After section 5 (the regulator) insert—“5A Power and duty of the regulator to make rules restricting charges for claims management services(1) The power of the regulator to make rules includes the power to make rules prohibiting authorised persons from—(a) entering into a specified regulated claims management agreement that provides for the payment by a person of charges which, taken with charges payable under an agreement treated by the rules as being connected with the regulated claims management agreement (if any), are specified charges, and(b) imposing specified charges on a person in connection with the provision of a service which is, or which is provided in connection with, a specified regulated claims management activity.(2) Within two months beginning with the day on which the Financial Guidance and Claims Act 2017 is passed, the regulator must make rules by virtue of subsection (1) in relation to all regulated claims management agreements, and all regulated claims management activities, which concern claims in relation to financial products or services.(3) The rules must be made with a view to securing an appropriate degree of protection against excessive charges for the provision of a service which is, or which is provided in connection with, a regulated claims management activity.(4) The rules may specify charges by reference to charges of a specified class or description, or by reference to charges which exceed, or are capable of exceeding, a specified amount.(5) In relation to an agreement entered into, or charge imposed, in contravention of the rules, the rules may (amongst other things)—(a) provide for the agreement, or obligation to pay the charge, to be unenforceable or unenforceable to a specified extent; (b) provide for the recovery of amounts paid under the agreement or obligation;(c) provide for the payment of compensation for any losses incurred as a result of paying amounts under the agreement or obligation.(6) This section is repealed at the beginning of the day on which section 17 of the Financial Guidance and Claims Act 2017 (power of the FCA to make rules restricting charges for claims management services) is implemented by the FCA.””

[Lord Kirkwood of Kirkhope]

My Lords, I will move Amendment 40 on behalf of the noble Baroness, Lady Meacher, who regrets that she has had to leave the Chamber to attend to an unexpected and unforeseen family problem. I can dispatch the amendment without taking up too much time. It is part of a process. As colleagues will see, it would insert a new clause to bring in interim rules restricting charges for claims management services.

The Government, through the FCA, are promoting public interest in completing applications for PPI claims. There is a public interest in that, and a lot of advertising encouraging people to do so, but as we heard in Committee, many people are being caught up in this and caused significant detriment as a result of the mis-selling of PPI. They are incurring fees of 30% or sometimes more when using a claims management company, when they could achieve the same thing by themselves directly from lenders without charge. Citizens Advice has advised that almost half of the problems and complaints relating to claims management concern disproportionate fees.

I have been involved only at the margins, but it should be acknowledged that the noble Baroness, Lady Meacher, has been working on this issue intensively with the Minister and her team. The noble Baroness, Lady Buscombe, has spent a lot of time trying to make sense of it. This is an interim but necessary measure. The amendment is part of a process and its purpose is to seek assurance that something could be brought forward at Third Reading, and that that is being worked on.

A lot of intensive work is being done, which is welcome, but during the gestation of the ideas currently in play, the noble Baroness, Lady Meacher, and I would like serious consideration to be given to the quantum of the cap we are talking about. One of the figures being considered is approximately 20% plus VAT. We can consider that in more detail at Third Reading, but it sounds quite high to the noble Baroness and me. There may be a technical reason why it has to be set at that level, but our plea in moving the amendment is for careful consideration to be given to the level at which the cap is set.

It has been suggested that if a company charges more than the cap allows under the amendment, that would not be a breach of statutory duty, but the excess only would be recoverable by the claimant. The mechanism is not clear and is difficult to understand. If the Minister can explain why an excess charge would not be a breach of statutory duty, I, as a provincial solicitor many years ago, would go to bed this evening in a happier place.

The process being undertaken by the ministerial team is acknowledged and welcome. On our side, we have had help from Lloyds Bank and Citizens Advice, but I hope the Minister can give us some welcome assurance on the process going in to Third Reading. This is a probing amendment, and anything he can say in that regard would be extremely helpful. I beg to move.

18:15

[Lord McKenzie of Luton]

My Lords, we should be grateful to the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. If I understand the points he made it looks as though this will be another issue for us to consider on Third Reading, so I do not propose to dwell on it extensively. If that is not the case it will be good if the Minister tells us.

The thrust of the amendment is to try to get interim rules in place to put a cap on the charges levied, particularly relating to PPI as the ability to claim is coming to the end of its natural life. The noble Lord raised an interesting point on what the remedy would be when people exceed the cap. Will the Minister confirm that the route would be that the excess is recoverable by the claimant, rather than some other more direct remedy? I look forward to his reply.

[Baroness Altmann]

My Lords, I thank the noble Lord, Lord Kirkwood, for moving the amendment on behalf of the noble Baroness, Lady Meacher. I ask the Minister whether we have considered the issue, supported by a number of consumer groups, that I raised in Committee requiring a company that has been found to need to pay out on a claim to pay the claims management fee, rather than taking it out of the compensation. That should perhaps be more acceptable with a cap, but also more effective for those who receive compensation, as well as encouraging companies that have mis-sold something or perpetrated harm to the consumer to voluntarily contact consumers who have been harmed, rather than waiting for a claims management firm to do so on their behalf, thus saving them the extra cost of the claims management fee.

[Lord Young of Cookham]

My Lords, I join the noble Lord, Lord McKenzie, in thanking the noble Lord, Lord Kirkwood, for moving the amendment in the absence of the noble Baroness, Lady Meacher. We are sorry that she had to leave for family reasons. I again pay tribute to the work she has put into this amendment. She has pursued it with diligence.

The amendment seeks to put in place a fee cap from two months after Royal Assent until the FCA implements its own cap. We debated this in Committee. I am grateful to noble Lords who contributed to this debate for highlighting it again.

Clause 17 already makes great strides to secure fair and proportionate prices for consumers by giving the FCA a duty to cap fees charged for financial services claims. However, as a number of noble Lords pointed out in Committee, the implementation of a new regulatory regime and an effective, robust cap will necessarily take some time, during which consumers could continue to be charged disproportionate fees. In that debate, noble Lords expressed concerns that the FCA’s PPI claims deadline may have passed by the time its fee cap is in place. That point was made by the noble Lord, Lord McKenzie. We already know that 90% of financial services claims relate to PPI and therefore we want to ensure that consumers are protected against excessive fees for PPI claims as soon as possible. That is why, as the noble Lord, Lord Kirkwood, anticipated with commendable foresight, the Government intend to table an amendment at Third Reading to introduce an interim fee cap in respect of PPI claims management services.

The amendment will set a fee cap at 20%, excluding VAT, of the claim value and will be enforced by relevant regulators on commencement two months after the Bill receives Royal Assent. The Claims Management Regulation Unit consulted on a 15% cap. The data that it collected on the costs to CMCs of processing claims and market analysis of profit margins resulted in proposals to introduce a 20% excluding VAT cap on claims management services. The amendment supports the Government’s aim of ensuring that the claims management sector works in the interests of consumers by protecting them from excessive fees.

The amendment tabled by the noble Baroness, Lady Meacher, and moved by the noble Lord, Lord Kirkwood, would go some way towards ensuring that consumers are protected during this interim period. However, the government amendment will go further in two key areas. First, it will have a wider application than the amendment tabled by the noble Baroness. The interim fee cap will apply to both CMCs and legal services providers that carry out claims management services in relation to PPI claims, to be enforced by the relevant regulators.

Secondly, it will include in primary legislation a prohibition against charging more than 20% of the claim value for PPI claims, which will enable the regulators to implement the cap quickly. As I said a moment ago, this level was reached using the helpful and comprehensive responses to the Ministry of Justice’s consultation on proposals to introduce a fee-capping regime for CMCs handling financial services claims.

On the procedure for claiming any excesses imposed over the cap, anyone in breach of the interim fee cap will be subject to regulatory enforcement, which could include fines. Furthermore, a contract to receive or pay a sum in excess of the fee cap would be unenforceable, thereby ensuring that firms cannot profit from their malpractice and that consumers are entitled to recover excessive fees.

My noble friend Lady Altmann raised a question about compensation. As we will revert to this issue at Third Reading, perhaps we could deal with it then.

I make it clear that the interim cap is intended to be a temporary measure and, as such, will apply only until the FCA has implemented its new rules under Clause 17. It will also apply only to PPI claims, whereas the FCA’s cap will apply to all claims relating to financial products and services. We remain of the view that the FCA, as the incoming regulator, will be well placed to develop its own cap, or caps, based on an assessment of the market. Given the Government’s undertaking to table an amendment on this matter at Third Reading, I hope that the noble Lord will feel able to withdraw the amendment.

[Lord Kirkwood of Kirkhope]

My Lords, I am very happy with that undertaking. I hope that the dialogue can continue and I beg leave to withdraw the amendment.

Amendment 40 withdrawn.

Amendment 41

Moved by

[Lord Holmes of Richmond]

41: After Clause 17, insert the following new Clause—
“Regulatory principles to be applied in respect of claims management services
(1) In relation to the regulation of claims management services, the FCA must act according to the principles that— (a) authorised persons should act honestly, fairly and professionally in accordance with the best interests of consumers who are their clients; and(b) authorised persons should manage conflicts of interest fairly, both between themselves and their clients, and between clients.(2) In this section, “authorised person” has the same meaning as in the Financial Services and Markets Act 2000, and “authorised persons” shall be construed accordingly.”

[Lord Holmes of Richmond (Con)]

My Lords, being a member of the my noble friend Lord Hunt’s flock in your Lordships’ House, I am a bit concerned that if I overly push on Amendment 41, which comes hot on the heels of Amendment 39A, I, too, may be the victim of whiplash. We discussed many of the issues in Committee. I have brought back the amendment on Report so that I might push my noble friends who understand the timeline for bringing in a duty of care. My initial intention was to table an amendment placing a general duty of care on financial institutions; as a result of the scope of the Bill, a specific duty as set out in my amendment pertaining to CMCs is what we are discussing today.

