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Oral Answers to Questions
(6 years, 9 months ago)
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Ruth George (High Peak) (Lab)
Helen Hayes (Dulwich and West Norwood) (Lab)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
Maintaining access to justice is a key principle when changes to the estate are proposed. Before issuing our consultation on court closures in January, we assessed the impact on access to justice—principally, the changes in travel time for court users. The decision to close a court is never taken lightly, and is made only after full public consultation and where we are satisfied that access to justice is maintained. Our reform programme will improve access to justice for many users, while allowing many needs to be met without the need to attend court. Online solutions and video hearings will make access to justice easier.
Ruth George
The Minister’s experience is not happening in my constituency, where Buxton court closed in 2016. Some of my constituents now have to travel 40 miles on a one-and-a-half-hour trip to Chesterfield court. The police say that it now takes them a whole day to take someone to court, whereas it used to take less than half a day, and that is having an impact on the number of offenders they can bring to court and on justice in my area. Please will the Minister take this into account in the current consultation?
Mr Gauke
I am grateful to the hon. Lady for her comments, but we also have to take into account the fact that 41% of courts and tribunals used less than half their available hearing capacity during the financial year 2016-17, and across the country courts are utilised at 58% of their capacity. In those circumstances, where resources are scarce we have to make decisions about the reforms we undertake.
Helen Hayes
I have been raising concerns about the closure of Lambeth county court for the past two years, and the court finally closed in December. My constituents facing the repossession of their homes must now attend Clerkenwell county court, which lawyers report to be a chaotic environment, which is impossible to contact by telephone, where cases and files frequently go missing and where the number of respondents failing to attend is rocketing. When will the Justice Secretary take action to address this unacceptable situation?
Mr Philip Hollobone (Kettering) (Con)
Very sadly, we have lost our magistrates court in Kettering, which, I have to say to the Government, was a mistake. It means that magistrates, the police and witnesses are all having to travel further. The closure of court sends a poor signal to the magistracy that they are not valued. Can we get rid of this ridiculous age limit, whereby magistrates have to retire at the age of 70?
Yasmin Qureshi (Bolton South East) (Lab)
The Government are continuing to cut court staff, close courts and sign contracts worth millions of pounds for their digitisation programme. These are huge changes, which will have an impact on our courts for decades. Will the Minister promise not to close any more courts or sign contracts until the courts Bill is published and the matter has been debated fully in this Chamber?
Mr Gauke
I hope to be able to bring forward further news on the courts Bill in the near future, but I am not going to give the undertaking the hon. Lady seeks. It is important that we continue to look to get the best out of the resources we have. If that means reforms here in making greater use of digital technology and ensuring that our court estate is as rational and efficient as possible, we will need to continue to do that.
Tony Lloyd (Rochdale) (Lab)
The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)
I understand that the hon. Gentleman has a great interest in this area and did a lot of work when he was the police and crime commissioner of Greater Manchester, calling for a review of how victims and witnesses are treated in the criminal justice system. It is right that cases come to court as quickly as possible, and timeliness in the criminal courts system is improving. The average mean number of days from listing to completion is down from 33 in 2015 to 27 in the third quarter of 2017. Unfortunately, as he will know, there are particular challenges in relation to sex offences, where it does take longer for cases to come to court.
Tony Lloyd
The Minister is absolutely right that there are complexities in cases of, for example, child sexual abuse or rape. Nevertheless, constant, even legitimate, adjournments in cases can lead to months of delay. Sometimes, it takes years before victims come to court. Victims who are already traumatised by what has happened to them deserve better than to be traumatised by the process. Can we make them a priority?
Lucy Frazer
The hon. Gentleman is absolutely right that we need to be extremely careful with vulnerable witnesses and witnesses in sex cases and ensure that they get justice. We are bringing in and rolling out measures on the taking of their evidence to ensure that they can do that pre-trial and therefore safely, which will speed up justice. As the hon. Gentleman knows and as the Secretary of State has mentioned, we are hoping to introduce the courts Bill, which will ensure the streamlining of justice and do away with unnecessary hearings. Hopefully, that will speed up access to justice.
Jim Shannon (Strangford) (DUP)
Will the Minister further outline what training lawyers receive in the handling of vulnerable witnesses? Does the Department intend to make updates to such training compulsory?
Lucy Frazer
In the family court, all judges have training on dealing with vulnerable witnesses. I am sure that the Crown Prosecution Service has training as well.
Alan Mak (Havant) (Con)
The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)
We are committed to improving the experiences of those who have become victims of crime, which is why, by the summer, we will publish our victims strategy, a key aspect of which is how we can improve support for victims as they interact with the criminal justice system.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
The serious case review of the appalling sexual abuse of girls and vulnerable adults in Newcastle was published last month. Although it generally praised the actions of local authorities, the police and so on, it also raised significant concerns about how the victims of these appalling crimes were supported and the way they were made to relive harrowing experiences. Will the Minister be responding directly to the Spicer review’s recommendations?
Dr Lee
I thank the hon. Lady for her question. The Department is of course aware of that serious case review of the sexual exploitation of children. The details are shocking. Like all the agencies involved, we are looking into ways to continuously improve our service. I shall write to the hon. Lady about whether we will respond directly to that review.
Patrick Grady (Glasgow North) (SNP)
Is the Minister aware of new regulations that the Scottish Government are introducing to exempt domestic abuse victims, recipients of crisis welfare support and those on low incomes from civil court fees? What discussions is he having with the Scottish Government about what lessons he might learn from that process?
Dr Lee
We have plenty to learn from what is happening in Scotland with regard to the way we deal with women who are victims of domestic abuse, and indeed offenders who have been victims of domestic abuse. As the Justice Minister with responsibility for the devolved Administrations, my discussions continue regularly. I look forward to learning from Scotland in future.
Sir Edward Davey (Kingston and Surbiton) (LD)
The Government had plans to legislate to ban alleged domestic abusers from cross-examining their victims in the family courts. Is that still Government policy? If so, when will such a provision be put before the House? Every day that there is a delay, more vulnerable people get tormented in court.
Dr Lee
The right hon. Gentleman is spot on in his analysis. The abuse and coercion of females, invariably by males, through the court process is wrong and not acceptable. We will bring forward details on how we intend to address that in the Bill that is coming later this year.
Gloria De Piero (Ashfield) (Lab)
The court experience can be a bewildering one—it can often feel like a different planet. That is not helped by the fact that 72% of court judges are men. It is International Women’s Day on Thursday; will the Government commit to a timetable to ensure that 50% of court judges are women?
Dr Lee
The hon. Lady points to something with which I would agree. It would be appropriate if the number of women in that position in our society was greater. I am supporting International Women’s Day by visiting HMP Bronzefield on Thursday evening. I cannot commit to a timetable—the hon. Lady knows that—but I will certainly take away her suggestion.
Philip Davies (Shipley) (Con)
The Minister of State, Ministry of Justice (Rory Stewart)
As the House will be aware, a major change in the law was brought in in 1988 to allow victims to be able to challenge unduly lenient sentences. At the moment, that applies to the most serious indictable offences, but the Government have recently extended it to a range of terrorist offences.
Philip Davies
I am grateful to the Minister for that answer, but as he well knows the Government have promised for quite some time—including in our manifesto—to extend it to a further range of offences. When will the Government pull their finger out and extend the number of cases that can be appealed for being unduly lenient, as we have been promising for quite some time?
Rory Stewart
As I have already said in my answer, the most serious offences—murder and so on—are already covered by the unduly lenient sentence scheme. We have extended it twice in the past few years, but we are talking very closely to my right hon. and learned Friend the Attorney General about looking at other opportunities to extend the scheme.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Secretary of State will know that I regularly write to him about unduly lenient and unduly severe sentences, but I never ever seem to get a reply. The fact is that too many women are locked up for non-violent offences for long periods of time, and that is the sort of case that I write to him about. Why do we never get any comeback?
Mr Speaker
It is reassuring to know that I am not the only person to whom the hon. Gentleman regularly writes. I am grateful to him for confirming that important fact on the Floor of the House.
Rory Stewart
To get to the nub of the hon. Gentleman’s question, there is a very serious issue here, which is that it is absolutely true that there are many more women in prison than we would like. The Under-Secretary of State for Justice, my hon. Friend the Member for Bracknell (Dr Lee), is working very hard to reduce that population for exactly the reasons that the hon. Gentleman has raised.
Emma Little Pengelly (Belfast South) (DUP)
While I welcome the fact that victims can ask for a review in relation to unduly lenient sentences, there is an absolute 28-day limit on that. A criminal case can be very traumatising for victims. Will the Minister consider perhaps introducing a discretion in relation to that 28-day absolute limit?
Rory Stewart
That is a very interesting idea. Perhaps the hon. Lady and I can sit down to discuss that interesting idea in more detail.
Andrew Bridgen (North West Leicestershire) (Con)
Chris Green (Bolton West) (Con)
Tom Pursglove (Corby) (Con)
The Minister of State, Ministry of Justice (Rory Stewart)
Skilled professional prison officers are absolutely heart and centre of running good prisons. That is why we have committed to recruiting 2,500 extra prison officers. I am pleased to say that we are now nine months ahead of target on delivering those prison officers.
Andrew Bridgen
I of course welcome the fact that the Government are making progress in recruiting extra prison officers, but will the Minister reassure the House that he is making every effort to retain the services of experienced and long-serving officers who are absolutely essential for mentoring new recruits into the service?
Rory Stewart
Absolutely. As my hon. Friend points out, this is not just about numbers. Working in a prison is incredibly challenging, and having the experience and the prison craft to do it is vital, so we are putting incentive schemes in place to try to retain our most experienced staff and to understand, when they do leave, why they are doing so.
Chris Green
There is a huge opportunity for rehabilitation in prisons, which is often not taken. What rehabilitative capacity will this increase in prison officers create?
Rory Stewart
The central objective of bringing in 2,500 extra prison officers is to allow us to pair each individual prison officer with six prisoners, which allows them to develop their individual personal relationship over time through weekly meetings to achieve exactly the rehabilitative and educational objectives needed to reduce reoffending and protect the public.
Tom Pursglove
The redevelopment of Wellingborough prison will provide many new employment opportunities for people across Northamptonshire, including in my constituency, but what are the Government doing to attract local people into the profession and to encourage them to stay in the role—including, for example, former members of the armed forces?
Rory Stewart
I am very pleased that this has been raised. As you will be aware, Mr Speaker, almost 40% of prison officers traditionally came from the armed forces, but that number has fallen. We are now working very closely with the Ministry of Defence to explain what an interesting career this can be, and we are doing a lot of advertising. But the most important thing we can do is remind people that, as we have all seen when meeting prison officers, although it is a very challenging and sometimes quite difficult career it also can be a deeply fulfilling one, and we would like to encourage many more people to come forward into the profession.
Mr Jim Cunningham (Coventry South) (Lab)
Rory Stewart
There are a number of drivers of suicide and self-harm, of which the number of staff is one. There are other questions around the estate, but probably the largest single driver that we have seen since 2011 is the use of new psychotropic drugs that are creating extraordinary psychotic episodes and leading to a direct increase in violence. We must address those drugs.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
The Government’s recruitment drive is welcome, but is it not true that we are just now catching up? The number of staff at Feltham young offenders institution in my constituency has fallen by a third, from 600 in 2013 to 461, which has had a huge impact on the governor and staff. The institution has been deemed unsafe for both staff and prisoners. Is it not time that the Government committed to working closely with staff and the Prison Officers Association to tackle this crisis and ensure that we get back on track with rehabilitation for young offenders?
Rory Stewart
One hundred per cent.—we will be working very closely with prison officers for exactly that reason. As the hon. Lady points out, we must get the numbers right. Those 2,500 extra prison officers will be vital in order to get the 1:6 ratio needed for rehabilitation.
Richard Burgon (Leeds East) (Lab)
I have listened carefully this morning to the Secretary of State talking about high-security prisons. Ministers talk of finally starting to address the crisis that they made by axing so many prison officers, yet over a third of high-security prisons have actually seen a fall in the number of prison officers since the Department’s so-called recruitment drive began. Will the Minister guarantee that these high-security prisons will have more staff by the next Justice questions?
Rory Stewart
One of the challenges around the high-security estate, particularly in places such as London, has been the employment opportunities. We have put new incentives in place—a signing-on bonus and a retention bonus—to recruit people in London. I am not in a position to guarantee the employment market exactly, but we are making a lot of progress—for example, in recruitment to the high-security Belmarsh Prison in London.
Richard Burgon
I thank the Minister for his answer, but nearly one in four prisons has seen prison officer numbers fall since the Government’s recruitment drive began. Moving on, we have another problem of very experienced officers leaving the service, creating a dangerous cocktail of inexperienced officers and experienced prisoners. In the last year alone, 1,000 prison officers with more than five years’ experience each have left the service. That is the equivalent of more than 5,000 years of experience in the Prison Service lost in the last year alone. Will the Minister guarantee that there will be more prison officers will five years’ experience at the end of the year than there are now?
Rory Stewart
The hon. Gentleman’s fundamental point is right: we need experienced prison officers. It is very difficult working in a prison. We can bring in huge numbers of new junior staff, but it will be difficult to get the kind of results we need unless they have experience. We therefore have a plan whereby we have targeted the prisons that are losing the most experienced officers and we are understanding why that is happening. We are both working with the staff and putting in place financial incentives to retain experienced staff.
Vicky Ford (Chelmsford) (Con)
Rory Stewart
I take this opportunity to pay tribute to the work of my hon. Friend, particularly on prisons and advocating for the prison population in her constituency. It is absolutely true that there is a strange anomaly in the human resources procedure, and we must tackle it. It cannot make sense that people are paid more to act up than to occupy the role. We want people to have career development and we will focus on the issue immediately.
John Mann (Bassetlaw) (Lab)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
In 2016-17, offenders completed 16 million hours of work and there were, on average, 11,200 offenders working in prison workshops. In the same period, 2,048 individuals were released on temporary licence for work-related purposes. The New Futures Network will aim to get even more prisoners working during their sentence and to see that that work leads to employment on release.
John Mann
I know that the Secretary of State is new in office, but people at Ranby Prison have been waiting for two years now to be able to get on with creating the sports facilities that they are capable of building inside— the seating, the dugouts for community sports, and even the changing rooms—but the one thing they have not been given is the Secretary of State’s permission to proceed with doing this commercial work. Could I incentivise him with perhaps a cup of tea afterwards, to concentrate his mind on why he needs to make this decision urgently?
Mr Gauke
Certainly, the prospect of a cup of tea with the hon. Gentleman does concentrate the mind, and I would be delighted to accept his invitation. We are trying to ensure that we have a prison system that encourages people to progress by having opportunities to gain experience of work, and I am keen to do that in this post.
Mr Speaker
The hon. Gentleman’s offer is an interesting one. It might also be thought by some to be a divisible proposition.
Robert Neill (Bromley and Chislehurst) (Con)
The Secretary of State’s speech this morning and his emphasis on more use of release on temporary licence is extremely welcome and constructive. Will he bear in mind, though, that the Through the Gate programme currently involves careers and employment advice being given only towards the very end of a prisoner’s sentence, whereas all the evidence suggests that that should happen much earlier?
Mr Gauke
I thank the Chair of the Justice Committee for his comments. I do want to look at whether we can expand release on temporary licence and provide these opportunities more widely. On his second point, I am keen to ensure that we provide as much support as possible and make it clear that there is a second chance for people who have gone to prison. If they abide by the rules and comply with the system, we want to give them the support to turn their lives around.
Kate Green (Stretford and Urmston) (Lab)
Will the Secretary of State consider what can be done to facilitate prisoners in applying for universal credit before they are released, so that they can receive the support of jobcentre and other staff immediately on release to move into paid work as quickly as possible?
Mr Gauke
The hon. Lady raises a good point, and rightly so. I am keen to do precisely as she suggests. A lot of work already goes on in prisons with, for example, work coaches providing this support. Part of the challenge is about access to emails. We need to look very carefully at that because it raises a large number of questions.
Andrew Selous (South West Bedfordshire) (Con)
Work experience in prison that leads to work on release is proven to reduce reoffending. Does the Secretary of State therefore believe that, while we rightly praise employers who offer ex-offenders work experience, we need to call out those employers who have a blanket ban on employing ex-offenders unrelated to any reasonable or fair risk assessment of doing so?
Mr Gauke
I agree with my hon. Friend. I have seen surveys suggesting that some 50% of employers simply will not engage. It is frustrating that when one speaks to employers who do take on ex-offenders, their experience is frequently very positive indeed. If we can increasingly build a culture whereby these offenders are given that opportunity, that is good for the offenders and good for society, as it will reduce reoffending.
Stephen Kinnock (Aberavon) (Lab)
The Minister of State, Ministry of Justice (Rory Stewart)
I believe that the hon. Gentleman and I have discussed this issue about five times in the past six weeks. I pay tribute to him for being a very firm advocate for his community. We have listened very carefully to his complaints. A decision on this prison is not likely to be imminent, as construction is not likely to be imminent. I would like to say, however, in addition to having listened to his complaints, that a prison built in the right place in the right way can provide significant economic opportunities for an area.
Stephen Kinnock (Aberavon) (Lab)
I thank the Minister for his answer, but the problem is that the proposed site is right next to residential areas, schools and a care home; is served by very poor transport links; is on a designated enterprise zone; is on marshland; and is restricted by a covenant saying that it can only be used as an industrial park. The Minister must surely agree therefore that the whole idea is a non-starter and should be scrapped with immediate effect.
Rory Stewart
The hon. Gentleman has made those points on a number of occasions. We are listening very carefully. Indeed, two members of our Department travelled to Port Talbot, to a very lively public meeting where those points were made repeatedly. We are listening very carefully to him.
Crispin Blunt (Reigate) (Con)
Would there be an answer to the hon. Gentleman’s question on the industrial estate if any new prison fully incorporated the work of ONE3ONE Solutions, which was designed more than six years ago to increase the productive and commercial output of prisoners? The numbers given by the Justice Secretary just now suggest that we have not made much progress in the number of prisoners who are working. Will any new prison include ONE3ONE Solutions, and how are we getting on with prisoners working overall?
Mr Speaker
Particularly if any prospect of their working is in Port Talbot, upon which the question is focused.
Rory Stewart
I look forward very much to meeting my hon. Friend to hear more about ONE3ONE Solutions.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
If a super-prison is built in Port Talbot, there will up to 1,000 more prison places in Wales than there are currently prisoners from Wales. Does the Minister share the Howard League’s concern that Wales is set to become Westminster’s penal colony?
Rory Stewart
I think we ought to be very careful with that kind of language. There are currently about 85,000 prisoners within the estate, so having 1,000 extra prisoners in Wales is not the creation of England’s penal colony.
Sir Desmond Swayne (New Forest West) (Con)
If that prison is built, will the Minister ensure that its chaplaincy avoids the extraordinary carrying-on that has recently been reported at HMP Brixton?
Rory Stewart
I would like to take this opportunity not to get drawn into the individual case of Brixton, which I am looking at personally, but to pay tribute in general to the work of the chaplaincy—that is the Christian chaplaincy, the Jewish chaplaincy and the five imams I met recently at Belmarsh Prison who are doing extraordinary work with the Muslim community.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
We are seeking a new deep and special partnership with the EU that works for the whole United Kingdom. Of course, Scotland and Northern Ireland have distinct legal systems. That is why, in the negotiations on civil judicial co-operation, market access for our legal services and criminal justice, I want a deal that works for Scotland and Northern Ireland as well as England and Wales. That is also why my Department is meeting regularly with the devolved Administrations to look at the ways in which our legal and justice systems are affected by EU exit.
Gavin Newlands
Unlike the European Union (Withdrawal) Bill, the Scottish Government’s legal continuity Bill gives the Scottish Parliament an enhanced role in scrutinising legal changes to devolved laws due to Brexit. What is the Secretary of State doing to urge his Cabinet colleagues to make similar provision for this Parliament for reserved matters in the EU withdrawal Bill?
Mr Gauke
In terms of what is described as the continuity Bill, I am not sure, in all honesty, how helpful or useful that will prove to be. The reality is that there is very close scrutiny in this House of the measures the Government are taking and the negotiations we are having.
Mr Speaker
The hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont) has the next question, so he does not have long to wait. We are saving him up for the delectation of the House. It will be a short wait.
Mr Gregory Campbell (East Londonderry) (DUP)
Is the Secretary of State looking forward to April next year, when each of the jurisdictions across the United Kingdom will be able to fashion and formulate legislation in keeping with the demands and the requirements of the people of the United Kingdom?
Joanna Cherry (Edinburgh South West) (SNP)
Unlike the EU withdrawal Bill, the Scottish Government’s legal continuity Bill contains a power to enable devolved law in Scotland to keep pace with EU law after Brexit, where appropriate. Does the Secretary of State agree that similar provisions should be made in the EU withdrawal Bill for reserved matters and for the benefit of the English legal system?
Joanna Cherry
Another point of contrast between the Scottish Government’s legal continuity Bill and the EU withdrawal Bill is that the Scottish Government’s Bill incorporates the charter of fundamental rights into Scots law in so far as it applies to devolved matters. What is the Secretary of State doing to make sure that everyone in the United Kingdom keeps their rights guaranteed by the charter, regardless of which jurisdiction they live in?
Mr Gauke
When the charter of fundamental rights was brought in, the argument was made at the time that it was essentially replicating rights set out elsewhere in other parts of EU treaties. To the extent that that fundamentally changes matters, there is certainly a debate to be had about it.
Jeremy Lefroy (Stafford) (Con)
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
Stephen Hammond (Wimbledon) (Con)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
It is absolutely right that we provide legal certainty for businesses, families and individuals as we leave the European Union. That is why, as the Prime Minister said in her speech on Friday, part of our future partnership with the EU will be to have effective reciprocal arrangements with the EU to deal with cross-border legal disputes in civil and family matters. The best way to deliver that co-operation is with a close and comprehensive agreement between the UK and the EU that sets out coherent common rules.
Jeremy Lefroy
I thank the Secretary of State for that answer. Leaving the EU is likely to lead to additional workload for the UK legal system. What additional resources have been made available to his Department and to the legal and courts system more generally to ensure that they are fully prepared?
Mr Gauke
My hon. Friend is right that we should be prepared. He will be aware that the Treasury has made another £3 billion of extra funding available to Departments for 2018 to 2020. We are in discussion with the Treasury about the allocation for the justice system, and we hope to agree it soon.
John Lamont
As we leave the European Union, many powers over many aspects of our legal and judicial enforcement will return from Brussels. What discussions have the Government had with the Scottish Government on how such policies will be implemented after Brexit, and does the Secretary of State agree that the SNP Government’s disruptive continuity Bill will do nothing but add to the uncertainty in our country?
Mr Gauke
We are committed to securing a deal that works for the entire United Kingdom—for Scotland, Wales, Northern Ireland and all parts of England. The Government expect that the outcome of leaving the EU will significantly increase the decision making of each devolved Administration. I can tell the House that I wrote to Michael Matheson last month to reaffirm the Department’s commitment to continue meaningful engagement with the Scottish Government.
Stephen Hammond
Professional services, including legal services, are clearly one of the key exports of this country. What is my right hon. Friend doing to ensure that there will be new arrangements for the recognition of legal standards and qualifications?
Mr Gauke
My hon. Friend raises a good question. We recognise that this is an important right to protect UK nationals, so that they can continue with their chosen line of work. It has already been agreed that those who have received a recognition decision or applied for one before the withdrawal date will be able to have their qualifications recognised after exit, including lawyers. Talks on many key issues, including the mutual recognition of professional qualifications, will continue into the next phase of negotiations. We will seek to reach an agreement with the EU on parts of MRPQ that are not seen as in scope of the withdrawal negotiations, such as home title practice. The Prime Minister has been clear that she wants EU nationals in the UK and UK nationals in the EU to be able to continue their lives broadly as now.
Mr Speaker
Order. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) has a not wholly dissimilar inquiry at Question 19, and he is welcome to come in on this question if he is so inclined, because we are not likely to reach Question 19.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Mr Gauke
On clause 6 and this question more widely, let us be clear: we are leaving the EU, so the jurisdiction of the ECJ will end, but EU law and the decisions of the ECJ will continue to affect us. For a start, the ECJ determines whether agreements the EU has struck are legal under the EU’s own law. If, as part of our future partnership, Parliament passes an identical law to an EU law, it makes sense for our courts to look at the appropriate ECJ judgments, so that we interpret those laws consistently. We have to remember, however, that our Parliament will remain ultimately sovereign. It could decide not to accept such rules, but there would be consequences for our membership of the relevant agencies and linked market access rights.
Alex Norris (Nottingham North) (Lab/Co-op)
The Minister of State, Ministry of Justice (Rory Stewart)
There have been a number of challenges with the community rehabilitation companies—CRCs—particularly in transition. It is not all bad news: in fact, the number of people reoffending has come down by 2% and certain CRCs, such as Cumbria and my own county, are performing well. But we need to focus particularly on the questions of assessment, planning and meeting, and that is what we have focused on in the report on London that is due on Thursday.
Alex Norris
Her Majesty’s inspectorate of probation recently warned that private sector probation companies’ focus on contract compliance rather the true quality of supervision was inevitably having an impact on culture and was undermining the established values of probation professionals. Does the Minister agree that it is time to put proper probation ahead of private profit?
Rory Stewart
The hon. Gentleman is a Nottingham Member, and I had a very interesting meeting with the CRC last week on my visit to Nottingham Prison, where the CRC is providing very good Through The Gate services—in fact, services for prisoners in prison that did not exist before the transformation reforms. Before, they were outside the prisons. I do not believe this is a question whether it is done by the private sector, the public sector or the voluntary sector, but it is a question of getting the basic standards right. As I say, that is exactly what we will be assessing the London CRC on on Thursday.
Imran Hussain (Bradford East) (Lab)
Putting it bluntly, probation privatisation has been a disaster. Despite that, the Government are still pursuing their privatisation agenda. Last week, the Government outsourced night staff in probation hostels. Given that those hostels house some of the most dangerous ex-offenders, will the Minister accept full responsibility for any impact on public safety resulting from that ideological outsourcing?
Rory Stewart
The shadow Minister refers to a decision by the National Probation Service—which is a Government- run service, so it is not a CRC service—to bring in additional contracted staff to provide double night duty in the hostels. That has been done because it is not work that is traditionally done by trained probation officers, but by contracted staff. Of course I will accept full responsibility for that decision.
Louise Haigh (Sheffield, Heeley) (Lab)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
This case is a matter for the Home Office and the police. However, I understand that the Home Office is working closely with the National Police Chiefs Council to understand the impact of the ruling and monitor current claims.
Louise Haigh
Failures to disclose digital evidence have led to the collapse of four rape trials in recent months. Does the Secretary of State agree that, in the light of the landmark ruling on the Worboys case, the lack of digital capacity now exposes the police to huge financial liability and risks breaching the human rights of victims on an unprecedented scale? Will he make representations to the Home Office to carry out a full resource impact assessment of the decision?
Stephen McPartland (Stevenage) (Con)
The Minister of State, Ministry of Justice (Rory Stewart)
I would like to express, as I am sure would the whole House, our immense gratitude for the role that service animals play and have played for a long time in public life. They frequently do things that humans would not do, ranging from detection of bombs and drugs to taking on violent criminals. There are serious aggravating circumstances that a judge can take into account when sentencing, and serious sentences can be given to anyone attacking a service animal—that is absolutely right.
Stephen McPartland
Police dog Finn was brutally stabbed several times in my constituency while apprehending a violent criminal. The current law treats police dog Finn, a canine hero, like a piece of computer equipment—the charge is criminal damage. This is unacceptable. My right hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) is leading a campaign to introduce Finn’s law. Will the Minister agree to meet me and my right hon. and learned Friend, so that we can provide greater protection for our service animals in the course of their duty?
Rory Stewart
I pay tribute to my hon. Friend and others for the very active campaign that they are leading. I would of course be delighted to meet them to discuss that law.
David Hanson (Delyn) (Lab)
Given that Canada, America, Australia and many European Union states have a law similar to that being introduced by the right hon. and learned Member for North East Hertfordshire—I am a sponsor of his Bill—why did the Minister order the Government to block the Bill last Friday?
Rory Stewart
As we have discussed, very significant sentences of up to 10 years can already be imposed for this kind of action, but I would be delighted to discuss the issue in more detail with the right hon. Gentleman and my hon. Friends.
Mr Speaker
And doubtless with the right hon. and learned Member for North East Hertfordshire (Sir Oliver Heald).
Sir Oliver Heald (North East Hertfordshire) (Con)
I am very grateful to the Minister for that kind offer. I just make the point that there is a gap in the law. There are legal difficulties with prosecuting under the Animal Welfare Act 2006, because of the drafting of section 4. Prosecuting for criminal damage means that the value of the animal determines the sentence. However, a police dog like Finn, who was eight years old, is not worth much money—he is of course invaluable to PC Dave Wardell and the country’s police enforcement efforts, but he is not worth a lot of money. I am therefore grateful that the Minister will to talk to us about this issue.
Mr Speaker
Perhaps we could have an Adjournment debate about Finn, if the right hon. and learned Gentleman has not already procured such.
Sir Oliver Heald
I have already done that, Mr Speaker, and I have a ten-minute rule Bill as well.
Mr Speaker
Very well done. The right hon. and learned Gentleman is obviously ahead of events. I was enjoying the family history he was educating us on just now.
Rory Stewart
My right hon. and learned Friend is a great authority on the law. There are a number of issues here, ranging from the exact sentences that can be imposed to the work my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs is doing to introduce new sentences for animal cruelty. I look forward to discussing all those issues both in the House and over a cup of tea.
Tracy Brabin (Batley and Spen) (Lab/Co-op)
The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)
Health services are commissioned by NHS England, which is responsible for assessing provision of mental health treatment in prisons in England. In Wales, health is devolved to the Welsh Government and separate arrangements are made for assessment.
Mr Speaker
I think the Minister might be a bit confused. I have the impression that he is answering a question that would have been put if the hon. Member for Coventry South (Mr Cunningham) had not been called earlier on a different question. The question with which we are now dealing is Question 16, on levels of violence and self-harm.
The Minister of State, Ministry of Justice (Rory Stewart)
My apologies, Mr Speaker.
There have been worrying increases in levels of violence and self-harm. As was said earlier, a lot of that is being driven by new drugs inducing psychotic episodes. We are working hard on this issue. We have provided training to an additional 14,000 prison officers focused on issues of violence and self-harm. More staffing will help, but there is much more to do.
Tracy Brabin
The Minister will be aware that incidences of self-harm in prisons have risen by 75% since 2007. I appreciate the Minister giving us the drivers of violence and self-harm in prisons, but will he tell us in more detail what steps he will take to reduce the amount of self-harm and suicide? Does he agree that part of the solution is encouraging the use of mental health treatment requirements, which has fallen by 48%?
Rory Stewart
The hon. Lady is absolutely correct that mental health is at the heart of a lot of these issues. On the concrete steps we are taking, one is the training for 14,000 additional officers and the second is the proper use of the ACCT—assessment, care in custody and teamwork—strategy, which is the process for assessing the risk posed to the prisoner and coming up with a plan to deal with it. We have managed to significantly reduce suicide over the past 18 months, but the level is still far too high. Any death is a great tragedy, and we will continue to work very closely to reduce suicide further.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Sixty-two years ago, Bessie Braddock, the then MP for Liverpool Exchange division, stood in this Chamber and raised concerns about the appalling conditions at Liverpool Prison—then called Walton Prison—and particularly the treatment of prisoners with mental illness. In the past two years at that very same prison, seven inmates have taken their life, including Tony Paine two weeks ago. I note that the Minister said on 22 February that the conditions at the prison were “very disturbing” and “unacceptable”. What action is he going to take today to ensure that all prisoners’ mental health needs are adequately met and that no other prisoner takes their life in one of our prisons?
Rory Stewart
As the hon. Lady mentions, the situation at Liverpool Prison was very disturbing. I have visited Liverpool Prison, and mental health provision is now significantly better than it was at the time of the inspection—I spent quite a lot of time with the mental health staff there—but there is a broader issue. Although we are reducing suicide, there is still far too much of it happening. A lot of this will be about making sure not only that we deal with drugs, but that we have the right kind of purposeful activity in prisons, so that prisoners do not feel the temptation to take their own life.
Kerry McCarthy (Bristol East) (Lab)
The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)
The hon. Lady is absolutely right to highlight the value of early legal advice, which is why the Department spent £100 million in legal aid on early legal advice for civil cases last year.
Kerry McCarthy
Citizens Advice has estimated that for every £1 of legal aid spending on housing advice the state would save over £2, and that if the advice was on debt and housing, it would save even more. Will the Minister commit to commissioning research into the cost-effectiveness of reintroducing early legal advice in the housing sector, so that we can save money in the long run?
Lucy Frazer
Advice can already be taken through a telephone hotline in relation to housing. Legal aid is available where homelessness is a risk, and debt leads to homelessness. A whole variety of early legal advice is available through legal aid at the moment, but as the hon. Lady will know, we are conducting a review of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, and this issue will be considered.
Maria Caulfield (Lewes) (Con)
The Minister of State, Ministry of Justice (Rory Stewart)
Reducing reoffending is above all about having healthy relationships between the individual and their family, the individual and society, and the individual and the state, so having that relationship with the family is vital. That is partly, of course, about the prisoners’ entitlement to two visits a month. There have been some excellent examples in Liverpool—for example, at Altcourse Prison, with its fantastic family centre for meeting family—and it is also about having telephony in place to keep those contacts up.
Maria Caulfield
I thank the Minister for his response. Does he agree with the findings in the Conservative-led strengthening families manifesto, which found that if family contact is maintained, reoffending can be reduced by more than 39%?
Rory Stewart
Absolutely. Getting that family relationship right and embedding people properly with their family is vital to reducing reoffending, along with many of the measures we take on education.
Priti Patel (Witham) (Con)
The Secretary of State for Justice and Lord Chancellor (Mr David Gauke)
For prisons to be effective, we must get the basics right. This means creating prisons that are safe, secure and decent. It also means tackling the ringleaders of serious organised crime, so that they cannot continue to profit from their crimes and ruin people’s lives through drugs, deaths and violence from behind bars. I can announce that we are investing an extra £14 million to tackle serious organised crime. This includes creating new intelligence and serious organised crime teams to support work with the National Crime Agency, and enhancing our intelligence and information-gathering capacity across the country. I will also look at how we categorise prisoners to make sure that we are using our most secure prisons to tackle ongoing criminality behind bars. At the same time, we will reset the system of incentives in our prisons, so that they work much more in the favour of prisoners who play by the rules and want to turn their lives around, while coming down harder on those who show no intention of doing so.
Priti Patel
The number of foreign national offenders from EU countries in our prisons remains at around 4,000. As part of the negotiations on leaving the EU, is my right hon. Friend liaising with other Government Departments, including the Home Office and the Department for Exiting the European Union, to ensure that we can deport more of the thousands of EU nationals who are in our prisons and remove these dangerous people from Britain?
Mr Gauke
Since 2010 we have removed more than 40,000 foreign national offenders from our prisons, immigration removal centres and the community. A range of removal mechanisms exist that enable foreign offenders to be returned to their home countries, and we are working closely with the Department for Exiting the European Union and the Home Office as we consider our future criminal justice arrangements with the EU, with the aim of carrying on our close working relationship.
Richard Burgon (Leeds East) (Lab)
In a formal statement, the previous Secretary of State for Justice said that the Grenfell inquiry would
“get to the truth and see justice done”.
For that to be the case, Grenfell survivors and the bereaved families must have full confidence in it, so to tackle the obvious current lack of trust, does the Minister agree with survivors and bereaved families who are calling for a broad inquiry panel, as there was in the watershed inquiry into the death of Stephen Lawrence?
Andrew Bridgen (North West Leicestershire) (Con)
The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)
I am very aware of the importance of looking at family law, in the context of the fact that relationship breakdown leads to unwelcome life chances for the children of that relationship. I am happy to meet my hon. Friend, who should know that I have already met the president of the family division and the chief executive of the Children and Family Court Advisory and Support Service, and to discuss this issue.
Stephen Kinnock (Aberavon) (Lab)
The Minister of State, Ministry of Justice (Rory Stewart)
I am very grateful. There is almost no Member of Parliament who has been more assiduous on this subject, with, I think, five meetings in the past six weeks. There was a vigorous encounter between my officials and the hon. Gentleman’s community on their last visit. I would like very much to have the next meeting here in London, if that is possible, and I would be delighted to discuss the issues on that occasion.
Kevin Foster (Torbay) (Con)
Rory Stewart
That is an interesting example of a community rehabilitation company in Devon and Cornwall. The particular strengths of the Torbay approach seem to us to be in the partnership working with the police and children’s services and in the work done with Catch22 on accommodation.
Alex Norris (Nottingham North) (Lab/Co-op)
Rory Stewart
As the hon. Gentleman will know, I had a serious visit to HMP Nottingham last week. I pay tribute to the prison officers and the governor for their work, but there are a number of serious challenges in the prison. We are particularly focused on safety. We have a new manager in place and a new violence reduction strategy, and the ACCT process will be central to solving these problems.
Sir Edward Leigh (Gainsborough) (Con)
Rory Stewart
It is absolutely true that many of the serious challenges we have been discussing in the House today, particularly on violence, self-harm and drug use, focus on the population imprisoned for less than 12 months. The more we can do to try to rehabilitate people in the community while protecting the public the better.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
Lucy Frazer
I thank the hon. Lady for her question. It was a pleasure to meet her recently to discuss the issue, and I am grateful to her for following up with an email on Friday. I am very happy to meet her again to discuss the issue, and I have sent her a letter today, as I said I would, setting out a timetable for the consideration of sites. When she has had a chance to look at that I am happy to meet her again.
Alan Mak (Havant) (Con)
Mr Gauke
I very much agree. Indeed, I advanced that argument this morning in a speech to the Royal Society of Arts. If prisoners are abiding by the rules and complying with what is required of them, governors should have more flexibility to reward them with additional privileges. I think that that could help to move people in the right direction and change behaviour in a positive way.
Justin Madders (Ellesmere Port and Neston) (Lab)
Lucy Frazer
The Department is responsible for upholding the law, and it does so. As for the specific issue of refunds, the Department has done a great deal of work in trying to explain to interested bodies how they can make a refund. It has written to Citizens Advice, the Law Society, the Bar Council and the Free Representation Unit. New figures will be published on 8 March. If people do not receive refunds, we will continue to liaise with them.
Maria Caulfield (Lewes) (Con)
Rory Stewart
Levels of literacy in prisons are shocking. About 54% of prisoners currently have a reading level below that which we would expect in an 11-year-old. Let me put that in context. Nearly 50% of prisoners have been excluded from school at some point, compared with about 2% of the general population. Our solution is to give governors more control of their education budgets, and to ensure that literacy training is available in every prison as part of the core curriculum.
Derek Twigg (Halton) (Lab)
The Minister’s earlier answers to questions about violence in prisons focused on prisoner violence. Our hard-working prison officers face daily violence in their jobs. I have just written to the Minister about a constituent who had urine and excrement poured over him, but let me now ask him a wider question. What is the Department doing to ensure that prison officers are given full support when they are assaulted, and also to ensure that mental health services become better than they are at present?
Rory Stewart
We have a huge obligation to prison officers, particularly when they are assaulted. We can deal with the problem in a number of ways. We need to ensure that prisoners are punished for assaults, and to make it clear that they will be punished. We need to reduce drugs, and we need violence reduction strategies. We are already using more CCTV cameras and body-held cameras to record assaults, but our prison officers must feel safe in their environment. [Interruption.]
Mr Speaker
I very much hope that the Foreign Secretary is beetling his way towards the Chamber as I speak, and I dare say that that will be the aspiration of the House. Either the right hon. Gentleman himself or one of his ministerial accomplices is required in the Chamber. We cannot ask the Lord Chancellor to deal with the next business; that would be unreasonable. [Hon. Members: “Border check!”] I do not think that the Foreign Secretary is between Islington and Camden. No, I am sure he is not.
James Duddridge (Rochford and Southend East) (Con)
On a point of order, Mr Speaker.
Mr Speaker
No, I will not take points of order now. I am always interested in the views of the hon. Gentleman, but not now. We will hear from him in due course, and we look forward to that with interest and anticipation. Well done—the hon. Gentleman should stay in his seat, and we will hear from him in due course.
Fiona Bruce (Congleton) (Con)
I commend the Prisons Minister for following up his predecessor’s strong support for Lord Farmer’s review. Will he meet me to discuss extending its reach to the welfare of prisoners’ children, especially at the point—[Interruption.]
Mr Speaker
Order. It is very good of the Foreign Secretary to drop in on us—we are deeply grateful to the right hon. Gentleman. However, I think that the hon. Member for Congleton (Fiona Bruce) should be given a chance to reprise her question, because I have interrupted her. Blurt it out from start to finish.
Fiona Bruce
Will the Prisons Minister meet me to discuss the welfare of prisoner’ children, especially at the point of sentencing? There are 200,000 such children a year, and they often fall through the care system completely.
Rory Stewart
Absolutely. One of the most terrifying statistics is the very high number of prisoners’ children who go on to offend themselves. I should be delighted to meet my hon. Friend to discuss not just the issue of families, but the issue of children in particular.
Ruth Cadbury (Brentford and Isleworth) (Lab)
What are the Government doing to reverse the dramatic fall in community sentencing, which has nearly halved in the past decade, with a particularly sharp drop in recent years?
Mr Gauke
We have seen an increased use of suspended sentences, but the hon. Lady is right that we must do more. We want to work closely with community rehabilitation companies and the National Probation Service, because the judiciary must have confidence in non-custodial sentences as well as custodial sentences.
Mr Speaker
The Foreign Secretary is scribbling away with great determination and no little emotion, and we are grateful for that, but I have an appetite to hear a couple more questions—[Interruption.] Yes, I want to hear a couple more questions to the Justice Secretary while the Foreign Secretary is recovering his breath.
Mr Philip Hollobone (Kettering) (Con)
We need compulsory prisoner transfer agreements to send foreign national offenders back to prison in their own country. Are the Government seeking to sign any new such agreements? If so, with which countries?
Mr Gauke
As I said to my right hon. Friend the Member for Witham (Priti Patel), in the last few years, something like 40,000 foreign national offenders have been returned to their own countries. We continue to seek to sign additional agreements so we can continue to make progress with this.
Eleanor Smith (Wolverhampton South West) (Lab)
Will the impact of cuts to legal aid on unaccompanied and separated children under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 be considered?
Lucy Frazer
The purpose of the review is to look at the effectiveness of the legislation, so any changes made by LASPO will be considered.
Sir Desmond Swayne (New Forest West) (Con)
So what exactly has happened at the chaplaincy at HMP Brixton?
Rory Stewart
That is a brilliant question. The answer is that I am still trying to get to the bottom of it and I cannot provide an answer to the House.
Mr Speaker
May I exhort the right hon. Member for New Forest West (Sir Desmond Swayne) for the umpteenth time to circulate his textbook on succinct questions to all colleagues in the House? If he is in a generous mood, he might even offer copies to people sitting in the Public Gallery as well?
Mr Speaker
I will ignore that sedentary chunter from the hon. Gentleman, which is unworthy of someone of his normal generosity of spirit.
Daniel Zeichner (Cambridge) (Lab)
Last week the Justice Committee produced an excellent report highlighting some of the issues around virtual courts. We might have a virtual Foreign Secretary today, but the Committee raised some important issues, so why is the Secretary of State rushing to close courts such as that in Cambridge when we are yet to have a wider discussion about virtual courts?
Mr Gauke
As I said in reply to the very first question of this session, it is important that we make progress in using the court estate as sensibly as possible. It is underused, and when resources are scarce, it is important that we use them more efficiently. It is also right that we make advances in using digital technology so that access to justice becomes easier.
Mohammad Yasin (Bedford) (Lab)
Last weekend a prison officer at HMP Bedford was rushed to hospital with a serious brain injury inflicted by a prisoner. Other serious incidents occurred over the weekend, such as prison officers running for their lives to hide from an out-of-control prisoner. The weekend before, five prison officers were taken to A&E due to injuries inflicted by prisoners. Will a prison officer have to die before this Government act to keep prison staff safe in the line of duty?
Mr Gauke
The events in Bedford at the weekend were deeply disturbing and the sympathy of the whole House goes out to that prison officer and his family. Violence against prison officers is at an unacceptable level. There were 8,000 incidents last year and, as I set out in a speech this morning, we must take this incredibly seriously. We must recognise that the driver of a lot of this violence is drugs, and that the driver of a lot of drugs in prison is serious organised crime. I want to ensure we do everything we can to address that, because prison officers do a great job and it is far too dangerous for them.
Diana Johnson (Kingston upon Hull North) (Lab)
With the support of Co-op Funeralcare, Dignity plc, the National Association of Funeral Directors, the bereavement charity Cruse and the all-party group on baby loss, 50 bereaved parents in Hull are still seeking an independent inquiry into what happened to their babies’ ashes. Does the Minister still stand by Hull City Council, which has refused to have that independent inquiry?
The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)
This situation was truly appalling—the hon. Lady knows that I think that. The review was comprehensive, so I will not be changing any decisions any time soon. My heart goes out to all those involved, as clearly this was very traumatic, but the review was comprehensive.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
Instead of carrying out their in-house review of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, should Ministers not follow the excellent example of the Scottish Government by having an independent review of legal aid, and perhaps looking at how the Scottish scheme has managed to achieve greater scope and eligibility but with lower costs?
Lucy Frazer
The review of legal aid will be important. We will be inviting a number of independent experts to give evidence so that we can make the necessary decisions.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Secretary of State will know that even in the best justice systems there are miscarriages of justice. Will he therefore pay attention to the fact that so many people who are later found to be innocent and have their sentences quashed, having spent years in prison, never get any compensation?
Government Policy on Russia
(6 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Tom Tugendhat (Tonbridge and Malling) (Con)
(Urgent Question): To ask the Secretary of State for Foreign and Commonwealth Affairs if he will make a statement on Her Majesty’s Government’s policy towards Russia.
The Secretary of State for Foreign and Commonwealth Affairs (Boris Johnson)
I am grateful to my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) for raising this important matter. Although he asks a general question about Russia, let me immediately say that there is much speculation about the disturbing incident in Salisbury, where a 66-year-old man, Sergei Skripal, and his 33-year-old daughter Yulia were found unconscious outside The Maltings shopping centre on Sunday afternoon. Police, together with partner agencies, are now investigating.
Hon. Members will note the echoes of the death of Alexander Litvinenko in 2006. Although it would be wrong to prejudge the investigation, I can reassure the House that, should evidence emerge that implies state responsibility, Her Majesty’s Government will respond appropriately and robustly, although I hope that hon. Members on both sides of the House will appreciate that it would not be right for me to give further details of the investigation now, for fear of prejudicing the outcome.
This House has profound differences with Russia, which I outlined in the clearest terms when I visited Moscow in December. By annexing Crimea in 2014, igniting the flames of conflict in eastern Ukraine and threatening western democracies, including by interfering in their elections, Russia has challenged the fundamental basis of international order.
The United Kingdom, under successive Governments, has responded with strength and determination, first by taking unilateral measures after the death of Litvinenko, expelling four Russian diplomats in 2007 and suspending security co-operation between our respective agencies, and then by leading the EU’s response to the annexation of Crimea and the aggression in Ukraine by securing tough sanctions, co-ordinated with the United States and other allies, targeting Russian state-owned banks and defence companies, restricting the energy industry that serves as the central pillar of the Russian economy, and constraining the export of oil exploration and production equipment.
Whenever those sanctions have come up for renewal, Britain has consistently argued for their extension, and we shall continue to do so until and unless the cause for them is removed. These measures have inflicted significant damage on the Russian economy. Indeed, they help to explain why it endured two years of recession in 2015 and 2016.
As the House has heard repeatedly, the UK Government have been in the lead at the UN in holding the Russians to account for their support of the barbaric regime of Bashar al-Assad. The UK has been instrumental in supporting Montenegro’s accession to NATO and in helping that country to identify the perpetrators of the Russian-backed attempted coup. This country has exposed the Russian military as cyber-criminals in its attacks on Ukraine and elsewhere.
As I said, it is too early to speculate about the precise nature of the crime or attempted crime that took place in Salisbury on Sunday, but Members will have their suspicions. If those suspicions prove to be well founded, this Government will take whatever measures we deem necessary to protect the lives of the people in this country, our values and our freedoms. Though I am not now pointing fingers, because we cannot do so, I say to Governments around the world that no attempt to take innocent life on UK soil will go either unsanctioned or unpunished. It may be that this country will continue to pay a price for our continued principles in standing up to Russia, but I hope that the Government will have the support of Members on both sides of the House in continuing to do so. We must await the outcome of the investigation, but in the meantime I should like to express my deep gratitude to the emergency services for the professionalism of their response to the incident in Salisbury.
Several hon. Members rose—
Mr Speaker
Order. Unfortunately, the Foreign Secretary arrived slightly later than scheduled and addressed the House for slightly longer than the time limit allows, but by virtue of my generosity of spirit, he has thus far escaped unsanctioned in respect of either offence. His acknowledgement of same would of course be appreciated by the House.
Mr Speaker
I must now make some allowance for the shadow Foreign Secretary, Emily Thornberry—[Interruption.] Oh, only once we have heard from Mr Tugendhat; I am ahead of myself.
Tom Tugendhat
Thank you, Mr Speaker. It is good of you to have accorded this urgent question.
I welcome my right hon. Friend’s tour of the world and of the various abuses from Russia that we are dealing with at the moment. Though it is, as he rightly says, too soon to point fingers at Moscow regarding what happened in Salisbury, it is quite clear that we are seeing a pattern in Russian behaviour. Indeed, BuzzFeed’s Heidi Blake, a journalist who has been researching this subject intensively over a number of years, has come up with 14 deaths that she attributes to Russian elements, and there are others who have pointed this out. Only today, Shashank Joshi, a researcher at the Royal United Services Institute, indicated that murder is a matter of public policy in Russia today. My right hon. Friend’s ministerial colleague, the Minister for Europe and the Americas, was also absolutely right to criticise the murder of Boris Nemtsov only recently.
We are seeing a pattern of what the KGB would refer to as “demoralise, destabilise, bring to crisis and normalise”, so does my right hon. Friend agree that Russia is now conducting a form of soft war against the west, that its use of so-called fake news—more often known as propaganda and information warfare—is part of that, and that this requires a whole-of-Government response, which his Department is best placed to lead?
Boris Johnson
I am grateful to my hon. Friend, who is indeed correct that Russia is engaged in a host of malign activities that stretch from the abuse and murder of journalists to the mysterious assassination of politicians. I am glad that he mentioned Mr Nemtsov, as in December I was privileged to pay tribute to his memory at the site of his murder on a bridge in Moscow.
It is clear that Russia is, I am afraid, in many respects now a malign and disruptive force, and the UK is in the lead across the world in trying to counteract that activity. I must say to the House that that is sometimes difficult, given the strong economic pressures that are exerted by Russia’s hydrocarbons on other European economies, and we sometimes have difficulty in trying to get our points across, but we do get our points across. There has been no wavering on the sanctions regimes that have been imposed by European countries, and nor indeed will there be such wavering as long as the UK has a say in this.
A cross-Government review is an interesting idea that I will take away and consider. As my hon. Friend knows, the National Security Council has repeatedly looked at our relations with Russia, which are among the most difficult that we face in the world. I assure him that we will be looking at it again. We must be very careful in what we say because it is too early to prejudge the investigation, but if the suspicions on both sides of the House about the events in Salisbury prove to be well founded, we may well be forced to look again at our sanctions regime and at other measures that we may seek to put in place.
Emily Thornberry (Islington South and Finsbury) (Lab)
Thank you, Mr Speaker, for granting this urgent question. I thank the Chairman of the Foreign Affairs Committee, the hon. Member for Tonbridge and Malling (Tom Tugendhat), for securing it.
We are all extremely concerned about the incident in Salisbury yesterday, and I am sure we all hope for the recovery of Mr Skripal and his daughter. I am sure both sides of the House will join me in praising the professionalism and frankly, given the nature of previous poisonings, the bravery of the emergency services that dealt with this incident.
As the Secretary of State says, the incident has disturbing echoes of the assassination of Alexander Litvinenko 12 years ago, and it comes after the exposure last June by BuzzFeed News of the fact that, since 2012, 14 individuals considered hostile to the Putin regime have died in mysterious circumstances on British soil. However, the investigation of this particular incident in Salisbury has only just begun, and I do not believe it is appropriate for us to indulge in speculation while the investigating authorities are still doing their job, so I will not ask the Secretary of State any specific questions about the incident or the Government’s response, although I am sure the time for those questions will come soon.
I have two related questions for the Secretary of State. He talks about working across Europe in relation to sanctions. As we leave the European Union, how will we continue to work with our European allies on sanctions?
Secondly, on the issue of Russian human rights abuses, the Sanctions and Anti-Money Laundering Bill is currently upstairs in Committee where, right now, the Government are resisting an amendment that would enable Britain to sanction individuals who perpetrate gross human rights abuses, such as those who tortured Sergei Magnitsky to death in a Moscow jail in 2009. Can the Secretary of State explain why the Government are taking such a negative stance against our Magnitsky amendment? Surely they should be supporting it.
Thirdly, the Secretary of State will, like me, surely have heard President Putin’s speech and have been disturbed to hear Putin boasting about the proficiency of Russia’s new nuclear weapons systems, all in response to Donald Trump’s planned expansion of America’s nuclear arsenal. Both are driving a coach and horses through the nuclear non-proliferation treaty. What are the Government doing to urge all parties to renew their compliance with that vital international treaty?
Boris Johnson
The right hon. Lady is right to place that emphasis on the breaches of the intermediate-range nuclear forces treaty that we are now seeing and on the risk to the nuclear non-proliferation treaty, which is one of the great achievements of the post-war order. The UK is active in New York, and, with our American friends, we are making the case that it is time to bring the Russians firmly to heel. There is no doubt that there is a great deal of anxiety about what is now happening. Fundamentally, it is not in Russia’s interest.
The right hon. Lady makes an interesting point about so-called Magnitsky amendments. Members on both sides of the House are interested in tabling such amendments to the Sanctions and Anti-Money Laundering Bill, which, as she rightly says, is now in Committee. We will look at all such proposals with an open mind. We are very interested in trying to address the issue of those who grossly abuse human rights, which is what everybody wants to achieve. As currently framed, the Bill, a fortiori, tackles such gross abuses because it tackles all those who abuse human rights. I am conscious that the House wishes to go further, and we are happy to look at that.
Mr Keith Simpson (Broadland) (Con)
I follow the example of the shadow Foreign Secretary by saying that, as a member of the Intelligence and Security Committee, I do not intend to ask the Foreign Secretary for details of the recent incident, but does he agree that, after more than a decade now, we can see the direction of travel of the Putin regime? Its ability to murder people it regards as traitors is in the finest traditions of the KGB, the NKVD, et cetera. Are the measures taken by the British Government having any effect whatsoever on Putin?
Boris Johnson
As I have told the House, we believe the sanctions that we have been instrumental in implementing have had an effect, and it is certainly the case that the Russian economy took a serious hit as a result of those sanctions—more than 100 individuals have been listed, and the sectoral measures cover energy, art, the arms trade and financial services. The sanctions are having an effect. If I may say so, it is a measure of the UK’s leading role in enforcing those sanctions and in calling Russia out that Russian rhetoric towards the UK is quite as hostile as it is.
Stewart Malcolm McDonald (Glasgow South) (SNP)
First of all, my thoughts go to Mr Skripal and his daughter, who we hope will recover. Does this not demonstrate the different types of threat that we face? The threats are not always obvious or traceable. This is not a classic article 5 scenario, but this type of scenario is not unknown to our allies in the Baltic states. Does this not cut to the heart of the modernising defence programme in terms of how we protect human assets like Mr Skripal in this country? Can the Foreign Secretary tell us whether this type of scenario will lead to a review of how we best protect these people across the United Kingdom?
Boris Johnson
The hon. Gentleman makes a very perceptive point about the way in which such attacks affect not only the UK but many of our NATO allies. If what happened in Salisbury turns out to be as many suspect, we will co-ordinate our response with our NATO allies.
The hon. Gentleman asks how we protect such individuals, which is obviously not something on which he would expect me to comment in the House of Commons. We do our best to give such individuals the protection we can.
Mr Dominic Grieve (Beaconsfield) (Con)
I welcome the Foreign Secretary’s statement, which highlights the very real problems that we are now encountering in our relations with Russia. He will be aware that when the Intelligence and Security Committee was reformed, we immediately announced that one of our priorities is to carry out an inquiry into Russia’s covert activities and whether we have the appropriate responses to them. He may agree that that matter perhaps now requires a greater degree of urgency. I therefore ask him to do everything possible to facilitate that inquiry and ensure that it can get under way as soon as possible.
Boris Johnson
From his vantage point as Chair of the ISC, my right hon. and learned Friend has been following this very closely. I undertake to get back to him on that matter as soon as possible.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
The Foreign Secretary rightly says that no attempt on an innocent life on our soil should go uninvestigated or unpunished. I would not expect him to comment on the investigation that is currently under way—obviously we all have concerns for the welfare of the two individuals—but what about the 14 suspicious deaths that several Members have now raised?
In many of those cases, UK authorities concluded that the deaths were suicides, despite the fact that there has now been considerable reported evidence, including in the BuzzFeed report, casting serious doubt on those conclusions. There are also claims that US intelligence may have provided further evidence to the contrary in those 14 individual cases, and there are serious questions about whether the police investigations were thorough enough. As a result of what he has said, will the Foreign Secretary now discuss urgently with the Home Secretary whether a National Crime Agency investigation, or other form of police investigation, and review of all 14 cases should now take place?
Boris Johnson
The right hon. Lady is perfectly right to say that, as my hon. Friend the Member for Tonbridge and Malling (Tom Tugendhat) pointed out, there are a number of deeply troubling cases, such as that of Mr Perepilichnyy. To the best of our knowledge at present, there is no further evidence that points in the direction of criminality, but what she says is very important. We will certainly follow it up and I will certainly have that discussion with the Home Secretary.
Mr John Whittingdale (Maldon) (Con)
It is almost exactly four years since the annexation of the sovereign territory of Ukraine in Crimea by Russia. It is two years since the public inquiry concluded that President Putin almost certainly approved the murder of Alexander Litvinenko. Is it not clear therefore that existing sanctions are failing to deter Russia, possibly even from carrying out further assassinations on British soil, and that the time has come to impose far tougher sanctions targeted against individuals associated with President Putin’s regime?
Boris Johnson
I am very grateful to my right hon. Friend for that. Obviously, we cannot prejudge the outcome of this investigation, as that would not be right. As I have said repeatedly, in the formula I have used, if the suspicions of Members on both sides of the House are confirmed, such sanctions are going to have to be one of the options we look at.
Jo Swinson (East Dunbartonshire) (LD)
These developments are clearly deeply concerning—not only those in Salisbury but the Heidi Blake reports about the potential of a wider pattern of multiple assassinations on UK soil by the Russian regime. I welcome the fact that the Foreign Secretary, in response to the Chair of the Home Affairs Committee, said he is going to look into those cases further. I want to press him on this point about assets, because other countries have taken a tougher line on the assets of Russian nationals than we do here in the UK, particularly in London, where there is a higher concentration of these assets. Will he look again at what can be done, not only on cases where we are yet to have further investigation, but on past cases where we already know many of the facts, such as that of Magnitsky?
Boris Johnson
I will certainly look at what the hon. Lady proposes, but I have to say that the UK leads the world in cracking down on money laundering and those—[Interruption.] We do. We lead the world in cracking down on money laundering and we are trying to expose the beneficial ownership of accounts across the world. If it is possible to expose further such illicit activity in London, or indeed anywhere in the UK, in order to hold people to account, of course we will do this.
James Brokenshire (Old Bexley and Sidcup) (Con)
I recognise that the Foreign Secretary will be constrained in what he can say, but at a time when the focus has understandably been directed at confronting terrorism, will he reassure us that he and other Cabinet colleagues will see that the Security Service and our other intelligence agencies devote appropriate resources and attention to the activities of Russia and other foreign Governments within the UK, and the potential threats they pose?
Boris Johnson
My right hon. Friend speaks for many, on both sides of the House, in wanting to see our intelligence services, which are one of the great global assets of this country, properly funded, particularly now, not just in the war against terror but in the struggle against malign Russian activity.
Chris Bryant (Rhondda) (Lab)
I do not think the Government have been robust or consistent enough over these past few years, and I have said that for a long time. Putin’s violent record is a matter for all to see—Beslan, the Moscow theatre, Crimea and Ukraine, Anna Politkovskaya and many other journalists, Sergei Magnitsky, Boris Nemtsov and so on. The truth is that this Government have repeatedly just shrugged their shoulders. After the Litvinenko inquiry found that Putin was personally responsible, the Government did absolutely nothing in response. What happens when a murdering dictator is told that nothing is going to happen? They just do it all over again. I urge the Foreign Secretary to think long and hard about a proper Magnitsky Act, which many other countries have adopted already. Let us make it absolutely clear to Russia: you cannot kill people on our soil with impunity.
Boris Johnson
I agree with the last sentiment the hon. Gentleman expressed, but I do not agree that the UK stood by and did nothing after the murder of Alexander Litvinenko. On the contrary, we have led the world in tough action against Russia: both at the United Nations and in the European Union we have been in the forefront of those calling for tough measures against Putin’s Russia. I made exactly those points in Moscow when I saw Sergei Lavrov, as some hon. Members may recall. As for the hon. Gentleman’s substantive point about a Magnitsky Act or a Magnitsky amendment, as I said in an earlier answer to an Opposition Member we are certainly willing to look at sensible proposals.
James Duddridge (Rochford and Southend East) (Con)
Is the Foreign Secretary concerned, as I am, about future Russian attacks on critical infrastructure in the UK? I am conscious that the Economic Secretary to the Treasury is probably here more as the Member of Parliament for Salisbury, but is the Foreign Secretary particularly concerned about financial services infrastructure? As we carry less cash and cheque books, we are reliant on our electronic cards.
Boris Johnson
Absolutely. It is clear from the NotPetya attack and others that Russia is certainly prepared to attack our infrastructure, and we should guard against that possibility with every preparation we can.
Mr Ben Bradshaw (Exeter) (Lab)
I may have misinterpreted the question from the Chairman of the Intelligence and Security Committee, but it left me with the worrying impression that the Government are resisting the Committee’s attempts to hold an investigation into Russian interference. I would therefore be grateful if the Foreign Secretary could reassure the House on that point. The BuzzFeed investigation was published last June, so perhaps he could tell the House what the Government did then.
Boris Johnson
I have a couple of points to make on that. No attempt is being made to resist any investigation. On the contrary, as I have told the House repeatedly, this Government have mounted the strongest possible resistance across the world to Russian aggression and interference. I think hon. Members will readily concede that plenty of other Governments trade freely with Russia, oppose sanctions and are massively dependent on Russian hydrocarbons, and it is up to the UK to stand up for decency and to resist what Russia is doing.
Richard Benyon (Newbury) (Con)
As someone who has campaigned for some time on the so-called “Magnitsky campaign”, may I say that the Sanctions and Anti-Money Laundering Bill offers an opportunity for us to have the full Magnitsky, as opposed to Magnitsky-lite which we got last year in another piece of legislation? The Opposition’s amendments were well intended but can be improved on. May I tell my right hon. Friend that on Report there will be an opportunity for the whole House to come together to give a clear message? I urge him, with all the measures I can, to listen to all sides, because this issue concerns people right across this House.
Boris Johnson
My right hon. Friend is right to say that this issue greatly exercises Members on both sides of the House. As I have said repeatedly, we will certainly address the issue and we will try to find a way forward that addresses Members’ concerns.
John Woodcock (Barrow and Furness) (Lab/Co-op)
The Government’s response to Sir Robert Owen’s findings on Alexander Litvinenko was criticised at the time for not providing a sufficient deterrent effect. Whatever the Foreign Secretary’s view on whether the Government have taken action so far and no matter what findings in relation to Mr Skripal come through in time, does not this increasingly comprehensive picture show that the deterrent effect that the Government have desired is not working and that much more is needed?
Boris Johnson
I think all Members would concede that, in the case of Sergei Skripal and his daughter, we need to await the outcome of the investigation. Let us wish them every possible good fortune in their recovery. The Government are obviously going to look very carefully at whatever we can do to stop such a thing happening again. If things are as suspected by Members on both sides of the Chamber, we may have to come forward with much tougher measures, but we obviously cannot prejudge the investigation. The most important point is that the UK is in the lead around the world in standing up against Russia. It may well be that that explains the particular hostility we are currently having to endure. All I will say to the House is that it is worth it for this country to carry on with what it is doing to stand up to Russia, even if it exposes us to this kind of threat and challenge.
Sir Edward Leigh (Gainsborough) (Con)
Over the years, I have tried to understand the Russian position, and particularly the Russian attitude to the right of self-determination of the Russian majority in Crimea and eastern Ukraine, but the way to preserve peace with Russia is by having peace through strength. There is no point in giving commitments to the Baltic states without hardware and men on the ground. Will the Foreign Secretary echo the words of the Under-Secretary of State for Defence, my right hon. Friend the Member for Bournemouth East (Mr Ellwood), who is sitting next to him and who said in the estimates debate last week that spending 2% on defence was not enough?
Boris Johnson
I am not going to join my hon. Friend in calling for an increase in another Department’s budget right now, although it is absolutely right that we should be spending at least 2%. I should say, though, that out of that 2% we are able to fund—[Interruption.] The shadow Foreign Secretary says that we should spend it properly; we are, for instance, spending it on the 800 UK serving men and women in Tapa in Estonia, on the frontline with Russia, who are giving reassurance to a vital NATO ally. That is what the UK is doing. Believe me, the Russians know that we are doing that and that we are in the lead in calling for France and other EU countries to step up to the plate and deploy in the Baltics. The Russians know that we are in the lead in standing up for our friends in that part of the world. Yes, it may be that we in this country are paying a price for that, but we are not going to resile from that commitment.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Following the apparent poisoning of Mr Skripal and his daughter, will the Foreign Secretary tell us whether the toxicology report will be made public, and if so, when?
Boris Johnson
I must respectfully tell the hon. Lady that, as I said right at the beginning of my response to the urgent question, I am not going to give a commentary on the investigation.
Jack Lopresti (Filton and Bradley Stoke) (Con)
Will my right hon. Friend join me in paying tribute to the work that Britain’s National Cyber Security Centre does to resist Russian cyber-attacks on the UK’s critical infrastructure? How does he categorise such attacks—are they just nuisances that we have to learn to live with and deal with, or are they, as some would say, acts of war?
Boris Johnson
That is a very perceptive question. I increasingly think that we have to categorise them as acts of war, which means that we need to elaborate a new doctrine of response and a new doctrine of deterrence. We certainly are doing that—it was one of the conclusions that we reached in the National Security Council a few months ago.
Emma Reynolds (Wolverhampton North East) (Lab)
The Foreign Secretary speaks of the UK leading the way on EU sanctions on Russia. When we leave the EU, we will lose our seat at the table. In the six-monthly review of the sanctions, we have continued to push for their renewal. How will we exert influence when we have left the EU? What will be the legal status of the sanctions during the transition period?
Boris Johnson
I think the hon. Lady may have been in the House when we introduced the Sanctions and Anti-Money Laundering Bill, when I explained that although we may be leaving the EU, we are not leaving Europe, and we will be intimately involved in the development of sanctions and other foreign policy. That is the intention of not only the UK but all our European partners. Fully half of EU sanctions listings depend on UK intelligence. We are an integral part of the European sanctions environment and will continue to be so.
Sir Desmond Swayne (New Forest West) (Con)
We could speak softly if we carried a big stick, so was not the peace dividend at the end of the cold war utterly misconceived?
Boris Johnson
I respectfully disagree with my right hon. Friend, in the sense that, appalling though recent events have been—as I say, we do not know exactly what has taken place in Salisbury, but if it is as bad as it looks, it is another crime in the litany of crimes that we can lay at Russia’s door—as somebody who grew up during the cold war, I resist the comparison between events today and the misery and horror of the gulags and the suffering of the peoples of eastern Europe that I remember. I do not think we should necessarily equate the conflict and difficulties that we have with Russia today with the existential threats that we faced during the 1970s and 1980s.
Mrs Madeleine Moon (Bridgend) (Lab)
The Foreign Secretary is right to say that the current situation is not the same as it was during the cold war, but is it not time to have an open and honest dialogue with the British people about how Russia uses instability, uncertainty and violence across the continent as part of its hybrid warfare, which is not peace but not war? That is the situation we are in and that conversation needs to be had. Will the Foreign Secretary lead it?
Boris Johnson
As the hon. Lady will know, the Prime Minister herself spoke in her Mansion House speech about this very matter and set out clearly her deep anxieties about how Russia is behaving. What we need to do is to concert international activity, sanction individuals who are part of Putin’s regime and keep the international community focused on exactly the points that the hon. Lady makes. Believe me, there is growing support around the world for what she says.
Mr Philip Hollobone (Kettering) (Con)
Having listened closely to today’s exchanges, I am sadly struggling to avoid the conclusion that Russia has now reached the point where it has little or no respect for Britain’s foreign, defence and security policy. If I am wrong, will the Foreign Secretary tell me why?
Boris Johnson
I have to disagree with my hon. Friend, because I believe that the UK is in the frontline of a struggle between two value systems. As the hon. Member for Bridgend (Mrs Moon) said, Russia is determined to impose its own way of thinking, particularly on the peoples of central and eastern Europe—the countries of the former Soviet Union. Russia is effectively revanchist, and it is the UK that is in the lead in standing up to it. Many other countries would prefer to turn a blind eye. Many other countries would prefer to go to the St Petersburg International Economic Forum, step up their trade in hydrocarbons and ignore what is going on. Believe me, there are many countries around the table in the European Union that would like to do that, and there are many countries around the world that believe that it is wrong and misguided to stand up to Russia.
We do not take that view; we take a principled view. We have been in the lead in the imposition of sanctions. We have been in the lead in standing up against Russian-supported aggression in Syria and in calling out Russia for what it did in the western Balkans and Montenegro. We are having a summit in this country in July on the defence of the western Balkans and all those countries against Russian encroachment. It is the UK that is resisting. As I have said to Members repeatedly, it may very well be that Russia will behave towards us in a way that is notably aggressive, but we will not be bowed and we will not allow such action to go unpunished.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
The Skripal case has disturbing parallels not only with the Litvinenko case, but with the BBC drama “McMafia”, as does the report leaked to The Guardian and the Organised Crime and Corruption Reporting Project last month, which found that millions of pounds linked to the Putin family and the FSB—Russia’s federal security service—spy network had been laundered through the London property network. Does not the Foreign Secretary appreciate how simply patting himself on the back and saying that we are leading the world looks complacent? We simply must do more to promote financial transparency.
Boris Johnson
I certainly agree that more can be done to promote financial transparency, but across the world the UK is second to none in doing that.
Paul Masterton (East Renfrewshire) (Con)
Does the Foreign Secretary share my concern about the basing of Sputnik in Edinburgh from where it spreads misinformation and peddles conspiracy theories to foment division in the UK? Does he also agree that it is incredibly disappointing that current MPs and former First Ministers give Russia Today and Sputnik a pretence of credibility that they do not deserve?
Boris Johnson
My hon. Friend makes an excellent point. Members from all sides of the House should think long and hard before they appear on Russia Today, which is clearly a vehicle for Kremlin propaganda.
Toby Perkins (Chesterfield) (Lab)
The Foreign Secretary, like many other people, has spoken powerfully about the extent to which Russia—while not at war with us—can be seen only as an enemy of the best interests of the United Kingdom. On that basis, is it not time to review whether we should continue to sit on the UN Security Council and have Russia in a position where it is able to decide whether the actions that we take with our military are lawful?
Boris Johnson
If things turn out as many Members on both sides of the House suspect they will—to return to that formula—we will have to have a serious conversation about our engagement with Russia. Thinking ahead to the World Cup this summer, it is very difficult to imagine how UK representation at that event could go ahead in the normal way, and we will certainly have to consider that.
Bob Blackman (Harrow East) (Con)
The southern gas corridor, which is currently under construction by BP, stretches from Azerbaijan to Italy, with spurs across Europe. It will end the reliance on Russian gas, which makes it a threat to Russia’s potential finances. Will the Foreign Secretary undertake a review of the security of that pipeline to ensure that Russia cannot interfere with it, so that Europe can then get its proper gas supplies in an appropriate way?
Boris Johnson
My hon. Friend is absolutely right to focus on gas supplies and the political strategic use that Russia makes of those supplies. I will certainly look at the point that he raises about the Azerbaijan pipeline.
Chris Evans (Islwyn) (Lab/Co-op)
International arrest warrants are still outstanding for the two people alleged to have killed Litvinenko. There is no chance of extraditing them to this country. Yesterday, whether it was poisonous gases or substances that we saw on the streets of Britain, they could have caused harm to our citizens. If the Foreign Secretary cannot bring Litvinenko’s killers to justice, how can he guarantee that those who perpetuated yesterday’s crime will equally be brought to justice?
Boris Johnson
Obviously, we must leave it to the police and the security services to do what they can to bring the perpetrators of yesterday’s crime, or attempted crime, to justice.
Andrew Bridgen (North West Leicestershire) (Con)
Here in the UK, we often say that pride comes before a fall. In Russia, it is rather different. They say that if you have no pride, you will surely fall. Will my right hon. Friend reassure the House that, in the dealings of the Foreign Office and other Departments with Russia, full account is taken of the Russian psychology, which respects only strength?
Boris Johnson
My hon. Friend is entirely right, which is why the UK has been at the forefront of those calling for a robust approach to Russia both in the Baltics and in the western Balkans.
Christine Jardine (Edinburgh West) (LD)
Given the various concerns expressed in this Chamber about both today’s events and the demonstration of Russian power, which we saw earlier in the week, can the Foreign Secretary reassure us that discussions on how to counter this are taking place with current EU member states and other allies?
Boris Johnson
If the hon. Lady will forgive me, she makes a good point, but we must really await the outcome of the investigation before we begin to draw conclusions with our friends.
Angela Smith (Penistone and Stocksbridge) (Lab)
Russia has conducted cyber-attacks against European countries, invaded the sovereign territory of Ukraine, abducted an Estonian border guard, and murdered people on British soil. Given Putin’s strategy of divide and rule, does the Foreign Secretary not agree that the UK response to Russian aggression needs to be robust, but, to be most effective, should it not also command the support not just of his party and the Government, but the whole of this Parliament?
Boris Johnson
I very much agree with both the manner and the content of what the hon. Lady has said, and I know that she speaks for the vast majority of people in both Houses of Parliament.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I urge the Foreign Secretary to think not of the 1950s and the cold war, but of the 1930s. Personally, I believe that the period we are passing through now is probably as dangerous as the 1930s. Russia is the new Germany, with a leader who is also very unpredictable and very determined to take on America and the free world. Will the right hon. Gentleman make sure that, at a time when we have a fragmented Europe and when America has, in many respects, distanced itself from the world stadium, he takes this issue seriously, because colleagues on both sides of the House are absolutely right: the Russians will listen only to force and challenge.
Boris Johnson
The hon. Gentleman is completely right that the Russians only respect force, which is why the UK has been so absolutely insistent on the enhanced forward presence in Estonia, in supporting the Baltic countries, in resisting Russian aggression in the western Balkans, and in imposing sanctions for what Russia did in Ukraine. There are plenty of other Governments who do not believe that we should take this line—that do not believe that the international community should be taking this line. It is the UK that has been in the lead and will continue to be in the lead.
Christian Matheson (City of Chester) (Lab)
Much as I welcome the Foreign Secretary’s strong condemnation of Russia and his reassertion of state sanctions, it is clear that they not working. I am concerned that there is a lack of political will to take the matter further, perhaps because there is an awful lot of Russian money sloshing around the City of London, driving the London property market and, dare I say it, being donated on some occasions to political parties. Could we not put further pressure on Putin by targeting those members of the Russian community over here who have perhaps brought over some of those large amounts of money?
Boris Johnson
Let us await the outcome of the investigation. Let us get to the bottom of what has happened to Sergei Skripal and his daughter, and then we can consider what more we can do.
Yarl’s Wood Detention Centre
(6 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab) (Urgent Question)
To ask the Secretary of State for the Home Department if she will make a statement on the detention centre at Yarl’s Wood.
The Minister for Immigration (Caroline Nokes)
Ensuring that individuals abide by immigration rules is an essential part of an effective immigration system. This includes individuals leaving the UK if they have no lawful basis to remain. Of course, we all hope that those with no right to remain in the UK will leave voluntarily, and we have measures in place to assist those who wish to do so. However, this is not always the case, and detention is therefore an important tool.
The dignity and welfare of all individuals detained is of utmost importance, and any decision to detain is made on a case-by-case basis, taking into account individual circumstances. But let me be clear: Home Office officials work with any individual with no right to be in the UK, both detained—including those at Yarl’s Wood—and in the community, to assist with their return at any time, if they decide to leave the UK. In fact, 95% of people without the right to be here are managed in the community and most people detained under immigration powers spend only very short periods in detention.
In 2017, 92% of people were detained for four months or less, and nearly two thirds were detained for less than a month. As well as regular reviews of detention, individuals can apply for bail at any time. I visited Yarl’s Wood on 8 February to see that all detainees were being treated in a safe and dignified manner, and I understand that the right hon. Member for Hackney North and Stoke Newington (Ms Abbott) is meeting the Home Secretary to discuss this issue very shortly.
The provision of 24-hour, seven-day-a-week healthcare in all immigration removal centres ensures that detainees have ready access to medical professionals and levels of primary care in line with individuals in the community. Any detainees who choose to refuse food or fluid, including the declining number of residents at Yarl’s Wood who are currently refusing food, are closely monitored by on-site healthcare professionals. Home Office staff will not only ensure that detainees are informed about how their actions may impact on their health, but make it clear that we will continue to seek to progress their case. The Government are committed to protecting the welfare and dignity of those in detention and we will always set the highest standards to ensure the safety and wellbeing of detainees.
Ms Abbott
The shadow Attorney General and I travelled to Yarl’s Wood detention centre on Friday 23 February to inspect conditions and speak to some of the people detained there. The Minister will be aware that I have been pressing for such access to the centre since the autumn of 2016. The timing of our visit coincided with a hunger strike by some of the detainees, who were protesting at what they described as the inhumane conditions there. But in response to my repeated inquiries, the authorities at the detention centre, the Home Office, Serco and G4S said categorically that there was no hunger strike. It now seems that we were misled.
Is the Minister aware that newspaper reports show a letter that has been sent to these women by the Home Office? The letter has been reproduced in some media outlets. It is a signed letter, on Home Office headed paper, which begins by stating that
“the fact that you are currently refusing food and/or fluid…may, in fact, lead to your case being accelerated”.
To some Opposition Members, this sounds like punitive deportations for women who have dared to go on hunger strike. Furthermore, I was contacted at the weekend by lawyers and others attempting to prevent the deportation of a young woman and her mother. This is wrong. The personnel at Yarl’s Wood are paid for from the public purse, yet Members of Parliament seem to have been misled by officials. Now we learn that the Home Office is apparently threatening these women with accelerated deportation.