I am grateful to all the organisations that helped with briefing for the amendment, not least Macmillan Cancer Support, which really demonstrates what a modern charity can do, not just focusing on the specific issue at the centre of its organisation but going wider to all the elements that directly affect people when they receive a cancer diagnosis. That is partly why I chose to focus on Macmillan and cancer in putting down this amendment. It goes to the heart of bringing to life why there is a need for a general duty of care to be exercised by financial services institutions, when one in two of us will receive a cancer diagnosis in our lifetime. This is not a marginal matter; it demonstrates that financial institutions not only have their current responsibilities and obligations but need that general duty of care.

The amendment deals specifically with CMCs. I push my noble friend the Minister to accept it and to give some further description building on comments that he made in Committee on the timeline for considering bringing forward and implementing a general duty of care, with the good offices of the FCA obviously involved—I am grateful to the FCA for meeting me to discuss this, not least Mr Christopher Woolard. I shall say no more; the arguments were put in Committee. I urge my noble friend to accept the amendment and beg to move.

[Baroness Kramer (LD)]

My Lords, I congratulate the noble Lord, Lord Holmes of Richmond, on sticking with this issue, because it is fundamental. I say to the Government that a duty of care is so important and should be so central to every piece of our financial services industry that we should not let the perfect—having a general duty of care—be the enemy of the good, which is the opportunity to put a specific duty of care in this Bill. I hope the Government will consider that.

I have the privilege to be on the Parliamentary Commission on Banking Standards. As we sought to strengthen the framework of regulation and to expose a lot of misdirection within the financial services industry, I think everybody, not only on the committee but far more broadly, agreed that the key problem lay in culture. We have turned to the banking and financial services industries and asked them through various bodies to improve their culture, but surely we also have a responsibility to drive that with every piece of legislation that comes our way. Duty of care reflects that whole-culture approach: the underlying, underpinning approach that we expect our financial services to take, where the interests of the customer are at the centre. It is not that the financial services should not be able to make profits—of course, that is the business they are in—but it should never be at the expense of that central interest of the client or customer.

I urge the Government to take seriously this opportunity in an area where there has been extraordinary abuse. I listened to the noble Lord, Lord Hunt of Wirral, for example; others talked about whiplash and issues around holiday sickness. In issue after issue, we have seen a complete failure in the culture of the bodies that provide such services. We should tackle that issue head on and not be afraid to use language that is clearly around that duty of care—not considering it too soft or too difficult—so that it becomes a general habit. I hope we will not rely just on general duties of care, because those can sometimes be imperfect, but will make sure that in every piece of financial services legislation this issue is underscored. In that, this legislation could be a leader.

[Lord McKenzie of Luton]

My Lords, like the noble Baroness, Lady Kramer, we have added our name to the amendment of the noble Lord, Lord Holmes of Richmond, which takes us back to regulatory principles and the duty of care.

The noble Lord is right to have removed the “where appropriate” qualification from his earlier amendment. The amendment deals with the regulation of claims management, although this is seen as an opportunity to debate the wider calls for a duty of care across the financial services piece.

On the narrower point, we acknowledge that in Committee the Minister gave assurances about the FCA consulting on the design of new rules for claims management companies and taking account of its statutory operational objectives, including an appropriate degree of protection for consumers. However, we note that there is no current alignment of the objectives of the CMRU and the FCA, and there seems to be no certainty about where this process will end up.

18:30

On the wider issue of duty of care, we should note the recommendation of the House of Lords Select Committee on Financial Exclusion that the Financial Services and Markets Act should be amended to require the FCA to make rules that require financial services providers to exercise a reasonable duty of care towards their customers. The Financial Services Consumer Panel suggested that,

“a duty of care … would oblige providers of financial services to avoid conflicts of interest and act in the best interests of their customers”.

According to Macmillan Cancer Support, a duty of care is supported by organisations including StepChange, the Financial Services Consumer Panel, the Money Advice Trust and the Consumer Council, to name but a few. I think we have all had the briefing from Macmillan which outlines how cancer can bring a real risk of financial hardship and the difference that, for example, providers of mortgages can make in helping individuals to manage periods of financial difficulty. But there will need to be a change in culture if individuals are to have the confidence to tell their bank about their diagnosis.

The Minister has told us that we will receive the Government’s response to the Select Committee report before Third Reading. Are there any pearls that might be shared with us today, given the strong recommendations that it makes around duty of care?

[Baroness Altmann]

My Lords, I congratulate my noble friend Lord Holmes on persisting with the amendment. I support the need to make sure that regulated firms have this duty of care, especially in circumstances such as the diagnosis of cancer and other illnesses, from which people can recover but for which they need particular care during that period. While the Bill is going through the House, it would be excellent for the market if we were able to introduce measures of this nature, but I also look forward to hearing from my noble friend and seeing the Government’s response before Third Reading.

[Lord Young of Cookham]

My Lords, I am grateful to my noble friend Lord Holmes for moving the amendment. He mentioned that he was a member of my flock. He displays exactly the right independence of thought tempered by loyalty to the party that any Whip could wish for. I am grateful to the noble Baroness, Lady Kramer, the noble Lord, Lord McKenzie, and my noble friend Lady Altmann for speaking to the amendment, which seeks to ensure that the FCA adheres to a set of regulatory principles in relation to acting in the best interest of consumers and managing conflicts of interest fairly. Noble Lords also raised the broader issue of duty of care, which is not mentioned specifically in the amendment but is obviously relevant. As noble Lords may remember, my noble friend tabled a similar amendment in Committee.

Aside from the provisions in general consumer law, the FCA already applies rules on firms conducting regulated activities in relation to their dealings with consumers. First, the FCA’s rules set out in Principles for Businesses require firms to conduct their business,

“with due skill, care and diligence”,

and to,

“pay due regard to the interests of … customers and treat them fairly”.

Principle 8 sets out:

“A firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client”.


That accurately mirrors proposed new subsection 1(b) in the amendment, so there is a congruity of objective there.

Secondly, the rules on clients’ best interests require a firm to act in its client’s best interests across most regulated activities. The client’s best interests rule states:

“A firm must act honestly, fairly and professionally in accordance with the best interests of its client”.


Again, those are exactly the words used in my noble friend’s amendment, so there is no disagreement over objective.

Thirdly and finally, a number of FCA rules contain an obligation on firms to take “reasonable care” for certain activities. For example, one of the Insurance: Conduct of Business rules states:

“A firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgment”.


Those rules in the FCA Handbook are supplemented by more specific rules in various FCA sourcebooks. The FCA will be able to apply its existing Principles for Businesses, which I have just quoted, to claims management companies and to make any other sector-specific rules that may be necessary, under its existing objectives. The FCA supervises against these rules and other provisions and, where necessary, can take enforcement action against firms to secure appropriate consumer protection.

The FCA is of the view that its current regulatory toolkit is sufficient to enable it to fulfil its consumer protection objective. The FCA will consider the precise rules that apply to claims management services and how they fit together as an overall regime. In doing this, the FCA will take into account its statutory operational objectives, including its objective of securing an appropriate degree of protection for consumers. It will also consult publicly on its proposed rules.

Turning to the broader issue of duty of care, the noble Lord, Lord McKenzie, asked whether there were any pearls. I think the oyster is still at work so the pearls are not available for display this evening. The words “duty of care” mean different things to different people and the precise scope and content of any proposed duty of care are uncertain. The impact of a duty of care obligation needs to be fully considered, as do the cost, complexity and time that might be involved in customers seeking to bring firms to court as a result of a duty of care obligation.

I was asked to say something about the timescale of the work on this. A duty of care could have an effect on many of the FCA’s provisions in its handbook, including the need to replace or remove some. The FCA intends to undertake a comprehensive review of the handbook post Brexit. The FCA believes that it would be best to include duty of care in that review, particularly as the FCA’s ability to change its rules in some areas will depend on the relationship between the EU and UK post withdrawal. Many of the FCA’s current rules are based on EU legislation. Once the relationship between the EU and the UK following withdrawal is clear, there will be more clarity around the degree of discretion that the FCA has to amend its rules.

In addition, the FCA is currently identifying the necessary changes to its rules to ensure that they continue to operate as a coherent set of rules following EU withdrawal. This work is being done in parallel with the work across government to review directly applicable EU legislation. It is a significant, complex and time-critical exercise that must be progressed immediately. If noble Lords have any concerns about the timing of the discussion paper, that is primarily a matter for the FCA.

Returning to the amendment, it is not necessary to include regulatory principles in the Bill because of the provisions the FCA already has. For that reason, I would request—or suggest—to my noble friend Lord Holmes that he withdraw his amendment.

[Lord Holmes of Richmond]

I thank all noble Lords who have participated in this short debate, and my noble friend the Minister, from whom I am happy to take requests and suggestions in equal measure.

I imagine my noble friend has become far more familiar with the rulebook than he could have imagined or perhaps even desired. I agree with the rules he recited but there seems to be a slight contradiction in that the rules are clearly stated but simultaneously it is accepted by all concerned, not least the FCA, that there is at least a question worth asking and looking into around duty of care. I think we are in a positive place: there is an acceptance that there is at least a question that is worth looking into.

In financial services there is a lot of talk around the acronyms, as in any business or organisation. There is a lot of focus on KYC—“Know your customer”. May I suggest that, rather than promoting just KYC, all noble Lords involved in this debate and everybody outside the Chamber should also promote alongside it CFYC? That would take financial services into a very positive place for the future, as that “Care for your customer” is where banking originated centuries ago. It would be a thoroughly good thing for all financial services organisations to have a sense of CFYC.

On the amendment itself, I have heard my noble friend’s arguments and I understand the position. It would be helpful to have further discussions between now and Third Reading, to see what specifics it may be possible to set out in regard to this amendment. We may have had the answer on the general duty for this stage but it would be worth while having more discussions, not least because we are promised the response to the report of the Financial Exclusion Select Committee, of which I was fortunate enough to be a member. I would welcome further discussions and we could then decide what the route may be to Third Reading. But in thanking all noble Lords who have participated this evening, including my noble friend the Minister, at this stage I beg leave to withdraw the amendment.

Amendment 41 withdrawn.

Amendment 42

Moved by

[Lord Sharkey]

42: After Clause 17, insert the following new Clause—
“Ban on unsolicited real-time direct approaches by, on behalf of, or for the benefit of companies carrying out claims management services and a ban on the use by claims management companies of data obtained by such methods
(1) The FCA must, within the period of six months beginning with the day on which this Act comes into force, introduce bans on—(a) unsolicited real-time direct approaches to members of the public carried out by whatever means, digital or otherwise, by, on behalf of, or for the benefit of companies carrying out claims management services or their agents or representatives, (b) the use for any purpose of any data by companies carrying out claims management services, their agents or representatives where they cannot demonstrate to the satisfaction of the FCA that this data does not arise from any unsolicited real-time direct approach to members of the public carried out by whatever means, digital or otherwise.(2) The FCA must fix the appropriate penalties for breaches of subsection (1)(a) and (b) above.”

[Lord Sharkey]

My Lords, Amendment 42 is in my name and those of the noble Baroness, Lady Altmann, and the noble Earl, Lord Kinnoull. Given our extensive discussions of cold calling at every stage of the Bill, I can be brief.

This amendment would require the FCA to ban cold calling for claims management companies. Critically, it would also ban the use by these companies of any data obtained by cold calling. Together, these provisions would make cold calling for CMCs illegal and cut off the revenue stream to cold callers, by preventing CMCs using their data. The amendment would also allow the FCA to set the appropriate penalties for any breach of either of these bans. The bans would come into effect with the passing of this Bill—in other words, fairly soon. I will not rehearse here the manifest evils and dangers of cold calling, either in general or for CMCs in particular, but I will just mention that the disgraceful whiplash and holiday sickness scams are a prime and continuing example of why cold calling for CMCs remains an active and current problem. There will inevitably be another scam along any time soon.

We discussed all this at some length last Tuesday, when the House showed the strength of its dislike and disapproval of cold calling, not for the first time and from all sides. The House voted by a large majority last Tuesday to enable a ban on all types of cold calling where consumer detriment could be shown. During the debate that led up to that vote, the Minister pointed out that our proposed mechanism for banning cold calling involved quite a lengthy process. She went on to make a generous offer to do something about cold calling for CMCs faster than our amendments would allow. The Minister said:

“I have asked officials to consider the evidence for implementing a cold-calling ban in relation to claims management activities, and I am pleased to say that the Government are working through the detail of a ban on cold calling by claims management companies”.


She also proposed to bring forward a government amendment in the other place to meet the concerns of the House. Towards the end of her speech on the issue, the Minister said:

“To reiterate, the Government agree with the spirit of these amendments and will bring forward legislation in this Bill, in the other place, in relation to cold calling for claims management activities”.—[Official Report, 24/10/17; cols. 861-63.]

18:45

I hope that the Minister’s promise remains open. It would be extremely disappointing and very odd if it were now to be withdrawn. If the Minister intends to withdraw this timely and welcome promise, I hope she will tell the House why, and explain why a problem she saw clearly as requiring urgent action last Tuesday no longer requires it this Tuesday. It really is hard to see how this would make any sense, or be seen as fair or reasonable. The Minister could of course accept the amendment before us as a way of doing by other means what she promised last Tuesday. But one way or the other, it is time that we put a speedy and definitive end to these flagrant and damaging abuses. I beg to move.

[Baroness Altmann]

My Lords, briefly, I support this amendment as well. Cold calling and other unsolicited approaches are a growing nuisance. I have not come across a group pushing to stop the Government from banning these cold calls. Direct marketing to people’s home phones or personal mobiles surely has no place in modern business practice. Leaving responsibility for a ban to Ofcom and the ICO is simply not an effective strategy. It clearly is not working.

The measures in Amendment 42, which has been deliberately and carefully crafted by the noble Lord, Lord Sharkey, supported by the noble Earl, Lord Kinnoull, are designed to prevent the cold calls rather than trying to catch cold callers afterwards, once they have already plagued the public. If firms engage in unsolicited approaches to encourage consumers to make claims which may or may not be valid, using the data thereby obtained would also be an offence. We could finally tell the public that any people who call them out of the blue, or contact them in some unsolicited way, are breaking the law; they should therefore not engage with them.

This provision would not stop claims management companies advertising broadly to offer claims management services, but it would help to stop the speculative nuisance calls, texts or emails which are plaguing millions of British people so frequently. The crucial additional power would be the role of the FCA. Using the regulator and forcing firms to demonstrate, if challenged, that they have not obtained business as a result of leads from cold calls would then mean that they would be at risk of losing their licence. It would be a much more effective strategy to stop the cold calls in the first place. I welcomed my noble friend Lady Buscombe’s words during our previous day on Report, which promised that there would indeed be some action from the Government in another place. I hope that we will get broad reassurance on those points in tonight’s debate.

[The Earl of Kinnoull]

My Lords, I will be very brief indeed, as we have heard two very clear and good speeches from the noble Lord, Lord Sharkey, and the noble Baroness, Lady Altmann. The first point I made at Second Reading was on the importance of maintaining access to justice for our citizens. The point I make now is that I see nothing in Amendment 42 which in any way fetters access to justice. I see only good features of it, and I very much hope that we will hear good news from the Government in due course.

[Lord Stevenson of Balmacara]

My Lords, I too support this amendment, which we discussed earlier and which I think has been re-presented in the expectation that it will commend itself to Ministers, and in the hope that they will look kindly at it. It is absolutely right to consider these cold-calling activities as one of the greatest nuisances of the modern age. Indeed, the Minister herself admitted that they had led her to give up her landline so that she could not be persecuted. But that does not seem to stop them; they just find your mobile phone and get on to that as well, using texts and other means. I cannot wait until they start using drones and other things to deliver their messages in the hand. Maybe at that stage we would have the Government on our side, as they might recognise aerial bombardment as taking it a step too far.

But at the heart of this is the question of trust. The noble Baroness was extremely persuasive on an earlier amendment in suggesting that she could be trusted and was a person of trust. Her work with all of us around the House—we have all had a chance to talk to her about issues of interest to us—can be seen in the amendments that she laid herself and the support she has given to other amendments coming forward. Here is a classic: she gave a commitment at an earlier stage, admittedly in slightly different circumstances, to bring something forward. She let slip that the civil servants are already working on it, which suggests that a great deal of activity has probably gone on around Parliament and departments, because she would not have mentioned it if she did not have some confidence that what was being proposed could have been seen and agreed by other Ministers who have an interest in this area. So I suspect that things are well primed. I do not like defence or guns in metaphors, but if the gun has been so charged and so primed, it seems rather odd that it has been left in a loaded position somewhere close to her office not being used. Trust is something we want to see exercised in practice, and I look forward to hearing the noble Baroness’s comments.

[Baroness Buscombe]

That is quite an interesting one: any gun should be locked in a cabinet. The amendment tabled by the noble Lord, Lord Sharkey, my noble friend Lady Altmann and the noble Earl, Lord Kinnoull, seeks to ban “unsolicited direct approaches” such as phone calls,

“by, on behalf of, or for the benefit of companies”,

providing claims management services. It also seeks to prevent these companies using data obtained through the use of such methods.

I have spoken previously about the significant steps taken by the Government to address these issues. We have increased the amount that regulators can fine those breaching direct-marketing rules. We have forced companies to display their number when calling you. As we have previously discussed in your Lordships’ House, cold calling is already illegal in certain circumstances, such as where a person has registered with the Telephone Preference Service or has already withdrawn consent.

The Information Commissioner’s Office enforces restrictions on unsolicited direct marketing. The Data Protection Act 1998 requires organisations to process data fairly and lawfully. Organisations must: first, have legitimate grounds for collecting and using personal data; secondly, not use the data in ways that have unjustified adverse effects on the individuals concerned; and, thirdly, handle people’s personal data only in ways they would reasonably expect. A serious contravention of the data protection principles could result in a monetary penalty notice being issued by the Information Commissioner. Depending on the circumstances, this could include a CMC which sought to use data that it had originally obtained through unlawful means.

However, we have listened carefully to the views of your Lordships’ House and fully agree that more needs to be done to tackle the prevalence of nuisance calls across the UK. As I previously explained, there are complex issues to work through, including those relating to EU directives. But I can reassure your Lordships’ House that the Government are working through the details of a cold-calling ban in relation to the claims management industry. To that end, I am pleased to say that I revisit the offer made in your Lordships’ House last week and repeat that the Government intend to bring forward an amendment in the other place to meet the concerns of this House. This amendment will look to ensure that the onus is no longer on the consumer to opt out of marketing calls.

Unfortunately, the amendment tabled by noble Lords would give the FCA a duty it cannot enforce under its current regime. I assure noble Lords that the Government are committed to tackling this issue properly and will consult with the FCA, the CMRU and the ICO to ensure that the government amendment addresses these issues in the most effective way. But if Amendment 42 were accepted, it would not achieve its aim. For these reasons, I urge the noble Lord to withdraw the amendment.

[Lord Sharkey]

My Lords, I thank all noble Lords who have spoken in this brief debate, but especially the Minister for what she has just said to the House. There is only one possible response to what she said, which is to say thank you and to withdraw the amendment.

Amendment 42 withdrawn.

Clause 18: Extent

Amendment 43

Moved by

[The Earl of Kinnoull]

43: Clause 18, page 15, line 27, at end insert “and Scotland.”