The Minister has a series of questions to answer. When did she first know about the hunger strike? When did she know of the existence of the threatening letters, implying that deportation would be accelerated for those continuing on hunger strike? Did she or her officials approve these letters? How is it possible to accelerate deportations and conform to natural justice, as surely all cases are expedited in any event? Does the decision for removal supersede any health concerns that a detainee may have? Is the Minister aware that the primary demand of the hunger strike is to end the inhumanity of what, in practice, is indefinite detention? Finally, will the Government, in line with their own policy, stop detaining women who have been trafficked or sexually abused and stop misleading this House about their detention of these most vulnerable women?
Mr Speaker
Nobody would intentionally mislead the House. I am sure that the shadow Home Secretary was not suggesting that. I think that the allegation was of what the Clerk would consider to be a collective, rather than an individual, character.
Caroline Nokes
The right hon. Lady has raised some very important points. I will first clarify the circumstances in which a letter is given to individuals who may be refusing food or fluid while in detention. A letter will only be handed to people after an extensive welfare interview, which happens with a medical professional, and is used to explain to individuals the very real risk that they are putting themselves at by refusing food and fluid. We want nobody in detention to be in that situation and it is important that we explain to them the risks involved.
The letter is, in fact, part of official Home Office guidance and was published on the gov.uk website in November last year. It was agreed after consultation with NHS England, Medical Justice, the Immigration Law Practitioners Association and a range of non-governmental organisations, because it is important that we get the correct information to detainees who are choosing to refuse food and fluid.
I was first aware that individuals at Yarl’s Wood were refusing food and fluid at about the same time that the right hon. Lady undertook her visit. Of course I regard it as very serious. Nobody wants detainees to be at any risk, but it is important that they should not regard this as a route to preventing their removal from this country. As I said clearly in my opening statement, ensuring that individuals abide by immigration rules is an essential part of our immigration system. I wish to do nothing that encourages them to put their own health at risk by suggesting that doing so might prevent their removal from this country.
Indeed, there are some circumstances whereby people could be prioritised, such as if we anticipated that somebody needed escorts to be removed from the country, because there is always a long wait for that service. We can also talk to embassies to understand whether there is a problem with papers from someone’s home country, and get those expedited, so that the individual can be returned to their home country as swiftly as possible.
Sir Desmond Swayne (New Forest West) (Con)
Accelerated processing would only be a threat if the judicial process was not seen to be fair and independent. Is it?
Caroline Nokes
My right hon. Friend will be aware that there is an extensive judicial process, whereby individuals seeking to stay in this country may apply to the first tier and, indeed, the upper tier tribunal at any stage in the process that they may apply for judicial review. We are determined to make the immigration system as fair as we possibly can, but also to uphold our rules.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
The large-scale, routine detention of thousands of human beings in private prisons for an indeterminate period simply at the discretion of immigration officers is, frankly, a stain on our democracy and an affront to the rule of law. This most recent horrible episode in a detention facility is far from the first, as hon. Members know, and it will not be the last unless there is radical change. Why does the UK detain more than other European countries? Why can every other EU country manage with a time limit on immigration detention, but not the UK? Why do the Government continue to detain vulnerable people, including victims of torture, to the serious detriment of their health and wellbeing? It is very welcome that the shadow Home Secretary has brought this issue to the House, but will the Government have the courage to allow this House a binding vote and the chance to make it clear that it is time for radical reform of the UK immigration detention regime and that it is time for a limit?
Caroline Nokes
Immigration officials always consider individuals in detention on a case-by-case basis and put their welfare absolutely at the forefront. Some 95% of people with no right to be in this country are managed within the community. Only 5% will be within the immigration removal centres at any one time. They are only there when there is a realistic chance of removal, and we always seek to ensure that they are removed as soon as possible.
Mr Philip Hollobone (Kettering) (Con)
I congratulate my right hon. Friend on the superb job that she is doing as check Immigration Minister. My constituents in Kettering want to see firm but fair border controls, and the detention centre is absolutely part of that. Will the Minister assure me that the 5% of applicants who end up in a detention centre are there because there is a very real risk that they will abscond and we will not be able to deport them?
Caroline Nokes
There are several reasons why an individual might be in immigration detention. First and foremost, those for whom there is a realistic chance of removal from the UK may be there for a short period, as we seek to get them to removal as soon as possible. There are also those in immigration detention who are foreign national offenders and those who pose a risk to our society.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I welcome the work that the shadow Home Secretary has done to pursue this issue. I share her concern about the state of Yarl’s Wood and some of the policies that underpin it. I understand that the Immigration Minister this weekend responded to calls from my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) to prevent the deportation of two of her constituents from being accelerated as a result of one of them being on hunger strike. But as well as that individual case, will the Minister address the wider issue and confirm that no individual should have their case or their deportation accelerated or prioritised simply because they have gone on hunger strike or made some kind of protest in response to the very difficult conditions that they face? I am sure that she would not want that kind of punitive action to be taken in response to protest.
Caroline Nokes
We take the issue of individuals refusing food and fluid very seriously indeed. We do not want any individual to put their own health and wellbeing at risk. It is important that we have an immigration policy that includes detention, but that we administer it in as fair a way as possible, always seeking to use detention as a last resort. The right hon. Lady referred to a specific case. I am not going to comment on individual people’s immigration status on a case-by-case basis. However, it is important that I am always prepared to listen when Members ask me to review their cases.
Anna Soubry (Broxtowe) (Con)
I thank the Minister for her statement and for the assurances that she has given the House. It is right that we have to have detention centres. Nobody likes them, but they have to exist as part of a policy that is the right policy to pursue. But will she be absolutely clear and give us all an assurance that the welfare of anybody—whatever their status may be—is always the primary concern?
Caroline Nokes
Of course the welfare of individuals at any of our immigration centres is of paramount importance. I assure my right hon. Friend that Yarl’s Wood was inspected by Her Majesty’s chief inspector of prisons between 5 and 16 June last year, and the report was published on 15 November. In addition, Yarl’s Wood was subject to a review by Stephen Shaw, who reported in 2016. He is currently looking at the recommendations that he made and the progress that the Government—and Serco, our operative there—have made in implementing them.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
My constituency has already said no to a part of the UK Government’s immoral immigration policy—a short-term holding facility near Glasgow airport. One of the main reasons cited for that refusal was the UK’s indefinite detention policy. The UK is the only country in the EU that has indefinite detention. Is the Minister proud of that policy?
Caroline Nokes
There is an automatic review of detention after a month and at every recurring month. Individuals may apply for bail at any time. It is important to reflect on the fact that only 5% of the immigration offender population will be found in detention at any one time. We seek to manage them in the community wherever we possibly can. They will be held in detention only when there is a real risk of absconding or of public harm, or where we are seeking to move somebody to removal as soon as possible.
Jess Phillips (Birmingham, Yardley) (Lab)
I have a huge amount of respect for the Minister, but her statement that this happens only when people are at risk of absconding is not one that I recognise from immigration casework that I do every single day. A woman in my constituency rang the police because of a threat to kill her from a violent ex-husband. She was taken to Yarl’s Wood, not to a place of safety. We detained a woman who was a victim. She has now been given indefinite leave to remain because her case was going through the process. This is not an isolated case. Does the Home Office think that it keeps vulnerable women who are at risk of rape, sexual violence or domestic abuse safe by basically deterring them from calling the police because they will be sent to a detention centre?
Caroline Nokes
The hon. Lady will be aware that we have a very clear policy on adults at risk in immigration detention. I do not want any woman to be at risk of harm from either a current partner or a former partner. She raised a particular case. I urge her and all Members to bear in mind that if such cases occur in their constituencies, I will always want to look at them personally. We must remember, however, that we have in this country an immigration policy that seeks to implement the rules as they are set out, and it is important that we are able to uphold those rules at all times.
Sir Edward Davey (Kingston and Surbiton) (LD)
In the Minister’s answer to the right hon. Member for Broxtowe (Anna Soubry), she mentioned Stephen Shaw’s second review of the detention of people in immigration centres, particularly the experience of vulnerable people, and said that he is looking at the Home Office’s implementation of his first review. Has the second review been concluded, and has she received the report on it? If not, when does she expect to receive it, and when does the Home Office expect to publish it?
Caroline Nokes
The honest answer is no, I have not yet received it, but we anticipate it very shortly indeed.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
My hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth) is travelling with the Defence Committee, but as Opelo and her mother are her constituents, she has asked me to put on record her thanks to the Minister for her intervention at the weekend. She also asked me to put on record her thanks to the Rev. Ashley Cooper and all those at Swan Bank church for the welfare support they have been giving to the immediate friends and family. Does the Minister agree that the fact that Members of Parliament have to resort to weekend telephone calls directly to Ministers to try to stop individuals from being deported before they have had their due process is a sign that the immigration system in this country is simply failing?
Caroline Nokes
I said very clearly that I was not going to comment on individual cases, but we do follow due process very closely indeed. I put on record my thanks to the hon. Gentleman’s colleague, the hon. Member for Stoke-on-Trent North (Ruth Smeeth), to whom I spoke over the weekend and with whom I am in regular contact. It is quite right that she should be able to make those representations to me at, quite frankly, whatever time of day.
Mr David Lammy (Tottenham) (Lab)
I am very proud to be the son of immigrants and proud of this country’s record on supporting refugees and immigrants. Does the Minister understand that at the heart of her answer is an indifference, first, to indefinite detention and, secondly, to the fact that many women at Yarl’s Wood have been there for months and months, running into years? That is why many of them are refusing food. The possibility that the Government will accelerate deportation on that basis must be contrary to human rights. Can she satisfy the House that this satisfies all the obligations that the Government have to meet in their human rights record and that it is not cruel and unusual punishment?
Caroline Nokes
It is important to reflect on the fact that detention plays an important part in our immigration system and will continue to do so. Of course we put the welfare and wellbeing of individuals who are in detention at Yarl’s Wood, and at every other centre in this country, at the forefront of our policies. It is important to remember, however, that some people in detention, including foreign national offenders, are there because if they were in the community they would have very high potential to do harm.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
A constituent of mine was detained in Yarl’s Wood last summer. She was at risk of losing her eyesight due to a serious eye condition that had already left her blind in one eye and, if left untreated for a short time, risked her going blind in the other. Despite people being made aware of this information, she was left for some time before being seen by a nurse. In the end, my office had to intervene directly to ensure that urgent medical assistance was provided to my constituent, to avoid her losing her sight. This appalling case is one of many. Will the Minister make an assessment and overall review of the conditions that women in Yarl’s Wood are subject to?
Caroline Nokes
Upon detention, individuals at Yarl’s Wood are given access to a healthcare professional within two hours and then have the ability to make an appointment with a general practitioner within 24 hours. It is really important that we provide healthcare to all those in detention. That is why it is available 24 hours a day, seven days a week, and referral onwards to external healthcare services is also available. The hon. Lady asked whether I would review welfare at Yarl’s Wood. In fact, that is the job of the independent monitoring board, the independent inspector, and of course Stephen Shaw, whom we have asked to go back to review the recommendations that he made two years ago and provide us with an update on progress.
Kate Green (Stretford and Urmston) (Lab)
How can the Minister say that the justification for detention is severe risk of harm or women absconding when so many of them are very quickly, or ultimately, released back into the community and sometimes go round the loop of “detention and release, detention and release” on a number of occasions?
Caroline Nokes
In upholding our immigration rules, we seek to assist those who have no right to be here to return home, whether on a voluntary basis or indeed, on occasion, by force. It is really important that we have an immigration system that is robust. We do not have indefinite detention. The hon. Lady will have heard me say that 92% of those held are released within four months and 63% are released within a month. It is important that we have a system where we can be confident that when we are able move people to removal, we have the capacity to do so.
Stella Creasy (Walthamstow) (Lab/Co-op)
I want to put on record my support for the work that the shadow Home Secretary has been doing on this issue and for the work of my hon. Friend the Member for Stoke-on-Trent North (Ruth Smeeth), who has fought tirelessly for her constituents. I am grateful that the Minister has listened and agreed to review the case. For many of us, the trouble with this is that we are talking about an environment where we know that two thirds of the women in Yarl’s Wood have experienced rape or sexual torture and that 85% of them are then released back, not deported. Does the Minister recognise that, rather than continuing to keep Yarl’s Wood open, there may be not only cheaper but much more compassionate and humane ways in which we can manage our immigration system that would speak to the best of British values?
Caroline Nokes
The hon. Lady will have heard me say that 95% of immigration offenders are in the community and only a very small proportion—5%—are in detention. However, detention does play an important part. We will keep people in detention where there is a realistic prospect of removal and where they might cause harm out in the community. It is important that we retain that facility.
Mohammad Yasin (Bedford) (Lab)
At Yarl’s Wood and many institutions like it, vulnerable people are being held for long periods, despite the fact that the majority of them have committed no crime. Does the Minister agree that there must be an urgent review of the UK’s detention system?
Caroline Nokes
I think that I have been very clear this afternoon that, although we regard detention as a last resort, it is an important part of our suite of immigration policies. We use detention to enable us to remove people from this country, to make sure that those who might cause harm in our communities are kept away from society and on occasions when we are seeking to remove foreign national offenders as quickly as we can.
David Linden (Glasgow East) (SNP)
How many people in Yarl’s Wood are currently on suicide watch?
Caroline Nokes
We keep the welfare of detainees under very close supervision, and I can reassure the hon. Gentleman that a declining number of people are choosing to refuse food and fluid. Of course, where people have mental health issues or there are concerns about their health, it is absolutely right that we keep them under very close supervision.
Water Supply Disruption
(6 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
We now turn to the statement—what might be described as “Coffey on water”—from the Parliamentary Under-Secretary of State for the Environment, Dr Thérèse Coffey.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dr Thérèse Coffey)
Thank you, Mr Speaker. I promise my response will not be diluted.
I would like to take this opportunity to update the House on the water supply situation following the severe weather experienced last week. The exceptionally cold spell and the rapid thaw that followed has caused widespread water supply issues in the country. Over the weekend, and at the start of this week, tens of thousands of people across southern England have experienced loss of water supply in their homes, and even more have had to cope with low water pressure following leaks from burst pipes. I entirely recognise that it has been a stressful and difficult time for many residents and businesses.
The immediate priority is to get water back up and running for those who have been affected, particularly vulnerable people, businesses, hospitals and care homes. Water companies have been following standard practice, including isolating bursts and redirecting water to mitigate the problem. Bottled water has been provided in the areas most badly affected, and water has been provided by tanker to keep hospitals open.
This morning I chaired a meeting with water company chief executives, Ofwat and Water UK to make sure that water companies in England are working to restore supplies as quickly as possible and that water companies in other parts of the country are preparing for the thaw as it spreads across the country. That will include learning any lessons from places that have already experienced thawing through higher temperatures. The challenge the sector faces is the sheer number of bursts following the rapid change in weather across multiple companies’ networks. Many of them have been relatively small and difficult to detect, and some of the loss of pressure is due to leaks in private homes and businesses.
As of 10.30 am today, based on the information provided by the chief executives on the phone call, we are aware of 5,000 properties still affected in Streatham. The principal source of the problem is airlocks in the water network, which Thames Water is acting to remove, and we expect that to be completed today. Southern Water reconnected supply to more than 10,000 properties overnight, and 867 properties in Hastings are still experiencing problems. We expect everyone there to be reconnected by this afternoon. South East Water has identified approximately 2,000 properties spread across Kent and Sussex that are still without supply, and we expect that they will be reconnected today. South West Water has approximately 1,500 properties affected, but that is changing on a rolling basis as the thaw progresses west. Yorkshire Water has identified 13 affected properties.
Some water companies have identified higher demand than usual on service reservoirs, which indicates that there are burst pipes that need to be dealt with. I want to encourage householders and businesses to report leaks and burst pipes, including those on their property, not just those on public highways.
Water companies have been working hard to address the issues for customers, though I recognise the frustration that many have had in contacting their water companies. I have been assured that companies have increased their staff on the ground who are out identifying where bursts have occurred and repairing them, as well as moving water across their networks to balance supply across the areas they serve. We should recognise the efforts of the hard-working engineers and all involved in working through the night to fix these problems.
Once the situation is restored to normal, we expect Ofwat to formally review the performance of the companies during this period. That will be a thorough review. As well as problems being identified, I want to see excellent examples of practice and preparation shared across the sector. The Government will consider any recommendations from the review and act decisively to address any short- comings exposed. As part of that review, Ofwat will decide whether statutory compensation should be paid. Of course, water companies will want to consider how they compensate customers on a discretionary basis, and I discussed that with the chief executives this morning.
This Government actively support a properly regulated water sector. We have high expectations of water companies increasing their investment in their water and sewerage networks. That was laid out clearly in the strategic policy statement issued to Ofwat last September and reinforced by my right hon. Friend the Environment Secretary when he addressed the water industry last week and said that he expects the industry to increase investment and improve services by maintaining a resilient network, fixing leaks promptly where they occur and preparing for severe weather.
As my right hon. Friend has said, we want a water industry that works for everyone, is fit for the future, improves performance and makes sure that bill payers are getting the best possible value for money. Ofwat will be given any powers it needs, and we will back it in action that it needs to take to ensure that water companies up their game.
Holly Lynch (Halifax) (Lab)
I am grateful to the Minister for that statement.
While last week’s freezing temperatures presented serious challenges all over the country, the failure of water companies to supply water to customers as the weather has improved has now descended into chaos. The aftermath of the “beast from the east” and Storm Emma meant that yesterday, 5,000 homes were without water in Kent, with thousands of properties across Wales, parts of the midlands and Scotland also affected by intermittent water supply.
In London, Thames Water battled to re-establish supply to around 12,000 homes and several schools. Two of the country’s flagship businesses, Jaguar Land Rover and Cadbury, were among several forced to cease production at the request of Severn Trent Water, as it sought to prioritise household supplies. Even today, as we heard from the Minister, South East Water says that around 12,000 of its customers still have no supply, and companies continue to struggle to reconnect homes and businesses across London, Kent, Sussex and Wales, leaving some homes without water for up to three days.
While we all accept that last week’s weather conditions were incredibly challenging, the reality in London is that although freezing temperatures persisted over several days, temperatures did fluctuate and only fell as low as minus 6°C on one occasion overnight. Where is the resilience in the system, and why have we seen such systemic failure?
The Secretary of State for the Environment, Food and Rural Affairs made a speech just last week outlining that in many areas, water companies were failing to deliver. Six companies missed their leakage targets for 2016-17, with Thames Water’s performance data showing that 677 million litres are being lost to leakages every single day. To put that in context, the entire city of Cape Town uses 631 million litres a day.
Despite those failings on leakage, water bills have increased by more than 40% since privatisation, with many consumers set to see another rise in a few weeks’ time. Further to that, analysis by the House of Commons Library shows that executives at the top nine water and sewerage companies operating in England earned a combined total of nearly £23 million in 2017. The highest paid executive, the CEO of Severn Trent—the same water company that yesterday asked Cadbury and Jaguar Land Rover to cease production—took home a total of £2.45 million last year, or 16 times the Prime Minister’s salary. That is on top of the billions paid to shareholders—the owners of those same nine water companies paid out £18.1 billion in dividends in the 10 years to 2016. In addition, six water companies have offshore finance structures registered in the Cayman Islands.
We have had tough words from both the Secretary of State and Ofwat, but where is the governance, and where is the action? In his recent speech, the Secretary of State said:
“Some companies have been playing the system for the benefit of wealthy managers and owners”
and stressed that he would give Ofwat “whatever powers are necessary” to get all the water companies to “up their game”. Rachel Fletcher, Ofwat’s chief executive, has been tough on water companies in the past 72 hours, saying that
“we won’t hesitate to intervene if we find that companies have not had the right structures and mechanisms in place to be resilient enough.”
However, just last month, Fletcher confirmed to the BBC that a dividend cap was not in Ofwat’s current thinking, nor was direct action on executive pay or tax structures. Instead, she said, Ofwat would require water companies to provide more public information on each of the areas of concern. If the Secretary of State’s plan is to empower Ofwat to intervene, I am afraid that based on what we have seen, there is no appetite in Ofwat to do so.
That regulatory failure on this Government’s watch has contributed to a situation where executive pay is out of control, and the failure to invest in resilience has left households and businesses picking up the cost. With that in mind, I would be grateful if the Minister could answer this question: if Ofwat lacks either the appetite or the powers to tackle—pay and rebalance profits so that less is pocketed by executives and more is invested in improving the service and resilience, what action will the Government take to make that happen? Will the Government respond to calls for a public inquiry into the handling of the crisis, and can the Minister outline whether that will involve the role of Ofwat leading up to where we are today?
Finally, can the Minister outline what compensation packages will be made available to customers, some of whom have had to seek temporary alternative accommodation or pay for childcare because schools have been closed? How will businesses that have lost a day’s trade be both compensated and reassured that this will not happen again?
Dr Coffey
The hon. Lady asked a number of questions, mostly about company structures, but she will understand that we have been focused on customer experiences in the past 48 hours in particular. That said, my right hon. Friend the Environment Secretary read the riot act to the water industry last week.
We recognise that over £140 billion has been invested in infrastructure since privatisation, but we still believe that more needs to be done. The hon. Lady will also recognise that, on average, water bills have fallen in real terms in the past five years—over the price review period. It is important that we get an appropriate balance between investment, recognising that people expect to be able to turn on the tap and get water—I fully accept that many households in London are still not receiving water—and customer bills. It is important to have a regulated water industry to achieve such a balance.
I think Jonson Cox has been an active chairman of Ofwat in challenging the water companies. In particular, he has taken on Thames Water about its financing arrangements. Again, the Department and Ministers have made it clear to the water companies that we expect them to accelerate the changes to their financial structures. I recognise that those structures were put in place some time ago, but we have said that we expect them to change more rapidly than some of their current plans suggest.
Overall, we need to recognise that the review—I have asked Ofwat to report back to me by the end of the month—may be only an interim one, with the initial lessons about what has happened. In the short term, however, I am conscious that we must continue to put pressure on Thames Water in particular to make sure that it reconnects households as quickly as possible.
Antoinette Sandbach (Eddisbury) (Con)
The Environment Secretary highlighted to the industry last week that, on a normal day, 3 billion litres of water is lost to leaks. What can be done to ensure better regulation, particularly in tackling such a huge yearly water loss?
Dr Coffey
My hon. Friend is right to talk about leaks; the hon. Member for Halifax (Holly Lynch) did so, too. We know that, as has been pointed out, companies are missing their leakage target. That is why we have tasked the companies to come up with plans for how they will put more investment into their infrastructure, including the sewerage network.
Peter Grant (Glenrothes) (SNP)
I thank the Minister for her statement. First, I pay tribute to all those who have worked on behalf of local authorities and other services over the past week—and even more so now —to deal with the unprecedented weather difficulties in Scotland and much of England. In Scotland, we had a red alert for snow for the first time since the current alert system was devised.
While there are still water supply difficulties in Scotland, there does not seem to have been the degree of systemic failure that we have seen in many authorities in England and Wales. Right here in London—one of the world’s greatest cities; many would argue that it is the world’s greatest city—in the 21st century, it is beyond the wit of the Government and the water authorities to provide one of the most basic essentials of human existence to tens of thousands of citizens.
I hope that the Minister will respond positively to demands for a public inquiry to find out what went wrong. It might also find out what lessons can be learned from the water service in Scotland, which has faced the same weather difficulties. There have been supply interruptions, but nothing on the scale or to the extent of what we have seen elsewhere.
When I checked the Scottish Water site immediately before the Minister stood up, the areas still affected were parts of EH10 in Edinburgh, as well as Dalwhinnie, South Ronaldsay, Burray and Lybster. If Members check those places on a map, they will see that all four of them have very substantial remoteness issues, so we would expect it to take longer to fix any problems there.
As the hon. Member for Halifax (Holly Lynch) pointed out from the Opposition Front Bench, there are problems in England with poor customer service in an industry that has paid out £18 billion to shareholders and pays out between £2.5 million and £3 million each to some chief executives. Customers in parts of England are paying £150 a year more for their water than those in Scotland, and the service is not being provided to them. The reason for that may be that the service in England is profit-driven and shareholder-driven, whereas in Scotland—thanks to the foresight of successive Governments of all parties in the Scottish Parliament—we have retained a Scottish water supply under public ownership and public control.
Will the Minister undertake, in the public inquiry that she must surely now accept, that nothing will be off the table, and that part of the remit will be to examine whether the ownership model that applies in Scotland would be beneficial to customers in the rest of the United Kingdom?
Dr Coffey
We have a well-established pattern of water provision in England. The hon. Gentleman will be aware that I am not responsible for Scotland. I do not know how much has been invested in the Scottish water industry in a comparable timeframe, but I would point to the fact that the £140 billion figure is considerably higher than the amount invested prior to privatisation. There is no doubt that there have been a lot of benefits not only in service to customers, but—dare I say it?—to the environment. We will not allow that progress to stall. On other matters, I stress that I do not pretend to be a water engineer; it is the job of Ofwat, working with my officials, to come back to me on them.
I understand that Mr Jonson Cox, the chairman of Ofwat, is a constituent of yours, Mr Speaker. You will know, I am sure, that he is a fine fellow, and he will not be taking any rubbish. I am sure he has taken some lessons from you.
Mr Speaker
That is very gracious of the Minister. Jonson Cox is in fact an estimable fellow. I have met him on many occasions, including at the Great Brickhill cricket club. I hope he recalls that, because I certainly do.
Sir Desmond Swayne (New Forest West) (Con)
We have too much water in the lower Avon. When is the Minister coming to have a look?
Dr Coffey
As I said to my right hon. Friend at the last Environment, Food and Rural Affairs questions, I am sure I will find time to visit his wonderful constituency in due course, but he will recognise that my priorities at the moment are the people who do not have enough water.
Helen Hayes (Dulwich and West Norwood) (Lab)
In my constituency, we have had a Thames Water leak or burst every single week of the winter. The pipe network is crumbling and causes constant problems, but it is not a surprise. The unforgivable thing about this week’s water supply problems has been the total lack of a robust emergency plan for a situation that anyone could have predicted would occur sooner or later.
Thames Water customers, faced with no water supply, have been unable to contact the company by phone or via the website, and have not had access to up-to-date detailed information, while the distribution of emergency supplies has been delayed, patchy and chaotic. There has been no plan for getting water to customers not already registered as vulnerable, but who are nevertheless unable to carry bottles of water long distances.
Thames Water made pre-tax profits of £638 million last year. There is simply no excuse for not having robust emergency plans in place. The failings this week have been appalling, and they have exposed an organisation that is not fit for purpose. Will the Minister now commit to ensuring automatic compensation for all Thames Water customers who have been without water this week, and to reforming our water industry to ensure its resilience for future emergencies?
Dr Coffey
I fully understand why the hon. Lady is so angry on behalf of her constituents. It is right that Thames Water is very much under the spotlight, and I am angry with it, too. This is a recurring pattern, but we should recognise that there has been a change of ownership and a change of leadership. I am absolutely determined that Thames Water customers should receive a far better service than they are now receiving.
It is not in my power to compel the water companies to give compensation. However, I can tell the hon. Lady that Thames Water is proactively going around to her constituents door to door in the 5,000 properties affected. It has been working through the problems with the airlocks. [Interruption.] I am just flagging up to the hon. Lady the information that I have received. I know that there was a particular problem with one of its service reservoirs, which it has now fixed, but that has caused further problems along the way.
I will of course make sure that we keep pressing Thames Water because, frankly, it has not delivered what it should be doing. I expect a full review from Ofwat that will particularly focus on its performance.
Mr Philip Hollobone (Kettering) (Con)
Will the Minister confirm that record amounts are being invested in our water supply system? It is far more than was ever invested when the industry was state-owned, and our water supply is actually among the best and cleanest in the world. Having said that, in this case—given that the weather was well predicted—the water supply companies have been caught on the hop, and automatic compensation ought to be paid. Does she agree that Ofwat, the water industry regulator, really needs to set a new leakage target? If, on a normal day, we are losing a fifth of the water in the system, most of my constituents in Kettering would say that that is far too much.
Dr Coffey
It is important that we also recognise those companies and parts of the country that have had no interruption of supply to customers. I thank companies such as Anglian Water, Essex and Suffolk, Wessex—I could go on. Yorkshire Water, for example, has seen an increase in demand and is proactively trying to identify where the leaks are before they become a problem for its customers. I want to zone in on the companies that are failing to help their customers and, meanwhile, I want to learn from the companies that are doing their best to protect customers.
Tim Farron (Westmorland and Lonsdale) (LD)
Water engineers and others providing emergency support to customers around the country deserve our thanks and praise today, but there is no excuse for water companies that make huge profits being unable to provide the resilience that would have protected businesses and residents. While I am grateful for the Minister’s announcement of an Ofwat review, we do not need that to tell us that the water companies are held to half the standard on resilience and capacity that the Environment Agency is. Will she act and ensure that the water companies have to meet the once-in-100-years event criterion that the Environment Agency is held to?
Dr Coffey
The hon. Gentleman is confusing two levels of protection standards. I am more than happy to write to him with the full details but, in essence, when we did the national resilience review of critical national infrastructure, water companies were expected to be held to a higher standard. I think that he is referring to other parts of the water infrastructure network that do not have the same comparison to the Environment Agency.
Chuka Umunna (Streatham) (Lab)
I have come here straight from Henry Cavendish Primary School in St Leonard’s ward in Streatham, which you used to represent, Mr Speaker. It is closed today because of the water issues. Not only has that caused huge practical inconvenience to the school, but parents have not been able to find childcare in such a short timeframe, and are losing at least a day’s wages—the school was also shut yesterday.
Under the water industry guaranteed standards scheme, most of my constituents will get compensation of only £20 if they have been without water for 48 hours. They will get a further £10 per 24 hours after that point. Frankly, that is an insult. Does the Minister agree that proper compensation should be given to my constituents, and that £20 is derisory?
Dr Coffey
The hon. Gentleman will recognise that those are the minimum requirements, and I made that clear in my phone call to the chief executive today. The areas where people have been particularly affected include the hon. Gentleman’s constituents, and I believe that the issue is now isolated to SW16 and SW17. I expect Thames Water to go far beyond that figure to make sure that it redresses the balance.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
The town of Blaenau Ffestiniog lost its water supply on Friday, and many people had to cope for three days or more without mains water, with some of them boiling snow. Will the Minister join me in commending the community of Ffestiniog, which has helped out neighbours and family, and the water company workforce who have worked day and night in horrendous conditions to restore supplies? Will she also join me in commending Dŵr Cymru’s not-for-profit business model, which directs all profits to supporting the vulnerable and a rolling investment in infrastructure?
Dr Coffey
The hon. Lady will recognise that I do not regulate the water companies in Wales, but I pay tribute to the community coming together to look after each other. That is something that we have seen across the country—people helping their neighbours. It is worth pointing out that each company has a vulnerable user register. At the moment, people are required to register for that, but there are other ways in which people can be proactively highlighted as potentially needing support. Thanks to the Digital Economy Act 2017, we have data sharing provisions and, when the secondary legislation comes forward in the near future, water companies will have the capacity to proactively identify vulnerable people so that they do not need to ask for help, but get that automatically.
Angela Smith (Penistone and Stocksbridge) (Lab)
The dreadful and unacceptable situation faced by thousands of water consumers needs urgent action and certainly would not be addressed by blunt tools such as nationalisation. Rather it begs questions about whether Ofwat has the powers and duties required to regulate the industry effectively and in the public interest. Will the Minister therefore commit the Government to the reform of Ofwat to ensure that it is fit for purpose?
Dr Coffey
The hon. Lady will recognise the proactivity of her water company as it affects her constituents. By and large, Ofwat is doing a good job. My right hon. Friend the Secretary of State has asked Jonson Cox and Rachel Fletcher, who is the new chief executive, what powers they need to further improve the performance of water companies and to help consumers and businesses. We are prepared to give them those powers and back the actions they take to make sure that the water industry is fit for purpose.
Vernon Coaker (Gedling) (Lab)
The reality for many thousands of people, including hundreds in my constituency in Arnold, Nottingham, was 24 hours without water and, in some circumstances, no access to bottled water. In particular, people had concerns about vulnerable customers. Can the Minister assure us that companies such as Severn Trent will now review their emergency plans so that such things cannot happen again? It is simply unacceptable that we cannot even get bottled water to everyone who needs it.
Dr Coffey
I would be happy to hear a bit more detail from the hon. Gentleman on his local situation. I know that Severn Trent has been working throughout the night over the past few days to fix the issues. Part of the review will look into that, and I have already outlined how we want to do more to help our vulnerable customers.
Dr Rosena Allin-Khan (Tooting) (Lab)
Over the past four days, thousands of Balham and Tooting residents have been without water. The response from the local community in coming together has been superb, and I have been communicating with more than 1,000 residents each night on Twitter. Not every resident is on social media such as Twitter or Facebook, however, so does the Minister agree that a drastic rethink is needed of how Thames Water communicates in a time of crisis?
Dr Coffey
Social media can be a useful way to communicate, but I recognise that it is not the only way. Part of Ofwat’s review will look at communications, and that might be a role for Ofwat or other media sources, such as broadcast. We recently introduced the 105 number for electricity disruptions, and I have asked officials and Water UK whether we could perhaps do the same for water disruptions so that reporting leaks or getting help are less complicated. We need to make sure that help comes more quickly than perhaps the hon. Lady’s residents have experienced in the last few days.
Catherine West (Hornsey and Wood Green) (Lab)
The N8 and N4 areas have also been badly affected. Not a week goes by without a large flood and now we do not have enough water. Will the Minister please make representations to Thames Water? The regulator is toothless: £20 compensation will not cut it for most of my constituents, many of whom have had to miss work, incur extra childcare costs and so on.
Dr Coffey
The hon. Lady describes difficult issues that are affecting her constituents as well as other parts of the country. That is why I have made the point to the water companies that they have the opportunity to offer discretionary compensation. I would welcome their doing that, especially in areas where the issue has been prolonged, in recognition of the frustrations in daily life that are caused by the lack of this basic service.
Andy Slaughter (Hammersmith) (Lab)
Lest anyone think these major bursts and leaks are solely the product of the recent snow and ice, let me say that in the last week of January, two major mains burst in Hammersmith, flooding residential and business premises, cutting off thousands of people in west London and closing two major east-west routes—King Street and Goldhawk Road. The latter is still closed almost six weeks later. The problem is that private monopoly utilities such as Thames have neither the carrot nor the stick so that they undertake the necessary repair and replacement of their pipework. My constituents want the Government to force them to do that, but I have heard nothing about it. Is not the Minister just washing her hands?
Dr Coffey
I recognise the description of the issue on Goldhawk Road. It is perhaps worth explaining that the problems being experienced at the moment are quite different from a mains burst. This is what is happening when pipes are dotted all around, whether in people’s properties or on the highway, so it is a different experience from the picture that the hon. Gentleman paints on behalf of his constituents in Goldhawk Road. Investment has been increasing, but the Government are not satisfied. That is why Ofwat has set a stringent price review, and we look forward to making sure that the plans on which water companies will shortly consult will lead to a significant increase in investment to tackle some of the challenges that have been outlined today.
Points of Order
Toby Perkins (Chesterfield) (Lab)
On a point of order, Mr Speaker. In the Foreign Secretary’s response to an urgent question a few minutes ago, he said: “Thinking ahead to the World cup this summer, it is very difficult to imagine how UK representation at that event could go ahead in the normal way”. If the Foreign Secretary is saying that England should pull out of the World cup, the consequences would be absolutely massive for the travel industry and other businesses, as well as the media and the tens of thousands of supporters who intend to travel. Have you heard, Mr Speaker, whether there will be a statement to that effect? If not, we should ask the Foreign Secretary to come back very quickly to explain such an important claim.
Mr Speaker
I am very grateful to the hon. Gentleman for his attempted point of order—a description I use advisedly. I understand the very strong concern he feels about this matter, not least in view of his passion for sport which, as he knows, he shares with me and with a great many right hon. and hon. Members across the House. To be fair to the Foreign Secretary, whom the hon. Gentleman briefly quoted, he used the conditional tense. I think it would be correct to say that he was ruminating on the possibilities in the event of no improvement in the situation. I do not think it would be right to say that he made a statement of policy. It is, however, a matter of concern and one which, knowing the insistence of the hon. Gentleman in the pursuit of his quarry, I think he will be minded again to raise in the days ahead.
Mr Speaker
Order. I am not sure that there is a “further”, as I gave a pretty comprehensive response to the hon. Gentleman, but I am in such good spirit that I am inclined to indulge him, as he seems curiously and fetishistically attached to his device.
Toby Perkins
Further to that point of order, Mr Speaker. To be fair, the Foreign Secretary qualified his comments by saying: “If things turn out to be as many Members…suspect they will”. He did not say, “If there is no improvement in relations,” so he was very specific. He is saying that if things are as we suspect they are, he will call into question whether we should appear at the World cup. That is a fairly substantial policy declaration, so I wonder whether we should ask him to make a statement to the House to that effect.
Mr Speaker
The whole point about this situation is that there is an urgency and a topicality associated with it. The reason why I granted the urgent question to the Foreign Secretary was precisely that I thought the matter warranted the urgent attention of the House today. There had been no offer of a Government statement, but I decided that a Minister should come to respond to the Chair of the Foreign Affairs Committee, the hon. Member for Tonbridge and Malling (Tom Tugendhat). There is a police investigation into a particular set of circumstances, which will cause grave disquiet to colleagues —the incident, rather than the police investigation—and the matter is ongoing. If, in the days ahead, the hon. Gentleman wishes to assume his place in the Chamber, there will be an opportunity for him to put questions. If the situation were to prove as bad as some fear, I have no doubt that a Minister would volunteer a statement. If, however, such a statement is not volunteered when it is warranted, the use of the urgent question is now very commonplace. On my recollection, since I took the Chair of this House, we have had 441 urgent questions over the past eight and a half years. The hon. Gentleman should not despair. He need not fear that his legitimate concerns will not have a chance to be aired in this Chamber, for they will have such a chance. I hope that that will satisfy the hon. Gentleman, at least for now.
Nic Dakin (Scunthorpe) (Lab)
On a point of order, Mr Speaker. I rise to draw attention to the fact that at the end of last week the US Administration gave notice of potential punitive tariffs—about 25% on steel and 10% on aluminium. Since then, they have suggested that there will be further punitive action against car imports. I am surprised, Mr Speaker, that we have not already had a statement from a Minister about trade policy and the trade action that the UK Government are taking. I seek your guidance on whether you have been given notice that one will be forthcoming.
Mr Speaker
I have been given no indication that a statement on the matter is forthcoming. The Secretary of State for Business, Energy and Industrial Strategy is with us in the Chamber, and he will have heard what the hon. Gentleman has said. I think it is fair to say—I make this point for the benefit of those who were not present yesterday during the Prime Minister’s statement but who are listening to our proceedings—that the matter was touched upon in the course of the questioning of the Prime Minister. However, that is very different from a full-blooded treatment of what is a very important discrete issue in and of itself. If the issue remains urgent in the mind of the hon. Gentleman and is objectively urgent, it may well have an opportunity to be aired in the course of this week.
Bills Presented
Hospital Patients (Transport)
Presentation and First Reading (Standing Order No. 57)
Tim Farron, supported by Tom Brake, Layla Moran, Stephen Lloyd, Norman Lamb, Grahame Morris and Gillian Keegan, presented a Bill to make provision about transport services for patients travelling to and from hospital appointments, including requiring the Government to review the current provision of public and private transport services for such purposes; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 6 July 2018, and to be printed (Bill 173).
Voyeurism (Offences)
Presentation and First Reading (Standing Order No. 57)
Wera Hobhouse, supported by Sir Vince Cable, Jo Swinson, Christine Jardine, Layla Moran, Caroline Lucas, Anna Soubry, Jeremy Lefroy, Catherine West, Grahame Morris, Tonia Antoniazzi and Ben Lake, presented a Bill to make certain acts of voyeurism an offence.
Bill read the First time; to be read a Second time on Friday 11 May 2018, and to be printed (Bill 174).
Wild Animals in Circuses
Tuesday 6th March 2018
(6 years, 9 months ago)
Commons ChamberRead Full debate Wild Animals in Circuses Bill 2017-19 View all Wild Animals in Circuses Bill 2017-19 Debates Read Hansard Text
A Ten Minute Rule Bill is a First Reading of a Private Members Bill, but with the sponsor permitted to make a ten minute speech outlining the reasons for the proposed legislation.
There is little chance of the Bill proceeding further unless there is unanimous consent for the Bill or the Government elects to support the Bill directly.
For more information see: Ten Minute Bills
This information is provided by Parallel Parliament and does not comprise part of the offical record
Trudy Harrison (Copeland) (Con)
I beg to move,
That leave be given to bring in a Bill to make provision to prohibit the use of wild animals in travelling circuses.
In recent years, Members of Parliament have worked hard to prohibit the use of wild animals in circuses and I want to pay tribute to their efforts. I thank the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), my hon. Friends the Members for The Wrekin (Mark Pritchard) and for Colchester (Will Quince), and, most recently, my hon. Friend the Member for Torbay (Kevin Foster). I am also grateful to colleagues from right across the House for their support for the Bill.
As a child I remember my Grandad’s often repeated account of the travelling circus that visited our small village of Bootle in 1936. As a 14-year-old young farmer, it was his job to ensure that the performing animals had feed, water and bedding. The highlight of the tale was the mad elephant that escaped and ran riot up Bootle Main Street. As Members can imagine, in a small village this story, told by many across the generations, captured the imagination, but it also highlights how times have changed. What was acceptable in 1936 is no longer the case. Thanks to the likes of David Attenborough and documentaries about African elephants, I now think about how unhappy and frightened that magnificent creature must have been, and not about the excitement of a circus rolling into a small village.
More recently, in 2009, while visiting a Spanish town, my family and I saw big cats and monkeys contained in small beast wagons in a large car park occupied by a travelling circus. That experience instilled in me a desire to put an end to the use of wild animals in travelling circuses. My opinion is shared by the vast majority of the British public, and by my daughters who witnessed the animals’ cramped conditions. Thankfully, that region of Spain, Murcia, has now banned wild animals in circuses, as have many countries in Europe, including Austria, Belgium, Cyprus and Greece. More recently, Italy, Ireland and Scotland have followed.
In the UK, going to the circus to see wild animals being used for the public’s entertainment is no longer viewed as morally or ethically acceptable in our modern society. In 2009, the then Labour Government launched a consultation which revealed that a ban on wild animals in circuses was supported by 94.5% of those who responded to the consultation, and I am pleased that Members from right across the House are supportive of a ban. In years gone by, animal performances, when the travelling circus came to town, were hugely popular. They provided perhaps the only opportunity to see incredible creatures, such as elephants, big cats and bears, in close proximity. Today, though, we know better, and we can recognise that the needs of wild animals are not best served by a life in the circus. In fact, the use of wild animals in travelling circuses is not necessary for people to experience the joys of a circus performance. Animal-free circuses have all the thrills and excitement that people would hope to find inside the mystical big-top tent, but without a single wild-animal performance.
The success of Cirque du Soleil in London, Las Vegas and around the world—nearly 150 million people have paid to be amazed by acrobats and daring high-wire stunts without wild animals being involved—demonstrates the change in public opinion. Furthermore, wild animals are not naturally suited to the travelling circus life and may suffer as a result of not being able to fulfil their instinctive natural behaviour. In modern Britain, is it right that we allow wild animals to travel around the country from temporary enclosures to circus tent and back to a lorry for a journey on to the next town? What sort of a life is that for animals such as zebras and camels? Without space to forage and interact with animals of their own kind in the way that they would naturally, these wild animals cannot truly be said to be wild.
I do not doubt that the vast majority of circus keepers licensed by the Department for Environment, Food and Rural Affairs care for their animals and rightly adhere to strict animal welfare standards. However, if wild animals are to be kept in captivity, they require the environment, care, facilities and cohabitation to exhibit their natural behaviour as they would in the wild, which is simply not possible on the road with a circus. This stance is supported by the Royal Society for the Prevention of Cruelty to Animals, the British Veterinary Association and many other animal health and welfare organisations that I have spoken to. As recently as 2011, with the case of Anne the Asian elephant, who was badly mistreated at her circus winter quarters, we have seen that homes for retired circus animals can be found. Longleat safari park took on the care of Anne and she is now living out her days there without having to perform or travel the length and breadth of the country.
Eighteen wild animals are currently owned by the two remaining circuses who use wild animals in their performances. This includes zebras, camels, reindeer and racoons, but the species and number of animals used by circuses change routinely. That highlights the problem with the reliance on the current regulations: if licensing conditions are met, there is nothing to stop more animals and different types of animals returning to the circus.
The House of Commons Library reported that in 2014, one circus in the UK borrowed three elephants from Germany to use in performances here. Without an explicit ban brought into law, there is nothing to stop elephants, lions and tigers coming back to the circuses in our local towns. Although people may have their own opinions about the ethics and morality of keeping animals in zoos and wildlife safari parks here in the UK, they contribute to educational research, breeding programmes and conservation efforts around the world. Most UK zoos have special links to national parks in Africa and South America to increase awareness of species protection and to sponsor anti-poaching efforts. Circuses that use wild animals in their performances add nothing to the understanding and conservation of wild animals and their natural environment.
Wild animals deserve our respect and should not to be in circuses, trained solely for the entertainment of crowds to perform tricks and acts that have no correlation to their natural behaviour. The British public over- whelmingly support a ban on the use of wild animals in travelling circuses, and bringing the law up to date is long overdue. I commend the Bill to the House.
Question put and agreed to.
Ordered,
That Trudy Harrison, Sir Roger Gale, Will Quince, Sue Hayman, Mark Pritchard, Dr Matthew Offord, Jim Shannon, Sir David Amess, Theresa Villiers, Zac Goldsmith Kerry McCarthy and Neil Parish present the Bill.
Trudy Harrison accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 16 March, and to be printed (Bill 175).
Domestic Gas and Electricity (Tariff Cap) Bill
Tuesday 6th March 2018
(6 years, 9 months ago)
Commons ChamberRead Full debate Domestic Gas and Electricity (Tariff Cap) Act 2018 View all Domestic Gas and Electricity (Tariff Cap) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
I beg to move, That the Bill be now read a Second time.
Virtually every household in the country depends on gas or electricity, or both. They are essential services on which we rely. On average, each household spends around £1,250 a year on energy at home—it is one of our biggest household bills—and for the poorest 10% of households, energy is 10% of their annual household expenditure.
Since the early 1980s, when the industry was privatised, consumers have benefited from a more reliable service. Power cuts are at half the level that they were before privatisation and prices have been among the lowest in Europe. Last year, household electricity prices were 13% below the EU average. In recent years, more than 60 new energy suppliers have entered the market, selling direct to consumers. One in five consumers are now with small and medium-sized suppliers and save significant sums.
Gareth Thomas (Harrow West) (Lab/Co-op)
Is not the problem with the Bill the fact that it locks the stable door after the horse has bolted? Energy companies have jacked up their prices ever since whispers of an energy cap surfaced, such that there is a nice cushion that they can continue to benefit from enormously over the coming months.
Greg Clark
I disagree with the hon. Gentleman. As I will go on to explain, part of the problem that we are addressing is that the competition authorities have for some time identified this tendency on the part of companies, and the Bill’s proposals will give Ofgem the power to correct that. He brings me to my next point: for all the progress that has been made since privatisation, it is clear that the market is not perfect. That is indeed why the coalition Government referred the industry to the Competition and Markets Authority to assess how competitive the retail market was.
In 2016, the CMA concluded, following a two-year investigation, that
“our view is that the overarching feature of weak customer response gives suppliers a position of unilateral market power concerning their inactive customer base and that suppliers have the ability to exploit such a position through their pricing policies…by pricing their standard variable tariffs materially above a level that can be justified by cost differences from their nonstandard tariffs; and/or by pricing above a level that is justified by the costs incurred in operating an efficient domestic retail supply business.”
The CMA identified the detriment to consumers—that is, how much consumers are overpaying compared with a fully competitive market—at an average of £1.4 billion a year. This comes from the approach to pricing that is practised by the biggest six energy companies, which for the most part, inherited their customers from previous monopolies. Their approach is to charge their customers on default tariffs much more than those who engage in the competitive part of the market. Currently, the differential for the big six stands at around £300 a year. Those paying the default tariff are much more likely to be in reduced circumstances; 80% of households with an income of less than £18,000 did not switch supplier in the past three years.
From the outset, the UK’s energy market has had a regulator whose responsibility is to act in the interests of consumers. Indeed, if we look back, we can see that Britain has long been a pioneer in not only the privatisation and liberalisation of industries but the regulation of these utility industries, too. Indeed, the British model of privatising state-owned monopolies is to liberalise the market to allow new competitors in and to protect consumers against the power of incumbents—from BT to British Gas—which enjoy an advantage of inertia and loyalty. That has always been recognised in our regulatory arrangements.
Stephen Crabb (Preseli Pembrokeshire) (Con)
My right hon. Friend is making a very important point about regulation, but is not part of the context of the Bill the fact that the regulator, Ofgem, was far too slow to respond to the pressures on people, particularly those on low incomes and in vulnerable households?
Greg Clark
I agree with my right hon. Friend, and I was making the point that we have long been a pioneer in regulation, which has meant adapting regulation to the changing circumstances. We started with RPI minus X, and that evolved into different models, including looking at the regulated asset base. In my view, it is necessary to keep up with our traditions of acting boldly to protect consumers’ interests, and we should be agile in response to new behaviours, especially those brought on by new technologies.
Albert Owen (Ynys Môn) (Lab)
I find myself in agreement with the Secretary of State and shall support the Bill. Indeed, I am in agreement with the Prime Minister that the energy market is broken and that customers are being ripped off. The importance of this legislation will be that Governments of whatever colour and the regulator cannot blame each other when something happens in future. There will be a framework that the Government, the regulator and the energy companies understand, and that is why we need legislation.
Greg Clark
I agree with the hon. Gentleman, and I was saying in response to my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) that I think the regulator should be more agile in responding to the behaviour that had come about. In fact, the energy companies themselves should have recognised this, and one thing that they said to me was that none of them wanted to act individually and that they would prefer to have a consistent approach.
Rebecca Pow (Taunton Deane) (Con)
The Secretary of State is making a valid case for the Bill, which, after all, is all about fairness for the consumer, but will he comment on the fact that we do not want the Bill to reduce competitiveness in the industry—I am sure that it will not—and is that not key? Competitiveness has already done so much for the industry, and we want to encourage it, not reduce it.
Greg Clark
I quite agree with my hon. Friend. In fact, the Competition and Markets Authority found that, in effect, two markets were operating. There is a vigorous and highly competitive market, but among those consumers who, for whatever reason, trust the company of which they may have been customers for some time to reward them for that loyalty, there is an absence of competition. We need to change that, but, as I shall go on to say, the analysis shows that the market is not fully competitive at the moment and will take some time to get to that stage.
Sir Desmond Swayne (New Forest West) (Con)
As someone who has benefited significantly from changing my supplier on a number of occasions, my concern is that by placing a cap we will diminish the competition from which I have benefited in the same way that the provision of a cap on university fees has led to everyone charging the maximum. Can the Secretary of State persuade me that that will not be the case?
Greg Clark
My right hon. Friend personifies engagement and activity, so it does not surprise me that he has a good deal. His point is very important, and, as I shall go on to explain, the minority report from the Competition and Markets Authority recommends, and the Bill requires, that the cap should be set at a such a level that competition can take place for active consumers such as him. There should still be an advantage in shopping around, but customers should be protected from an ever-increasing differential that particularly penalises those who are vulnerable.
Several hon. Members rose—
Greg Clark
I want to make a bit of progress, but I will give way to the right hon. Member for Birkenhead (Frank Field).
Frank Field (Birkenhead) (Lab)
On protecting the vulnerable, we know that the most vulnerable do not move around, despite having shining examples of people doing that. Will the Secretary of State consider putting a duty on companies, running alongside capping, which is a key part of the Bill, to put their poorer consumers on the lowest tariff, so that it is not up to them to try to match the skills of the right hon. Member for New Forest West (Sir Desmond Swayne)?
Greg Clark
The right hon. Gentleman makes an important point. That is not within the scope of the Bill, which is meant to protect those consumers from the excesses that can be visited on them by the market. The Bill is narrow in scope and particular in its effects.
Frank Field
I am pushing the Secretary of State on this, but even if we cannot get an amendment because the long title is drawn so carefully, may I ask him to consider the need to introduce such a measure, so that the poorest constituents are automatically looked after by their company and put on the lowest rate for the range of consumption?
Greg Clark
There already is a cap for those on prepayment meters, and that is being extended to some of those who are identified as the most vulnerable. The reason for this more general scope is that not everyone can be identified through the receipt of particular benefits—that does not comprise the whole population of those who are vulnerable—so the Bill proposes a backstop.
Rachel Reeves (Leeds West) (Lab)
I thank the Secretary of State for giving way and I welcome the Bill, which will do a great deal to reduce the energy prices paid by consumers. On the point about helping the most vulnerable customers, one issue that we have is that data about who those customers are is not shared with energy companies. The Cabinet Office already has a consultation on showing this data as part of the Digital Economy Act 2017, and the Department for Business, Energy and Industrial Strategy has announced another consultation. When will the Department get on and give the powers to enable the data to be shared, so that we can protect the most vulnerable customers?
Greg Clark
The hon. Lady makes a very important point. The statutory instrument that will allow that data sharing will be tabled shortly, before this Bill, which we hope will make rapid progress, receives Royal Assent. She is absolutely right.
I was explaining that the original RPI minus X model, which required annual reductions in prices by incumbents, was followed around the world, but with new developments in technology and practice, it is vital to keep our regulatory system up-to-date. In recent years, it has become more and more possible for suppliers to have extensive information on the habits and behaviour of individual consumers—often more information than the consumers know about their own habits, which are studied so minutely. Incumbent suppliers can identify which of their consumers do not respond to higher prices and instead display loyalty to what they might think of as a long-standing and trusted supplier. They can then penalise those customers with ever higher prices.
The CMA identified the problem and recommended that certain consumers, those on prepayment meters, should be protected from such pricing behaviour. It also recommended measures to drive up the rates of switching. The roll-out of smart meters in particular can make information that is currently only available to the incumbent supplier available to other potential suppliers, with the customer’s permission, which is what everyone wants to be able to drive up competition.
In its report, the CMA was in two minds about whether that action was sufficient, and a minority report thought that such remedies, including smart meters, would not come soon enough to eradicate this detriment quickly enough. The minority report said:
“The harm which is presently inflicted on households…is very severe…the remedies proposed for the large majority of households will take some time to come into effect. That is why…they must be supplemented by a wider price control designed to give household customers adequate and timely protection from very high current levels of overcharging”.
James Heappey (Wells) (Con)
I agree with the report that the march of technology was not correcting the market quickly enough, but there is no doubt that the arrival of all this technology in the energy system is creating a market that will benefit consumers in the future. Can the Secretary of State reassure us that while the Bill provides a temporary measure to correct the current market, it will in no way impede the arrival of the digitised market that will be so greatly to consumers’ advantage in the future?
Greg Clark
My hon. Friend has captured the position very succinctly. That is exactly the point. These remedies will introduce more competition based on technology, allowing consumers to have access to the data that will drive it. However, it will take a few years for that to come into effect, so the Bill is doing what my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) advocated—it is addressing the current problem with greater agility than the regulator has shown.
In 2016, the CMA’s minority report stated:
“These customers are exposed to the prospect of excessive prices on a scale which might amount of many billions of pounds of harm over the next four years”.
Experience has shown that the CMA was right. In the last few years, prices for customers on the standard variable and default tariffs have not declined; in fact, they have continued to increase, in some cases by double digits. There has certainly been no change in the behaviour of many of the companies.
Yvonne Fovargue (Makerfield) (Lab)
I support the Bill, but does the Secretary of State not agree that, while it may tackle the so-called loyalty penalty for certain customers, more needs to be done to tackle the loyalty penalty in other markets, which, according to Citizens Advice, costs the most vulnerable and possibly the oldest customers about £900 a year?
Greg Clark
The Bill focuses narrowly on a problem that the independent inquiry has exposed as being very significant. As I have said, 10% of the annual expenditure of the poorest households is on energy. I recognise that we need to be agile in our regulatory system, and I hope that the behaviour of companies in other markets will reflect the fact that it is not acceptable to use information to ratchet up the amount paid by vulnerable consumers in particular. This is a regulated market with a regulator that is there to protect the interests of consumers, and I think it right for the Bill to focus on that.
Stephen Kerr (Stirling) (Con)
I fully support the Bill, but I have a question about Ofgem. The Secretary of State has mentioned a change in the behaviour of the energy companies, but what about a change in the behaviour of Ofgem in increasing productivity and being more on the ball? So far it has failed consumers miserably in that respect.
Greg Clark
I too would like to see greater agility on the part of the regulator. It seems to me that its powers would have allowed these actions to be taken under its existing remit, and it is a matter of regret that we have to introduce a Bill to compel it to act in this way. I concede, however—this was made clear in evidence given to the Select Committee on which my hon. Friend serves—that in recent months the current management of Ofgem have displayed more understanding of the need to act to protect consumers.
Caroline Flint (Don Valley) (Lab)
Do the Government not already have powers, under section 26 of the Energy Act 2010, to introduce a price cap if one group of customers is treated less favourably than others by an energy supplier? Ofgem fears that if it used its powers, there would be a ruling against it and it would end up in the courts. Our purpose today, and my purpose in supporting the Bill, is to lay out once and for all the powers to introduce a price cap for people who are losing out.
Greg Clark
It is true that Ofgem has said that it might be challenged in the courts. I do not think we should be afraid of testing arguments in the courts, and I would have preferred to see that happen. The statute that the right hon. Lady mentions would not enable the gap to be closed in a way that would allow competition to continue in the other part of the market—other Members have raised that matter. It would require a closing of the gap, but that could take place by means of the deletion of other tariffs, which is not what we want.
John Redwood (Wokingham) (Con)
I fully support the effort to lower energy prices, and competitive markets should be able to do that. Last week we were very short of both gas and electricity. There seems to be a capacity problem, and we are going to close a load of coal power stations. What action is being taken to expand capacity to increase the chance of competitive prices?
Greg Clark
The capacity auction arrangements that have been pursued over the last few years have been very successful. We have had a higher margin this winter than last, and the prices of securing that capacity for future years have fallen in successive auctions. My right hon. Friend is right to raise the question, but the framework is actually delivering more resilience than has been delivered in the past.
James Heappey
My right hon. Friend the Member for Wokingham (John Redwood) made a good point, but does the Secretary of State agree that it is not just additional capacity that is required, but more flexibility in the system so that we can make existing capacity work better?
Greg Clark
My hon. Friend is absolutely right. We have already had the pleasure of debating that issue. The hon. Member for Southampton, Test (Dr Whitehead) has spent many hours in Committee scrutinising the Smart Meters Bill, which will contribute to making the energy system more interactive and therefore more resilient.
The Bill follows precisely the advice to set a non-renewable price cap for a short period while competition increases. Address the problem was one of the commitments made by the Prime Minister when she entered Downing Street. I recognise the important campaigning work done by my hon. Friend the Member for Weston-super-Mare (John Penrose) and, indeed, by the right hon. Member for Don Valley (Caroline Flint).
The Bill comes to us today having been scrutinised in draft by the Select Committee on Business, Energy and Industrial Strategy. I am very grateful to the Committee, and to its Chair and members, for their swift yet thorough scrutiny. The Committee took evidence from a wide range of stakeholders and produced a well-considered report. It agreed with the CMA’s minority report and with the Government’s proposed approach.
The Bill has been supported by consumer groups and, indeed, by many energy suppliers. Citizens Advice has said:
“We welcome the…Bill, which will prevent loyal customers being ripped-off”.
Octopus Energy, one of the newer and more innovative entrants to the market, has called the Bill:
“A crucial step towards a fair energy market in which energy suppliers compete to offer their customers the best value and service”.
The Bill constitutes a sensible intervention to address a specific problem in the market. The Government are not setting prices, and this is not a price freeze. Such a freeze could disadvantage consumers by leaving them stuck on high prices when underlying costs fall, or force energy suppliers to face the entire risk of international commodity markets. Subject to parliamentary approval, the Bill will require Ofgem to cap domestic standard variable and default tariffs until 2020. It will be for Ofgem to decide the methodology and the level of the cap, as appropriate. The cap will stay in place until the end of 2020. Ofgem will then be required to assess the conditions for effective competition in the market and make a report and recommendation to the Government, which I am sure the House and its Select Committees will consider as well.
The price cap can be continued for one year at a time up to the end of 2023, when a sunset clause will come into effect. The Government have no wish for the price cap to become a permanent feature of the landscape. The inclusion of the sunset clause relates directly to the point made by my hon. Friend the Member for Taunton Deane (Rebecca Pow) that we need to address the problem by increasing competition. Ofgem currently has the power to impose a cap for vulnerable consumers, and is taking steps to do that. When consumers make an active choice to opt for green standard variable or default tariffs, they will be able to continue to pay extra for such tariffs if they choose, to prevent unintended consequences. That was a very helpful recommendation from the Select Committee, and I can confirm that all of its recommendations have been accepted in full and are reflected in the Bill before the House today.
The Government want the market to thrive. We continue to promote competition as the best driver of value and services for consumers.
Mark Pawsey (Rugby) (Con)
The Secretary of State talks about the setting of the cap, and setting it at the right level in the Bill is incredibly important. If it is too high, it will not achieve its objectives; if it is too low, there is a danger that some of the new entrants into the market will fail. The power is with Ofgem, but we have already heard that Ofgem has not been exactly brilliant in exercising its existing powers. Is the Secretary of State confident in Ofgem’s ability to set the cap at the right level?
Greg Clark
I am. There has been recognition from Ofgem that this role is perhaps more important than was suggested by the attention it has been given in the past. Most observers recognise that the work on setting the cap for consumers on prepayment meters has been effective and that competition still exists in the market.
Mark Menzies (Fylde) (Con)
Can my right hon. Friend assure me that any changes to the price cap will also take into account those on prepayment meters, so that if, for example, the price cap changes every six months, that is taken into account for those on prepayment meters or prepayment cards and they are not disadvantaged?
Greg Clark
The arrangements for prepayment meters will continue separately from these provisions, not least because the costs of the prepayment meter are different from those of consumers on normal meters, and that must not be used to the disadvantage of those consumers.
The price cap must be in place as soon as possible, and our intention is that it should be by the end of the year subject to progress in this House and the other place. Ofgem is undertaking preparatory work alongside the consideration of the Bill by Parliament. The Bill will require Ofgem to put the price cap in place as soon as possible after the Bill is enacted.
Kevin Hollinrake (Thirsk and Malton) (Con)
The whole House wants to help those in vulnerable circumstances in particular. My right hon. Friend alluded earlier to the provisions of the Digital Economy Act 2017, which will give suppliers access to customers in difficult circumstances. At that point, if we do not take action through legislation, will my right hon. Friend work with the industry to develop best practice so that suppliers seek out their vulnerable customers and do whatever they can to get them on to the lowest tariffs?
Greg Clark
My hon. Friend makes an excellent point, and my Department will work closely with Ofgem to ensure that those consumers can benefit from these provisions.
Albert Owen
The regulator will need time to consult before the Bill’s provisions are enacted. Is the right hon. Gentleman confident that, with the Bill being put before both Houses of Parliament today, customers will be able to benefit from it this winter?
Greg Clark
I am indeed confident of that, and it is one of the reasons why I am so grateful for the swift attention of the Committee on which the hon. Gentleman served in giving the Bill pre-legislative scrutiny and taking evidence from expert witnesses.
As I said earlier, the Bill has been constructed to be proportionate and to be directed at a particular problem that we expect to be temporary. On that basis, I hope it will enjoy support from across the House and we can swiftly progress it so that we can correct an intolerable situation in which consumers have been exposed to paying £1.4 billion more than they would in a competitive market. That abuse should end. This Bill will give Ofgem not only the ability to do so, but the requirement that it should do so, and I commend it to the House.
Rebecca Long Bailey (Salford and Eccles) (Lab)
I am pleased that the Bill is before the House today, but I must express my exasperation that it has taken so long to get to this point. The 2017 Conservative manifesto committed to implementing an energy price cap that would protect 17 million households. The Government then repeatedly rowed back on that promise, passing responsibility to Ofgem, which made it clear that legislation was required. After months of to-ing and fro-ing, the Prime Minister reintroduced her commitment in her conference speech, and finally, on 11 October, a draft Bill was published. That Bill was then passed to the Business, Energy and Industrial Strategy Committee for pre-legislative scrutiny, which, due to the thorough work rightly done by colleagues, was not completed until mid-February. At the same time, a leaked conversation between the civil service and an energy investor seemed to suggest that the Government had no intention of seeing through the legislation. So yes, I was relieved last week to finally see the Bill introduced to Parliament, and I welcome the Government’s foray into a policy that they previously denounced as Marxist, but it remains the case that, as a result of this Government’s inaction, millions of households have been left to scrape through the winter facing a choice between cold homes or astronomical bills.
As all hon. Members will be aware, the UK experienced one of its coldest periods for decades over the past week, with the Met Office reporting that the UK had officially broken its record for the lowest March temperatures in a 24-hour period on Friday. As a result of this Government’s dithering and delay, the 4 million households currently living in fuel poverty, 1 million of which include a disabled person, will be receiving whopping bills at the end of the month. Startlingly, the latest figures from National Energy Action for the winter of 2016-17 show that excess winter deaths were 39.5% higher than in the year before, with an estimated 34,300 excess winter deaths in England and Wales.
James Heappey
The hon. Lady underlines the fact that the harshness of the recent weather will have increased energy bills for millions of people. Was she therefore as impressed as I was by the speed at which emergency payments were made to the most vulnerable to help them with their additional heating costs?
Rebecca Long Bailey
The emergency payments were certainly welcome—I thank the hon. Gentleman for his comment—but the fact remains that this price cap should have been in place this winter and it was not.
National Energy Action also found that each year an average of 9,700 people die due to living in a cold home. That equates to 80 people per day, the same number of people who die from breast or prostate cancer each year. It has been Labour party policy since 2013 to introduce a price cap on consumer energy bills, and although the principle of this Bill is positive, I remain concerned that, as drafted, it does not go far enough.
Antoinette Sandbach (Eddisbury) (Con)
Given that electricity prices rose by 44% between 2003 and 2007, will the hon. Lady outline what action the Labour Government took in their 13 years in power to address this issue?
Rebecca Long Bailey
The hon. Lady makes an interesting point. I think that both sides of the House have reached something of a consensus on our energy market. People on the right and left—wherever they place themselves on the political spectrum—agree that our energy market is fundamentally broken and needs to be reviewed. It is interesting that the Government put their own commission in place, under Dieter Helm, but we have had no response from them so far about the proposals it made.
I have several issues with the Bill as drafted, but I start with the fact that it does not provide any direction from the Secretary of State on his preferred level of cap, which effectively passes the buck to Ofgem. The Bill merely states:
“The Authority must exercise its functions…with a view to protecting existing and future domestic customers who pay standard variable and default rates”.
In doing so, Ofgem must consider a number of factors, including creating incentives for suppliers to improve efficiency, enabling suppliers to compete effectively, maintaining incentives to switch between suppliers, and the need to ensure that holders of supply licences who operate efficiently are able to finance activities authorised by that licence.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
With respect, I dispute the hon. Lady’s claim that we are in accord on energy policy. The Opposition’s stated policy is to proceed with wholesale nationalisation, which Government Members strongly disagree with. Does she not accept that renationalising National Grid and the energy sector would be antithetical to driving down prices, which is what we all want?
Rebecca Long Bailey
I refer the hon. Gentleman to the Labour party’s manifesto, which clearly states that we wish to increase competition in the energy market by creating regional suppliers. We want to promote fair and transparent competition within the energy market, but unfortunately the Government do not advocate a similar position. We hope to fine-tune aspects of the Bill as it goes through the House so that competition in the energy market will be effective, fair and transparent.
Gareth Thomas
The hon. Member for Middlesbrough South and East Cleveland (Mr Clarke) deliberately misinterprets our policy. The shadow Chancellor has committed the Labour party to supporting a doubling of the co-operative sector. Energy co-operatives do not mean nationalisation, but they do amount to democratic public ownership. Will my hon. Friend re-endorse the commitment to see more energy co-operatives in the market?
Rebecca Long Bailey
I wholeheartedly support my hon. Friend’s fantastic point. I think that our manifesto commitments have been misrepresented or, in the case of the hon. Member for Middlesbrough South and East Cleveland (Mr Clarke), overstated. I again encourage him to read our manifesto, which encourages competition in the energy market while also considering some of its fundamental problems, such as in relation to grid ownership. I will address those points later in my speech.
With regard to the factors that Ofgem must consider, the problem is that although the Opposition are not averse to these principles, at present they are at best ambiguous, and there is no duty to consult on how such measures can be accurately quantified. Perhaps the Minister for Energy and Clean Growth will confirm how these measures will be quantified. Will they form part of Ofgem’s cap methodology consultation? If not, how will Ofgem determine these ambiguous proposals?
Speaking of those guidelines, Energy UK has highlighted the uncertainty in which the provisions are shrouded. Indeed, The Guardian’s financial editor recently commented of the chief executive of Ofgem:
“At best, he is being sent mixed messages by government. At worst, he is being asked to deliver contradictory goals.”
We recognise that Ofgem will consult on the cap methodology to be used, but has the Secretary of State given any indication to Ofgem of the final outcome he wants to see? The Prime Minister promised that £100 would be knocked off 17 million household bills, but nothing in the Bill will ensure that that happens.
Labour has confirmed that we would introduce an immediate emergency price cap to ensure that the average dual fuel household bill remains below £1,000 a year. Had that policy been in place since 2010, the average customer would have saved more than £1,000 on their bills by now. Will the Minister confirm whether the final cap will go anywhere near Labour’s proposals, or indeed anywhere near the Prime Minister’s promise?
Just as ambiguous is the mechanism for deciding whether to extend the cap beyond the end of 2020. The Bill merely states:
“The Authority must carry out a review into whether conditions are in place for effective competition for domestic supply contracts.”
It does stipulate that the review must include an assessment of progress made in installing smart meters, but unfortunately that is as good as it gets. The industry has expressed concern that this provision is unclear. I agree. For example, Energy UK says that there is an absence of a
“clear and realistic definition of effective competition”.
Which? says:
“the criteria for effective competition are not defined so it is not certain under what circumstances the cap will be lifted or how its success will be judged.”
Will the Secretary of State issue any further guidance on what the conditions for effective competition might be, or are we simply deferring to Ofgem to determine that without question?
Mark Pawsey
Does the hon. Lady support the sunset clause, which means that this legislation will not apply indefinitely as we will reach a stage where there is sufficient competition, or would she rather see a permanent price cap that lasts forever?
Rebecca Long Bailey
The hon. Gentleman makes an important point, and I will refer to this later in my submission. The Bill does not provide an answer to the broken energy market; it is simply a sticking plaster while the energy market is reformed. We would not expect the provision to be in place for a prolonged period. We are not openly against sunset provisions, although we might dispute how they are drafted, which we will explore in Committee.
In considering the cap removal, I must raise an issue that was highlighted recently by the Business, Energy and Industrial Strategy Committee. It found that vulnerable and low-income people were especially affected by poor-value tariffs, with 83% of those living in social rented housing, 75% of those on low incomes, 73% of those with no qualifications and 74% of disabled customers on a standard variable contract. It was clear from the Committee’s findings that, even with the advent of smart meters, those groups will still require protection from overcharging. I therefore urge the Government to consider representations by charities such as Scope, which has called for clause 7 to be amended to ensure that Ofgem, when it considers “effective competition”, has regard to the impact of removing or extending the cap in relation to vulnerable and disabled customers.
Finally on the drafting of the Bill, I am concerned that there is no guarantee that the price cap will be in place this winter, despite the Secretary of State’s earlier assertions. The Bill states that Ofgem must introduce a cap “as soon as practicable” after it is passed, but Ofgem has already said that it would take around five months after a Bill receives Royal Assent to enact a price cap because it has a statutory duty to consult power companies. This morning Ofgem has said that it
“will look to set the level of the cap over the autumn and bring the cap into effect at the end of this year”.
It therefore seems that the cap will not even be in place when the weather turns in autumn this year. I think that the Bill would be greatly improved by the inclusion of a hard deadline by which the cap must be in place, and Labour will be seeking to include such a deadline in Committee.
Given that the Government have already set the date for Committee consideration as 15 March, it would be encouraging if they provided a clear date for cap implementation because, even accounting for the relevant consultation periods set out in the Bill, it would be possible to introduce the cap earlier than next winter. Indeed, my advice is that including such a date might even lay to rest suggestions in some press reports that the big six, and indeed some members of the Cabinet, have been lobbying the Secretary of State to procrastinate or even drop the Bill entirely.
James Heappey
The shadow Secretary of State is kind to give way to me a second time. Does she agree that another option she might consider to help to introduce the cap as quickly as possible would be for her party to pledge its full support in helping to get the Bill through the House and the other place as quickly as possible?
Rebecca Long Bailey
I thank the hon. Gentleman for that very helpful comment. I have not opposed the Bill in any of my comments so far; I am providing helpful advice. We support the principle of a price cap and want it to be introduced in the most efficient and detailed way possible.
I think that there is consensus across the House that the energy price cap is no more than a sticking plaster, and that much deeper problems within the UK’s energy market need to be addressed. The market is fundamentally broken. Electricity bills soared by 20% between 2007 and 2013, while in the past year alone, every household in the UK paid £120 for dividends to energy company shareholders. Over the past few months, report after report and news story after news story have detailed the unfairness of the current system, but it must be noted that the final bills that consumers face are not simply a consequence of manipulation by some supply companies. As the Business, Energy and Industrial Strategy Committee has highlighted, network costs make up the second highest element of a duel fuel energy bill.
The Energy and Climate Intelligence Unit found last year that the six distribution network operators made an average profit margin after tax of 32% a year between 2010 and 2015, equating to £10 billion over six years. At the same time, shareholders received £5.1 billion in dividends. In a subsequent report, the ECIU calculated that electricity network companies’ exceptionally high profits are set to add £20 to household energy bills this year. Moreover, analysis by Citizens Advice last year calculated that network operators, including National Grid, had made £7.5 billion in unjustified profits, which it thinks should be returned to consumers. Quite frankly, that is the exploitation of a natural monopoly. It is not a market and there is no effective competition, and I want to hear how the Minister will deal with competition within this element of the energy market.
Gareth Thomas
I am grateful to my hon. Friend for giving way a second time. Is it not a problem—and deeply ironic—that Conservative Members should defend an energy system in which foreign nationalised companies have more control and earn more income and wealth from the distribution and supply of British energy than the British citizenry?
Rebecca Long Bailey
My hon. Friend makes a fantastic point. Many people across Britain find the situation absurd.
As I said, I welcome the Minister’s comments about how she will tackle network exploitation but, along with the BEIS Committee, the Opposition are closely monitoring the next phase of network regulation. We also wonder whether the Minister will shine a little more light on what that might entail, what benchmark the Government have set as their acceptable level of regulation, and what actions she will take if Ofgem’s proposals are insufficient, as was the case with the initial price cap proposals.
The Labour party has been clear that it will not allow the exploitation to continue. We will radically reform the UK’s energy system, not just tinker around the edges, and if the Government are serious about reforming the market and protecting consumers, it is about time that they keep up. Sadly, however, the Secretary of State’s opening remarks were rather thin on proposals for long-term market reform. Reform of the market is not just critical in order to instil fairness and affordability, but vital to ensure that Britain has an energy system fit for the future.
We are experiencing a pace of technological change within the energy sector that has never been seen before. Batteries, storage and smart systems are transforming demand and supply. There is a move to smarter, more decentralised forms of energy generation and supply, emulating many of the models we have seen established across Europe, along with the potential of accessing a low-carbon market that is, according to Goldman Sachs, worth over $600 billion.
Dieter Helm, who was commissioned last year by the Government to conduct a review into the cost of energy, said:
“The corporate structures and policies designed for the 20th-century world no longer work well.”
That review had two main findings: first, that the cost of energy is significantly higher than it needs to be to meet the Government’s objectives and, in particular, to be consistent with the Climate Change Act 2008 and to ensure security of supply; and, secondly, that energy policy, regulation and market design are not fit for the purposes of the emerging low-carbon energy market as it undergoes profound technical change. Dieter published his report in late October. It echoed our calls for a change in ownership of the electricity network; unsurprisingly, we heard little from the Government.
Following the report’s publication, the Government launched a call for evidence to gather the views of stakeholders. That process closed on 5 January this year. I have not heard anything from the Government about that, so in the absence of any future energy vision from the Secretary of State today, perhaps the Minister for Energy and Clean Growth will confirm when a response to that consultation will be published and if the Government agree with Dieter Helm’s proposals.
Mark Menzies
The hon. Lady is making suggestions to improve the Bill, so what role does she see for the Competition and Markets Authority to ensure that consumers’ interests are paramount?
Rebecca Long Bailey
The hon. Gentleman makes an interesting point. We would expect all stakeholders to be engaged in the process, because the Bill must suit the entire energy market and deal effectively with competition. As I set out earlier, the Bill, as drafted, does not provide sufficient clarity on what is meant by “effective competition”.
Mr Jim Cunningham (Coventry South) (Lab)
In answer to the question asked by the hon. Member for Fylde (Mark Menzies), the regulator is supposed to represent consumers, but it is not strong enough to do that. The sooner we have a proper inquiry into the energy market the better. I have been saying that for the past seven years.
Rebecca Long Bailey
My hon. Friend makes a fantastic point about the need for a fundamental root-and-branch look into how our energy market functions and what we will expect to see from it if it is to suit our needs.
The Opposition are pleased that the Government have caught up and finally brought forward legislation to ensure that a price cap is implemented, but the Bill is frankly too little, too late, for millions of people who will not feel benefit this winter and nor, it would seem, for half of next winter. This sticking plaster is only guaranteed to be in place until the end of 2020, so the Government need urgently to bring forward radical proposals for long-term reform of the energy market. We have already set out a clear plan, and it is time that this Government started to catch up.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. As Members can see, many colleagues are trying to get in on this debate. If Members could stick to eight minutes, we will be able to get everyone in without having to impose a time limit. I call John Penrose.
John Penrose (Weston-super-Mare) (Con)
Thank you, Madam Deputy Speaker; I will try to edit as I go.
Today is a great day. To those who say that politicians never deliver on their election promises, we can collectively send a blaring foghorn reply of “You’re wrong.” Today’s energy price cap Bill is an incredibly rare political unicorn: a pledge that not only has cross-party support, but is being fulfilled. As the organiser of the cross-party letter, which gathered an exceptional and unprecedented 213 MPs’ signatures, I thank my co-convenors, the right hon. Member for Don Valley (Caroline Flint) and the hon. Member for North Ayrshire and Arran (Patricia Gibson), for their help. I also thank every MP who signed the letter and the Ministers who have listened and brought its contents forward. Without their help, we would not be here today.
The Secretary of State has already ably described the problem. It is a two-tier market in which millions of customers are penalised for being loyal. Sneaky price hikes mean that people who have forgotten to switch are gouged on super-expensive rates to which they never agreed. Customers are being taken for granted and taken for a ride. So it is a great day, but in spite of all that we still have some pitfalls to step around. First, it is vital that the price cap is temporary. The long-term answer for most people is not an endless cap; it is making the customer king and putting them in the driving seat, so that the energy industry provides the same good-value and sensible deals that we take for granted in every other walk of life.
Stephen Crabb
I pay tribute to my hon. Friend for his hard work in ensuring that the Bill was brought forward. He makes an important point about consumers. He described them as behaving in a “loyal” way, but for many people, particularly the most vulnerable and those on the lowest incomes, this is about inertia. We need to change behaviours and get better engagement from some of the most vulnerable energy customers, which will be key to making this Bill work.