[The Earl of Kinnoull]

My Lords, we are on the home leg. In moving Amendment 43, I shall speak also to Amendment 46. I am reporting back the same two amendments that we discussed in Committee, and your Lordships will be delighted to hear that my remarks will be very short. Before I make them, I should say that the Minister is now a great hero of mine. I remarked that he was sending me emails at 7.21 am during Committee stage, but he takes a bit of a lie-in these days: his first email to me this morning was at 8.20 am. He has worked with terrific courtesy, particularly on this issue, which is a very difficult one given the poor state of relations between our Parliament and Holyrood. It will be very helpful, because working on this is greatly to the benefit of people both sides of the border.

Your Lordships will recall that I had two beefs with the law as it is. The first is my beef about arbitrage: companies can set up in unregulated Scotland and aim their activities at England. I felt that any form of arbitrage within the United Kingdom was against the general principle of having a single market in the United Kingdom and was wrong. The second beef I had was that as one looked at the statistics—we have drowned in really depressing statistics in this area—one saw that Scotland had it worse than England in terms of the activities of these very unpleasant companies. So I thought it was time for Scotland to do something about it. The Justice Committee at Holyrood has been studying the problem and feels the same—we had various quotes from various Scottish Ministers feeling that.

I should also say that this is another piece of Meccano, because the trigger in my mechanism would actually be held by Scottish Ministers. Tantalisingly, the good news is that last night a letter surfaced that was being sent by Annabelle Ewing, the relevant Scottish Minister, to the Justice Committee at Holyrood, saying that the Scottish Government were now keen to regulate CMCs in Scotland and that officials were in active discussions with equivalent officials down south to do that. Accordingly, I am hoping that in a minute we will hear some very good news from the Minister. I do not know what happened next, but he does. I beg to move Amendment 43.

[Lord Young of Cookham]

My Lords, the end is in sight. I am very grateful to the noble Earl, Lord Kinnoull, for his amendment and for the kind words he said about me. It has been a very constructive dialogue to seek to get this bit of the Bill right.

The amendments in his name seek to extend Part 2 of the Bill to Scotland. As noble Lords will be aware, the Government worked closely with the Scottish Government during the development of this policy to ensure that the FCA’s regulatory regime not only achieves the aim of strengthening claims management regulation but is proportionate to the needs of the sector and its consumers. Having sufficient evidence of malpractice by CMCs in Scotland is essential to justify extending regulation across the border. Our initial discussions with the Scottish Government revealed that they did not want regulation of CMCs to be extended to Scotland. Their view was that there was limited evidence of malpractice. We had powerful contributions in our debate in Committee which put forward a contrary view.

Because CMCs in Scotland have tended to be solicitor led, they are often regulated by the Law Society of Scotland. The decision was therefore made to replicate the current scope of claims management regulation to England and Wales only. However, following the very useful debate which we had on this issue in Committee, we have continued discussions with the Scottish Government, and their views are evolving.

The Scottish Government have not yet requested that claims management regulation is extended to Scotland, but I say to the noble Earl that, should we receive ministerial confirmation that the Scottish Government wish to extend claims management regulation to Scotland, we would be ready and willing to table a government amendment to that effect. So we will continue to engage with the Scottish Government and we will keep our position on claims management regulation in Scotland under review.

19:00

On the issue of arbitrage, under the current regulatory regime the requirement to be authorised is not dependent on where the CMC is located but on where it carries out the regulated service—for example, a CMC based abroad will still be regulated for the services that it provides in England and Wales. We intend to replicate this approach as far as possible under the new regime.

It seems churlish to end by noting that the amendments tabled by the noble Earl would not have the effect of extending FCA regulation of claims management to Scotland; they would amend only the extent of the claims management provisions and would not amend the regulation to encompass claims management services provided to consumers in Scotland. Given that somewhat technical objection but, more importantly, against a background of the ongoing conversations with the Scottish Government, I hope that the noble Earl will feel able to withdraw the amendment.

[The Earl of Kinnoull]

I thank the Minister for his typically courteous and thorough response. It is incredibly important that the discussions that are currently taking place between UK and Scottish officials progress. I think I am right in saying that what I have heard gives us more than sufficient proof that that is the case and that both Ministers here today have their shoulders behind this one—because it is a very important feature. On that basis, I beg leave to withdraw the amendment.

Amendment 43 withdrawn.

Clause 19: Commencement

Amendments 44 and 45

Moved by

[Baroness Buscombe]

44: Clause 19, page 16, line 11, after “11” insert “and section (FCA general rules: information about the availability of guidance)”

45: Clause 19, page 16, line 12, after “11” insert “, section (FCA general rules: information about the availability of guidance)”

Amendments 44 and 45 agreed.

Amendment 46 not moved.

Railways: Reliability

Tuesday 31st October 2017 Lords Chamber

Question for Short Debate

19:03

Asked by

[Baroness Randerson]

To ask Her Majesty’s Government what measures they intend to take to improve the reliability of railway services.

[Baroness Randerson (LD)]

My Lords, with perfect timing, the Rail Delivery Group published a report yesterday that seeks to address all the key issues that I had in mind when tabling this topic for debate. Our railways are under severe pressure but I do not support the renationalisation of the railways. They say that if you can remember the 1960s, then you were not there. Well, if you think the answer to the problems of our rail system is to bring back British Rail, you probably did not use it when it existed.

There has been enormous change in our rail system in the years since the introduction of franchises in the mid-1990s, when passenger numbers and revenue were falling. The number of people travelling by rail has effectively doubled. We have the most rapidly expanding railways in the world, while elsewhere in Europe railways are in decline. Anyway, we already own most of the rail system via Network Rail. The Government also set the terms and conditions for franchise operators and regulate the fare structure.

However,passenger satisfaction is falling—down to 81% last autumn, especially among commuters. Poor perceptions deter people from using the railways despite intense congestion on the roads. Recently passenger numbers have fallen back slightly, which is possibly a sign of a crisis of trust among passengers, too many of whom are plain angry. A network built in the 19th century, and neglected and partially dismantled in the latter half of the 20th, is now creaking at the seams. It needs modernisation, much better maintenance and expansion. All these problems affect reliability and punctuality, which is down from 91% to 89% in the last four years, and the Government are not proving good at tackling any of these factors.

Even the easy bits to modernise within the current system, such as the franchise model, the ticketing system and the complaints system, have not been energetically tackled. The headline measures of passenger satisfaction and performance used by the rail industry do not reflect real-life experience and underestimate punctuality and reliability problems. For instance, a long-distance train can arrive almost 10 minutes late and still not be considered to be delayed, so definitions of “on time” are, at the least, generous. I was pleased to see that yesterday’s report attempted to tackle that in future plans, but currently the system positively encourages train operators to skip stations in order to make up time and avoid a late arrival at the final destination.

Then there is the process of applying for compensation. The system remains too complex. In the last two weeks I have made eight separate railway journeys and, sadly, only two of them have been without delay, disruption or cancellation. Okay, I have hit a bad patch, but it took me an hour and five phone calls to make one compensation claim—and I think I understand the system. Why is it that six out of 17 railway companies will accept compensation claims via third-party apps but the rest refuse to do so? This would make it simpler for passengers wishing to claim. We need a single standardised form, leaflets available at the gate on arrival and on the train, and announcements on the train to make all passengers aware of their rights. Is it any wonder that at the moment, only one-third of eligible passengers claim compensation, and £100 million a year goes unclaimed?

The ticketing system needs modernising and simplifying. When I put my usual journey into the website each week it comes up with nine options, and that is at one point in time and for a specific timetable slot. Factor in advance-tickets and those people savvy enough to artificially divide their journey by buying two tickets for a single trip, and you have an unfriendly and, frankly, ridiculous system—all the more unacceptable because it is the most expensive in Europe.

I read yesterday’s report very carefully. Although the rail industry says it can create a simpler structure, it puts the ball very firmly in the Government’s court. Next January, passengers who are already under strain because wages have not kept pace with rising inflation will face above-inflation fare rises. The Government should step in, as they have done year after year with the fuel duty escalator, and freeze rail fares this year while the system is reformed. The modernisation of the ticketing system was promised a long time ago, but very little progress has been made so far with electronic and smart ticketing. I welcome the commitment in yesterday’s report to tackle this issue, but we are still talking about limited improvement.

Too frequently trains are desperately overcrowded, a victim of their own success. This discourages passengers and reduces punctuality. Add to this the fact that many of our existing lines are full and there are simply no more slots available. We need more consumer-friendly franchises and more emphasis on things that passengers value most highly, such as flexibility. Devolution seems to be popular with DfT and Network Rail. I strongly support that but, for the concept to be meaningful, local authorities should be able to bid for franchises designed around the needs of their citizens and the local economy.

Yesterday, the rail industry pledged major improvements to the network, with extra services and new carriages. But there is a big gap between the investment needed—on the east coast main line and the trans-Pennine routes, for example—and what the Government have committed to.

We on these Benches support HS2 because existing lines are full, but it will not be ready until the mid-2030s, so what about the upgrades and repairs needed now to the existing lines serving those cities? They are desperately in need of maintenance and repair.

The Government’s approach to electrification is confused and incoherent. Cardiff to Swansea, Oxenholme to Windermere and midland main line are all cancelled. I agree that Network Rail has to improve its performance, but instead of taking action to deal with that, the Government simply seem to have given it less to do. I fear that we will end up with a patchwork approach of bi-mode trains switching mid-journey from electric to diesel. They cost more to buy, and it is obviously less fuel efficient to carry a spare diesel engine around. It will soon be unacceptable to run diesel engines on city centre roads, so why is it okay to be planning to have diesel trains in the future?

Despite recent promises of increased government funds and private investment, there is still a shortfall at the end of this control period. The industry needs an end to the feast-and-famine approach to investment cycles, with more certainty and a longer term view. Without this, our overstretched rail infrastructure will fail increasingly frequently.