John Penrose
My right hon. Friend is a co-signatory to the letter, for which I thank him, and he makes an important point. It is not just vulnerable customers, of course; it is the many of the rest of us who are time poor. This is a far broader question than just vulnerable customers, although they are a key part of it. Many other families, either because they are loyal or because they just have not got round to it, have not switched. We need to persuade them to change their behaviour, and we need to change the market to help them to do so.
Choosing a new supplier should be no more complicated than changing our brand of coffee or corn flakes. The big six should have to work a lot harder to attract and keep our business. To be fair, as we have heard and as I think my right hon. Friend was alluding to, the regulator, Ofgem, has made a start. We have more than 50 new competing firms that are scrambling to take business off the big six. Smart meters are coming, and switching is slowly getting simpler, quicker, easier and less scary.
The Bill rightly says that the price cap should die after a couple of years, but what about the other details? Price caps, as we have heard, are dangerous things. They are fiendishly difficult to get right: they drive suppliers away if the price is set too low, and they gouge customers if the price is set too high.
So how do we design a cap that does not make things worse rather than better? Well, the Bill says that the price will be set by an all-knowing committee of Ofgem regulators every six months, but the international price of energy moves around every day. Although I am sure Ofgem is full of clever and well-intentioned people, no one is that clever. Any energy trader will tell us it is impossible to know what the price will be in the next six minutes, let alone the next six months.
Caroline Flint
Some 5 million people are already benefiting from the price cap for those on pre payment meters or on the warm home discount, and Ofgem is in charge of that. Why cannot it be trusted to extend its skill to a wider group of customers?
John Penrose
The right hon. Lady is one of the co-organisers of the letter, and I thank her again for her help. No matter how clever, good and high calibre the committee, people are just not as good as the market at price discovery, provided the market runs properly. When she was shadow Secretary of State for Energy and Climate Change, I heard her talk about having to get a better energy market with better price discovery and having to re-establish an energy pool precisely because of that point. Ofgem, no matter how hard it tries or how well intentioned it may be, just will not get it right a large proportion of the time.
Bim Afolami (Hitchin and Harpenden) (Con)
My hon. Friend knows a great deal about this issue. Is not the point that this is not a price freeze but a price cap? Those two things are different and allow a sensible regulator, as the right hon. Member for Don Valley (Caroline Flint) suggests, to set a ceiling rather than an absolute price.
John Penrose
I agree that there is a difference between a freeze and a cap, but there are a couple of things that, none the less, make it an extremely risky and dangerous proposition to go down that road. For example, what if Ofgem picks a number and the international price of energy falls the very next day? What then? Switching customers in the ultra-competitive part of the market would find their prices drop quickly as energy firms react to the news, but Ofgem’s capped prices for loyal, non-switching customers on default tariffs—that is the example my hon. Friend talks about—would not move at all for another six months, when the cap can be reset according to the terms of the Bill. In that situation, the cap would be ineffective at protecting the customers it is designed to help and, because it is officially blessed by Ofgem, it would embed and legitimise high prices. Things would get worse rather than better.
It is not just me who is worried about that. Which? says it is
“not certain that customers on a capped default tariff will benefit as market conditions change in future”.
Sir Oliver Letwin (West Dorset) (Con)
As my hon. Friend knows, I have some sympathy with his arguments. Does he recognise that, as drafted, the Bill enables Ofgem to set the cap by formula, which could be related to wholesale prices and have the flexibility required to overcome the problem he describes?
John Penrose
I wish I shared my right hon. Friend’s confidence in Ofgem. All the discussion of the Bill so far from Ministers, from comments on the Bill and from people inside Ofgem is not what he describes. They are talking about an absolute cap in which people sit in a room and come up with a number, which stays that way until it is reset after six months—that is the way the Bill is drafted.
If the Bill can be amended in a way that allows it to be far more flexible—that is one of the things I hope to encourage both Members here present and Ministers at later stages to consider—we might be able to iron out some of these issues, but I do not share my right hon. Friend’s optimism in that regard.
Sir Oliver Letwin
Looking at clause 2(1)(b), as drafted, it seems perfectly clear to me that Ofgem will have to set out how the cap is to be calculated, which positively points in the direction of a formulaic rather than an absolute position.
John Penrose
But as my right hon. Friend will know, it is also stated elsewhere, particularly in the guidance and in many of the other documents on this, that we are looking at an absolute cap. The word “absolute” is used repeatedly, and it has been used repeatedly to me in conversations with Ministers. If we can remove those other points as well, so that they are not going to push us in the direction I worry about, many people here would be a great deal more reassured. We will have to come back to this on Report—
John Penrose
I will give way one more time and then I will have to make some progress, because Madam Deputy Speaker is catching my eye.
Sir Oliver Letwin
I certainly will not press the point beyond this. Does my hon. Friend not need to distinguish between absolute, which means not relative—to offer tariffs—and formulaic and flexible, which the drafting certainly does allow, as opposed to a point that is set by a Committee for six months?
John Penrose
We will need to come back to this matter, but it would be tremendously helpful if Ofgem came up with some clarifications on it, because that might reassure me and others. So far I have had nothing to reassure me in that direction—in fact, quite the opposite.
As I was saying, it is not just me who is worried about this: both Which? and uSwitch worry it will mean cheaper fixed deals will be withdrawn from the market; and leading challenger energy firms such as Octopus Energy, Utilita Energy, Utility Warehouse, Ebico and Good Energy are all worried that Ofgem’s price-fixing efforts will inevitably get it wrong. The lawyers and lobbyists for the big six are licking their lips at the prospect of all those fat fees from legal challenges and persuasive lunches. It is no coincidence that they are already demanding the Bill should allow expensive and time-consuming appeals to the Competition and Markets Authority whenever Ofgem’s committee sets a price.
If all these people think the Bill’s details create problems, what is the alternative? What needs to change? The thing to remember is that default tariff prices are just a symptom of a much deeper problem. The moral flaw at the heart of this market—the thing that sticks in the throat —is the mark-up loyal customers are charged compared with competitive switching deals. I am talking about the enormous, unjustified, sneaky price hike the big six hit people with, without their consent, just because they are loyal or simply too busy to switch. That is the unfairness, the burning injustice and the thing that drives customers—our constituents—to write to each and every one of us demanding, “This must change”.
If the problem is the mark-up as between the competitive deals and the default tariffs, why does the Bill only address half the problem—the price of the default tariffs—rather than the gap between the two? If we are really serious about solving the problem, why not cap the gap instead? A cap that creates a maximum mark-up would deal directly with this moral underlying problem—the cause of the rip-off—rather than only half of it. It would mean default tariffs would have to move in tandem with the ultra-competitive, consumer-friendly part of the market. People who took the trouble to switch would still get the best deals, but customers who forgot or did not want to switch would get protection, too.
Capping the gap is future-proof as well. If the international price of energy fell suddenly, as we were discussing earlier, it would not just be the competitive switching deals that would get cheaper; the price of capped tariffs would fall, too, and people would not have to wait for six months for Ofgem’s all-knowing committee to meet and change it. Capping the gap would not dilute or derail the all-important underlying market changes which are going to make energy feel competitive and normal either. Customers would still have plenty of incentives to start switching. That is why this Bill and its introduction make this a great day— I meant it when I said it. This Bill is important, even though it is only temporary. It will save millions of customers hundreds of pounds on an essential product. Although it is not perfect and it could be better, it is a very important step. So for the moment, for the principle of the thing, for the Second Reading debate today, let us just celebrate the fact that it is here at all and support it.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to follow the hon. Member for Weston-super-Mare (John Penrose). He has clearly done a lot of work on this and is revelling in the fact that the Bill is here today, but I thought for a moment near the end of his speech that he was starting to argue against the principle of a cap. Clearly, I, too, welcome the principle of the legislation, which is intended to limit the amount of money paid by consumers stuck on tariffs above the market rate. It is usually those from the lowest-income households who suffer in that way.
I pay tribute to the ongoing cross-party work by the hon. Member for Weston-super-Mare, the right hon. Member for Don Valley (Caroline Flint) and my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson). They have garnered massive support from all parts of the House, and the cross-party letter to the Prime Minister, which was signed by more than 200 Members, helped to build the momentum to get us to this stage, with the Government introducing a Bill to the House.
When in October 2017 the Secretary of State initially announced the Government’s intention to introduce a cap, he stated:
“Over the past 15 years energy prices have risen by over 90% in real terms.”
He also said:
“Customers of these firms have seen their energy bills increase by between 7% and 10% within the past 12 months, increases on prices the CMA had already concluded were too high.”
In the same speech, he acknowledged that despite action by Ofgem to protect a further 1 million households, there would still be
“13 million families paying more than they would in a competitive market.”—[Official Report, 12 October 2017; Vol. 629, c. 473-74.]
The Secretary of State’s justification not only illustrates the need for the Bill but confirms that it has taken too long to get to this point.
The headline figure for customer overpayment was £1.4 billion in 2016 alone—that is the poorest and most vulnerable customers subsidising the more wealthy. It is therefore no surprise that the Business, Energy and Industrial Strategy Committee has criticised Ofgem and the energy suppliers for failing customers. The fact that intervention and protection is required for some 17 million to 18 million households is a stark illustration of the current market failure. In addition, the fact that there has been a debate between the Government and the regulator about whether primary legislation is even required to introduce a price cap is perhaps a further indicator of a market that is not fit for purpose. With all that said, I acknowledge that the Bill represents progress and welcome the fact that the Government are taking steps to make sure that a cap is going to happen, rather than having an ongoing battle with Ofgem.
Customers have an innate suspicion of energy companies, especially when it comes to their profit announcements, or the fact that when wholesale prices drop, they feel they never see a corresponding drop in their energy bills. There needs to be greater clarity on the operation of the market. I understand that energy companies buy in advance and hedge against future wholesale costs; that there are many components to an energy bill; and that profits make up a relatively small part of energy bills. However, unless there is greater clarity on all these matters and an easy-to-understand bill format, customer suspicions will remain. Generic pie charts are fine for showing the make-up of a bill, but customers really need to know what is going on with the relationship between wholesale prices and the buying power of the big six, and how locked in companies really are to higher-than-market-rate prices at a given point in time.
I accept that a 5% profit cannot be classed as excessive profiteering, but we have to acknowledge that 5% of huge turnover sums still equals a huge profit in terms of actual numbers and the bottom-line figures that the public see. An absolute cap should protect some customers, but if the companies aim to maintain the same profit numbers, there will clearly be losers elsewhere in the system. If the average saving between a big six company’s cheapest tariff and its standard variable tariff is £300 per annum, somebody other than me can do the maths to assess the sort of amounts that these companies will seek to recover from other customers. Arguably, if those other customers were the people who should be able to afford to pay a bit more money, that would mean that any possible cross-subsidies would be working in the right direction, but there is a risk that the companies will just recover the money from elsewhere.
Given that profits, along with VAT, are the joint second-lowest component of a bill, if we are looking to get lower energy bills, the only other way for there to be substantial savings is if the wholesale cost of energy comes down or if the network costs, which are estimated to account for 26% of energy bills, are reduced. I therefore suggest that the market mechanisms for network costs should be reviewed and considered.
On the back of the Government’s intention to introduce this Bill, we have now seen three of the big six—E.ON, SSE and Centrica—announce a move away from standard variable tariffs, and Scottish Power has indicated that it will do likewise. Those companies are now using this strategy as an argument against a cap, but of course they need to acknowledge that it was their inertia on standard variable tariffs that actually led us here in the first place, so they are having that argument once the horse has bolted from the stable.
None the less, we must be careful that the unintended consequence of the cap is not an equalisation effect that drifts towards the higher end of the scale. I understand that that is why the hon. Member for Weston-super-Mare is calling for a relative cap. However, even a relative cap can have an equalisation effect, eliminating lower level tariffs. I note that the Business, Energy and Industrial Strategy Committee and Citizens Advice, among others, support an absolute cap, which is what is proposed at the moment. However, this strategy needs to be reviewed. With a requirement on Ofgem to consult on the cap methodology, I hope that we will be able to flesh out the risks and thrash out mitigations.
Not surprisingly, the big companies are against the Bill, and, intuitively, that is quite a good thing. However, some of the concerns that have been raised possibly require consideration by the UK Government. There is a suggestion that appeals to the CMA should be allowed, as happens for every price control and every price-regulated sector in the UK. I can see the logic of that, and if appeals to the CMA are allowed, consumer groups, as well as the suppliers, could make representations, so that is not necessarily a concession to the energy companies. Additionally, the companies argue that there needs to be clarity on the conditions on which a cap may be removed or extended in 2020. From the point of view of the investor and of a tariff setting policy, I can understand the argument for further clarity on this matter.
Even the consumer group Which? wants to ensure that there are no unintended consequences that limit the success of the cap and eliminate future competition. It has suggested that Ofgem must: set out clear criteria for effective competition that the price cap will be reviewed against; monitor and evaluate the success of the price cap before, during and after the period it is in place; publish monitoring reports, detailing actions to be taken to mitigate any adverse impact on competition; and test how the price cap is communicated to consumers and report any negative effect following that engagement.
Hopefully, the Minister will explain how the concerns of both suppliers and, importantly, consumer groups can be mitigated. On energy bills, we must remember that to lower bills and eliminate fuel poverty, the UK Government’s wider energy strategy and welfare strategy have to be correct as well. The smart meter roll-out, which we have heard about, is seen as an enabler for smarter, lower tariffs, but that is still unreasonably linked to a 2020 deadline forcing a roll-out of SMETS1 meters rather than a longer roll-out period with more appropriate updated technology that allows for better and easer switching in the future.
The UK Government’s nuclear obsession must end. The National Audit Office has already confirmed the impact that Hinkley will impose on electricity bills. Therefore, looking at additional nuclear and a whole raft of micro reactors makes no sense, especially when costs for offshore and onshore wind are now at an all-time low. Energy policy must be consistent. We cannot have a repeat of the debacle of the removal of the £1 billion of funding for carbon capture and storage. Transmission charges have to be considered, particularly when we have opportunities with renewables and energy storage.
On other mitigation measures, further work needs to be done on home energy measures, and that needs direct Government intervention. All energy companies agree on that, and the Scottish Government lead the way in taking direct intervention. The Scottish Government have committed to a warm homes Bill and a statutory fuel poverty target as well as the roll-out of an ongoing further energy efficiency programme.
This Bill imposes a welcome temporary cap, but during the period that a temporary cap is in place, the UK Government must not only review its effectiveness, but explore other strategies and develop that consistent energy strategy. They could also follow the lead of the Scottish Government and look at a not-for-profit public energy supply company, otherwise, there is no doubt that this Bill will take a classic sticking plaster approach. It might represent a quick political win, but, in the long term, we need to have a solution to high energy bills and fuel poverty.
Robert Halfon (Harlow) (Con)
I apologise for having to leave soon after I have spoken, but I am hosting another event elsewhere in the House of Commons.
High energy costs are felt most significantly by the vulnerable and those on lower incomes, which is why I strongly support the Bill and congratulate both the Business Secretary and the Energy Minister for what they are doing. Those who pay the most for energy are the ones who can least afford it. Eight out of 10 people on high-cost standard tariffs earn £18,000 a year. Scope, the charity for disabled people, found that households with disabled persons make up 38% of all fuel-poor households in England. More than a quarter of households with a disabled person—over 4 million households—spend more than £1,500 a year on energy bills, which is why this is a matter of social justice. The Government’s emphasis on the cost of living is incredibly important. I welcome that more than 4 million households are on prepayment meters. I also welcome the freeze in fuel duty for eight consecutive years, meaning that the average motorist has saved £850 since 2010.
The truth is that our energy market is fundamentally uncompetitive. The six largest energy providers focus on cheap introductory offers and leave loyal customers on poor-value tariffs. These standard tariffs earn the big six an average of £1.4 billion more than they would earn if the market was working well. The lack of competition means that suppliers can charge what they please. We have seen in recent weeks how increasing wholesale energy costs have had a knock-on effect on tariffs in smaller providers and those in the big six.
I urge the Minister to look at other issues hitting energy consumers. For example, those who do not pay by direct debit face an extra bill. I had an email only yesterday from someone telling me that they refuse to pay by direct debit, so they have to pay the electricity company—the Co-operative Energy—£200 a year more than if they had signed up by direct debit. We know that the vulnerable often do not pay by direct debit and sometimes do not have bank accounts. Some are paying up to £390 extra a year. This charge is unfair. I urge the Minister to look into these cases.
I also have concerns about the huge wages and the way in which profits are used by the big six bosses. Now, I am not against high wages or profits, but I do not think that these wages are linked to performance. For example, top staff in Centrica get £13.1 million a year, and the chief executive officer of E.ON UK said that his company had £235 million in profits. Although I am not against profits or high wages, wages should be linked to performance and we should ensure that those profits are ploughed back into helping the most vulnerable consumers.
We need a consumer Bill of rights to bolster the position of all energy consumers. It should be easily digestible and understood. To get cheaper tariffs, everybody should know what their energy bills should be and what rights they have. A consumer Bill of rights should ensure access to the lowest possible cost for loyal customers who decide not to switch and end up on the standard tariffs.
Robert Halfon
I would normally be pleased to take interventions but, if the hon. Gentleman does not mind, I will not give way because of the demands on time. There are a lot of speakers and Madam Deputy Speaker has asked us to cut down our contributions.
My next point is about injecting competition into the market that is currently dominated by the big six. We have a problem because, although this is very much about competition in the private sector, energy is actually a public good. The Government need to do much more to support not-for-profit providers. The hon. Member for Harrow West (Gareth Thomas) mentioned co-operatives, of which I am very supportive. Robin Hood Energy, launched by Nottingham City Council, is an example of a not-for-profit provider. Although we need market competition, we need to look much more at the co-operative model when we are talking about a public good. I do not believe in nationalisation, but I do think that we should have not-for-profit models in essential services, because energy is the lifeblood of our country and, without it, we would be in the dark ages. For too long, to use a well-known phrase, the market has been dominated by the few, not the many.
I very much support the Bill because it is the right thing to do symbolically. It sets the tone of what this Government are about—helping the most vulnerable. It is also the right thing to do practically. To me, this is not an argument about big government or small government; it is simply an argument about good government.
Rachel Reeves (Leeds West) (Lab)
It is an honour to follow the right hon. Member for Harlow (Robert Halfon).
I welcome the Bill and look forward to its clauses becoming law in due course, with the impact that will have on energy bills. Of course, Labour first proposed action to tackle excessive energy prices in 2013. I look forward to hearing shortly, I hope, from my right hon. Friend the Member for Don Valley (Caroline Flint), who was the architect of that policy. As my right hon. Friend the Member for Doncaster North (Edward Miliband) put it at the time,
“When wholesale prices go up, people pay more. When they come down, they still pay more.”
Between 2010 and 2015, energy bills went up by £300 on average, so in the 2015 Labour party manifesto, we committed to cap energy bills until 2017, ensuring that bills could fall but not rise. That same winter, we committed to giving the regulator the power to cut bills and then to reform the energy market to deliver fairer prices and a better deal for consumers. Like all good ideas that Oppositions have, it has now somewhat belatedly become Government policy. I congratulate the Secretary of State and the Minister on that.
The fact that the energy market is broken is undeniable. It is a feeling shared by Members across the House and, indeed, by all our constituents. The Business, Energy and Industrial Strategy Committee’s report showed that it is a two-tier market in which customer loyalty is not rewarded but punished with excessive prices. It is totally unacceptable that nearly 60% of customers pay up to £350 more a year for their energy, on average, especially when those customers are the most vulnerable: 83% of those living in socially rented housing, 75% of those on low incomes and 74% of disabled customers are on standard variable tariffs, which we know rip consumers off. It is unacceptable that the exploitative behaviour of some energy providers exacerbates the financial woes of customers who were already facing difficult financial decisions. I do not want to live in a country where so many people are priced out of heating their homes in the winter, or having to choose between sitting in a freezing cold flat and putting food on their table. This Bill is a step in the right direction in addressing some of those concerns.
The big six energy companies insisted in evidence to our Select Committee that the market was already competitive and delivering fair outcomes and that this action was excessive and unnecessary, but our report showed why that is not the case. The CEO of E.ON told us in evidence that it is fair that customers who do not engage in the market pay more for their energy. We found that this kind of discriminative pricing is unfair on customers who cannot engage with competition, as opposed to those who can take advantage of it. Centrica admitted in its evidence to making the majority of its profits on expensive standard variable tariffs. It is not alone in that position, as a large majority of all big six customers are on standard variable tariffs, including 68% of Centrica’s customers.
The big six have lobbied intensely to get appeal rights to the Competition and Markets Authority because they want to try to stop this cap happening by dragging the process through the courts. I am pleased that this Bill rules out that action by those companies. Some argue that switching is increasing and so a cap is not necessary. Although the number of customers switching suppliers has improved recently, it is not improving nearly fast enough, with only a third of customers having switched in the past three years. It is time to try a different approach —one that puts the onus on suppliers to do the right thing. The big six energy companies have brought this cap on themselves by their discriminative pricing practices.
The BEIS Committee held four evidence sessions and analysed 44 pieces of written evidence as part of our pre-legislative scrutiny of the draft Bill. We welcome the Government’s Bill and the intention to put an end to the overcharging of 12 million households on poor-value standard variable and default tariffs.
One of our key recommendations to the Government was that they seek Royal Assent for the Bill before the summer recess, allowing Ofgem time to consult and then set the cap, so that customers do not spend another Christmas facing excessive prices. I welcome the letter from Ofgem today saying that it will be able to meet that timetable, so that we do not go through another winter of excessively high bills. My only disappointment is that this legislation did not come sooner. Last week, temperatures dropped significantly across the whole country. If there had been a price cap in place, families would not have had to worry about rising bills during this unprecedented drop in temperatures.
Following our Select Committee’s work, the Government have accepted all the recommendations that we made, including excluding the possibility of a relative price cap—something that the hon. Member for Weston-super-Mare (John Penrose) advocated, but which I believe would push up prices for customers who switch, rather than reducing the standard variable tariffs. It seems obvious that that is what would happen. For the big six energy companies, 70% or 80% of their customers are on standard variable tariffs and that is where they earn their profits, so they will not unilaterally drop those prices. Instead, they will increase prices for new customers, to cling on to their profits. That is why excluding the possibility of a relative price cap is the right thing to do.
John Penrose
I thank the hon. Lady for giving way; I will try to keep this brief. Does she accept that that criticism about a potential rise in competitive switching deal prices is being levelled by others at the absolute cap? When such a course as she described was experimented with last summer by Centrica, it lost market share hand over fist and was really hurt commercially, so it is unlikely to try that again.
Rachel Reeves
When we took evidence from the big six companies and probed them on where their profits came from, they were very clear that their profits came from the standard variable tariffs. Centrica has a £287 difference between its standard variable tariff and its best tariff, while Scottish Power has a £333 difference between those tariffs. They are earning their profits on the higher tariffs, and I just do not think that they will unilaterally reduce those tariffs, because that will be a hit to their profits, not a slight reduction in the number of new customers they get. The Government are right to exclude that cap, and that is why our Select Committee recommended that.
The Government have also accepted our recommendation to continue encouraging consumer switching. I believe that competition and regulation can co-exist effectively.
Mark Pawsey
We heard a lot of evidence from the challenger companies. There are 60 suppliers in the energy market now, and while switching rates are not increasing fast enough, they are increasing. Does the hon. Lady share my concern that with a cap, there will be precious little incentive for people to look at alternative suppliers and change and that the rate of switching we have managed to get in recent years will start to fall back?
Rachel Reeves
I hope that does not happen. Ofgem and the Competition and Markets Authority are putting the cap in place to make it easier for customers to switch. Northern Ireland, where there is a price cap, has as much switching as we do. The international examples suggest that we can have switching in a market that also has a price cap.
Rachel Reeves
Sorry, I am not going to give way again, otherwise I am going to get into trouble with Madam Deputy Speaker, and I am more scared of her than I am of my hon. Friend.
Rachel Reeves
Indeed.
There are two areas where the Government need to take action to ensure that, once the price cap is over in 2021 or 2023, we do not go back to business as usual. First, they need to give greater clarity about what will happen to things such as the energy company obligation and the warm home discount once the price cap goes away.
Secondly, I welcome the Secretary of State’s commitment today that the statutory instrument on data sharing to allow energy companies to know who their vulnerable customers are will be tabled before the Bill receives Royal Assent. We need to see that SI and those changes, because the energy companies do not know all the customers who are vulnerable and experiencing financial difficulties. Our Committee is convinced that those two issues will be key in ensuring that, both during and after implementation of the price cap, those who need it most get the protection they need.
The time for action is over-ripe. These rip-off practices cannot be allowed to continue. There is cross-party support for this legislation, and both the Labour and Conservative manifestos at the last election included a commitment to cap energy prices. Now the Government must make that cap a reality before next winter. I strongly urge colleagues across the House to support the Bill, to deliver some fairness to all our constituents.
Sir Oliver Letwin (West Dorset) (Con)
In the interests of brevity, I want to make one point about the rationale for the cap that I do not think has yet been stated in this debate, and two points to reassure my hon. Friends about issues that have arisen.
On the rationale, it is true that Ramsey pricing—the gouging of so-called loyal or, in other words, inertial customers—is a major issue, but predatory pricing on the other side of the balance sheet is equally important. As the hon. Member for Leeds West (Rachel Reeves) said, large suppliers are making uncovenanted surpluses out of the default tariffs, which they are using to cross-subsidise their competitive tariffs to exclude entrants from the market to the greatest possible extent. Once they are deprived of the ability to generate oligopolistic returns from the default tariffs, as my hon. Friend the Member for Weston-super-Mare (John Penrose) mentioned, they will have to do what they are very reluctant to do —namely, recognise more closely the true cost of their own inefficiencies in their more competitive tariffs, thereby allowing much greater penetration of the market by small challengers.
That is why I celebrate the fact that the Government have made the cap a temporary one with reviews. The shadow Secretary of State, when she was engaging in what sounded on this side of the Chamber suspiciously like scraping the barrel to find things to object to, asked the question: how will we know that the time is ripe for the cap to be removed? The answer is when the challengers have actually been able to move into the market in great numbers, because the cross-subsidy in the predatory pricing model has faded away and we therefore have a proper energy supply market.
Of my two crumbs of comfort, I want to offer one directly to my hon. Friend the Member for Weston-super-Mare. We all owe him a great debt of gratitude for banging on about this for a very long time and thinking about it deeply. I assure him that the Bill, whatever anybody may have said about it, clearly allows for a cap that, far from being a freeze, will never be a freeze, as he recognises, and will also not be an absolute point tariff either—or need not be an absolute point tariff. It is entirely in Ofgem’s gift to decide how the cap varies or does not vary depending on circumstances in the external supply markets for energy.
Knowing the current personnel in Ofgem, and having talked to them about this—I am grateful to the Minister for Energy and Clean Growth for facilitating some of those discussions—I am absolutely convinced that they will in fact make this a calculated, formulaic cap that properly reflects the changes in external international circumstances. It will therefore be miles away from the lunacies, although they were politically attractive lunacies at the time, of the Labour party’s original proposal for an absolute price freeze, which, incidentally, would have crippled customers at a time when energy prices were falling.
The second point I want to make to my hon. Friends is that this is the right kind of structure.
John Penrose
I seek a little further reassurance from my right hon. Friend. He seems to be coming up with an elegant mechanism for redefining an absolute cap to encompass relative caps, but just relative to the wholesale market rather than relative to other tariffs. If so, that would be incredibly elegant. Does he believe that that would allow repricing within the six-month period before the Ofgem committee sat again?
Sir Oliver Letwin
Who knows? The point I was just about to make is that the Bill will hand the whole thing over to Ofgem. This is basically an “Ofgem—you get to decide it” Bill, so we will only know when we see what it produces. However, I would bet my bottom dollar—not that I have very many bottom dollars—that Ofgem will actually produce a formula, not a number, so the cap will vary continuously, or pretty much continuously. Ofgem is pretty sophisticated economically and it knows perfectly well what happens in the wholesale markets. I do not think it will lock itself in to an unvarying cap.
My main point is structural: the Bill will hand the issue to Ofgem. The good news is that that is not nationalising the pricing of the energy markets. It is not taking it into the hands of the Government. What my right hon. Friend the Secretary of State said is true—one of the great achievements of the last 30 or 40 years of the evolution of our utilities markets as a whole is that we have reinvented what the Victorians once had, which we lost in the early and middle part of the 20th century, which was the whole idea of the Government establishing a set of technocrats who are not politically motivated or driven by electoral dynamics, and so are not inclined to do things that are stupid in the long run but look good because they win votes in the short term. Instead, they try to get economically rational results.
Ofgem is such a case. It is not perfect—no regulator is—but it will be a hell of a lot better than politicians at setting prices over time. The Bill therefore has the right structure. It is not a Marxist takeover, a price freeze or a recipe for point tariffs. It is a recipe for allowing a regulator to set an economically rational means of preventing a combination of Ramsey pricing and predatory pricing, and as such those of us who believe in the purities of markets can perfectly well subscribe to it.
Gareth Thomas (Harrow West) (Lab/Co-op)
I agree with the right hon. Member for West Dorset (Sir Oliver Letwin) that we collectively owe praise to the hon. Member for Weston-super-Mare (John Penrose) and my right hon. Friend the Member for Don Valley (Caroline Flint) for bullying the Government into bringing the Bill before the House. Nor do I completely reject the right hon. Gentleman’s final assertion about the importance of having an effective regulator to regulate the market. What he missed, however, was the need to shake up significantly the way in which the market operates at the moment, to fundamentally challenge the power of the big six and the way in which regulation works between the transmission provider—National Grid—and the various distributor companies, given the impact that that has on bills.
As other hon. Members have said, while the Bill is good in that it will finally introduce an energy cap, it does not address the full scale of concerns across the House about how the energy market operates. E.ON put up prices last week on the coldest day of the year. Experts are increasingly concerned that the lights will go off at some point in the future. Gas capacity is another fear, and the energy ombudsman is unable or unwilling to enforce rulings in favour of consumers. Those are just some of the concerns about how the energy market works. It would have been good to have a far more comprehensive energy market reform Bill, of which the energy price cap was only part.
I fear that Ministers’ reluctant acceptance that a wider price cap is needed confirms the failure of regulation as it stands, and specifically confirms concerns about the powers and practices of Ofgem and its ability to keep the big six energy companies honest, along with National Grid and the distribution companies.
The Competition and Markets Authority, in its landmark investigation of the industry some four years ago, said that customers had essentially been ripped off to the tune of £1.4 billion—and that was since 2012. The only reason the Government referred the energy market to the CMA for investigation was the pressure from shadow Ministers and the then Leader of the Opposition. In the circumstances, and given the scale of overpayment by consumers, an energy price cap is hardly going to fundamentally change the dynamics of the energy market. Therein lies the problem with the Bill. It does not address the issues of ownership and the lack of accountability of those who currently own and distribute our energy. I therefore suspect that it will be of limited benefit to customers.
When the energy market was privatised, the country was promised the chance to have a stake in the new market. There was the famous “Tell Sid” campaign, which offered everybody a chance to own a stake in the energy market. Many mergers and acquisitions later, all we have seen in practice is that centralised unaccountable decision making has shifted from a series of Government Departments to six privately owned companies that control pretty much the whole chain from power station to customer. At the time, we were promised that unleashing competition would bring considerable benefits: prices would be driven down alongside an increase in innovation and efficiency. It is difficult to see exactly where those benefits are. Dissatisfaction with the energy market is so great that it is ranked bottom of all UK industries by the Institute of Customer Service. Part of the reason why people do not switch from one supplier to another is that they do not think they will get much benefit from switching, given the time and hassle it takes.
Six years ago, a very impressive ten-minute rule Bill was brought forward by the hon. Member for Harrow West, which I commend to the House, proposing that customers should be given the right to own the grid in their area, and that more people should be given the right to help control who benefits from the energy market. In effect, it proposed the sort of democratic public ownership that at the time was less fashionable on the Labour Benches, but which has become a bit more fashionable of late. I very much welcome that.
Albert Owen
I am sure the author of the Bill would agree with me that one model is the not-for-profit Welsh Water, which runs the utility and competes against others where necessary, but has competition in its tendering process so that it meets European competition rules for utility companies. It also invests in its customers, which is what is missing from the private monopolies that run distribution and transmission.
Gareth Thomas
My hon. Friend makes a very good point. If I may, I commend to him and the whole House the Co-operative party report on the reform of the energy market, which contains several proposals. One suggestion is that Welsh Water and the energy distribution model of similar mutuals in New Zealand might be the model for future of energy distribution in this country.
I do not hold the dogmatic view that public ownership through nationalisation might be a sensible way forward. I can see that there might be a case for some of the transmission network to be publicly owned, and I can see the argument for some public ownership of crucial, strategically important power stations to keep the lights on while a broader transition process is taking place. Fundamentally, however, I would like to make the argument for more co-operative, community-owned not-for-profit energy companies. They would own and supply energy, help to decarbonise our existing energy supply, be properly regulated, and, crucially, help to keep in the local community some of the wealth that is generated by energy, which I gently suggest should be strongly encouraged and allowed to emerge. Robin Hood Energy in Nottingham is a great example of that, as are Bristol Energy and Westmill Solar Co-operative.
I finish by gently saying to Government Members that I understand why they are tempted, for political reasons, to attack Opposition Members for looking again at public ownership, but when so many of the energy businesses in this country are owned, or part-owned, by state-owned companies from other countries, it prompts the question why public ownership by the British Government, or by the people of this country, could not be given a bit more encouragement by Ministers.
Mark Menzies (Fylde) (Con)
I pay tribute to my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy for bringing forward the Bill and for his hard work on delivering what the Conservative party promised—dealing with unfairness in the energy market. His dedication, and that of my right hon. Friend the Minister for Energy and Clean Growth, to ensuring that the most vulnerable customers are not left behind to pay extortionate prices for their energy should be commended by Members on both sides of the House.
However, I cannot escape the fact that, as a Conservative, I question it when any Government seek to intervene in markets. I accept that on occasion markets need some interference. Many require regulation, and unfair practices need to be tackled robustly, but the question is whether the level of market interference is necessary and proportionate. As we consider this Bill, we must ask whether energy companies are in fact employing unfair tactics against their customers. If so, can those customers avoid paying over the odds for electricity and gas? Is introducing a price cap on certain tariffs the only and/or best way to deal with this issue?
I point to significant increases in the number of new energy suppliers—their market share has risen from 2% in 2012 to around 18% in 2017—and the increasing number of customers who are now switching suppliers regularly. I would argue that that shows an improving picture, thanks to the measures that this Secretary of State and his predecessors have implemented to ensure that the energy market is open to new and smaller companies and to encourage switching. As a result of that success, I would argue that the Bill is unnecessary— I would argue that, but I cannot. We committed to introducing the Bill in the Conservative manifesto, and introduce it we shall, but that does not mean that I would wave it past without considering whether its provisions are entirely proportionate or if there are opportunities for improvement. I have marked reservations about a key part of this Bill—or, more to the point, a lack thereof.
No part of the Bill allows energy providers to challenge the level at which Ofgem sets the price cap, other than by judicial review. I have asked a number of written questions on this point, and it appears that the Government are simply not prepared to admit that this is an inadequate means of appeal against the cap. As a non-lawyer, I am always very suspicious of matters that are settled in the court, so let me explain why it is so important to get this aspect of the Bill right, why judicial review is inadequate, and why the right for energy companies to appeal to the Competition and Markets Authority must be written into the Bill.
In January, prior to the Government publishing the Bill, I asked them to name the countries that they had looked at that currently regulate retail energy prices. In reply, my right hon. Friend the Minister for Energy and Clean Growth stated that Canada, the United States, Spain and New Zealand had all been studied. However—this is hugely significant—as their markets were not previously liberalised, or had only recently been liberalised, all are in very different situations from that in this country.
The Government are clear. They accept that what the Bill seeks to do in this country—to impose a price cap in a long-standing liberalised energy market—has never been done before. We are sailing into completely unchartered waters. Should we not therefore proceed with some caution? The Bill does not; it sails off with abandon, trusting Ofgem to set the level of the cap. This major new power has the potential to alter the UK energy market with as yet unknown consequences, as the Government have effectively admitted through their decision not to release quantitative data in their impact assessment, but the Bill provides no check nor expert oversight of Ofgem’s decisions.
Antoinette Sandbach
Judicial review provides a remedy when Ofgem is acting unreasonably. If it is acting reasonably, it would not be possible for the energy companies to review the matter, but what they would do, as evidence given to the Business, Energy and Industrial Strategy Committee suggests, is to seek to delay the process through endless appeals to the Competition and Markets Authority.
Mark Menzies
My hon. Friend makes a valid point. We would not want a situation in which energy companies, especially big energy companies, seek to delay the implementation of the measure for that reason through appeals to the Competition and Markets Authority. Perhaps the Government could consider having a time-limited window of appeal lasting for a matter of weeks in which any appeal could be looked at by the CMA. I am not sure whether recourse to judicial review, with a case tied up in court and argued by incredibly expensive lawyers, is the solution to the problem. I am not sure where the transparency is in that, and I am not sure that judges are the best people to make a determination. I shall say a little more on that as I proceed.
Appeals on price controls are always to the Competition and Markets Authority. This is consistent with every other comparable sector, including telecoms, water, and aviation, and there are very good reasons why. Energy suppliers, just like National Grid and distribution network operators, invest huge sums into our energy infrastructure. The Treasury has estimated that approximately £250 billion of projects are in the pipeline in the coming years. All companies require certainty to deliver these projects and they only get this if Ofgem sets a fair and accurate price.
In most cases, if Ofgem gets it wrong, National Grid, DNOs and their shareholders can make their case to the economic experts at the CMA. They know that they have effective recourse against Ofgem’s decision and they have certainty that the CMA will not allow any price cap that places these billions of pounds of investments into our vital energy network at risk. Under the Bill, however, retail suppliers are being sent out on to the high wire only to find that this effective and long-standing safety net has been removed from beneath them. Should Ofgem fail, the Government believe that judicial review will adequately cushion their landing. It will not.
As I have mentioned, the CMA is designed precisely to consider such appeals. As an expert appeals body, it has specialist panels with experience of deciding whether price controls have been set properly through consideration of the economic merits of each case. In contrast, a judicial review would consider only whether Ofgem reached its decision reasonably and in accordance with the relevant procedure. A judge with legal—not economic —training and with no specialist expertise would be asked to assess whether these deeply technical price control issues were fair and accurate.
If we follow through with this and allow such uncertainty to fester, even if only in the minds of our major energy suppliers, what assessment has been done of the impact of that on investment in our energy market? What assessment has been done of the impact that the initiative will have on the prices that consumers on non-default tariffs will be asked to pay? I have asked to be furnished with that information, but the Government do not have it. They answered that this calculation will depend on the methodology employed and the ultimate decision taken by Ofgem when setting the level of the cap.
I can be persuaded to agree that the Bill should pass without considering the future supply in this country—at least for this afternoon. I can be persuaded to agree that Ofgem sets the methodology. I can be persuaded to agree that Ofgem sets the level of the energy price cap. However, I cannot be persuaded, because it defies simple logic, that Ofgem has the sole preserve of wisdom in these matters. I cannot be persuaded that there should be no possible recourse to the Competition and Markets Authority.
Greg Clark
My hon. Friend raises reasonable questions about whether the approach that is taken will be fair. That is why Ofgem will have to consult on the methodology. Applying it in particular cases is simply the mechanical application of something that has already had the degree of scrutiny that he is looking for.
Mark Menzies
I thank the Secretary of State for his intervention. Steps like that seek to reassure me. As the Bill makes progress, I will follow its course in detail, particularly on this matter. I want to ensure that the Bill is effective and does not end up disappointing where we hope that it will succeed.
Geraint Davies (Swansea West) (Lab/Co-op)
Will the hon. Gentleman give way?
Mark Menzies
I will not, as I want to make a bit more progress.
I would struggle to support a Bill that does not address that crucial point. I ask the Government to reconsider and amend the Bill accordingly in Committee. Before I sit down, if the hon. Member for Swansea West (Geraint Davies) wishes to do so he can intervene. He does not.
Caroline Flint (Don Valley) (Lab)
Today is a political lesson in never giving up. Despite all the lobbying noise of vested interests, constant denials of market failure and numerous attempts to persuade energy bill payers to shop around, the Government could no longer ignore the fact that the majority of energy bill payers were—and are—being ripped off.
The Bill has a virtuous purpose: to protect customers from unfair energy prices in a market which, sadly, has failed to deliver. Its greatest shortcoming is its timing. In October 2011, I first raised the failings of the UK energy market—the overcharging and the poor value for money offered by the big six. In that year, energy prices had risen by 20%. Data required by the last Labour Government had become available to those with an “anorak” interest in tracking what was happening to prices. It was becoming clear that they did not reflect wholesale costs, and that those on standard variable tariffs were paying over the odds.
The coalition Government of Conservatives and Liberal Democrats attempted reform, but they had little to offer to affect the pricing structure of the failing retail market. They opposed Labour’s energy price freeze—a proposal to cap prices for 20 months while the energy market was reformed—but they knew that they were on the back foot as evidence of overcharging mounted. David Cameron’s agreement to a Competition and Markets Authority review in 2014 was an attempt to take pressure off the Government and kick the issue beyond the 2015 general election. That worked, but it delayed action further.
It must have come as quite a surprise to some in government when the CMA’s findings vindicated Labour’s concern about unfair energy prices. It took two years to reach a conclusion that some of us had already exposed: customers were being systematically overcharged. Between 2012 and 2015, people were overcharged by an average of £1.4 billion a year, and the detriment had increased to £2 billion a year by 2015. By the time the CMA reported the damage, overcharging since 2012 amounted to more than £8 billion. Delay has cost consumers dear.
Some may have thought that the introduction of a price cap for prepayment meter customers would lay the matter to rest, but that was never going to be the case. Ministers and others on the Government Benches were now keen to talk about market failure and systemic overpricing, using language for which my party and I had been condemned only a few years earlier. Progress has been too slow by half, but now the Government are taking action that has cross-party support, and we have an opportunity to serve notice on injustice and legislate for price protection for consumers, which I believe should take the form of a protected tariff. In fact, I argued for such protection after the 2015 general election. Consumers need nothing less than a regulated maximum charge based on wholesale prices, network costs, and an acceptable level of profit set by Ofgem.
To expose market failure is not to be against all markets. Despite privatisation, energy has always rightly been a managed market when it comes to changes in our energy generation, contracts for difference and capacity markets, and that is the case today. I believe that, across the House and across British society, it is recognised that certain products, such as energy and water, require a different level of Government intervention and regulation.
Even today, with record levels of switching—about 5 million people switched in 2017—many of the criticisms that I levelled at the energy market in 2011 still apply. The market is still dominated by the big six. Between them, they control 78% of the market. The biggest new entrant has just 1% of market share. Movements in energy prices bear little relation to the movement in wholesale prices. The majority of customers have little faith in switching and have not changed supplier for a decade or more, and, as we all know, the majority sit on expensive default standard variable tariffs. More than 5 million people have been helped with a safeguard tariff. The Bill addresses the 11 million households who are overcharged year in, year out.
So what should we do? Let us build on the cross-party support and, through the Bill, defend the principle of a short-term cap on a failing market. We should not be cowed by the self-interested propaganda that we have heard from opponents of the price cap. At the extreme end, we have Centrica linking its plan to shed jobs up to 2020 with the cap. That is outrageous. Centrica has lived off its nationalised legacy—a sticky customer base that it has treated badly. Business analysts observe that British Gas’s businesses supplying energy to business have been performing poorly and that Centrica’s US operation, Direct Energy, has underperformed. They note that almost 80% of those employed by Centrica are abroad—just one in five are in the UK. While those UK jobs are important, it is little surprise that trade unions representing Centrica employees—Unite the union, GMB and Unison—are rightly sceptical about why UK employees might bear the brunt of the effect of corporate failures internationally under the leadership of Iain Conn.
A cap does not mean an end to competition. A reasonably set upper limit on unit prices that is reviewed every six months allows lots of opportunity for competition beneath the cap. It is not a difficult concept. The cap is a maximum; it is not a requirement to charge prices at that level, and the industry knows that full well. It also knows that it will put a bar on unfair prices, and not before time.
Geraint Davies
I am listening fascinated to my right hon. Friend’s speech. She is aware that there has been a history of oligopoly abuse in terms of delays in changing prices for customers when world commodity prices change, meaning that there are excessive differentials. Does she think it is possible to have a relatively simple system that takes those two factors into account, but also takes the opportunity to encourage renewables?
Caroline Flint
Absolutely, and I am going to come on to renewables. Ministers should beware of any proposal to exempt green tariffs or low-carbon tariffs from the price cap, and let me be clear why. In 75% of days in 2017, wind power supplied more energy than coal power in the UK. Nuclear and renewables are central to our power output in the UK energy market and the generators are well rewarded for that. The notion that any energy provider should charge a premium for so-called green tariffs does not stand up to scrutiny. Consumer support for 100% green energy is welcome, but the idea that they should pay the most expensive tariff cannot be justified. I therefore hope that the Secretary of State will rule that out and deliver a comprehensive cap.
Sir Oliver Letwin
I am listening with increasing admiration to the right hon. Lady’s speech, which reminds me of why there was once a Labour party with which I had a great deal more sympathy than I do at present. I strongly agree with what she says about green tariffs. We want to promote green energy, but to do so on a basis that is economically rational.
Caroline Flint
I welcome the cross-party support that continues to blossom on this issue.
I urge Ministers to ensure that Ofgem is equipped with all the powers it needs to act as a consumer champion, and to deliver both a price cap and penalties for corporate misbehaviour. I have not been uncritical of Ofgem. For too long the regulator did not hold the big six to account for poor customer service. Where fines were issued, companies were allowed to strike a deal to use the so-called fine to subsidise tariffs for new customers—there was nothing for their loyal customers stuck on default tariffs. Thankfully that has changed.
We saw last week the CMA having to rule on a challenge by SSE and EDF against Ofgem when they tried to modify industry rules. Ofgem determined that those modifications would have led to consumers paying a £120 million rebate to generators and said no. Ofgem was immediately challenged. In this instance, the CMA backed Ofgem and the consumer interest was protected, but let us be under no illusion: there is a constant veiled threat that the energy giants will contest its decisions. We need to be certain that Ofgem has the powers and remedies it needs under the Bill so that it can do the job this House expects and does not become a scapegoat for failure.
Finally, may I urge Ministers to use the period of the cap to review the structure of the energy market? Good regulation, fairness and innovation from existing and new players must all be part of a reshaped energy market of the future. Let us get on with it. The Bill has my support; let us give Ofgem the power to act and cap unfair energy bills.
James Heappey (Wells) (Con)
This is an important Bill that comes from a very good manifesto commitment. Our energy market is undoubtedly broken, with millions of consumers stuck on the most expensive tariffs. Many are taken for granted and, arguably, even exploited for their loyalty, and it is right that the Government have intervened to protect them.
In many ways, in delivering this cap we have accepted that we failed over the last few decades to create the culture of switching that we hoped for. That is not to say that impressive progress has not been made; it has been, and we have seen further progress in the last few months, but even if that recent improvement in progress were to continue, we would still have far too many people—disproportionately concentrated among the most vulnerable and the lowest income consumers—left on the most expensive tariffs.
We should also note that some of the biggest energy suppliers have changed the way they operate SVT-type products over the past nine months, which is very welcome. One suspects that they saw what was coming down the tracks. None the less, I know that they will feel aggrieved by the Bill after voluntarily acting to tackle the problem of those stuck on rip-off SVTs.
The progress on switching and the improved behaviour of the big suppliers underlines why the cap need only be temporary. My hope is that the Secretary of State will encourage the industry to respond quickly to the cap so that tariff structures become fairer for the most loyal consumers. Clear criteria for ending the cap would be most welcome. While the cap is in force, let us not take our foot off the accelerator in encouraging more people to start switching. In short, the cap must be regarded as a means to an end, not—I suspect this is the view of some Opposition Members—as an end in itself.
Bim Afolami
Does not the Bill show the Government’s general approach to intervention in markets, which we have heard a lot about this afternoon, which is about markets not as a means in themselves, but as a means to an end, which is good, cheap and reliable energy for the British people?
James Heappey
My hon. Friend is indeed right. To resort to my former career as a soldier, I hope that the Government see this as a raid into the energy market, rather than an occupation.
In her opening remarks, the shadow Secretary of State made the important point that an amazing energy future is emerging in the margins of our current broken market, although I disagree with her analysis that the Government are not embracing that, because the clean growth strategy is a passionate embrace of those opportunities. Insurgent companies such as Octopus Energy are relishing bringing the new time-of-use tariffs to the market, giving consumers the benefits of fluctuating wholesale energy prices. Others are looking at how localised generation or aggregated shifts in demand might allow consumers to access cheaper energy or monetise their flexibility. Others still are looking at delivering heat and power as a service, often enabled by clean tech provided by the supplier for free, with the supplier then monetising the customer’s flexibility in order to make their margin. These and countless other innovations are accelerating our decarbonisation, increasing system flexibility—and therefore our energy security—and will mean lower bills for consumers.
We must also create an energy system that allows the full price-reducing power of clean technologies to bring down prices for the consumer. This will require significant regulatory change in order properly to unlock storage, demand-side response and the advantages of generating and consuming energy locally. We must also encourage the deployment of more renewables, no longer because they are the cleanest method of generation, although they still are, but because they are now so obviously the cheapest.
Rebecca Pow
My hon. Friend has great knowledge of this subject. Will he comment on the fact that we need to concentrate not only on energy efficiency, but on cutting energy waste, particularly in our domestic systems, because there is a lot of great new technology that could be harnessed?
James Heappey
I very much agree. Let us be clear that energy efficiency measures are no longer simply barrier technologies—in windows, walls and roofs—but digital technologies that ensure that we use less energy, or that devices immediately stop working when we no longer need them, rather than being left on unnecessarily.
Ofgem has a key role in delivering the Bill, but that work must be no more of a priority for it than ensuring the much-needed regulatory change that will be delivered through the unlocking of wholesale disruption of our energy system and market. Let us be clear that the real prize is not the correction of the old, analogue, broken market system of today, but the arrival of a digitised, decentralised, dynamic and disrupted energy system with a market that allows consumers to benefit fully from the price reduction that these technologies will deliver. A cap that saves consumers £100 or £200 is very welcome, so I support the Bill wholeheartedly, but not at the expense of the much greater savings that await consumers with the green, clean energy system of tomorrow.
Alex Sobel (Leeds North West) (Lab/Co-op)
I have lived my whole adult life under the liberal energy market —an oligopoly—that was created by the Conservative party in the 1990s. I have personal experience of prepayment meters and of having to feed 50p pieces into the meter and then often having to sit in the dark when the 50ps ran out. I support the principle of the price cap but, as my hon. Friend the shadow Secretary of State said, we do not know when it will be in place, what the level will be or by how much bills will be reduced.
As all my hon. Friends have said, a price cap was Labour policy during the 2015 election, and I pay tribute to our Front-Bench team at the time, to our continued support for the policy and, latterly, to the Government. I also pay tribute to Which? for its campaigns to reform an energy market that is failing the majority of consumers. In 2014, the “Fix The Big Six” campaign called for the energy market to be referred to the Competition and Markets Authority. The subsequent CMA investigation found that weak consumer engagement and competition allowed energy suppliers with unilateral market power to exploit approximately two thirds of customers through excessive prices on default tariffs, leading to £1.4 billion consumer detriment a year, which is what the price cap will attempt to resolve.
Ofgem is now implementing a package of remedies recommended by the CMA to improve consumer engagement and encourage customers to switch to better value deals, to which the hon. Member for Wells (James Heappey) referred. However, nearly 60% of consumers remain on default standard variable tariffs. In February 2018, the difference between the average price of an SVT offered by the big six and the cheapest tariff in the market was £3,051—a huge difference for consumers. Are the Government choosing to act, or has the failure of the CMA and big six to provide customer value forced the Government to act?
The Bill only proposes a temporary price cap, and I am concerned that energy providers may use that to offset initial price reductions with increases once the cap is removed. It is also not certain that customers on a capped default tariff will benefit as market conditions change in the future. The Government are relying on future digital technology to solve the problem, but I am concerned about a long-tailed digital divide lasting decades, a point lost on many Conservative Members—as cheaper— fixed-term tariffs may be withdrawn from the market, an effect which was observed following the introduction of the prepayment meter cap in April last year.
In 2016, 4.4 million customers paid for electricity using a prepayment meter, which is 16% of all electricity customers, and 3.5 million prepaid for their gas, which is 15% of gas customers. That marked a slight reduction in the number of customers on such meters after a long-term increase. Customers on PPMs cannot easily switch to credit meters, which would give them access to a wider range of market tariffs, including the cheapest. In 2016, just 4% of PPM consumers changed to credit meters. That is an increase on previous years, but there continues to be a substantial number of cases in which the supplier refuses to let the customer switch or sets a condition, such as a credit check or security deposit, that the consumer does not meet; I have experienced that in the past. In 2016, 14% of electricity customers and 18% of gas customers who requested a change to a credit meter were prevented from doing so. Indebted PPM customers—about 10% of all PPM consumers—generally cannot switch to a credit meter, but those with a debt below £500 have the right to change supplier, which gives access to cheaper PPM tariffs. The number of successful switches by indebted PPM customers remains low at fewer than 3,000 in 2016, which is just 5% of the consumers who applied to switch supplier, but that has risen following an increase in the debt threshold for customers to be eligible. And I have to say that much of that debt has been caused by Government welfare policies.
Concerns about competition led the CMA to introduce a transitional safeguard tariff for PPM customers, which was introduced last April and is administered by Ofgem, so we have a model for the cap. As a result, the average price fell by around £60 for a typical dual-fuel PPM consumer. That is great, but it is nowhere near the level that PPM customers need to reach to be anywhere near where credit customers are. The cheapest available prepayment tariffs remain consistently more expensive than the cheapest tariffs available to those using direct debit, and that is a scandal. The growth of smart metering should increase tariff choice for prepayment meter customers by lowering the technical and structural barriers to competition. By the end of 2016, prepayment meter customers were slightly more likely than other customers to have smart meters—14% of electricity prepayment meters and 16% of gas prepayment meters were smart—but that indicates how long it will take us to move to smart technology, which many Conservative Members are ignoring.
I am concerned that standard variable tariff customers will have the same experience as people on prepayment meters, and also that the energy companies, particularly the big six, will try to force people on standard variable tariffs to go on to prepayment meters. The Government need to be mindful of that during the passage of this Bill.
My hon. Friend the Member for Harrow West (Gareth Thomas) and others have referred to municipal energy companies and co-ops. Robin Hood Energy has been mentioned, and White Rose Energy has been started by my local authority in Leeds—I declare an interest both as a customer and having been the deputy executive member for climate change and sustainability when White Rose Energy was launched.
Both White Rose Energy and Robin Hood Energy have worked to take people off prepayment meters and to ensure that customers are on the best possible tariff—I looked at my bill this morning, and it told me that I am on the best possible tariff for both electricity and gas. That is a model of great practice implemented by a great local authority in Leeds.
I am concerned that the Bill does not provide an effective and holistic solution to the problems facing people on standard variable tariffs. Utilising technology to ensure faster switching, and utilising mechanisms to ensure more people move off prepayment and to ensure greater market choice should all be central to the Bill, rather than just the sticking plaster of a temporary cap that may penalise some customers. Before Third Reading, I hope the Minister will investigate the effect of the unintended and potentially perverse consequences of the Bill as it stands.
Mark Pawsey (Rugby) (Con)
It is a pleasure to follow the hon. Member for Leeds North West (Alex Sobel). Unlike him, I do remember the time before privatisation took place in the 1980s and 1990s. It is worth remembering some of the objectives of the privatisation led by the then Conservative Government.
The first objective was to spread ownership, which has happened—ownership is much more diverse now. It is a little concerning when we hear Labour Members oppose private investment in our utilities and infrastructure, from wherever it may come. A serious message is coming from the Opposition, one that they need to think long and hard about before it goes out more broadly to overseas investors who want to come and invest here in the UK.
Caroline Flint
Would the hon. Gentleman be surprised to learn that it was only in 1998 that people were first able to change their electricity supplier?
Mark Pawsey
That is a concern, but let us not forget who owned these businesses at the time. In many instances, shares in the utilities were bought by the customers, some of whom have since disposed of their shares—some utilities have been acquired by larger corporations. I agree that the ability to change supplier is important.
The other reason for privatisation was to make the industry more efficient. There is no question but that that happened in the immediate aftermath of privatisation. There were dramatic falls in price. I accept that there has been some consolidation, and it is now important that there is some intervention.
I am a member of the Business, Energy and Industrial Strategy Committee, which has taken evidence on this subject. I am probably the most sceptical member of the Committee, and I needed some persuading of the merits of the Bill. I accept that the market could work better, and other interventions could be made to improve it. I have concerns about the long-term consequences of the cap, and I know the Minister will address some of those concerns in her summing up.
The Select Committee has drawn attention to two key issues: the lack of activity by the regulator in holding the big six—the legacy companies of those that were privatised—to account; and, more importantly, the “feeble” response of the big six to the threat of a cap. It may be that the industry did not take the Government’s remarks to heart and that it thought it would get away with it. It is a shame that this legislation has had to be introduced.
As for the market, all customers receive the same product and it is therefore entirely wrong that so many of the big six have a large proportion of their customers on standard variable tariffs—the most expensive rates. I understand that 57% of big six customers are on those tariffs. Of course, it is wrong that those companies should use the high standard variable tariff price to subsidise low prices to attract new customers—we hear of a £300 difference—and in that respect the energy companies have not done the right thing in recent years. One thing they could have done easily was change the description of a “standard variable tariff” to an “emergency rate tariff”, so that consumers were clear that they were on a default rate and that a better rate would be available to them if they were to change tariff. It is wrong that the big six have taken advantage of inertia in that way.
The other innovation that could have been introduced, at the instigation of the regulator, would have been to have a fixed-term contract for the supply of energy, in the same way as people have a fixed 12-month period for their insurance, be it for their home or their motor. If people receive a renewal that is significantly different from the price they have been paying, that in itself is a trigger to shop around. It is a great shame the regulator has not identified and done this, and instead has been far too slow and too reluctant to use the powers it has had.
Switching rates are a useful measure of the effectiveness of the market, and it is great that more and more people are switching. We hear that about 20% switched in the past year. The rate is increasing, but I accept the point that the Minister will make that the figures we see are affected by super switchers. Like my right hon. Friend the Member for New Forest West (Sir Desmond Swayne), who sounds as though he is a super switcher, these people are changing very regularly. We do not need huge numbers of super switchers; we need people to look at and understand their bill, and change when they see themselves at a disadvantage.
I also hope the Minister will address the issue of the detriment that the CMA found—the £1.4 billion. We are looking at a transfer of that sum from companies to consumers, in many cases rectifying the wrongs done to those on standard variable tariffs. One concern is that that detriment exceeds the profits of the energy companies, so the question we might want to ask is: where is that money going to come from? I hope that the action of Government will drive efficiencies, but are those going to be able to be generated sufficiently quickly?
Alternative measures could have been implemented, and one of the first things I would have liked to have seen the Government consider is extending the existing protections for vulnerable customers. We have had protection for those on prepayment meters for some time, and that has been extended to those on the warm home discount. It should not have been difficult to look at Department for Work and Pensions data in order to identify other people who we might consider as being vulnerable and extend those existing protections to them. I am disappointed that we have not looked at doing that.
I am also disappointed that we did not look at more effectively turbo-charging the marketing programme to encourage people to change their supplier or tariff. Some 5.5 million people switched in 2017. If more people exercised the power to which the right hon. Member for Don Valley (Caroline Flint) just referred—the ability to switch—this legislation would not be necessary.
The third issue I wish to raise is that of smart meters, which will empower consumers. It is a great shame that we have not managed that process more successfully and we have not got SMETS2 meters out into the market more quickly, so that people are also provided with the tools to be able to change their supplier swiftly and easily. It is important that the Bill is a short-term measure. It is vital that the sunset clause is in place, and I know that the Minister will be keen to state why that is there. Like other Members, I hope she will address how we are going to identify whether the market is working sufficiently well to make the second term unnecessary. I hope that it will not be necessary and that the action the Government are taking now will cause the energy companies to address the issues and deal with standard variable tariffs.
I wish quickly to address one concern about the possible consequences of the price cap. I am worried that we will see the same as what happened with tuition fees, with suppliers congregating around the cap and there being less incentive for people to change. I am worried that in the short term some of the work we have done to encourage people to switch will be lost as things stabilise. As I have mentioned, I am also worried about the difficulty of removing the cap, and, as I said in my intervention on the Secretary of State, I am concerned about how we can set it at the right level.
As other Members have said, there is currently lots of change in energy generation. I hope that the dynamic nature of the market in generation can be replicated in the market in supply, and that the temporary measure in the Bill will be exactly that so that we can return to an effective, competitive market as quickly as possible.
Patricia Gibson (North Ayrshire and Arran) (SNP)
I have long expressed concern and alarm at the way the energy market simply does not seem to work for consumers. I have worked with Members from other parties, most notably the hon. Member for Weston-super-Mare (John Penrose), to try to ensure action is taken on this issue.
The fact that the Bill will impose a cap on the price of the standard variable and default tariffs, at least until 2020 and possibly longer, is good news for consumer, particularly those who do not switch for a whole variety of reasons. The Competition and Markets Authority’s investigations found
“a lack of engagement in the markets on the part of many customers, which suppliers are able to exploit by charging high prices.”
Indeed, some 34% of domestic energy customers had never considered switching supplier, with 56% saying that they did not know whether it was possible or did not know whether they had done so in the past.
As we have heard, consumers on standard variable tariffs are much more likely to be older, disabled, on low incomes, living in rented accommodation or without internet access. Those on standard variable tariffs have not seen their bills fall by much when the cost of providing energy has fallen. Such savings as are available are passed on only to consumers who were active switchers, as we have heard. We have to understand that not all consumers can engage in the switching process, so suppliers clearly need to do more to ensure that customers are not trapped in poor deals. The poorer someone is, the more likely they are to be on the more expensive standard variable tariff, subsidising cheaper electricity deals for the better-off. That cannot be right, and is essentially what has brought us to this point.
People in my constituency of North Ayrshire and Arran are overpaying on energy bills by £5.5 million a year. That illustrates the need for action in the market, but that action is much more urgent than the mooted timetable of winter 2018 would suggest. I absolutely welcome the cap, but I am extremely disappointed that Ofgem has said it will need five months to implement it. We have been told that the cap will be in place for winter 2018, but why not sooner? I am afraid that the perception again raises its head that Ofgem is dragging its feet.
The Bill is indeed welcome, but the focus hereafter must be on fixing this broken market. We must have easier and faster ways to switch suppliers, for those who can and do; we need more transparent energy bills for consumers; and we need to create the conditions for a much more competitive market. Some people propose that we should consider scrapping standard variable tariffs altogether and prohibiting all tariffs without an end date, as they inhibit consumer engagement, but that prompts the question what energy suppliers can and will do to increase consumer engagement, because the figures for switching and the CMA investigations have shown that consumer engagement is severely lacking, for a whole variety of reasons.
Is it not interesting that, since there has been political focus on this matter, with a commitment from all parties to tackle the standard variable tariff rip-off, we now see some energy companies withdrawing this tariff, or seeking to introduce new measures to prevent customers from languishing on it? That shows that, so far, there has been a lack of will to deal with this issue on the part of the bigger companies in particular. However, it is clear that political focus in itself can help to drive change.
I echo the view that was expressed earlier: we must take care that the action taken in this Bill, welcome as it is, does not lead to higher prices in the longer term. We cannot have a situation in which energy providers offset initial price reductions with increases once the cap is removed. We also need to ensure that consumers who are on a cap default tariff do not lose out as market conditions change in the future. When the cap is lifted, we need to ensure that we know what the conditions and criteria for doing so are and that, in the end, we are left with a more competitive and fairer market for consumers. We need to know what the impact of this cap is and to ensure that there will be no adverse impact on a competitive market.
What is done by the Government and the regulator for the period during which this cap is in place really matters. I am keen to hear the Minister’s thoughts on this, as we cannot begin too early to prepare for what comes after this cap—whenever it is lifted. We need to know how we can continue to protect consumers and ensure that they have energy deals that are right for them and that they are not ripped off as they have been. We cannot go back to business as usual after the cap is removed. We need real and lasting change, and this period when the cap is in place is an opportunity to make that change happen.
Antoinette Sandbach (Eddisbury) (Con)
It is a pleasure to follow the hon. Member for North Ayrshire and Arran (Patricia Gibson). I agree with many of her comments.
It is quite clear that gas prices fell in the period between the early 1990s and 2001, and bills were down by about £102, but they rose in the period from 2001 to 2015 by about £408. Electricity prices rose 44% between 2003 and 2007. Although I agree that we need to take action, I argue that it this Government who are acting when the previous Government failed to do so. Why do we have to act? As my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) pointed out, it is because of predatory pricing by the big six companies.
Caroline Flint
I accept that we are talking about decades—I do not think that the market we ended up with was one that Margaret Thatcher thought that she was creating. The truth is that it was only after 2010 that we had any transparency and could access the data to tell us what was going on with these prices and why the mark-ups were so high. That is an important lesson from all this: transparency in this market is absolutely key.
Antoinette Sandbach
I agree that transparency is key, but I do not think that the price rises would have been hidden in the period between 2003 and 2007. Ordinary consumers would have seen—as we all did—what was happening in their bills at that time. I also agree that evidence-based policy making is the best way forward. In instituting the CMA review, David Cameron was not kicking the matter into the long grass; he was getting the evidence that proved that consumers have had a detriment of £1.4 billion. This is the action that is coming out of that inquiry, which reported in 2016. It is right that we are taking action. Which? shows that energy prices topped the list of consumer worries— 64% of consumers were worried about their energy prices. I find it puzzling that switching rates are so low—only 18%—given the way that consumers worry about their bills.
On the Select Committee, it was very shocking to hear the high numbers of people on the standard variable tariffs. Some companies had more than 80% of their customers on standard variable tariffs, which is simply unacceptable. It is that predatory pricing by companies where they are using those so-called sticky customers on the higher rates to offer switching rates that new entrants to the market cannot compete with and are therefore squeezed out. The Bill will address that practice, and I welcome that.
There is another area where we need to act. I follow on from the hon. Member for North Ayrshire and Arran in saying that switching is biased towards the A, B and C1 social groupings. Some 29% of those earning over £16,000 have never switched, but this figure rises to 39% among those who earn less than £16,000. As others have said, if people are not switching, they are not able to access the best deals. This cap is needed to protect those on the lowest incomes, but we must also encourage people in those groups to take advantage of the market. They can do so through Citizens Advice. Many libraries have computers that people can use to look up deals on the internet. It is important that, as well as the cap, the Government look at how they can reach out to the more disadvantaged social groups—groups D and E—that have never switched and at how they can take advantage of the market.
Caroline Flint
The hon. Lady is making an important point. Does she agree that it worth looking at how we could regulate independent brokers who could switch customers—on the customers’ behalf and under their authorisation—to the best deals? That might help these customers, and it could apply not only to energy, but to broadband, mobiles and insurance.
Antoinette Sandbach
We are already seeing those kinds of mechanisms with MoneySuperMarket.com and other organisations. However, some are incentivised, getting payments for switching. The Government have given Citizens Advice £100,000 to provide transparency regarding the rates offered and to help those who come to it with debt problems or other problems to switch.
The Minister for Energy and Clean Growth (Claire Perry)
I am cautious not to make too many interventions because Members are making great speeches, but I am worried that there will be so many questions that I will not have time to respond to them all at the end. I just want to reassure the right hon. Member for Don Valley (Caroline Flint) and my hon. Friend the Member for Eddisbury (Antoinette Sandbach). The midata trial is really important, as it enables people to allow their data to be ported to a third-party website that will then automatically come up with the best deals for them. Ofgem is working on that tool and it should open the way to much more innovative third-party switching services, which we all desperately need.
Antoinette Sandbach
We have seen that the cap works for the vulnerable customers who have had their energy prices capped. Although some have gone on to less advantageous tariffs, most have benefited, as shown in the evidence received by the Business, Energy and Industrial Strategy Committee. I agree with others that smart meters will revolutionise how we deal with not only energy, but perhaps other services. The cap is a temporary measure and is only needed as one. I add my voice to the others who called on the Government to ensure that loopholes on green tariffs are not used to game the legislation. The Bill has expanded the exemptions to include the safeguard tariff and those explicitly chosen by consumers, and the Government have strengthened the language relating to green tariffs.
I, too, call on Ofgem to act. I am afraid that I do not take the view that we needed this legislation. I would argue that Ofgem had the right to protect consumers without it, but I welcome the fact that the Government are acting to ensure that we address the clear problems in the market, particularly predatory pricing. This is about getting access to tariffs and the switching mechanism for those who need it. We should encourage those people and reach out to them, whether through Citizens Advice or how they sign on for their benefits. We clearly need to enable data sharing, so that energy companies can quickly identify vulnerable customers.
Antoinette Sandbach
I must sit down soon; I have taken many interventions.
We must make data far more available to allow more competition in the market. That is where the Government’s policy differs from that of the Labour party.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
It is a pleasure to follow my Select Committee colleague, the hon. Member for Eddisbury (Antoinette Sandbach), who made a number of important points, not least about reaching out to those who are not in the AB group. My hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown) covered many of the aspects of the Bill in detail. My hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) also picked up on many of the issues.
One of the great pleasures of such a debate is that there is great consensus around the Chamber, but when we speak late in the debate, we find ourselves saying, “There are some things I want to repeat.” I will try to avoid that, because while welcoming the proposals, I want to highlight how much more there is to do to protect people with regard to energy costs.
I speak as a member of the BEIS Committee, and it was very clear to us that there are significant failings in the consumer energy sector and that intervention is needed, as consumers continue to get a raw deal. The alternative proposals from the consumer energy players were quite simply too little, too late, and it has become necessary to take action. Ofgem and the energy companies should not continue to make the same mistake on issues affecting consumers.
One of those issues is particularly important to constituents in the highlands and islands—distribution charges. In the highlands and islands, consumers pay 4p per unit more on restricted meters, so the average consumer is about £400 worse off. The need for the price cap, as with distribution charges, highlights the failure of the big energy companies to take positive action to protect vulnerable customers in constituencies in the highlands and islands and in other rural constituencies. The costs for people there are already higher. Many are off the gas grid. Many have to use much more electricity. The weather is colder. Income is often lower. There is a continuing, deepening crisis of fuel poverty, putting a weight on the backs of those already suffering straightforward poverty, especially those having to claim universal credit. We have seen some of the most severe cold weather in the past week. Who suffers more when it is cold? The poor, the vulnerable and the disabled. Although the cap is welcome, it is not a panacea, and much, much more needs to be done.
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. Can I just help a little bit? We have asked Members if they can do up to eight minutes, and some people are stretching that, but the hon. Lady has just spoken and is intervening again. I know it is part of the debate, but I want to make sure that those wanting to speak at the end have not been sitting here for no reason.
Antoinette Sandbach
I will keep it brief, Mr Deputy Speaker. Does the hon. Gentleman agree that energy efficiency measures are key in this regard?
Drew Hendry
Yes, absolutely. There needs to be an acceptance that this is just one measure and there are many more measures—including on energy efficiency, which should have had much more attention from the Government.
There remains a need to remove legislative obstacles to data sharing for vulnerable customers to give them better consumer protection. There also remains—
Patricia Gibson
I will make a very brief intervention if I may, Mr Deputy Speaker. As I said in my speech, we are having this debate because of the loyalty penalty that people pay. We see this in the energy industry, the insurance industry and a whole range of industries. Does my hon. Friend agree that we need more Government regulation across industries to stop people being punished for being loyal to their providers, whatever the market?
Drew Hendry
I absolutely agree. To assist, Mr Deputy Speaker, I will take no more interventions during the rest of this speech.
As I said, we need data sharing for vulnerable customers to give them better protection. There remains a risk, as was highlighted by the hon. Member for Rugby (Mark Pawsey), who is still in the Chamber, that suppliers may just increase their lowest prices to maintain profit. We will all be watching carefully to see how they react.
So what must now be done? In Scotland, the SNP Government are providing resources for financial health check-ups to help pensioners and those on low incomes to make the most of their money and to secure the best energy tariffs. The UK Government will, I hope, follow suit.
We call on the Government to place a new duty on energy companies to set out a clear timetable for reducing the number of people on prepayment meters, to implement the Competition and Markets Authority’s call to reduce the costs for households and to introduce a requirement for energy companies to prioritise the roll-out of new-generation smart meters to households at risk of fuel poverty. That can all be done in short measure.
When it comes to disabled people, even more action is needed. Disabled people face higher energy costs because of issues related to their impairment or condition. Those extra costs have a detrimental impact on disabled people’s financial resilience and ability to fully participate in society. The price cap goes some way, but the UK Government must now put in place longer term plans alongside the price cap to improve support for disabled consumers, including increasing accessible communication and digital inclusion and, as I mentioned earlier, building on more effective data use.
The challenges for disabled people are that they have no choice but to consume more. They have limited mobility, use more heating to stay warm and run additional technology and equipment. Over a quarter—27%—of households with a disabled person spend more than £1,500 a year on energy, and nearly 800,000 households across the nations of the UK spend more than £,2,500.
There must be a different way to deal with this. In Scotland, the Scottish Government have announced a publicly owned energy company, supporting efforts to take fuel poverty and climate change targets seriously. We will provide people, particularly those on low incomes, with more choice and the option of a supplier whose only job is to secure the lowest price for consumers and who looks after the wellbeing of those who lack the confidence or ability to engage effectively in complex energy markets. That will also allow us to deliver on broader energy ambitions for renewable generation and the maximisation of community benefit. By the end of this parliamentary term, the conditions will be in place to meet the set-up challenges.
In welcoming the Bill, I once again stress that this action comes too late in the day for many. Progress on helping hard-pressed consumers must now be much more rapid and effective, especially for those who are hurting the most.
Rebecca Pow (Taunton Deane) (Con)
I am pleased to follow so many eloquent speakers, almost all of whom agree that this is a very sensible Bill.
I would like to begin with a question: can it be right that customers purchasing energy from the big six for some of the most basic things in life—simply keeping warm, making a cuppa, cooking the supper or running the washing machine—collectively paid some £1.4 billion more than they ought to have done between 2012 and 2015? In 2016, that figure escalated to almost £2 billion. As we have heard, that was the conclusion of the Competition and Markets Authority’s energy investigation. I am pleased to say that the Bill is intended to rectify that, which I am sure you will agree, Mr Deputy Speaker, is eminently sensible. Why? Because it is in the interests of fairness, of delivering for the customer and of giving better value to many people who quite frankly have been taken for a ride and have been paying over the odds for the self-same energy supply that others have got cheaper. In reality, they have been taken advantage of, as the hon. Member for Ynys Môn (Albert Owen) said.
We would not think that it was possible, but how has it happened? What we might call “active customers” are on the ball and save money by switching continuously, according to the prices on offer. Those people can save up to £300 a year by hunting out the cheapest deals. However, as we have heard, not everybody does that. Indeed, five out of every six households did not switch energy supplier in nearly a year between October 2016 and September 2017. That adds up to a cool 11 million households, although I am pleased that 4 million vulnerable households have been helped with an absolute price cap on prepayment meter tariffs.
The people in these 11 million households are on standard variable tariffs. They do not chop and change, but stick with the initial supplier. How are they rewarded for their faithfulness? By paying over the odds by up to £300 in a six-month period. That is itself a far from fair state of affairs, but it is even more scandalous that many of those staying on standard variable tariffs are those who can ill afford to do so. A high proportion of them are elderly. That is especially pertinent in a county such as mine, Somerset, where there is an ageing population. Between 1984 and 2014, the number of people aged 85 or more in Somerset increased by an incredible 170%, which is more than 18,000 people. The number of people aged 75 or more is projected to double in the next two decades, and the fastest-growing group is men aged 80 and over.
Those people should not be targeted and taken advantage of because they are not au fait with modern technologies such as surfing the internet to find cheaper energy deals. I am standing up for the elderly in particular—I run an older generation fair in Somerset, where I talk about these and many other things—and I believe that the Bill will definitely benefit elderly people in rural areas. We have a very high proportion of elderly people: two thirds of people in Somerset are over 65, and I believe that many of them will benefit from the Bill. Picking up the phone or checking on the internet is just not on many people’s agenda. A lot of them are already struggling to make ends meet, so we need to do everything we can to help them.
At the other end of the scale, the many young people who are renting accommodation also fall into the category of those on standard variable tariffs—they are often restricted from swapping energy suppliers by their landlord. I believe that the Bill will benefit them as well.
There is another category of people who are affected, whom I call the “mid-rangers”—my hon. Friend the Member for Weston-super-Mare (John Penrose) mentioned them—and I put myself and my family in that category. These people are really busy: they are working all day, and when they get home they are caring for their kids and they have to cook the dinner, take the dog for a walk and do all those other things. Are they really going to say, “I know what I’ll do tonight—I’ll pick up the phone or go on the internet to see whether I can get a better energy deal”? Truly, they do not do that, and they are the ones on SVTs.
I really believe that setting an absolute cap is a very sensible way of helping people in all those categories. It is not a price freeze, but a cap, as has been well pointed out. Ofgem will be given the task of making it work effectively, with a formula, and it will be responsible for setting the cap. I urge it to be transparent in doing so, because there must be no loopholes for big companies to game the system. It is absolutely imperative that companies do not take advantage of the cap and then raise all their bills to the top level; we have also heard much about that.
Ofgem will have a duty to report regularly on whether the whole system is to be expanded. The system is meant to be temporary, which is absolutely right. It is an artificial lever to control the market for a short while, and it is being applied in the interests of the consumer. I believe that this is the right way to go, as it will still enable competitiveness in the market, which is absolutely essential. We want the market to work better for everybody by continuing all the advances that are under way, such as smart meter technology and data-driven technology. If the market is made to work more efficiently, there will be more money for all companies to invest in renewables and to achieve our clean growth strategy.
On that note, I want to say that if we are talking about fairness in energy and better deals for customers, new technologies will play a very important part in the future direction of travel. Focus needs to be placed not just on energy efficiency, but on cutting the energy that is wasted, because a real concentration on such things could save consumers half their winter energy bills. I will give a couple of quick examples of gadgets that could be used. There is a small device—1.5 square inches in size—called Margo, which I saw only yesterday at the sustainable energy event in Parliament.
Rebecca Pow
I believe the Minister opened the event. This gadget listens to the amount of gas in one’s meter and can hear how much gas is being used, and it has shown that customers are being overcharged by £40 to £50 a year because they are not being metered correctly. That is £1 million for all the people in Taunton Deane. The other gadget is a stored passive flue device, which uses waste heat from the boiler to heat water before it goes into the boiler so that it does a lot less work. It can provide a whole tank of hot water that can be used for other things. Overall, it will save the consumer money. [Interruption.] People are coughing to get me to wind up, but those new technologies are incredibly important and will play a part in the good work the Government are already doing on their clean growth strategy, cutting our emissions, reducing fuel bills and giving consumers a better and fairer deal. At the heart of that is the Bill, which I fully support.
Albert Owen (Ynys Môn) (Lab)
The hon. Member for Taunton Deane (Rebecca Pow) is right to say that we have heard many good speeches, including from Members who took part in the pre-legislative scrutiny of the Bill by the Business, Energy and Industrial Strategy Committee. It produced a unanimous report, and I am pleased that the Government have taken on board the recommendations in it, because the Committee did a thorough piece of work.
I have supported and campaigned for an energy cap for many years. I am pleased that it will be introduced, and I will support the Bill tonight, but it would be wrong to say that it is a panacea: it is not. Many other pieces of work need to be done. I hope— I will work with the Government on this—that during the period of the price cap, we will look at other parts of the energy market, which the Prime Minister rightly described as “broken”. People are getting ripped off by, for example, transmission and distribution costs, because we have private monopolies running those sections of the energy market. It is right that we have the Bill, because the market has not worked.
I want to say something contrary to some of my colleagues on the Committee who have blamed the regulator. I have been on the Committee for many years, since it was the Energy and Climate Change Committee, and the regulator has done some good work. The first thing it did, as my right hon. Friend the Member for Don Valley (Caroline Flint) pointed out, was to ensure that consumers had greater transparency in their bills, so that they could see the unit prices. Before, those prices were hidden and people did not really know what they were being charged. The energy companies blamed the fact that wholesale costs had gone up, so they had to put their prices up. There is a new regime in Ofgem that is doing more impressive work in looking after the most vulnerable. When the chief executive gave evidence to the Committee he had the honesty to apologise for not doing enough, and that was the right approach.
Successive Governments have not done enough either. We have a huge responsibility to look after the most vulnerable energy users. As individual Members we must scrutinise the Government, but they must do more. When I was on the Energy and Climate Change Committee between 2010 and 2015, I was fed up of Ofgem coming to one session and saying that it did not have enough powers, and the Government would not give it more powers, and then a Minister—they changed regularly—coming to another session and saying that the regulator had enough powers. It was a missed opportunity, and we are much better placed now.
We put too much emphasis on switching as a panacea. As other hon. Members have said, a low number of people switch. It is not an easy thing to do. People are very busy, and vulnerable people may have two or three jobs. The last thing that they want to do is spend hours and hours on the line to a call centre to switch. That approach did not work, for many good reasons. I remember the Secretary of State in the coalition Government—the right hon. Member for Kingston and Surbiton (Sir Edward Davey)—saying that switching was the great answer. David Cameron, as Prime Minister, accepted that, and the issue was kicked into the long grass. I am glad that the CMA produced its report, but its predecessor, the Office of Fair Trading, held many inquiries and did not do a good enough job of helping people. I am pleased that we are better placed now. The role of the regulator is important, and it is now more proactive and helpful.
My hon. Friend the Member for Southampton, Test (Dr Whitehead) was a member of the Committee that pushed for measures on prepaid meters, which were affecting the most vulnerable. The energy price cap for prepaid meters has worked in helping to reduce their energy costs. There was a fear that the energy companies and suppliers would go up to the highest rate, but that has not really happened. I am therefore pleased to support the cap in the Bill, and I am pleased that there is a sunset clause.
Changing the behaviour of energy companies is essential. In the past, they have been playing the system while blaming others. They have always said that transmission costs are too high and fixed, and that they are vulnerable to wholesale costs. We had a situation, particularly from 2008 to 2014, described as “rocket and feathers”: prices rocketed, but when the price of crude came down there was only a trickling down or “feathering” in the cost of people’s bills. That situation has been exposed through tariffs, which has been important.
Transmission and distribution costs account for as much as 25% of people’s bills. The distribution companies are private monopolies, as is National Grid for transmission. There is no competition in that part of the sector. When we talk about a broken sector and free markets, we must remember that in many areas the market is actually restricted to one company. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) rightly talked about the peripheral areas of the United Kingdom, many of which are off-grid, paying more for their energy. People who are off-grid do not have the option of dual fuel payments, so they are paying a lot for either off-mains gas or oil.
Stephen Crabb
The hon. Gentleman is making an important point about rural consumers who rely on off-grid gas and liquefied petroleum gas supplies. There have been inquiries into how that market functions. Is he satisfied that it is working fairly for rural consumers in Wales and the rest of the UK?
Albert Owen
No. I think more has to be done. I hope that the energy cap sunset clause will enable us, working with the Government and the regulator, to consider greater reform of the energy market so that we can prioritise helping isolated communities. I want to highlight the excellent work of Citizens Advice and many other groups. In my constituency and, I am sure, in the right hon. Gentleman’s, energy costs are a big issue in the citizens advice bureau’s casework, because of the price of oil in rural constituencies.
There is an answer to the monopoly status of the transmission and distribution companies: greater competition from not-for-profit organisations that reinvest in infrastructure. Welsh Water is a not-for-profit organisation. It has competition within it, because it puts its contracts out to tender. It is not a monolithic public monopoly, but a not-for-profit organisation that values its customers first and foremost. I know that the Minister will refer to the Government review of transmission costs. We have not had a response to that yet. I will support the Bill, because I have been campaigning for it for years. I do not think it is a panacea in itself, but together we can help vulnerable and non-vulnerable customers who have been ripped off for too many years.
Several hon. Members rose—
Mr Deputy Speaker (Sir Lindsay Hoyle)
Order. There are 10 speakers left, so I suggest that they speak for six minutes each.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
It would be prudent at this time for me to thank the Business, Energy and Industrial Strategy Committee for its hard work and its contribution to the Bill. I wish to refer to what the hon. Member for Leeds North West (Alex Sobel), who is no longer in his place, said earlier about paying with meters. He appeared to think that they came along with privatisation, but I can go back to the 1950s and 1960s, when meters took a shilling, which is the equivalent of 5p today. Prepayment meters have been with us for quite some time.
When competition works, it delivers the best for consumers, shareholders and the Government alike, and over the past two decades, energy utilities have secured significant investment. It would be a mistake to damage the market that has evolved in recent decades or distort it unnecessarily by introducing state-owned or publicly owned suppliers. That would jeopardise public investment, cost the taxpayer significant sums and lead to the loss of corporate tax receipts. That approach would, in my view, be folly, given that this Conservative Government have already worked hard, and continue to do so, to ensure that the market is more competitive.
The number of energy suppliers has increased fourfold, from about 13 to 50, since 2010, giving the consumer a much wider range of options should they choose to take them. The advent of smart meters will in due course make energy bills more accurate and pricing more transparent, although I concede that there is some way to go to secure the installation of about 53 million such meters by 2020, which is an ambitious target. By working with Ofgem, which has rightly come in for some criticism this afternoon, and by harnessing the power of the internet, the Government will make it quicker and easier for consumers to switch suppliers, which should reduce their energy costs.
There is a large of group of over 5 million active consumers who are willing to use their options to secure the best deal, as was referred to earlier in the debate. Almost one in five United Kingdom households are switching supplier each and every year. The big six are having to work much harder and offer better deals to retain that group of important customers and to compete for their loyalty. However, there are people who, for whatever reason, still do not switch. The non-switchers, who include some of the least well off and the most vulnerable in society, remain for the most part a captive market for the large and dominant suppliers. A form of two-tier market has inadvertently emerged, and those households tend to be on high-cost tariffs.
Our aim as Conservatives must be to create a competitive market that is fair to consumers and to the suppliers, and in which the big six cannot rest on their laurels and prosper—and they have prospered—by inflicting higher charges on those who can least afford it. Encouraging switching does go some way towards achieving that, and we should certainly continue those efforts, but in the meantime we also need to protect the very large group of non-switchers.
The Conservative manifesto proposed the introduction of a safeguard tariff that would protect consumers on the poorest-value tariffs, and I am pleased to support this Bill, which honours that commitment. Indeed, I commend the Government for driving forward their promise to deliver lower fuel bills for millions of customers. This temporary cap, which is not a freeze, as has been said often today, will ensure that 11 million or so customers on a standard variable tariff will, delightfully, no longer have to pay an inflated price for their gas or electricity. That can only be good news for constituents in Ayr, Carrick and Cumnock and throughout the United Kingdom. It is not a distortion of the market, but a corrective measure.
In 2015-16, it was estimated that domestic customers in the UK supplied by the big six paid almost £1.5 billion more than they would have done in a properly functioning marketplace. It is clear that the marketplace is not working, but it will work better, because the Bill will help to reduce that figure and bring prices into line with what they should be in a properly functioning market, while letting the market continue and even flourish within the confines of the cap.
In conclusion, as a Conservative, I believe in the free market, but like many, I recognise that there are times when it can fall short, and this is one of those occasions. It is then the Government’s responsibility to listen, step in and make the necessary reforms and regulations to ensure that the market works well for as many people as possible. The Bill will ease the unfairness and yet allow the market to prosper. I am pleased to support it and, in doing so, note that the cap will cease by the end of 2023 at the latest, but there is the opportunity for it to end in the near future, in 2020.
Ben Bradley (Mansfield) (Con)
It is a pleasure to follow my hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant). I support the Bill, because the energy price cap will help to ensure that overcharging for energy use is brought under control, which will support some of the most vulnerable people in our society and in my constituency.
Allowing the independent regulator, Ofgem, to cap energy tariffs until 2020 will mean that an absolute cap can be set on poor-value tariffs. That will help to protect the 11 million households on low standard variable or default tariffs who are not protected by existing caps. As hon. Members have said, the difference between the cheapest tariff and the average standard variable tariff from a big six supplier is about £300 a year, and it has been at about that level for the past six months. That is an awful lot of money for constituents in some of the poorest parts of our region, as well as others in the UK. The Competition and Markets Authority’s recent investigation into the energy market found that the domestic customers of the big six energy suppliers pay on average £1.4 billion a year more than they would in a truly competitive market. I do not think that there is any argument in the House about the fact that the market is not truly competitive.
Although I believe that promoting competition is generally the most effective way to ensure that customers receive the best value in their service, I welcome the fact that the Government are prepared to act when it becomes apparent that markets are not working for consumers. As colleagues have said, the technological advances that will improve the market are not happening fast enough to support vulnerable people now.
The Government made a manifesto commitment to extend the price protection that is currently in place. I welcome Ofgem’s commitment to protect a further 1 million families from expensive standard variable tariffs for the first time, taking those protected to a total of more than 5 million people. Despite that, however, not all consumers on the most expensive tariffs are helped. As my right hon. Friend the Secretary of State suggested, it is not enough just to support people who have ticked the right boxes for vulnerability on paper. We must support all vulnerable people and others who are being overcharged to the detriment of their standard of living.
The Bill strikes the right balance by protecting those on standard tariffs while ensuring that energy customers who shop around and switch suppliers can find the best energy deals. I am confident that the Bill will also ensure that Ofgem can set a cap that will enable suppliers to compete effectively. It is obviously vital that that is set at the right level, and that the outcomes are measured and reviewed. There is an interesting discussion to be had about how that will work, which I shall come on to later.
It is right to highlight, as many colleagues have, that this is a cap, not a freeze. Companies will still be expected to compete below the cap to attract customers, just as they were before. Nobody will be prevented from reducing their bills by switching supplier or changing tariff, and energy companies will still be able to pass savings on to consumers when possible. It is also important to acknowledge that the price cap is intended as a temporary measure while innovations such as smart meters and more reliable switching are fully rolled out. It is not always easy to switch. Even in my own house, my wife and I are trying to work out why the bills are so high—is it an appliance, are we doing too much washing, are we drinking too many cups of tea, or is it my tariff? That is not easy to work out without a smart meter, but my energy supplier will not give me one, so it all gets very complicated.
It is important that we take steps now until such services are available so that people can switch quickly and easily. There are provisions to ensure that the cap is set at a sensible level and reviewed regularly, and Ofgem will have to consult on how to calculate the level of the cap. The cap will also have the flexibility to go up and down depending on market conditions, and I agree with my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) that it should be a formula, not a number.
I support initiatives that help to encourage consumers to switch energy suppliers and, of course, I support a competitive energy market. The number of suppliers has increased from 13 to more than 60 since 2010, which can only be a good thing. My right hon. Friend the Member for Harlow (Robert Halfon) mentioned Robin Hood Energy in Nottinghamshire, which is a great local example of a new, competitive company delivering lower prices.
It is people who do not have the means to call around asking for different energy quotes or do not have access to the internet, including elderly people who perhaps do not feel confident using price comparison websites, who suffer the most under the current system, as well as families who have too much on ever to get around to switching. Ofgem’s recent survey found that vulnerable consumers were the most negatively affected by the market, and I am sure that no one in the House supports that situation.
The number of consumers switching energy suppliers continues to be notably low. It would be great if that was because everyone was happy with their bills, but I am not sure that any of us believes that that is the case. Citizens Advice assisted more than 74,000 people with issues related to fuel last year, which again shows that the market is not functioning as well as it should, and it is great news that that organisation has offered its support to the Bill.
The Bill has huge potential to benefit the most vulnerable customers. If it achieves Royal Assent by the summer, the cap can be in place by next winter, providing protection for my constituents in Mansfield and millions of customers across Britain. It is therefore very important that we crack on and deliver it.
Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)
I am grateful for the opportunity to make a few brief remarks in a debate that has been perhaps the most consensual in which I have participated since my election last summer. I pay tribute to the Minister, and also to my hon. Friend the Member for Weston-super-Mare (John Penrose), who has done so much to ensure that the Bill is indeed a reality. It is certainly needed. In a winter in which we have been reminded of just how bad the British weather can be, and just how much we rely on our ability to heat and light our homes, too many of our constituents are being taken for a ride by their energy suppliers. Millions of so-called sticky customers, many of them elderly and on low incomes, are stuck on poor-value default tariffs and, as a result, pay more for their energy than they need to. In a deprived constituency such as mine, the case for change is clear. In June 2016, the Competition and Markets Authority found that consumers were being overcharged by about £1.4 billion a year. That is not fair. It is bad for consumers’ finances, and it is bad for trust in the energy market. I was therefore pleased to see this measure included in our election manifesto last year.
It is important to understand how the Bill will work, and it is also important to understand what it is not. As was pointed out by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin), it is not the crude measure proposed by the right hon. Member for Doncaster North (Edward Miliband) in the good old days when he led the Labour party. He proposed a straight-up freeze on energy tariffs: a blunt proposal with insufficient scope to deal with natural price fluctuations. In contrast, the Bill will implement not a freeze but a cap: a cap set on standard variable and default energy tariffs.
Competition still lies at the heart of our vision for the energy market, and that must be the right way forward. However, those who are less able to switch will no longer be at the mercy of rip-off merchants. This is not a permanent solution, but it will buy time for the ambitious programme of reform that the Government are delivering to take effect. The provision of faster, cheaper and more reliable switching, backed by smart meters and simpler, clearer energy bills, is an essential step that was proposed by the Competition and Markets Authority and is now being introduced by Ofgem. In the meantime, a temporary cap must a good idea. It will promote choice while also ensuring that the energy market works for everyone.
That is an infinitely more progressive approach than the one proposed by Labour Members. The Centre for Policy Studies has shown that Labour’s plans to renationalise our energy network would cost up to £185 billion, exploding the deficit and leaving every household in our country facing a bill for thousands of pounds. Putting the cost aside, however, I challenge Labour Members to tell us where is the evidence that the state would suddenly develop the all-seeing wisdom that would enable it to know how best to price what is an immensely complex and fast-changing market. We know from the Government’s reforms of the way in which we produce our energy that it is far better for Governments to set an enabling framework, and then to let the market shape itself according to innovation and demand. If we relied on the state to direct how we generate our electricity, we would still be relying on dirty coal today, rather than enjoying subsidy-free solar and offshore wind. Of course, as we noted from their shameful early-day motion, tabled a few weeks ago, too many Labour Members would rather like that, but at best we would have a series of Hinkley Points. I will not take lessons from Labour Members about embracing the merits of outright state control and the direction of prices.
1s the Bill perfect? I must say that I wish it were not necessary. I did not come into politics to cap prices, and I do not believe that the state is generally particularly adept at doing so effectively. However, we are where we are. We have a market that is not working for some of the most vulnerable people whom we serve. I am a great believer in not making the best the enemy of the good. A price cap is what my constituents need and want, a price cap is what we promised to deliver, and a price cap is what I will vote for tonight.
Jack Brereton (Stoke-on-Trent South) (Con)
As a number of Members have said, the issue of domestic gas and electricity supply is particularly pertinent following the recent extreme weather. The cost of that supply is always hugely important to our constituents, not least because when the mercury drops and blizzards swirl, it an absolutely necessary and unavoidable cost.
Like all other Members, I receive letters and surgery visits from people who struggle with their bills, struggle to understand the tariff choices available, or struggle with access to the internet and the comparison websites that might help them to reduce their domestic fuel bills. I recently hosted an energy-switching surgery with our local citizens advice bureau to help more people to switch to the best deal.
According to the latest figures available, the Office for National Statistics considered 12.3% of households in my constituency to be fuel-poor in 2015. Thankfully, that was a great deal less than the 23.3% of households who were fuel-poor in my constituency back in 2010, but there is clearly still more work to do. Similarly, while the Office for National Statistics reveals that the percentage of households in Great Britain with internet access has increased dramatically over the last decade—from 60% to 90%—there are still in Stoke-on-Trent, according to the city council’s digital inclusion strategy, about 15,000 households without internet connection and 7,000 without a mobile phone. That matters, because one of the driving forces behind the need for the temporary tariff cap under the Bill is the reluctance of consumers to switch, or the inability to do so with ease and convenience. The Bill matters to Stoke-on-Trent’s digital inclusion strategy because a temporary cap would give us the breathing space that we need to take the measures planned locally that will get the market for energy functioning more freely online than at present.
Great efforts have been made to ensure the domination of the market by Blair and Brown’s big six does not mean that new entrants are perpetually crowded out. They demonstrated what Labour does in power: it quashes competition. It now wants to go further, as we have heard from the Leader of the Opposition, by nationalising the energy market at huge expense to taxpayers, eliminating all consumer choice that would allow people to shop around and get the best price. It is greatly to the credit of this Government and their coalition predecessors that the number of suppliers has increased from just 13 in 2010 to 60 now, and that the dual fuel market share of independent suppliers now runs at 22%.
The nudges towards greater competition are not working for everyone, however. The £1.5 billion premium—the difference between what people would be paying in a fully functioning market and what they actually pay—identified by the Competition and Markets Authority in 2016 is a shocking figure. Just as we are taking measures locally to improve consumer engagement in a competitive market—not least with my own free energy guide for constituents, which I recently published—it is right that the Government continue to roll out measures to increase competition in the breathing space that a temporary tariff cap can and will bring.
As a consumer, the rigmarole of changing an energy supplier involves psychological barriers that everyday retail markets—like going to the shops—do not share. The sclerotic consumer side of the energy market also effects psychological disinhibition on the producer side, by which I mean that energy suppliers feel able, and indeed entitled, to take their customers for granted in a way that suppliers in fully functioning free markets do not. As Octopus Energy puts it in its briefing for this debate, in a healthy market, consumers who shop around for the best deals keep prices low for everyone.
I would go further than Octopus Energy: in healthy markets, consumers who are loyal are rewarded, not ripped off. In the very healthy market of coffee houses, for example, suppliers might well attract new customers with flyers or vouchers, but they also tend to take care to reward loyalty over caprice. That point is well illustrated by the fact that even the House of Commons has a loyalty card for tea and coffee. Huge energy corporations with loyal customers have no excuse for treating loyalty with contempt.
My tests for this Bill are that it should motivate more consumers to be confident switchers, that it will require suppliers to provide the customer care that loyal consumers would expect in a fully functioning market, and that it will spur the regulator into action as the consumers’ champion. I am confident that it will.
I will be glad to receive assurances that the long-term ambition for energy policy is not just a reliance on short-term caps. The long-term interests of consumers are best served by the freest possible markets with the greatest possible competition. Looking to the future, there is great potential for new energy sources and new firms in the market. In the renewables sector, costs are coming down. In the nuclear sector, innovative new technology promises unthought-of energy security if we get the policy framework right, taking pressure off the gas network as our primary source of energy. An energy tariff cap cannot become a comfort blanket against embracing sectoral change in the decades to come, even if a temporary cap is a necessary safety net in the immediate months ahead.
In conclusion, the market for household fuels does not function as well as we would hope. It needs to become more competitive, more consumer-focused, and easier to enter for new firms on the block. The Bill will provide temporary respite from the more egregious excesses of the big energy firms that fail to reward loyal customers. It opens a clear window of opportunity for further action in boosting market information, digital access, competition and security of supply. I support the Bill in principle and as part of a wider approach to fixing the problems in our wider energy market.
Richard Graham (Gloucester) (Con)
What a pleasure it is to contribute to the debate, because there is so much to respect about the process by which Ministers have guided the Bill forward. It starts, of course, with the crucial truth that many of our constituents feel strongly that their energy bills are not fair. From there, similar solutions were set out in the two largest parties’ manifestos. We had the report from the Competition and Markets Authority, the letter from my hon. Friend the Member for Weston-super-Mare (John Penrose), which I supported very early, and the Business, Energy and Industrial Strategy Committee’s report and pre-legislative scrutiny. Today we have seen an unusual cross-party consensus, echoed among Opposition Members by the hon. Member for Leeds West (Rachel Reeves), the right hon. Member for Birkenhead (Frank Field), the hon. Member for Ynys Môn (Albert Owen), the right hon. Member for Don Valley (Caroline Flint) and the hon. Member for Harrow West (Gareth Thomas), and by all my colleagues on the Government side of the House. This has been a model of how to build support, not least because we all want to do something to help so many of our constituents.
Interestingly, the Bill does not target the most vulnerable, because broadly speaking they are already on fixed or prepayment tariffs, which are already capped. The Bill provides for a temporary, absolute cap for 20 months, starting in time for the winter of 2018-19—I know that it feels as though we are still in the winter of 2017-18—which will affect a slightly different category of our constituents: the 11 million who are on standard variable tariffs, many of whom have been on them for many years, paying roughly £300 more a year than they need to. There are twice as many of our constituents on such tariffs as there are switchers.
I wish we had the data on standard variable tariffs. I believe that the Government’s statutory instrument will make the data available—I hope that the Minister can confirm this—so that we can see what the details actually are in our constituencies. My guess is that in Gloucester, which is part of the huge west midlands energy region, about 25,000 of my constituents are on standard variable tariffs. What we do know from the west midlands energy statistics is that 20% of electricity customers and 34% of gas customers are actually served by their legacy supplier, and have therefore been on a standard variable tariff for a very long time.
I also guess that many of our city’s hard-working residents—we have the fourth highest employment rate of any city in the country—who are on relatively modest salaries, with an average salary of around £25,000, do not have enough time to switch. The Bill will therefore have the greatest impact on hard-working families and individuals, and it will enable them to budget for their family’s biggest cost after council tax. It is to them that the Bill is effectively dedicated.
There is a bit of an urban myth among Opposition Members that nationalisation is the real answer, but that is simply not backed up by history. We know that when energy companies were owned by the state, there were twice as many power cuts as there are now, and we know that energy prices fell after privatisation, only to rise between 2000 and 2008—we know which party was in power then—due to lax control of the regulatory environment.
What is needed today is for the balance of interests between the Government, the regulator, energy companies and customers to work above all for customers—our constituents. The Bill sorts the one major issue for 11 million people—the standard variable tariff—for now, and allows the Government and the regulator to focus on how in the longer term we use innovation, better smart meters, better and easier ability to switch, and a greater use of renewables to ensure that the energy market works as best it can.
Peter Aldous (Waveney) (Con)
Going through the briefings that I have received from various organisations representing both consumers and suppliers, it is quite clear that there is universal recognition of the problem that the Bill seeks to address: market failure. There is almost universal support for the Bill on those grounds, and for that reason I am also extremely supportive of it. However, as we have heard, it is important to say that this Bill is not a panacea for all our ills and that the hard work does not stop here.
Citizens Advice is supportive of the Bill and sees it as a vital first step towards ensuring that consumers on default tariffs are no longer ripped off. Scope highlights the fact that disabled customers face higher energy costs for reasons related to their impairments and conditions, and it is of the opinion that the Government should also put in place a long-term plan to address the barriers that disabled customers face. First Utility, a challenger supplier, is also supportive, but it highlights the need for serious consideration of the level at which the price cap is set, for a level playing field for all suppliers and for consumers to become more active players in the market instead of them sitting back and becoming more passive. uSwitch has concerns in principle and believes that any price regulation should be light touch and in place only for the minimum time necessary.
I sense that we are moving in the right direction, but I do have one concern nagging me at the back of my mind about the possible unintended consequences. I hope that the Minister will be able to address my worry about a negative knock-on impact on investment in the energy supply sector. While I recognise that there is a strong element of “They would say that, wouldn’t they?” I take note of the worry raised by both the CBI and Centrica that the CMA should consider appeals against Ofgem’s decisions, rather than them being pursued through the courts by way of a judicial review, as the Bill currently proposes.
A revolution is taking place in the energy supply sector as it is decarbonised and decentralised and as more renewables come on stream. That welcome process requires an enormous amount of investment, and the Treasury has identified over £250 billion of energy investments that will be made in the early 2020s. We need to ensure that that investment keeps taking place in the UK. Such investment is beginning to bring significant benefits to East Anglia and my Waveney constituency, with numerous projects planned in the southern North sea, including the opening up of marginal gas fields and decommissioning. In offshore wind, 11 wind farms are either operational, under construction or planned off the East Anglian coast, with a total capacity of 8.7 GW. As I chair the all-party parliamentary group on energy storage, I should also highlight the exciting opportunities emerging in that sector that will help to decarbonise not only the energy sector, but the transport sector, that will empower British households to become generators of their own electricity and that will help to make our industrial base more competitive as cheap renewables are more easily deployed.
We are on the cusp of an exciting future that could bring significant benefits to the UK and create thousands of jobs, often in parts of the country where regeneration is badly needed. That requires enormous investment and, up to now, Britain has been an attractive destination for such investment due to its straightforward regulatory framework and limited state intervention. Everyone knows where they stand, and it is vital that we do not lose that hard-earned reputation.
The appeals process needs to be carefully designed and implemented to allow for continued investment and consumer engagement. Proper appeals are important to ensure that regulatory decisions are well founded. The appeals processes in sector-specific regulated industries show that regulators make errors. Ofgem is a regulator with wide-ranging powers that can make decisions that have significant consequences both for consumers and for companies operating in energy markets. Robust checks and balances are needed to ensure that the regulatory decision-making process is both rigorous and careful.
In making decisions, investors are mindful of the overall integrity of the regulatory process, which includes a proper right of appeal. There is a worry—as we heard from my hon. Friend the Member for Fylde (Mark Menzies), who is currently not in his place—that the Bill as drafted is damaging from that perspective. That said, I recognise and take on board the significant amount of work that the Select Committee carried out in its pre-legislative scrutiny. The research and evidence it received suggests that this is not a problem.
I have a slight nagging doubt about unintended consequences. I am mindful of an article in the Financial Times yesterday that painted a scenario of increasing investor uncertainty that, in turn, could lead to higher costs of capital and, ultimately, higher costs to British energy bill payers.
I would welcome from the Minister, either in her summing up or later in correspondence, an assurance that there has been due diligence and an impact assessment confirming that the Bill will not lead to a downturn in the investment that is currently being unleashed in the energy supply system and that is beginning to bring significant benefits to many parts of the UK.
Michelle Donelan (Chippenham) (Con)
For too long many of my constituents and people living across the UK have been trying to manage overpriced energy bills and have been punished for being loyal customers. In a poorly functioning energy market, all customers would switch between suppliers to get the best value tariff for energy. However, only a proportion of consumers have been doing that, so creating a two-tier, broken system. In fact, according to Ofgem, as of September 2017, 57% of customers with the 10 largest energy firms were on uncapped standard variable tariffs.
I make it clear that I believe in a free market, but I also believe in a free market that is fair—one where the consumer is king and has choice. Currently, loyal customers suffer and we have a two-tier, unfair, broken energy market. This Bill will enable a temporary intervention in the market and will support our manifesto commitment to extend price protection.
Currently, some 11 million households are unprotected and on poor-value standard variable tariffs. The rate of switching is not yet high enough to rectify that anytime soon, so loyal customers suffer. We effectively have a system in which switchers can save around £300 a year but customers of the big six who do not switch and who stay on default standard variable tariffs are overpaying each year. In fact, the Competition and Markets Authority has found that, between 2012 and 2015, customers of the big six collectively paid £1.4 billion a year more than they would have paid in a well-functioning market.
With other initiatives to drive down energy costs and usage, as well as to promote switching, it is easy to question why a cap is needed. Well, it is needed. Those measures will help, but they will all take time, hence the need for a temporary measure. Let us briefly look at the key initiatives.
First, the roll-out of smart meters alone is predicted to take £300 million off consumer energy bills by 2020, giving consumers the knowledge to make informed energy and supplier choices, but that roll-out will take time. In addition, ensuring that properties are energy efficient is also essential, and the energy company obligation “help to heat” scheme will upgrade around 1 million homes by 2020—it will still help only a fraction of the population. The warm home discount scheme provides 2 million low-income and vulnerable households with a £140 rebate each year, but that helps only that specific group. The uSwitch campaign has gained traction over years, and the Government are also working with Ofgem to make switching suppliers even quicker and easier. But the annual switching rate in September 2017 was only 18%, meaning that five out of six households do not switch energy supplier. The number of people actually switching increased by 30% for electricity and 24% for gas. So the proportion of people switching is still far too low but the rate at which switching is increasing is growing dramatically. That indicates that it will become more the norm, but that it will take time.
We can argue today that we need to take responsibility for our own actions and for switching, but we also need to encourage and enable people to do this, and protect the most vulnerable in society. Leaving the system broken and ripping off loyal customers is not the right thing to do. In addition, there is a lack of awareness that switching needs to be done regularly, because as a good-value contract ends, it usually defaults to a single variable tariff. Martin Lewis, founder of MoneySavingExpert.com, has said that we need to make up our minds up between regulating prices, or encouraging competition and switching. However, I do not believe the two are mutually exclusive in this scenario. The regulation is just a temporary fix while we encourage switching and work to reduce energy prices.
Martin Lewis and some others also argue that a narrower price differential will discourage switching. That has not happened in Northern Ireland, and it should incentivise companies to find more efficiencies and reduce prices for switching customers. In addition, Mr Lewis himself warns that the cap will only reduce some customer bills by about a third of what switching would do. That shows the incentive.
I am delighted that the Government have accepted the Business, Energy and Industrial Strategy Committee’s sensible recommendations on the six-month reviews and on the Bill requiring Ofgem to consult on exemptions from the price cap for green tariffs, including the power to exempt them. That will protect green energy providers and give consumer choice. I agree with the Committee that we must also strengthen the definition, standards and checks to ensure that those that qualify as green are green and that this is not just used as a loophole. Good Energy, one of the leading green providers in the UK, is based in my constituency and has in the past expressed its concern to me that consumers select companies thinking they are green when they are actually only partially green. These companies can therefore afford to charge less, so we need to be careful about exemptions to the cap and ensure that the energy market is more transparent to give consumers informed choices. I look forward to hearing from the Minister on that.
In conclusion, I agree with the chief executive of Citizens Advice that this Bill is
“a significant step towards an energy market that works for everyone”.
But it is important that this provision is seen not as a stand-alone measure but as a temporary solution that will encourage switching, work to inform consumers of their energy use and bring energy prices down via a number of incentives.
Stephen Crabb (Preseli Pembrokeshire) (Con)
I am very grateful to be called to say a few words in support of this useful piece of legislation, Mr Speaker. I was pleased to be asked by my hon. Friend the Member for Weston-super-Mare (John Penrose) in the early autumn to sign a letter with him to Ministers and the Prime Minister calling for this legislation to be brought forward. So I join him and others this afternoon who have given a strong cross-party welcome to the fact that we are here today debating the Second Reading of this important Bill.
I believe in a successful, strong, profitable energy industry. We need a successful industry, given the asks we are making of these companies in terms of our wider energy objectives. We are asking these companies to invest in new capacity—in resilience—to make sure that our lights stay on and to give us security of supply. We are also asking them to invest in decarbonisation efforts and do the heavy lifting in creating a low-carbon economy. We want them to do this all the time, while giving consumers the lowest possible prices. There is a duty on Government and on regulators here. When any piece of this industry—any of the individual markets that go towards creating this strong and successful industry—is not working perfectly, there is a duty to step in. That lies, first, with the regulator, but when it is slow to act, the duty then falls to Government. That is the point we have reached with this legislation today.
It is estimated that 23,000 consumers in my constituency are overpaying on their energy bills, by an average of around £275 per year, so the Bill will be strongly welcomed in Preseli Pembrokeshire. In fact, south Wales is estimated to be among the regions of the UK with the largest numbers of consumers overpaying for their energy.
With respect to the comments made by the hon. Member for Ynys Môn (Albert Owen), I wish to put on record that there is a group of energy consumers who will not be protected by the legislation: people who live in small, isolated rural communities and rely on off-grid liquefied petroleum gas or off-grid heating oil supplies. Over the years, concerns have been expressed repeatedly about how well the markets are functioning for those consumers. Those concerns perhaps go beyond the Bill’s immediate scope, but I urge the Minister to keep them on her radar and to ensure that those consumers get the full protection that they believe they should be entitled to.
I have some other concerns about the legislation. We are looking for a change in behaviour on the part of the supplying companies and on the part of consumers. Although the Bill is a necessary condition, it will not be the final answer to the challenges. We need energy companies to behave in a way that demonstrates that they really value their consumers. We have seen a lot of lazy, inefficient practices on the part of the big six and some excellent behaviours on the part of some of the emerging challenger companies. They have entered the market and had to scrap and fight for every single one of their customers, unlike the big six, which have largely inherited their customer load from the old nationalised system. The Bill will be a helpful stepping stone, but it will not be the final story in respect of prodding the big six to model some of the best behaviours we see in the industry.
In respect of consumers, we heard a great example earlier in the debate from my right hon. Friend the Member for New Forest West (Sir Desmond Swayne), who described his own experience of being able to benefit from being a switching customer. As so many Members have pointed out, the truth is that a great many consumers just do not behave like that at all. I think the Bill will be a helpful stepping stone to encourage more switching in the marketplace, but a wider body of work needs to be done, particularly for the most vulnerable, the disabled and the people who perhaps are not readily using the internet for a lot of their day-to-day consumer needs. We need to get them better engaged, so I encourage Ministers to keep that on their horizons.
We need to consider the ongoing support for the vulnerable. I agree with Citizens Advice that, after the sunset clause has been reached and the cap has been and gone, and when hopefully we have seen some positive reforms in the marketplace, there will still be an ongoing need for measures to protect the most vulnerable energy consumers. I would welcome the Minister’s thoughts on that. I wish her well as she takes the Bill through Committee. She has a lot of support from all parts of the House, but this debate has shown clearly that Ministers will need to address a number of specific concerns.
Stephen Kerr (Stirling) (Con)
I rise to make a short contribution to the debate on this important Bill. I pay particular tribute to the right hon. Member for Don Valley (Caroline Flint) and my hon. Friend the Member for Weston-super-Mare (John Penrose) for their persistence over time to get us to this point.
The Bill will make a real impact on the day-to-day lives of the people who elected me, which is why it matters very much to me and why I have been pleased to sit here listening to the debate for several hours. When it comes to such important issues, we are talking not about academic abstractions or economic theories, but about reducing the energy bills of my constituents. That really does matter to me, as it matters to them, so I support the Bill and wish to make a few comments on it.
The price cap in the Bill is not, as some might fear, a corruption of the free market, but a market intervention to protect consumers from the worst excesses of a market that is not working. On a related note, I shall quote the words of a very famous Scotsman, which I am sure that you, Mr Speaker, will recognise instantly:
“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
I am not laying the charge of corruption against the big six, but their activities might be described as a contrivance to raise prices.
The price cap is a blunt object—
Mr Speaker
Order. I was rather hoping that the hon. Gentleman was going to furnish us with the page reference in “The Wealth of Nations”.
Stephen Kerr
I am unable to furnish you with the page number in “The Wealth of Nations”, Mr Speaker, but you are absolutely right that it is, of course, the famous Scotsman, Adam Smith, to whom I was referring. He was a great soul indeed.
The price cap can be a blunt object if it is left in place too long: it could cause stagnation; it could cause a reduction in competitiveness; and it could reduce the scope for investment in innovation in the sector. The effect of the price cap is not intended to result in that end; it is to lead to something far subtler. I am talking about a market intervention that is consumer-led and that is about empowering consumers. I am glad that the cap is time limited. It gives us time, as has been said by many Members in this debate, to fix the market, but what does the fix look like? My contention is that the Government, Ofgem and the industry must work harder to create this consumer-led marketplace. New technology is becoming available to empower consumers—to give them more control over their energy consumption and supply like never before. It gives consumers the data they need to optimise their energy consumption and to give them control over their energy costs.
The idea of this technology is the start of something that is unstoppable—I am talking about the idea of the smart home. In effect, what it does is give power to consumers, which ultimately is what this Bill is all about. The average household energy bill—if someone is on a standard variable tariff—is between £1,200 and £1,300 a year. It is incredible how little interest many consumers pay to that kind of expense going through their households. Part of the remedy to this disengagement, or lack of interest, must be to give consumers the confidence to feel empowered to deal with those costs. At the heart of all this is the smart meter. I do not have time in this debate to talk much about smart meters, but they can create data, display data and give uses to data that help consumers to optimise their energy bills.
We need to make it easier for people to switch. There is a great fog that comes over many people’s minds when they are given the opportunity to switch suppliers. If we can make it as easy to switch supplier as it is to open an app on a smartphone or press a button on a smart meter, the game is on. I remain convinced that this technology can fix the market in time—and “in time” is the key phrase. We need a real national effort to install smart meters in every property across the country. There is a Bill, which has gone through this place and is now in the other place, that is about smart meters. There are issues about smart meters that demand the urgent attention of anyone who has an interest in seeing this vital national infrastructure installed in this country. There are technical issues, but that is not what we are here to discuss.
What are we discussing? Why am I standing here in the first place? Frankly, it is because we have a broken market. I wish to apportion blame for that: I put the blame firmly at the door of the regulator, which has been around, in one form or another, since the 1980s. I firmly believe that the regulator already has the power to do what this Bill will give it the power to do, but it lacks the will to use that power.
As a member of the Business, Energy and Industrial Strategy Committee, I was astonished to hear the leadership of the regulator, who were in front of us, admit in effect that they had the power to set the tariff cap, but that they were too frightened of litigation from the companies that they were supposed to be there to regulate in the first place. As we say in Sterling, why have a dog and bark yourself? That seems an apt expression for a regulator that has failed to protect the free market and has allowed itself to be sucked into the game of special interests. It is almost protecting the very businesses that it was supposed to be there to regulate. It is now time to question Ofgem and its fitness for purpose. If the leadership of Ofgem will not take these powers that will inevitably pass through Parliament and become law and use them to protect the customer and to build and create a proper, free and competitive market in energy, that leadership will need to be changed. It is time that we were better served by that regulator.
The energy suppliers are benefiting from this lax regulatory regime. By creating a situation in which they charge rip-off prices for standard variable rates, the big six suppliers have broken the covenant that all companies have with their customers. They have lost the trust of the people. They may use the period of the tariff cap to restore and rebuild that trust by working to create this proper functioning marketplace.
Let us not forget what these companies have done. They have used profits from standard variable tariffs to subsidise their cheaper tariffs. Unengaged consumers have been punished harshly because of their loyalty, to the tune of at least £300 per household per year—much too high. According to the Competition and Markets Authority, the country has overpaid a total of £1.4 billion. Consumers have been ripped off for years at the hands of companies that should have known better and at the mercy of a regulator that has proved ineffective. It is time for us to take action and to work pragmatically to solve this problem for our constituents. It is a time not for economic dogma or ideology, but for proper pragmatism. The Bill is a superb example of the pragmatism that this Government pursue, and I am proud to support it.
Lee Rowley (North East Derbyshire) (Con)
Thank you, Mr Speaker, for this opportunity to speak. It is a pleasure to follow my hon. Friend the Member for Stirling (Stephen Kerr), who made an excellent case and, as ever, argued with vim and vigour.
I welcome this important debate because it is the role of the Government to step in when markets do not work effectively. Although I am instinctively a small state Conservative, I know that it is important that the Government recognise when markets have not worked effectively and take appropriate action, as we propose in this legislation, which I support. The right hon. Member for Don Valley (Caroline Flint), who is not in her place, said that to expose market failure is not to try to weaken or be against all markets. That is a key point. Exposing market failure is vital for Government Members. Markets exist to improve people’s lives and make things more efficient. They provide outcomes and ensure that we can deliver things for consumers. If they are not working, it is important that those of us who stand up for free markets and capitalism point that out and take action accordingly.
I am instinctively cautious about caps, as are some of my friends, given their comments today. I support the statement of my hon. Friend the Member for Wells (James Heappey), who said that he hoped that the cap was an incursion into this area, rather than a wholesale annexation. He expressed my view much more pithily that I can. I do, however, accept the need for temporary measures to find ways in which we can make the market more competitive, and my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) spoke so eloquently about that in his speech.
It seems that there are two issues: supporting vulnerable customers, and the general stickiness of a market that is lacking in energy, vigour and the ease to switch. I hope that we can continue to put in place more support, protection and cover for vulnerable people, as we look to make the market more competitive. However, we have to recognise that there is an element of agency. People have the right to make and not make decisions, and we have to find that balance carefully.
There are some signs of improvement in the market. There has been a large increase in switching over the past year or so. The market share of the big six has reduced from over 95% in 2012 to around 80%; it is just not happening quickly enough. There is no doubt, however, that the market is broken. There are too many people on standard variable tariffs who do not benefit from the other tariffs as they could do. The price differential of £300 between the highest and lowest tariffs—or between the highest average and other averages—is too high. There is a clear disconnect between wholesale prices and the retail prices that people pay.
There is a strong suspicion of tacit co-ordination between the big six. Anybody who looks at the graphs in some of the briefings that we have all received will see how the price movements of the big six over a decade have so closely mirrored one another. There are clearly high barriers to entry. There is a real stickiness of customer movement, as well as stubbornly high market shares, which happily are slowly starting to float down. There is a clear problem.
I welcome the opportunity, in the next few years, for this competition and change to take place. I hope that some of the things that are proposed on improving communication, getting better data and improving the switching process also take place. I accept the interim changes, but hope that we can reboot the industry over the next few years, so that we do not need a cap in future. I hope that we can ensure that there is a competitive and successful energy market that serves the needs of its customers, so that we do not have to do some of the other things that none of us wants to do.
Dr Alan Whitehead (Southampton, Test) (Lab)
This afternoon we have witnessed the House at its best. I think it is fair to say that we have had not a single stupid contribution to this debate. [Hon. Members: “Yet!”] We are getting there. On the contrary, we have had a series of informed and thoughtful speeches, which, as the hon. Member for Gloucester (Richard Graham) said, have been overwhelmingly supportive of the Bill.
I particularly emphasise the contribution of my hon. Friend the Member for Leeds West (Rachel Reeves), who informed us that loyal customers are not rewarded but punished with high-price tariffs, and that energy companies have effectively brought this event on themselves with their discriminatory pricing—a theme that a number of hon. Members echoed. We heard a number of first-rate speeches by members of the BEIS Committee, which my hon. Friend chairs and of which the hon. Member for Eddisbury (Antoinette Sandbach), the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), my hon. Friend the Member for Ynys Môn (Albert Owen) and the hon. Member for Stirling (Stephen Kerr) are all members. The quality of the Committee’s report is underlined by the quality of its members, who have so informed our debate. I congratulate the Committee on its report, which was really illuminating in the context of the Bill and what Committee members have said about their work.
My hon. Friend the Member for Harrow West (Gareth Thomas) pointed out that the price cap itself is not going to change the nature of the market, that other forms of ownership are available, and that a lot more has to be done on changing how the market works in the longer term. I salute my right hon. Friend the Member for Don Valley (Caroline Flint) for her long campaigning on and intense interest in the price cap. In her view, we are at the end, not the beginning, of a long campaign to get action taken. My hon. Friend the Member for Leeds North West (Alex Sobel) reminded us particularly of the transition that we are making towards a locally disseminated energy economy and the importance of fair pricing to the longer-term issues. If I have missed out other hon. Members’ contributions, it is merely for the sake of time rather than a lack of estimation for what they have said. Overall, we have had a high-quality debate.
Because the contributions were as supportive of the Bill as they were, it would be particularly churlish of me to spoil the atmosphere by saying anything other than that we will not oppose the Second Reading of this Bill. We agree with the important points that have been made about the reasons for the cap, the consideration that has gone into it and what we need to reflect on with regard to its future.
Indeed, why should we oppose the Bill’s Second Reading? After all, if we look closely at the Labour party’s 2013 proposal for a price cap, we see an almost identical proposal: a temporary cap lasting a specified period and then removable based on an understanding of how the market was working. I am afraid to say that, as my right hon. Friend the Member for Don Valley pointed out, when that cap was put forward in 2013, it was roundly condemned by the Conservative party in trenchant terms. In that light, it is not surprising that the Government did nothing about a price cap for an extended period, during which action could have been taken to sort out energy market prices and create a fairer deal for customers—which, in the end, this is all about.
We have now had the Government’s conversion to the idea of a price cap. As Adam Smith famously said, I think in “The Wealth of Nations”:
“On the road from the City of Skepticism, I had to pass through the Valley of Ambiguity.”
I cannot give you a page reference for that, Mr Speaker, but that is what Adam Smith had to say about his route, and I think it rather sums up what the Government have gone through to get to this point.
A price cap was suggested in the last Conservative manifesto, then apparently reneged upon by the incoming Government, then rather weakly pushed away by the Department as the responsibility of Ofgem, then once again affirmed as a target idea at the last Conservative party conference, and then finally introduced as draft legislation. It is now being pursued in a hurry, in order to get the necessary legislation through in time for a cap to come into force by next winter.
That is quite a daunting timetable, but it is one for which we can have only limited sympathy, bearing in mind the time that the Government have wasted by opposition, then vacillation, then confusion and finally some degree of determination to introduce a price cap, which I applaud, and to do so in a way that is reasonably proofed against judicial review and other devices that displeased energy companies might decide to throw against it.
We have limited sympathy for the Government in the difficulty they have got themselves into with the timetable ahead, but I give a clear understanding that we will not oppose the Bill on Second Reading or be party to any slowing of the legislative timetable if it means a price cap is not in place before winter 2018. Indeed, as my hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) confirmed, we want to see that cap in place well before the winter, if possible, and are minded to seek to place an absolute start date on the face of the Bill.
It should be clear that we want this price cap to come in. We believe it should be an absolute and not a relative price cap, and we broadly support the cap’s mechanisms, particularly the reference arrangements relating to changes in wholesale prices. However, there are a number of points in the Bill that we want to see amended, and we will pursue those amendments in Committee with a central purpose of strengthening the Bill and not weakening or disabling it.
We want to see a clearer definition of the circumstances in which Ofgem might lay a report indicating that market circumstances suggest that the cap can be lifted. We want to see a better definition of which tariffs can be exempted from the cap—for example, those for supplying green electricity to customers.
We believe that a price cap is necessary now, rather than, say, an intensification of switching as a remedy for unfair price treatment by suppliers, because as hon. Members have said, we know that 65% of customers simply do not and probably will not switch. They deserve better protection for their tariffs—particularly the large number who are on standard variable tariffs—than being told that they are somehow bad customers if they do not switch and that they have to put up with whatever comes their way if they stick with their energy companies.
We want to see better arrangements in the Bill for what comes next, after the cap has ended, when people will continue not to switch and will need continued protection for their position as customers. We were clear in 2015 and are clear today that a price cap should not just be introduced for, as it were, punishment purposes, and then when it is lifted business as usual carries on until someone else suggests that the market distortions and failures require another temporary cap.
Instead, the cap needs to function as a carapace under which work is undertaken to put in place checks and systems to ensure that these circumstances do not recur, that we subsequently have a supply market that is fair to the customer and the supplier at the same time and works well to ensure fair competition, and that customers of energy companies have reasonable and firm expectations of how their energy supply company should deal with them over and above the recourse of switching. We remain to be convinced that the Government really have a set of measures, prepared and ready for implementation as the cap progresses, to produce such a long-lasting result for energy markets, and we certainly intend to seek amendments to the Bill that will allow the process to happen better.
It is in that context that we want to cast the proposals we have heard about today from, among other Members, the hon. Member for Weston-super-Mare (John Penrose). I commend him for his long battle to make sure that we now have a Bill before us. He has proposed a relative price cap, rather than the absolute price cap set out in the Bill. We do not support the introduction of a relative tariff range limiter as the instrument of a relative price cap. Among other reasons, it would not necessarily be a price cap at all.
However, such a cap would or could be an important device to ensure that customers who we hope will come off SVTs are not subject to equally disadvantageous practices in the long term through being placed initially on a low tariff, only to find themselves subsequently hoisted on to a very disadvantageous tariff, perhaps at levels similar to those of SVT customers, as soon as their initial contract has ended. Placing a piece of elastic between the best tariff and the highest tariff would substantially address such a practice, which is, as we know and have heard today, an area of bad behaviour by some energy companies now, and may well be in the future if we do not act to ensure that it does not happen.
At the beginning of my remarks, I gave the game away about whether we would support or oppose the Bill to provide some clarity of purpose about where the Bill should go not just tonight, but in its whole passage through the House. We already feel that we own the legislation, albeit in a form that has taken a mightily long time in arriving. We hope the Government will think carefully about our proposals to strengthen the Bill as it goes through Committee. If they want to introduce amendments that further reflect both those proposals and the commendable work of the BEIS Committee in carrying out pre-legislative scrutiny, I will not be precious about whose idea they were.
I want a legally watertight, effective price cap arrangement on our statute book as early as possible, with an equally effective regime in place to ensure that we will not be here doing exactly the same thing in a few years’ time. If between all of us in this Chamber we can achieve such an outcome, I will be well satisfied with our endeavours as we start out on that road today.
The Minister for Energy and Clean Growth (Claire Perry)
I thank my opposite number, the hon. Member for Southampton, Test (Dr Whitehead), for his characteristically calm and sensible remarks. Indeed, it has been fantastic to listen to the calm and intelligent debate we have had today, with so many very well-considered views.
There is really strong consensus across the House both on the need for the Bill and, broadly, on the scope and structure of the proposed legislation. For that, I want to thank several groups of people. I thank my civil servants, who have done a good job in producing the current draft. I also very much thank the BEIS Committee, which is ably chaired by the hon. Member for Leeds West (Rachel Reeves) and has several extremely committed members from both sides of the House. Giving evidence to the Committee was a terrifying experience, but their scrutiny and suggestions, which we have fully incorporated into the Bill, prove the excellence of such a method of pre-legislative scrutiny.
I thank colleagues on the Conservative Benches and, indeed, on the other side of the House, who have helped us to improve the legislation prior to this point with their very considered suggestions. I thank in advance those Members who will serve on the Public Bill Committee and will contribute to our further debates, because we all want the cap to be in place well before the year-end, and it must have a smooth passage through the House of Commons to achieve that aim.
I need to single out two Members. The first is my hon. Friend the Member for Weston-super-Mare (John Penrose), whose campaigning championship in this regard has really electrified the parties on both sides of the House about the need to act. As we heard today, the right hon. Member for Don Valley (Caroline Flint) has brought the best of her wisdom and experience to this debate. It was a pleasure to listen to both Members’ speeches.
I want very quickly to recap the purpose of the Bill and to refute the growing idea that we have in any way dragged our feet. I was struck by what my hon. Friend the Member for Eddisbury (Antoinette Sandbach) said about how the best form of legislation is evidence-based. We have had the CMA review, and we have taken the time to consider the fact that freezes do not work terribly well, and to have the regulator bring forward reasonable and welcome improvements. For example, we saw only this week the ending of the back-billing problem whereby people could be back-billed over many months, ending up owing thousands of pounds. The regulator has got the message strongly.
The Bill is a time-limited, intelligent intervention that will help to accelerate the transition to a more competitive market. It will give more powers to the regulator, which is right. The market has changed significantly since the original days of liberalisation. We have some extremely empowered customers, and we also have a large pool of customers who are less engaged and have ended up on poor-value tariffs. The cap has to be set to maximise investment, competition, innovation, switching and improved efficiency, and it will be accompanied by a whole package of other measures—the so-called carapace that the hon. Member for Southampton, Test mentioned—such as smart meter roll-outs, same-day switching and so on.
The Bill will also be a doughty defence of consumer rights. Indeed, my hon. Friend the Member for Stirling (Stephen Kerr), my right hon. Friend the Member for Harlow (Robert Halfon), my hon. Friends the Members for Chippenham (Michelle Donelan), for Mansfield (Ben Bradley) and for Stoke-on-Trent South (Jack Brereton), and the right hon. Member for Don Valley really stood up for their constituents and what the Bill will mean for them.
The Bill is not an attempt to extend political control over the industry. I champion the fact that since privatisation we have seen more than £80 billion invested in the industry, with power cuts halved and network costs down 17%. As my hon. Friend the Member for Wells (James Heappey) said, we need billions of pounds more of investment to drive forward an exciting low-carbon, distributed energy future. The last thing we would want to do is to scare off that level of investment.
I will say something gently to the Opposition, because they could not resist a poke, about the idea that their policy is for a cosy array of mutual companies. The shadow Chancellor has said, “We want to take these industries back.” We know what that means: borrowing billions of pounds, raising taxes for millions, and none of the further investment that we need. It would be entirely the wrong thing for the industry. The Bill is a clear signal that we believe in well-regulated competitive markets as the best way to deliver service and value for all customers, and that we will act on market failures to give regulators more power to improve market conditions.
Mark Menzies
I thank the Minister for the way in which she has engaged with me and other colleagues who had concerns about the Bill. She has made time to meet us, with her officials, and addressed many of the concerns that we have raised with her in private. I want to put my thanks on record.
Claire Perry
I thank my hon. Friend. I would also like to put on record my thanks to the hon. Member for North Ayrshire and Arran (Patricia Gibson), whom I omitted to thank as one of the original campaigners north of the border.
Eight main issues were raised that I want to address. The first, which was raised by many hon. Members, including the hon. Members for Leeds North West (Alex Sobel) and for Ynys Môn (Albert Owen), and my hon. Friends the Members for Mansfield and for Eddisbury, was what will happen to vulnerable customers once all this has taken place. Of course, we have the safeguarding tariff that is now protecting 5 million people, saving them on average £120 compared with what they would have paid. That has been brought forward. We expect a whole package of additional improvements—smart metering, next-day switching, the midata project, the CMA policies about engagement with those disengaged customers, and an expectation that Ofgem will continue to scrutinise and actively monitor tariffs to make sure that any gaming creeping into the system is knocked on the head.
Many good comments were made about ensuring that the Bill will not disincentivise competition, including by my hon. Friends the Members for Wells, for Rugby (Mark Pawsey) and for Middlesbrough South and East Cleveland (Mr Clarke). We know the level of investment that we have to maintain, which is why the Bill will introduce a time-limited, intelligent cap. The powers given to Ofgem have to ensure that we do not disincentivise competition, while ensuring that companies have an incentive to improve the efficiency of their operations. Too many companies are still stuck in the operational methods of the past and customers are paying the price for that.
Interesting points were raised by my hon. Friends the Members for Fylde (Mark Menzies) and for Waveney (Peter Aldous), and the hon. Member for Kilmarnock and Loudoun (Alan Brown), about an appeal to the CMA, which is something for which the big six are lobbying. I firmly believe that given the level of transparency and scrutiny that will happen when setting the cap, there will be opportunities to ensure that that is robust. Ofgem’s decision on the cap can be judicially reviewed. Courts can consider these issues more quickly than the CMA, and a whole range of evidence can be taken in such a case, whereas with CMA decisions, the range of those who can comment is very restricted. I do not want anything that slows the introduction of the cap.
Albert Owen
I pay tribute to the Minister and the Secretary of State for honouring their commitment to take this measure through as speedily as possible. Will she look at other reviews? We await a Government response to the Dieter Helm review, which, by looking at transmission and distribution, could complement the price cap.
Claire Perry
The hon. Gentleman anticipates a point I was going to make about many contributions about the calls for additional market reviews. The call for evidence on the excellent Helm review, which was commissioned by my right hon. Friend the Secretary of State, has only just closed, and I think we need to take the time to consider it. I was struck by the speech made by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin). What we want is a rational, functioning economic regulator in a market that is so vital in keeping the lights on, keeping investment going and keeping people warm in their homes, not a political rush to do things.
The right hon. Member for Don Valley raised the issue of green tariffs and gaming the system. Ofgem has never been required to scrutinise existing green tariffs. It will have to scrutinise carefully and consult during the process of the design of the cap to ensure that it is fit for purpose. As we heard from many Members, the expectation will be that customers should not have to overpay to be on a green tariff. We are now buying subsidy-free offshore wind and I opened the first subsidy-free solar farm only last year.
There were many questions about the structure of the cap, including whether it should be variable or fixed. My hon. Friend the Member for Weston-super-Mare has campaigned on this matter very strongly. I was again struck by what my right hon. Friend the Member for West Dorset said. The structure of the cap should be able to take into account changes in the wholesale system. Clause 6(1) states that the period of consideration has to be no greater than six months, but it is entirely within Ofgem’s powers to change the cap more frequently. Of course, as we know, standard variable tariffs are currently updated only one or two times a year. Companies buy forward and hedge their energy prices, so it is not usual for very strong changes in wholesale prices to be incorporated. We will get to see the structure of the cap and its sensitivity to those prices going forward.
There were concerns about ensuring we allow co-operative energy providers to be in the market. My right hon. Friend the Member for Harlow, who is such a doughty consumer champion, made that point, as did the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), the hon. Member for Harrow West (Gareth Thomas) and others. We already have co-operative energy structures—White Rose Energy, Robin Hood Energy and so on—and there is no barrier to those companies coming forward and delivering.
My right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) and my hon. Friend the Member for Rugby asked about the removal of the cap. We will have a series of tests, and we have set out clearly in the Bill what those tests will be. Ultimately, we want loyal customers to be treated as well as, if not better than, new customers who are being attracted by cheaper deals. That will be the absolute test.
In conclusion, we know the Bill is necessary. We know we need to get it through Parliament. I have been really encouraged by the tone of the debate, with so many Members having really scrutinised the Bill and being absolutely determined to see it through. I am confident that we can pass this vital Bill and our constituents expect us to do so, as they do not want to be overpaying on their bills. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Domestic Gas and Electricity (Tariff Cap) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Domestic Gas and Electricity (Tariff Cap) Bill:
Committal
1. The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 15 March 2018.
3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
4. Proceedings on Consideration and proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
7. Any other proceedings on the Bill may be programmed.—(Rebecca Harris.)
Question agreed to.
Business without Debate
Maldives: Political Situation
(6 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
I repeat what I say most days: if, unaccountably, there are hon. Members who do not wish to hear the right hon. Member for East Devon (Sir Hugo Swire) orating in the Adjournment debate, perhaps they could leave the Chamber quickly and quietly, so that he can address an attentive gathering on the subject of the political situation in the Maldives.
Sir Hugo Swire (East Devon) (Con)
I am extremely grateful to have secured this Adjournment debate on the topical and important issue of the current political situation in the Maldives. On 1 February, the full bench of the Supreme Court in the Maldives ordered the retrial of cases against nine political leaders, including former President Mohamed Nasheed, labelling their trials politically influenced. The Supreme Court also ruled that 12 Opposition MPs, barred from Parliament by the Elections Commission, must be allowed to retake their seats, thus handing the opposition a majority in Parliament, which has the power to impeach the President.
The Maldives police service immediately announced that it would comply with the Supreme Court ruling. Over the next two days, President Yameen fired the police chief, fired his replacement, and installed a third police chief. On 5 February, President Yameen declared a 15-day state of emergency. Masked security officials broke through the doors of the Supreme Court and physically dragged the chief justice away and threw him in detention. Another Supreme Court justice was also detained and thrown in jail. Former President Gayoom, Yameen’s half-brother, was also detained.
The remaining three Supreme Court Judges then overruled the 1 February judgment, despite it being unconstitutional for a three-bench court to overturn the decision of the full bench. On 20 February, President Yameen petitioned parliament to extend the state of emergency by 30 days. However, the ruling party was unable to gain a quorum in Parliament. Just 40 MPs attended Parliament; a quorum demands 43, but President Yameen announced the state of emergency extension regardless. The prosecutor general has publicly declared the state of emergency extension to be unconstitutional.
Despite the state of emergency and a 10.30 pm curfew in Malé, daily anti-Government protests have spread across the Maldives and have now entered their fourth week. Riot police have severely beaten numerous protesters, hospitalising many. A total of 110 individuals have been arrested since the declaration of the state of emergency and 31 of these are being held without trial under state of emergency rules. There are growing divisions in the security services. Some 50 military and police officials are being detained either at their barracks incommunicado or in detention centres. Four Members of Parliament are currently in detention.
Why should any of this be of interest to the United Kingdom? I would like to make four points this evening; the first concerns radicalisation. President Yameen continues to collude with a network of radical Islamists in the Maldives who are suspected of carrying out 26 murders over the past few years.
Sir Hugo Swire
I give way to the hon. Gentleman— I suspect that I know which angle he is coming from.
Jim Shannon
I think the right hon. Gentleman knows exactly which angle I am coming from. I congratulate him on securing the debate. He will be aware of the religious persecution that is clearly taking place in the Maldives. Some of my constituents went there on holiday. One was imprisoned and sent back home, because he took his Bible with him and read it. It is against the law for someone to read a Bible, be a Christian and practise their religion in the Maldives. Is that not another example of the human rights abuses carried out in the Maldives, in this case, against those of a religious and Christian belief?
Sir Hugo Swire
This is the great dilemma of the Maldives. It is, on the one hand, an Islamic country, but on the other it is host to many hundreds of thousands of people from around the world, on whom it depends and who should be free to practise their own religion, even if they are on holiday.
Zac Goldsmith (Richmond Park) (Con)
President Mohamed Nasheed was the first democratically elected president of the Maldives, and he was elected after years of having been tortured and abused in that country’s jails by his predecessor. He was a great leader, famously closing the political prisons and holding his first Cabinet meeting underwater to highlight climate change. He was a truly progressive, secular leader in a democratic country. Does my right hon. Friend not share my tremendous sadness at how far this country has fallen at the hands of utterly corrupt and malignant forces?
Sir Hugo Swire
My hon. Friend is of course absolutely right and I shall go on to say something about this. I very much see the former President Mohamed Nasheed having a role in the future of the Maldives, along with others who have sometimes been his political opponents. My hon. Friend is absolutely right.
There have been murders of prominent liberal bloggers and journalists, too. In late September last year Her Majesty’s Government warned that terrorists were “very likely” to carry out an attack on the islands. I understand that this is also the current travel advice from the Foreign and Commonwealth Office. Allegedly, between 200 and 250 Maldivians are either fighting or have fought in Syria and Iraq. US Assistant Secretary of State, Alice Wells, claimed that the Maldives was the highest foreign fighter contributor per capita to the so-called Islamic State.
Much of the recruiting and radicalisation is promoted by websites such as Bilad al-Sham Media, and Facebook and other social media are more accessible than ever on the remote islands that make up the country.
My second point concerns the safety of our British tourists. The United Kingdom ranks third in a list of visitors to the Maldives in 2016, behind Germany and China, with 7.9% of market share and more than 100,000 visitors. This was an increase of 9.8% compared with 2015.
The Maldives economy remains a tourism driven economy in that it contributes more than 25% of the country’s GDP. While the tourism sector supplies more than 70% of the foreign exchange earnings to the country, one third of the Government revenue is generated from this sector. Tourism is also known as the leading employment generator in the country. In 2016, tourism contributed 36.4% to the Government revenue. But as a result of the current situation, the Maldives is facing financial ruin, with the tourism industry estimated to be losing $20 million a day since the start of the state of emergency. If the trend continues, it will lead to unemployment and dissatisfaction—to my way of thinking both active recruiting sergeants for radicalisation. With our tourists spread out over 115 square miles in 105 resorts it is almost impossible to guarantee their safety.
My third point concerns the Commonwealth. After 30 years of President Maumoon Abdul Gayoom’s rule, it was President Nasheed who introduced democracy into the Maldives. From 1982, it was a welcome member of the Commonwealth family. It was President Yameen who took the country out of the Commonwealth in 2016.
Ian Paisley (North Antrim) (DUP)
I thank the right hon. Gentleman for giving way, and draw Members’ attention to my registered interests on the Maldives. Is the right hon. Gentleman going to draw some attention to the fact that the United Kingdom’s reach on the Maldives has declined somewhat because it has left the Commonwealth? What can we do to rebuild that relationship, working with the ambassador, who is based in Europe? What can we do to rebuild the relationship with the Government for the very reasons the right hon. Gentleman has outlined—to make the country more prosperous and, more importantly, to turn it away from what would be a terrible plight if his predictions came true?
Sir Hugo Swire
Indeed, and two of the neighbouring countries, Sri Lanka and India, are members of the Commonwealth. I will say later in my speech that, although I believe much needs to be done before the Maldives comes back into the Commonwealth, its proper place is back in the Commonwealth family.
President Yameen’s unconstitutional behaviour has seen him arrest three lawmakers and instigate a witch hunt of the families of his political opponents, including wives and children. President Maumoon and the justices at the supreme court have been charged with treason and bribery, and access to lawyers and family has been restricted, with reports of ill-treatment. Following the arrest of President Gayoom, all the leaders of the opposition political parties are under detention, or have been sentenced under similar trumped-up charges. The Government continue to defend their actions, claiming that state-of-emergency powers are applicable only to those who are believed to have planned or carried out illegal acts in conjunction with the 1 February Supreme Court ruling. That has led to increasingly politicised targeting of the opposition by security services.
President Gayoom’s daughter, Dunya, resigned last week as the state health Minister, and has herself now appealed for support from the international community. I hope very much that she will work with former President Nasheed and other members of the opposition, and that they will come together to chart a democratic future for the country—a future, hopefully, back in the Commonwealth family.
Nick Herbert (Arundel and South Downs) (Con)
My right hon. Friend is making a powerful case. Does he agree that a situation under the guise of a state of emergency in which judges are arrested, the normal business of courts is suspended, Members of Parliament are arrested and Parliament too is suspended makes a mockery of any notion of democracy, and, furthermore, constitutes an affront to human rights? Should not Members on both sides of the House of Commons condemn that action in the strongest possible terms?
Sir Hugo Swire
My hon. Friend is absolutely right. Unfortunately, there can be no pretence that democracy is alive in the Maldives at the moment.
The Maldives Government also continue to condemn foreign criticism of their actions—no doubt they will now be criticising my right hon. Friend for his intervention—asking members of the international community not to chastise them publicly, and to visit the Maldives to assess the situation on the ground for themselves. However, when a delegation of EU Heads of Missions did visit Malé, the Government refused to meet them. Similarly, members of a delegation from LAWASIA—the Law Association for Asia and the Pacific—were detained and deported on their arrival at the airport in Malé on Tuesday, 27 February, although they had informed relevant Government authorities in ample time of their intention to visit.
My fourth point concerns the possibility of regional conflict. In recent years, China has been sending more tourists to the islands and investing in the economy. In neighbouring Sri Lanka, we see China building a port at Hambantota, an 11,500-foot runway capable of taking an Airbus A380, and docks where oil tankers can refuel. That has caused understandable nervousness in India, and it is difficult to believe that the Indians will allow the Chinese to gain a similar foothold in the Maldives. It is also reported that the Japanese navy recently spotted a Maldivian-registered tanker, which allegedly is linked to President Yameen’s nephew, transferring suspected crude oil to a North Korean tanker, in violation of UN sanctions on the Democratic People’s Republic of Korea. It would be interesting to hear the Minister’s response to that.
I have seen the statement put out by the European External Action Service on 6 February and the Foreign Secretary’s statement of 5 February, but will Her Majesty’s Government now go further, building on the calls made on the Government of the Maldives by the International Democrat Union on 21 February? Will they call for the release of, and access to lawyers for, all political prisoners? Will they lobby for a UN-backed mission, led by someone like Kofi Annan, to go to the Maldives without delay? Will they call for free and properly convened elections later this year, to be overseen by an international body? Will they provide support and assistance in the wholesale reform of judges and the judicial system? Will they work with other like-minded countries to counter Islamic radicalisation in the Maldives? Will they raise the issue of the Maldives at the forthcoming Commonwealth Heads of Government meeting here in London in April? Will they ask the opposition parties to provide a list of resorts owned by President Yameen’s circle, so that they can be publicised and boycotted in the event of none of the above happening? At the same time, will they put plans in place to increase targeted sanctions against the Yameen regime if the Supreme Court ruling is not fully implemented?
As we exit the European Union, this is a good opportunity for the United Kingdom to show that we have our own foreign policy, and are working with like-minded friends.
The Minister for Asia and the Pacific (Mark Field)
I am grateful to my right hon. Friend the Member for East Devon (Sir Hugo Swire) for securing this debate. During his time as one of my predecessors in the office I currently hold, he was tireless in his efforts to improve the political and human rights situation for all the people of the Maldives. I pay great tribute to him for his continued commitment to this cause and share his disappointment and alarm at the recent deterioration in the political outlook in the Maldives. While I cannot promise that I will deliver on every last bit of the shopping list in his speech, he can rest assured that it provides not just food for thought, but an important pointer for the future, and we will look at all his proposals. I am also very grateful for the interest and shorter contributions of other Members, and I shall try to respond to a range of the points made during this debate.
Let me start by setting out the current situation in the Maldives, which is deeply concerning, and this Government’s response, before touching on the implications for visitors and the wider international context. For several years, particularly since 2015, President Yameen has been cracking down on the rights of political opponents, judicial institutions and the independent media, all in a bid to strengthen his own grip on power, despite growing popular discontent at his rule. Over the past year, the leaders of all Maldivian opposition parties have spent time either in jail or in exile. In July, President Yameen used the military to enforce a shutdown of Parliament to prevent the opposition from voting to impeach the Speaker, a close confidante of his. Parliament has in essence been ineffective in the Maldives since that time.
As my right hon. Friend the Member for East Devon pointed out, on 1 February this year the Supreme Court of the Maldives ruled that Parliament should release nine prominent opposition leaders from prison and reinstate the 12 MPs who had been stripped of their seats when they sought to leave the President’s party for the opposition. They included former President Nasheed, who is well known to several UK political figures, not least my hon. Friend the Member for Richmond Park (Zac Goldsmith). He currently resides here in the UK in exile. His time in office was, to be honest, turbulent, but he did represent an era of significant steps forward towards a more open and democratic Maldives—a secular Maldives, which would have taken religious freedom seriously in the way the hon. Member for Strangford (Jim Shannon) would wish all to experience.
However, just four days later, on 5 February, President Yameen declared a state of emergency in response to the Supreme Court decision. The effect of this is to suspend, among other things, the rights to privacy, freedom of assembly and silence following arrest, as well as protections from unlawful arrest. These measures were extended on 20 February for a further 30 days. In the weeks since the emergency was declared, the Maldivian Parliament has been closed down, two of five Supreme Court judges, including the chief justice, have been arrested, more opposition leaders and their families have been jailed and journalists and protestors have been pepper-sprayed and arrested.
Wider human rights concerns persist, including the Government’s highly regrettable and stated intention to resume executions under the death penalty. Freedom of speech is being persistently curtailed, and human rights defenders and independent journalists are being intimidated. A new anti-defamation Act is being used to attack independent media outlets, some of which have had temporarily to close out of fear for the safety of their employees.
This situation is entirely unacceptable. As for the state of emergency, let us make no bones about it: President Yameen has suspended the basic rights of his citizens because the Supreme Court ruled against him. It is an affront to any sense of democratic principles and the rule of law and a blatant power grab. It is entirely right that these actions have been condemned internationally. The United Nations High Commissioner for Refugees has described the situation as an “all-out assault” on democracy, and the International Commission of Jurists has said that the Maldivian authorities
“have not even come close to meeting the high threshold set by international law for the derogation of rights in times of genuine emergency”.
Those of us who follow media reporting will have seen speculation about how various regional powers might respond, particularly given that the Maldives is located close to the important shipping lanes that run from Malacca to Hormuz. The UK’s position on this is clear: the current situation in the Maldives is a political crisis that requires a political and diplomatic solution.
To address one of the points raised by my right hon. Friend, the Government are aware of reports about a Maldives-flagged vessel apparently engaging in ship-to-ship transfers with a DPRK vessel, in defiance of the UN Security Council sanction. We are also aware of the Maldives Government’s response that the ship does not belong to the Maldives. I think that it is only fair and right that we conduct further inquiries about this potentially serious case before coming to any judgment. Broadly speaking, I have to say that our response to the deteriorating situation over the past three years has been robust, as it will continue to be.
My right hon. Friend the Foreign Secretary made a statement on 5 February, calling for President Yameen to end the state of emergency peacefully, restore suspended rights and permit the full, free and proper functioning of Parliament. I will meet the Maldivian ambassador later this week to seek his explanation of what his Government are doing in these areas. Our ambassador, James Dauris, who is based at our embassy in Colombo in Sri Lanka, flew to Malé on 8 February to raise our concerns directly with the Maldives Government and to meet opposition politicians and journalists.
Jim Shannon
I thank the Minister for all that he does, which is deeply appreciated by everyone in the House—I mean that sincerely, because we all appreciate the influence he has around the world. When he meets the Maldivian ambassador, will he express the concerns that I and many other Members have, as was shown in last Thursday’s debate in Westminster Hall, about the persecution of Christians, who do not have an opportunity to worship their God in the way they want?
Mark Field
I will certainly do so. I have rather long list of things to raise with the ambassador, but I will do my level best to ensure that that issue is discussed.
The UK is also leading the international response, understandably. We helped to drive the EU Foreign Affairs Council conclusions on 26 February, which called for the state of emergency to be lifted. The Council announced that it would consider targeted measures if progress was not made. I also expect the UK to lead a statement of concern at the UN Human Rights Council in Geneva later this week, as we did last June on behalf of more than 30 other countries.
On human rights more broadly, the Maldives has been one of the Foreign Office’s human rights priority countries for several years. We have regularly raised our concerns about human rights, in particular the threatened re-imposition of the death penalty, with my Maldivian counterparts, as have my Government colleagues. We will continue to fund projects that support efforts by Maldivian civil society to promote human rights, strengthen democratic institutions and advocate a greater role for women in public life.
We are deeply concerned by reports of increasing radicalisation in the Maldives and take them very seriously. We co-operate with the Government of the Maldives in the global fight against terrorism. Our view is that open and pluralistic societies are better placed to combat the underlying drivers of radicalisation.
My right hon. Friend was right to point out that the decision by the Maldives to leave the Commonwealth in 2016—an institution that was assisting it in addressing a number of these concerns—remains a source of deep sadness to us. We hope that in time the Maldives will return to the Commonwealth family by reapplying for membership, but clearly in its current state that cannot happen.
My right hon. Friend mentioned the safety of British visitors to the Maldives, and many of them are there as we speak. That is clearly an extremely important consideration for us. Nearly 100,000 British tourists visit the islands every year—not necessarily in the most built-up areas of Malé, but they are visitors none the less. He rightly pointed out that there are also significant numbers of Chinese and German tourists.
We regularly review Foreign Office travel advice to ensure that travellers have the latest information. We have updated it twice since 5 February, most recently on 21 February, following the extension of the state of emergency. Our current advice states that political unrest has to date largely been confined to the capital island Malé or to major population centres.
Sir Hugo Swire
I suspect that the majority of tourists do not go to Malé because it is only atoll in the entire Maldives that is dry. My point is that many atolls are many miles away from Malé and would be difficult to get to in a crisis. Further, the fighters who have gone to Syria and Iraq do come from the remote areas because, as I said, they have been radicalised through the mosques, the internet and social media. Just because tourists are not in Malé, which is the centre of unrest, that does not mean that there are no problems elsewhere.
Mark Field
My right hon. Friend makes a fair point. He can be assured that we will be asking our embassy and James Dauris, our excellent ambassador based in Colombo, to keep our advice under constant review.
Although few British tourists visit the major population centres, we advise those who do so that they should exercise caution and avoid any protests or rallies, but I will ensure that we give further thought along the lines of my right hon. Friend’s intervention. We have had no indication to date that any British tourists have been affected directly by the unrest or, indeed, that it has affected the resorts in which they stay or the functioning of Malé’s international airport. The safety of British nationals will always be our primary priority, and we shall continue to keep our travel advice under constant review.
The current situation in the Maldives is deeply worrying. President Yameen’s crackdown on media, judges and political opponents through the suspension of fundamental rights is unacceptable in any country that calls itself a democracy, and I shall make that argument when I see the Maldivian ambassador tomorrow at the Foreign Office. I know that he works closely with UK parliamentarians to promote his country in a positive light here in the UK, and I hope he will have heard many of the concerns that have been raised tonight, not least because they have been raised by parliamentarians who have the interests of the Maldives and its citizens close to their heart.
Colleagues will share my concerns at the sustained misuse of parliamentary process used to justify such measures. The members of the all-party British-Maldives parliamentary group, while understandably keen not to talk down the islands’ reputation, might usefully consider ways in which they could speaking out against the abuse. We shall continue to work, both bilaterally and with international partners, to urge President Yameen to end the state of emergency peacefully, to restore all articles of the constitution and to restore the proper functioning of Parliament, so that the people of Maldives can once more enjoy their full democratic rights and freedoms and live without fear or intimidation.
Question put and agreed to.
Draft International Tax Enforcement (Bermuda) Order 2017
Draft Double Taxation Relief and INTERNATIONAL TAX ENFORCEMENT (KYRGYZSTAN) ORDER 2017
(6 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft International Tax Enforcement (Bermuda) Order 2017.
The Chair
With this it will be convenient to consider the draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017.
Mel Stride
May I say, Mr Hosie, what a pleasure it is to serve under your chairmanship? The draft orders deal with a replacement tax information exchange agreement with Bermuda and our first double taxation agreement with Kyrgyzstan. Both statutory instruments bolster the United Kingdom’s long-standing network of international tax agreements.
The UK has had a tax information exchange agreement with Bermuda since 2007. That arrangement has allowed for the exchange of information on request between Her Majesty’s Revenue and Customs and the Bermudan tax authorities. Under a further agreement, signed in 2013, certain financial account data are received automatically by HMRC directly from Bermudan financial institutions. The draft order will supersede that further agreement and replace the tax information exchange arrangement from 2007.
The new instrument allows for automatic exchange of bulk financial data. This important change ensures that the UK continues to align with current international tax transparency standards. Bermuda will provide HMRC with an increased amount of information on UK taxpayers. Bermuda has the status of a UK overseas territory, but it is a separate jurisdiction, with its own elected Government, and is responsible for its own domestic fiscal policy. Thanks to UK leadership, Bermuda is committed to global tax transparency standards. This instrument is an important part of Bermuda’s commitment to those standards and will enhance HMRC’s ability to check the compliance of UK taxpayers who have financial affairs in Bermuda.
There are no other substantial changes between the old instruments and the one proposed. It, too, reflects the model developed by the OECD. This Government are committed to maintaining an extensive network of tax information exchange partners and agreements, which are an essential aspect of securing UK tax revenues.
The fluid exchange of information between jurisdictions is a key tool in the arsenal of international tax co-operation. Since 2010, HMRC has secured more than £2.8 billion from those trying to hide money abroad to avoid paying what they owe. The arrangement under consideration will assist HMRC in maintaining its strong track record of countering tax avoidance and evasion.
The UK has not had a double taxation agreement with Kyrgyzstan since it gained independence from the former Soviet Union in 1991. It was Kyrgyzstan that suggested we rectify that situation. It first requested talks in 2008 and repeated that request to us in 2013, citing a desire to open up its economy to promote economic development. For our part, we were keen to close a gap in our DTA coverage in the region and ensure that UK businesses could compete on an equal footing with businesses in comparable countries that had already concluded DTAs.