In the economic uncertainty we now face as a country, the railways are a core part of joining up our country once again. So we need ambitious investment, particularly in the parts of the country that have been neglected for too long. Are the Government far-sighted enough to do it? So far, we have seen little sign of it. I welcome this evening the Minister to her new role and I look forward to her response.

19:13

[Lord Patten (Con)]

I hope I will not alarm the noble Baroness too much if I say that I agree very much with what she said. I also rise with some temerity to speak before the noble Lord, Lord Snape, who knows so much more about railways that I ever will. I well remember as a very green new Member meeting him on my first night in another place in the Strangers’ Bar, when he asked me what I did. I ‘fessed up to what I did, and asked him, “What do you do?”. He said, “I used to be with the NUR”. “What’s that?”, I asked. He said, “It stands for no use rushing”. I am sure that he remembers it as well as I do.

Before punctuality and reliability, connectivity comes to my mind, and the ease of finding stations and lines alike. This remains a great problem for many of our people, often still because of the closures for ever written against the name of Dr Beeching, whether fairly or unfairly, who in the late 1950s and early 1960s, helped by a supporting cast of experts, forecast the coming decline of our railways, which, of course, never happened.

Now, rather, there is pressure to reinvent passenger connectivity by reopening old lines, often by micromanagement. After some 50 years, for example, there has been the recent reopening in 2015 of links between two stations in Yeovil in Somerset, which are almost adjacent to each other, thus giving back local and welcome connectivity to Westbury and Weymouth. It is a little move but much welcomed locally.

On a larger scale we have the north-western powerhouse which may well soon be stimulated a bit by the north-south grand project of HS2, but in Lancashire, I am told there are groups pressing for more localised east-west reopenings or electrifications to bring back connectivity locally as well. That said, I am a very strong supporter of privately run railway operating companies. In saying that, I know that I may well be an endangered species. I think it is right, but I also recognise that they have a big responsibility to do better over reliability and timeliness, as do Her Majesty’s Government in writing new line contracts and renewal of contracts for franchises on our creaking railway infrastructure.

My weekly commute is on the Exeter-Waterloo so-called main line that is one of the mercifully few that still has substantial lengths of single track railway with attendant passing places—too often in my experience true loops of doom. Passengers, I know, long to have back the time in their lives that they have sat near Salisbury in the dreaded Tisbury loop—a kind of railway Bermuda Triangle in my experience. It is a black hole waiting for the delayed up or down train to pass, held up successively by maybe the wrong kind of leaves, the wrong kind of ice, or—once, late at night, it being dairy country—the wrong kind of heifers on the line.

There is no solution to this sort of thing from HMG. I am sorry to land these thoughts with my noble friend in her early outings on the Front Bench. The franchise was switched from the boringly named old South West Trains to the new, exciting and snappily named South Western Railway just last month. I went into it in some detail and it turns out to be a Sino-British outfit, promising in its franchise bid if successful, among much else,

“improved service frequencies and quicker journey times”.

I quote what it promised exactly.

Do Her Majesty’s Government have a well enough written contract with the means to claw back the franchise if these promises are not kept? I hope that they have, and I seek reassurances, not necessarily tonight, but in writing from my noble friend the Minister whom I am so pleased to see on the Front Bench.

The dualling of the whole of the Exeter-Waterloo railway is vital to the economic growth and social cohesion of the south-west, but in the meantime, it will be a Sino-British management failure if these promises are not kept. Above all else, it will be a central government failure if, together with the railway industry, and the new rail delivery group, we do not hammer out something that is more relevant to passengers than the currently imperfect public performance measure, rather concentrating much more, as the noble Baroness, Lady Randerson, said in her most interesting speech, on an “on time”, or as some would prefer a “right time” metric, measuring real performance.

I am sure that this will be a central issue for the new pan-industry Rail Delivery Group, set up so recently to represent private companies and the publicly owned Railtrack, to stress their public-private partnership. I hope that this will not be just a spokesperson-driven lobbying group, blaming the wrong kind of Brexit on the line, or whatever, but I particularly welcome the proposal to have a rail complaints ombudsman by the summer of 2018. I regard that as of fundamental importance. I hope that she or he will be truly independent and have teeth. I hope that the Rail Delivery Group will be circulating all noble Lords with details of where to raise issues, if they emerge. I shall certainly while away the time when stranded in the Tisbury loop by composing my thoughts.

19:19

[Lord Snape (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Patten. I cannot say that I actually remember the conversation in the Strangers’ Bar all those years ago to which he referred. It seems to be a much more exciting place these days from what I read in the newspapers. There is not very much discussion of the railway industry there now.

I am grateful, too, to the noble Baroness for the opportunity of speaking in the debate tonight. We like complaining about our railways. The noble Baroness talked about the PPM, as did the noble Lord, Lord Patten, and the fact that trains that arrive 10 minutes late are theoretically on time. The problem with changing the system—I speak with some degree of operating experience—is that there is no such thing as an on-time arrival. If every train runs on time, it means that the person in the wheelchair does not get on at the last minute and neither does the elderly gentleman who is not quite as fast on his feet as he used to be. We will see the failings of trying to run trains exactly on time when the new Thameslink service starts, on which there will be a two-minute headway. The first driver who inadvertently releases the driver safety device and brings his train to a stand will paralyse the railway for the rest of the afternoon. Human nature being what it is, that may well happen.

The noble Baroness started off by saying that only 81%—I wrote it down—of railway passengers were happy with their journey. A lot of retail organisations in this country would be more than happy if 81% of their customers expressed such satisfaction. If any of us left the Chamber now, we could pretty well guarantee being able to get one of three trains an hour to Birmingham, which would arrive in around 90 minutes, or three trains an hour to Manchester, which would arrive in two hours and 10 or 15 minutes. I do not know any other method of surface transport in the United Kingdom that could match that, whether or not those trains were up to 10 minutes late and declared to be on time when they arrived. The coach industry does not run timetables to the same times as the rail industry. When it comes to swift and on-time journeys, it is difficult to find a system of surface transport that matches the railway industry.

I shall return for a moment to the sojourn of the noble Lord, Lord Patten, in the Tisbury loop. During my time on the railway, that line was regarded as one of the southern region’s premier lines. It was singled when the railway industry was suffering from the 12-monthly financial arrangements laid down by Her Majesty’s Treasury. When the halcyon days come and the railway industry returns to being a nationalised one, I am sure that we will not return to that; there will be plenty of money, the Tisbury loop will be extended, and the double track between Waterloo and the south-west of England will presumably be restored—but I would not risk much money on that. I have to tell him that the Tisbury loop was added only comparatively recently. I do not know where he spent his time before it was installed, but timekeeping was a lot worse.

I wish to draw the attention of your Lordships’ House to a couple of matters that are slightly off the beaten track—no pun intended. Certain matters affect punctuality on our railway industry that Network Rail and the train operating companies do not have much power to correct. The first is the number of bridge bashes, when heavy goods vehicles hit bridges. The latest statistics are for about 10 months in 2016-17, in which there were 1,753 such incidents. It is difficult to know what else Network Rail can do to prevent those bridge strikes. It paints the bridges, puts up signs that say “Low bridge ahead”, prints the heights of the bridges on the signs, and often puts metal girders underneath the bridges to prevent damage to the bridge structures themselves. Yet almost 2,000 heavy goods vehicles hit those bridges every year. As ever, it is Network Rail or the taxpayer that picks up the bill, and the passengers who suffer delays.

It is scandalous that bridge strikes occur with such monotonous regularity. The road haulage industry ought to be held to account if we are to prevent them. The average delay is around two hours, and the cost of the repairs and delays over a year is about £23 million, according to Network Rail—all paid by the taxpayer, not the road haulage industry. But we are not talking just about delay to passengers, serious though that is, because bridge strikes are dangerous. Sooner or later, one of those 2,000 bridge strikes that takes place every year will displace the railway track above the road network. I need hardly overemphasise the danger that that would cause to a train travelling at a maximum speed of 125 miles an hour. I hope that the Minister will persuade her department to hold proper talks with the road haulage industry to see what can be done to prevent, or at least reduce dramatically, the number of bridge strikes.

Not all road hauliers shrug their shoulders, but the sad thing is that Network Rail estimates that over 50% of drivers of heavy goods vehicles do not know the height of the vehicle that they are driving. With the exception of three major companies—Stobart, Wincanton and DHL, all of which insist that their drivers know the weight and height of their vehicle before they leave—the road haulage industry as a whole appears not to take any great interest in such matters. Perhaps if it was forced to pick up the bill and a few serious prosecutions followed, it might do so.

The other matter that I want to raise in the next 30 seconds is the number of suicides on our railway, which again cause enormous delay to passengers as well as great suffering to the relatives of those involved. There were 252 suicides in the last year for which statistics were available on our mainline railways, amounting to 400,000 minutes of delay. I am not callous enough to say that no action should be taken when a suicide occurs. I saw my first one as a 16 year-old when I worked for the railway. In those slightly more cavalier days—that is the wrong term, but I cannot think of a more appropriate one—the stationmaster or appropriate officer covered the corpse with a tarpaulin and trains passed at reduced speed. Last week, there was a suicide at Harrow and Wealdstone. There are six tracks through it, all of which were closed for up to four hours following that suicide. Thousands of people using Euston station suffered delay. Again, perhaps the Minister could raise that with Network Rail. Its procedures, which I obviously cannot go into because of time, are far too protracted and ought to be speeded up.

19:27

[Lord Greaves (LD)]

My Lords, I congratulate my noble friend Lady Randerson on introducing this short debate. Unlike previous speakers, who have talked about the whole country—and the Tisbury loop—I want to talk about just one example in Lancashire, on eight miles of track and serving three stations. These are the Northern local services from Preston to Colne, notably those to the last three stations on the line, Brierfield, Nelson and Colne in the borough of Pendle. The problem is the number of trains that simply do not turn up.

In addition to all the ordinary reasons for that, such as staff not turning up, the problem is that, from where it leaves the main line over to Yorkshire at Gannow Junction in Burnley, the line is just an eight-mile-long single-track siding that ends in the buffers at Colne station. There is one train an hour. If a train to Colne is late or if the previous train was late and is still blocking the siding, the train turns back at Burnley. Passengers are left on the platform at Colne, Nelson and Brierfield, and incoming passengers from the Preston and Blackburn direction are turfed off the train at Burnley and left to their own devices.

I have some recent examples of that, as reported on the Facebook group “Colne Talk”. Andrew from Trawden said that on 12 July 2017 he caught the 1800 from Preston to Colne. It was about 20 minutes late leaving Preston and, just after Bamber Bridge, the passengers were informed that it would terminate at Burnley Central.

Helen Margaret reports:

“In the last six weeks, I’ve had two last minute total cancellations, one mad dash to Burnley in the morning last minute as not coming to Colne and been terminated at Burnley twice”.


She goes on to say:

“For me, the train is essential. As a nursing student at UCLAN”—


the University of Central Lancashire, in Preston—

“the option of living on campus is out of the question, as I am married with three children. Without this service, I simply could not undertake my degree, as I don’t drive”.

Steven reports:

“Today my son on his way back from Preston University had to get off at Burnley after buying a return ticket to Colne—no explanation and no refund offered. This isn’t the first time this has happened”.


Andrew from Brierfield reports:

“On Wednesday 18th October, the 7.29 arrival at Brierfield had terminated at Burnley Central on its way to Colne. It was supposed to leave Colne at 7.20 but never made it up there”.


Indeed, we are up in the Lancashire Pennines.

Sarah reports:

“My other half missed two last week from Nelson to Preston due to last minute cancellations”.


Helen Margaret, again, said:

“I got about £1.70 compensation for having to get a bus from Burnley to Colne. So the compensation does not even compensate for the bus fare. There have been days I haven’t had the spare cash and had to wait for the following train an hour later. I’m a nursing student trying to provide for a family at the same time”.


Patricia Hall, from Colne, reports:

“My son started a new job at Burnley College Monday 9th Oct. Train fine on the day. Tuesday got to the station train cancelled had to leg it to the bus and was late on his 2nd day through no fault of his own … not a good start to a new job”.


Karen Hillary Starkie reports that on,

“27 September they cancelled 2 early morning trains from Colne. Finally got on the train at 8.15 which meant I got to work in Blackburn 3 hours after I set off from home!”.

That is about 15 miles away. She goes on to say:

“Have claimed for train delay but doesn’t help to keep me in a job … I’m now at risk of redundancy as I cannot guarantee getting in on time when my job moves to Blackburn soon”.


She went on:

“After eight and a half years in my job and 18 months short of retirement age, I am now in the precarious position due to this unreliable service”.


Tony—not me, somebody else—reports:

“My wife works in Oswaldtwistle and regularly has trains cancelled or terminate at Burnley … A rough guess her train has been affected at least 10 times”.


She adds:

“The service is terrible and needs a complete upgrade, including link through to Skipton”,


one of the east-west links that the noble Lord, Lord Patten, mentioned.

Ben reports:

“Three times in the last two weeks I’ve had to take/pick up my Mum from Burnley/Blackburn as the service hasn’t run to Colne. One of those times we brought a group of young girls back who lived in Colne and had been kicked off late at night in the dark and expected to wait over an hour for the next train”.


Nobby reports:

“I was there that night. My wife was trying to organise taxis for everyone”.


Indeed, she did so. He adds:

“It’s disgusting that young girls of 13 or so are being kicked off miles from home, bad enough adults but kids!!!”.


I could go on and on with these.

One of the clear results is that it is having an effect on the number of people using this service. I have here the numbers of people in and out of these three stations over the past 20 years. They were going up and up until about three to five years ago. I have the figures from 2012 to 2015. Brierfield is down from 35,366 to 31,504; Nelson is down from 146,768 to 129,762; and the three stations together are down from 279,892 to 258,212. So in the light of the general increase in people using the railways, clearly, if trains do not turn up, people will not use them—and there is no suitable alternative bus service for those particular journeys.

In the medium term, the noble Lord, Lord Patten, says that he has a passing loop. If he does not like it, he should give it to us; we would love a passing loop. There used to be one at Nelson station; British Rail in its stupidity took it away. It will cost a great deal more to reinstate it than it cost to take it away. In the very long term, we want our railway back to Skipton and a proper double-track railway from Burnley to Skipton but, in the short term, Northern, which runs this service, needs to take its responsibility seriously and put on replacement transport, whether that means buses, mini-buses, taxis or whatever. There is a motorway between Colne and Burnley that can fill in when necessary. Northern needs to do it, and I call on the Government to put pressure on the new franchise to make sure that it provides a proper rail service to people in the Pendle area who want to use it.

19:35

[Lord Berkeley (Lab)]

My Lords, I declare an interest as chairman of the Rail Freight Group. I welcome the Minister to her exciting new post. I hope that she lasts longer than the previous Minister, because we have had a lot of musical chairs in the last week or two—but that is life. I congratulate the noble Baroness, Lady Randerson, on getting this debate.

Noble Lords have spoken already about the importance of reliability and the disasters that happen when things go wrong. Given the growth in passenger and freight traffic in recent years, which is of course very welcome, one of the major issues must be maintenance of the track. When things go wrong, it is quite often due to maintenance—more of the track than of the trains. So it is worth examining whether Network Rail, now owned by the Government, so they can answer for it, has the right equipment to maintain the network to modern standards.

Somebody recently drew my attention to the one train that monitors the electric overhead lines—we need more, but we have quite a lot at the moment—which is based on a 1973 converted coach. That makes it 44 years old, and there is only one of them. So it would be very interesting if the Minister was able to let me have, although I do not expect it from her now, a list of how many track measurement trains there are monitoring the gauge and the railhead conditions. Some noble Lords will remember the gauge and head cracking that happened probably 20 years ago. It is also about how old they are.

Now that Network Rail is divided more into separate routes, it would seem reasonable that each group could actually have its own equipment and be able to buy some decent modern equipment, then be benchmarked by the regulator and its own management as to who did the best maintenance, and who had the least delays due to things going wrong with the track or the signalling. That would be reflected in their bonuses, in the money that they got from central government—and on the performance of the trains. I am convinced that a little bit of incentive among the routes would bring enormous benefits improving the performance of the whole network, and therefore the performance of the trains.

I want to say a little bit about freight. We have talked about it quite often here. The support for rail freight comes from the Government’s rail freight strategy, the Scottish Government’s rail freight strategy, and the National Policy Statement for National Networks. Certainly, in many parts of the country, the encouragement that Governments are giving to freight is really good. A week ago, I was in Scotland trying to encourage Network Rail to allow timber to be loaded on to the tracks in Rannoch Moor and taken by rail, rather than across the bog, to the local sawmills in Corpach. It was very good to see the way that the Scottish Government and Network Rail were working towards a great solution, and I think they will get it. The Treasury has confirmed investment plans for rail freight in control period 6, which starts in a couple of years’ time, and the Scottish Government have done the same. Rail freight was also mentioned in all the three major parties’ manifestos for the last election.

Growth in rail freight is mainly in the container market and in aggregates and other building materials brought into city centres. The containers need terminals or interchanges where big loads can be made into small ones or transferred to road for the last few legs. I was pretty surprised and distressed last week to see the National Infrastructure Commission’s report, Congestion, Capacity, Carbon: Priorities for National Infrastructure, which said that the commission believes that,

“the pilots of ‘platooning’ truck convoys on motorways … may open the way to radical improvements in the efficiency and capacity of major freight distribution by road in the future … This would free up rail capacity for enhanced commuter and inter-city passenger services”.

The National Infrastructure Commission seems to be contradicting not just the policies in the documents I have mentioned but current thinking across the industry. In so doing, it is putting at risk a very large amount of private investment which is going into these terminals, on the basis of absolutely no evidence that I can see. They just thought it was a good idea and they would mention it. The people who live near some of these terminals do not like it very much. They have already cottoned on to this and are putting tens of millions of pounds of investment at risk. I hope that when the Minister responds she will be able to confirm her support for rail freight and for these investments. If the National Infrastructure Commission is going to come out with statements like this, it would be quite nice if it could provide some supporting evidence for a complete U-turn in policy. I hope the Minister will say something like, “They are independent and would say this, wouldn’t they”.

The railways have a really great future, for passengers and freight. The traffic is growing in a way that it is not doing anywhere else in Europe. We may sometimes worry about reliability, but the quality of service in most places is fantastic. I conclude by commending the Government’s suggestion that there should be contestability for some of the things that Network Rail does. We could try out new ways of reopening lines or enhancing them, such as the east-west rail or some of the enhancements which the noble Lord, Lord Greaves, was talking about. By having it done a different way, possibly with the private sector taking the lead, designing, getting the permissions, building and even operating the infrastructure, you can then contest whether it is more efficient than Network Rail or not. That could be a very useful way forward.

19:44

[Lord Astor of Hever (Con)]

My Lords, I also congratulate my noble friend on her appointment and wish her the very best in her new role. Rail is fundamental to the country’s prosperity, and I am delighted that the Government have a clear mission to put the travelling public first and to improve the passenger experience. I declare an interest as an occasional customer, with my children, of Southern Rail. My wife is a much more regular user, often with our disabled daughter. Using the words of the noble Baroness, Lady Randerson, my wife definitely has a “crisis of trust” in Southern Rail.