The agreement reached will improve the business conditions for UK companies and individuals operating and investing in Kyrgyzstan, while reflecting that nation’s status as a developing country. The rates of withholding tax are reduced to 5% for interest, royalties and dividend payments to direct investors; the rate under domestic law in Kyrgyzstan is 10%. In addition, the agreement permits the taxation of services where they are performed in a country over an extended period—a feature of the UN model tax treaty. However, there are no unwelcome provisions permitting the taxation of leasing payments on a gross basis that either impede commercial activity or increase costs for consumers. The resulting treaty is therefore a good compromise that will encourage investment in Kyrgyzstan by UK businesses, to the benefit of both economies.
I trust that the explanations I have given are helpful. The orders strengthen the UK’s taxing framework on many fronts, and I commend them to the Committee.
Clive Lewis (Norwich South) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hosie. I welcome the opportunity to participate in scrutinising these two tax enforcement orders. Work that has contributed to ensuring that the UK overseas territories have adopted the common reporting standard a year earlier than other parts of the world is to be commended. It is vital that tax that is rightly due is paid and any avoidance promptly investigated and, where appropriate, prosecuted. However, we should be cautious in assuming that tax treaties between wealthy and low-income nations are without problems.
We know that low-income countries rely more heavily on tax revenues than their rich counterparts, and the revenues can be assumed to be more urgently needed to provide public services such as health and education. Treaties have historically been one of the elements of the global tax system that have stood in the way of low-income countries collecting the tax revenue that is fair and just—undermining the ability of local companies to compete on a level playing field. It is therefore vital that we get this right.
With regard to the Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order, I ask the Minister why the treaty does not include the provisions against tax treaty abuse that were agreed as minimum commitments by the UK and all states participating in the G20/OECD project on base erosion and profit shifting, also known as BEPS. Those anti-abuse provisions are included in the multilateral instrument on BEPS, and would be imported into a treaty if both parties to that treaty list it as a covered agreement. The proposed agreement with Kyrgyzstan was not listed as a covered agreement by the UK when it signed the MLI in June 2017, although the one with Lesotho, tabled a few weeks ago, was. Are the Government content to proceed with the treaty without ensuring that it contains the anti-abuse provisions accepted as a minimum commitment under the BEPS project?
In addition, why does the treaty not include a provision for the arbitration of disputes in article 24, while the recently considered treaty with Lesotho did include such a provision, despite the fact that developing countries have, through the UN committee of tax experts, opposed inclusion of such arbitration provisions in tax treaties? If the UK is willing to sign a treaty with a country such as Kyrgyzstan without an arbitration provision, why was it included in the Lesotho treaty? Why has there been a delay in bringing the treaty to the House? It appears that the treaty was signed in Bishkek in June last year. Why was it not considered here earlier? Is that a result of the greater than average scrutiny to which the Lesotho treaty was subject?
With regard to the International Tax Enforcement (Bermuda) Order, will the Minister tell us whether the Government have arrangements in place for the automatic exchange of tax information? I think the Minister did mention that, but if he could clarify it once more, that would be really helpful. Finally, the explanatory note to the order states:
“The 2017 Arrangement replaces the 2007 Arrangement and makes provision for automatic exchange of tax information, which was not provided for in the 2007 Arrangement.”
Paragraph 6 of the 2017 arrangement provides for automatic exchange. It states that that will be done under procedures to be determined “by mutual agreement.” The UK-Bermuda agreement of 2014 to improve tax compliance stated that
“the Parties are committed to promoting a new single global standard in the automatic exchange of tax information and will look to align this agreement to that new global standard in due course”.
Has that been done, and can the Minister provide details?
Peter Grant (Glenrothes) (SNP)
It is a great pleasure to serve under your chairmanship, Mr Hosie. I will not repeat what the hon. Member for Norwich South said in relation to the inadequacies or incompleteness of the legislation. We all welcome any move that makes it harder for people to hide their gains—ill-gotten or well-gotten—from the rightful tax authorities. I believe that it is a fundamental principle, particularly for people who are making money out of developing countries, that any tax that is due on those profits should be retained within the country where the money has been raised, so that it can be invested to help it to develop its economy.
Although the exchange of information is a big help in that, such information can be used only to demonstrate whether somebody is acting within the existing legislation. If that legislation allows a country to be used as a tax haven, exchanging information so that HMRC knows that somebody is using it as a tax haven does not get us an awful lot further forward. Although I welcome the intention of the legislation, I am puzzled, like the hon. Member for Norwich South, as to why it has taken so long. If it is such a good piece of legislation, why have Bermuda and Kyrgyzstan not had the benefit of it much sooner? Why have we not had the benefit of it much sooner?
As well as enforcing the legislation that we have, I hope the Government will do a lot more to ensure that we use every means at our disposal to tighten up tax loopholes. That is not so that people can be taxed beyond what is reasonable, but so that tax revenues from the labours of developing countries are reinvested in their schools, hospitals, housing and communities. They cannot afford to subsidise the City of London—let us be brutal about it—but their resources, the skills of their people and the efforts of their local populations very often work on behalf of UK-owned companies. I welcome the legislation and I hope we will see much more being done in future.
Mel Stride
Perhaps I can respond to the speakers in reverse order and start with the hon. Member for Glenrothes, whom I thank for his comments. I am pleased that he welcomed appropriately the greater transparency and provision of information to HMRC that will flow from the order in the case of Bermuda. He raised the issue of tax transparency, but Bermuda is a sovereign country with a democratically elected Parliament that makes its own decisions in those contexts.
However, we have worked closely with Bermuda, particularly in respect of the work carried out by the European Union, to ensure that we further that transparency process. Most recently, the EU confirmed that sufficient progress is being made in that regard. Bermuda has embraced common reporting standards, which both Members on sides of the Committee welcome, to ensure that information is provided to other tax jurisdictions.
The hon. Member for Norwich South made a number of points. I was pleased that he welcomed common reporting standards and its early adoption across the overseas territories, as we do. He raised the general issue of low-income countries and the benefits or otherwise of entering into such agreements when they are negotiated with a high-income country.
I would point out that Kyrgyzstan requested the arrangement after all, and was under no compulsion to enter into any agreement as negotiated. The big benefits to a country such as Kyrgyzstan are in the medium to longer term. Various studies, such as one conducted by Vienna University, have looked at the economic impact of withdrawing withholding taxes, of lowering taxes, and of providing the kind of certainty that businesses require when they consider where to invest internationally. That is an important medium to longer-term consequence for those countries of this kind of arrangement.
The hon. Gentleman also talked about the anti-abuse provisions in the order and made specific reference to the BEPS project. The treaty was concluded before the BEPS arrangements came into effect, but there are anti-treaty shopping elements in the order to ensure that those anti-abuse provisions are robust.
The hon. Gentleman is right that there are no mandatory arbitration provisions in the treaty, because constitutionally Kyrgyzstan is not permitted to enter that kind of arrangement. We have respected that. He is right to say that there have been some delays. It has taken time to go through the stages of the negotiation, partly because the Kyrgyzstan Government requested various technical changes along the way. There were also some issues about language and translation because the agreement had to be very, very precisely translated into three languages.
On that basis, I hope the Committee will agree to these orders.
Question put and agreed to.
Draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017
Resolved,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017.—(Mel Stride.)
Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018
Draft National Employment Savings Trust (Amendment) Order 2018
(6 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018.
The Chair
With this it will be convenient to consider the draft National Employment Savings Trust (Amendment) Order 2018.
Guy Opperman
It is a pleasure to serve under your chairmanship, Mr Bailey. The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order aligns the lower and upper limits of the qualifying earnings bands for automatic enrolment with the respective national insurance thresholds of £6,032 and £46,350, ensuring stability and consistency in the way ahead. The order does not change the earnings trigger, which remains at £10,000. That strikes a balance between bringing in those most likely to benefit from pension saving with affordability for employers. The decision to maintain the alignment of the lower and upper earnings qualifying bands with those for national insurance contributions maintains simplicity and consistency and minimises burdens on employers.
The National Employment Savings Trust, commonly known as NEST, was established to support automatic enrolment by ensuring that all employers have access to a low-cost workplace pension scheme to meet their duties. NEST was specifically designed for and targeted at low to moderate earners and smaller employers that the wider pensions market had historically failed to serve adequately. It has a public service obligation to admit any employer that wishes to use the scheme to meet their automatic enrolment duties. It is a success. It has more than 6 million members, in excess of 554,000 participating employers and more than £2.4 billion of funds under management. All the measures in the order will improve the way in which the scheme operates for participating employers and members.
There are four minor and technical changes that I will briefly outline. First, there is a change to contractual enrolment. The order will make it possible for participating employers to enrol their workers in NEST whether or not the automatic enrolment duties apply to the employer. Secondly, the order will require the NEST Corporation to carry out research with scheme members and participating employers or their representatives in connection with the operation, development or amendment of the NEST pension scheme. Thirdly, the order will give NEST the ability to remove a member with an empty account from the scheme where certain conditions are met, including if the account has been empty for at least 12 months. These accounts are of no value to the member and incur administrative costs for other members. Finally, the order allows an individual to join NEST in the event of a bulk transfer with consent.
All the changes are deregulatory and positive for employers, but they are minimal. They are not expected to have a material impact and they will mitigate NEST scheme inefficiencies. I commend the order to the Committee.
Jack Dromey (Birmingham, Erdington) (Lab)
The Minister will forgive me if I say what I said in a debate in Westminster Hall this week: auto enrolment was the creation of a Labour Government, but this continuity in public policy is very welcome and is supported across the House. The proposals are entirely unobjectionable and we will not oppose the two orders.
As is appropriate on occasions such as this, I will briefly set out some issues and ambitions for the next stage. First, auto enrolment does not cover the self-employed or workers in the gig economy. Female workers with disabilities and black and minority ethnic workers are over-represented among low earners, the self-employed, those with multiple jobs and carers. Self-employment and bogus self-employment are becoming increasingly prominent in the modern economy, so tackling the issue at the next stages will be of the highest importance.
Secondly, the advent of auto enrolment has increased the number of workers saving for retirement. More active savers are now in defined contribution pension schemes, rather than defined benefit schemes. While having a greater number of savers is a positive move, we do not want to threaten good DB schemes.
Thirdly, the rise in the number of pension savers is a step in the right direction, but DC plans must continue to evolve to provide savers with an adequate pension. A report by the Pensions Policy Institute in 2016 found that the median saving of DC scheme members could yield only £3,000 a year as an annuity, which is not a lot of money. Eight per cent should not be the summit of our ambitions and the sooner the age threshold is reduced, the better.
In conclusion—and fourthly—more workers having access to a pension pot is welcome, but the public’s awareness and knowledge of their pensions needs to increase at the same time. As one of the proposals put forward, and referred to by the Minister, carrying out research is welcome as, in different ways and on different fronts, these are issues that need to be addressed at the next stages. Having made those points for the record, we will not oppose the orders.
Kirsty Blackman (Aberdeen North) (SNP)
It is a pleasure to take part in this Delegated Legislation Committee at this early time in the morning. On NEST, the Scottish National party has no concerns to raise about that part of the discussion. Our position on automatic enrolment and particularly the earnings trigger is that the scheme should be expanded so that as many employees as possible can take part. This has been our long-standing position and the Minister would expect me to put this forward today.
I am slightly concerned that the Minister seems to be slanting the decision-making process around both the earnings cap and the qualifying earnings band towards benefit and simplicity for employers, rather than the widest possible benefit for employees. I am sure that is not necessarily what he meant; it was just the way it was put across in this relatively short debate this morning. I understand what the Minister says about simplicity and consistency around the qualifying earnings band but, again, it should be the best possible deal for employees and those taking part in this deal, rather than one that is simply the easiest for businesses to administer.
The Minister did not seem to provide much evidence for keeping the earnings cap at £10,000. We believe that it should be expanded to cover those earning less than that amount. To add a point, if there were more people earning a real living wage that people could live on, it would be less of a concern that they would have to divert possible savings money into day-to-day spending.
Our major concern is that the Department has been unable to show a significant level of consultation around the decisions that have been made. I cannot see evidence for consultation with a wide range of people to decide the best possible level for either the earnings cap or the qualifying earnings trigger. I know the Government are busy dealing with Brexit—as we all are—but this is particularly important for those earning very little and who are most likely to be in poverty when they hit pension age. It would have been better if the Government had done more in the way of consultation and providing evidence about why they have suggested these figures as the most appropriate levels, rather than just some arbitrary level that happens to have been chosen.
Having said all of that, we will not oppose the measures at this stage. However, it would be useful for the Minister to give us a little more information on the decision-making process and, if possible, a commitment to wider consultation next year or the year after—or the next time this is discussed—so that we can see the evidence for the decisions that are made.
Guy Opperman
I will address those points. In relation to my friend, the hon. Member for Birmingham, Erdington, it is fair to say that we all wish to have larger numbers of the self-employed signing up to automatic enrolment. That is a manifesto commitment by this party and it is being pursued. A number of pilot projects are on the go, and the hon. Gentleman will know from the debate we had on this particular issue last week that he is welcome to attend the two-day seminar at the Association of British Insurers on 26 March to explore the specifics of how we involve greater numbers of the self-employed. We will be using the private sector to assist us on that particular point.
In relation to the present limit of 8% of savings under automatic enrolment, it is entirely the case that we wish to get 8% over the next two years. However, we all accept that is not sufficient in the longer term and there is a commitment across the House of Commons to push beyond that 8%, because the savings required on a longer-term basis are clearly going to come to more than that.
The hon. Gentleman knows—and referring to the points made by the hon. Member for Aberdeen North—that the auto enrolment review that reported to the House in December last year set out the reasons why long-term considerations should include a reduction to the first £1 people earn, bringing the qualifying age down from 22 to 18, and addressing the lower earnings limit. I am pushing back on the consultation on that, given that there was a review throughout pretty much all of 2017 across the entire sector. We then received information independently from a number of different experts as to why we should go down to 18 and why we should start from the first pound.
The main objective for the Department and the Government is to ensure that the April rises in 2018 and 2019 proceed in the appropriate way. If the hon. Member for Aberdeen North feels that there has been insufficient consultation, I take that on board. I propose to look at the documentation and write to her in detail. I take on board her point that there has to be consultation in future. I believe that I can provide quite a detailed explanation and I am happy to do so in writing.
Question put and agreed to.
draft national employment savings trust (amendment) order 2018
Resolved,
That the Committee has considered the draft National Employment Savings Trust (Amendment) Order 2018.—(Guy Opperman.)
Draft Electronic Commerce Directive (Miscellaneous Provisions) Regulations 2018
(6 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for Digital, Culture, Media and Sport (Margot James)
I beg to move,
That the Committee has considered the draft Electronic Commerce Directive (Miscellaneous Provisions) Regulations 2018.
It is a great pleasure to serve under your chairmanship, Mr Austin. The regulations, which were laid in both Houses on 30 January, seek to implement two parts of the electronic commerce directive, or e-commerce directive, in relation to various offences: the country of origin principle and provisions relating to the liability of intermediary service providers. When new legislation is introduced in a particular policy area and an element of it relates to offences or requirements that could apply to an information society service, such as intimate images on an online platform, the directive must be implemented to apply the rules. That must be done for the UK to be compliant with European Union law.
The statutory instrument does not create new policy; it is a technical measure to ensure that the offences are consistent with the e-commerce directive. The directive has already been implemented in UK law for 34 offences, along with regulations where that has been necessary to comply with EU law. The regulations under discussion implement the directive in relation to various offences, including those concerning extreme pornography and restricting the publication of material by which a child involved in an inquiry may be identified. The Committee should be aware that my Department worked closely with officials in the Scottish Government and the Northern Ireland Assembly on the draft instrument, and the Scottish Government are keen to see it come into law.
I will go into a little more detail about what the e-commerce directive is and what the statutory instrument aims to achieve. The directive seeks to contribute to the proper functioning of the internal market by ensuring the free movement of information society services within the European economic area. The SI implements the country of origin principle in relation to the offences, where relevant. For example, articles 3(2) and 3(4) of the directive, which relate to the extreme pornography offence, were implemented in the Extreme Pornography (Electronic Commerce Directive) (Scotland) Regulations 2011. Under the country of origin principle, information society services should be under only the jurisdiction of the member state in which the service is established, not the European economic area country that the service targets. The country of origin rules are described in more detail in paragraph 4.2 of the explanatory memorandum. The implementation also allows for the prosecution of a UK-based provider if it carries out the offences in the statutory instrument in another European economic area state.
Finally, the statutory instrument also implements articles 12 to 14 of the directive where relevant, which limit, in specified circumstances, the liability of intermediary service providers that carry out certain activities essential for the operation of the internet, namely those that act as mere conduits and those that cache or host information.
I emphasise that the sole intention and outcome of the statutory instrument is to implement the parts of the EC directive in relation to various offences where it has not been done before. It will not create or set new policy; it is a technical measure to ensure compliance with EU law. I hope that the Committee will allow the statutory instrument to become law.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
This is the first time I have had the privilege of serving under your chairmanship, Mr Austin, and it is of note that we have not only a Chairman from the west midlands but two Front Benchers as well.
I am grateful to the Minister for her speech. It was almost as long as her speech last night in winding up five hours of debate on the Data Protection Bill. I am sorry that we none the less managed to stretch business to 10 o’clock.
The regulations are important, but the e-commerce directive is hopelessly outmoded and outdated. It regulates internet service providers, but was written before most of them came to enjoy the force and stature they do today. None the less, it is what we have, and if we can use regulations attached to it to make progress, in particular in the defence of children and their safety online, we must seize those opportunities with both hands. We will not, therefore, divide the Committee today. However, I ask the Minister to reflect, in her winding-up remarks, on why it has taken so long for those necessary defences to be brought to the House, and invite her to look to the future and tell us how long we will have to wait for proposals for the e-commerce directive to be modernised. Now that we are leaving the European Union, there are all sorts of opportunities to modernise laws in a way that maintains a degree of regulatory harmony, and therefore trade, with our biggest continental market and that also brings regulation of this important industry up to date.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to see you for the first time in the Chair, Mr Austin.
As the Minister pointed out, the Scottish Government support the measure, so I will comment only briefly. We have no problems with the statutory instrument, but one of the offences it would affect in Scotland is in the Offensive Behaviour at Football and Threatening Communications (Scotland) Act 2012, which the Scottish Opposition have, sadly, decided to repeal, for reasons that pass understanding, to be perfectly honest—that is just an aside. We look forward to implementing EU rules and regulations for many years to come, but with that I will sit down and let us get on with it.
Margot James
I will first respond to the comments made by the right hon. Member for Birmingham, Hodge Hill. I agree that parts of the e-commerce directive, particularly in respect of its limiting the liability of service providers, are out of date. It was passed long before the service providers had the power they now have. It is important to note that it limits their liability in three categories, but I agree with him about the limits on hosting services’ liabilities. Perhaps there is also a measure of agreement with him elsewhere in the EU, in that the German Government’s regulation requiring internet hosting services to take down within 24 hours content that is agreed to be illegal, as far as the Germans are concerned, is not considered to be an infraction.
On the question why this has not been done before, I agree with the right hon. Gentleman: when I read my brief, I too was mystified by the timing. In answer to his question, in 2016—almost two years ago—the Scottish Government requested that we implement the EC directive in relation to the intimate image offence. Although we would like to have done this sooner, the process has been delayed in part by last year’s general election and in part by the Scottish Government subsequently coming to the UK Government with a list of additional offences to be included.
On proposals to modernise the EC directive, the right hon. Gentleman should probably address those questions elsewhere in Government, possibly to the Cabinet Office or the Department for Exiting the European Union. It is not my place to comment on that, although I watch with great interest what has happened in Germany, as we propose to respond to our consultation on internet safety. The Government are determined to make the UK the safest place to be online and there is clearly a lot of work to be done to realise that ambition.
I am grateful to the hon. Member for Paisley and Renfrewshire North, who represents the Scottish National party, for his support of the proposals. I had better not comment on the particular offence of football—that is definitely a Scottish matter for the Scottish Government and the SNP in the Scottish Parliament.
These regulations will provide legal certainty to online services to enable them to trade across the EU with confidence and I commend them to the Committee.
Question put and agreed to.
Sanctions and Anti-Money Laundering Bill [Lords] (Sixth sitting)
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Chair
Before we resume line-by-line consideration of the Bill, will everyone check that they have their electronic devices turned off or to silent mode? I remind Members of Mr Speaker’s rule that teas and coffees are not allowed during sittings.
New Clause 1
Public registers of beneficial ownership of companies in the British overseas territories
“(1) For the purpose of preventing money laundering, the Secretary of State must provide all reasonable assistance to the governments of—
(a) Anguilla;
(b) Bermuda;
(c) the British Virgin Islands;
(d) the Cayman Islands;
(e) Montserrat; and
(f) the Turks and Caicos Islands,
to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction.
(2) No later than 1 January 2019 the Secretary of State must prepare an Order in Council in respect of any British overseas territories listed in subsection (1) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register by 1 January 2020.
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”—(Helen Goodman.)
This new clause would require the Secretary of State to take steps to ensure the governments of specified British overseas territories introduce public registers of beneficial ownership of companies.
Brought up, read the First time, and motion made (this day), That the clause be read a Second time.
The Chair
I remind the Committee that with this we are considering new clause 8—Public registers of beneficial ownership of companies in the British Crown Dependencies—
“(1) For the purpose of preventing money laundering, the Secretary of State must consult with the authorities of governments in each Crown Dependency on establishing a publicly accessible register of the beneficial ownership of companies registered in their jurisdictions.
(2) Within 6 months of this Act being passed, and every 12 months thereafter, the Secretary of State must report to Parliament on progress within the Crown Dependencies on establishing registers as referred to in subsection (1).
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”
This new clause would require the Secretary of State to consult with the governments in each Crown Dependency about introducing public registers of beneficial ownership of companies in the Crown Dependencies, and to report to Parliament on the progress of establishing such registers.
Helen Goodman (Bishop Auckland) (Lab)
Before we broke for Justice questions, I was speculating about why David Cameron’s Administration were quite enthusiastic to make progress on this issue but the current Administration seem less enthusiastic. I had basically made my arguments and I was about to bring my speech to an end.
Luke Graham (Ochil and South Perthshire) (Con)
I say to the hon. Member for Bishop Auckland that there are Government Members who are in favour of public registers of beneficial ownership in British overseas territories. I studied international financial reporting standards extensively in my former life as an accountant—I draw Members’ attention to my entry in the Register of Members’ Financial Interests—and I am a member of the Public Accounts Committee. Having more transparency through country-by-country reporting and ensuring public oversight and increased transparency of a lot of our transactions will mean that we actually raise standards, not only in the UK mainland, where we have done so by introducing a public register, but in our overseas territories. Given the opportunity that Brexit provides us, in terms of having to reinvigorate our economy and our brand, it is important that we lead. Certainly, what is good enough for the mainland should be good enough for overseas territories.
I know from conversations with my right hon. Friend the Minister for Europe and the Americas that the Foreign and Commonwealth Office has concerns about whether it is right to impose measures on overseas territories. There is precedent for that, as the hon. Member for Bishop Auckland said, but there are concerns about whether it would be right to do so in this case. I do not believe in “devolve and forget”, although overseas territories have different constitutional arrangements. As MPs, we are responsible for taking a leading role. Westminster is here to lead, not to follow, and the United Kingdom should be a leading light when it comes to financial transactions and financial transparency, as it has been on so many global reporting standards.
Helen Goodman
The distinction that the hon. Gentleman makes suggests to me that, although he may hesitate to vote for new clause 1, he will agree to new clause 8, which merely calls for a consultation.
Luke Graham
Yes, exactly. I am conscious that we have discussed new clause 1 at length and that my right hon. Friend the Minister has listened to private petitions from me and other Members. I reiterate that I am sensitive to the different constitutional arrangements for each overseas territory, the way that local legislatures pass their laws and the reasons why they have interests in different areas of financial services, as the hon. Lady highlighted. However, the United Kingdom Parliament should be clear that, if we find a wrong, we should try to right it. I have received correspondence from overseas territories about the cost of implementing a public register and how that might negatively impact their economies. The United Kingdom Government should try to help them with any transition or implementation costs. In the longer term, if it means a shift in their economies and if implementing a public register creates a large gap, we should commit to helping their economies to transition. We must not just take away one aspect of their economies and leave them to fend for themselves.
I ask my right hon. Friend the Minister to commit to engaging with the overseas territories. We have already made a lot of progress. The United Kingdom mainland is the leading light on financial transparency, and we have led the way with the public register. We must engage with the overseas territories, take them on the journey with us and help them to overcome some of the challenges they will inevitably face in a positive and constructive way.
Alex Norris (Nottingham North) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Ochil and South Perthshire. My hon. Friend the Member for Bishop Auckland probably shares quite a few of these views. She made a comprehensive and weighty case; I just want to build on a couple of elements of it. We have recognised on Second Reading and during this discussion that Britain and the British Parliament have a really good record in this area. We should be proud that we are world-leading, and we should continue to be so. As we debate this transition Bill, which is a Brexit Bill at its heart, we should ensure that we remain at the forefront.
We can have the best fence in the world, but there are limits to what we can do if this goes on to our neighbours’ properties. If we have a special relationship with our neighbour, perhaps there are better ways of doing it—I will not torture that metaphor further. At its root, this is clearly a problem that needs solving. The hon. Member for Ochil and South Perthshire characterised it as a wrong that needs righting. The Panama papers listed the British Virgin Islands as the No. 1 location for those issues. Similarly, as my hon. Friend the Member for Bishop Auckland said, Oxfam listed Bermuda as No. 1, and we have seen the briefing materials from Christian Aid. Just so this cannot be portrayed as an activist campaign—as though that could be a bad thing—HSBC and even BHP Billiton say that this is the sort of thing we need. BHP Billiton is the world’s biggest mining company, so it is not often that it and I are bedfellows, but it understands that unclear audit trails for money are bad for its business. They are bad for the communities from which the money comes, but also bad for BHP Billiton’s global finance enterprises, so it is urging us to take action.
This proposal is proportionate. We heard on Second Reading that, given that the overseas territories have had a difficult few months, time has been built into the proposal. There is recognition of how the Crown dependencies ought to be supported. Ministers have said throughout this Bill Committee that, when it comes to the overseas territories, we are responsible for foreign affairs and security. Absolutely—I could not agree more—and anti-money laundering and dirty money passing over borders in massive quantities are at the root of security and foreign affairs. Money laundering underpins global terror, and we ought to be squeezing it wherever we can, because that is one way of cutting off those networks. The combatants we engage with may seem like they are hidden in hills and hard to find, and are perhaps not like us, but from all we have been through over the past 20 years, we know that they have some very sophisticated cells, behind which is big money. This is a chance to clamp down on that.
This will say a lot about us as we go into the brave new post-Brexit world. We have heard the phrase “brand Britain”—the hon. Member for Ochil and South Perthshire talked about our brand—and who we are and where we place ourselves in the world will be very important to it. On the one hand, our Ministers are going round the world saying that we have a great approach to money laundering, but on the other, these are British overseas territories—the Minister referred to them as overseas territories, but they are British overseas territories, and our name is attached to them.
Jo Stevens (Cardiff Central) (Lab)
Does my hon. Friend agree that, although there are some very good things in the Bill, not dealing with secrecy in relation to the overseas territories will damage the credibility of the rest of the Bill and will put it in danger?
Alex Norris
I thank my hon. Friend for that useful intervention. I absolutely agree. We should not see the Paradise papers and the Panama papers as the past, and assume that we will not see anything about this issue again. We are likely to see such things periodically on different programmes and in different newspapers. Every time that happens, people will ask, “What did you do about it? When you heard about it last time, how did you act?” If we say, “Well, we have this brilliant law, which we consider world-leading, but we stopped short of doing this,” people will wonder why we did that, and that will damage our brand.
This is not just about the British overseas territories—people will say, “Hang on a minute. They are British. What are you doing in your engagement with them?”—but about the Crown dependencies. The Crown will, dare I say, be a very important part of brand Britain, and people will draw a very straight line. Even if we feel that we should not be able to act in this area, people will expect that we can, so we ought to have a pretty clear picture on it. What is being asked for in the two new clauses is proportionate and sensible, and hopefully something that we can all support.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I do not want to speak for very long, or repeat what colleagues have said. I very much agree with the comments made by my hon. Friends the Members for Nottingham North and for Bishop Auckland. However, there are a couple of aspects that I would like to emphasise, and provide the Committee with a bit more information on.
First, it is the friends of the overseas territories and Crown dependencies who are deeply concerned about the lack of action in this area. I have had many meetings with representatives from both groups of jurisdictions over the years, both as an MP and as a Member of the European Parliament before that, when I sat on tax committees and the Panama papers committees in the European Parliament. I have had many discussions on these topics. I acknowledge that there is currently some resistance, but there is also an awareness of the reputational damage that is being done to their jurisdictions, as my hon. Friend the Member for Nottingham North mentioned.
There is also concern about having the resource necessary to implement more transparency. I strongly agree with what the hon. Member for Ochil and South Perthshire said in that regard. That is why our new clause calls for support for the overseas territories to implement the changes. We do not want to end up in a situation similar to what happened in the Turks and Caicos Islands, where there were repeated warnings that there were problems but nothing was done until it got to such a height that there had to be what some would say was a very draconian response. We do not want to get to that situation; we want to see change. I will go on to explain what happened in the Turks and Caicos Islands in a moment, because colleagues need to know about that. We have not yet talked about the instances where Britain has exercised its relationships and the levers it possesses.
It is also important that we acknowledge that for many of the overseas territories and Crown dependencies there has been positive legislative change, particularly around 2013 and 2014. However, that has died off a bit recently. One thing that worried me was the fact that the British Virgin Islands have passed new laws against whistleblowers. That has caused a lot of concern, and appears to suggest a shift in the wrong direction. The US State Department, for example, has commented on the fact that low numbers of prosecutions are coming from some of the jurisdictions. Frankly, it is a bit of an embarrassment that the US State Department has commented on that, and we have not seen the necessary action.
It is also a major concern for our country. Others have commented on this, but we have not yet quoted from the National Crime Agency’s “National Strategic Assessment of Serious and Organised Crime 2016”. That report spelled out the problem with having our open register of beneficial ownership without having commensurate obligations in our associated jurisdictions—not to mention the register’s own problems, which we will come on to. The report said:
“When legislation to report beneficial ownership begins to be fully enforced…the UK will be less vulnerable to shell companies formed by professional enablers and others within the UK for the purposes of enabling bribery, corruption and money laundering. The UK will remain at risk from company formation in overseas jurisdictions where similar legislation is not in place.”
It is a direct concern for Britain that we have this leaky fence, to stretch again the metaphor of my hon. Friend the Member for Nottingham North.
It is particularly worrying that the British Government’s position seems to have shifted backwards. Other colleagues have mentioned that, and I wanted to draw attention to the precise language that is now being used by the Government. David Cameron gave us a commitment to beneficial ownership registers—not to public ones. We wanted him to go further, but he committed to getting registers that could at least be used by law enforcement agencies.
As of the debate on the Bill in the other place, we have a new formulation of words, talking instead about either registers, or similarly effective mechanisms to beneficial ownership registers. It would be helpful to hear from the Minister exactly how they are similarly effective. I asked a parliamentary question about this issue and I was told that, for example, electronic search platforms are a technical solution designed to achieve precisely the same result. Well, they do not achieve the same result if it takes longer for law enforcement agencies to get the information they need to root out crooks and prosecute them.
The Minister for Europe and the Americas (Sir Alan Duncan)
Unfortunately for the hon. Lady, she seems unaware that I was the Minister responsible for Turks and Caicos, as a Minister in the Department for International Development at the time. The reasons she cited for our intervention are completely inaccurate. There was a growing financial deficit of £30 million, forecast to be £60 million and then £90 million—it would have been half a billion pounds within a very short time. On that basis, we stepped in and parachuted in a chief financial officer to get the public finances back into shape. It was a great success and is a good example of us intervening in a perfectly proper way in co-operation with the Governor and the Government there.
Anneliese Dodds
I am grateful to the Minister for those comments; I might agree with the second half of them. I wonder whether his remembering of the time is the same as that of the relevant FCO Minister. I am terribly sorry; I do not know who the individuals were, but I was not in the House at the time. He or she commented:
“These are some of the worst allegations that I have ever seen about sitting politicians”
and
“when things go badly wrong…we need to act”.
I suspect that they were not talking simply about a budget deficit at that stage; they may have been talking about other matters.
Sir Alan Duncan
The hon. Lady is conflating two separate issues. There was a parallel legal issue over the plight and fleeing of Mr Misick, but that was not the basis on which we intervened.
Anneliese Dodds
Whether the intervention was due to alleged corruption in the activities of the former leader or budgetary matters, the arguments point in the same direction. When the British Government saw there was a problem, they decided it was appropriate to take action. We are lucky to have the Minister here. We are grateful to hear of his experience, and I hope he will inform us of how, in that regard, we can use that experience, in a consensual, respectful manner, to deal with our associated territories in relation to ownership registers.
Sir Alan Duncan
This has been a lively and interesting debate on an issue that we all agree is of importance. It boils down to how we think it appropriate for the Government to act. I am grateful to hon. Members for tabling new clauses, and I appreciate the desire for the overseas territories and Crown dependencies to adopt public registers. However, we should acknowledge the significant steps already taken by those jurisdictions in this area and continue to build on that progress.
While we continue to push for public registers to become the global standard, we should recognise that the arrangements that the territories and dependencies have concluded with the UK exceed the international standards set by the Financial Action Task Force, which do not require private registers, let alone public registers. Nevertheless, should public registers become the global standard, we would expect the overseas territories and Crown dependencies to meet that standard.
As the Committee knows, the overseas territories and Crown dependencies are separate jurisdictions with their own democratically elected Governments. We have therefore legislated for them without their consent only in exceptional circumstances—for example, to decriminalise homosexuality in certain territories, to ensure they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory and dependency Governments.
Legislating for those jurisdictions without their consent effectively disenfranchises their elected representatives and risks harming our overall relationship with them. It also risks leading to a flight of business to other, less regulated jurisdictions, with the undesirable consequence that our law enforcement authorities would not have the same level of access to beneficial ownership information as under the existing bilateral arrangements. Imposing public registers of company beneficial ownership on the overseas territories would carry with it the risk that the territories would be less willing to work with us on this important issue.
[Dame Cheryl Gillan in the Chair]
I would like to draw parallels with the devolved Administrations and the Sewel convention. The hon. Member for Glasgow Central addressed the point on Second Reading:
“Much as I do not wish the House to legislate on Scottish matters, I do not want us to legislate for overseas territories or Crown dependencies without consent.”—[Official Report, 20 February 2018; Vol. 636, c. 92.]
I agree with her that that is the right approach.
The overseas territories and Crown dependencies have already made significant progress on beneficial ownership. Since we concluded our exchanges of notes with them in 2016, they have passed new primary legislation and delivered technological improvements to comply with the terms of the arrangements. They have committed to provide UK law enforcement authorities with automatic access to beneficial ownership information within 24 hours of a request being made, or within one hour in urgent cases. Those arrangements strengthen our law enforcement authorities’ ability to investigate serious organised crime, including money laundering and tax evasion.
The hon. Member for Oxford East asked about what are termed similarly effective systems. Some jurisdictions have opted under the bilateral arrangements concluded with the UK to establish an electronic search platform, allowing them to gain access to beneficial ownership information held by their authorities or by corporate service providers.
The exchanges of notes permit such similarly effective arrangements, provided that the following criteria are met. Law enforcement authorities can obtain beneficial ownership information without restrictions, and that information is available for use in both civil and criminal proceedings. Law enforcement authorities can also quickly identify all corporate and legal entities connected to a beneficial owner, without needing to submit multiple and repeated requests. Corporate and legal entities, or those to whom the beneficial ownership information relates, are not to be alerted to the fact that a request has been made or that an investigation is under way. We will monitor that arrangement to ensure that it does indeed provide the same results.
I hope that hon. Members agree that the overseas territories, in some cases in the most challenging circumstances, and the Crown dependencies have made significant efforts to move forward on this agenda. The effective implementation of the exchanges of notes will put them ahead of many G20 countries and many individual states of the USA, and demonstrates what can be achieved through working co-operatively.
Alex Chalk (Cheltenham) (Con)
Does my right hon. Friend agree that, as a result of the steps that have been taken in the Crown dependencies, there is a far greater degree of transparency in Jersey and Guernsey than in Delaware in the United States, for example?
Sir Alan Duncan
My hon. Friend is absolutely right. It is exactly that comparison that we need to see in the round, in order to understand that there could be unforeseen detrimental consequences of any kind of imposition proposed for the overseas territories.
Luke Graham
I understand the Minister’s point about overseas territories and the challenges faced by other jurisdictions such as the United States. Britain leads in a number of global reporting initiatives. Without compelling overseas territories to change their ways, we could still lead the conversation with the United States and the overseas territories in the round, to ensure that we progress this reporting and show the benefits that we have already recognised on the mainland. I urge my right hon. Friend not to draw parallels between the devolved settlement in the UK because we have Scottish MPs in this House, and they are there making laws in Scotland, whereas the overseas territories do not have MPs in this House.
The Chair
May I remind the hon. Gentleman that interventions should be shorter than that?
Sir Alan Duncan
You have been transformed, Dame Cheryl. The second point is within the constitutional settlement with the devolved Assemblies that has been reached in the United Kingdom. On the first point, I would have no objection to any hon. or right hon. Member urging the Government to take a lead in such areas. I hope that, at least by example and in international forums such as the UN, we do just that. I hope the UK’s leadership role will continue.
Hannah Bardell (Livingston) (SNP)
I am a little perplexed by what the Minister said. It seems that he conflated the comments of my hon. Friend the Member for Glasgow Central with the intent of the amendment, which is to encourage—not to compel—Governments in overseas territories to do that. Perhaps I am mistaken and he can clarify that, but it seems that there is a misrepresentation.
Sir Alan Duncan
The hon. Lady is not being unreasonable; there are some arguments where some people say compel, and others say urge and consult. My argument would be that we are consulting—we do it all the time. We have a regular dialogue, and in that, we are urging them in the right direction. Anything that smacks of us in any way telling them what to do is counterproductive, because rather than imposing new requirements on these jurisdictions, it is better that to continue to focus our efforts on the consolidation of the existing arrangements.
The exchange of notes provide for the operation of these arrangements to be reviewed six months after they come into force. We are working very closely with the territories and dependencies on this review, and plan to conclude it by the end of March. That is a very good example of the sort of consultation we are engaging in on a regular basis.
Anneliese Dodds
When the Minister those letters are exchanged, will it include the logistics of this operation? I am trying to get my head round how we can genuinely say that contacting potentially myriad trust and company service providers and getting information from them is equivalent to having access to a register. How are the Government truly going to assess that in this exchange of letters? Will it be a question of time? We could be talking about hundreds of TCSPs.
Sir Alan Duncan
I am not directly involved in this, but as I have said frequently, I am very happy to offer the expertise of officials to the hon. Lady so that she can fully get to grips with the intricate detail of the question she has asked.
Hon. Members will recall that the Criminal Finances Act 2017 provides for a review of the effectiveness of the bilateral arrangements. That report must be prepared before 1 July 2019, and it will then be published and laid before Parliament. The reviews will provide a clear understanding of how the jurisdictions are meeting their commitments. At that point, we will be in a better position to consider what more might need to be done. I stress once again that we will engage with the overseas territories and dependencies; we do so already and we will continue to do so on a regular basis, with the clear objectives in mind of wanting consistent and constant improvements in the way in which their finances are organised.
A key feature of the Government’s approach has been to maintain a level playing field between all the overseas territories with financial centres and the Crown dependencies. As I have described, we have robust review processes regarding the implementation of these arrangements. If these reviews demonstrate that the full implementation of the exchanges of notes is not taking place in any individual jurisdiction, it would be right for hon. Members to consider this issue further. For the time being, however, we should continue to focus on the full implementation of the existing bilateral arrangements. We are on a good and solid track; therefore, I urge hon. Members to withdraw the new clause.
Helen Goodman
It is nice to see you in the Chair, Dame Cheryl. I wish to remind members of the Committee of two things: first, the Government’s own statement in 2012 that, as a matter of constitutional law, the British Parliament can legislate for Crown dependencies and overseas territories. Secondly, the current approach, where the authorities in London have to ask individual questions, is not as effective in tracking down and deterring illegality as having a transparent approach. That was demonstrated by the fact that, when the Panama and Paradise papers were leaked, they were able to initiate more inquiries and take more action against people because, as I was trying to explain this morning, they were able to see the overall pattern.
I am disappointed in the Minister’s response—not surprised, but disappointed—because he has not shown any flexibility at all. However, I do not wish to put the hon. Member for Ochil and South Perthshire on the spot. I think we will come back to this on Report, so I do not wish to put the motion to a vote. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Public register of beneficial ownership of UK property by companies and other legal entities registered outside the UK
“(1) In addition to the provisions made under paragraph 6 of Schedule 2, for the purpose of preventing money laundering in the UK property market and public procurement, the Secretary of State must create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts.
(2) The register must be implemented within 12 months of the day on which this Act is passed.”.—(Helen Goodman.)
This new clause would require the Secretary of State to create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts, within 12 months.
Brought up, and read the First time.
Helen Goodman
I beg to move, That the clause be read a Second time.
In 2015, David Cameron said:
“London is not a place to stash your dodgy cash.”
That is why he wanted to set up a register of the real owners of UK property owned by companies registered overseas. Unfortunately, the timetable for that has slipped. Following his announcement in 2015, the Government made an announcement shortly before Christmas saying that they now expected to set up the register in 2021. That is six years. In the other place, it was Tory peers who pressed for this to be speeded up. Our new clause does precisely the same thing.
Last week, the right hon. Member for Newbury mentioned unexplained wealth orders. Indeed, the Security Minister got an excellent splash on the implantation of this part of David Cameron’s package on 3 February. It was headed:
“Russians in Britain told to reveal their riches. McMafia-style crackdown on ‘corrupt’ oligarchs.”
It said:
“The government estimates that about £90 billion of illegal cash is laundered in Britain every year.”
The Minister said:
“McMafia is one of those things where you realise that fact is ahead of fiction…It’s a really good portrayal of sharp-suited wealthy individuals, but follow the money and it ends up with a young girl getting trafficked for sex.
What we know from the Laundromat exposé is that certainly there have been links to the [Russian] state. The government’s view is that we know what they are up to and we are not going to let it happen any more.”
He then explained that unexplained wealth orders were coming into effect.
I cannot understand why, given that those orders are coming into effect, a start has not been made on one with the purchase from the Ministry of Defence of Brompton Road tube station by a Ukrainian gas magnate. For colleagues who have not been following this long-running issue, Dmytro Firtash is a friend of ex-President Yanukovych and an associate of both President Putin and Paul Manafort. He was arrested in Vienna on corruption charges at the request of the FBI. Latterly, attempts have been made to extradite him to the United States, first on Magnitsky charges and later in relation to his alleged role in masterminding an international racket that aimed to sell titanium to Boeing.
Like all rich people, he operates indirectly. For example, his foundation, New Century Media, paid for the £800 ticket to a summer ball for the Minister here today—the right hon. Member for Rutland and Melton—according to the Minister’s entry in the Register of Members’ Financial Interests from 2010. He also gave £85,000 to the Conservative party centrally. I would have thought that he was a prime candidate to receive an unexplained wealth order, and I hope that Ministers will see if that can be pursued.
Sir Alan Duncan
Is the hon. Lady saying that New Century Media is owned by Mr Firtash?
Helen Goodman
I think Mr Burnside is employed by Mr Firtash. That is the issue. These things are not exactly transparent.
Let us return to the question of whether the current state of the law is adequate. The Times also had a leading article which said:
“Three difficulties may blunt the effectiveness of the wealth orders. First, all the agencies involved in investigating and prosecuting those suspected of laundering dirty money in Britain are already over-stretched. They need experienced staff used to digging through multiple layers of shell companies and intricate business transactions, and they do not have enough of them.
Second, the orders frieze assets for an interim period and are only one early step in the process of bringing oligarchs to heel. The government has to be braced for legal marathons contested by the rich and corrupt. That requires political will.
Above all, the red carpet for crooks has to be rolled up. Too many people in the City of London, in the divorce and libel courts, in the art world and in high-end estate agencies have failed to look closely at the cash coming their way. An overdue step would be a public register revealing the true owners of overseas companies that own property in Britain.”
Until we have the public register, it is not going to be possible to identify who owns the properties and whether or not the wealth invested in them has been gained legitimately or illegitimately. In other words, are the wealth orders explained or unexplained? I am not quoting the Morning Star or the Daily Mirror—I am quoting The Times.
We think that this is all taking too long; it is a problem that it is taking too long. It is a problem because of its size, which I will describe. It is also a problem because Ministers are giving time to people to rearrange their affairs and to reorganise them in order to avoid the measures which are in train. A concrete example of that would be the use of trusts. That is why further we have tabled a new clause on trusts.
Global Witness and Transparency International believe that 86,397 properties in England and Wales are owned by companies registered in offshore secrecy jurisdictions; 87% of companies owned by foreign company owners in secret jurisdictions. Half of them are in London and half are in other parts of the country. The 10 most expensive properties owned by companies in tax havens are worth £1.5 billion. Furthermore, Transparency International believes that there are suspicions about £4.4 billion-worth of UK properties, over half of which—£2.36 billion—belongs to companies registered in the British Virgin Islands. They also say that these properties in secret jurisdictions account for 75% of all UK properties under investigation for corruption. If hon. Members or members of the public are interested in seeing what is going on, I recommend going to the Global Witness website where they can type in their postcode and see how many of those secretly owned properties with overseas owners are located on a map.
The Economic Secretary to the Treasury (John Glen)
May I say what a pleasure it is to serve under your chairmanship once again, Dame Cheryl? I acknowledge that the amendment seeks to set in legislation an obligation on the Government to implement, within 12 months of Royal Assent, our commitment to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or who bid on UK central Government contracts. It puts an accelerated timetable on something that the Government are doing anyway. In the next few minutes, I will remind the Committee of the timetable to which the Government are committed for delivery of this policy. I will set out the challenges and complexities of the policy and demonstrate why setting an early and artificial deadline for implementation would inadvertently undermine its aims. I know that these are supported across the House, so it is important to ensure that we get the detail of the policy right.
In listening to the remarks made by the hon. Member for Bishop Auckland, I acknowledge the frustration around this; but this Government are committed to continue to lead by example and improve corporate transparency. Over the past five years, the reforms delivered by the Department for Business, Energy and Industrial Strategy have made the UK a global leader on corporate transparency issues. We were the first country in the G20 to establish a fully and publicly accessible company beneficial ownership register and, across the world, non-governmental organisations lobby their Governments to follow the UK example. There is a reason we have that world-leading reputation: it is because of the quality of the measures we have passed and it is a reputation we would lose if this measure were accepted. A 12-month timetable to draft and pass primary and secondary legislation, empower the responsible agencies and commence the obligations is not realistic. The rush to meet such an unrealistic deadline would inevitably lead to loopholes that would be readily exploited by those seeking to evade the new requirements.
Alex Norris
We are not just talking about a 12-month timetable; this was first announced by a Conservative Prime Minister in 2015. What have Ministers been doing since then?
John Glen
I will come on to explain the history of this and why we are where we are. I am happy for the hon. Gentleman to intervene if he does not feel satisfied at the end of that.
Mindful that the eyes of the world are on us, hon. Members should recognise that this legislation would be a world first. Successful delivery raises significant challenges and it is right that the Government achieve the right balance in an effective regime with robust enforcement that does not have a negative impact on land registration processes across the UK. I acknowledge that some have accused the Government—and we have also been accused this afternoon—of not acting swiftly enough to implement this policy. Let me address those concerns.
We have committed to publishing a draft Bill before the summer to introduce the Bill early in the second Session and for the register to be operational in 2021. Publishing a Bill in draft is the right approach. As I said before, this register will be the first of its kind in the world, it will affect people’s property rights, including not just new purchasers but existing owners. This is a sensitive and delicate area. Getting it wrong would have significant adverse consequences.
Anneliese Dodds
The Minister is being generous. He has kindly set out for us a three-year timetable, adding on a couple of years before that when Government committed to this. Is he aware of the Private Eye map, which has been in existence for some time? Through civil society and journalistic activity, Land Registry and Companies House data were put together and a map produced. That appears to have been done quite quickly.
John Glen
I am not familiar with that particular map but I would be very happy to examine it. For clarity, and addressing the hon. Lady’s previous point, the register will capture the details of beneficial owners of all non-UK companies—including those in the overseas territories—that own UK property. This will be a world first, so we are moving as fast as possible, ensuring that the register is as comprehensive as possible.
As the Government set out in last year’s call for evidence, for the register to be effective the sanctions to be applied for non-compliance must be a meaningful deterrent. Enforcement must be energetic. Simple criminal sanctions may not be sufficient in isolation. The draft Bill will include enforcement through land registration law. Where an overseas entity buys property, it will never be able to obtain legal title to that property without having complied with the register’s requirements. Similarly, a restriction on the title register for property owned by an overseas entity will signal to third parties that the overseas entity must comply with the regime before selling the property, creating a long lease or legal charge. Those are significant steps on which it is right to consult.
Hon. Members will recognise that there are separate Land Registries in Scotland and Northern Ireland, as well as the Land Registry for England and Wales. The approaches taken to land registration and overseas entities by each of those Land Registries have been different until now. That too will need be streamlined. Delivery of an holistic outcome that complements all three land registration regimes is an exercise touching multiple teams across Government and the Land Registries. Put simply, it is an exercise that will take time to get right and a further demonstration of why publishing the legislation in draft is the appropriate next step if we are to get it right. Although I appreciate that the motive underlying the new clause supports the policy as a whole and demonstrates a desire for early delivery and implementation, it does not take account of the complexities that I have set out or the challenges of delivery and implementation.
The register will further demonstrate the Government’s commitment to combating money laundering through the property market. Hon. Members will have seen recent press reports—the hon. Member for Bishop Auckland drew our attention to the splash on 3 February—that two unexplained wealth orders have been obtained by the National Crime Agency in connection with two properties worth £22 million.
Those are the first orders obtained under the relevant powers conferred by the Criminal Finances Act 2017, which commenced at the end of January. They were obtained only a few days after it came into effect. As the Minister for Security and Economic Crime has said, the orders are an important addition to the UK’s ability to tackle illicit finance, and it is great to see them already in use.
The Government will continue to take action. BEIS’s response to last year’s call for evidence will be published shortly, and it will set out the Government’s approach to areas of particular complexity. BEIS has already made significant progress in preparing draft legislation; the work with the office of the parliamentary counsel to draft the Bill is under way.
Separately, BEIS is working to quantify the impact of the legislation on the UK. The impact assessment will quantify the register’s potential impact on the property market and investment flows, around which foreign direct investment is very specific, to pick up on the point made by the hon. Member for Bishop Auckland. The register will rightly make the UK more hostile to illicit flows of money, but we must understand the potential impact of legitimate inward investment.
All those issues were considered in last year’s call for evidence. Scrutiny of the draft Bill will further stress-test whether it will be effective. I hope that that process demonstrates the Government’s continued commitment to enact the policy, and our commitment to get it right. For those reasons, I hope that the hon. Lady will withdraw the new clause.
Sir Alan Duncan
On a point of order, the hon. Member for Bishop Auckland earlier asserted that New Century Media is owned by a disreputable Ukrainian oligarch called Dmytro Firtash. That is completely untrue. New Century Media is owned by a former Member of this House, Mr David Burnside, whose reputation she has inadvertently maligned. I ask her to withdraw her comment immediately, or to say the same thing outside the House and take the full legal consequences of doing so.
The Chair
That is not really a point of order for the Chair, but the Minister has made his point of order and put it on record.
The Chair
Unless any other Member wants to rise on a point of order, we will move on. If the hon. Lady wishes to respond, she may.
Helen Goodman
My understanding is—and this has been in the public domain and stated outside this House—that Mr Burnside was the executive chair, but that New Century Media represented the personal foundation of Dmytro Firtash.
The Chair
The hon. Lady has made a response, but it is really not a point of order for the Chair. Members have managed to put it on record, and we will move on. I apologise to Mr Norris, who did not catch my eye before I called the Minister. I call him now.
Alex Norris
You are very kind, Dame Cheryl. I am not a very good bobber—I find myself inadvertently bobbing in the wrong place or staying in my seat. My wife is currently doing the 100 squat challenge, and I wonder whether an afternoon of questions on a particularly good statement is a good way to make a down-payment on that. That is not the point I rise to make, however—proud of her though I am.
The new clause comes back to our place in the world after Brexit. There are very legitimate anxieties across the House, which are often played out in the Chamber, that post-Brexit, Britain will become the low standards capital of Europe: people will have all the benefits of being in Europe, but will not have to put up with those pesky regulations. We have what we consider to be very legitimate concerns about workers’ rights, product regulations and environmental standards that we raise frequently, and we hear back from Ministers—to their credit, we always hear back—“No, that is not our plan post-Brexit. That is not the Britain we want to live in.” We say that we will hold them to that, as we will.
The Ministers are exceptionally lucky that this is a good opportunity to raise that flag and demonstrate that. The Bill will send a strong signal about what Britain will be like and about our role in the world. The Ministers have said that it will be the first of its kind, which is a good thing. We should seek to lead on such important issues. We have a chance to lead and show that Britain is a high-standards, high-quality economy to occupy and if people come to Britain, they should expect to have the relevant level of scrutiny if there are questions over the assets that they bring or purchase. So it is time: that is what campaigners tell us and what we feel too. We are not asking for this to be done overnight. This is something that Ministers have had since 2015 and that will still have another year after this legislation passes, which is some way away. It is time.
Richard Benyon (Newbury) (Con)
I think it is worth saying for the record that there is a chill wind blowing through the financial lives of some of the people who have used our economy, particularly our property sector, for nefarious purposes and money laundering. From my conversations with a current Security Minister, and from what I know the Government are doing to implement the asset freeze legislation, I have no doubt that that is being taken forward aggressively and in a determined way. That is being recognised abroad; it is certainly being recognised by some of those people who have used the ability of our economy, through good title deeds, to make property a means by which to bury nefarious funds.
We are talking about legislation to hold future Governments to account. I entirely accept my hon. Friend the Economic Secretary’s assertion that this a complex situation to get right. I would like a little more clarification, and I am prepared to cut him some slack on this because if this is not done properly, it will be exploited and people will be able to move wealth in a globalised economy in a much freer way. It should be tied down in a way that encourages people still to invest in this country. I welcome the fact that people want to invest in our property, whether commercial or residential, but not, as the hon. Member Bishop Auckland says, just to leave homes empty. I recognise that that is a real issue, but there is the sheer importance of making sure that all of the provisions are correct. I know it has been complicated: in the asset freeze legislation, there was institutional resistance to what are called Magnitsky-lite measures that were introduced. In a classic piece of good ministerial play, the Government faced down those institutional problems that existed in parts of the civil service and elsewhere and took that forward. To their credit, they are now implementing the measures. I would just like some more assurance from my hon. Friend that this complexity will be tackled with urgency.
John Glen
I am grateful to my right hon. Friend the Member for Newbury and to the Member for Nottingham North for their further observations. I understand the sentiments of frustration and impatience with the Government on this matter. I hope I have spelled out in some detail—in the areas of land registration; alignment around the different parts of the United Kingdom; and making sure that the penalties are appropriate and that the enforcement measures are set to meet the challenge—that the Government have bold ambitions to get this right and to be a world leader in this area. I acknowledge that this has taken rather longer than it would have done in ideal circumstances, but I can confirm and reiterate to my right hon. Friend that the Government are fully committed to delivering this as soon as possible, and that there is a commitment across multiple Departments and the ministerial team to ensure that this reflects the bold aspirations that we have as a nation. I hope that that would be sufficient for us to move on.
Helen Goodman
Ministers have heard that this is an issue of significant concern, and interest in making speedy progress has been expressed on both sides. We will return to this on Report and, that being the case, I do not intend to press it to a vote. I beg to move that the clause be withdrawn.
Clause, by leave, withdrawn.
New Clause 6
Alignment of sanctions
(1) It shall be a negotiating objective of Her Majesty’s Government in negotiations on the matters specified in subsection (2) to continue the United Kingdom’s participation in the Political and Security Committee of the European Union in order to align sanctions policy with the European Union.
(2) Those matters are—
(a) the United Kingdom’s withdrawal from the European Union, and
(b) a permanent agreement with the European Union for a period subsequent to the transitional period after the United Kingdom’s withdrawal from the European Union.
(3) It shall be the duty of the Secretary of State to lay a report before both Houses of Parliament in accordance with either subsection (4) or subsection (5).
(4) A report under this subsection shall be to the effect that the negotiating objective specified in subsection (1) has been achieved.
(5) A report under this subsection shall be to the effect that the negotiating objective specified in subsection (1) has not been achieved.
(6) This Act shall not come into force until a report under either subsection (4) or (5) has been approved via resolution of the House of Commons and considered by the House of Lords.—(Helen Goodman.)
This new clause would require the UK Government to seek continued participation in the Political and Security Committee so as to allow alignment on international sanctions.
Helen Goodman
I beg to move, That the clause be read a Second time.
We now move to a slightly different aspect of the Bill—how decisions will be taken once we leave the European Union. The new clause would require that in negotiations with our European partners, we seek to maintain participation in the Political and Security Committee of the European Union, to align sanctions policy with the European Union, and would require the Government to report on those negotiations and on how they are going. As with the commencement plan, which I felt the Minister was vague and unclear about, so with this. How are we going to co-ordinate in the new world? How is this going to operate?
Sanctions will work if we co-operate and collaborate with other countries. We are all agreed that that is when they are most effective. They are effective in terms of putting pressure on those that are sanctioned, upholding the rule of international law and protecting national security. It is necessary for us to work with our European partners to make our international sanctions regime as effective as possible. One of the issues previously discussed —which Ministers bump up against all the time—is the difficulty of getting agreements in the UN Security Council. Obviously the sanctions that we had on Russia over the annexation of Crimea could not be agreed in the UN Security Council, and that stands to reason. We have been able to get effective sanctions at European level, however, and our security interests are obviously aligned with those of the European Union, objectively speaking, and therefore we are going to take a similar view. We propose that we need to carry on working through the Political and Security Committee. The withdrawal agreement produced by the Commission said some interesting things about decision making. On the subject of administrative co-operation in article 30, it says that,
“as of the date of entry into force of this Agreement, the United Kingdom shall have the status of observer in the Administrative Commission. It may, where the items on the agenda concern the United Kingdom, send a representative, to be present in an advisory capacity, to the meetings of the Administrative Commission and to the meetings of the Technical Commission”.
The section on institutions includes proposals on representatives of member states and the United Kingdom taking part in the work of the Union’s institutions. Chapter 4, article 104 states:
“Article 10…shall apply in the United Kingdom in respect of representatives of Member States and of the United Kingdom taking part in the work of the institutions, agencies, offices and bodies of the Union”
in so far as their participation in that work took place before the end of the transition period.
There is then a section on how the transition period should work, and that is in part 4 of the document produced by the European Commission.
Paragraph 2 of article 122 states:
“Should an agreement between the Union and the United Kingdom governing their future relationship in the area of the Common Foreign and Security Policy and the Common Security and Defence Policy become applicable during the transition period, Chapter 2 of Title V of the”
treaty on European Union
“and the acts adopted on the basis of those provisions shall cease to apply”.
We then have the UK’s obligations with respect to financing defence and security operations, and finally, in article 157 under “Institutional provisions,” it is proposed that, on the date that the withdrawal agreement comes into force:
“A joint committee is hereby established”.
I am not saying that what the Commission proposes is the right way to go, but we are concerned that we have no sense of what the Government think we should do. That is why we tabled the new clause, which suggests that, with respect to sanctions policy, we should retain our membership of the Political and Security Committee of the European Union.
Sir Alan Duncan
The new clause would require the Government to commit to negotiating the UK’s continued participation in the EU’s Political and Security Committee after Brexit and delay the commencement of the Bill until a report had been laid before Parliament setting out whether that had been achieved.
The first point I make is that the Bill is about powers, not policy. The UK’s legal powers to implement sanctions flow largely from the European Communities Act 1972. The Bill will replace those powers and, as is recognised on both sides of the House, is necessary to enable the UK to impose sanctions. We are, of course, looking at our sanctions policy and have described our desired future relationship with the EU in a range of places, but it is not appropriate to place that in the Bill.
Secondly, as we have set out, the Government have an unconditional commitment to European security, and we continue to share common threats, interests and values with our European partners. That makes close co-operation, including on sanctions, in both our interests. The exact nature of the UK’s future relationship with the EU on sanctions still needs to be determined, but the UK will remain a critical player in both the European context and the global context.
The UK’s influence on sanctions derives in part from our membership of the EU, but it is not dependent on continued participation in EU bodies. A lot of it derives from the pre-eminence of the City of London in controlling so many flows of money. Our influence also comes from our status as a permanent member of the UN Security Council and our membership of bodies such as the G7. That influence is underpinned by our strong economy and financial sector, and both public and private sanctions expertise. That makes the UK a key sanctions partner.
As the Prime Minister made clear at the Munich security conference a couple of weeks ago, our partnership with the EU should offer us the means and the choice to combine our efforts to the greatest effect where that is in our shared interest. That includes working closely with the EU on sanctions. My right hon. Friend the Foreign Secretary was clear on Second Reading that he hopes
“we can act in tandem”
with the EU on sanctions because we
“will always confront the same threats and defend the same values.”—[Official Report, 20 February 2018; Vol. 636, c. 78.]
That demonstrates our commitment to close co-operation with the EU and other international partners regardless of the institutional framework.
Finally, we do not seek to attend EU meetings on the same basis as EU members. It is worth noting that the PSC is not the primary body that deals with sanctions. Sanctions pass through a range of EU institutions before adoption, from working groups to Council meetings. Committing the Government to seek to join the PSC for sanctions would not make sense from a sanctions policy perspective, and does not make sense in relation to our broader approach to negotiations with the EU. Although the details are a matter for negotiation, in the area of foreign policy as a whole we envisage both formal and informal mechanisms to allow regular dialogue, co-operation and close co-ordination.
To tie our objectives to one model would be counterproductive and would remove the freedom to explore new and better ways of working together with the EU on sanctions once we have left the European Union. However, we do not need text in the Bill to underline our commitment to working closely with international partners on sanctions, because that is what we will do. Given that, I respectfully ask the hon. Lady to withdraw the motion.
Helen Goodman
The question of how we will co-operate with our European partners on sanctions was debated last July in a general debate on sanctions. I am glad that the Minister now acknowledges that we need to do this, and I am glad that he said that we need formal and informal contacts. Given that he says that this is not the only piece of institutional architecture used at the moment, I will not press the motion to a vote. However, a slightly clearer view from Ministers on how they propose to handle this would be extremely helpful to the House at some point in the future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Helen Goodman
I would like to put new clause 5 and new clause 7 to a vote. Have I missed the opportunity to vote on new clause 5?
Helen Goodman
Yes, I do.
New Clause 7
Parliamentary committee to scrutinise regulations
(1) A Minister may not lay before Parliament a statutory instrument under section 48(5) unless a committee of the House of Commons charged with scrutinising statutory instruments made under this Act has recommended that the instrument be laid.
(2) The committee of the House of Commons so charged under subsection (1) may scrutinise any reviews carried out under section 27 of this Act.—(Helen Goodman.)
This new clause would require a specialised House of Commons Committee to approve all statutory instruments laid under the affirmative procedure under this Act. The Committee would also scrutinise the Government’s reviews of sanctions regulations.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss new clause 15—Disqualification—
In the event that adequate procedures under subsection (3) of section [Failure to prevent money laundering] are found not to be in place, the Secretary of State must refer to the court a disqualification order under section 8 of the Company Directors Disqualification Act 1986 (disqualification of director on finding of unfitness).”.
This new clause would require the Minister to ask the courts to investigate whether directors of a company are fit and proper, if it was found that proper procedures against money laundering were not in place.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship, Dame Cheryl, and in rather warmer circumstances than the last time. New clause 9 seeks to create an offence if a relevant body failed to put in place adequate procedures to prevent a person associated with it from carrying out a money laundering facilitation offence. New clause 15 creates a process for disqualification for those at the top level who have failed to prevent money laundering.
I will deal with each new clause in turn and then speak briefly about the overall regulatory context, which creates a necessity for these new approaches. First, on new clause 9 and the failure to prevent the facilitation of money laundering, there are many problems with the existing system. The FCA has found weaknesses in governance and long-standing and significant under-investment in resourcing for control systems, even in the sector that is actually regulated for money laundering. I will talk about some of the problems there later on.
Many of those who investigate in this area find that rules are intermittently enforced, penalties are low and senior executives face few personal, financial or reputational consequences. It is constructive to compare some of the penalties that have been levied in the UK with those levied in the US. As I understand, the largest fine levied in the UK for anti-money laundering or sanctions offences—the Minister may contradict me if I am wrong—was levied against Coutts & Co for £8.75 million. That is six hundred times less than the penalty that was levied by the United States on BNP Paribas for sanctions-related offences.
Anneliese Dodds
It would be helpful to know under which pieces of legislation those fines were levied, because I am uncertain whether they were directly under money laundering legislation. I will come back to that, particularly in relation to some of the outcomes of some parliamentary questions that I have asked to try to dig into this and find out what prosecutions have been enabled by existing legislation.
I am grateful for the information that the Economic Secretary has provided; however, there is still a lot of concern about banks’ and others’ ability to root out money laundering and the facilitating of money laundering. The FCA found—admittedly, in 2014—that there was
“significant and widespread weaknesses in most banks’ anti-money laundering systems and controls”.
That is revealed in the case of HSBC. Many members of the Committee will know that it was involved in a money laundering scandal that led to the US fining it £1.2 billion. There was a large investigation into that matter in the United States Senate, where it was said that our UK-based bank had been a conduit for
“drug kingpins and rogue nations”,
including Mexican drug cartels and North Korea. In fact, that case has been referred to already in this Committee.
Particularly worryingly, a congressional report found that George Osborne and the Financial Services Authority—now the FCA—corresponded on numerous occasions with their US counterparts about the case; in fact, they urged a less aggressive judicial approach on the US side. Apparently, the congressional report said that the UK interventions played a significant role in ultimately persuading the US Department of Justice not to prosecute HSBC. I find it quite concerning that the UK actually argued against measures being taken by other countries to try to deal with this problem.
We were hoping to have some change; the Serious Fraud Office has called for the broadening of existing economic offences to cover a kind of umbrella approach, also to cover failure to prevent. It thinks that that would be helpful to hold large companies to account criminally across the board. At the moment, we have the ability to prosecute the failure to prevent bribery and corruption, but those activities are rarely committed in isolation from instances of money laundering by corporate entities. Therefore, it seems to make sense to try to extend corporate liability to money laundering. That would push in the same direction as existing pieces of legislation. Of course, the Bribery Act 2010 created a new offence of corporate failure to prevent. I believe that Act was put in place because of the same kind of repeated criticism of the UK regime that we have seen in relation to money laundering. We also now have the offence of failure to prevent criminal tax evasion in the Criminal Finances Act 2017. Surely there is now a strong case for an explicit reference to failure to prevent money laundering.
Many of us thought that we were not going to have to push for a separate offence of money laundering because we were to have an umbrella approach. In May 2016, the Government committed to consult on a broad offence of failure to prevent economic crime, which would cover fraud, false accounting and money laundering. In January 2017, the Government downgraded that commitment and instead published a call for evidence on whether there was a case for economic crime corporate liability law reform.
As I understand it, the call for evidence closed in March 2017. I have not yet seen the results of that call for evidence. It would be helpful for the Minister to let us know the outcome of that call for evidence, the main findings and how the Government have decided to act on them. Will they introduce the umbrella offence or create a discrete offence, as we are asking for? Because we think we need action now. That is new clause 19.
Anneliese Dodds
I beg your pardon. I am getting over-excited and trying to hurtle towards the end of the programme. I am sorry, Dame Cheryl.
Anneliese Dodds
No; we are very keen to have a thorough discussion on every one of our new clauses.
New clause 15 focuses on disqualification. The purpose is to ensure that directors specifically take responsibility for their organisation’s mistakes, and to ensure that the Secretary of State may hold them to account for a failure to prevent money laundering, in the instance where procedures have not been put correctly in place.
Many colleagues might have served as directors and will know the rules on being a director—that directors can already be disqualified if they display unfit conduct. Unfit conduct is defined as including allowing a company to continue trading when it cannot pay its debts, not keeping proper company accounts and so on.
With the new clause, we wish to extend that to include a commitment for every director to ensure that they are not ignoring money laundering concerns. We want to mirror what happens under competition law in Britain, where a director’s role is looked at in the event of a breach of the law. That is necessary because of the situation we find ourselves in today.
I am sure many colleagues will have talked to professionals on the frontline of anti-money laundering. I have talked to quite a lot of people who work in banks and other organisations who have anti-money laundering responsibilities. I am sure there are people who work in accounting and other walks of life for whom this is a concern. Very often the clear message I get, as I am sure colleagues do, is that those individuals are working very hard to prevent money laundering but they are not supported by the leadership team within their firm. Global Witness has stated that,
“responsibility for compliance with anti-money laundering and other regulations is usually allocated to compliance teams, rather than to senior executives, who actually wield power within banks over what customers they take. This is a serious problem because it gives compliance staff none of the authority but all of the responsibility, breaking the important link between decision making and accountability.”
That is certainly what I find when I talk to individuals who are in that responsible position. They find they are often not supported by senior managements. That has also been discovered in some of the big corporate scandals—I referred to the HSBC case a moment ago. In his written evidence to the UK Parliament, David Bagley, who led on compliance at HSBC during the period of the failings we were just talking about, stated:
“as the Head of Group Compliance, my mandate was … limited to advising, recommending and reporting. My job was not—and I did not have the authority, resources, support or infrastructure—to ensure that all of these global affiliates followed the Group’s compliance standards”.
Alison Thewliss (Glasgow Central) (SNP)
I do not want to add a huge amount, but I very much welcome the new clause. As the hon. Member for Oxford East said, there is a big issue of incentive and authority for organisations, particularly for those that facilitate the formation and operation of Scottish limited partnerships in the private fund sector.
There has to be an effort to ensure that compliance with the rules is extended as far as possible. For example, a legal firm may be asked to register an SLP to get it up and going, and operating, but if no buck stops with it, there is no punishment for not ensuring that the SLPs are operating as we would want them to. For example, if a firm asks its client to register a person of significant control, and the client does not do so, where is the incentive for that firm to remove that client altogether? The firm has to decide for itself whether the cost of reputational damage from being named in the press is enough. That is the balance that it has at the moment. It is not obliged not to have that SLP within its client base. There is no comeback and no consequence.
There needs to be some means by which the firm is forced to do something to put that right. If the SLPs under its umbrella do not register a person of significant control, and continue not to register them, there is no fine to that legal firm, as I understand it. The SLP may face a fine—I am trying to get to the bottom of how many fines have been issued to those who have not registered a person of significant control—but there is no comeback to the legal firm, other than potential reputational damage.
The Government need to think about where the buck really stops in these arrangements , and this type of new clause would put some emphasis on the firm to do something about failing to prevent money laundering, rather than allowing things to continue as they are. As I understand it, there is no comeback at the moment to the legal firm that is protecting the SLPs underneath its umbrella.
John Glen
I undertake to address the points raised by the hon. Member for Oxford East. I will come to the point about the directors’ responsibility in my scripted remarks and also to the issue of what provision the fines were imposed under.
On the specific question the hon. Lady asked, the Ministry of Justice’s call for evidence considered a wide range of reforms to the law relating to corporate liability for economic crime. That is against a backdrop of already significant reform in this area in recent years, including the Bribery Act 2010, the Criminal Finances Act 2017 and the introduction of deferred prosecution agreements, which the Government would contend have strengthened the UK’s defences against corporate criminality. The Ministry of Justice is carefully considering the responses received to the call for evidence and is analysing the impacts of the Government’s range of recent reforms in this area. It will respond to its call for evidence in due course. I do not have a specific timetable, but that is the best information I can give the hon. Lady.
New clauses 9 and 15 seek to create a corporate criminal offence of failure to prevent money laundering, with an obligation on the Secretary of State to submit a disqualification order to the court against directors of a company found guilty of such an offence without having adequate anti-money laundering procedures in place. New clause 9 provides that a company or partnership is guilty of a criminal offence where the company’s employee, agent or other service provider commits one of the substantive money laundering offences in part 7 of the Proceeds of Crime Act 2002. The relevant company would have a defence if it could prove that it had adequate procedures in place to prevent its employees or agents from committing such an offence.
The offence is not necessary in view of the extensive reforms to the UK’s anti-money laundering regime that the Government have put in place. The proposed offence is substantively applied to firms that are regulated for anti-money laundering purposes by part 2 of the Money Laundering Regulations 2017. Those require that regulated firms have policies, controls and procedures to mitigate and manage risks of money laundering and terrorist financing. The Government have legislated to require that these policies, controls and procedures are proportionate with regard to the size and nature of the firm’s business and proved by the firm’s senior management. Failure to comply with these requirements is a criminal offence in itself.
The Financial Conduct Authority and other supervisors are additionally able to take action against firms if their measures to counter money laundering are deficient. As was touched on in our exchange earlier, recent regulatory penalties related to firms’ anti-money laundering weaknesses include fines of £163 million for Deutsche Bank in January 2017 and £72 million for Barclays Bank in November 2015. They were a consequence of failures in anti-money laundering measures under the Financial Services and Markets Act 2000.
The new clause also seeks to address challenges that have arisen in apportioning responsibility for corporate failings. Within the financial services sector, that has been addressed through the senior managers regime, which was introduced after the financial crisis. Banks are now required to ensure that a named senior manager has unequivocal responsibility for overseeing the firm’s efforts to counter financial crime. That ensures that firms and individuals can be held to account for failing to put proper systems in place to prevent financial crime. If a relevant firm breaches its anti-money laundering obligations, the FCA can take action against a senior manager if it can prove that they did not take such steps as a person in their position can reasonably have been expected to take to avoid the breach occurring. The enforcement action includes fines and disbarment from undertaking regulated activities. The Government have legislated to extend the senior managers regime to apply across all financial services firms. That will be implemented in due course, and will further the Government’s reform programme. All those requirements are additional to the substantive money laundering offences in the Proceeds of Crime Act, such as entering into arrangements that facilitate the use of criminal property, which apply to any individual or company.
As hon. Members know, the Government have previously introduced two similar offences: the failure to prevent bribery, in 2010, and the failure to prevent the facilitation of UK and foreign tax evasion, in 2017. They are structured in a similar way to the proposed new clause, but they were introduced following clear evidence of gaps in the relevant legal frameworks that were limiting the bringing of effective and dissuasive enforcement proceedings. It is right that the offences that we have already established apply to legal entities, regardless of whether they operate in the regulated sector.
The situation in relation to money laundering is very different. The international standard is set by the Financial Action Task Force, which has been referred to numerous times in the Committee’s discussions. The UK’s money laundering regulations apply to banks, financial institutions, certain professional services firms and other types of entity, and act as gatekeepers to the financial system. As I have said, such firms are already required to have policies and procedures in place to prevent their services from being misused for money laundering.
Subsection (6) of new clause 9 would require all companies, regardless of whether they are incorporated, to have procedures in place to prevent persons connected to them from laundering money. The Government do not believe that that would be appropriate. It would risk making non-regulated firms liable for the actions of their regulated professional advisers. Instead, responsibility for anti-money laundering compliance should rest in the regulated sector, as is currently the case. The new clause would not go beyond the existing regulatory framework in that area, and it would blur where responsibility should lie for anti-money laundering compliance. Therefore, I respectfully ask the hon. Member for Oxford East to withdraw the new clause.
Anneliese Dodds
I am grateful to the Economic Secretary for those helpful explanations and clarifications. Despite his useful response, however, there are a number of areas where I am unclear. First, I appreciate that he has probably anticipated this question, but the Committee may ask why it has taken Government a whole year to assess the responses from their consultation on economic crime. Government frequently work at a far faster pace than that. He said that we will have the analysis of those consultation responses in due course. It would be helpful to know more about why it is taking so long for Government to analyse them.
Secondly, the Economic Secretary spoke about the requirement for all regulated firms to ensure that their policies, controls and procedures are appropriate to prevent money laundering, but there is a question about who assesses that and whose responsibility that is. That takes us back to the issue about there being myriad professional bodies, which all operate subtly different approaches towards regulation in this area. As I said, I appreciate that OPBAS has been created to try to draw them together, but I do not think we heard exactly what the status of that office is—I was trying to concentrate on what the Economic Secretary was saying. I have seen different descriptions of it as a team, an office and an organisation. It would be helpful to have a clearer indication, particularly because those professional bodies are, as I understand it, required to contribute financially to OPBAS, so a number of them are keen to understand what is happening with it. Furthermore, HMRC is not a member of it, as I said before, so the concern about a lack of regulatory co-ordination persists.
Finally, the Economic Secretary referred approvingly to the senior managers regime that has been brought in since the financial crisis, which looks like a positive step initially—of course, the HSBC problems occurred following that. In any case, as I understand it, the actual operation of this new regime and its extension are quite different from, for example, what was recommended by the Parliamentary Commission on Banking Standards. Under this approach, the burden to show that senior managers failed to take appropriate steps will be on the regulator, rather than the senior managers themselves.
That is different from the approach taken in many other areas, including road traffic, health and safety at work, the Bribery Act 2010—which the Minister referred to—terrorist legislation, the Misuse of Drugs Act 1971 and so on. It would be helpful to understand why, with the extension of this regime, the burden of proof has essentially now been placed on the shoulders of the regulator, rather than the shoulders of the managers.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 11—Due diligence—
“(1) For the purposes of preventing money laundering, when a company is formed, any company formation agent providing formation services must ensure that the identity and business risk profile of all beneficial owners of the company are established in accordance with—
(a) the customer due diligence measures under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692),
(b) regulations made under section 41 of this Act, or
(c) the Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on anti-money laundering measures.
(2) For the purposes of subsection (1), Companies House is to be treated as a ‘company formation agent’.”
This new clause would ensure that when a company is formed in the UK, the relevant formation services must identify the beneficial owners of the company. It will also treat Companies House as a “company formation agent”, ensuring that the data on the public register of beneficial ownership for companies is accurate.
New clause 12—Companies House: due diligence and resources—
“(1) For the purposes of preventing money laundering, the Companies Act 2006 is amended as follows.
(2) In section 1061 (the registrar’s functions) after subsection (1) insert—
‘(1A) Functions directed by the Secretary of State under subsection (1)(b) must include due diligence on a person wishing to register a company.
(1B) In this section “due diligence” has the same meaning as “customer due diligence measures” in regulation 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 692/2017).’
(3) In section 1063 (Fees payable to the registrar), in subsection (2)(a) after ‘Secretary of State’ insert ‘including the duty of due diligence under section 1061(1A).’”
This new clause would amend the duties of Companies House to ensure that any person wishing to register a company must be checked for due diligence by Companies House, in line with the measures included in the Money Laundering Regulations 2017. It also ensures that the Secretary of State can charge fees for due diligence checks to cover costs incurred by Companies House.
New clause 13—UK bank accounts—
“(1) For the purposes of tackling money laundering, the Companies Act 2006 is amended as follows.
(2) In section 853A (duty to deliver confirmation statements), after subsection (1) insert—
‘(1A) In subsection (1) “information” includes such information as is able to demonstrate that the company has a UK bank account.