Southern Rail’s industrial dispute has been catastrophic for passengers and our local community. In a Written Statement last month, the Secretary of State said that the Government are determined that the railway becomes more focused on issues that matter most to passengers, such as punctuality and overcrowding. My family’s experience is that Southern trains hardly ever arrive on time. I was amazed at my noble friend’s predecessor’s answer last month to the noble Baroness, Lady Smith of Basildon, saying that the punctuality of Southern Rail is currently 82%. Locals take these figures with a pinch of salt. How are these barely believable figures arrived at? Are they provided by the train operator, and who monitors them?

There is a strong case for more clearly identifying, and taking action to alleviate, substantial overcrowding on specific services across the network. At peak hours, Southern has some of the worst overcrowding in the country, and this can be a serious health and safety issue. What strategy do the Government have for tackling overcrowding? Have they considered incentivising train operators, through franchise agreements, to alleviate the worst examples of persistent overcrowding? Will the Government encourage train operators to publish reliable and informative information about delays and disruption in a format that will allow passengers to make informed decisions about their journeys and avoid crowded services where possible?

The department recently announced that £20 million will be allocated to address the problems on Southern Rail. What outputs do the Government expect this money to achieve? When will we see a timetable for the publication of the project board’s plan and the implementation of its actions? Hopefully, Southern’s service will improve, but if it does not, has the department worked up a plan to terminate GTR’s franchise and transfer some, or all, operations to one or more operators? The department should, for example, be working with Transport for London to develop plans, in the event of a default, for the transfer of Southern’s suburban rail services to Transport for London before the scheduled end of GTR’s agreement in 2021.

19:48

[Lord Faulkner of Worcester (Lab)]

I join other noble Lords in thanking the noble Baroness, Lady Randerson, for securing this very interesting debate. I too welcome the Minister to her first railway debate. I am sure there will be many more and I hope she will be here to take part in those as well. There can be no one in your Lordships’ House who disagrees with the aspiration to improve the quality of Britain’s rail services. I remind the House of my railway-related interests as declared in the register, particularly my chairmanship of the Great Western Railway advisory board. I am also president of the Cotswold Line Promotion Group, and chair of the North Cotswold Line Task Force, which has been set up by Worcestershire County Council and is supported by all local authorities and local enterprise partnerships in the area to act as the catalyst for a better and more reliable train service.

As the noble Lord, Lord Patten, may remember from his days as the Member for Oxford, the principal obstacle to achieving this is the infrastructure, as there are still substantial lengths of single-track railway at both the Oxford and Worcester ends of the line. Short of closing the route altogether, which was talked about in the immediate post-Beeching era, no single decision damaged the reliability of rail services—not just on the Cotswold Line but on routes such as the noble Lord’s South Western Main Line to Exeter—as much as that to reduce a double-track main line railway to single track, because of the delays that inevitably creates at the passing points.

Apologists for the Governments at the time—both Labour and Conservative—argued that, as the railways were thought to be in terminal decline, taking out excess capacity and eliminating alternative routes were inevitable and necessary cost-cutting measures. What utter nonsense that was, and how short-sighted. While none of us who were working in the industry then could have foreseen the astonishing growth in passenger demand over the past two decades, just a small degree of foresight in the 1970s and 1980s—particularly leaving infrastructure in place rather than ripping it out—could have saved hundreds of millions of pounds today as Network Rail battles to restore capacity and reopen routes such as that from Oxford to Cambridge through Milton Keynes.

That leads me to High Speed 2, the project conceived by my noble friend Lord Adonis and supported steadfastly by all transport Ministers after him, and by an overwhelming majority of Members of this House and the other place. In my view, the argument in favour of High Speed 2 has now been comprehensively won, and we look forward to the publication of the hybrid Bill which will take the railway north from Birmingham towards the end of the next decade. When we weigh up the arguments, we should take account of what we know about High Speed 1, Britain’s first high-speed line, from London to the Channel Tunnel through Kent. As recently as last September, Visit Kent published a report to mark the 10th anniversary of the line. It found that since 2010, leisure journeys to Kent via High Speed 1 had increased ninefold, from 100,000 to 890,000 in 2016, and that the total economic impact of HS1 on the visitor economy in 2016 alone was valued at £72.7 million. For every High Speed 1 leisure journey made to Kent in 2016, £81.65 was added to the local economy. Since 2010, High Speed 1’s activity has led to the creation and support of 5,766 tourism sector jobs in Kent. These are real facts relating to a real railway, so when we hear about projections for High Speed 2 we need to take those into account and realise what the benefits to the Midlands and the north of England will be when the railway gets there.

The other really significant point to make about High Speed 1 is its astonishing reliability. In 2017, the average delay affecting all operators, including the high-speed domestic Southeastern services as well as Eurostar, is just six seconds per train—the sort of reliability figure that the Japanese railways achieve regularly with their high-speed trains. So, the lesson for High Speed 2 is that a new railway is a reliable railway. It is also a popular railway which attracts customers in greater and greater numbers and provides the capacity which our conventional main lines can no longer offer because demand has grown so much. Above all, these railways demonstrate, and provide the proof, that railways are central to economic growth and prosperity.

We have had a number of briefings for this debate. I particularly commend that of the Railway Industry Association, which points out that passenger numbers have doubled in the last 20 years, that the rail industry employs 240,000 people and contributes £11 billion gross added value to the economy, and that with a vibrant rail industry at home, we are now again able, as we did in the past, to sell our railway expertise abroad. As the Prime Minister’s trade envoy to Taiwan, I have had the privilege of leading a railway industry delegation to Taiwan, where there is huge interest in buying British expertise. I anticipate that I shall do that again in January. However, you need a vibrant rail industry at home before you can be credible when you are selling your expertise abroad.

This has been a good debate, and everybody has been reasonably positive. I learned more about the railways of north-east Lancashire than perhaps it was necessary to know, but it was great all the same to listen to the noble Lord, Lord Greaves, speak about that. I support his aspiration to take the Colne line through to Skipton. Indeed, I am a member of the pressure group that is attempting to do that. I look forward very much to hearing what the Minister has to say on her first outing at the Dispatch Box.

19:54

[Lord Bradshaw (LD)]

My Lords, I am very grateful to my noble friend for this debate. I, too, extend my welcome to the Minister. She will have quite a lot to contend with, not just with railways but with transport as a whole. I am not going to take a tour of my local railway line but talk about a very important railway line on which I rarely travel.

The business case for extending the electrification north of Bedford to the east Midlands was stronger than that of the Great Western, but the Government of the day decided otherwise. Subsequently, an expensive scheme of electrification was initiated on the Great Western when skills were at an appallingly low level. The trains themselves were developed by the Department for Transport, rather than by railwaymen. The result has been an extraordinarily expensive electrification scheme on the Great Western that has absorbed all the money which it had been hoped was available for electrifying the midland main line. The east Midlands cities of Derby, Leicester, Nottingham and Sheffield have paid a high price, and they are justifiably furious that this is so.

There is a way out of this if the Government will listen. As the noble Lord, Lord Berkeley, mentioned, Network Rail has recently stated that it would let private contractors bid for and deliver “big schemes”. A competition put to the market would allow a contractor to bid for the whole of the electrification scheme, including any modifications to the signalling. I am quite sure that this would attract bids from a number of multifunctional operators, or even from the regions in Network Rail itself if it were freed from the cloying influence of the infrastructure section of that company. The risk would be mitigated by coming to a long-term contract with the bidders, who would be responsible for delivering and maintaining the system, and who would, of course, be paid only on the results that they achieved. As a railwayman of long standing, although I have no interest to declare, I am absolutely certain that the whole scheme would come in at a price very much lower in unit cost terms than the Great Western, and it would avoid the expense and poorer performance of producing bi-mode trains. The plain fact is that straight electric trains are lighter, provide a more reliable railway, use less power, are cheaper to run than bi-modes and require less maintenance. They benefit far more than bi-modes from regenerative braking and I am quite certain they will make a significant reduction in journey times. I estimate a reduction of six minutes in the London to Sheffield journey time, which is very significant.

If this option were on the table, it would come in at a price level that would prove an attractive proposition—one that Ministers would be willing to accept—and it would give the east Midlands community something that it would accept. I beg the Government to look at this proposition very seriously, and I am willing to help deliver it. As the east Midlands franchise is now in course of development, now is the time to take a completely new look at this.

19:59

[Lord Rosser (Lab)]

My Lords, I too extend my thanks to the noble Baroness, Lady Randerson, for securing this debate. I also take this opportunity to welcome the Minister to her new and enhanced role, and extend to her my congratulations. I also extend my best wishes to the noble Lord, Lord Callanan, in his new role. Clearly, he is not looking for a quiet life. The Minister’s two most recent predecessors have moved on to departments dealing with people and issues outside our national boundaries; clearly, being a Transport Minister produces a desire to travel beyond our shores.

The noble Baroness, Lady Randerson, made reference to her lack of enthusiasm for seeing train operating companies in the public sector, so it would appear likely that the Government will be rather more in agreement with what the noble Lady, Baroness Randerson, had to say than they will almost certainly be with my contribution to this debate. Railway operation being in the public sector is not something new or original in this country, even today. London Underground is in the public sector, and it carries quite a few passengers. Even the previous Mayor of London did not seem to think this was an unacceptable state of affairs that had to be changed. There also seems to be quite a wide measure of public support for having the railways in public ownership, judging by opinion poll data.

However, I will use the time I have—indeed, I shall not take up all the time I now have—to raise a few specific questions with the Government on issues that potentially affect reliability and quality of service. In so doing, I make it clear that I would be more than happy to receive the responses in a letter following this debate.

Recently the Secretary of State wrote—as set out towards the end of the helpful House of Lords Library briefing for this debate—that, while one of his “biggest priorities” was northern transport projects,

“they must be designed and managed by the North itself”,

and that:

“It is not up to central government to grasp these opportunities”.