(1B) Any company that is unable to provide the information required in subsection (1A) is liable to a fee which may be prescribed by regulations.’”
This new clause would ensure that all companies wishing to be created in the UK must provide evidence of a UK bank account to ensure it has gone through proper money laundering checks by a UK supervising body. If a company is unable to provide proof then they are liable to a fee which will cover the cost of such checks.
Anneliese Dodds
It is a pleasure to present the new clauses to the Committee. As colleagues will know, they all essentially call for an increase in the due diligence and anti-money laundering checks for those who register a company through Companies House.
There is a clear rationale for the new clauses. Around 40% of incorporations in the UK every year are done directly through Companies House, which in many ways offers an easy and helpful service. It is very quick; it is one of the fastest and easiest ways to form a company—it costs only £12 and takes a matter of minutes to complete the necessary paperwork online. That is all very positive, but the negative side comes from the risks that result from an approach where there is insufficient due diligence on the data submitted through that route.
The problem, as I am sure Ministers are well aware—I have asked a number of parliamentary question to probe this—is that Companies House is exempt from the Money Laundering Regulations 2017 because of its not-for-profit status and the fact that it is not a company service provider. That means that a huge number of companies are created without any checks being made on the person setting up the company or the source of their wealth. We are talking about 251,628 companies last year.
As I said, there are very positive aspects to being able to create companies quickly, but the quality of data that results from that is potentially very poor; my hon. Friend the Member for Bishop Auckland talked of , potentially, 10% of company reports not including the appropriate information. There are some cases that might almost be humorous, but given the the circumstances they are deeply disturbing and indicate how little due diligence is taking place. An investigative journalist, Oliver Bullough, created a company called “Crooked Crook Crook Ltd.” With that name, many of us might think that this would be a company we would want to look into, but no, the confirmation documents were delivered within 36 hours. He details in an article, which colleagues can look up, should they wish, how easy it was to create that company. If he had not reported his activities in an article for a media outlet, his company could have gone on to partake in a myriad of activities, showing just how cheap, easy and disposable company formation through Companies House can be.
There are many concerns about that. We have a new regime in place now through the money laundering regulations, which covers trust and company service providers—TCSPs—as we have already mentioned. We have some amendments further down the agenda looking at some of those, because there is a particular issue around the operations of non-UK TCSPs. It is surely the case that when a company can be created through a TCSP, that TCSP has to follow all money laundering legislation, but when it does not go through a TCSP, and there is no money laundering legislation applying to it, we should be very concerned. Potentially, that money laundering regulation is undermined by having this massive loophole in place.
There are many disturbing findings from the data from Companies House that has been crunched by different investigative journalists and NGOs. We find that 4,000 beneficial owners named in the Companies House register are under the age of two. My daughter is two. She is really good at lots of things, such as climbing on to chairs. I am not sure that she or any of her playmates would be very good at being a person exercising significant control within a company. There are five beneficial owners registered who control more than 6,000 companies. Perhaps each one of those five are exercising all of their responsibilities perfectly in line with legislation and probity, but it must be very difficult for them to do that. We also have the fact that companies from secrecy jurisdictions can then be registered by Companies House through a UK company, or another formation agent, without there being any background or due diligence check.
I realise that some of these cases might sound a little bit silly, but potentially we are talking about some very worrying examples where there has not been that due diligence and there should have been. There was recently a BBC investigation—we have already referred to it within this Committee—into the case where a UK company registered at a Potters Bar address appeared to facilitate very complex financial arrangements involving the former President of Ukraine. At least £1.2 billion has been funnelled through companies registered at the same Potters Bar address, some of them potentially linked to the very complex situation where huge funds from the Eurovision song contest and lots of other activities seem to have somehow ended up in this company through very unclear routes.
It is concerning that we are in this kind of situation. Because of that, we find a number of professionals highlighting this as an area where we need to have reform. Frances Coulson, the head of insolvency and litigation at Moon Beever Solicitors, has been quoted as saying that this money is passing through Britain, through companies created with insufficient due diligence. She said:
“This is going on now and all the time…All the indicators are that it’s getting worse.”
And she said that,
“better due diligence—such as checking identification documents—by company formation agents and the UK corporate register, Companies House, would help combat fraud.”
Even if we do not manage to pass these new clauses at this stage, I hope that we will at least get some clarification on some of the rather unclear aspects of the regulatory regime. First, there is the role of Companies House. We are getting only a bit of an inkling of the role of Companies House through parliamentary questions. One response, given on 12 October 2017, said that the Government’s view is that Companies House
“does not have a front-line role in combatting money laundering”.
In the same month we were told:
“Companies House does not have powers to verify the authenticity of company directors, secretaries and registered office addresses. However, it does carry out a number of checks on all information received; ensuring it is valid, complete, correctly formatted and in compliance with company filing requirements.”
However, when we try to find out what this verification process involves, the picture gets rather complicated. Is any automated verification of beneficial ownership information occurring? I tried to find out in February, and no, there are “no current plans” to undertake that; however, Companies House is, it seems, undertaking activities, including,
“contacting companies where they believe the company has misunderstood the requirements…pursuing companies that have not provided PSC information”—
it seems that there is a huge number they will have to pursue, given the statistics discussed by my hon. Friend the Member for Bishop Auckland,
“following up with companies and PSCs where they have issued notices to their PSC (asking the PSCs to provide them with information)”—
PSCs being “people with significant control”—and
“seeking compliance from companies where there has been a complaint about missing or incorrect PSC information.”
This was where the picture got more confused. [Interruption.]
I may have heard the Minister suggesting that I was rabbiting on. I am terribly sorry, but some of us are concerned about these matters and a number of professionals have contacted us about their concerns, so it is absolutely right that we deal with them in this Committee.
I tried to find out how many reports have been made about money laundering through the “report it” facility that Companies House has set up. The Minister of State, Department for Digital, Culture, Media and Sport, the hon. Member for Stourbridge (Margot James), responded to me on 19 December, stating:
“Eight reports about money laundering have been made through the Companies House report it facility.”
However, I was then told on 20 December that the new “Report It Now” feature had led to Companies House
“receiving between 180-200 contacts a day through this service.”
That seems like quite a big gap. Will the Economic Secretary please indicate how many of those reports are about money laundering? Is it eight, or is it 180 to 200 a day?
I have been very concerned by the Government’s claim, in the same written answer:
“Higher risk company formation activities in the UK will generally be done via Trust or Company Service Providers, who are subject to the Money Laundering Regulations.”
I want to illustrate that with one last example, which I was told about yesterday and is quite concerning. It is the case of an individual who has previously described himself as “The Chicken Thief”. That is his name as a person of significant control within the Companies House database. His real name is thought to be Antonio Righi—a mafia kingpin in Italy. If someone searches for his name on the Companies House website, as an academic did yesterday before informing me about this, they get a link to Business Bank Italy Ltd.
All banks should be regulated through the FCA nowadays. We are supposed to have that proper approach in place. The use of the word “bank” in a company name is restricted. Any would-be bank has needed to obtain a letter or email of non-objection from the FCA before being allowed to operate as a bank. Yet we see this company still apparently registered with Companies House.
That is deeply worrying because the individual concerned has been named as an active member of the Camorra—a very problematic criminal network that operates in Italy, with links in many other countries. The revelations about “The Chicken Thief” are not new, so one would have thought that Business Bank Italy would have been looked into carefully by the Government, but apparently not, and it still appears to be registered on the Companies House website. I hope the Minister can indicate why that is and whether he will look into this matter, if he has not done so already.
Alison Thewliss
I support the new clauses proposed by the hon. Member for Oxford East. They flag up a huge loophole in the anti-money laundering regime, which is the inability of Companies House to do anything about what comes through its door. By not acting on information, and expecting company formation agents to behave in a different way from the way the Government’s own agency behaves, the Government become complicit in the money laundering that is clearly going on through companies that are registered for only £12.
The situation is curious. Last week I sat on a delegated legislation Committee that discussed passport fees and the need for full cost recovery of those fees by the Government because the Passport Agency wants to ensure that it is not making a loss. There is an argument about whether passports are too expensive, which I think they are, but it costs £12 for the registration of a company. If Companies House is not getting full-cost recovery for that, and that is the reason for not carrying out the due diligence that ought to be done on anti-money laundering, that is an argument to find a reasonable cost of registration that would allow Companies House to operate, make money and have sufficient funds to carry out the due diligence it ought to. If there is an incentive not to play by the rules, and the Government are incentivising that through the operation of its own agency, that is nonsense. That is highlighted in Global Witness’s “The Idiot’s Guide to Money Laundering”:
“Step 4: open your company direct with the corporate registry—they don’t do any checks on you!”
It seems ludicrous that the Government are going to encourage agents who want to set up companies for people to do that and go through the anti-money laundering things that they have to do, but the Government are not enforcing that. That seems absolutely ludicrous. I cannot for the life of me think how the Government will defend that unjustifiable loophole.
Transparency International reported that in the UK last year, 251,628 companies were created with no checks being made on the person setting up the company or their source of wealth. It is a scandal that these companies can be set up, facilitated by the Government, because Companies House has to accept their documents in good faith without doing due diligence checks that we would expect of other agents. If they are not going to support the new clauses, I urge the Government to propose a measure themselves, because this simply cannot continue.
John Glen
The new clauses are broadly similar in purpose and intention. Each would expand the role that Companies House plays in relation to anti-money laundering checks, whether by conducting due diligence directly, confirming that due diligence has been carried out, or confirming that a company seeking to be incorporated has a UK bank account.
I will turn to the practical difficulties of these proposals in a moment, but the first point to make in connection with each is that the UK’s anti-money laundering regime is undergoing an assessment by the Financial Action Task Force. The FATF is the international standard setter in this area and will report publicly later this year on its findings. The report will consider matters, including the effectiveness of how the UK prevents the misuse of legal persons, such as companies, for money laundering purposes. Hon. Members will appreciate that this report will greatly inform the future of the UK’s anti-money laundering regime, including in relation to how we can best prevent the misuse of legal entities, some of which have been described in the course of this debate.
Once the FATF has reported, the Government will actively consider its conclusions, including those in relation to any areas in which the UK’s anti-money laundering framework can be improved. These new clauses pre-empt the review process already under way. It would be more sensible to allow the review to identify specific areas where action is necessary before making further changes to our AML regime.
New clause 10 would require anti-money laundering checks to be undertaken before any UK company can be incorporated by preventing the registrar of companies from registering a company unless she is satisfied that such checks have been carried out. It then says that the registrar is entitled to accept the anti-money laundering registration number of the UK body that has submitted the application as evidence that such checks have taken place. The effect would be to require all incorporations to be made through a UK body regulated for anti-money laundering purposes. This would prevent people from applying directly to Companies House to register and set up their own business; any person seeking to set up a business would be required to use the services of a professional agent that is also regulated for anti-money laundering purposes, and pay for those services, which will in turn increase the cost of setting up businesses.
The proposed new clause assumes that all bad companies are set up directly with Companies House, and that only companies set up through the agency of a regulated professional can be trusted. That is simply not true. Only the simplest companies—those using standard-form constitutions—can be set up directly with Companies House online in the way described by the hon. Member for Glasgow Central. Typically they are self-standing, family-run and family-operated businesses. More complex corporate structures will, in contrast, frequently be established through trust or company service providers. The UK’s national risk assessment of money laundering and terrorist financing noted last year that
“While companies can be registered directly with Companies House, criminals continue to make use of third party TCSPs, to establish the structures within which illegitimate activity subsequently takes place.”
The fact that TCSPs are legally required to conduct customer due diligence does not in and of itself solve the problem. The new clause would therefore impose an across-the-board administrative burden on individuals seeking to establish companies, without adding any significant new obstacles to money laundering. Companies incorporated directly through Companies House are overwhelmingly likely to interact with the UK regulated sector, and so face anti-money laundering checks either by having a UK bank account or through having a UK accountant.
We discussed in the previous debate the 22 different regimes, and this speaks to the necessity for some degree of complexity to minimise the risks as far as possible. New clauses 11 and 12 are similar in outcome to new clause 10: they would require company formation agents—defined for these purposes as including the UK registrar of companies at Companies House—to conduct customer due diligence to establish the identity and risk profile of all beneficial owners of such companies registered at Companies House. The key difference is the reclassification of Companies House, which would now be required to deliver its statutory duties as if it were a private sector business. The accompanying explanatory statement suggests that these clauses will identify the beneficial owners of a company and make information held at Companies House more accurate. Although similar to the proposed new clause 10, these new clauses would go further in imposing expansive new obligations upon Companies House, requiring significant changes to the UK company law system.
Given the overlap with the lead new clause group, I will focus on the most novel element: the proposal that Companies House be treated as a company formation agent. Since the registrar of companies was first created, it has been required to accept any application that is validly and correctly submitted, and to duly incorporate the company as requested. Companies House does not help customers through this process, and is responsible solely for conducting the process of company incorporation. Company formation agents, known as TCSPs, are entirely distinct from Companies House. They are already subject to due diligence obligations through the Money Laundering Regulations 2017, and these extend to being required to terminate any existing business relationship when they are unable to meet their due diligence obligations. In contrast, Companies House has no legal right to refuse or decline a request to incorporate a company if the application is valid, and therefore it does not have the ability to decline a business relationship in the way that TCSPs must when they cannot discharge their due diligence obligations. If accepted, these amendments would essentially require fundamental reform of the Companies Act 2006.
To emphasise the scale of that proposed reform, 3.9 million companies are currently registered at Companies House and approximately 600,000 new companies register each year. The impact on resource to carry out due diligence on that number of companies would be considerable. The burdens and cost would fall on those 3.9 million companies, and specifically on the vast majority of legitimate companies, many of which are very small businesses. They would be forced to pay to duplicate the cost of due diligence checks that are already conducted by banks and other regulated professionals. The overall cost to the UK economy could run into hundreds of millions of pounds each year.
New clause 13 would amend part 24 of the Companies Act so as to require UK companies to establish a UK bank account and evidence that to Companies House on an annual basis or pay a fee or financial penalty. As with other new clauses in this group, new clause 13 will not achieve its stated intention. The wider purpose behind that part of the Act is to provide a simple mechanism for companies to confirm that corporate information registered with Companies House, as required under other obligations, is accurate and up to date in relation to company share capital, business activities and the address of a company’s registered office.
That is not to say that the new clause’s underlying principle does not merit further consideration. Evidence of a UK bank account is intended to demonstrate that a company has been through proper money laundering checks by a UK supervising body related to the financial activities of that company. However, the practical implications need careful consideration. To make the proposal operational, Companies House would require new systems with access to UK and international banking information. The costs associated with the development and operation of such systems would inevitably be large and would need to be recovered from UK businesses. Once again, that would necessarily establish a new reporting burden that would essentially target the overwhelming majority of law-abiding UK businesses.
The new clause suggests that companies that cannot provide evidence that they have a UK bank account would be liable to a fee, although that could better be characterised as a penalty—its purpose is not specified. If it is intended to incentivise companies that are established to launder money to open a UK bank account, it would need to be set sufficiently high to achieve that objective, which would be disproportionate to the notional offence of not providing evidence of a UK bank account.
The Government are already active in that sphere. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, regulated bodies such as banks are obliged to carry out CDD checks on their customers on an ongoing basis. That is a rich field of data, and the regulated sector is already closely engaged with UK law enforcement to identify and report suspicious behaviour. In parallel, Companies House has an extensive outreach programme to the regulated sector to promote use of its data and encourage bodies to report possible errors back to it.
To sum up, a simple demonstration of a bank account is a blunt instrument. As drafted, the new clause simply adds a burden to UK companies to report more information. We should not proceed down that path without being much clearer that the information we require them to disclose is valuable, that it is necessary and that it cannot be achieved by other less burdensome means. On that basis, I ask the hon. Member for Oxford East to withdraw the amendment.
Anneliese Dodds
I am grateful to the Economic Secretary for those clarifications. He made several helpful points, but some concerns remain. He mentioned the FATF process, which the Committee has discussed previously, and seemed to suggest that we should not make alterations in this area of anti-money laundering activity because of the ongoing FATF assessment. Of course, that argument could stop action in any other area, because the FATF is looking at anti-money laundering and anti-corruption provisions across the board, so it is not clear that it is completely convincing. Furthermore, I understand that representations have been made to the FATF as part of its review that change is needed in this area, which suggests that the argument is the other way round. The Economic Secretary also suggested that there would be a much higher cost for those that want to incorporate through a TCSP. In practice, as I understand it, the cost may not be substantial—only a couple of pounds more in many cases.
Hannah Bardell
Does the hon. Lady agree that we are letting our citizens down if we do not legislate properly and close these loopholes? I am sure we have all had constituency cases where people have lost money to unscrupulous companies and company owners. We have an opportunity to take action, and we must take it. The Government are letting citizens down if they do not accept the new clauses.
Anneliese Dodds
I am grateful to the hon. Lady for making the point clearly that our proposal has been portrayed as only a burden, when it could help to prevent our constituents from being ripped off by unscrupulous individuals who are able to set themselves up as a company with only minimum requirements for due diligence. As I said, they can be there by day, fly off by night, and leave the unfortunate person who dealt with that company in a very difficult position.
To end my remarks specifically on the Minister’s comments on new clause 13, many of us are worried that, in practice, there are TCSPs that offer UK company formation with a range of optional services, including setting up bank accounts in other jurisdictions such as Latvia, Belize, Switzerland and Cyprus. That would not necessarily be a problem, were it not for the fact that, time and again, we have seen in the cases we have discussed in this Committee that reliance on the third parties—the banks in those other countries—does not lead to a real assurance that money laundering provisions are being followed. The reality is quite the opposite.
In the Russian laundromat scandal, which we have already talked about, of the 440 UK shell companies used in the scheme—in itself, a staggering statistic—392 of them had Baltic bank accounts, with 270 UK firms using Latvian banks and 122 using banks in Estonia. It may be that we are fully confident in every case that anti-money laundering regulations were followed in those countries, but given some of what came out of the Russian laundromat scandal, it could be suggested that that is not the case.
We do need to get at this problem through another route. We need reform of the Companies House system, but we also need the use of another prong which is requiring a UK bank account.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It feels a little like going out of the freezer and into the fire, because it is rather warm on this side of the Committee Room, but I am sure that we will be rewarded somewhere else for our endurance.
Anneliese Dodds
We tabled the new clause because ineffective anti-money laundering supervision has a clear and obvious link with inadequate compliance and with low and poor-quality reporting of suspicious activity to the National Crime Agency. Research by a number of non-governmental organisations, particularly Transparency International, has indicated serious failings in the current framework for supervising money laundering compliance in the UK, especially with respect to trust and company service providers.
Under the Money Laundering Regulations 2017, only TCSPs carrying on business in the UK—that is their formulation in the legislation—have to register with an anti-money laundering supervisor and comply with MLR 2017. That means of course that TCSPs with no UK presence can incorporate UK companies without any oversight from an AML supervisor. They do not have to comply with UK standards for money laundering checks. We have seen a number of clear examples—I will talk about some in a moment—where that has allowed non-UK TCSPs to incorporate UK companies that have subsequently been used in large-scale money laundering schemes. I think many of the concerns raised a moment ago around undercutting existing legislation and the lack of a fair playing field for UK TCSPs come up again in this regard.
In 2012 the International Consortium of Investigative Journalists showed how a number of UK individuals offering company services had moved their base of operations outside our country but continued to form, and act as nominee directors for, UK companies. There are two examples that are particularly important. The first was Jesse Grant Hester, who was originally from the UK and who moved to Cyprus to form Atlas Corporate Services Ltd before moving to Dubai and, finally, Mauritius—he is somebody who has been lucky enough to travel much in life. Those jurisdictions have all been identified as presenting high money laundering risks. Mauritius in particular is very concerning: it scored 5.92 out of 10 on the Basel Institute on Governance money laundering risk index. Ten is the highest level of money laundering risk and zero is the least, so it is well up there. Jesse Grant Hester appeared on numerous occasions as a nominee director for companies embroiled in corruption scandals. In the Moldovan bank theft that we talked about earlier, he signed fake promissory notes using an alias on behalf of a UK firm, Goldbridge Trading Ltd, allowing £444 million to be stolen. Atlas Corporate Services is associated with eight people who, between them, have held directorships of 3,613 UK companies. Again, that is a staggering number of companies to be held by just eight people. As we discussed, that scandal caused enormous problems for the country of Moldova.
Another UK resident who became internationally renowned, although not in a positive way, for his company formation activities, is Ian Taylor. That is not the famous social policy academic, who I had the pleasure of working with, but another Ian Taylor. He also moved around a lot: he moved to Vanuatu.
Anneliese Dodds
Oh, there was a Tory MP as well. Goodness—the name is frequently used. He moved to Vanuatu after he was banned from being a corporate director, first in New Zealand in 2011 and then in the UK in 2015, as a result of his companies’ involvement in numerous scandals, including a land banking scam in Somerset. Vanuatu’s self-assessment on money laundering risk found that its TCSP sector was among the most vulnerable to such activity. In 2015 the Asia/Pacific Group on Money Laundering found serious deficiencies in Vanuatu’s AML system. Despite being banned in the UK, Taylor seems to have retained a UK presence. Various investigations have identified the circle of nominee directors that he works with. One of them is a Vanuatu resident who is a director of more than 61 companies. He took over from Taylor as a director of 20 of them on the same date.
Those examples show that physically moving out of the UK does not result in a lack of activity in the UK. Networks of associates make it difficult to stop the formation of UK companies by individuals who have already been disqualified here. Such individuals, who have been shown to have engaged in money laundering activities or have otherwise been disqualified or viewed as not competent in this arena, can function in other countries and create companies. The checking that should go on does not happen, and there is inadequate anti-money laundering supervision. We do not have a means of dealing with that, because we do not have a regulatory system for TCSPs that are not based in countries with appropriate anti-money laundering provisions. That is not currently illegal, which is why we want to change the legal situation.
John Glen
I am grateful to the hon. Lady for setting out her new clause, which would prohibit TCSPs that do not conduct business in the UK from incorporating UK companies, unless they are overseen by a UK anti-money laundering supervisor. As hon. Members will know, the Money Laundering Regulations 2017 specifically provide for TCSPs conducting business in the UK to be subject to a fitness and propriety test and to register with either Her Majesty’s Revenue and Customs or the Financial Conduct Authority. In borderline cases where it is unclear whether a TCSP is conducting business in the UK—in which case it would be supervised by a UK anti-money laundering supervisor—HMRC would consider on a case-by-case basis whether registration for supervision is necessary. This acts as an anti-evasion mechanism preventing TCSPs from artificially claiming that they are outside the scope of the UK’s anti-money laundering regime.
The hon. Member for Oxford East asked earlier where this was based. The Government recently established the Office for Professional Body Anti-Money Laundering Supervision, known as OPBAS, within the Financial Conduct Authority. It works to secure consistently high standards of AML supervision of professional bodies, including TCSPs. These reforms follow the identification of risks associated with TCSPs in the Government’s 2016 action plan for anti-money laundering and counter-terrorist financing. This found that service sectors such as TCSPs were a significant money-laundering threat.
Although it is for anti-money laundering supervisors to determine their areas of focus, they are required to have regard for the UK’s national risk assessment of money laundering and terrorist financing when assessing risks in their own sector. The risk assessment that the Government published in October last year concludes:
“The highest risk TCSPs are assessed to be UK TCSPs which offer a wide range of services (including nominee directors, registered office services, and banking facilities)”.
Additionally, individual anti-money laundering supervisors are under a duty to identify and assess the international and domestic risks of money laundering and terrorist financing to which their sectors are subject.
Helen Goodman
I am surprised by what the Minister is saying. He obviously did not listen to the BBC “Analysis” programme that was broadcast about three weeks ago on the role of overseas TCSPs. We think it is great when people build real-life factories as a jumping-off point into the single market, but it is evident that TCSPs and banks located in the Baltic states, which do not have such good anti-money laundering regulatory regimes, attract money and are used as a jumping-off point to move that money into the European system. Does the Minister really think that the anti-money laundering regimes throughout the European Union are as effective the one in the UK?
John Glen
I cannot comment on the specific cases that the hon. Lady mentions, because I have not seen or studied them. I imagine that there is a degree of variability in the effectiveness of regimes, but I am trying to set out the Government’s rationale for what we have in place. I do not suggest that it is perfect, but some of the developments have occurred in response to shortcomings that have been identified.
The individual anti-money laundering supervisors are under a duty to identify and assess international and domestic risks, including the money laundering and terrorism risk, which ensures that the most intensive supervision is applied where the highest risks of money laundering exist. The establishment of OPBAS will assist with the consistent identification of such risks across the TCSP sector. Our national risk assessment makes it clear that the Government are aware of the money laundering risks connected with TCSPs, and further reform in the area should take account of the conclusions of the ongoing FATF review. I assure Opposition Members that the regime is a searching and exacting one. I know from ministerial meetings concerning preparations for it that the evaluation will be exacting. We expect the observations to be meaningful, and we will need to respond carefully to them. However, until we receive the outcome of that review of the UK’s anti-money laundering regime and of the experience of OPBAS as its role develops, it would not be appropriate to adopt the amendment.
Hon. Members should be mindful of the fact that anti-money laundering supervision around the world follows a territorial model. Simply requiring non-UK TCSPs to have a UK supervisor when they set up UK companies will not address the challenges of extra-territorial supervision. Effective anti-money laundering supervision depends on measures that include supervisory on-site visits and close engagement with higher-risk firms. Requiring a UK supervisor to do that in relation to a non-UK firm will not, in and of itself, address the issue that hon. Members have identified.
As was noted in the other place, the most effective means of combating international money laundering is cross-border co-operation to drive up the standards of overseas supervision and enforcement. For those reasons, we have imposed a duty on each UK anti-money laundering supervisor to take such steps as they consider appropriate to co-operate with overseas authorities. That is the agenda we pursue through the global FATF process. I therefore respectfully ask the hon. Lady to withdraw the new clause.
Anneliese Dodds
I am grateful to the Minister for those remarks and clarifications. They have been genuinely helpful, but I regret that some areas are still rather unclear to me; perhaps they are not to other Committee members. He stated that the highest-risk TCSPs are assessed to be UK ones, but it has not been spelled out why. Perhaps he could write to me about that.
Anneliese Dodds
I am grateful to the Minister for offering to look into that. We must always be wary of talking about a general pattern of activity as necessarily reflecting the risk profile of that overall activity. Among those TCPS, there could be overseas ones that are not appropriately regulated and that also offer a wide range of services, in the same way as some UK TCSPs do.
I am also a bit confused about the professional regulators. As the Minister said, there are about 22 of them, and then on top of that we stick Her Majesty’s Revenue and Customs, the Financial Conduct Authority and so on. As I understand it, the professional regulators do not have members based in other countries; they cover only UK residents. We are talking about, for example, the Law Society of Scotland and the Law Society of England and Wales—professional bodies dealing with UK individuals. We are not talking about professional associations covering professionals in other countries.
The Minister seemed to talk about a process of liaison between these organisations and their counterparts in other countries. I am sure we all want to encourage that, because it sounds like a very good idea. Information sharing is wonderful, but information sharing is not the same as having an appropriate process of regulation to ensure that there is compliance with anti-money laundering requirements.
The Minister said that the approach was an extraterritorial one, because it affects bodies in other countries. That is absolutely right, but those bodies then interact with our company formation procedure. That is the reason why we, as a country, have a stake in this process—a rather large one, given the reputational damage that seems to be being caused by the activities of some unregulated or inappropriately regulated TCSPs. I will be pressing the new clause to a vote.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
The new clause looks to ensure that standards published by the Financial Action Task Force in relation to combating money laundering, terrorist financing and other threats to the integrity of the financial system can be easily implemented in this country. We are also seeking to identify or revoke a designation of a high-risk country, taking account of best international practice, including EU sanctions regimes.
We have talked a bit about the FATF in the Committee. As colleagues will know, its objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. It is a policy-making body that works to generate political will to bring about national legislative and regulatory reforms. We have talked about its reporting cycle already and the fact that the UK is currently being investigated in order for the FATF to report on us later in the year.
John Glen
I just want to clarify that, while I would not profess to be an expert on Pakistan’s compliance with the FATF, the concerns raised about its recent greylisting were around the specific handling of various banned terrorist organisations. I would not wish to cast any wider doubt over its intentions to improve the provision of services.
Anneliese Dodds
I thank the Minister for that helpful clarification. It is helpful to know the exact locus of FATF activity or the concerns about Pakistan that were focused on terrorist financing. That is not the area we are focused on now, but such financing and money laundering often go hand in hand.
Given the potential effects of such a ruling—we have talked about that in relation to Pakistan—we think it necessary that Ministers should have the flexibility to ensure that FATF standards can be implemented as soon as possible in our country in order to be on top of new international standards. That is particularly important because the UK was a founding member of the FATF, so we need to show that we are at the cutting edge of implementing its requirements.
As I mentioned, we also need to be able to identify or revoke high-risk countries quickly, taking account of the FATF’s standards and given the effect that it can have on the countries themselves and also on our reputation. If we are viewed as not following FATF recommendations, that prevents the co-ordinated approach that the FATF was set up to promote in the first place.
Finally on this amendment, we hope that Ministers will take account of aligning the designations with our EU partners. We have talked consistently in our deliberations about the need for co-ordination, which of course makes all the mechanisms much more effective. When they are not co-ordinated, there can be loopholes. In that regard, it is important to mention the case of Russia. In 2014, the Arms Export Controls Committees—we talked about their composition when we talked about scrutiny arrangements—reported that more than 200 licences to sell British weapons to Russia, including missile-launching equipment, were still in place, despite David Cameron’s claim that the Government had imposed an absolute arms embargo against Russia in alignment with the rest of the EU. We really need to make sure that that alignment is genuine in practice, not just on the surface and rhetorical.
John Glen
New clause 16 would limit amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to those that would implement standards published by the Financial Action Task Force, or those whose purpose was identifying or revoking a designation of a high-risk third country. The 2017 regulations transpose the fourth EU anti-money laundering directive, which was in turn derived from the most recent major updates to the FATF standards, which were made in 2012. As the hon. Lady acknowledged, the UK is a founder member of the FATF and is committed to playing a leading role in its continuing work. It is right for the Government to have the power to update the UK regime when such standards change.
There are, however, several areas where the UK’s anti-money laundering regime already goes beyond those standards. Our recently established register of trusts generating tax consequences, for example, goes beyond the standards set by the FATF. Similarly, the UK announced at the time of the 2015 Budget that we intended to regulate virtual currency exchanges for AML purposes—an objective that was accomplished through negotiation of the fifth EU anti-money laundering directive—but that was not required by the FATF. So although we will remain aligned with the FATF standards after the UK ceases to be a member of the EU, our anti-money laundering regime exceeds those standards in certain areas.
The Government are determined to ensure that our defences against misuse of a financial system remain ahead of global standards rather than solely reflecting them. That is reflected in our commitment to the establishment of a public register of the beneficial ownership of non-UK companies that own UK property, which the Committee debated earlier, even if we did not agree on the timeline for it. The new clause would reduce our ability to do so. Under the power in question, the UK’s anti-money laundering regime could not go further in areas where we would otherwise want to.
As I said previously, in debating amendment 7, and as my right hon. Friend the Minister said about new clause 3, we do not believe that a bar on new offences is the right way to address the concerns raised by Lord Judge and others. We have instead tabled amendments to ensure that the power is used only where it is needed, and that Ministers are properly accountable to Parliament for it.
Ensuring that we can make regulations to prevent, or to enable or facilitate the detection or investigation of, money laundering or terrorist financing, as well as to implement the standards of the FATF, is the most certain method of placing future changes to our anti-money laundering system on a sound legal basis. The new clause would limit our ability to do so in the future, and I am sure that is not the intention behind it. I respectfully suggest that the hon. Lady might withdraw it.
Anneliese Dodds
I am grateful to the Minister for his explanation. It may be the fact that we have been in this room for a few hours, but I am struggling a little with, in particular, the suggestion that new clause 16 would somehow tie the UK’s hands in implementing additional requirements beyond the FATF standards.
The Minister referred to the public register of property owned by non-UK entities. We had a discussion about that, but he is right: it would arguably be an innovation in the UK. Of course it is one that we need more than other countries, because of the use of our property market in many such cases, and the exponential rise in house prices. He could have talked—although he did not—about the register of beneficial ownership of companies being an innovation as well, but countries such as the Netherlands and Norway are putting those into practice anyway, so perhaps we are not quite as far-reaching in what we are doing as we might suggest. Particularly in relation to the charges and fines levied against those found guilty of money laundering offences, we seem to be in a different position from that of our North American counterparts, for example, as we have discussed. None the less, it is not clear how the new clause would stop us going further than those other jurisdictions where we wished to do so. It says that we would take account of the
“best international practice including EU sanctions regimes”,
not that we would be led by it.
Helen Goodman
On a point of order, Dame Cheryl, in the light of what the Minister said earlier, I would like to read precisely what was published by The Independent. I misinterpreted it and, consequently, I misled the Committee. I wish to apologise to him and to the Committee for that. This is what The Independent published in 2014:
“According to Electoral Commission records, New Century Media gave the Conservatives £85,000 in the months leading up to the 2010 general election…New Century represents the personal foundation of the Ukrainian billionaire Dmitry Firtash, who has been indicted on bribery and corruption charges, which he denies, in the United States…David Burnside, New Century’s executive chairman, has made…claims about his connections with senior Tories…The company has paid for a table at the last four Conservative summer balls and paid for…the International Development minister”—
who is now the Minister for Europe and the Americas—to be its guest
“at Conservative events at a cost of…£800”.
I am sorry. I misread it and misunderstood it, and consequently I misled the Committee.
The Chair
The hon. Lady has had the opportunity to put that on the record. If the Minister wants to add something, he may.
Sir Alan Duncan
May I thank the hon. Lady for her most gracious withdrawal, which sets the record straight? I appreciate the manner in which she did it.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It is good that we can continue proceedings, because there are many matters that we still need to consider, not least this new clause and the others on the selection list. I am grateful for the opportunity to do so.
New clause 17 requires a public consultation on corporate liability for money laundering within six months. We have already discussed what occurred with the Government’s evidence-gathering exercise—as I think they described it—in relation to a broader economic crime offence, and how the results of that exercise have been with the Government since last March. We still have no indication of how that will be dealt with, aside from the Economic Secretary’s helpful remark that it will be dealt with in due course. I know he always tries to be helpful, but I am afraid that that is not good enough for those of us who want to see change in this area.
We are specifically requesting a public consultation to get the process moving and to promote it, not least because of what the Government have committed to—or at least, what past Conservative leaders have committed to. In 2016, at the time of the anti-corruption summit, David Cameron wrote an article for The Guardian in which he claimed:
“In the UK, in addition to prosecuting companies that fail to prevent bribery and tax evasion”—
Sanctions and Anti-Money Laundering Bill [ Lords ] (Sixth sitting)
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Chair
Before we resume line-by-line consideration of the Bill, will everyone check that they have their electronic devices turned off or to silent mode? I remind Members of Mr Speaker’s rule that teas and coffees are not allowed during sittings.
New Clause 1
Public registers of beneficial ownership of companies in the British overseas territories
“(1) For the purpose of preventing money laundering, the Secretary of State must provide all reasonable assistance to the governments of—
(a) Anguilla;
(b) Bermuda;
(c) the British Virgin Islands;
(d) the Cayman Islands;
(e) Montserrat; and
(f) the Turks and Caicos Islands,
to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction.
(2) No later than 1 January 2019 the Secretary of State must prepare an Order in Council in respect of any British overseas territories listed in subsection (1) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register by 1 January 2020.
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”—(Helen Goodman.)
This new clause would require the Secretary of State to take steps to ensure the governments of specified British overseas territories introduce public registers of beneficial ownership of companies.
Brought up, read the First time, and motion made (this day), That the clause be read a Second time.
The Chair
I remind the Committee that with this we are considering new clause 8—Public registers of beneficial ownership of companies in the British Crown Dependencies—
“(1) For the purpose of preventing money laundering, the Secretary of State must consult with the authorities of governments in each Crown Dependency on establishing a publicly accessible register of the beneficial ownership of companies registered in their jurisdictions.
(2) Within 6 months of this Act being passed, and every 12 months thereafter, the Secretary of State must report to Parliament on progress within the Crown Dependencies on establishing registers as referred to in subsection (1).
(3) In this section a ‘publicly accessible register of beneficial ownership of companies’ means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”
This new clause would require the Secretary of State to consult with the governments in each Crown Dependency about introducing public registers of beneficial ownership of companies in the Crown Dependencies, and to report to Parliament on the progress of establishing such registers.
Helen Goodman (Bishop Auckland) (Lab)
Before we broke for Justice questions, I was speculating about why David Cameron’s Administration were quite enthusiastic to make progress on this issue but the current Administration seem less enthusiastic. I had basically made my arguments and I was about to bring my speech to an end.
Luke Graham (Ochil and South Perthshire) (Con)
I say to the hon. Member for Bishop Auckland that there are Government Members who are in favour of public registers of beneficial ownership in British overseas territories. I studied international financial reporting standards extensively in my former life as an accountant—I draw Members’ attention to my entry in the Register of Members’ Financial Interests—and I am a member of the Public Accounts Committee. Having more transparency through country-by-country reporting and ensuring public oversight and increased transparency of a lot of our transactions will mean that we actually raise standards, not only in the UK mainland, where we have done so by introducing a public register, but in our overseas territories. Given the opportunity that Brexit provides us, in terms of having to reinvigorate our economy and our brand, it is important that we lead. Certainly, what is good enough for the mainland should be good enough for overseas territories.
I know from conversations with my right hon. Friend the Minister for Europe and the Americas that the Foreign and Commonwealth Office has concerns about whether it is right to impose measures on overseas territories. There is precedent for that, as the hon. Member for Bishop Auckland said, but there are concerns about whether it would be right to do so in this case. I do not believe in “devolve and forget”, although overseas territories have different constitutional arrangements. As MPs, we are responsible for taking a leading role. Westminster is here to lead, not to follow, and the United Kingdom should be a leading light when it comes to financial transactions and financial transparency, as it has been on so many global reporting standards.
Helen Goodman
The distinction that the hon. Gentleman makes suggests to me that, although he may hesitate to vote for new clause 1, he will agree to new clause 8, which merely calls for a consultation.
Luke Graham
Yes, exactly. I am conscious that we have discussed new clause 1 at length and that my right hon. Friend the Minister has listened to private petitions from me and other Members. I reiterate that I am sensitive to the different constitutional arrangements for each overseas territory, the way that local legislatures pass their laws and the reasons why they have interests in different areas of financial services, as the hon. Lady highlighted. However, the United Kingdom Parliament should be clear that, if we find a wrong, we should try to right it. I have received correspondence from overseas territories about the cost of implementing a public register and how that might negatively impact their economies. The United Kingdom Government should try to help them with any transition or implementation costs. In the longer term, if it means a shift in their economies and if implementing a public register creates a large gap, we should commit to helping their economies to transition. We must not just take away one aspect of their economies and leave them to fend for themselves.
I ask my right hon. Friend the Minister to commit to engaging with the overseas territories. We have already made a lot of progress. The United Kingdom mainland is the leading light on financial transparency, and we have led the way with the public register. We must engage with the overseas territories, take them on the journey with us and help them to overcome some of the challenges they will inevitably face in a positive and constructive way.
Alex Norris (Nottingham North) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Ochil and South Perthshire. My hon. Friend the Member for Bishop Auckland probably shares quite a few of these views. She made a comprehensive and weighty case; I just want to build on a couple of elements of it. We have recognised on Second Reading and during this discussion that Britain and the British Parliament have a really good record in this area. We should be proud that we are world-leading, and we should continue to be so. As we debate this transition Bill, which is a Brexit Bill at its heart, we should ensure that we remain at the forefront.
We can have the best fence in the world, but there are limits to what we can do if this goes on to our neighbours’ properties. If we have a special relationship with our neighbour, perhaps there are better ways of doing it—I will not torture that metaphor further. At its root, this is clearly a problem that needs solving. The hon. Member for Ochil and South Perthshire characterised it as a wrong that needs righting. The Panama papers listed the British Virgin Islands as the No. 1 location for those issues. Similarly, as my hon. Friend the Member for Bishop Auckland said, Oxfam listed Bermuda as No. 1, and we have seen the briefing materials from Christian Aid. Just so this cannot be portrayed as an activist campaign—as though that could be a bad thing—HSBC and even BHP Billiton say that this is the sort of thing we need. BHP Billiton is the world’s biggest mining company, so it is not often that it and I are bedfellows, but it understands that unclear audit trails for money are bad for its business. They are bad for the communities from which the money comes, but also bad for BHP Billiton’s global finance enterprises, so it is urging us to take action.
This proposal is proportionate. We heard on Second Reading that, given that the overseas territories have had a difficult few months, time has been built into the proposal. There is recognition of how the Crown dependencies ought to be supported. Ministers have said throughout this Bill Committee that, when it comes to the overseas territories, we are responsible for foreign affairs and security. Absolutely—I could not agree more—and anti-money laundering and dirty money passing over borders in massive quantities are at the root of security and foreign affairs. Money laundering underpins global terror, and we ought to be squeezing it wherever we can, because that is one way of cutting off those networks. The combatants we engage with may seem like they are hidden in hills and hard to find, and are perhaps not like us, but from all we have been through over the past 20 years, we know that they have some very sophisticated cells, behind which is big money. This is a chance to clamp down on that.
This will say a lot about us as we go into the brave new post-Brexit world. We have heard the phrase “brand Britain”—the hon. Member for Ochil and South Perthshire talked about our brand—and who we are and where we place ourselves in the world will be very important to it. On the one hand, our Ministers are going round the world saying that we have a great approach to money laundering, but on the other, these are British overseas territories—the Minister referred to them as overseas territories, but they are British overseas territories, and our name is attached to them.
Jo Stevens (Cardiff Central) (Lab)
Does my hon. Friend agree that, although there are some very good things in the Bill, not dealing with secrecy in relation to the overseas territories will damage the credibility of the rest of the Bill and will put it in danger?
Alex Norris
I thank my hon. Friend for that useful intervention. I absolutely agree. We should not see the Paradise papers and the Panama papers as the past, and assume that we will not see anything about this issue again. We are likely to see such things periodically on different programmes and in different newspapers. Every time that happens, people will ask, “What did you do about it? When you heard about it last time, how did you act?” If we say, “Well, we have this brilliant law, which we consider world-leading, but we stopped short of doing this,” people will wonder why we did that, and that will damage our brand.
This is not just about the British overseas territories—people will say, “Hang on a minute. They are British. What are you doing in your engagement with them?”—but about the Crown dependencies. The Crown will, dare I say, be a very important part of brand Britain, and people will draw a very straight line. Even if we feel that we should not be able to act in this area, people will expect that we can, so we ought to have a pretty clear picture on it. What is being asked for in the two new clauses is proportionate and sensible, and hopefully something that we can all support.
Anneliese Dodds (Oxford East) (Lab/Co-op)
I do not want to speak for very long, or repeat what colleagues have said. I very much agree with the comments made by my hon. Friends the Members for Nottingham North and for Bishop Auckland. However, there are a couple of aspects that I would like to emphasise, and provide the Committee with a bit more information on.
First, it is the friends of the overseas territories and Crown dependencies who are deeply concerned about the lack of action in this area. I have had many meetings with representatives from both groups of jurisdictions over the years, both as an MP and as a Member of the European Parliament before that, when I sat on tax committees and the Panama papers committees in the European Parliament. I have had many discussions on these topics. I acknowledge that there is currently some resistance, but there is also an awareness of the reputational damage that is being done to their jurisdictions, as my hon. Friend the Member for Nottingham North mentioned.
There is also concern about having the resource necessary to implement more transparency. I strongly agree with what the hon. Member for Ochil and South Perthshire said in that regard. That is why our new clause calls for support for the overseas territories to implement the changes. We do not want to end up in a situation similar to what happened in the Turks and Caicos Islands, where there were repeated warnings that there were problems but nothing was done until it got to such a height that there had to be what some would say was a very draconian response. We do not want to get to that situation; we want to see change. I will go on to explain what happened in the Turks and Caicos Islands in a moment, because colleagues need to know about that. We have not yet talked about the instances where Britain has exercised its relationships and the levers it possesses.
It is also important that we acknowledge that for many of the overseas territories and Crown dependencies there has been positive legislative change, particularly around 2013 and 2014. However, that has died off a bit recently. One thing that worried me was the fact that the British Virgin Islands have passed new laws against whistleblowers. That has caused a lot of concern, and appears to suggest a shift in the wrong direction. The US State Department, for example, has commented on the fact that low numbers of prosecutions are coming from some of the jurisdictions. Frankly, it is a bit of an embarrassment that the US State Department has commented on that, and we have not seen the necessary action.
It is also a major concern for our country. Others have commented on this, but we have not yet quoted from the National Crime Agency’s “National Strategic Assessment of Serious and Organised Crime 2016”. That report spelled out the problem with having our open register of beneficial ownership without having commensurate obligations in our associated jurisdictions—not to mention the register’s own problems, which we will come on to. The report said:
“When legislation to report beneficial ownership begins to be fully enforced…the UK will be less vulnerable to shell companies formed by professional enablers and others within the UK for the purposes of enabling bribery, corruption and money laundering. The UK will remain at risk from company formation in overseas jurisdictions where similar legislation is not in place.”
It is a direct concern for Britain that we have this leaky fence, to stretch again the metaphor of my hon. Friend the Member for Nottingham North.
It is particularly worrying that the British Government’s position seems to have shifted backwards. Other colleagues have mentioned that, and I wanted to draw attention to the precise language that is now being used by the Government. David Cameron gave us a commitment to beneficial ownership registers—not to public ones. We wanted him to go further, but he committed to getting registers that could at least be used by law enforcement agencies.
As of the debate on the Bill in the other place, we have a new formulation of words, talking instead about either registers, or similarly effective mechanisms to beneficial ownership registers. It would be helpful to hear from the Minister exactly how they are similarly effective. I asked a parliamentary question about this issue and I was told that, for example, electronic search platforms are a technical solution designed to achieve precisely the same result. Well, they do not achieve the same result if it takes longer for law enforcement agencies to get the information they need to root out crooks and prosecute them.
The Minister for Europe and the Americas (Sir Alan Duncan)
Unfortunately for the hon. Lady, she seems unaware that I was the Minister responsible for Turks and Caicos, as a Minister in the Department for International Development at the time. The reasons she cited for our intervention are completely inaccurate. There was a growing financial deficit of £30 million, forecast to be £60 million and then £90 million—it would have been half a billion pounds within a very short time. On that basis, we stepped in and parachuted in a chief financial officer to get the public finances back into shape. It was a great success and is a good example of us intervening in a perfectly proper way in co-operation with the Governor and the Government there.
Anneliese Dodds
I am grateful to the Minister for those comments; I might agree with the second half of them. I wonder whether his remembering of the time is the same as that of the relevant FCO Minister. I am terribly sorry; I do not know who the individuals were, but I was not in the House at the time. He or she commented:
“These are some of the worst allegations that I have ever seen about sitting politicians”
and
“when things go badly wrong…we need to act”.
I suspect that they were not talking simply about a budget deficit at that stage; they may have been talking about other matters.
Sir Alan Duncan
The hon. Lady is conflating two separate issues. There was a parallel legal issue over the plight and fleeing of Mr Misick, but that was not the basis on which we intervened.
Anneliese Dodds
Whether the intervention was due to alleged corruption in the activities of the former leader or budgetary matters, the arguments point in the same direction. When the British Government saw there was a problem, they decided it was appropriate to take action. We are lucky to have the Minister here. We are grateful to hear of his experience, and I hope he will inform us of how, in that regard, we can use that experience, in a consensual, respectful manner, to deal with our associated territories in relation to ownership registers.
Sir Alan Duncan
This has been a lively and interesting debate on an issue that we all agree is of importance. It boils down to how we think it appropriate for the Government to act. I am grateful to hon. Members for tabling new clauses, and I appreciate the desire for the overseas territories and Crown dependencies to adopt public registers. However, we should acknowledge the significant steps already taken by those jurisdictions in this area and continue to build on that progress.
While we continue to push for public registers to become the global standard, we should recognise that the arrangements that the territories and dependencies have concluded with the UK exceed the international standards set by the Financial Action Task Force, which do not require private registers, let alone public registers. Nevertheless, should public registers become the global standard, we would expect the overseas territories and Crown dependencies to meet that standard.
As the Committee knows, the overseas territories and Crown dependencies are separate jurisdictions with their own democratically elected Governments. We have therefore legislated for them without their consent only in exceptional circumstances—for example, to decriminalise homosexuality in certain territories, to ensure they were compliant with international human rights obligations. By contrast, financial services are an area of domestic responsibility for territory and dependency Governments.
Legislating for those jurisdictions without their consent effectively disenfranchises their elected representatives and risks harming our overall relationship with them. It also risks leading to a flight of business to other, less regulated jurisdictions, with the undesirable consequence that our law enforcement authorities would not have the same level of access to beneficial ownership information as under the existing bilateral arrangements. Imposing public registers of company beneficial ownership on the overseas territories would carry with it the risk that the territories would be less willing to work with us on this important issue.
[Dame Cheryl Gillan in the Chair]
I would like to draw parallels with the devolved Administrations and the Sewel convention. The hon. Member for Glasgow Central addressed the point on Second Reading:
“Much as I do not wish the House to legislate on Scottish matters, I do not want us to legislate for overseas territories or Crown dependencies without consent.”—[Official Report, 20 February 2018; Vol. 636, c. 92.]
I agree with her that that is the right approach.
The overseas territories and Crown dependencies have already made significant progress on beneficial ownership. Since we concluded our exchanges of notes with them in 2016, they have passed new primary legislation and delivered technological improvements to comply with the terms of the arrangements. They have committed to provide UK law enforcement authorities with automatic access to beneficial ownership information within 24 hours of a request being made, or within one hour in urgent cases. Those arrangements strengthen our law enforcement authorities’ ability to investigate serious organised crime, including money laundering and tax evasion.
The hon. Member for Oxford East asked about what are termed similarly effective systems. Some jurisdictions have opted under the bilateral arrangements concluded with the UK to establish an electronic search platform, allowing them to gain access to beneficial ownership information held by their authorities or by corporate service providers.
The exchanges of notes permit such similarly effective arrangements, provided that the following criteria are met. Law enforcement authorities can obtain beneficial ownership information without restrictions, and that information is available for use in both civil and criminal proceedings. Law enforcement authorities can also quickly identify all corporate and legal entities connected to a beneficial owner, without needing to submit multiple and repeated requests. Corporate and legal entities, or those to whom the beneficial ownership information relates, are not to be alerted to the fact that a request has been made or that an investigation is under way. We will monitor that arrangement to ensure that it does indeed provide the same results.
I hope that hon. Members agree that the overseas territories, in some cases in the most challenging circumstances, and the Crown dependencies have made significant efforts to move forward on this agenda. The effective implementation of the exchanges of notes will put them ahead of many G20 countries and many individual states of the USA, and demonstrates what can be achieved through working co-operatively.
Alex Chalk (Cheltenham) (Con)
Does my right hon. Friend agree that, as a result of the steps that have been taken in the Crown dependencies, there is a far greater degree of transparency in Jersey and Guernsey than in Delaware in the United States, for example?
Sir Alan Duncan
My hon. Friend is absolutely right. It is exactly that comparison that we need to see in the round, in order to understand that there could be unforeseen detrimental consequences of any kind of imposition proposed for the overseas territories.
Luke Graham
I understand the Minister’s point about overseas territories and the challenges faced by other jurisdictions such as the United States. Britain leads in a number of global reporting initiatives. Without compelling overseas territories to change their ways, we could still lead the conversation with the United States and the overseas territories in the round, to ensure that we progress this reporting and show the benefits that we have already recognised on the mainland. I urge my right hon. Friend not to draw parallels with the devolved settlement in the UK because we have Scottish MPs in this House, and they are there making laws in Scotland, whereas the overseas territories do not have MPs in this House.
The Chair
May I remind the hon. Gentleman that interventions should be shorter than that?
Sir Alan Duncan
You have been transformed, Dame Cheryl. The second point is within the constitutional settlement with the devolved Assemblies that has been reached in the United Kingdom. On the first point, I would have no objection to any hon. or right hon. Member urging the Government to take a lead in such areas. I hope that, at least by example and in international forums such as the UN, we do just that. I hope the UK’s leadership role will continue.
Hannah Bardell (Livingston) (SNP)
I am a little perplexed by what the Minister said. It seems that he conflated the comments of my hon. Friend the Member for Glasgow Central with the intent of the amendment, which is to encourage—not to compel—Governments in overseas territories to do that. Perhaps I am mistaken and he can clarify that, but it seems that there is a misrepresentation.
Sir Alan Duncan
The hon. Lady is not being unreasonable; there are some arguments where some people say compel, and others say urge and consult. My argument would be that we are consulting—we do it all the time. We have a regular dialogue, and in that, we are urging them in the right direction. Anything that smacks of us in any way telling them what to do is counterproductive, because rather than imposing new requirements on these jurisdictions, it is better to continue to focus our efforts on the consolidation of the existing arrangements.
The exchange of notes provides for the operation of these arrangements to be reviewed six months after they come into force. We are working very closely with the territories and dependencies on this review, and plan to conclude it by the end of March. That is a very good example of the sort of consultation we are engaging in on a regular basis.
Anneliese Dodds
When those letters are exchanged, will they include the logistics of this operation? I am trying to get my head round how we can genuinely say that contacting potentially myriad trust and company service providers and getting information from them is equivalent to having access to a register. How are the Government truly going to assess that in this exchange of letters? Will it be a question of time? We could be talking about hundreds of TCSPs.
Sir Alan Duncan
I am not directly involved in this, but as I have said frequently, I am very happy to offer the expertise of officials to the hon. Lady so that she can fully get to grips with the intricate detail of the question she has asked.
Hon. Members will recall that the Criminal Finances Act 2017 provides for a review of the effectiveness of the bilateral arrangements. That report must be prepared before 1 July 2019, and it will then be published and laid before Parliament. The reviews will provide a clear understanding of how the jurisdictions are meeting their commitments. At that point, we will be in a better position to consider what more might need to be done. I stress once again that we will engage with the overseas territories and dependencies; we do so already and we will continue to do so on a regular basis, with the clear objectives in mind of wanting consistent and constant improvements in the way in which their finances are organised.
A key feature of the Government’s approach has been to maintain a level playing field between all the overseas territories with financial centres and the Crown dependencies. As I have described, we have robust review processes regarding the implementation of these arrangements. If these reviews demonstrate that the full implementation of the exchanges of notes is not taking place in any individual jurisdiction, it would be right for hon. Members to consider this issue further. For the time being, however, we should continue to focus on the full implementation of the existing bilateral arrangements. We are on a good and solid track; therefore, I urge hon. Members to withdraw the new clause.
Helen Goodman
It is nice to see you in the Chair, Dame Cheryl. I wish to remind members of the Committee of two things: first, the Government’s own statement in 2012 that, as a matter of constitutional law, the British Parliament can legislate for Crown dependencies and overseas territories. Secondly, the current approach, where the authorities in London have to ask individual questions, is not as effective in tracking down and deterring illegality as having a transparent approach. That was demonstrated by the fact that, when the Panama and Paradise papers were leaked, they were able to initiate more inquiries and take more action against people because, as I was trying to explain this morning, they were able to see the overall pattern.
I am disappointed in the Minister’s response—not surprised, but disappointed—because he has not shown any flexibility at all. However, I do not wish to put the hon. Member for Ochil and South Perthshire on the spot. I think we will come back to this on Report, so I do not wish to put the motion to a vote. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Public register of beneficial ownership of UK property by companies and other legal entities registered outside the UK
“(1) In addition to the provisions made under paragraph 6 of Schedule 2, for the purpose of preventing money laundering in the UK property market and public procurement, the Secretary of State must create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts.
(2) The register must be implemented within 12 months of the day on which this Act is passed.”.—(Helen Goodman.)
This new clause would require the Secretary of State to create a public register of beneficial ownership information for companies and other legal entities registered outside of the UK that own or buy UK property, or bid for UK government contracts, within 12 months.
Brought up, and read the First time.
Helen Goodman
I beg to move, That the clause be read a Second time.
In 2015, David Cameron said:
“London is not a place to stash your dodgy cash.”
That is why he wanted to set up a register of the real owners of UK property owned by companies registered overseas. Unfortunately, the timetable for that has slipped. Following his announcement in 2015, the Government made an announcement shortly before Christmas saying that they now expected to set up the register in 2021. That is six years. In the other place, it was Tory peers who pressed for this to be speeded up. Our new clause does precisely the same thing.
Last week, the right hon. Member for Newbury mentioned unexplained wealth orders. Indeed, the Security Minister got an excellent splash on the implantation of this part of David Cameron’s package on 3 February. It was headed:
“Russians in Britain told to reveal their riches. McMafia-style crackdown on ‘corrupt’ oligarchs.”
It said:
“The government estimates that about £90 billion of illegal cash is laundered in Britain every year.”
The Minister said:
“McMafia is one of those things where you realise that fact is ahead of fiction…It’s a really good portrayal of sharp-suited wealthy individuals, but follow the money and it ends up with a young girl getting trafficked for sex.
What we know from the Laundromat exposé is that certainly there have been links to the [Russian] state. The government’s view is that we know what they are up to and we are not going to let it happen any more.”
He then explained that unexplained wealth orders were coming into effect.
I cannot understand why, given that those orders are coming into effect, a start has not been made on one with the purchase from the Ministry of Defence of Brompton Road tube station by a Ukrainian gas magnate. For colleagues who have not been following this long-running issue, Dmytro Firtash is a friend of ex-President Yanukovych and an associate of both President Putin and Paul Manafort. He was arrested in Vienna on corruption charges at the request of the FBI. Latterly, attempts have been made to extradite him to the United States, first on Magnitsky charges and later in relation to his alleged role in masterminding an international racket that aimed to sell titanium to Boeing.
Like all rich people, he operates indirectly. For example, his foundation, New Century Media, paid for the £800 ticket to a summer ball for the Minister here today—the right hon. Member for Rutland and Melton—according to the Minister’s entry in the Register of Members’ Financial Interests from 2010. He also gave £85,000 to the Conservative party centrally. I would have thought that he was a prime candidate to receive an unexplained wealth order, and I hope that Ministers will see if that can be pursued.
Sir Alan Duncan
Is the hon. Lady saying that New Century Media is owned by Mr Firtash?
Helen Goodman
I think Mr Burnside is employed by Mr Firtash. That is the issue. These things are not exactly transparent.
Let us return to the question of whether the current state of the law is adequate. The Times also had a leading article which said:
“Three difficulties may blunt the effectiveness of the wealth orders. First, all the agencies involved in investigating and prosecuting those suspected of laundering dirty money in Britain are already over-stretched. They need experienced staff used to digging through multiple layers of shell companies and intricate business transactions, and they do not have enough of them.
Second, the orders freeze assets for an interim period and are only one early step in the process of bringing oligarchs to heel. The government has to be braced for legal marathons contested by the rich and corrupt. That requires political will.
Above all, the red carpet for crooks has to be rolled up. Too many people in the City of London, in the divorce and libel courts, in the art world and in high-end estate agencies have failed to look closely at the cash coming their way. An overdue step would be a public register revealing the true owners of overseas companies that own property in Britain.”
Until we have the public register, it is not going to be possible to identify who owns the properties and whether the wealth invested in them has been gained legitimately or illegitimately. In other words, are the wealth orders explained or unexplained? I am not quoting the Morning Star or the Daily Mirror—I am quoting The Times.
We think that this is all taking too long; it is a problem that it is taking too long. It is a problem because of its size, which I will describe. It is also a problem because Ministers are giving time to people to rearrange their affairs and to reorganise them in order to avoid the measures which are in train. A concrete example of that would be the use of trusts. That is why further we have tabled a new clause on trusts.
Global Witness and Transparency International believe that 86,397 properties in England and Wales are owned by companies registered in offshore secrecy jurisdictions; 87% of properties owned by foreign companies have owners in secret jurisdictions. Half of them are in London and half are in other parts of the country. The 10 most expensive properties owned by companies in tax havens are worth £1.5 billion. Furthermore, Transparency International believes that there are suspicions about £4.4 billion-worth of UK properties, over half of which—£2.36 billion—belongs to companies registered in the British Virgin Islands. They also say that these properties in secret jurisdictions account for 75% of all UK properties under investigation for corruption. If hon. Members or members of the public are interested in seeing what is going on, I recommend going to the Global Witness website where they can type in their postcode and see how many of those secretly owned properties with overseas owners are located on a map.
The Economic Secretary to the Treasury (John Glen)
May I say what a pleasure it is to serve under your chairmanship once again, Dame Cheryl? I acknowledge that the amendment seeks to set in legislation an obligation on the Government to implement, within 12 months of Royal Assent, our commitment to establish a public register of company beneficial ownership information for foreign companies that already own or buy property in the UK or who bid on UK central Government contracts. It puts an accelerated timetable on something that the Government are doing anyway. In the next few minutes, I will remind the Committee of the timetable to which the Government are committed for delivery of this policy. I will set out the challenges and complexities of the policy and demonstrate why setting an early and artificial deadline for implementation would inadvertently undermine its aims. I know that these are supported across the House, so it is important to ensure that we get the detail of the policy right.
In listening to the remarks made by the hon. Member for Bishop Auckland, I acknowledge the frustration around this; but this Government are committed to continue to lead by example and improve corporate transparency. Over the past five years, the reforms delivered by the Department for Business, Energy and Industrial Strategy have made the UK a global leader on corporate transparency issues. We were the first country in the G20 to establish a fully and publicly accessible company beneficial ownership register and, across the world, non-governmental organisations lobby their Governments to follow the UK example. There is a reason we have that world-leading reputation: it is because of the quality of the measures we have passed and it is a reputation we would lose if this measure were accepted. A 12-month timetable to draft and pass primary and secondary legislation, empower the responsible agencies and commence the obligations is not realistic. The rush to meet such an unrealistic deadline would inevitably lead to loopholes that would be readily exploited by those seeking to evade the new requirements.
Alex Norris
We are not just talking about a 12-month timetable; this was first announced by a Conservative Prime Minister in 2015. What have Ministers been doing since then?
John Glen
I will come on to explain the history of this and why we are where we are. I am happy for the hon. Gentleman to intervene if he does not feel satisfied at the end of that.
Mindful that the eyes of the world are on us, hon. Members should recognise that this legislation would be a world first. Successful delivery raises significant challenges and it is right that the Government achieve the right balance in an effective regime with robust enforcement that does not have a negative impact on land registration processes across the UK. I acknowledge that some have accused the Government—and we have also been accused this afternoon—of not acting swiftly enough to implement this policy. Let me address those concerns.
We have committed to publishing a draft Bill before the summer to introduce the Bill early in the second Session and for the register to be operational in 2021. Publishing a Bill in draft is the right approach. As I said before, this register will be the first of its kind in the world, and it will affect people’s property rights, including not just new purchasers but existing owners. This is a sensitive and delicate area. Getting it wrong would have significant adverse consequences.
Anneliese Dodds
The Minister is being generous. He has kindly set out for us a three-year timetable, adding on a couple of years before that when Government committed to this. Is he aware of the Private Eye map, which has been in existence for some time? Through civil society and journalistic activity, Land Registry and Companies House data were put together and a map produced. That appears to have been done quite quickly.
John Glen
I am not familiar with that particular map but I would be very happy to examine it. For clarity, and addressing the hon. Lady’s previous point, the register will capture the details of beneficial owners of all non-UK companies—including those in the overseas territories—that own UK property. This will be a world first, so we are moving as fast as possible, while ensuring that the register is as comprehensive as possible.
As the Government set out in last year’s call for evidence, for the register to be effective the sanctions to be applied for non-compliance must be a meaningful deterrent. Enforcement must be energetic. Simple criminal sanctions may not be sufficient in isolation. The draft Bill will include enforcement through land registration law. Where an overseas entity buys property, it will never be able to obtain legal title to that property without having complied with the register’s requirements. Similarly, a restriction on the title register for property owned by an overseas entity will signal to third parties that the overseas entity must comply with the regime before selling the property, creating a long lease or legal charge. Those are significant steps on which it is right to consult.
Hon. Members will recognise that there are separate Land Registries in Scotland and Northern Ireland, as well as the Land Registry for England and Wales. The approaches taken to land registration and overseas entities by each of those Land Registries have been different until now. That too will need be streamlined. Delivery of an holistic outcome that complements all three land registration regimes is an exercise touching multiple teams across Government and the Land Registries. Put simply, it is an exercise that will take time to get right and a further demonstration of why publishing the legislation in draft is the appropriate next step if we are to get it right. Although I appreciate that the motive underlying the new clause supports the policy as a whole and demonstrates a desire for early delivery and implementation, it does not take account of the complexities that I have set out or the challenges of delivery and implementation.
The register will further demonstrate the Government’s commitment to combating money laundering through the property market. Hon. Members will have seen recent press reports—the hon. Member for Bishop Auckland drew our attention to the splash on 3 February—that two unexplained wealth orders have been obtained by the National Crime Agency in connection with two properties worth £22 million.
Those are the first orders obtained under the relevant powers conferred by the Criminal Finances Act 2017, which commenced at the end of January. They were obtained only a few days after it came into effect. As the Minister for Security and Economic Crime has said, the orders are an important addition to the UK’s ability to tackle illicit finance, and it is great to see them already in use.
The Government will continue to take action. BEIS’s response to last year’s call for evidence will be published shortly, and it will set out the Government’s approach to areas of particular complexity. BEIS has already made significant progress in preparing draft legislation; the work with the office of the parliamentary counsel to draft the Bill is under way.
Separately, BEIS is working to quantify the impact of the legislation on the UK. The impact assessment will quantify the register’s potential impact on the property market and investment flows, around which foreign direct investment is very specific, to pick up on the point made by the hon. Member for Bishop Auckland. The register will rightly make the UK more hostile to illicit flows of money, but we must understand the potential impact on legitimate inward investment.
All those issues were considered in last year’s call for evidence. Scrutiny of the draft Bill will further stress-test whether it will be effective. I hope that that process demonstrates the Government’s continued commitment to enact the policy, and our commitment to get it right. For those reasons, I hope that the hon. Lady will withdraw the new clause.
Sir Alan Duncan
On a point of order, the hon. Member for Bishop Auckland earlier asserted that New Century Media is owned by a disreputable Ukrainian oligarch called Dmytro Firtash. That is completely untrue. New Century Media is owned by a former Member of this House, Mr David Burnside, whose reputation she has inadvertently maligned. I ask her to withdraw her comment immediately, or to say the same thing outside the House and take the full legal consequences of doing so.
The Chair
That is not really a point of order for the Chair, but the Minister has made his point of order and put it on record.
The Chair
Unless any other Member wants to rise on a point of order, we will move on. If the hon. Lady wishes to respond, she may.
Helen Goodman
My understanding is—and this has been in the public domain and stated outside this House—that Mr Burnside was the executive chair, but that New Century Media represented the personal foundation of Dmytro Firtash.
The Chair
The hon. Lady has made a response, but it is really not a point of order for the Chair. Members have managed to put it on record, and we will move on. I apologise to Mr Norris, who did not catch my eye before I called the Minister. I call him now.
Alex Norris
You are very kind, Dame Cheryl. I am not a very good bobber—I find myself inadvertently bobbing in the wrong place or staying in my seat. My wife is currently doing the 100 squat challenge, and I wonder whether an afternoon of questions on a particularly good statement is a good way to make a down-payment on that. That is not the point I rise to make, however—proud of her though I am.
The new clause comes back to our place in the world after Brexit. There are very legitimate anxieties across the House, which are often played out in the Chamber, that post-Brexit, Britain will become the low standards capital of Europe: people will have all the benefits of being in Europe, but will not have to put up with those pesky regulations. We have what we consider to be very legitimate concerns about workers’ rights, product regulations and environmental standards that we raise frequently, and we hear back from Ministers—to their credit, we always hear back—“No, that is not our plan post-Brexit. That is not the Britain we want to live in.” We say that we will hold them to that, as we will.
The Ministers are exceptionally lucky that this is a good opportunity to raise that flag and demonstrate that. The Bill will send a strong signal about what Britain will be like and about our role in the world. The Ministers have said that it will be the first of its kind, which is a good thing. We should seek to lead on such important issues. We have a chance to lead and show that Britain is a high-standards, high-quality economy to occupy and if people come to Britain, they should expect to have the relevant level of scrutiny if there are questions over the assets that they bring or purchase. So it is time: that is what campaigners tell us and what we feel too. We are not asking for this to be done overnight. This is something that Ministers have had since 2015 and that will still have another year after this legislation passes, which is some way away. It is time.
Richard Benyon (Newbury) (Con)
I think it is worth saying for the record that there is a chill wind blowing through the financial lives of some of the people who have used our economy, particularly our property sector, for nefarious purposes and money laundering. From my conversations with a current Security Minister, and from what I know the Government are doing to implement the asset freeze legislation, I have no doubt that that is being taken forward aggressively and in a determined way. That is being recognised abroad; it is certainly being recognised by some of those people who have used the ability of our economy, through good title deeds, to make property a means by which to bury nefarious funds.
We are talking about legislation to hold future Governments to account. I entirely accept my hon. Friend the Economic Secretary’s assertion that this a complex situation to get right. I would like a little more clarification, and I am prepared to cut him some slack on this because if this is not done properly, it will be exploited and people will be able to move wealth in a globalised economy in a much freer way. It should be tied down in a way that encourages people still to invest in this country. I welcome the fact that people want to invest in our property, whether commercial or residential, but not, as the hon. Member Bishop Auckland says, just to leave homes empty. I recognise that that is a real issue, but there is the sheer importance of making sure that all of the provisions are correct. I know it has been complicated: in the asset freeze legislation, there was institutional resistance to what are called Magnitsky-lite measures that were introduced. In a classic piece of good ministerial play, the Government faced down those institutional problems that existed in parts of the civil service and elsewhere and took that forward. To their credit, they are now implementing the measures. I would just like some more assurance from my hon. Friend that this complexity will be tackled with urgency.
John Glen
I am grateful to my right hon. Friend the Member for Newbury and to the Member for Nottingham North for their further observations. I understand the sentiments of frustration and impatience with the Government on this matter. I hope I have spelled out in some detail—in the areas of land registration; alignment around the different parts of the United Kingdom; and making sure that the penalties are appropriate and that the enforcement measures are set to meet the challenge—that the Government have bold ambitions to get this right and to be a world leader in this area. I acknowledge that this has taken rather longer than it would have done in ideal circumstances, but I can confirm and reiterate to my right hon. Friend that the Government are fully committed to delivering this as soon as possible, and that there is a commitment across multiple Departments and the ministerial team to ensure that this reflects the bold aspirations that we have as a nation. I hope that that would be sufficient for us to move on.
Helen Goodman
Ministers have heard that this is an issue of significant concern, and interest in making speedy progress has been expressed on both sides. We will return to this on Report and, that being the case, I do not intend to press it to a vote. I beg to move that the clause be withdrawn.
Clause, by leave, withdrawn.
New Clause 6
Alignment of sanctions
(1) It shall be a negotiating objective of Her Majesty’s Government in negotiations on the matters specified in subsection (2) to continue the United Kingdom’s participation in the Political and Security Committee of the European Union in order to align sanctions policy with the European Union.
(2) Those matters are—
(a) the United Kingdom’s withdrawal from the European Union, and
(b) a permanent agreement with the European Union for a period subsequent to the transitional period after the United Kingdom’s withdrawal from the European Union.
(3) It shall be the duty of the Secretary of State to lay a report before both Houses of Parliament in accordance with either subsection (4) or subsection (5).
(4) A report under this subsection shall be to the effect that the negotiating objective specified in subsection (1) has been achieved.
(5) A report under this subsection shall be to the effect that the negotiating objective specified in subsection (1) has not been achieved.
(6) This Act shall not come into force until a report under either subsection (4) or (5) has been approved via resolution of the House of Commons and considered by the House of Lords.—(Helen Goodman.)
This new clause would require the UK Government to seek continued participation in the Political and Security Committee so as to allow alignment on international sanctions.
Helen Goodman
I beg to move, That the clause be read a Second time.
We now move to a slightly different aspect of the Bill—how decisions will be taken once we leave the European Union. The new clause would require that in negotiations with our European partners, we seek to maintain participation in the Political and Security Committee of the European Union, to align sanctions policy with the European Union, and would require the Government to report on those negotiations and on how they are going. As with the commencement plan, which I felt the Minister was vague and unclear about, so with this. How are we going to co-ordinate in the new world? How is this going to operate?
Sanctions will work if we co-operate and collaborate with other countries. We are all agreed that that is when they are most effective. They are effective in terms of putting pressure on those that are sanctioned, upholding the rule of international law and protecting national security. It is necessary for us to work with our European partners to make our international sanctions regime as effective as possible. One of the issues previously discussed —which Ministers bump up against all the time—is the difficulty of getting agreements in the UN Security Council. Obviously the sanctions that we had on Russia over the annexation of Crimea could not be agreed in the UN Security Council, and that stands to reason. We have been able to get effective sanctions at European level, however, and our security interests are obviously aligned with those of the European Union, objectively speaking, and therefore we are going to take a similar view. We propose that we need to carry on working through the Political and Security Committee. The withdrawal agreement produced by the Commission said some interesting things about decision making. On the subject of administrative co-operation in article 30, it says that,
“as of the date of entry into force of this Agreement, the United Kingdom shall have the status of observer in the Administrative Commission. It may, where the items on the agenda concern the United Kingdom, send a representative, to be present in an advisory capacity, to the meetings of the Administrative Commission and to the meetings of the Technical Commission”.
The section on institutions includes proposals on representatives of member states and the United Kingdom taking part in the work of the Union’s institutions. Chapter 4, article 104 states:
“Article 10…shall apply in the United Kingdom in respect of representatives of Member States and of the United Kingdom taking part in the work of the institutions, agencies, offices and bodies of the Union”
in so far as their participation in that work took place before the end of the transition period.
There is then a section on how the transition period should work, and that is in part 4 of the document produced by the European Commission.
Paragraph 2 of article 122 states:
“Should an agreement between the Union and the United Kingdom governing their future relationship in the area of the Common Foreign and Security Policy and the Common Security and Defence Policy become applicable during the transition period, Chapter 2 of Title V of the”
treaty on European Union
“and the acts adopted on the basis of those provisions shall cease to apply”.
We then have the UK’s obligations with respect to financing defence and security operations, and finally, in article 157 under “Institutional provisions,” it is proposed that, on the date that the withdrawal agreement comes into force:
“A joint committee is hereby established”.
I am not saying that what the Commission proposes is the right way to go, but we are concerned that we have no sense of what the Government think we should do. That is why we tabled the new clause, which suggests that, with respect to sanctions policy, we should retain our membership of the Political and Security Committee of the European Union.
Sir Alan Duncan
The new clause would require the Government to commit to negotiating the UK’s continued participation in the EU’s Political and Security Committee after Brexit and delay the commencement of the Bill until a report had been laid before Parliament setting out whether that had been achieved.
The first point I make is that the Bill is about powers, not policy. The UK’s legal powers to implement sanctions flow largely from the European Communities Act 1972. The Bill will replace those powers and, as is recognised on both sides of the House, is necessary to enable the UK to impose sanctions. We are, of course, looking at our sanctions policy and have described our desired future relationship with the EU in a range of places, but it is not appropriate to place that in the Bill.
Secondly, as we have set out, the Government have an unconditional commitment to European security, and we continue to share common threats, interests and values with our European partners. That makes close co-operation, including on sanctions, in both our interests. The exact nature of the UK’s future relationship with the EU on sanctions still needs to be determined, but the UK will remain a critical player in both the European context and the global context.
The UK’s influence on sanctions derives in part from our membership of the EU, but it is not dependent on continued participation in EU bodies. A lot of it derives from the pre-eminence of the City of London in controlling so many flows of money. Our influence also comes from our status as a permanent member of the UN Security Council and our membership of bodies such as the G7. That influence is underpinned by our strong economy and financial sector, and both public and private sanctions expertise. That makes the UK a key sanctions partner.
As the Prime Minister made clear at the Munich security conference a couple of weeks ago, our partnership with the EU should offer us the means and the choice to combine our efforts to the greatest effect where that is in our shared interest. That includes working closely with the EU on sanctions. My right hon. Friend the Foreign Secretary was clear on Second Reading that he hopes
“we can act in tandem”
with the EU on sanctions because we
“will always confront the same threats and defend the same values.”—[Official Report, 20 February 2018; Vol. 636, c. 78.]
That demonstrates our commitment to close co-operation with the EU and other international partners regardless of the institutional framework.
Finally, we do not seek to attend EU meetings on the same basis as EU members. It is worth noting that the PSC is not the primary body that deals with sanctions. Sanctions pass through a range of EU institutions before adoption, from working groups to Council meetings. Committing the Government to seek to join the PSC for sanctions would not make sense from a sanctions policy perspective, and does not make sense in relation to our broader approach to negotiations with the EU. Although the details are a matter for negotiation, in the area of foreign policy as a whole we envisage both formal and informal mechanisms to allow regular dialogue, co-operation and close co-ordination.
To tie our objectives to one model would be counterproductive and would remove the freedom to explore new and better ways of working together with the EU on sanctions once we have left the European Union. However, we do not need text in the Bill to underline our commitment to working closely with international partners on sanctions, because that is what we will do. Given that, I respectfully ask the hon. Lady to withdraw the motion.
Helen Goodman
The question of how we will co-operate with our European partners on sanctions was debated last July in a general debate on sanctions. I am glad that the Minister now acknowledges that we need to do this, and I am glad that he said that we need formal and informal contacts. Given that he says that this is not the only piece of institutional architecture used at the moment, I will not press the motion to a vote. However, a slightly clearer view from Ministers on how they propose to handle this would be extremely helpful to the House at some point in the future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Helen Goodman
I would like to put new clause 5 and new clause 7 to a vote. Have I missed the opportunity to vote on new clause 5?
Helen Goodman
Yes, I do.
New Clause 7
Parliamentary committee to scrutinise regulations
(1) A Minister may not lay before Parliament a statutory instrument under section 48(5) unless a committee of the House of Commons charged with scrutinising statutory instruments made under this Act has recommended that the instrument be laid.
(2) The committee of the House of Commons so charged under subsection (1) may scrutinise any reviews carried out under section 27 of this Act.—(Helen Goodman.)
This new clause would require a specialised House of Commons Committee to approve all statutory instruments laid under the affirmative procedure under this Act. The Committee would also scrutinise the Government’s reviews of sanctions regulations.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss new clause 15—Disqualification—
In the event that adequate procedures under subsection (3) of section [Failure to prevent money laundering] are found not to be in place, the Secretary of State must refer to the court a disqualification order under section 8 of the Company Directors Disqualification Act 1986 (disqualification of director on finding of unfitness).”.
This new clause would require the Minister to ask the courts to investigate whether directors of a company are fit and proper, if it was found that proper procedures against money laundering were not in place.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It is a pleasure to serve under your chairmanship, Dame Cheryl, and in rather warmer circumstances than the last time. New clause 9 seeks to create an offence if a relevant body failed to put in place adequate procedures to prevent a person associated with it from carrying out a money laundering facilitation offence. New clause 15 creates a process for disqualification for those at the top level who have failed to prevent money laundering.
I will deal with each new clause in turn and then speak briefly about the overall regulatory context, which creates a necessity for these new approaches. First, on new clause 9 and the failure to prevent the facilitation of money laundering, there are many problems with the existing system. The FCA has found weaknesses in governance and long-standing and significant under-investment in resourcing for control systems, even in the sector that is actually regulated for money laundering. I will talk about some of the problems there later on.
Many of those who investigate in this area find that rules are intermittently enforced, penalties are low and senior executives face few personal, financial or reputational consequences. It is constructive to compare some of the penalties that have been levied in the UK with those levied in the US. As I understand, the largest fine levied in the UK for anti-money laundering or sanctions offences—the Minister may contradict me if I am wrong—was levied against Coutts & Co for £8.75 million. That is six hundred times less than the penalty that was levied by the United States on BNP Paribas for sanctions-related offences.
Anneliese Dodds
It would be helpful to know under which pieces of legislation those fines were levied, because I am uncertain whether they were directly under money laundering legislation. I will come back to that, particularly in relation to some of the outcomes of some parliamentary questions that I have asked to try to dig into this and find out what prosecutions have been enabled by existing legislation.
I am grateful for the information that the Economic Secretary has provided; however, there is still a lot of concern about banks’ and others’ ability to root out money laundering and the facilitating of money laundering. The FCA found—admittedly, in 2014—that there was
“significant and widespread weaknesses in most banks’ anti-money laundering systems and controls”.
That is revealed in the case of HSBC. Many members of the Committee will know that it was involved in a money laundering scandal that led to the US fining it £1.2 billion. There was a large investigation into that matter in the United States Senate, where it was said that our UK-based bank had been a conduit for
“drug kingpins and rogue nations”,
including Mexican drug cartels and North Korea. In fact, that case has been referred to already in this Committee.
Particularly worryingly, a congressional report found that George Osborne and the Financial Services Authority—now the FCA—corresponded on numerous occasions with their US counterparts about the case; in fact, they urged a less aggressive judicial approach on the US side. Apparently, the congressional report said that the UK interventions played a significant role in ultimately persuading the US Department of Justice not to prosecute HSBC. I find it quite concerning that the UK actually argued against measures being taken by other countries to try to deal with this problem.
We were hoping to have some change; the Serious Fraud Office has called for the broadening of existing economic offences to cover a kind of umbrella approach, also to cover failure to prevent. It thinks that that would be helpful to hold large companies to account criminally across the board. At the moment, we have the ability to prosecute the failure to prevent bribery and corruption, but those activities are rarely committed in isolation from instances of money laundering by corporate entities. Therefore, it seems to make sense to try to extend corporate liability to money laundering. That would push in the same direction as existing pieces of legislation. Of course, the Bribery Act 2010 created a new offence of corporate failure to prevent. I believe that Act was put in place because of the same kind of repeated criticism of the UK regime that we have seen in relation to money laundering. We also now have the offence of failure to prevent criminal tax evasion in the Criminal Finances Act 2017. Surely there is now a strong case for an explicit reference to failure to prevent money laundering.
Many of us thought that we were not going to have to push for a separate offence of money laundering because we were to have an umbrella approach. In May 2016, the Government committed to consult on a broad offence of failure to prevent economic crime, which would cover fraud, false accounting and money laundering. In January 2017, the Government downgraded that commitment and instead published a call for evidence on whether there was a case for economic crime corporate liability law reform.
As I understand it, the call for evidence closed in March 2017. I have not yet seen the results of that call for evidence. It would be helpful for the Minister to let us know the outcome of that call for evidence, the main findings and how the Government have decided to act on them. Will they introduce the umbrella offence or create a discrete offence, as we are asking for? Because we think we need action now. That is new clause 19.
Anneliese Dodds
I beg your pardon. I am getting over-excited and trying to hurtle towards the end of the programme. I am sorry, Dame Cheryl.
Anneliese Dodds
No; we are very keen to have a thorough discussion on every one of our new clauses.
New clause 15 focuses on disqualification. The purpose is to ensure that directors specifically take responsibility for their organisation’s mistakes, and to ensure that the Secretary of State may hold them to account for a failure to prevent money laundering, in the instance where procedures have not been put correctly in place.
Many colleagues might have served as directors and will know the rules on being a director—that directors can already be disqualified if they display unfit conduct. Unfit conduct is defined as including allowing a company to continue trading when it cannot pay its debts, not keeping proper company accounts and so on.
With the new clause, we wish to extend that to include a commitment for every director to ensure that they are not ignoring money laundering concerns. We want to mirror what happens under competition law in Britain, where a director’s role is looked at in the event of a breach of the law. That is necessary because of the situation we find ourselves in today.
I am sure many colleagues will have talked to professionals on the frontline of anti-money laundering. I have talked to quite a lot of people who work in banks and other organisations who have anti-money laundering responsibilities. I am sure there are people who work in accounting and other walks of life for whom this is a concern. Very often the clear message I get, as I am sure colleagues do, is that those individuals are working very hard to prevent money laundering but they are not supported by the leadership team within their firm. Global Witness has stated that,
“responsibility for compliance with anti-money laundering and other regulations is usually allocated to compliance teams, rather than to senior executives, who actually wield power within banks over what customers they take. This is a serious problem because it gives compliance staff none of the authority but all of the responsibility, breaking the important link between decision making and accountability.”
That is certainly what I find when I talk to individuals who are in that responsible position. They find they are often not supported by senior managements. That has also been discovered in some of the big corporate scandals—I referred to the HSBC case a moment ago. In his written evidence to the UK Parliament, David Bagley, who led on compliance at HSBC during the period of the failings we were just talking about, stated:
“as the Head of Group Compliance, my mandate was … limited to advising, recommending and reporting. My job was not—and I did not have the authority, resources, support or infrastructure—to ensure that all of these global affiliates followed the Group’s compliance standards”.
Alison Thewliss (Glasgow Central) (SNP)
I do not want to add a huge amount, but I very much welcome the new clause. As the hon. Member for Oxford East said, there is a big issue of incentive and authority for organisations, particularly for those that facilitate the formation and operation of Scottish limited partnerships in the private fund sector.
There has to be an effort to ensure that compliance with the rules is extended as far as possible. For example, a legal firm may be asked to register an SLP to get it up and going, and operating, but if no buck stops with it, there is no punishment for not ensuring that the SLPs are operating as we would want them to. For example, if a firm asks its client to register a person of significant control, and the client does not do so, where is the incentive for that firm to remove that client altogether? The firm has to decide for itself whether the cost of reputational damage from being named in the press is enough. That is the balance that it has at the moment. It is not obliged not to have that SLP within its client base. There is no comeback and no consequence.
There needs to be some means by which the firm is forced to do something to put that right. If the SLPs under its umbrella do not register a person of significant control, and continue not to register them, there is no fine to that legal firm, as I understand it. The SLP may face a fine—I am trying to get to the bottom of how many fines have been issued to those who have not registered a person of significant control—but there is no comeback to the legal firm, other than potential reputational damage.
The Government need to think about where the buck really stops in these arrangements , and this type of new clause would put some emphasis on the firm to do something about failing to prevent money laundering, rather than allowing things to continue as they are. As I understand it, there is no comeback at the moment to the legal firm that is protecting the SLPs underneath its umbrella.
John Glen
I undertake to address the points raised by the hon. Member for Oxford East. I will come to the point about the directors’ responsibility in my scripted remarks and also to the issue of what provision the fines were imposed under.
On the specific question the hon. Lady asked, the Ministry of Justice’s call for evidence considered a wide range of reforms to the law relating to corporate liability for economic crime. That is against a backdrop of already significant reform in this area in recent years, including the Bribery Act 2010, the Criminal Finances Act 2017 and the introduction of deferred prosecution agreements, which the Government would contend have strengthened the UK’s defences against corporate criminality. The Ministry of Justice is carefully considering the responses received to the call for evidence and is analysing the impacts of the Government’s range of recent reforms in this area. It will respond to its call for evidence in due course. I do not have a specific timetable, but that is the best information I can give the hon. Lady.
New clauses 9 and 15 seek to create a corporate criminal offence of failure to prevent money laundering, with an obligation on the Secretary of State to submit a disqualification order to the court against directors of a company found guilty of such an offence without having adequate anti-money laundering procedures in place. New clause 9 provides that a company or partnership is guilty of a criminal offence where the company’s employee, agent or other service provider commits one of the substantive money laundering offences in part 7 of the Proceeds of Crime Act 2002. The relevant company would have a defence if it could prove that it had adequate procedures in place to prevent its employees or agents from committing such an offence.
The offence is not necessary in view of the extensive reforms to the UK’s anti-money laundering regime that the Government have put in place. The proposed offence is substantively applied to firms that are regulated for anti-money laundering purposes by part 2 of the Money Laundering Regulations 2017. Those require that regulated firms have policies, controls and procedures to mitigate and manage risks of money laundering and terrorist financing. The Government have legislated to require that these policies, controls and procedures are proportionate with regard to the size and nature of the firm’s business and proved by the firm’s senior management. Failure to comply with these requirements is a criminal offence in itself.
The Financial Conduct Authority and other supervisors are additionally able to take action against firms if their measures to counter money laundering are deficient. As was touched on in our exchange earlier, recent regulatory penalties related to firms’ anti-money laundering weaknesses include fines of £163 million for Deutsche Bank in January 2017 and £72 million for Barclays Bank in November 2015. They were a consequence of failures in anti-money laundering measures under the Financial Services and Markets Act 2000.
The new clause also seeks to address challenges that have arisen in apportioning responsibility for corporate failings. Within the financial services sector, that has been addressed through the senior managers regime, which was introduced after the financial crisis. Banks are now required to ensure that a named senior manager has unequivocal responsibility for overseeing the firm’s efforts to counter financial crime. That ensures that firms and individuals can be held to account for failing to put proper systems in place to prevent financial crime. If a relevant firm breaches its anti-money laundering obligations, the FCA can take action against a senior manager if it can prove that they did not take such steps as a person in their position can reasonably have been expected to take to avoid the breach occurring. The enforcement action includes fines and disbarment from undertaking regulated activities. The Government have legislated to extend the senior managers regime to apply across all financial services firms. That will be implemented in due course, and will further the Government’s reform programme. All those requirements are additional to the substantive money laundering offences in the Proceeds of Crime Act, such as entering into arrangements that facilitate the use of criminal property, which apply to any individual or company.
As hon. Members know, the Government have previously introduced two similar offences: the failure to prevent bribery, in 2010, and the failure to prevent the facilitation of UK and foreign tax evasion, in 2017. They are structured in a similar way to the proposed new clause, but they were introduced following clear evidence of gaps in the relevant legal frameworks that were limiting the bringing of effective and dissuasive enforcement proceedings. It is right that the offences that we have already established apply to legal entities, regardless of whether they operate in the regulated sector.
The situation in relation to money laundering is very different. The international standard is set by the Financial Action Task Force, which has been referred to numerous times in the Committee’s discussions. The UK’s money laundering regulations apply to banks, financial institutions, certain professional services firms and other types of entity, and act as gatekeepers to the financial system. As I have said, such firms are already required to have policies and procedures in place to prevent their services from being misused for money laundering.
Subsection (6) of new clause 9 would require all companies, regardless of whether they are incorporated, to have procedures in place to prevent persons connected to them from laundering money. The Government do not believe that that would be appropriate. It would risk making non-regulated firms liable for the actions of their regulated professional advisers. Instead, responsibility for anti-money laundering compliance should rest in the regulated sector, as is currently the case. The new clause would not go beyond the existing regulatory framework in that area, and it would blur where responsibility should lie for anti-money laundering compliance. Therefore, I respectfully ask the hon. Member for Oxford East to withdraw the new clause.
Anneliese Dodds
I am grateful to the Economic Secretary for those helpful explanations and clarifications. Despite his useful response, however, there are a number of areas where I am unclear. First, I appreciate that he has probably anticipated this question, but the Committee may ask why it has taken Government a whole year to assess the responses from their consultation on economic crime. Government frequently work at a far faster pace than that. He said that we will have the analysis of those consultation responses in due course. It would be helpful to know more about why it is taking so long for Government to analyse them.
Secondly, the Economic Secretary spoke about the requirement for all regulated firms to ensure that their policies, controls and procedures are appropriate to prevent money laundering, but there is a question about who assesses that and whose responsibility that is. That takes us back to the issue about there being myriad professional bodies, which all operate subtly different approaches towards regulation in this area. As I said, I appreciate that OPBAS has been created to try to draw them together, but I do not think we heard exactly what the status of that office is—I was trying to concentrate on what the Economic Secretary was saying. I have seen different descriptions of it as a team, an office and an organisation. It would be helpful to have a clearer indication, particularly because those professional bodies are, as I understand it, required to contribute financially to OPBAS, so a number of them are keen to understand what is happening with it. Furthermore, HMRC is not a member of it, as I said before, so the concern about a lack of regulatory co-ordination persists.
Finally, the Economic Secretary referred approvingly to the senior managers regime that has been brought in since the financial crisis, which looks like a positive step initially—of course, the HSBC problems occurred following that. In any case, as I understand it, the actual operation of this new regime and its extension are quite different from, for example, what was recommended by the Parliamentary Commission on Banking Standards. Under this approach, the burden to show that senior managers failed to take appropriate steps will be on the regulator, rather than the senior managers themselves.
That is different from the approach taken in many other areas, including road traffic, health and safety at work, the Bribery Act 2010—which the Minister referred to—terrorist legislation, the Misuse of Drugs Act 1971 and so on. It would be helpful to understand why, with the extension of this regime, the burden of proof has essentially now been placed on the shoulders of the regulator, rather than the shoulders of the managers.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 11—Due diligence—
“(1) For the purposes of preventing money laundering, when a company is formed, any company formation agent providing formation services must ensure that the identity and business risk profile of all beneficial owners of the company are established in accordance with—
(a) the customer due diligence measures under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692),
(b) regulations made under section 41 of this Act, or
(c) the Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on anti-money laundering measures.
(2) For the purposes of subsection (1), Companies House is to be treated as a ‘company formation agent’.”
This new clause would ensure that when a company is formed in the UK, the relevant formation services must identify the beneficial owners of the company. It will also treat Companies House as a “company formation agent”, ensuring that the data on the public register of beneficial ownership for companies is accurate.
New clause 12—Companies House: due diligence and resources—
“(1) For the purposes of preventing money laundering, the Companies Act 2006 is amended as follows.
(2) In section 1061 (the registrar’s functions) after subsection (1) insert—
‘(1A) Functions directed by the Secretary of State under subsection (1)(b) must include due diligence on a person wishing to register a company.
(1B) In this section “due diligence” has the same meaning as “customer due diligence measures” in regulation 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 692/2017).’
(3) In section 1063 (Fees payable to the registrar), in subsection (2)(a) after ‘Secretary of State’ insert ‘including the duty of due diligence under section 1061(1A).’”
This new clause would amend the duties of Companies House to ensure that any person wishing to register a company must be checked for due diligence by Companies House, in line with the measures included in the Money Laundering Regulations 2017. It also ensures that the Secretary of State can charge fees for due diligence checks to cover costs incurred by Companies House.
New clause 13—UK bank accounts—
“(1) For the purposes of tackling money laundering, the Companies Act 2006 is amended as follows.
(2) In section 853A (duty to deliver confirmation statements), after subsection (1) insert—
‘(1A) In subsection (1) “information” includes such information as is able to demonstrate that the company has a UK bank account.
(1B) Any company that is unable to provide the information required in subsection (1A) is liable to a fee which may be prescribed by regulations.’”
This new clause would ensure that all companies wishing to be created in the UK must provide evidence of a UK bank account to ensure it has gone through proper money laundering checks by a UK supervising body. If a company is unable to provide proof then they are liable to a fee which will cover the cost of such checks.
Anneliese Dodds
It is a pleasure to present the new clauses to the Committee. As colleagues will know, they all essentially call for an increase in the due diligence and anti-money laundering checks for those who register a company through Companies House.
There is a clear rationale for the new clauses. Around 40% of incorporations in the UK every year are done directly through Companies House, which in many ways offers an easy and helpful service. It is very quick; it is one of the fastest and easiest ways to form a company—it costs only £12 and takes a matter of minutes to complete the necessary paperwork online. That is all very positive, but the negative side comes from the risks that result from an approach where there is insufficient due diligence on the data submitted through that route.
The problem, as I am sure Ministers are well aware—I have asked a number of parliamentary questions to probe this—is that Companies House is exempt from the Money Laundering Regulations 2017 because of its not-for-profit status and the fact that it is not a company service provider. That means that a huge number of companies are created without any checks being made on the person setting up the company or the source of their wealth. We are talking about 251,628 companies last year.
As I said, there are very positive aspects to being able to create companies quickly, but the quality of data that results from that is potentially very poor; my hon. Friend the Member for Bishop Auckland talked of, potentially, 10% of company reports not including the appropriate information. There are some cases that might almost be humorous, but given the the circumstances they are deeply disturbing and indicate how little due diligence is taking place. An investigative journalist, Oliver Bullough, created a company called “Crooked Crook Crook Ltd.” With that name, many of us might think that this would be a company we would want to look into, but no, the confirmation documents were delivered within 36 hours. He details in an article, which colleagues can look up, should they wish, how easy it was to create that company. If he had not reported his activities in an article for a media outlet, his company could have gone on to partake in a myriad of activities, showing just how cheap, easy and disposable company formation through Companies House can be.
There are many concerns about that. We have a new regime in place now through the money laundering regulations, which covers trust and company service providers—TCSPs—as we have already mentioned. We have some amendments further down the agenda looking at some of those, because there is a particular issue around the operations of non-UK TCSPs. It is surely the case that when a company can be created through a TCSP, that TCSP has to follow all money laundering legislation, but when it does not go through a TCSP, and there is no money laundering legislation applying to it, we should be very concerned. Potentially, that money laundering regulation is undermined by having this massive loophole in place.
There are many disturbing findings from the data from Companies House that has been crunched by different investigative journalists and NGOs. We find that 4,000 beneficial owners named in the Companies House register are under the age of two. My daughter is two. She is really good at lots of things, such as climbing on to chairs. I am not sure that she or any of her playmates would be very good at being a person exercising significant control within a company. There are five beneficial owners registered who control more than 6,000 companies. Perhaps each one of those five are exercising all of their responsibilities perfectly in line with legislation and probity, but it must be very difficult for them to do that. We also have the fact that companies from secrecy jurisdictions can then be registered by Companies House through a UK company, or another formation agent, without there being any background or due diligence check.
I realise that some of these cases might sound a little bit silly, but potentially we are talking about some very worrying examples where there has not been that due diligence and there should have been. There was recently a BBC investigation—we have already referred to it within this Committee—into the case where a UK company registered at a Potters Bar address appeared to facilitate very complex financial arrangements involving the former President of Ukraine. At least £1.2 billion has been funnelled through companies registered at the same Potters Bar address, some of them potentially linked to the very complex situation where huge funds from the Eurovision song contest and lots of other activities seem to have somehow ended up in this company through very unclear routes.
It is concerning that we are in this kind of situation. Because of that, we find a number of professionals highlighting this as an area where we need to have reform. Frances Coulson, the head of insolvency and litigation at Moon Beever Solicitors, has been quoted as saying that this money is passing through Britain, through companies created with insufficient due diligence. She said:
“This is going on now and all the time…All the indicators are that it’s getting worse.”
And she said that,
“better due diligence—such as checking identification documents—by company formation agents and the UK corporate register, Companies House, would help combat fraud.”
Even if we do not manage to pass these new clauses at this stage, I hope that we will at least get some clarification on some of the rather unclear aspects of the regulatory regime. First, there is the role of Companies House. We are getting only a bit of an inkling of the role of Companies House through parliamentary questions. One response, given on 12 October 2017, said that the Government’s view is that Companies House
“does not have a front-line role in combatting money laundering”.
In the same month we were told:
“Companies House does not have powers to verify the authenticity of company directors, secretaries and registered office addresses. However, it does carry out a number of checks on all information received; ensuring it is valid, complete, correctly formatted and in compliance with company filing requirements.”
However, when we try to find out what this verification process involves, the picture gets rather complicated. Is any automated verification of beneficial ownership information occurring? I tried to find out in February, and no, there are “no current plans” to undertake that; however, Companies House is, it seems, undertaking activities, including,
“contacting companies where they believe the company has misunderstood the requirements…pursuing companies that have not provided PSC information”—
it seems that there is a huge number it will have to pursue, given the statistics discussed by my hon. Friend the Member for Bishop Auckland. It is also
“following up with companies and PSCs where they have issued notices to their PSC (asking the PSCs to provide them with information)”—
PSCs being “people with significant control”—and
“seeking compliance from companies where there has been a complaint about missing or incorrect PSC information.”
This was where the picture got more confused. [Interruption.]
I may have heard the Minister suggesting that I was rabbiting on. I am terribly sorry, but some of us are concerned about these matters and a number of professionals have contacted us about their concerns, so it is absolutely right that we deal with them in this Committee.
I tried to find out how many reports have been made about money laundering through the “report it” facility that Companies House has set up. The Minister of State, Department for Digital, Culture, Media and Sport, the hon. Member for Stourbridge (Margot James), responded to me on 19 December, stating:
“Eight reports about money laundering have been made through the Companies House report it facility.”
However, I was then told on 20 December that the new “Report It Now” feature had led to Companies House
“receiving between 180-200 contacts a day through this service.”
That seems like quite a big gap. Will the Economic Secretary please indicate how many of those reports are about money laundering? Is it eight, or is it 180 to 200 a day?
I have been very concerned by the Government’s claim, in the same written answer:
“Higher risk company formation activities in the UK will generally be done via Trust or Company Service Providers, who are subject to the Money Laundering Regulations.”
I want to illustrate that with one last example, which I was told about yesterday and is quite concerning. It is the case of an individual who has previously described himself as “The Chicken Thief”. That is his name as a person of significant control within the Companies House database. His real name is thought to be Antonio Righi—a mafia kingpin in Italy. If someone searches for his name on the Companies House website, as an academic did yesterday before informing me about this, they get a link to Business Bank Italy Ltd.
All banks should be regulated through the FCA nowadays. We are supposed to have that proper approach in place. The use of the word “bank” in a company name is restricted. Any would-be bank has needed to obtain a letter or email of non-objection from the FCA before being allowed to operate as a bank. Yet we see this company still apparently registered with Companies House.
That is deeply worrying because the individual concerned has been named as an active member of the Camorra—a very problematic criminal network that operates in Italy, with links in many other countries. The revelations about “The Chicken Thief” are not new, so one would have thought that Business Bank Italy would have been looked into carefully by the Government, but apparently not, and it still appears to be registered on the Companies House website. I hope the Minister can indicate why that is and whether he will look into this matter, if he has not done so already.
Alison Thewliss
I support the new clauses proposed by the hon. Member for Oxford East. They flag up a huge loophole in the anti-money laundering regime, which is the inability of Companies House to do anything about what comes through its door. By not acting on information, and expecting company formation agents to behave in a different way from the way the Government’s own agency behaves, the Government become complicit in the money laundering that is clearly going on through companies that are registered for only £12.
The situation is curious. Last week I sat on a delegated legislation Committee that discussed passport fees and the need for full cost recovery of those fees by the Government because the Passport Agency wants to ensure that it is not making a loss. There is an argument about whether passports are too expensive, which I think they are, but it costs £12 for the registration of a company. If Companies House is not getting full-cost recovery for that, and that is the reason for not carrying out the due diligence that ought to be done on anti-money laundering, that is an argument to find a reasonable cost of registration that would allow Companies House to operate, make money and have sufficient funds to carry out the due diligence it ought to. If there is an incentive not to play by the rules, and the Government are incentivising that through the operation of their own agency, that is nonsense. That is highlighted in Global Witness’s “The Idiot’s Guide to Money Laundering”:
“Step 4: open your company direct with the corporate registry—they don’t do any checks on you!”
It seems ludicrous that the Government are going to encourage agents who want to set up companies for people to do that and go through the anti-money laundering things that they have to do, but the Government are not enforcing that. That seems absolutely ludicrous. I cannot for the life of me think how the Government will defend that unjustifiable loophole.
Transparency International reported that in the UK last year, 251,628 companies were created with no checks being made on the person setting up the company or their source of wealth. It is a scandal that these companies can be set up, facilitated by the Government, because Companies House has to accept their documents in good faith without doing due diligence checks that we would expect of other agents. If they are not going to support the new clauses, I urge the Government to propose a measure themselves, because this simply cannot continue.
John Glen
The new clauses are broadly similar in purpose and intention. Each would expand the role that Companies House plays in relation to anti-money laundering checks, whether by conducting due diligence directly, confirming that due diligence has been carried out, or confirming that a company seeking to be incorporated has a UK bank account.
I will turn to the practical difficulties of these proposals in a moment, but the first point to make in connection with each is that the UK’s anti-money laundering regime is undergoing an assessment by the Financial Action Task Force. The FATF is the international standard setter in this area and will report publicly later this year on its findings. The report will consider matters, including the effectiveness of how the UK prevents the misuse of legal persons, such as companies, for money laundering purposes. Hon. Members will appreciate that this report will greatly inform the future of the UK’s anti-money laundering regime, including in relation to how we can best prevent the misuse of legal entities, some of which have been described in the course of this debate.
Once the FATF has reported, the Government will actively consider its conclusions, including those in relation to any areas in which the UK’s anti-money laundering framework can be improved. These new clauses pre-empt the review process already under way. It would be more sensible to allow the review to identify specific areas where action is necessary before making further changes to our AML regime.
New clause 10 would require anti-money laundering checks to be undertaken before any UK company can be incorporated by preventing the registrar of companies from registering a company unless she is satisfied that such checks have been carried out. It then says that the registrar is entitled to accept the anti-money laundering registration number of the UK body that has submitted the application as evidence that such checks have taken place. The effect would be to require all incorporations to be made through a UK body regulated for anti-money laundering purposes. This would prevent people from applying directly to Companies House to register and set up their own business; any person seeking to set up a business would be required to use the services of a professional agent that is also regulated for anti-money laundering purposes, and pay for those services, which will in turn increase the cost of setting up businesses.
The proposed new clause assumes that all bad companies are set up directly with Companies House, and that only companies set up through the agency of a regulated professional can be trusted. That is simply not true. Only the simplest companies—those using standard-form constitutions—can be set up directly with Companies House online in the way described by the hon. Member for Glasgow Central. Typically they are self-standing, family-run and family-operated businesses. More complex corporate structures will, in contrast, frequently be established through trust or company service providers. The UK’s national risk assessment of money laundering and terrorist financing noted last year that
“While companies can be registered directly with Companies House, criminals continue to make use of third party TCSPs, to establish the structures within which illegitimate activity subsequently takes place.”
The fact that TCSPs are legally required to conduct customer due diligence does not in and of itself solve the problem. The new clause would therefore impose an across-the-board administrative burden on individuals seeking to establish companies, without adding any significant new obstacles to money laundering. Companies incorporated directly through Companies House are overwhelmingly likely to interact with the UK regulated sector, and so face anti-money laundering checks either by having a UK bank account or through having a UK accountant.
We discussed in the previous debate the 22 different regimes, and this speaks to the necessity for some degree of complexity to minimise the risks as far as possible. New clauses 11 and 12 are similar in outcome to new clause 10: they would require company formation agents—defined for these purposes as including the UK registrar of companies at Companies House—to conduct customer due diligence to establish the identity and risk profile of all beneficial owners of such companies registered at Companies House. The key difference is the reclassification of Companies House, which would now be required to deliver its statutory duties as if it were a private sector business. The accompanying explanatory statement suggests that these clauses will identify the beneficial owners of a company and make information held at Companies House more accurate. Although similar to the proposed new clause 10, these new clauses would go further in imposing expansive new obligations upon Companies House, requiring significant changes to the UK company law system.
Given the overlap with the lead new clause in the group, I will focus on the most novel element: the proposal that Companies House be treated as a company formation agent. Since the registrar of companies was first created, it has been required to accept any application that is validly and correctly submitted, and to duly incorporate the company as requested. Companies House does not help customers through this process, and is responsible solely for conducting the process of company incorporation. Company formation agents, known as TCSPs, are entirely distinct from Companies House. They are already subject to due diligence obligations through the Money Laundering Regulations 2017, and these extend to being required to terminate any existing business relationship when they are unable to meet their due diligence obligations. In contrast, Companies House has no legal right to refuse or decline a request to incorporate a company if the application is valid, and therefore it does not have the ability to decline a business relationship in the way that TCSPs must when they cannot discharge their due diligence obligations. If accepted, these amendments would essentially require fundamental reform of the Companies Act 2006.
To emphasise the scale of that proposed reform, 3.9 million companies are currently registered at Companies House and approximately 600,000 new companies register each year. The impact on resource to carry out due diligence on that number of companies would be considerable. The burdens and cost would fall on those 3.9 million companies, and specifically on the vast majority of legitimate companies, many of which are very small businesses. They would be forced to pay to duplicate the cost of due diligence checks that are already conducted by banks and other regulated professionals. The overall cost to the UK economy could run into hundreds of millions of pounds each year.
New clause 13 would amend part 24 of the Companies Act so as to require UK companies to establish a UK bank account and evidence that to Companies House on an annual basis or pay a fee or financial penalty. As with other new clauses in this group, new clause 13 will not achieve its stated intention. The wider purpose behind that part of the Act is to provide a simple mechanism for companies to confirm that corporate information registered with Companies House, as required under other obligations, is accurate and up to date in relation to company share capital, business activities and the address of a company’s registered office.
That is not to say that the new clause’s underlying principle does not merit further consideration. Evidence of a UK bank account is intended to demonstrate that a company has been through proper money laundering checks by a UK supervising body related to the financial activities of that company. However, the practical implications need careful consideration. To make the proposal operational, Companies House would require new systems with access to UK and international banking information. The costs associated with the development and operation of such systems would inevitably be large and would need to be recovered from UK businesses. Once again, that would necessarily establish a new reporting burden that would essentially target the overwhelming majority of law-abiding UK businesses.
The new clause suggests that companies that cannot provide evidence that they have a UK bank account would be liable to a fee, although that could better be characterised as a penalty—its purpose is not specified. If it is intended to incentivise companies that are established to launder money to open a UK bank account, it would need to be set sufficiently high to achieve that objective, which would be disproportionate to the notional offence of not providing evidence of a UK bank account.
The Government are already active in that sphere. Under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, regulated bodies such as banks are obliged to carry out CDD checks on their customers on an ongoing basis. That is a rich field of data, and the regulated sector is already closely engaged with UK law enforcement to identify and report suspicious behaviour. In parallel, Companies House has an extensive outreach programme to the regulated sector to promote use of its data and encourage bodies to report possible errors back to it.
To sum up, a simple demonstration of a bank account is a blunt instrument. As drafted, the new clause simply adds a burden to UK companies to report more information. We should not proceed down that path without being much clearer that the information we require them to disclose is valuable, that it is necessary and that it cannot be achieved by other less burdensome means. On that basis, I ask the hon. Member for Oxford East to withdraw the amendment.
Anneliese Dodds
I am grateful to the Economic Secretary for those clarifications. He made several helpful points, but some concerns remain. He mentioned the FATF process, which the Committee has discussed previously, and seemed to suggest that we should not make alterations in this area of anti-money laundering activity because of the ongoing FATF assessment. Of course, that argument could stop action in any other area, because the FATF is looking at anti-money laundering and anti-corruption provisions across the board, so it is not clear that it is completely convincing. Furthermore, I understand that representations have been made to the FATF as part of its review that change is needed in this area, which suggests that the argument is the other way round. The Economic Secretary also suggested that there would be a much higher cost for those that want to incorporate through a TCSP. In practice, as I understand it, the cost may not be substantial—only a couple of pounds more in many cases.
Hannah Bardell
Does the hon. Lady agree that we are letting our citizens down if we do not legislate properly and close these loopholes? I am sure we have all had constituency cases where people have lost money to unscrupulous companies and company owners. We have an opportunity to take action, and we must take it. The Government are letting citizens down if they do not accept the new clauses.
Anneliese Dodds
I am grateful to the hon. Lady for making the point clearly that our proposal has been portrayed as only a burden, when it could help to prevent our constituents from being ripped off by unscrupulous individuals who are able to set themselves up as a company with only minimum requirements for due diligence. As I said, they can be there by day, fly off by night, and leave the unfortunate person who dealt with that company in a very difficult position.
To end my remarks specifically on the Minister’s comments on new clause 13, many of us are worried that, in practice, there are TCSPs that offer UK company formation with a range of optional services, including setting up bank accounts in other jurisdictions such as Latvia, Belize, Switzerland and Cyprus. That would not necessarily be a problem, were it not for the fact that, time and again, we have seen in the cases we have discussed in this Committee that reliance on the third parties—the banks in those other countries—does not lead to a real assurance that money laundering provisions are being followed. The reality is quite the opposite.
In the Russian laundromat scandal, which we have already talked about, of the 440 UK shell companies used in the scheme—in itself, a staggering statistic—392 of them had Baltic bank accounts, with 270 UK firms using Latvian banks and 122 using banks in Estonia. It may be that we are fully confident in every case that anti-money laundering regulations were followed in those countries, but given some of what came out of the Russian laundromat scandal, it could be suggested that that is not the case.
We do need to get at this problem through another route. We need reform of the Companies House system, but we also need the use of another prong, which is requiring a UK bank account.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It feels a little like going out of the freezer and into the fire, because it is rather warm on this side of the Committee Room, but I am sure that we will be rewarded somewhere else for our endurance.
Anneliese Dodds
We tabled the new clause because ineffective anti-money laundering supervision has a clear and obvious link with inadequate compliance and with low and poor-quality reporting of suspicious activity to the National Crime Agency. Research by a number of non-governmental organisations, particularly Transparency International, has indicated serious failings in the current framework for supervising money laundering compliance in the UK, especially with respect to trust and company service providers.
Under the Money Laundering Regulations 2017, only TCSPs carrying on business in the UK—that is their formulation in the legislation—have to register with an anti-money laundering supervisor and comply with MLR 2017. That means of course that TCSPs with no UK presence can incorporate UK companies without any oversight from an AML supervisor. They do not have to comply with UK standards for money laundering checks. We have seen a number of clear examples—I will talk about some in a moment—where that has allowed non-UK TCSPs to incorporate UK companies that have subsequently been used in large-scale money laundering schemes. I think many of the concerns raised a moment ago around undercutting existing legislation and the lack of a fair playing field for UK TCSPs come up again in this regard.
In 2012 the International Consortium of Investigative Journalists showed how a number of UK individuals offering company services had moved their base of operations outside our country but continued to form, and act as nominee directors for, UK companies. There are two examples that are particularly important. The first is Jesse Grant Hester, who was originally from the UK and who moved to Cyprus to form Atlas Corporate Services Ltd before moving to Dubai and, finally, Mauritius—he is somebody who has been lucky enough to travel much in life. Those jurisdictions have all been identified as presenting high money laundering risks. Mauritius in particular is very concerning: it scored 5.92 out of 10 on the Basel Institute on Governance money laundering risk index. Ten is the highest level of money laundering risk and zero is the least, so it is well up there. Jesse Grant Hester appeared on numerous occasions as a nominee director for companies embroiled in corruption scandals. In the Moldovan bank theft that we talked about earlier, he signed fake promissory notes using an alias on behalf of a UK firm, Goldbridge Trading Ltd, allowing £444 million to be stolen. Atlas Corporate Services is associated with eight people who, between them, have held directorships of 3,613 UK companies. Again, that is a staggering number of companies to be held by just eight people. As we discussed, that scandal caused enormous problems for the country of Moldova.
Another UK resident who became internationally renowned, although not in a positive way, for his company formation activities is Ian Taylor. That is not the famous social policy academic, who I had the pleasure of working with, but another Ian Taylor. He also moved around a lot: he moved to Vanuatu.
Anneliese Dodds
Oh, there was a Tory MP as well. Goodness—the name is frequently used. He moved to Vanuatu after he was banned from being a corporate director, first in New Zealand in 2011 and then in the UK in 2015, as a result of his companies’ involvement in numerous scandals, including a land banking scam in Somerset. Vanuatu’s self-assessment on money laundering risk found that its TCSP sector was among the most vulnerable to such activity. In 2015 the Asia/Pacific Group on Money Laundering found serious deficiencies in Vanuatu’s AML system. Despite being banned in the UK, Taylor seems to have retained a UK presence. Various investigations have identified the circle of nominee directors that he works with. One of them is a Vanuatu resident who is a director of more than 61 companies. He took over from Taylor as a director of 20 of them on the same date.
Those examples show that physically moving out of the UK does not result in a lack of activity in the UK. Networks of associates make it difficult to stop the formation of UK companies by individuals who have already been disqualified here. Such individuals, who have been shown to have engaged in money laundering activities or have otherwise been disqualified or viewed as not competent in this arena, can function in other countries and create companies. The checking that should go on does not happen, and there is inadequate anti-money laundering supervision. We do not have a means of dealing with that, because we do not have a regulatory system for TCSPs that are not based in countries with appropriate anti-money laundering provisions. That is not currently illegal, which is why we want to change the legal situation.
John Glen
I am grateful to the hon. Lady for setting out her new clause, which would prohibit TCSPs that do not conduct business in the UK from incorporating UK companies, unless they are overseen by a UK anti-money laundering supervisor. As hon. Members will know, the Money Laundering Regulations 2017 specifically provide for TCSPs conducting business in the UK to be subject to a fitness and propriety test and to register with either Her Majesty’s Revenue and Customs or the Financial Conduct Authority. In borderline cases where it is unclear whether a TCSP is conducting business in the UK—in which case it would be supervised by a UK anti-money laundering supervisor—HMRC would consider on a case-by-case basis whether registration for supervision is necessary. This acts as an anti-evasion mechanism preventing TCSPs from artificially claiming that they are outside the scope of the UK’s anti-money laundering regime.
The hon. Member for Oxford East asked earlier where this was based. The Government recently established the Office for Professional Body Anti-Money Laundering Supervision, known as OPBAS, within the Financial Conduct Authority. It works to secure consistently high standards of AML supervision of professional bodies, including TCSPs. These reforms follow the identification of risks associated with TCSPs in the Government’s 2016 action plan for anti-money laundering and counter-terrorist financing. This found that service sectors such as TCSPs were a significant money-laundering threat.
Although it is for anti-money laundering supervisors to determine their areas of focus, they are required to have regard for the UK’s national risk assessment of money laundering and terrorist financing when assessing risks in their own sector. The risk assessment that the Government published in October last year concludes:
“The highest risk TCSPs are assessed to be UK TCSPs which offer a wide range of services (including nominee directors, registered office services, and banking facilities)”.
Additionally, individual anti-money laundering supervisors are under a duty to identify and assess the international and domestic risks of money laundering and terrorist financing to which their sectors are subject.
Helen Goodman
I am surprised by what the Minister is saying. He obviously did not listen to the BBC “Analysis” programme that was broadcast about three weeks ago on the role of overseas TCSPs. We think it is great when people build real-life factories as a jumping-off point into the single market, but it is evident that TCSPs and banks located in the Baltic states, which do not have such good anti-money laundering regulatory regimes, attract money and are used as a jumping-off point to move that money into the European system. Does the Minister really think that the anti-money laundering regimes throughout the European Union are as effective the one in the UK?
John Glen
I cannot comment on the specific cases that the hon. Lady mentions, because I have not seen or studied them. I imagine that there is a degree of variability in the effectiveness of regimes, but I am trying to set out the Government’s rationale for what we have in place. I do not suggest that it is perfect, but some of the developments have occurred in response to shortcomings that have been identified.
The individual anti-money laundering supervisors are under a duty to identify and assess international and domestic risks, including the money laundering and terrorism risk, which ensures that the most intensive supervision is applied where the highest risks of money laundering exist. The establishment of OPBAS will assist with the consistent identification of such risks across the TCSP sector. Our national risk assessment makes it clear that the Government are aware of the money laundering risks connected with TCSPs, and further reform in the area should take account of the conclusions of the ongoing FATF review. I assure Opposition Members that the regime is a searching and exacting one. I know from ministerial meetings concerning preparations for it that the evaluation will be exacting. We expect the observations to be meaningful, and we will need to respond carefully to them. However, until we receive the outcome of that review of the UK’s anti-money laundering regime and of the experience of OPBAS as its role develops, it would not be appropriate to adopt the amendment.
Hon. Members should be mindful of the fact that anti-money laundering supervision around the world follows a territorial model. Simply requiring non-UK TCSPs to have a UK supervisor when they set up UK companies will not address the challenges of extra-territorial supervision. Effective anti-money laundering supervision depends on measures that include supervisory on-site visits and close engagement with higher-risk firms. Requiring a UK supervisor to do that in relation to a non-UK firm will not, in and of itself, address the issue that hon. Members have identified.
As was noted in the other place, the most effective means of combating international money laundering is cross-border co-operation to drive up the standards of overseas supervision and enforcement. For those reasons, we have imposed a duty on each UK anti-money laundering supervisor to take such steps as they consider appropriate to co-operate with overseas authorities. That is the agenda we pursue through the global FATF process. I therefore respectfully ask the hon. Lady to withdraw the new clause.
Anneliese Dodds
I am grateful to the Minister for those remarks and clarifications. They have been genuinely helpful, but I regret that some areas are still rather unclear to me; perhaps they are not to other Committee members. He stated that the highest-risk TCSPs are assessed to be UK ones, but it has not been spelled out why. Perhaps he could write to me about that.
Anneliese Dodds
I am grateful to the Minister for offering to look into that. We must always be wary of talking about a general pattern of activity as necessarily reflecting the risk profile of that overall activity. Among those TCPS, there could be overseas ones that are not appropriately regulated and that also offer a wide range of services, in the same way as some UK TCSPs do.
I am also a bit confused about the professional regulators. As the Minister said, there are about 22 of them, and then on top of that we stick Her Majesty’s Revenue and Customs, the Financial Conduct Authority and so on. As I understand it, the professional regulators do not have members based in other countries; they cover only UK residents. We are talking about, for example, the Law Society of Scotland and the Law Society of England and Wales—professional bodies dealing with UK individuals. We are not talking about professional associations covering professionals in other countries.
The Minister seemed to talk about a process of liaison between these organisations and their counterparts in other countries. I am sure we all want to encourage that, because it sounds like a very good idea. Information sharing is wonderful, but information sharing is not the same as having an appropriate process of regulation to ensure that there is compliance with anti-money laundering requirements.
The Minister said that the approach was an extraterritorial one, because it affects bodies in other countries. That is absolutely right, but those bodies then interact with our company formation procedure. That is the reason why we, as a country, have a stake in this process—a rather large one, given the reputational damage that seems to be being caused by the activities of some unregulated or inappropriately regulated TCSPs. I will be pressing the new clause to a vote.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
The new clause looks to ensure that standards published by the Financial Action Task Force in relation to combating money laundering, terrorist financing and other threats to the integrity of the financial system can be easily implemented in this country. We are also seeking to identify or revoke a designation of a high-risk country, taking account of best international practice, including EU sanctions regimes.
We have talked a bit about the FATF in the Committee. As colleagues will know, its objectives are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. It is a policy-making body that works to generate political will to bring about national legislative and regulatory reforms. We have talked about its reporting cycle already and the fact that the UK is currently being investigated in order for the FATF to report on us later in the year.
John Glen
I just want to clarify that, while I would not profess to be an expert on Pakistan’s compliance with the FATF, the concerns raised about its recent greylisting were around the specific handling of various banned terrorist organisations. I would not wish to cast any wider doubt over its intentions to improve the provision of services.
Anneliese Dodds
I thank the Minister for that helpful clarification. It is helpful to know the exact locus of FATF activity or the concerns about Pakistan that were focused on terrorist financing. That is not the area we are focused on now, but such financing and money laundering often go hand in hand.
Given the potential effects of such a ruling—we have talked about that in relation to Pakistan—we think it necessary that Ministers should have the flexibility to ensure that FATF standards can be implemented as soon as possible in our country in order to be on top of new international standards. That is particularly important because the UK was a founding member of the FATF, so we need to show that we are at the cutting edge of implementing its requirements.
As I mentioned, we also need to be able to identify or revoke high-risk countries quickly, taking account of the FATF’s standards and given the effect that it can have on the countries themselves and also on our reputation. If we are viewed as not following FATF recommendations, that prevents the co-ordinated approach that the FATF was set up to promote in the first place.
Finally on this amendment, we hope that Ministers will take account of aligning the designations with our EU partners. We have talked consistently in our deliberations about the need for co-ordination, which of course makes all the mechanisms much more effective. When they are not co-ordinated, there can be loopholes. In that regard, it is important to mention the case of Russia. In 2014, the Arms Export Controls Committees—we talked about their composition when we talked about scrutiny arrangements—reported that more than 200 licences to sell British weapons to Russia, including missile-launching equipment, were still in place, despite David Cameron’s claim that the Government had imposed an absolute arms embargo against Russia in alignment with the rest of the EU. We really need to make sure that that alignment is genuine in practice, not just on the surface and rhetorical.
John Glen
New clause 16 would limit amendments to the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 to those that would implement standards published by the Financial Action Task Force, or those whose purpose was identifying or revoking a designation of a high-risk third country. The 2017 regulations transpose the fourth EU anti-money laundering directive, which was in turn derived from the most recent major updates to the FATF standards, which were made in 2012. As the hon. Lady acknowledged, the UK is a founder member of the FATF and is committed to playing a leading role in its continuing work. It is right for the Government to have the power to update the UK regime when such standards change.
There are, however, several areas where the UK’s anti-money laundering regime already goes beyond those standards. Our recently established register of trusts generating tax consequences, for example, goes beyond the standards set by the FATF. Similarly, the UK announced at the time of the 2015 Budget that we intended to regulate virtual currency exchanges for AML purposes—an objective that was accomplished through negotiation of the fifth EU anti-money laundering directive—but that was not required by the FATF. So although we will remain aligned with the FATF standards after the UK ceases to be a member of the EU, our anti-money laundering regime exceeds those standards in certain areas.
The Government are determined to ensure that our defences against misuse of a financial system remain ahead of global standards rather than solely reflecting them. That is reflected in our commitment to the establishment of a public register of the beneficial ownership of non-UK companies that own UK property, which the Committee debated earlier, even if we did not agree on the timeline for it. The new clause would reduce our ability to do so. Under the power in question, the UK’s anti-money laundering regime could not go further in areas where we would otherwise want to.
As I said previously, in debating amendment 7, and as my right hon. Friend the Minister said about new clause 3, we do not believe that a bar on new offences is the right way to address the concerns raised by Lord Judge and others. We have instead tabled amendments to ensure that the power is used only where it is needed, and that Ministers are properly accountable to Parliament for it.
Ensuring that we can make regulations to prevent, or to enable or facilitate the detection or investigation of, money laundering or terrorist financing, as well as to implement the standards of the FATF, is the most certain method of placing future changes to our anti-money laundering system on a sound legal basis. The new clause would limit our ability to do so in the future, and I am sure that is not the intention behind it. I respectfully suggest that the hon. Lady might withdraw it.
Anneliese Dodds
I am grateful to the Minister for his explanation. It may be the fact that we have been in this room for a few hours, but I am struggling a little with, in particular, the suggestion that new clause 16 would somehow tie the UK’s hands in implementing additional requirements beyond the FATF standards.
The Minister referred to the public register of property owned by non-UK entities. We had a discussion about that, but he is right: it would arguably be an innovation in the UK. Of course it is one that we need more than other countries, because of the use of our property market in many such cases, and the exponential rise in house prices. He could have talked—although he did not—about the register of beneficial ownership of companies being an innovation as well, but countries such as the Netherlands and Norway are putting those into practice anyway, so perhaps we are not quite as far-reaching in what we are doing as we might suggest. Particularly in relation to the charges and fines levied against those found guilty of money laundering offences, we seem to be in a different position from that of our North American counterparts, for example, as we have discussed. None the less, it is not clear how the new clause would stop us going further than those other jurisdictions where we wished to do so. It says that we would take account of the
“best international practice including EU sanctions regimes”,
not that we would be led by it.
Helen Goodman
On a point of order, Dame Cheryl, in the light of what the Minister said earlier, I would like to read precisely what was published by The Independent. I misinterpreted it and, consequently, I misled the Committee. I wish to apologise to him and to the Committee for that. This is what The Independent published in 2014:
“According to Electoral Commission records, New Century Media gave the Conservatives £85,000 in the months leading up to the 2010 general election…New Century represents the personal foundation of the Ukrainian billionaire Dmitry Firtash, who has been indicted on bribery and corruption charges, which he denies, in the United States…David Burnside, New Century’s executive chairman, has made…claims about his connections with senior Tories…The company has paid for a table at the last four Conservative summer balls and paid for…the International Development minister”—
who is now the Minister for Europe and the Americas—to be its guest
“at Conservative events at a cost of…£800”.
I am sorry. I misread it and misunderstood it, and consequently I misled the Committee.
The Chair
The hon. Lady has had the opportunity to put that on the record. If the Minister wants to add something, he may.
Sir Alan Duncan
May I thank the hon. Lady for her most gracious withdrawal, which sets the record straight? I appreciate the manner in which she did it.
Question put, That the clause be read a Second time.
Anneliese Dodds
I beg to move, That the clause be read a Second time.
It is good that we can continue proceedings, because there are many matters that we still need to consider, not least this new clause and the others on the selection list. I am grateful for the opportunity to do so.
New clause 17 requires a public consultation on corporate liability for money laundering within six months. We have already discussed what occurred with the Government’s evidence-gathering exercise—as I think they described it—in relation to a broader economic crime offence, and how the results of that exercise have been with the Government since last March. We still have no indication of how that will be dealt with, aside from the Economic Secretary’s helpful remark that it will be dealt with in due course. I know he always tries to be helpful, but I am afraid that that is not good enough for those of us who want to see change in this area.
We are specifically requesting a public consultation to get the process moving and to promote it, not least because of what the Government have committed to—or at least, what past Conservative leaders have committed to. In 2016, at the time of the anti-corruption summit, David Cameron wrote an article for The Guardian in which he claimed:
“In the UK, in addition to prosecuting companies that fail to prevent bribery and tax evasion”—
Sanctions and Anti-Money Laundering Bill [ Lords ] (Fifth sitting)
(6 years, 9 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Committee divided: - Ayes: 8 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 10 / Noes: 8 - Question accordingly agreed to.
The Chair
Before we resume line-by-line consideration, may I ask everyone to ensure that their electronic devices, including phones, are turned off or silenced? I remind hon. Members that Mr Speaker does not allow tea or coffee to be brought into Committee sittings.
Today’s selection list is available in the Committee Room and on the Bill website. It shows how the selected amendments—generally those on the same or a similar issue—have been grouped for debate. I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules after debate on the relevant amendments.
Clause 44
Reports on progress towards register of beneficial owners of overseas entities
Question proposed, That the clause stand part of the Bill.
Helen Goodman (Bishop Auckland) (Lab)
It is nice to see you in the Chair again, Mr McCabe, in this much warmer Committee Room 12.
Clause 44 is a concession that the Government made in the other place because there was a lot of concern that they had not cracked on with making progress towards a register of beneficial owners of overseas entities—an extremely important part of the machinery for preventing money laundering. It is rather a pathetic clause, so the Opposition have tabled a new clause that would speed up the timetable, for reasons that I will explain when I move it. I want to register the fact that although we do not intend to vote against clause 44, we think it somewhat weak as a concession.
The Economic Secretary to the Treasury (John Glen)
As the hon. Lady says, clause 44 fulfils a Government commitment made at an earlier stage of the Bill in response to a call for clarity on our intentions for the delivery of a separate anti-corruption policy. My noble Friend Lord Ahmad of Wimbledon committed us to reporting on progress made on our policy to create a register of beneficial owners of overseas entities that own or buy property in the UK or that participate in UK Government procurement. We are committed to the register being operational in 2021.
The clause requires the Secretary of State to publish and lay before Parliament three reports on the progress made towards putting the register in place, each of which will be due after the expiry of a 12-month reporting period. The first and second reports must set out
“the steps that are to be taken in the next reporting period towards putting the register in place, and…an assessment of when the register will be put in place.”
The third
“must include a statement setting out what further steps, if any, are to be taken towards putting the register in place.”
The obligation to report to the House on progress reinforces the commitments on our timetable that the Government have given elsewhere.
Question put and agreed to.
Clause 44 accordingly ordered to stand part of the Bill.
Clause 45
Crown application
Question proposed, That the clause stand part of the Bill.
The Minister for Europe and the Americas (Sir Alan Duncan)
Clause 45 allows sanctions regulations under clause 1 and regulations under clause 43 to make provision binding the Crown, but not to make the Crown criminally liable. It also stipulates:
“Nothing in this Act affects Her Majesty in Her private capacity”.
Both are common provisions in law. I commend the clause to the Committee.
Question put and agreed to.
Clause 45 accordingly ordered to stand part of the Bill.
Clause 46 ordered to stand part of the Bill.
Clause 47
Regulations: general
Helen Goodman
I beg to move amendment 39, in clause 47, page 34, line 33, leave out paragraph (a).
This amendment would remove paragraph 2(a) from Clause 47, which enables the appropriate Minister to amend, repeal or revoke enactments for regulations under section 1 or 43.
We return to the vexed issue of Henry VIII powers and the Government over-reaching themselves once again. I want to recount for the Committee what happened on this matter in the Lords. Lord Judge moved an amendment to leave out paragraph (a), because he was concerned that it was a Henry VIII provision. Our amendment covers the same issue. Lord Judge said that
“with Clause 44, there is no primary legislation at all...It just says, ‘Let’s give the Minister regulation-making powers for this, that and the other’...This is all being done on the basis of an unknown law, because the Minister has not yet brought the regulations into existence.”
One might say that clauses 47 and 48 are pure Henry VIII powers. They give Ministers the power to change this piece of legislation and other pieces of legislation in perpetuity before the regulations under the clauses have been made. This is perhaps slightly more difficult to understand than the problems with making new criminal offences by regulations, but it is wholly objectionable.
Lord Judge continued:
“In advance of the law being made by regulation, we are giving the Minister power to amend the regulations and to do away with statute. This is in a world where, as we discussed earlier, we already have the Terrorism Act, the Counter-Terrorism and Security Act, the Terrorism Asset-Freezing etc Act and the Proceeds of Crime Act…all of which bear on this Act, and all of which will be susceptible to amendment repeal at the Minister’s behest…the secondary will override the primary; and the Minister is in effect going to replace Parliament”.—[Official Report, House of Lords, 17 January 2018; Vol. 788, c. 718.]
It was not just the Cross-Bench peers who expressed concern about this. Viscount Hailsham, another Lord with a great deal of legal experience, also argued against it. He said:
“It could be used in amending, revoking or repealing existing legislation or to extend classes of offence to which the amended legislation applied. It could be used to increase penalties. It could be used to remove statutory defences. It could be used to amend the definition of criminal intent. Indeed, it could make absolute offences that presently require proof of a specific intent. Because it is an amending power, it could be used to give further powers to the investigating officials or to increase the penalties imposed by the courts.”—[Official Report, House of Lords, 17 January 2018; Vol. 788, c. 719.]
Lord Pannick, as everybody will recall, was the lawyer who ensured that article 50 was brought to Parliament rather than exercised through the royal prerogative, and he is a person with a strong commitment to this House. He argued that this excess of Henry VIII powers could lead to a point where,
“the courts are not prepared to accept them and are showing every sign that they will give them the narrowest possible interpretation because, as a matter of constitutional principle, they are objectionable”.—[Official Report, House of Lords, 17 January 2018; Vol. 788, c. 721.]
The Committee has gone over the argument about the problem with Henry VIII powers before, and we have debated it in the Chamber on the European Union (Withdrawal Bill.) People may begin to find it slightly boring, but we are debating it repeatedly because the Government have stuffed it into the Bill so many times. That is the problem, so we really need to persuade Ministers that it is excessive and we need to demonstrate how much they are going down that path.
Of course Ministers think, “When we write these regulations it will all be absolutely fine, because we are nice chaps. It will all be perfectly okay,” but they need to remember that they might not always be in power. Other Ministers might write regulations, about which the current Ministers might not be quite so enthusiastic. We need to be a lot more cautious. I do not understand why Minsters have structured the Bill in such a way. They should have put into primary legislation the overall structure for making regulations on both sanctions and anti-money laundering. Ministers are in an even weaker position on anti-money laundering than they are on sanctions.
There is a case for saying that individual sanctions must be made swiftly, and therefore having the negative resolution procedure for statutory instruments is common sense. We all understand that. However, I cannot fathom why Ministers have not said to the lawyers, “Can we please structure this so that we have the overall shape of the way these things work and the penalties in primary legislation?”, and Ministers could categorise them. They could say, “We will have a class A, a class B and a class C, and then we will name them quickly,” in the way that we do with drugs when people make new chemical formulae and we have to swiftly designate things. That would have got over the problem.
We started with clause 1(1), which states that Ministers may make sanctions regulations. Here we are, right at the end of the Bill, and the pattern is still the same. We still have the same problem.
Sir Alan Duncan
Amendment 39 would remove the power to make certain consequential modifications to existing primary and secondary legislation through regulations made under the Bill. Such power is not unusual. It is worth noting that the Delegated Powers and Regulatory Reform Committee made no comment on the inclusion of the delegated power in its report on the Bill. I recognise that concerns have been expressed—we have just heard them—about the breadth of the regulation-making powers conferred by the Bill. The consequential power is both appropriate and necessary, and I hope I can provide reassurance on that.
The power can be used only to make consequential provisions. It also enables other provisions that are supplemental, incidental or transitional, or that make savings to the sanctions or money-laundering regulations. It is important to note that it does not confer the power to make any changes to legislation that are independent of the sanctions and money-laundering power. For example, the power can be used to repeal frozen EU legislation saved by the European Union (Withdrawal) Bill, so when we use the powers in the Bill to replace a sanctions regime in frozen EU law with one in a statutory instrument, the power will enable the frozen EU law to be repealed even if all that has happened in practice is that the sanctions have been relabelled. Without the power we would be unable to do so without another Act of Parliament. I am sure hon. Members agree that that would not be a good use of parliamentary time and that it would be impractical.
The power simply provides a tool to make changes to ensure that the statute book works as a result of sanctions being imposed or anti-money laundering regulations created. It does not give the Government the ability to change swathes of legislation without regard to the purposes of sanctions and anti-money laundering.
I want to reassure hon. Members that any regulations made that use the power to amend, revoke or repeal any primary legislation would be required to use the draft affirmative procedure. That means both Houses would need to give their consent before the changes would come into effect, and it is fully in line with the standing advice of the Delegated Powers and Regulatory Reform Committee about the appropriate parliamentary procedure for such powers.
In other words, we know what these laws will be. They will be sanctions and anti-money laundering regimes of the types set out in the Bill and for the purposes listed in it. I hope that I have been clear that this power is appropriately limited to what is necessary, and that on that basis the hon. Lady will withdraw the amendment.
Helen Goodman
The Minister said that this power to amend primary legislation through regulations will apply only to sanctions and anti-money laundering; however, he did not and could not say, because it would not be true, that that will mean amendments only to this Bill. That is because sanctions and anti-money laundering offences are already covered by other pieces of legislation on the statute book. This will not be the one Act that says everything anybody ever dared to ask about sanctions and anti-money laundering. This is part of a large carpet, and it has been woven in, I feel, in a most unsatisfactory way. The principle is broken when Ministers take the power to make regulations that may amend primary legislation.
Sir Alan Duncan
May I point out that if there is an amendment to another Bill, it is because those offences would become out of date, and therefore these are consequential?
Helen Goodman
I am grateful to the Minister for that interjection. As I said, and as he has just admitted, this does affect other pieces of legislation. Even if that were not the case, the problem is an issue of principle. We are changing primary legislation with secondary legislation. That is what we find objectionable, and that is why I wish to test the will of the Committee on the amendment.
Question put, That the amendment be made.
John Glen
I beg to move amendment 8, in clause 47, page 34, line 38, leave out subsection (3) and insert—
“(3) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to remove any reference to a provision of regulations that is revoked by regulations under section 1.
(3A) Regulations under section 1 may amend the definition of “terrorist financing” in section 43(4) so as to add a reference to a provision of regulations under section 1 that contains an offence, but only if—
(a) each purpose of the regulations containing the offence, as stated under section1(3), is compliance with a UN obligation or other international obligation, or
(b) paragraph (a) does not apply but the report under section 2 in respect of the regulations containing the offence indicates that, in the opinion of the appropriate Minister making those regulations, the carrying out of a purpose stated in those regulations under section1(3) would further the prevention of terrorism in the United Kingdom or elsewhere.”
This amendment provides that regulations under Clause 1 may amend the definition of “terrorist financing” in the Bill to add a reference to an offence only where the purpose of the regulations containing the offence is compliance with a UN or other international obligation or a purpose related to the prevention of terrorism.
There are two purposes behind the amendment. The first is to allow us to update the definition of “terrorist financing” in regulations. The nature of terrorist finance has a tendency to change over time and it is important that we are able to update our counter-terrorism measures to take account of the changes. This will allow us to continue to maintain a robust counter-terrorism regime, while meeting our international UN obligations.
While that is crucial, we also seek to restrict the ability to add to the definition of terrorist financing in the second part of the amendment. The Government listened to the concerns expressed by noble Lords about the aims of the regimes and the need for a proportionate approach. Having engaged with noble Lords, we agreed to restrict the ability to add to the definition of terrorist financing. The definition may be changed only to comply with international obligations or to further the prevention of terrorism, as set out in the clause. If the amendment were not agreed to, we would be unable to update our terrorist finance regime to respond to changing events.
Helen Goodman
Of course, nobody thinks that we should not have effective measures to tackle terrorist financing. That is plain and there is an obvious consensus about that. There are two questions. First, is this the appropriate way to go about it? Secondly—I would like the Minister to elucidate on this a little further—could the Minister give us some examples of the kind of changes to terrorist financing, that are not caught at the moment, but that could be dealt with in regulations as the issues arose?
John Glen
I am grateful for that challenge. As I set out, the Government would only amend the definition when necessary to meet UN obligations to further the prevention of terrorism. The clause is designed just to give the scope to amend the definition of terrorist financing.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is good to be here with you in the Chair, Mr McCabe. My reading of the Government amendment—maybe I have interpreted something wrong—is that it says,
“or a purpose related to the prevention of terrorism.”
John Glen
As I was about to say, the Government will be allowed to amend the definition only if it is necessary to continue to meet our new UN obligations or if it would further the prevention of terrorism in the UK or elsewhere.
The hon. Member for Bishop Auckland asked me to speculate on potential uses. That is difficult to do, by the very nature of these things, but, for example, we are seeing the use of cryptocurrencies such as Bitcoin. It may be that there is potential risk associated with that and there may be a need to include that, but I am making a speculative observation. It would depend on the circumstances, and what other jurisdictions and the UN were bringing forward.
Amendment 8 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Alison Thewliss (Glasgow Central) (SNP)
It is a pleasure to see you in the Chair, Mr McCabe.
I would like to reiterate the concerns that I raised on Second Reading about the overruling of any Acts made by the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. I have a solution to this, to some degree, in amendment 37. That is coming up, so I will speak about it more then. However, I am deeply concerned that UK Ministers are being empowered in this Bill to make changes to devolved legislation without the involvement or the permission of the Scottish Government or the Scottish Parliament. That is deeply concerning. If not this Government, it makes future Governments capable of amending Acts of another Parliament and I remain deeply concerned about that.
Sir Alan Duncan
The hon. Lady’s fears are utterly unfounded. I do not think there are any such examples. These are reserved matters, so changes are for this Parliament. The question of overriding the devolution settlement simply does not apply to this clause or to the Bill.
Question put and agreed to.
Clause 47, as amended, accordingly ordered to stand part of the Bill.
Clause 48
Parliamentary procedure for regulations
Helen Goodman
I beg to move amendment 40, in clause 48, page 36, line 1, leave out paragraph (d).
The Chair
With this it will be convenient to discuss new clause 7—Parliamentary committee to scrutinise regulations—
“(1) A Minister may not lay before Parliament a statutory instrument under section 48(5) unless a committee of the House of Commons charged with scrutinising statutory instruments made under this Act has recommended that the instrument be laid.
(2) The committee of the House of Commons so charged under subsection (1) may scrutinise any reviews carried out under section 27 of this Act.”
This new clause would require a specialised House of Commons Committee to approve all statutory instruments laid under the affirmative procedure under this Act. The Committee would also scrutinise the Government’s reviews of sanctions regulations.
Helen Goodman
The clause relates to parliamentary procedure for regulations. Amendment 40 distinguishes between regulations relating to anti-money laundering and those relating solely to sanctions. As I have said in relation to other amendments and clauses, there is a question of whether it is appropriate, in the case of anti-money laundering measures, to use the swift regulatory approach, which does not give either House the opportunity to make changes to the regulations. Although it is proposed that the affirmative procedure be used at this point in the Bill, that does not give us the opportunity to amend. We feel that the Government have not made their case for going down this path. We think it would be better to use the super-affirmative procedure as a bare minimum. There was cross-party consensus on that in the Lords—it was not complete, obviously, which is why the proposal is still in the Bill.
New clause 7 would enable us to create a new Committee of the House. One of the problems with what the Government are doing in the Bill is that they are reducing the amount of scrutiny of regulations on sanctions. We have discussed that issue before. For UN sanctions, the same process—Delegated Legislation Committees and the negative resolution procedure—will be followed, but at the moment EU sanctions go to the European Scrutiny Committee and there is a scrutiny reserve. We will lose that part of the machinery. With this new clause, we seek not simply to replace but to enhance and strengthen that piece of the machinery.
In the European Union (Withdrawal) Bill, we agreed that there should be a sifting Committee of the House, which will decide, for any piece of delegated legislation, whether it is appropriate to use the negative procedure or the affirmative procedure. For sanctions, we all agree that we sometimes have to act quickly and use the negative procedure, so the affirmative procedure clearly would not be appropriate.
I am concerned about the use of Delegated Legislation Committees. I am sure that every member of the Committee will agree that they are the lowest form of parliamentary life; they are the weakest form of parliamentary scrutiny. They are pulled together, people often do not turn up to them, people do not read the papers and the papers are not given to the Opposition Front Bench spokesperson more than two days before. Again, there is no possibility of amending the substance of the measures being considered. Because every single Delegated Legislation Committee is a new Committee, no expertise is built up; there is no institutional memory.
One of the things that we kept being told during the referendum campaign was that we were going to take back control and have parliamentary sovereignty. Accepting the amendment would be a way of strengthening Parliament. It would provide a way for Parliament to structure things, to build up some expertise in this important policy area, to learn from experience and to bring the experience of one situation to the next situation.
It would also be sensible, obviously, for the new Committee to be the Committee that looks at the reviews that the Government have agreed to prepare annually for the House under clause 27. I take the Committee back to clause 27, which sets out that annual reviews will be carried out to consider the effectiveness of sanctions.
At the moment, there is not really a Select Committee that has an overarching view of sanctions policy. There is no Select Committee in this House that examines sanctions policy on a regular basis. That is partly because—
Sir Alan Duncan
There is the European Scrutiny Committee, which looks at every single sanction and every piece of legislation coming from the EU. There is a formalised procedure for that sort of thing.
Helen Goodman
First, we are going to lose that Committee under what Ministers are proposing. Secondly, the European Scrutiny Committee is not a Select Committee. Thirdly, that Committee does not look at the UN-based sanctions, which, as the Minister knows, make up half the sanctions we impose.
Sanctions encompass many things: foreign policy objectives, which is why the Minister for Europe and the Americas is leading for the Government on this Bill; financial measures, which is why we have a Treasury Minister on the Committee; trade measures; and travel bans. Because of that, many Departments are involved with sanctions and therefore many Select Committees have an interest in them, but at the moment we do not have a regular review of sanctions policy by everybody.
It might be possible to set up such a scrutiny Committee on a similar basis to the Committees on Arms Export Controls, which have people from a number of different Select Committees bringing their different expertise to a subject. However, I thought that that would be rather too complex and, in any case, it would not be something that one would legislate for in a Bill; it would be a matter for the Standing Orders of the House.
What we would do is to agree that we wanted to improve scrutiny—that is what the whole Brexit thing is all about—and improve the standing and the role of the House. Then, we could consider the detail as to whether we wanted the Committee to be free-standing or a sub-committee of other Committees when we came to amend the Standing Orders of the House.
Both the amendment and the new clause are designed to strengthen Parliament, to strengthen parliamentary sovereignty and to bring back control.
Sir Alan Duncan
Before I speak to the two amendments in this group, perhaps it would be helpful if I restated the Government’s case for the approach we are taking—the parliamentary procedures for secondary legislation under this Bill.
The Government recognise that it is important that Parliament scrutinises the use of sanctions and that this Bill allows for such scrutiny. A set of regulations dealing with UN sanctions regimes will be made under the negative procedure. Once sanctions are agreed at the UN Security Council, the UK has an obligation to implement them under the UN Charter. Not doing so would leave the UK in breach of international law.
A set of regulations that do not deal with UN sanctions regimes will be made under the made affirmative procedure. That will allow regimes to come into force immediately, while still allowing Parliament to debate the regulations. That will negate the risk that, before any restrictions take effect, assets are removed, individuals leave or enter the UK, or arms or other prohibited goods are exported to countries that they should not be. It negates that risk.
Helen Goodman
I do not think the Minister or the officials have understood what the new clause aims to do. It would not change the process or whether the negative, made affirmative or draft affirmative procedure was used for a statutory instrument; it would change the group of people who looked at it, so that we build up some expertise on the matter among parliamentarians across the House.
Sir Alan Duncan
Let me come to the detail of the amendments in a second. I am just outlining the principles behind the Bill and its context.
At present, anti-money laundering regulations are transposed into UK law through the negative procedure in section 2(2) of the European Communities Act 1972. Under the Bill, the vast majority of anti-money laundering regulations will be made using draft affirmative procedures, so parliamentary scrutiny will be increased in that regard. Both the Delegated Powers and Regulatory Reform Committee and the Constitution Committee accepted in their reports on the Bill that the use of delegated powers for sanctions is appropriate. The DPRRC thought that it is
“appropriate for this mechanism to operate through the exercise of delegated powers”.
The Constitution Committee confirmed that and thought that,
“In practice, a delegated powers model is inevitable, given the practical difficulties that would arise if Parliament had to legislate to create and amend individual sanctions regimes.”
Amendment 40 would delete subsection (5)(d) and so remove the reference to regulations made under clause 43 being made under the draft affirmative procedure, in all but narrowly defined circumstances. The effect of that—which I assume is not hon. Members’ intention—would be to reduce parliamentary scrutiny over future money-laundering regulations after the UK ceases to be a member of the EU.
Money-laundering regulations, most recently those that came into force last year, are typically made through the negative procedure. They do not usually require a debate or vote in this House or the other place before coming into force. To enhance scrutiny after the UK ceases to be a member of the EU, subsection (5)(d) provides that substantive changes to money-laundering regulations made under the Bill will be made through the draft affirmative procedure. That will require all such regulations to be debated and voted on by Parliament before coming into force.
The only exception is when the UK is updating the list of high-risk jurisdictions in connection with which enhanced due diligence measures are required. Changes to the list will be made via the made affirmative procedure, as set out in subsections (2) and (3). Again, that will enhance parliamentary scrutiny. Changes to the list are currently made at EU level. If accepted, the amendment would require most regulations under clause 43 instead to be made under the negative procedure, as is provided for clause 48(6). That would weaken parliamentary scrutiny under the Bill as drafted.
New clause 7 would require secondary legislation introduced under subsection (5) to receive the approval of a new House of Commons Committee before being laid before Parliament. I do not think that is necessary, because the new clause would apply to all regulations made using the draft affirmative procedure. Such regulations will be scrutinised directly by Parliament when they are made, as both Houses would need to give consent before they could come into force, thereby negating the need for a scrutiny Committee to look at any of them first.
Were parliamentarians to object, they could reject the regulations. That would force the Government to lay a new instrument, taking into account any concerns that had been expressed. The EU withdrawal Bill is an exception because of the very large volume of statutory instruments that will need to be passed under it in a very short space of time, ahead of the day the UK leaves the EU. That is why a Committee with such a sifting function is appropriate for the powers in that Bill. The same does not apply to the powers mentioned in the new clause. There will not be nearly as much secondary legislation to pass via the draft affirmative procedure. Given that, and together with the points I made on amendment 40, I ask the hon. Lady to withdraw her amendment.
Helen Goodman
I am grateful to the Minister for that explanation. Of course, improvements were made to the Bill in the other place in response to criticisms, and some processes were upgraded from the negative procedure in the original draft to the affirmative procedure in the Bill before the Committee. I do not wish to press amendment 40, but we will wish to press new clause 7 to the vote. I shall explain why, even though we are going to vote on it. First, it is for this House to decide on our processes. We would not dream of telling the other House how to run its affairs. What the Delegated Powers and Regulatory Reform Committee or Constitution Committee in the House of Lords say does not cover procedures in this House. They are our responsibility. The Minister said there would be far fewer statutory instruments under this Bill, but he has given us no estimate. Does he have any sense of the number of statutory instruments that might come forward? Perhaps he will benefit from inspiration before I sit down, so that he can intervene and tell me what he expects.
Sir Alan Duncan
Our estimate of the regimes that will have to be transferred at the moment is in the region of 33.
Helen Goodman
Thirty-three whole regimes is quite a chunky number, is it not? That is not 33 individuals; it is 33 regimes. Of course, I was extremely concerned about the way that the EU withdrawal Bill looked, as were many Members. However, in one respect the problem is greater in this Bill. This is a Bill with permanent powers; the EU withdrawal Bill is one with temporary powers. Therefore, when we come to the right moment, we will wish to put new clause 7 to a vote. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Alison Thewliss
I beg to move amendment 37, in clause 48, page 36, line 5,
‘(5A) A statutory instrument containing regulations under section 1 that repeals, revokes or amends—
(a) an Act of the Scottish Parliament,
(b) a Measure or Act of the National Assembly for Wales, or
(c) Northern Ireland legislation,
must receive the consent of the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly, respectively.”
This amendment would require the UK Government to obtain the consent of the devolved administrations before repealing, revoking or amending devolved legislation using a statutory instrument containing regulations under section 1.
As I mentioned before, in this Bill the Government have given themselves the capability—although it is not necessarily their intention—to amend devolved Acts. It is not necessarily that the Government will do that, but we need to be mindful that future Governments may choose to. We cannot foretell exactly what the future will hold. In its response to the consultation on this issue, the Law Society posed the question about whether the Government have consulted the devolved Administrations and for what purpose the measure is in the Bill. Although the Government have given themselves this power, they have not explained the circumstances in which they might need to use it. If they say that nothing in the legislation has to do with the devolved Assemblies, why are they giving themselves the power to revoke devolved Assemblies’ legislation, when they would not have any competence to do so? It does make any sense that they would put something in the Bill if they have no intention or need to use it.
I would also like to know—given that the Government have not explained this either—the circumstances in which they would want to override devolved legislation and why they feel a consent provision such as the one I am suggesting is not appropriate. If the Government believe that devolved legislations have no power in this area anyway and would therefore not be legislating in it, why have they put the capability of amending devolved Acts within the scope of this Bill? Would the Minister also explain why our consent provision would be considered inappropriate? That has not been explained up to this point, or during deliberations in the Lords. I have read some of the background, and Baroness Northover and Baroness Sheehan did not quite understand the need for what the Government propose either, so I would be grateful if they made more information available. It is not clear to me, and, as I mentioned previously, this provision strikes me as a power grab, and an unnecessary one at that.
Sir Alan Duncan
If I can set this out again to the hon. Lady’s satisfaction I hope she will draw a conclusion. Under the UK’s constitutional settlement, matters of foreign policy are reserved to Westminster. This Bill will provide the UK Government with powers to be used in pursuit of the UK’s foreign policy as well as to ensure that our national security is intact and to deal with money laundering. The Bill therefore relates to matters that are accordingly reserved. The devolved Administrations were consulted during the Bill’s preparation, and they have not disagreed with our assessment that the Bill deals with a reserved matter. Amendment 37 would mean that the consent of the relevant devolved Administration was required for any sanctions or anti-money laundering regulations that made a consequential repeal, revocation or amendment to any law created by the devolved Administrations. This would effectively give devolved Administrations veto rights over legislation relating to UK foreign and security policy, or to anti-money laundering policy. That is contrary to the established devolution settlement between Westminster and the devolved legislatures.
With regard to regulations under the Bill, any amendment to laws created by devolved Administrations would only arise as the consequence of the sanctions or money laundering measures under the Bill. Regulations cannot make free-standing changes to devolved legislation. Their primary purposes will always be a reserved matter. Such consequential amendments are entirely consistent with the constitutional settlement, and it would not be consistent with our devolution settlement to give the right of veto to devolved Administrations. Given that the effect of this amendment would be to rewrite the devolution settlement without consulting other devolved Administrations or seeking their consent, I do not agree with it and I urge the hon. Lady to withdraw the amendment.
Anneliese Dodds
We have had an interesting exchange of views. The Minister, however, did not explain a couple of things that would be helpful for the Committee to understand. He indicated that there was consultation with the devolved Governments, but did not spell out what kind of arrangements he anticipates in future that might fall short of the requested veto but that could constitute consultation. This is important, because we have just been talking about the fact that money-laundering regulations in particular span a range of Government issues, not all of which are reserved. They cut across a number of different powers and it would be helpful to know whether, for example, he anticipates that these matters would be part of the ongoing dialogue between the Westminster Government and the devolved Governments, and whether there is regular exchange of information.
The Committee has discussed SLPs, and there is huge concern about whether there is sufficient action in Westminster on that. Devolved Administrations have raised the issue, and it would be interesting to know whether that was part of a structured dialogue or whether it was something that occurs in an ad hoc way, and how the Minister anticipates that developing in the future.
Sir Alan Duncan
We have continuous discussions with the devolved Assemblies and, of course, with Scottish Members of this House. Once again, I must make it clear that clause 48 is focused entirely on reserved matters, so it does not affect our devolution settlement in any way, whereas the amendment moved by the hon. Member for Glasgow Central most certainly does.
Alison Thewliss
I am not certain that the Government have answered my points. I can buy what the Minister of State says about sanctions and foreign policy, but Scotland and the Scottish Parliament may have something to say about the money-laundering part. I am concerned that the case has not yet been made for the power grabs in the Bill. Why include powers to overrule Scotland on something that it cannot do in the first place? That is just not logical.
I do not intend to press amendment 37 to a vote at this stage, but I would like the Government to consider the matter further; we might raise it again on Report.
Luke Graham
Opposition Members have spoken about power grabs, and hon. Members who are not Scottish have raised issues relating to devolved Administrations, but we need to be really clear that this is a reserved area, that there is ongoing dialogue and that Scotland has a voice here in Scottish MPs. That is why we are part of Westminster, which is our Parliament as much as Holyrood is. We need to make it very clear that we are having a discussion, but these powers are reserved.
Luke Graham
I will not. These powers are reserved. This is not a power grab; it is a reserved matter. Devolution does not mean “separate”. We are in conversations, and Scotland has a strong voice here in its Members of Parliament.
Alison Thewliss
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 48 ordered to stand part of the Bill.
Clauses 49 and 50 ordered to stand part of the Bill.
Schedule 3 agreed to.
Clauses 51 to 53 ordered to stand part of the Bill.
Clause 54
Extent
Helen Goodman
I beg to move amendment 41, in clause 54, page 41, line 6, leave out “may” and insert “must”.
The Chair
With this it will be convenient to discuss the following:
Amendment 42, in clause 54, page 41, line 16, leave out “may” and insert “must”.
Amendment 43, in clause 54, page 41, line 22, leave out “may” and insert “must”.
Amendment 44, in clause 54, page 41, line 25, leave out “may” and insert “must”.