He said this despite the fact that Transport for the North is dependent on central government for the necessary resources to carry out projects of substance. In the light of rumours—let us hope that that is all they are—that seem to be circulating, can the Minister give a clear assurance that the Government are not contemplating or considering any change in the status, role or powers of Transport for the North?

I would also be obliged if the Minister could clarify—I sometimes get confused by this—which electrification proposals or schemes, or parts of electrification proposals or schemes, have recently been abandoned and which have been officially paused or deferred. I refer in particular to the Great Western electrification, the Midland Main Line electrification, the electrification of the trans-Pennine route and the Oxenholme to Windermere electrification.

On the Great Western electrification, when will the electrification of the route into Bristol now be completed—assuming that this part has been deferred or paused and not abandoned? As has already been said, at a time when the Government are seeking to reduce the use of diesel fuel and vehicles on our roads, they have just made a decision on railway electrification which will increase the expected future use of diesel power on our railways. The Government’s left hand does not always seem to know what their right hand is doing.

As is clear from this debate, we all want to see the railways expand and progress and have a successful future. However, this Government have almost certainly cancelled or deferred more electrification projects than any previous Government, on top of their record of hitting passengers by increasing fares faster than the rate of inflation at a time of austerity and no or low pay increases.

To come back to the Great Western electrification, what aspects of the contracts with Hitachi are having to be revised or renegotiated in the light of the Government’s decision to delay or abandon parts of the electrification scheme? Since the new bi-modal trains will now have to be used more than expected in diesel rather than electric mode, running costs and maintenance costs are likely to be even higher. That is on top of the fact that the bi-modal trains are presumably heavier than all-electric trains, since they have a diesel engine to carry around, which in itself already makes them more expensive, with higher running costs. Electric trains are usually regarded as being more reliable and cheaper to run than diesel trains. Do the Government accept that view?

There has recently been a change to the operation of the south-western franchise. Is the introduction or extension of driver-only operation included as part of the contract signed by the new operator of the south-western franchise?

On the issue of reliability, how much of the network grant to Network Rail, both in the current period and the next, is needed to meet contractual commitments to franchise operators under franchise agreements covering, for example, infrastructure improvements and levels and standards of maintenance—and thus presumably is not an amount that can be cut by central government—and how much of the network grant to Network Rail is potentially vulnerable since it could be cut by the Government without adversely impacting on contractual commitments with franchise operators under franchise agreements?

Talking of franchise agreements—this relates to something that the noble Lord, Lord Astor of Hever, said—how much have train operators been fined or otherwise penalised under the terms of their franchise agreements, and how many operators, for poor performance?

The Government’s statement of funds available in the period from April 2019 to March 2024, states that the Secretary of State is,

“looking to the ORR to ensure a strong and robust challenge on cost and deliverability. An important part of this will be to support an ambitious implementation of route devolution to deliver the benefits of competition and improved understanding of costs through better benchmarking”.

Can the Government say what precisely “route devolution” means in this context and what it is expected to deliver, and what is the nature and extent of the competition that will be created, as referred to in the statement of funds available?

I repeat that I would be happy with a written response to the questions I have asked, and I look forward to the Minister’s response to the many interesting and different points and issues raised during the course of this debate.

20:08

[The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)]

My Lords, I thank noble Lords for their enthusiastic and expert contributions this evening, and in particular the noble Baroness, Lady Randerson, for providing us with the opportunity to discuss this important issue. I also thank noble Lords for their kind words of welcome, and I look forward to working with all noble Lords on all issues around transport. It is a great pleasure that my first speaking duty as Transport Minister is to debate one of the most important challenges for every transport mode: reliability. I hope that noble Lords will bear with me if I am not able to answer all questions on day two of this brief. If I am unable to answer everything tonight, I will write.

Other than safety, there is no more important goal for the rail industry than to deliver reliable services for passengers. This is why the Government are investing at record levels in all our rail services. In October, the Secretary of State announced our intention to commit some £47.9 billion to improve the reliability of the rail network in the next control period. This is on top of the current record levels of investment, which will see £50 billion spent on reliability and transformational infrastructure enhancements. All that is in addition to the £55 billion already planned for HS2. Of course, high-speed rail is not just about faster trains; it will add desperately needed capacity to a network that is already under unprecedented strain.

There is no denying the fact that, as trains vie for space on a network unchanged in size since 1996, reliability has suffered, as several noble Lords have mentioned. Therefore, although we are dealing with a problem that is associated with success, not failure, we recognise that passengers have not always had the high-quality service that they deserve. One of the most effective measures for improving reliability has already been introduced: namely, allowing the industry to forward plan with certainty by replacing annual industry funding cycles with five-year control periods.

We are also fully focused on what can be done in the shorter term and are taking steps to deepen the collaboration between Network Rail and train operators on a franchise-by-franchise basis. This alliancing will create a culture of shared responsibility with the aim of achieving one goal—a more reliable service for passengers.

I have many more examples of what the Government are doing to improve reliability across the country, but I am keen to answer as many questions from noble Lords as I can, so I will move on to those and perhaps return to the other matters.

The noble Baroness, Lady Randerson, and my noble friend Lord Patten raised the issue of better performance measures. We are working with the industry to improve the focus on right-time arrivals. The noble Baroness rightly explained that at the moment we rely on arrivals within five or 10 minutes of the due time, which is not ideal. For the next five-year control period we will be reporting on-time performance at each and every station—that is, arrival within a minute of due time. There will be a heightened focus on performance, and it is hoped that this will improve reliability as the industry becomes more accountable to passengers.

The noble Baroness also asked about compensation. Again, we are working with the industry to try to improve this, most notably through the Delay Repay 15 scheme. However, we recognise that this is not always good enough and, as I said, we are working to improve it further.

My noble friend Lord Patten asked about the rail ombudsman. This was a manifesto commitment and we are working to deliver it as soon as we can. The ombudsman will help industry and government to identify issues of general consumer concern. I can confirm that we and the industry are very clear that the ombudsman must be independent.

I anticipated that my noble friend Lord Patten might raise the Tisbury issue. I am afraid to say that I understand that Network Rail’s Wessex Route Study concluded that the forecast levels of growth between Salisbury and Exeter did not justify the need for additional sections of double track.

My noble friend Lord Patten and the noble Lord, Lord Rosser, asked about the remedies available if franchises fail to deliver. All our franchises include a provision to take enforcement action in the event that a franchise fails to deliver on the obligations to which it has committed.

The noble Lord, Lord Snape, provided me with an education on bridge-bashing incidents. I believe that Network Rail is currently running a campaign to educate haulier drivers, but I will certainly take that issue back to the department to discuss it further—as I will the issue of suicides on track.

I listened with interest to the noble Lord, Lord Greaves, talk about Colne, with his numerous examples from “Colne Talk”. I was unaware of the issue but I certainly got the message, and we will take up his concerns with Northern Rail, including the need for bus substitution.

The noble Lord, Lord Berkeley, asked about the age of maintenance equipment. I am afraid that I will have to get back to him on that, although I can tell him that the example he gave was older than I am.

I can confirm that the Government are absolutely committed to working with the rail freight industry to support its continued success. I have not yet read the report from the National Infrastructure Commission but I will certainly do so. The noble Lord also made interesting points about Network Rail and I will reflect on them.

The noble Lord, Lord Astor of Hever, spoke about Southern Rail, I am very sorry to hear of his personal experience. We are of course all aware of the frustrations that passengers feel. I reassure all noble Lords that we are doing our best to resolve the issue. The performance of Southern is still not good enough. It has improved in recent months but, as the noble Lord mentioned, in the four-week period to 14 October only 80% of trains met the PPM target—which, as we discussed, is getting a train to its final destination within five minutes of its scheduled time.

We are determined to tackle overcrowding. A key aim of our investment strategy is to increase capacity for passengers, including with the new high-capacity 12-car trains on the Brighton route. We are working with train operators to improve the information available to passengers so that they can make an informed decision on how to locate the less busy services.

My noble friend referred to the £20 million announcement which we made in 2016 as an initial package. In January, the DfT also announced a £300 million package for work on Southern’s routes. The funding will improve reliability and allow us to replace old track, old points and signals and deal with some of the structural repairs in tunnels. We are working very closely with GTR to hold it to account.

The noble Lord, Lord Faulkner, spoke in support of HS2. Of course, this will form the new backbone of our national rail network, providing new capacity and better connecting our major cities while creating more space for commuter and freight trains on our busiest lines. This will cut congestion and improve service reliability. I look forward to working with noble Lords when we take the next iteration of the Bill through the House.

The noble Lord, Lord Bradshaw, raised the issue of the East Midlands franchise. I would be delighted to meet with the noble Lord to discuss that in detail further. I am afraid that I do not have a more detailed response at the moment.

The noble Lord, Lord Rosser, raised a number of points on electrification and bi-mode trains. Our decision to not progress with some electrification was made in order to deliver benefits to passengers sooner than otherwise would have been possible. While I listened carefully to his detailed questions, I will take him up on his offer to respond in writing and I thank him for that.

I thank all noble Lords for participating in this evening’s debate. Our railways are crucial to their daily users and to the UK’s long-term economic prosperity. However, their success is determined predominantly by the reliability of the services they offer. We have a strategy for turning this round. We have a clear vision for change and industry collaboration; unprecedented investment, past and future, targeted directly at the causes of poor performance; transformative infrastructure schemes across the country that will reduce congestion and improve reliability; brand new trains for passengers across the north, south, east and west of the country; and investment in electrification, bi-mode trains and state-of-the-art digital technology where it will best serve passengers. All of this is aimed at one outcome: improving reliability.

The Government are committed to providing funding for the framework and the incentives that the industry needs to improve performance and give passengers the reliability they expect from a 21st-century railway.

House adjourned at 8.17 pm.