Helen Goodman
Clause 54 defines the territorial extent of the Bill. I did not include an explanatory statement for amendments 41 to 44 because I thought their effect so obvious that it did not need further explanation.
In the sanctions part of the Bill, at the moment, Ministers may, by Order in Council, provide for any of the provisions to the Channel Islands, the Isle of Man and the British overseas territories, whereas the amendment would require an Order in Council to extend the provisions to the Channel Islands, the Isle of Man and any of the British overseas territories. We are obviously making the distinction that the Minister made earlier between Her Majesty in her personal role and Her Majesty as the Crown, which is the representative of the Executive. We think that it is appropriate to extend the sanctions part of the legislation in this way.
I am sure that Ministers have looked at the draft EU withdrawal document produced by the EU Commission last week, but in case not every member of the Committee has done so, I would like to draw their attention to article 3 on territorial scope:
“1. Unless otherwise provided in this Agreement or in Union law made applicable by this Agreement, any reference in this Agreement to the United Kingdom or its territory, shall be understood as referring to:
(a) the United Kingdom;
(b) the Channel Islands, the Isle of Man, Gibraltar and the Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus to the extent that Union law was applicable to them before the date of entry into force of this Agreement;
(c) the overseas countries and territories listed in Annex II to the TFEU having special relations with the United Kingdom, where the provisions of this Agreement relate to the special arrangements for the association of the overseas countries and territories with the Union.
2. Unless otherwise provided in this Agreement or in Union law made applicable by this Agreement, any reference in this Agreement to Member States, or their territory, shall be understood as covering the territories of the Member States to which the Treaties apply as provided in Article 355 TFEU.”
Then there is a footnote to list the overseas countries and territories that have that special relation with the United Kingdom:
“Anguilla, Cayman Islands, Falkland Islands, South Georgia and the South Sandwich Islands, Montserrat, Pitcairn, Saint Helena and Dependencies, British Antarctic Territory, British Indian Ocean Territory, Turks and Caicos Islands, British Virgin Islands and Bermuda.”
This Bill is a Brexit Bill. We are trying to have new provisions that apply to the United Kingdom post-Brexit. It is absolutely clear that when we leave, the Channel Islands, the Isle of Man, Gibraltar and all the overseas territories will also be affected as set out in that draft agreement. Many things in the Commission’s draft were controversial and were challenged and questioned, but the territorial extent was not one of them. It seems reasonable to enable us to move from a situation where Union law applies in the existing way to the Crown dependencies and the overseas territories, and not to set up a situation where we have great big loopholes.
This raises a question for Ministers. At the moment, European law applies to the United Kingdom, the Channel Islands, the Isle of Man and Gibraltar. There is still a question mark over Ministers’ intentions with respect to the fifth anti-money laundering directive. Although my amendment applies to the sanctions part of the Bill, it raises the question of whether Ministers plan to accept the contents of the fifth anti-money laundering directive. The UK is ahead in some respects, but not in all, and clearly the Crown dependencies and the overseas territories are not ahead. I wish to tease that matter out with this series of amendments.
Sir Alan Duncan
I suppose the overarching point is that Brexit will change the UK’s relationship with the EU; it is not designed to change the UK’s relationship with its overseas territories and Crown dependencies. The starting point is that EU law applies to a certain extent to Crown dependencies and overseas territories, but not entirely. Currently, overseas territories are not bound to apply EU sanctions, but choose to do so to ensure alignment with the UK’s foreign policy.
Let me explain that in more detail. As I said last Tuesday, the UK is responsible for the foreign affairs and security of the Crown dependencies and overseas territories. That is the constitutional position. However, another important constitutional point is that our long-standing practice is that we do not generally legislate for these jurisdictions without their consent, except in exceptional circumstances. Sanctions are tools of foreign policy, or are used to protect our national security. We have been clear that the overseas territories and Crown dependencies must follow the UK Government’s foreign policy, including the sanctions that we apply.
Currently, there are two ways in which sanctions are implemented by the overseas territories and Crown dependencies. The UK legislates directly for the majority of these jurisdictions, with their consent, through Orders in Council. Other jurisdictions choose to legislate for themselves, but they follow precisely the sanctions implemented in the UK. That model is well established, and respects the rights of the jurisdictions. The Bill is drafted in a way that reflects that reality. It is consistent with the current implementation model for UN and EU sanctions, as well as measures under the Terrorist Asset-Freezing (Temporary Provisions) Act 2010. It allows those jurisdictions that choose to follow UK sanctions through their own legislation to continue to do so. It also allows the UK to legislate directly for certain overseas territories, where they choose.
I do not see the Bill as the right place to change those long-standing constitutional arrangements, nor do I see a compelling case for doing so at all. I am sure that hon. Members would not wish to jeopardise the achievements that friendly co-operation with these jurisdictions has already made, nor would they seek to disenfranchise those territories that have chosen to legislate for themselves. On that basis, I urge the hon. Member for Bishop Auckland to withdraw her amendment.
Helen Goodman
The Minister has set out the position in principle; he has not given any examples. Let me put it like this: if they always do what we want them to, why do we not just have an automatic system? What is the value of the divergence? That is the obvious rejoinder, but I feel that perhaps this is not the right way, and the right place, to deal with this matter, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 54 ordered to stand part of the Bill.
Clause 55
Commencement
Helen Goodman
I asked the Minister about commencement last week and he did not have a clear answer. I hope he has had time over the weekend to think about the issue and can now explain the Government’s plan to us. While it is perfectly acceptable, normal and understandable, when dealing with some real technicality, to rely on officials, commencement is something for which Ministers themselves are responsible—how the Bill’s commencement provisions will interrelate with our withdrawal from the European Union, and whether the intention is to implement the sanctions on 1 April 2019, to wait until 1 January 2020—the projected end of the transition period—or to implement them at some other time.
I am concerned that, in looking at the Bill, thinking about what they wanted to do, and considering how this interrelates with everything else in EU withdrawal, Ministers did not seem to have a clear plan—last week, at any rate. They do not appear to have thought through what they are trying to achieve with these negotiations. It is all very well to say, “It’ll all come out in the wash and we’ll find out in the end,” but that puts us very much in the position of being recipients of whatever the European Union, from on high, prefers to give. I would have thought that Ministers would have an objective, and how they wanted it to happen. We need more clarity from the Minister, not on subsection (1) which covers sections 44 to 56, but on the earlier parts of the Bill. What is his plan?
Sir Alan Duncan
This clause sets out when the Act will commence. It is not part of the negotiations we are currently having with the EU, which are, of course, still a matter of negotiation. I urge the hon. Member for Bishop Auckland to appreciate that what we debating here is the detail of this particular Bill.
Clauses 45 to 49 and 51 to 56 will come into force on the day on which the Bill becomes an Act of Parliament. Those clauses make up part 3 of the Bill, dealing with supplementary provisions, definitions and final provisions, with the exception of clause 50 which deals with consequential amendments and repeals. The remaining clauses will come into force on a day appointed by the Secretary of State, who may allow for clauses to commence on different days. That will enable the Secretary of State to commence the other clauses when required. With that flexibility—which I hope the hon. Lady appreciates— I urge that clause 55 stand part of the Bill.
Helen Goodman
The Minister has not given us a plan; he has not said how he sees this panning out, and he has not even made it clear whether the Secretary of State will implement chapters 1 to 5 on the same day, or on multiple days. I think we need to test the view of the Committee.
Question put, That the clause stand part of the Bill.
Sir Alan Duncan
I beg to move, That the clause be read a Second time.
In view of the debate in the other place I will discuss the new clause in some depth, which I hope will satisfy the Committee. I apologise in advance for speaking at length, but this matter exercised the other place in considerable detail and I feel duty bound to give a proper in-depth explanation.
We debated the offences provisions in the Bill in an earlier sitting, and I recognise the concerns raised by hon. Members about returning control to Parliament. We have listened to the concerns raised here and in the other place by Lord Judge and others, and the new clause is intended to address them directly. As I mentioned in a previous sitting of this Committee, we have had meetings with Lord Judge and others, and my officials and I continue to make this offer. We are happy to meet hon. Members to answer their questions about the new clause and previous discussions.
It might be helpful if I remind hon. Members that the new clause proposes nothing new. Offences are regularly provided for in secondary legislation made under the European Communities Act 1972 by the negative procedure. Every current sanctions regime involves offences that are set out in the secondary legislation relating to that regime. None of the maximum penalties that we are providing for in the Bill are new. They reflect maximums provided for in existing secondary legislation relating to sanctions. However, the new clause recognises that concerns were raised in the other place and ensures that Ministers do not use the powers without good reasons, and that Ministers inform Parliament about the use of the powers so that they can be properly held to account.
The new clause will require the appropriate Minister to lay a report in Parliament whenever a sanctions regime includes criminal offences. The report will confirm that Ministers consider there are good reasons to do so and will set out what those reasons are. The clause specifies what elements should be included in the report, and I will address those in more detail in a minute.
I am sure that we all agree, as was the consensus in the other place, that sanctions are crucial to fulfilling our UN obligations and are a useful foreign policy and national security tool. To be effective, they must be enforced robustly, and those who breach sanctions must face the consequences—for example, it seems appropriate that those contributing to North Korean weapons proliferation should face financial penalties and criminal prosecution for their actions. In April 2017, the UK used the Policing and Crime Act 2017 to increase, using secondary legislation, the maximum sentences available for those who breach sanctions. We drafted this Bill with a view to continuing that practice, but were met with resistance in the other place on constitutional grounds. On Report, Lord Judge tabled an amendment that removed criminal offences provisions from the Bill, asking the Government to think again about the appropriate level of parliamentary oversight on criminal offences.
We accept that the powers of the Executive to create criminal offences and regulations should be subject to appropriate parliamentary scrutiny and we have carefully considered what we can do here. One option we considered was putting all criminal offences in the Bill, but that is both difficult and impractical, as was recognised by the House of Lords Delegated Powers and Regulatory Reform Committee. Setting out the detail of the criminal offences in the Bill solely by reference to the powers under which sanctions regulations will be made would risk producing the wrong results. We would be creating criminal offences about prohibitions and requirements that have not yet been set.
Trying to set out the offences in primary legislation would risk producing offences and penalties that are defective or disproportionate, or both. That would also run counter to the general principle that provisions creating criminal offences should be precisely drafted and clear in their effect, and would not provide the necessary flexibility to respond to fast-moving international events and changing sanctions regimes. For example, we may need a new criminal offence if the UN adopts a new type of sanction to curtail the North Korean regime, which is entirely plausible as the North Korean sanctions regime has gone significantly further than any regime has gone previously, and it is entirely possible that it will continue on that trajectory. It is important that we can implement the sanctions without gaps in our ability to enforce them.
We also considered whether criminal offences relating to breaches of sanctions could be dealt with in their own separate regulations, which could be considered by Parliament in slower time than regulations that contain the sanctions themselves. However, I am sure that Members will appreciate that that is also unworkable because it would mean that, for a period of time, there would be no criminal penalties for breaches of sanctions and people could breach them with impunity.
After much consideration, including meetings with Lord Judge, we proposed that the Government should have to consider whether there were good reasons for creating offences and setting penalties and explain their rationale to Parliament in relation to every offence and penalty in every individual sanctions regime. The new clause and the resultant reports will ensure that the Government must properly consider that there are good reasons for any offences and penalties and justify those decisions in detail to Parliament.
As I said, the new clause indicates what should be included in the report to Parliament: first, the offences and the prohibitions or requirements to which they refer; secondly, the good reasons that the Minister has considered that justify why breaches of those prohibitions or requirements need to be criminal offences; thirdly, the maximum prison terms for any offences created that are punishable by imprisonment; and finally, the good reasons that the Minister considers justify setting the maximum sentences of imprisonment at the level they have been set. That will largely involve replicating the offences and penalties that currently exist in relation to existing sanctions. Where the Minister is using offences and penalties that already exist in law as a precedent, the report must identify the existing offences to Parliament.
Putting offences in secondary legislation is nothing new. The report would give Parliament the opportunity to scrutinise offences and regulations to a greater extent than currently. Importantly, it would give Parliament greater opportunity to scrutinise sanctions regimes than it has while we are in the EU. The new clause would hold the Government accountable to Parliament, ensuring that new criminal offences for sanctions can be questioned following the report.
To clarify, and in response to comments from the hon. Member for Bishop Auckland on the first day in Committee, the enforcement provisions in the Bill do not create Henry VIII powers. Henry VIII powers would allow the Government to alter primary legislation by statutory instrument. The enforcement provisions in the Bill just enable the Government to provide appropriate criminal penalties in secondary legislation. For example, the North Korea regime statutory instrument may say something to the effect that a person who contravenes any of the prohibitions or requirements and regulations commits an offence.
Helen Goodman
That was an extremely useful explanation. We feel that the new clause is a significant step forward, and deals well with some of the issues raised in the other place. We are happy for it to be added to the Bill.
Question put and agreed to.
New clause 3 accordingly read a Second time, and added to the Bill.
New Clause 4
Duties to lay certain reports before Parliament: further provision
(1) In this section “a reporting provision” means section 2(4), (Report in respect of offences in regulations)(2) or 40(2) or paragraph 20A(2) of Schedule 2 (duties to lay before Parliament certain reports relating to regulations).
(2) Where more than one reporting provision applies in relation to particular regulations under section 1, the reports to which those provisions relate may be contained in a single document.
(3) If a reporting provision is not complied with, the appropriate Minister who should have complied with that provision must publish a written statement explaining why that Minister failed to comply with it.
(4) Subsection (5) applies where a reporting provision applies and—
(a) a statutory instrument containing the regulations concerned, or
(b) a draft of such an instrument,
is laid before the House of Commons and House of Lords on different days.
(5) Where this subsection applies, the reporting provision in question is to be read as requiring the laying of a copy of the report to which that provision relates—
(a) before the House of Commons at the time the instrument or draft mentioned in subsection (4) is laid before the House of Commons, and
(b) before the House of Lords at the time that instrument or draft is laid before the House of Lords.—(Sir Alan Duncan.)
This new clause enables certain reports relating to regulations to be combined in one document, requires a written statement to be made by the Minister if certain reporting requirements are not complied with, and clarifies how those requirements apply.
Brought up, read the First and Second time, and added to the Bill.
New Clause 1
Public registers of beneficial ownership of companies in the British overseas territories
(1) For the purpose of preventing money laundering, the Secretary of State must provide all reasonable assistance to the governments of—
(a) Anguilla;
(b) Bermuda;
(c) the British Virgin Islands;
(d) the Cayman Islands;
(e) Montserrat; and
(f) the Turks and Caicos Islands,
to enable each of those governments to establish a publicly accessible register of the beneficial ownership of companies registered in that government’s jurisdiction.
(2) No later than 1 January 2019 the Secretary of State must prepare an Order in Council in respect of any British overseas territories listed in subsection (1) that have not by that date introduced a publicly accessible register of the beneficial ownership of companies within their jurisdiction, requiring them to adopt such a register by 1 January 2020.
(3) In this section a “publicly accessible register of beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).—(Helen Goodman.)
This new clause would require the Secretary of State to take steps to ensure the governments of specified British overseas territories introduce public registers of beneficial ownership of companies.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss new clause 8—Public registers of beneficial ownership of companies in the British Crown Dependencies—
(1) For the purpose of preventing money laundering, the Secretary of State must consult with the authorities of governments in each Crown Dependency on establishing a publicly accessible register of the beneficial ownership of companies registered in their jurisdictions.
(2) Within 6 months of this Act being passed, and every 12 months thereafter, the Secretary of State must report to Parliament on progress within the Crown Dependencies on establishing registers as referred to in subsection (1).
(3) In this section a “publicly accessible register of beneficial ownership of companies” means a register which, in the opinion of the Secretary of State, provides information broadly equivalent to that available in accordance with the provisions of Part 21A of the Companies Act 2006 (information about people with significant control).”
This new clause would require the Secretary of State to consult with the governments in each Crown Dependency about introducing public registers of beneficial ownership of companies in the Crown Dependencies, and to report to Parliament on the progress of establishing such registers.
Helen Goodman
The issue of the secret jurisdictions of the Crown dependencies and the overseas territories is extremely vexed. The Opposition are disappointed by what has happened, because we felt that considerable progress was made under David Cameron’s Administration on this matter. There are no Liberal Democrats on the Committee—they normally take credit for anything positive that happened when David Cameron was Prime Minister—but my impression from talking to Conservative Members is that many of them were strongly supportive of what the then Prime Minister promised.
I will remind hon. Members what was promised, go through what has happened and the current state of play, say something about why it matters, and then say something about both the counter-arguments and what we are proposing. The Government of the day committed to implementing a central registry of company beneficial ownership information at the G8 conference in Lough Erne in June 2013. It was truly a British initiative; I was criticised on Second Reading for not giving David Cameron credit, but I am not going to fall into that trap today.
The Companies House register contains information on people with significant control, meaning individuals who hold more than 25% of a company’s shares or voting rights. The Department for Business, Innovation and Skills published details of its intention to create such a register in a discussion paper called “Transparency and Trust” and then made a call for evidence. The Government passed the relevant primary legislation—the Small Business, Enterprise and Employment Act 2015—at the end of March 2015 and the new register went live in 2016.
The new register is very interesting. Searching for information at Companies House used to involve trolling through lots of papers without finding anything of interest, but now that we can see who is controlling companies, we can spend a very interesting hour finding out who owns what—we are all interested in companies in our constituencies. The register is not perfect, as will become evident when we debate other Opposition new clauses—there is no process for checking information, and 10% of the 4 million companies have not submitted the information—but it is a big, helpful step forward none the less.
In parallel with the new register, the then Prime Minister wrote to the overseas territories to encourage them to consult on a public registry and look closely at what we were doing in this country. Whereas progress in this country has been good, albeit not perfect, progress in Crown dependencies and overseas territories has been extremely limited. Let me explain the very different situations in each place.
In the British Virgin Islands, legislation is in place and a registry exists, but it is not public—a big weakness. There is information sharing with five or six regulatory or prosecuting authorities in this country, including the National Crime Agency, the Serious Fraud Office and Her Majesty’s Revenue and Customs. Those organisations can phone up and say, “We are suspicious about Bloggs, the Member for Salisbury South.”
Helen Goodman
Yes, indeed. Our authorities can ask the BVI registry to check what is going on, which I understand has been quite helpful. However, unlike our register, the BVI registry is not public, which means that our authorities are not allowed to go on fishing expeditions; they need a reason to ask for information. The problem is that they cannot see the full pattern of ownership. That can make it very difficult to work out what is going on, because people involved in money laundering set up extremely complex structures and relationships. In other areas of organised crime, the NCA maps nodal interconnections, which helps it to find criminals, but a secret register makes that impossible.
Another relevant point is which EU list people are on—whether they are on the greylist, or whether they are not on the list, for lacking transparency. The BVI were given more time in order not to be on the greylist.
The situation in the Cayman Islands is similar. We have an exchange of beneficial ownership information—a central register—but it is done in secret. They are on the European Union’s greylist. The Turks and Caicos have a private register. Like the British Virgin Islands, they were given more time by the European Union because they were affected by the hurricanes. Bermuda has a private register and is on the European Union greylist. The legislation is in place for Montserrat, but no register has been set up. Mind you, Montserrat does not have any particular financial expertise, so it does not matter very much.
Sir Alan Duncan
The hon. Lady is trying to paint a picture of the OTs and we all understand what she is trying to do. She said a moment ago that progress in the Crown dependencies and Overseas Territories was “extremely limited”. However, I think it is undeniable—and I would ask her to confirm that she admits this—that progress in these areas is steps ahead of all the other G20 countries, except the UK. Can she put it on the record that she admits that that is the case?
Helen Goodman
I was going to come to that point at the end, because I anticipated that that was an argument. If the Minister will be a little patient, I will stick to the structure of my speech. In the case of Gibraltar, we have exchange of beneficial ownership information. Gibraltar is in a different situation because it is subject to European legislation. In Anguilla, we have exchange of beneficial ownership information. Like the BVI, it was given more time due to the hurricanes.
In the case of Jersey, Guernsey and the Isle of Man, there is exchange of beneficial ownership information legislation in place, but all three are, unfortunately, on the greylist. This is obviously a matter of regret and it is also extremely damaging to our reputation.
Sir Alan Duncan
It is very important that some of the basic facts are established as either true or false, and I hope the hon. Lady will not object to my pointing out another thing that she has got wrong. She spoke about the greylist. There is no greylist. The EU Council conclusions, which I could explain at length, set out the jurisdictions that have been cleared. She is wrong on the greylist in the way she explained it earlier.
Helen Goodman
I am interested that that is the Minister’s perception, but I think there might be a competing perception.
Anneliese Dodds
I regret to contradict the Minister, but perhaps there is a slight information gap around the procedure operated by the EU in regard to these matters. There is a blacklist of jurisdictions that have definitely been viewed as beyond the pale by the EU. That has followed a very intensive process of consultation through ECOFIN, which is obviously an intergovernmental mechanism. Countries that are not yet on the blacklist, but about which there are concerns, are on the greylist. I suggest that it would be helpful to look at that list.
I am grateful to my hon. Friend for enabling me to intervene. I made a freedom of information request to the UK Government to find out what they had done to try to remove jurisdictions from the blacklist, and the lobbying they had done in that case, which appeared to reveal that our Government had been active on this matter. So I hope Ministers will update us on what the Government have been doing in relation to this issue.
Helen Goodman
Now I turn to why this issue matters. I am extremely grateful to Christian Aid for its very thorough briefing. The problems fall into three categories: tax losses, corruption and crime, and the impact on the least developed countries.
On tax losses, the problem is that people are basically using secret jurisdictions to hide both capital and income, and, in doing so, avoiding tax. A particularly powerful example is the case of Bywater Investments. In November 2016, an Australian federal court found that two anonymous Cayman Islands companies controlled by an Australian accountant had facilitated multimillion-dollar tax evasion schemes, leading to 300 million Australian dollars of repayments and fines. The scam relied on the accountant being able to pretend that the companies were owned and controlled by someone else, thanks to beneficial ownership secrecy in the Cayman Islands. Despite the existence of a legally binding tax information sharing agreement between Australia and the Cayman Islands, Cayman courts and laws had blocked both Australian and UK tax authorities from access to information about the real owner of the companies—and these laws still exist. In that particular case, the tax losses were to the Australian Revenue, but I think that everybody is conscious that we, too, are losing tax in this country.
On corruption, crime and money laundering, I will talk about the problem of the Azeri Government. The first time that I came across Azeri money laundering was about seven years ago, when the hon. Members for Bridgwater and West Somerset (Mr Liddell-Grainger) and for Na h-Eileanan an Iar (Angus Brendan MacNeil) and I all became very concerned that some students had been locked up for putting a video on the internet about some donkeys. Those donkeys had been bought from the Germans and each donkey was worth $250,000. The students made a video and they found that the reason the donkeys were so valuable was that they could play the violin like Menuhin, and there were photographs of them doing so. That kind of creative sarcasm would get somebody a television award in this country, but in Azerbaijan those students were locked up. The hon. Members for Bridgwater and West Somerset and for Na h-Eileanan an Iar and I tabled an early-day motion and we got the students released.
That is not the sort of money laundering that usually goes on in Azerbaijan. My hon. Friend the Member for Oxford East spoke about the laundromat case. When discussing money laundering cases, we may use one example to illustrate a multitude of problems, because there is not just one problem. My hon. Friend, for example, has mentioned Scottish limited partnerships. Secret jurisdictions were also part of the problem, because the beneficial ownership secrecy gave the Azeri politicians the opportunity to circumvent money laundering laws. Two of the four UK-registered partnerships whose control and ownership was concealed were registered in the BVI.
Crime and corruption cases often involve a great deal of violence in the initial corruption and the initial crime. It is easy to take the view that these are white-collar crimes and that nobody really gets hurt, and that it is just about moving money from one bank account to another and clicking on a computer. What is really going on, however, is that people are stealing from weak and fragile states and running big organised crime gangs. For example—this relates to an earlier point made by the Economic Secretary—kidnappers in Mexico requested that the ransom be paid in bitcoin. The Mexican authorities said that they had never come across that before, although they had certainly come across kidnappings before: 70 people a day are kidnapped in Mexico, which is linked to drug running.
Large international organised crime syndicates are involved in extremes of violence and the destruction of societies. Stealing taxpayers’ money from former Soviet Union states or getting involved in big drug deals in Latin America is worth their while only if they can one day get that money and spend it; otherwise, why would they bother? Although these crimes might not seem very serious, they have horrendous consequences for other people. I am not saying that everybody who puts their money in a secret jurisdiction in the British overseas territories is doing so for criminal purposes—that is obviously not the case—but some people are doing that and we need to end the secrecy in order to identify them and track them down.
Last week we discussed sanctions busting and the selling of weapons of mass destruction and their components and materials to North Korea, which also involves shell companies. United Nations investigators and the American courts showed that the North Koreans had used networks of shell companies to evade UN sanctions and to help conceal the origins and destinations of the money that they needed to do so. A significant proportion of those shell company networks have been registered in the BVI and Anguilla. It is unfortunate that the BVI is mentioned a lot, but that is because their specialism lies in this type of registration. It does happen in the other places, but it happens a lot there because it is a world leader in the provision of offshore companies, whereas the Caymans specialise in hedge funds, and Bermuda in captive insurance.
Christian Aid is concerned about the issue because of its impact on developing countries. The former president of Zambia stole $25 million, which he put through an anonymous BVI company and bought property in Brussels. Zambia’s per capita income is $4,000 a year. The Nigerian dictator, Sani Abacha, used a BVI company to hold at least $450 million of the $2 billion he is believed to have stolen from the Government during his time in power. Nigeria has a per capita income of below $6,000 a year. The case of Equatorial Guinea is tragic. It has a much higher average income because of its oil reserves, but those reserves have not been used for the benefit of the people, because the President’s son, Teodorin Obiang, and others have stolen $38 million of their country’s money and spent it on private jets and other luxuries.
The United Nations Conference on Trade and Development estimates that the overall loss to developing countries is some £100 billion a year, which is more than the aid flows going into those countries. If we could sort this out, we would be doing something as useful as all of DFID’s efforts. [Interruption.] I can hear the Minister saying from a sedentary position, “Yeah, but the real fundamental problem is corruption.” He has a point, but we facilitate it. We make it easy, but why? It makes no sense.
We want the Government to set up public registers of beneficial ownership of companies in the British overseas territories. For the purposes of preventing money laundering, the Secretary of State should provide all reasonable assistance to the Governments of the countries we have listed, to enable them to establish a publicly accessible register. The Minister is concerned about the constitutional niceties of making a distinction between the constitutional arrangements in the overseas territories and those in the Crown dependencies. To respect that distinction, we tabled new clause 8, which requires the Secretary of State to consult the authorities of Governments in the Crown dependencies.
The Minister said again this morning that we do not intervene directly. I have two points to make about that: first, we run the foreign policy bit, and secondly, we also run domestic legislation from time to time. We have intervened on gay rights and capital punishment. There was a suspicion that Royal Assent was given to the change to gay marriage laws in Bermuda because it was felt that that was a price worth paying for not having the counter-example of us debating, within a month, these tax privileges—
Sir Alan Duncan
No, no, the hon. Lady cannot allow that to lie on the record. The decision on Bermuda was taken—
Sir Alan Duncan
I meant lie in the sense of nestling into its duvet on the record.
Sir Alan Duncan
Bermuda introduced a gay marriage Act that gave no particular rights. When it introduced civil partnerships for everybody, it gave proper pension and equality rights, which was in itself a good step, even though it is not called gay marriage.
Helen Goodman
I am grateful to the Minister for that interpretation. I will come now to the counter-arguments. The first is the one the Minister put to me a few minutes ago, that the overseas territories are ahead of others and we should not focus on them.
The problem with that argument is twofold. First, everybody else will catch up soon: there is the EU anti-money-laundering directive, and other countries across the world are introducing public registers. Secondly, we are responsible for what happens, to some extent, and we can influence it. We can make a change if we want to. I will end by asking why Ministers are not making a change. Furthermore, these secret jurisdictions are the most used: the BVI was by far the most popular tax haven in the Panama papers and Bermuda ranked as number one on Oxfam’s list of worst corporate tax havens. So we are talking not about obscure little operations, but about the centre of this financial secrecy problem.
The next counter-argument is that we should wait until public registers of beneficial ownership become a global standard, and then expect swift change. I will not be able to speak as eloquently as the right hon. Member for Arundel and South Downs (Nick Herbert) did on Second Reading, but he put the kibosh on that argument very effectively. We do not say about other crime or problems that we are not going to deal with that thief over there until we have caught this one somewhere else. That is not a sensible way to run policy. The fact is that the UK is at the centre of this problem. Post-Brexit we could do so much to regain leadership on anti-corruption.
The third counter-argument is that the overseas territories’ economies are heavily reliant on financial services. There are a number of things to say about that, but first being that, were we to have more tax revenues, we would be able to support the overseas territories better in trying to shift their economies from where they are now to where we would like them to be. Examples of alternatives include tourism and the geothermal resources in Montserrat. There are a number of ways in which we could support a better and more balanced development of their economies.
Another reason is that, in the long run, people want to use financial services in jurisdictions that are trustworthy, have a high reputation and where the rule of law is enforced. The rule of law is one reason why London is such a successful financial services centre. Some of the overseas territories’ activities—for example, the insurance market—are perfectly legitimate and reasonable, and they can get an income from that. Leaders of large businesses are now calling for that, including at HSBC—notorious for its involvement in the Mexico problem.
We then have the argument that trying to intervene in the overseas territories is neo-colonialist. I think that is a problem of missing the wood for the trees, given that it cannot be neo-colonialist to want to ensure that African countries are not ripped off and lose their tax revenues and the value of their assets. That is not neo-colonialist; it is supportive of their development. That is why, for examples, the South Africans were very pleased with the information they got from the Panama papers, and they used it.
The next argument is that public beneficial ownership registers degrade the quality of information available to law enforcement. I am puzzled by that argument, as that does not seem to be the case, given that the more people are scrutinising something, the more likely it is that the quality of information will be improved.
Another argument is that such a policy threatens the privacy and security of people using the secrecy jurisdictions. There are two things to say about that: first, we seem to be extremely worried about the privacy and security of a very small number of rich people, but not at all worried about the massive and violent crimes inflicted on people who are suffering from human trafficking, drugs gangs or other kinds of violence. Even if we say that we need to address that, though, it is adequately addressed in the British regime; and we are suggesting that they run a similar publication regime. An analysis commissioned by the Government found that the UK register would actually save our law enforcement authorities £30 million a year; so I think that that argument is also extremely weak.
When David Cameron was in power we were making progress on this. I do not know what has changed or why this Government seem to be in a different place. Perhaps it is because there are too many people influencing the Government who keep their money in these offshore havens. For example, the hon. Member for North East Somerset (Mr Rees-Mogg) was referred to in the Paradise papers because of a $680,000 payment he received when the BVI-based investment firm he worked for was bought by a Canadian bank. Everybody knows that the hon. Gentleman is extremely rich and his finances are complex, but his stake in Somerset Capital is managed by subsidiaries in the tax havens of the Cayman Islands and Singapore. Or are we seeking to protect the interests of Philip May, who works for an investment management firm—
Sir Alan Duncan
On a point of order, Mr McCabe, I think these ad hominem attacks are highly inappropriate for this stage of the Committee, or indeed any stage in our Parliamentary proceedings.
The Chair
That is not strictly speaking a point of order. Perhaps we can stick with the detail of the new clause, though.
Helen Goodman
I know what the rules of the House are and I wrote to the hon. Member for North East Somerset yesterday, telling him I would be mentioning him in the Committee today. However, the rules and courtesies of the House do not apply to people who are not Members of the House. It is perfectly reasonable to tell the Committee that Philip May works for an investment management firm, Capital Group, which reportedly used offshore-registered funds to make investments in a Bermuda registered company.
Westminster Hall
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British Transport Police/ Police Scotland Merger
(6 years, 9 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
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Douglas Ross (Moray) (Con)
I beg to move,
That this House has considered proposals for the merger of British Transport Police Scottish division with Police Scotland.
It is a pleasure to serve under your chairmanship, Mr Hollobone. We had a slight wait for you to take the Chair, but I know better than most that the match cannot start without a referee, so it is good to have you in your place. I thank the Backbench Business Committee for allowing us time for this debate, as well as all right hon. and hon. Members who supported the application—in particular, the hon. Member for East Lothian (Martin Whitfield), who joined me in front of that Committee to present our case for the debate. I refer Members to my declaration in the Register of Members’ Financial Interests. My wife is a serving police officer: a police sergeant with Police Scotland.
I want to divide my remarks into three sections: the process from the Smith commission to the vote in the Scottish Parliament approving the proposed merger; where the process got to and the pause announced last month; and finally, the next steps and, I hope, the opportunities for the British Transport police Scottish division.
Early in my remarks—before any Scottish National party Members jump up with interventions diligently provided to them by party researchers—I would like to note that the merger of the British Transport police into Police Scotland is wholly different from what was proposed in the Conservative manifesto. I strongly opposed from the outset the SNP plans in Scotland. Our plans in the UK manifesto pledged to protect specialist policing at a UK level by bringing together the Civil Nuclear Constabulary, the Ministry of Defence Police and British Transport police. That is a completely different approach from the one supported by the SNP, which is to rip the Scottish operations out of the extremely successful British Transport police and merge them into Police Scotland—which has itself been beset with problems since its inception and formation as an amalgamation of eight regional forces.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
Having sat through the various stages of the Bill at the Scottish Parliament, the hon. Gentleman will be more aware than anyone else that the Scottish Government and Police Scotland have gone out of their way to give assurances that the transport police function and specialism will be preserved even after the merger. What is the difference between that assurance and the assurance given by the UK Government?
Douglas Ross
What is different about that assurance is that the Scottish Government could not even deliver it by 1 April 2019 as they proposed. The assurances were so weak that even the joint programme board had to finally accept that it was not going to happen and the services could not be protected as they had said they would be.
Stuart C. McDonald
That is not a fair categorisation of what the board said at all. It said progress had been made in some parts of the merger process, but not in others. The hon. Gentleman has not answered my question about what is different about the Scottish Government’s guarantee to preserve the police specialism and the functions for the transport police, and the UK Government’s guarantee.
Douglas Ross
As an example, the Scottish Government say that they would take the 280 or so full-time equivalent BTP officers in Scotland and merge them into Police Scotland with its 17,234 officers. That would not protect them, because if the officers within Police Scotland who wish to have a specialism in railway policing were first on the scene at a non-railway incident, they would be stuck with that incident right the way through. Currently, if Police Scotland are the first on scene at the railways, they can transfer that to a BTP officer when they arrive and vice versa. They could not do that. That is not protecting the current situation and the good work done by BTP officers in Scotland and across the country.
My opposition and the strong opposition from Scottish Conservatives in Westminster and Holyrood must not be considered as disrespecting the Smith commission and devolution settlement that followed. I agree that the functions of the British Transport police in Scotland should be a devolved matter—I just strongly disagree with the approach taken by the SNP Government.
There were and are other options to devolve the powers, but we know that they were never considered by the Scottish Government. Right from the start, the SNP had a blinkered view on its approach—unwilling to listen to expert advice, which opposed its plans, and unwilling to listen to the views of BTP officers, the British Transport Police Federation, rail unions and rail operators. Basically, everyone with considerable knowledge of railway policing warned the SNP against the plans, but they were ignored and the SNP marched on regardless. It only consulted on its preferred option: full integration with Police Scotland.
That was the first of many failures by the Scottish Government, who were unwilling even to consider alternatives put forward by the British Transport police authority as far back as 2015, which suggested giving increased accountability to the Scottish Parliament and giving the Scottish Government greater power over setting policing priorities. That was put forward by the BTPA, and ignored by the SNP Government, who only consulted on their preferred option.
Stuart C. McDonald
I wonder whether the hon. Gentleman can tell me whether the UK Government are going to begin to consult on their preferred option, as contained in the manifesto, or whether they are going to look at other options as well.
Douglas Ross
I wonder whether the hon. Gentleman is going to speak about the SNP policy that we are discussing today—the debate is about the proposed merger of the British Transport police into Police Scotland—or, as the SNP constantly does, does he just want to deflect attention somewhere else, shouting and screaming, “Look over there; don’t look at our failures in Scotland”? The SNP is letting Scotland down. This is yet another example of its centralisation plans, which seem to work in SNP heads and on a bit of paper, but do not deliver for the people of Scotland.
Every proposal was dismissed by the SNP. With the support of the Scottish Greens, the SNP Government forced through their plans. In the face of overwhelming volumes of evidence showing that this was a bad move that would dilute the service currently provided and potentially put rail users at risk, the Bill was passed in the Scottish Parliament. The plans were criticised by Her Majesty’s inspectorate of constabulary in Scotland for being entirely political. It also criticised the fact that no business case or due diligence outlining the benefits and costs was or had been prepared by the Scottish Government, saying:
“As the decision to transfer BTP’s functions in Scotland to Police Scotland was a Ministerial decision, no single, detailed and authoritative business case which articulates the benefits, disadvantages or costs of the transfer to Police Scotland was developed.”
That is shameful and unacceptable.
Colin Clark (Gordon) (Con)
Given that the merger will not in fact be cost-neutral, as originally claimed by the Scottish Government, does my hon. Friend agree that stopping it will not only protect the quality of railway policing in Scotland but save money for hard-pressed Scottish taxpayers, who pay more in Scotland than taxpayers in the rest of the United Kingdom?
Douglas Ross
I absolutely agree. We were also told that the merger of eight regional forces in Scotland into Police Scotland was going not only to deliver a better service but save money. However, the single police force is struggling because of the financial restrictions put on it by the Police Scotland; it is not saving money as the SNP promised it would.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Gentleman on bringing this debate to Westminster Hall for consideration. Does he agree that a workable timeline must be set before allowing a safe transfer that does not compromise public safety? Furthermore, the vital role carried out by the British Transport police must be allowed to continue seamlessly for the benefit of everyone.
Douglas Ross
I fully agree with the hon. Gentleman. Safety for rail users and our officers has to be of paramount importance and I will come on to that in my concluding remarks.
One of the issues that I raised in the Scottish Parliament, when I was on the Justice Committee, was the personal track safety certificate and what it covers. Every BTP officer has that certification. Would all 17,234 Police Scotland officers have that certificate? No, because the cost involved would not allow it. There is a safety risk if officers who have not received the certification go on to the tracks.
Jim Shannon
The hon. Gentleman mentioned Police Scotland, and it will be very important for the know-how and full power of the police forces to be combined as quickly and efficiently as possible, to ensure that the benefit of knowledge and experience comes together at the right time.
Douglas Ross
Absolutely. I will come to the timing in a moment, but there is no doubt that, several years after the merger, Police Scotland is still operating under considerable strain because of it; now is not the time to add to the workload of Police Scotland when it is struggling to manage what it has now.
Kirstene Hair (Angus) (Con)
Surely the fact of the delay is proof that Police Scotland is in no fit state to absorb the BTP.
Douglas Ross
Absolutely. We have to remember that the joint programme board is made up of representatives of the Scottish Government, the UK Government and Police Scotland. At their latest meeting in February, they all agreed to recommend a pause to the Scottish Government. None of them could see the implementation of integration being achieved safely by 1 April 2019.
The intervention of my hon. Friend the Member for Angus (Kirstene Hair) takes me back to where we are now, which is the pause. We are in a welcome place: the SNP, Police Scotland and the joint programme board all accept that the implementation date of 1 April 2019 will not be met. Gone are the supportive comments from the Police Scotland high command that everything about the proposal is rosy.
I cannot forget the response I received to a question that I put as a member of the Scottish Parliament’s Justice Committee; it came from Assistant Chief Constable Bernie Higgins. Almost exactly a year ago today, on 7 March, I asked him about the problems we had seen with the merger of the eight forces into one and the ongoing challenges faced by Police Scotland. At that point last year, I was asking whether it was the correct time to force ahead with this merger. ACC Higgins, before the Scottish Parliament Justice Committee, replied:
“To be frank, two years is a luxury, based on what we had to do to bring Police Scotland together, so I am confident that the transition would occur”.
Two years as a luxury and confidence from an assistant chief constable of Police Scotland—all now wilted on the vine. Deputy Chief Constable Iain Livingstone has made it very clear, in his remarks to the joint programme board and since, that Police Scotland was not ready, that it was not a luxury to have two years to implement the integration and, therefore, that it is correct that we have now paused.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
Given all that, does my hon. Friend think it might be the time for Her Majesty’s Government to consider delaying the laying of orders facilitating the merger north of the border?
Douglas Ross
I am grateful for my hon. Friend’s intervention and will come on to that towards the end of my speech, when addressing the Minister on what we could do in this Parliament.
Ian Murray (Edinburgh South) (Lab)
I congratulate the hon. Gentleman on securing the debate. The chair of the British Transport Police Federation said, in the light of the terrorist attacks in Manchester and London, that the merger should be suspended permanently. The fact that he is talking about terrorism shows the significant difficulties that there might be over safety in the merger.
Douglas Ross
I agree with the points made by the hon. Gentleman. Nigel Goodband and the BTP Federation have been strong advocates for the BTP maintaining its current form in Scotland, with its strong links with Police Scotland and across the rail network. They are strongly opposed, as many of us in this Chamber and indeed in Holyrood are, to the SNP’s plans for integration.
I have just quoted ACC Bernie Higgins from almost a year ago to the day saying that two years was a luxury. Even more recently, however, SNP politicians have been saying, “Everything is fine. Don’t worry about this. We’ll keep on moving.” On 24 January 2018 in the Scottish Parliament, my colleagues in the Scottish Conservatives, led by our justice spokesperson Liam Kerr, moved a motion calling for a pause, but every single SNP Member voted against that motion.
Not only did the SNP MSPs vote against, but they gave us some great quotes. Rona Mackay said:
“What more proof do the Conservatives need that the merger has been planned meticulously to ensure a smooth transition in 2019?”
She continued:
“It would be preposterous to pause the process while negotiations are on-going, so I urge the Conservatives to stop trying to derail the merger, which will make Scotland a safer and more secure place in which to live and travel.”
Her colleague, Fulton MacGregor, said that
“plans are going as expected and there should be no issue with integration going ahead on 1 April next year.”
Deputy SNP leadership candidate James Dornan said:
“The terms and conditions have been worked on regularly and I am pretty sure that, when they get to the merger, everybody will be happy.”—[Scottish Parliament Official Report, 24 January 2018; c. 54-64.]
It turns out no one is happy, because we will not achieve the merger on the timescale put forward by the SNP Government. They were wholly unprepared for the problems faced by a number of elements in the joint programme board, yet they were optimistic that everything would be fine, it could all be sorted out and, finally, they could get rid of the “British” from the name “British Transport police” operating in Scotland.
I want to look at a number of other aspects. We have had many useful briefings for this debate, and in particular I welcome the contribution of the British Transport Police Federation. A recently published study by Dr Kath Murray and Dr Colin Atkinson looked at the British Transport police merger in Scotland. It was published just before the announcement of a pause, but it included many useful pieces of information. For example, 83% of British Transport police officers in Scotland responded to the study to say that they were either very unsupportive or quite unsupportive of the merger plans—83% of our BTP officers in Scotland; that tells a story.
The study was also useful for some of the quotes of the respondents, which I want to read out. Speaking about the BTP Scotland merger, one officer said:
“It is being destroyed for political reasons. I am happy with my job and the way I am treated. It is an infuriating turn of events.
It is this political motivation which has angered officers most rather than any other issue.”
Another said:
“I find it incredible that a merger of this size has been allowed to progress without a formal business case outlining the benefits and risks.”
One final quote is:
“The communication throughout has been woefully lacking. Two years of talks; I am unsure what, if anything, has actually taken place.
The vacuum of information is filled with rumour and hyperbole which tends to affect morale.”
Those are just three of the comments made by officers who contributed to that study, but they are reiterated time and again by the British Transport Police Federation, which is standing up for its officers and opposing the merger.
Stuart C. McDonald
The hon. Gentleman is right to raise that survey, which will of course have to be addressed, but one of the key reasons behind those levels of opposition was, in essence, a sense of loyalty to the British Transport police as it stands. Does he not agree that the proposals in his party’s manifesto would receive a similar response if there was a survey on those as well?
Douglas Ross
I am unsure whether I have given way two, three or four times to the hon. Gentleman, yet he has still not mentioned his own party’s plans, which we are debating today—the SNP plans to merge the British Transport police in Scotland into Police Scotland. He only wants to ask about the Conservative plans; perhaps he should propose a debate on them to the Backbench Business Committee. I would gladly join him in Westminster Hall to debate those proposals, but today we are debating his party’s plans—dangerous plans for merging British Transport police into Police Scotland. We should focus our remarks on how damaging those plans are to police officers in Scotland, rail users in Scotland and indeed the operators.
The lack of a financial case has been highlighted a number of times. When I was on the Justice Committee, we concluded that the supporting financial memorandum did not provide enough detail on the expected cost of integration or on who should pay. We said at the time that that was unacceptable, and again the Scottish Government did not respond with the information required.
Another huge issue for the federation and officers was terms and conditions: the so-called triple lock that was promised by Michael Matheson as Justice Secretary and Humza Yousaf as Transport Secretary. There is a real vacuum on information available to our officers, who potentially were just 13 months from the merger—from leaving the force that they joined and were proud to serve in, to be merged into Police Scotland—yet still had no concrete detail on pay and conditions and on terms and conditions. Again, they have rightly felt let down by the Scottish Government in their negotiations.
Alan Brown (Kilmarnock and Loudoun) (SNP)
On jobs, pay, conditions, and terms and conditions, it was actually guaranteed that there would be no jobs lost; terms and conditions were maintained, and there will be no pension issues arising from either retired, deferred or current British Transport police officers transferred across.
Douglas Ross
I thank the hon. Gentleman for mentioning pensions, because that is exactly what I was about to come on to. In the Public Gallery, we have members from the National Association for Retired British Transport Police Officers. What consultation did they have with the Scottish Government or the joint programme board? Zero. Retired officers, who will be impacted, were not consulted, included or even recognised by the Scottish Government in the merger proposals. Those officers have serious concerns, which include that they understood that the proposal was for Scottish members to be moved from the main funds to a newly segregated Scottish fund. That is likely to amount to around 250 serving officers, and probably about 200 retired officers, affected, without the courtesy of being informed of how many members in Scotland would come under the proposal. That will create almost immediately a closed fund: at one end, the number of serving officers will reduce each year due to retirements; at the other, retired officers will stop taking their pensions. Very quickly, there will be no new money coming in.
I would be grateful if SNP Members responded to the many concerns from the National Association for Retired British Transport Police Officers on that point, because they have never been answered by the Scottish Government through the joint programme board or at any opportunity in the Scottish Parliament. Such uncertainty is unacceptable for men and women who have served this country with great dignity and service, but are being left in the lurch by the SNP.
There are some positive developments. I said at the beginning that I welcome the fact that the SNP Government have paused these plans. We called for that in January; the joint programme board agreed it in February, and the SNP Government have finally listened. The Deputy Chief Constable designate of Police Scotland, Iain Livingstone, welcomed the delay and made no commitment at the most recent Scottish police authority board. He said that
“we will be reassessing in the coming months what the challenges and options are, and will then report back to Government”.
I took that as a very welcome signal from the top of Police Scotland that it is not simply pausing, but looking at all other options.
It is also extremely welcome that the British Transport police integration will be reviewed by Audit Scotland as part of its annual review. Proper scrutiny of the plans has been missing throughout this process, to judge how things were progressing as we went along. That intervention by Audit Scotland is welcome, but we must ensure that any progress, or lack of it, is highlighted at the correct times.
I am grateful that we have the UK Minister here; I think the hon. Member for East Lothian will agree that much of the concern from the SNP at the Backbench Business Committee was, “This has nothing to do with Westminster; you devolved these powers in 2016.” The SNP Member on the Backbench Business Committee told us that we should not debate it here. When I raised the issue in business questions or with the Prime Minister, SNP Members in the House of Commons shouted me down because they did not want it discussed in Westminster. But it is right that this issue is discussed in Westminster, because, as was said in an intervention, the UK Government still have to lay the orders that are scheduled for this autumn. I hope the Minister confirms that those orders will be paused, because of the pause in Scotland.
We do not devolve and forget. It is right that elected Members from Scotland in this place continue to look at the merger of British Transport police into Police Scotland. It is also right that peers in the other place tabled a motion of regret on this very point. Indeed, as I have said a number of times, this issue has been debated as recently as January in the Scottish Parliament. Both Parliaments are right to raise it and to discuss and debate it.
Ian Murray
There is a role for this Parliament, and not only for the reasons that the hon. Gentleman stated, as there will be a consequence for the British Transport police, too, when the Scottish section is taken away. There are no railway stations on the Scottish border. Therefore, transport police from England will have to travel beyond Carlisle and beyond Berwick, through the Scottish border, when that is not their responsibility.
Douglas Ross
Absolutely. That was highlighted a number of times when the issue was debated in the Scottish Parliament, and it has been included in almost every briefing that we have received. If we end up with the SNP proposal and the status quo here in the rest of the UK, potentially two different forces will be investigating crimes on the same line. Not only is that confusing to rail users and consumers, but it will lead to duplication and misunderstanding, which will lead to a poorer service for Scottish rail users. We should not accept that.
Let us not just pause this process; let us restart it. Let us go back and look at all the options, to ensure that everyone is considered and every option listened to. When I raised the issue at Prime Minister’s questions, she made it clear that she did not believe that this Government should devolve and forget. She also made it clear that passenger safety must come first in any decision making. That has not happened so far, which is why the pause is welcome and why we must look again from the beginning, to ensure the best outcome for BTP officers both current and retired, for rail operators and for everyone who uses our rail services in Scotland and across the UK.
I will take my final words from the study by Dr Kath Murray and Dr Colin Atkinson, which sums up the issue better than anything else. An officer who looked at the plans said:
“It quickly became very clear that dissolving BTP Scotland as opposed to devolving BTP Scotland was going to take place…With no career future in sight, I decided to leave, but long service, conscience and pride in what we have achieved so far means I will stay until the last day. Leaving the best crime and justice legacy of BTP Scotland is important to me. My name will be on it at handover.”
I hope that that officer will continue to serve BTP in Scotland, because with this pause he can continue longer in the force he joined, the force he enjoyed working with and the force in which he took great pride in protecting the people of Scotland and the UK on our railways.
Mr Philip Hollobone (in the Chair)
The debate can last until 11 o’clock. As there are five Members who wish to speak, I will impose a five-minute limit on speeches. That allows some leeway for interventions, but if there are too many, I am afraid that the last speakers will not be allowed the full five minutes. I call Ian Murray.
Ian Murray (Edinburgh South) (Lab)
As always, it is a great pleasure to serve with you in the Chair, Mr Hollobone. I do not want to echo all the remarks made by the hon. Member for Moray (Douglas Ross), whom I congratulate, along with my hon. Friend the Member for East Lothian (Martin Whitfield), on initiating the debate.
We are having this debate at a crucial point in the life cycle of the British Transport police and this issue, and I am delighted that it has been brought forward.
Let me say at the outset that all five parties that sat around the Smith commission table agreed that the Scottish section of the British Transport police should be devolved. No one suggests that it should not be; the questions are how it will be devolved to the Scottish Parliament, how it will subsequently be operated, and what that will achieve not only in Scotland but across the United Kingdom. Those are significant issues for everyone involved.
The issue really is safety. We know that the merger is driven by ideology—everything is driven by ideology for the Scottish National party—but safety is the issue.
Stuart C. McDonald
It is important to say that the merger is not driven by ideology. What does the hon. Gentleman think of the recent review of terror attacks in London by his colleague, Lord Harris, who aired the possibility that the London underground functions of the British Transport police should be considered for merger with the Metropolitan Police Service? Other Governments are thinking about these things, too.
Ian Murray
The hon. Gentleman has just highlighted that, in terms of terrorism, the Metropolitan police do not say that the British Transport police should be merged in the same way that is suggested in Scotland. I am glad we are having a discussion about terrorism. As I mentioned in an intervention, the BTP chair said that, in the light of terror attacks, any reorganisation of the British Transport police should be paused or halted permanently, on the basis that terrorism and the safety of the people of this country are the single biggest issue that the police service and security services deal with. Everyone should pause and reflect on why the Scottish Government have completely dismissed the British Transport police’s incredibly serious concerns about terrorism. As the biggest public safety issue, terrorism should be at the forefront of our minds. As I said, none of us wants the devolution of transport policing stopped; the question is how it is done in a way that ensures that the police service operates correctly.
It is not just politicians who say that—35% of BTP officers and 45% of BTP staff in Scotland say that they would probably leave the service if this integration went through. They have a great deal of pride in the service and safety that they provide to the public. Before my nationalist colleagues jump up and say that I am talking the police service down, let me say that the entirety of the police service—BTP and the police in my constituency—do a fantastic job in incredibly difficult circumstances. Great damage is being done to Police Scotland because of the botched merger of all the police forces to create that body, not because of individual officers, who do as much as they possibly can on the ground with the slim pickings of resources they are given.
To see how bad this integration would be, it is worth thinking about one of the basic grassroots issues—trains. They were discussed at great length on a cross-party basis when Lord Foulkes of Cumnock brought a debate on this subject to the House of Lords. There is no station on the border, on either the west coast or the east coast. In fact, no one could get a train into Scotland for four days last week. The last stations in England and the first out of Scotland on the UK main lines are Carlisle on the west coast and Berwick on the east coast.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
Many constituents got in touch with me last week who had been stranded in Carlisle and relied on the help of the British Transport police to make arrangements to get home safely. Surely that would be disrupted if this merger happened and the single policing structure on the west coast main line were dislocated.
Ian Murray
The service would be disrupted, and it would be an incredible waste of resources. If I may use these crude terms, we would need either English officers to stay on trains from Carlisle to Glasgow or from Berwick to Edinburgh, or—vice versa—Scottish officers to stay on trains going south. There will have to be some kind of agreement. None of that has been taken into account. That is why we welcome the pause in the integration and the fact that all these issues will have to be looked at.
Ian Murray
I will not, if the hon. Gentleman doesn’t mind, because of the time. Other people want to speak.
Many people have asked for a commissioning arrangement to be set up that would allow the Scottish Government to commission BTP services and the chief constable to be directly accountable to the Scottish Parliament—and perhaps even the UK Parliament—for the operation of the Scottish side of BTP. That arrangement would be based on a framework that everyone was happy with. The shadow Justice Secretary in Scotland, Daniel Johnson MSP, called for a pause, and I am delighted that one has been put in place. I hope that the Minister listens seriously to what the people who actually police our safety, our borders and our transport system say about how such a commissioning arrangement may work in the longer term.
The pension fund is a huge issue. No one has any confidence that the integration would be done properly, because the creation of Police Scotland was botched. I will not go into the VAT issue, but the SNP created a problem by ensuring that Police Scotland was no longer able to apply for section 33 VAT exemption. They said that it did not matter and blamed the UK Government for removing Police Scotland from the exemption. The UK Government then said that they would exempt Police Scotland again, and the SNP claimed victory and blamed the UK Government for its removal in the first place.
I use that example not to make a political point but to say that it is little wonder that police forces, police officers and people who work in the sector have no confidence that the integration can be done properly. The pension fund is a big issue. It is a small fund, and I understand from one of the pensioners in it that it is in surplus. Integrating it or taking away the safety net of the wider British Transport police pension fund would certainly be detrimental to current pensioners and future pensioners. I hope that the Minister will look very seriously at working with his Scottish counterparts to ensure that any integration is done properly and will look at the commissioning proposals.
Bill Grant (Ayr, Carrick and Cumnock) (Con)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Moray (Douglas Ross) for securing this important debate.
Members will be aware that recommendation 67 of Lord Smith of Kelvin’s report on Scottish devolution, which was published in November 2014, provides:
“The functions of the British Transport Police in Scotland will be a devolved matter.”
Furthermore, sections 45 and 46 of the Scotland Act 2016 empower the Scottish Parliament to legislate for the policing of Scotland’s railways and provide for the Scottish Government to be consulted on appointments of senior officers to the British Transport police. That said, I contend, as I am sure would many others, that it is not in the travelling public’s interest to apply those powers and that this is not the appropriate time to bring together the British Transport police and Police Scotland. However, I note and welcome the Scottish Government’s very good decision to put on hold indefinitely their plans to absorb the Scottish division of the British Transport police into Police Scotland. Why would they seek at this moment in time to amalgamate the British Transport police—a specialist, standalone, effective force that apparently operates seamlessly with Police Scotland—into Police Scotland, a force that in recent years, together with the Scottish police authority, has been under increasing public criticism and scrutiny?
I must make it clear that the vast majority of Police Scotland’s frontline officers are to be commended for continuing to serve to the best of their abilities in difficult times, when consistency of high-level leadership may be perceived to be lacking and maintaining staff morale is immensely challenging.
In 2017, the British Transport police set a core budget of around £297 million for policing Great Britain’s railways and kept its price promise to keep budget increases below the retail prices index. It has maintained policing costs at the same level as last year. I doubt that the same may be said for Police Scotland since its inception. The chief constable of the British Transport police reports that more than 7,000 rail passengers and rail staff responded to a public consultation, and 85%—a significant number—of rail passengers were positive about the work BTP was doing at their local station. The satisfaction rating and feedback were apparently similar among the rail staff who responded.
As I understand it, the Scottish Government’s vision, although it is on hold, is for the British Transport police to become a specialist railway policing unit within Police Scotland. However, that unit would be funded differently from the remainder of Police Scotland. How can we be sure that the train operating companies, freight companies, Network Rail and London Underground, which currently provide funding, would continue to do so for a force that was incorporated within another based solely in Scotland? If we cannot be sure of that, might the Scottish taxpayers yet again be burdened with extra financial costs?
Concerns were expressed by the British Transport police authority, who identified a number of potential operational risks associated with the integration, including, in particular, and as mentioned by hon. Members, cross-border issues and staff morale, and the serious issue of pensions. The Rail Delivery Group identified possible additional expenses and a dilution of accountability associated with the Scottish Government’s proposal.
I, for one, am not convinced that those reasonably held concerns have been properly addressed to everyone’s satisfaction to ensure that we achieve British Transport police’s vision of working with industry partners and stakeholders to deliver a safe, secure, reliable and expanding transport system. Will it be maintained at its present, effective level should a merger take place at some time in the near future? I do not think the British Transport police’s effectiveness would be preserved if the merger took place.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
It is good to see you in the Chair, Mr Hollobone. I congratulate the hon. Member for Moray (Douglas Ross) on bringing the debate to the Chamber. This is clearly an issue that he feels passionately about—and quite right, too.
I start by paying tribute to the officers and staff of the British Transport police for their dedicated service and hard work in making safe the journeys of millions of passengers every day—not just on the rail network, but on services such as the London underground, docklands light railway, Emirates air line, Glasgow subway and others.
The officers of the British Transport police have been involved in some of the most difficult and dangerous incidents and policing operations in living memory, including the 1987 King’s Cross underground fire; dealing with numerous IRA bomb threats; rail crashes at Southall, Paddington, Hatfield, Potters Bar and Selby; and the response to the 7/7 terror attacks on underground trains near Edgware Road, King’s Cross and Aldgate. Whatever our views are on the future structure of transport policing, we are all united in offering our thanks to those officers and staff.
Although the British Transport police draws its authority from an Act of Parliament from 2003, it can trace its history back to 1830, allowing it to claim to be one of the world’s oldest police forces. Its history is also one of numerous reinventions and reorganisations to meet the challenges of the times. In the same way, each of the Governments of the UK are called on to make sure transport policing is prepared for current and future challenges. These are challenging times—or, as the British Transport police authority’s 2013 plan put it,
“a period that will require unprecedented change in railway policing”
to provide exceptional service quality at reduced cost.
Different proposals have come forward. As we have heard, in last year’s elections Conservative MPs across the UK stood on a manifesto that included the pledge:
“We will create a national infrastructure police force, bringing together the Civil Nuclear Constabulary, the Ministry of Defence Police and the British Transport Police to improve the protection of critical infrastructure such as nuclear sites, railways and the strategic road network.”
In London, Mayor Sadiq Khan commissioned a review by the Labour peer Lord Harris of Haringey into London’s ability to deal with a terrorist attack. Noting that the Home Office is currently exploring options for merging certain national policing functions, his lordship reported that
“if such changes are being considered, it is important that the benefits of fully integrating the MPS and the underground policing functions of the BTP are considered at the same time.”
The outgoing Met Police Commissioner said there was a “good argument” for a merger, because the current set-up is “confusing” and such a merger could achieve “improved operational effectiveness” in responding to terror attacks.
Douglas Ross
Will the hon. Gentleman clarify that the examples he has cited from other parties in the UK are quite different from the SNP’s proposal for Scotland—to merge a specialist force into Police Scotland, which itself is a relatively new body still struggling with its own merger of the eight regional forces into one?
Stuart C. McDonald
Of course there are differences between the various merger plans, but a variety of different institutions and Governments in the United Kingdom are having to make changes to how transport policing works. Indeed, the possibility flagged up in Lord Harris’s report is of integrating the specialist British Transport police on the underground into the more general Metropolitan Police Service.
In Scotland, the Scottish Government have decided that policing and public safety are best served by merging the recently devolved British Transport police into Police Scotland. That decision was debated in great detail in the Scottish Parliament, including by the hon. Member for Moray, but ultimately the Scottish Parliament backed that decision, passing the Railway Policing (Scotland) Act 2017, which is the first step in making that happen.
Without raking over old coals again, I do think that was the correct decision. Through the merger, the assets, resources and range of skills of the second-largest police force in the United Kingdom will be deployed routinely, rather than on request, on rail transport policing, just as for our roads, seaports, airports and border policing. That, together with clear assurances from both the Scottish Government and Police Scotland that specialist railway policing functions and the skill set of our transport police will be preserved after integration means that the merger’s objective is to not just maintain but enhance safety and security standards on railways in Scotland.
All those arguments are mirrored in Lord Harris’s report to Mayor Khan. Given the developments at the Home Office and the Conservative Government’s proposals, without the Scottish Government’s decision we might have ended up being the only part of the United Kingdom with a stand-alone transport police service, which would not have made much sense. It is not clear whether Conservative Members are arguing for that today.
Rather than reopen that argument, our task is to ensure that the considerable challenges of the merger are overcome, and that the inevitable and legitimate concerns and uncertainty for staff are addressed as thoroughly as possible. That is why a joint programme board was established. It was always the case that the timetable for the merger could change as progress was reviewed. While progress has been made in some areas, the board has recommended that the merger target date be extended beyond April 2019. That is regrettable, but it is right that the timescale is changed rather than the merger attempted at an impossible pace.
Meanwhile, Police Scotland has provided assurances that the right of any BTP member transferred to police the railway environment until they retire will be respected. There have been detailed discussions between the Scottish Government, the British Transport Police Federation and the Transport Salaried Staffs Association, and a guarantee has been pledged that secures jobs, pay and pensions through the course of integration.
Despite the picture that has been painted, there has been constructive engagement among railway operators, the Scottish Police Authority, Police Scotland and the Government. Unlike at present, a railway policing management forum is to be placed on a statutory footing to ensure rail operator engagement and accountability, and tasked with reaching agreement on the service, performance and costs of railway policing in Scotland. There has been positive engagement with the Transport Department at Westminster, where statutory instruments will be required.
I acknowledge that this has been and will be a challenging period for the British Transport police and current and retired staff. However, I believe this ultimately to be the best option for transport policing in Scotland—in fact, it is almost the only option. I trust that all parties involved will continue to work to make the transition as smooth as it can be.
Martin Whitfield (East Lothian) (Lab)
I congratulate the hon. Member for Moray (Douglas Ross) on securing this debate, which it was a pleasure to co-sponsor. I thank the Backbench Business Committee for providing time for it. It is, as always, an honour to serve under your chairmanship, Mr Hollobone.
I thank the Scottish Government, who have eventually arrived at the same conclusion as almost everyone else in Scotland: there is a need for a pause and to think through full-scale integration. Rather than dwell on what took so long, I hope that we can face the challenges and complexities of merging these diverse organisations and look at it again, for the sake of passenger safety, on the advice of experts including the federation, trade unions, Police Scotland employees, me and the Labour party. We need to kill the concept of a future full-scale merger.
The debate has been carelessly framed by some as a divide between those who want to weaken the current devolution settlement and those who want to strengthen it. The Smith commission was clear. It said, among other things on transport, that
“the functions of the British Transport Police in Scotland will be a devolved matter.”
Martin Whitfield
I will not, because the hon. Gentleman has made a lot of interventions and had his chance to make a speech.
I hold no objections to the devolution of functions from the British Transport police to Police Scotland. In fact, the Scotland Act provides good scope for the transferral of such policing powers; yet, contrary to popular belief, a full merger under the devolution powers was not the only option.
The Smith commission preceded the publication of the Delegated Powers and Law Reform Committee’s report on the matter. The Committee produced a number of options, which offered a range of answers. Options 1 and 2 looked first to provide an administrative and legislative settlement that would provide political accountability to Holyrood and Police Scotland. Those options, which were ignored by the Scottish Government, would as a preliminary settlement still have carried the recommendations brought forward by the Smith commission. We would still be able to devolve the service without putting passenger safety at risk and casting the uncertainty over pensions and jobs that we have heard about today.
Option 3 was full-blown integration: the most complex route to answer the devolution statement. By opting for a full merger, the Scottish Government put dogma before the people and services that they should serve. We have heard—this is an example of an alternative administrative legislative settlement—that Transport for London funds more than 2,500 police officers across the Metropolitan police, British Transport police, and the City of London police. Those police tackle crime and antisocial behaviour, and they make people feel safer when travelling in London. British Transport police have responsibility for the tube, the DLR and other areas, and through their neighbourhood policy they cater for the particular needs of communities near the stations they serve.
We have considered the financial demands that the Police Scotland merger has created, the stress faced by officers who serve on the street, and the managerial integration that is proving so very challenging. We have heard discussions about terrorism: the British Transport police have a terrorist specialism based in London, as does the unit that specialises in murder on the transport network. That is because, unfortunately, that is the geographical area where such things occur the most, so the specialist teams are where they need to be.
Hopefully, this debate will highlight the financial impact of the merger and the genuine questions that Police Scotland and BTP employees have about pay and conditions. It is better late than never, and I am relieved that those concerns have put any merger on hold. However, the past refusal of the Scottish Government to consider alternative forms to devolution fails to rectify the issues under discussion.
The Scottish Government have questions to answer, but I also wish to pose three questions to the Minister. When does the Secretary of State plan to lay orders to transfer power under the Scotland Act? Has the Minister received any acknowledgement of discussions between Police Scotland and train operators to establish a railway policy agreement? What discussions have the Government held with their counterparts north of the border about the review of British Transport police integration by Audit Scotland? There are proposals, including the commissioning model, that are supported by BTP, rail users and other interested parties. Such solutions will deliver an transparent and accountable BTP for Scotland, and a fair, consensual devolution settlement that I hope all parties will get behind.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
Thank you, Mr Hollobone, for your efficient chairmanship of this debate. I commend the hon. Member for Moray (Douglas Ross) for securing it.
Last week we debated Scottish city deals, which examined one side of the devolution equation. This debate examines the other side of that equation, and looks at how effective the devolution process has been over the past 20 years. We are seeing the emergence of the Scottish Government as a Leviathan—an unwelcome Leviathan in many ways. The devolution process was never designed to be like this; it was designed to create institutions to facilitate collaboration and strong partnerships at all levels of government, including local government and with the UK Government. Devolution should never be considered an annexation of power; it should be about building strong partnerships that facilitate efficient collaboration. We need to rediscover that as part of the devolution settlement.
I wish to reflect on the process through which the Smith commission discussed the devolution of the British Transport police to the Scottish Government, and the spirit in which that was done. No one disagrees with the idea of devolution, but the manner in which the Scottish Government have subsequently managed it has been less than satisfactory. The Delegated Powers and Law Reform Committee presented three options for railway policing following the publication of the Smith commission’s report and the passage of the Scotland Act. Instead of consulting on which of those three would be the most effective, the Scottish Government instead railroaded through one simple option, with little room for stakeholders to affect the outcome. What sort of democratic devolved discussion and collaborative process is that?
Option 1 looked at administrative measures, including ways to increase alignment with Police Scotland initiatives and BTP’s accountability to Scottish institutions. It examined a new role for the Scottish Police Authority in scrutiny and performance, but that was disregarded. Option 2 considered legislative and administrative measures, including clarifying in statute arrangements through which the Scottish Government may give direction to the British Transport police authority. Under that option, the BTPA would retain responsibilities for pensions, employment contracts, and defraying the costs of policing to the rail industry. Planning and strategy setting for railway policing in Scotland would be reviewed to enable greater involvement by the Scottish Police Authority. Both options considered new branding for the BTP in Scotland, but again that was disregarded without any consultation.
The only option presented as a meaningful way forward was full integration, which was also deemed the most complex route. There was, however, no justification for it on that basis, so why were the other options disregarded out of hand? It is no surprise that the process has been halted, because its basis was clearly unsound from the beginning. That is why the chief inspector of constabulary in Scotland stated:
“The scope and scale of the challenges and complexity of the transfer should not be underestimated. It is not a merger of one complete organisation with another, but the partial extraction of a function from one organisation and its integration into another organisation.”
There is also a problem with staffing, morale, and the skills that are vital to sustaining the British Transport police across the United Kingdom. The Scottish Government seek to merge the BTP with Police Scotland, but they opposed the first two options on the grounds that they would not deliver a single command structure for policing in Scotland.
However, a single command structure is not necessarily desirable, because staff of the British Transport police want to maintain their integrity and their skills and specialisms. If they are removed from that structure and the only way to advance in the organisation is to move out of the rail division and into another part of Police Scotland, the dilution of the skills base will be self-evident. Why is that desirable? It is not, which is why it is necessary and key to maintain the discrete structure of the British Transport police in Scotland through other measures. Such dilution of the skills base is not desirable for staff or for efficient devolution.
For devolution to be a true success, we must examine both sides of the equation and ensure that local government, structures and institutions in Scotland are protected from the encroachment of Edinburgh. We must ensure effective collaboration among the Scottish Government, the UK Government and UK institutions to enable the most efficient management of those services in Scotland.
Stuart C. McDonald
Why would it be more difficult to retain a transport police function within a broader Police Scotland than to retain a firearms specialism, for example?
Mr Sweeney
Because opportunities for advancement within the British Transport police transcend the border—people can move between different regional divisions and they can learn different skills and benefit from training across the UK. It is desirable to maintain such opportunities, and on that basis the British Transport police structure in Scotland should be revisited. We should reconsider those three options and discuss them openly and with good intentions.
Several hon. Members rose—
Mr Philip Hollobone (in the Chair)
Order. We now come to the Front-Bench speakers, and the guideline limit is 10 minutes each. To help them, I will ask the clock to show 10 minutes per speech.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Hollobone, and I thank you for your guidance. I congratulate the hon. Member for Moray (Douglas Ross) on securing this debate. He raised important issues, and I will try to address some of them in my speech. Parts of his contribution felt a bit like Saturday when the football was happening in front of me but I was not necessarily enjoying what I was seeing.
For me, the low point is the suggestion that this change is driven by a desire to get rid of the word “British” from British Transport police, as that clearly is not a credible argument. The hon. Member for Moray also accused my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) of shouting and screaming, but all he was doing was trying to make valid interventions. The hon. Gentleman did make important points, however, and I will come on to them.
The hon. Member for Edinburgh South (Ian Murray) confirmed that five parties in the Smith commission agreed on the devolution of the Scottish division of British Transport police, and we must understand that devolution is about handing powers to the Scottish Parliament, and about that Parliament making decisions using those powers. That is where the thrust of the debate should be. The hon. Gentleman also said that there was no train station right on the border, and the hon. Member for Glasgow North East (Mr Sweeney) intervened and said that passengers were stranded at Carlisle last week, and if it had not been for the British Transport police helping them to go up the road, they might have struggled. However, I fail to see how that will change in a new set-up. The police will always do their best to help passengers, constituents and members of the public, and that will not change. To suggest that it will is to cloud the issue.
The hon. Member for Ayr, Carrick and Cumnock (Bill Grant) mentioned the overall budget, but he failed to say that Scotland currently gets 5% of the BTP budget. Given that it has more than 11% of the rail network, that suggests a budget deficit. Perhaps that can be looked at in future, with the possible merger with Police Scotland.
Ian Murray
I do not think my hon. Friend the Member for Glasgow North East (Mr Sweeney) and I were suggesting that customer service at Carlisle would be damaged by any of these changes to British Transport police, but if there is an incident on a train between Carlisle and Glasgow, who deals with it?
Alan Brown
Does that mean someone on the train, or someone in a call centre?
Martin Whitfield
Who deals with it from the British Transport police perspective?
Alan Brown
Obviously, I am not involved in the day-to-day workings, but it would depend where the incident was reported to. It is clear that working practices could be put in place, to be agreed between companies, about who to speak to about an incident and who would take charge.
Stuart C. McDonald
That sort of example would be no more challenging with respect to cross-border rail police than would an incident on the roads, for example. Immigration officers also surely have to cross borders regularly, and powers are created to allow people to operate across borders and overcome such difficulties.
Alan Brown
The hon. Member for East Lothian (Martin Whitfield) has said he welcomes the pause in the process, but in fact he considers it as an opportunity to kill the policy off outright. He said that the British Transport police centre of excellence on terrorism was in London because London was more prone to terrorist attacks, but I do not see why that means that the Scottish division should not be incorporated into Police Scotland. There is still clear cross-border co-operation on such matters.
Alan Brown
I cannot just now. The hon. Member for Glasgow North East spoke of an automatic dilution of skills. That is not a logical conclusion. If a railway division is retained in the new set-up, there should not be a dilution of skills. In fact, it is a way to enhance skills and opportunities within Police Scotland.
Alan Brown
No; I will see if I have time near the end of my speech.
We are debating an important matter, which the Scottish Government are trying to deal with. It is clear that there are concerns within the Scottish division of the British Transport police about the proposals, and the claim that there are concerns among staff members cannot be refuted. We have to take the concerns seriously, given that we are talking about valued police officers who provide vital services, keeping us safe. Staff morale and welfare in relation to stress or concerns is of utmost priority. I think that that is what led to the current pause. However, even when those factors are taken into account, they do not justify the complete policy U-turn that most Members of other parties have called for.
Douglas Ross
To take the question away from what Opposition parties say, Deputy Chief Constable Livingstone said at the last Scottish police authority board meeting that we should look at options, not only at the merger that has been paused. If the hon. Gentleman does not agree with Opposition politicians, does he agree with Deputy Chief Constable Livingstone?
Alan Brown
He obviously feeds into the joint programme board that will be developed; but it depends what he means by “options”. It could be timescales and how the integration goes ahead.
The Smith commission recommended the devolution of the transport police. The SNP Government submission at that point made it clear that their planned governance mechanism would be to incorporate the British Transport police division into Police Scotland. No opposition party responded to the consultation on British Transport police integration, so I have to ask what their concerns were previously. In reality, following the devolution of the British Transport police, the Scottish Parliament approved the integration proposals in June 2017. The majority of the Justice Committee endorsed the proposals; as I said, it was the Scottish Parliament that agreed to them, not simply the SNP Government. The SNP does not have a majority at Holyrood.
Page 44 of the Conservative manifesto for the UK general election in June stated:
“We will create a national infrastructure police force, bringing together the Civil Nuclear Constabulary, the Ministry of Defence Police and the British Transport Police to improve the protection of critical infrastructure”.
It is clear that the UK Government propose to merge those specialist areas into one body. There may be a justification for that, but it still means that the Scottish division of the British Transport police would be left as an isolated railway division, separating the forces anyway. The UK Government still want their own single force.
As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East mentioned, the staff are highly motivated people who clearly enjoy their roles. They have clearly developed a loyalty to the British Transport police. That is a good thing, and it helps us to understanding some of their concerns, too. If they have worked for a long time in a division that they know to be high-performing, clearly there will be natural resistance to change. It is not directly comparable, but in my career I worked through the mergers of Strathclyde Sewerage, with the incorporation of the water division and the West of Scotland Water and Scottish Water mergers. At no point, as an employee, was I in favour of any of the mergers or changes, but once they went ahead there was never a desire to look back. I am confident that the same will happen once the merger we are debating goes ahead and there is a high-performing integrated police unit.
As to concerns about terms and conditions, I said earlier that there was a triple-lock guarantee to secure the jobs, pay and pensions of railway policing officers and staff in Scotland. There has been ongoing consultation with representatives of the British Transport Police Federation and the Transport Salaried Staffs Association. Admittedly, some staff members clearly felt that there had not been enough communication, but that has now been addressed, and hopefully their concerns will be allayed, especially by the guarantees on terms and conditions. Again, the delay should help allay those concerns and allow the communication process to clarify things.
Some of the respondents to the staff survey were concerned about the loss of the specialism. However, there are plans to retain a specialist railway department and I hope that in due course that will prove to be the correct working arrangement and will maintain the specialism. Ultimately, the integration will provide a single command structure, with seamless access to wider support facilities and specialist resources. It will also ensure that railway policing in Scotland is accountable to the people of Scotland through the SPA and the Scottish Parliament. The integration can be used further to enhance the safety of passengers and railway staff. Some British Transport police staff have also recognised that there could be enhanced promotion and learning prospects within a wider Police Scotland. Concerns have been expressed about the integration of the IT systems, and clearly it must be done properly, but an integrated IT system must be an operational advantage in the bigger picture.
There is an argument that seamless cross-border working happens at present. Leaving aside the fact that the UK Government want to create their own national infrastructure force, it is clear that cross-border working happens with Police Scotland and other police forces now—particularly with counter-terrorism. If police from different police forces work on areas of that kind on a cross-border basis now, surely that can continue in the new set-up.
Police Scotland was mentioned in passing, and I should point out that it is being protected, budget-wise, in real terms. It has 1,000 more officers than in 2007. The fantastic work that its officers do needs greater political support, not to be drowned out by high-level politicking. Police Scotland performs well in its day-to-day fight against crime, which is at an all-time low in Scotland but is rising in England and Wales. The current D division employees of the British Transport police do a fantastic job, and I am confident that integration can be made to work well, and will prove the correct model in the future.
Rachael Maskell (York Central) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Hollobone, in what has been a strong debate on the Railway Policing (Scotland) Act 2017, which permits the merger of the British Transport police Scottish division with Police Scotland, although it does not make it obligatory. Clearly there are many other models, as we heard from the hon. Member for Moray (Douglas Ross), who opened the debate so well, and from my hon. Friend the Member for East Lothian (Martin Whitfield), who explained the importance of the Smith commission and the devolution settlement in moving forward. As my hon. Friend the Member for Glasgow North East (Mr Sweeney) articulated incredibly well, that meant not annexation but collaboration. We should move forward in that way, and the debate is timely in the light of the announcement of 20 February on the pause in the process.
It is vital in policing that policy decisions be backed by strong evidence. Sadly, I have heard more ideology from the Scottish National party today. As to SNP Members saying that they are confident there will be no looking back, confidence is not enough. We need strong evidence, because this is a matter of public safety. The transport network faces challenging issues today. When we hear that 83% of police oppose the measures, we need to understand why there is a lack of confidence in what the SNP has put forward.
We cannot take away some of the other challenges that are being brought to bear, particularly the governance and capacity issues within Police Scotland—not that they cannot be resolved in the future, but they certainly exist at this time. We have heard about the challenges over pensions, terms and conditions, and cross-border policing, which my hon. Friend the Member for Edinburgh South (Ian Murray) has been pursuing through written questions and raised again today.
Rachael Maskell
The hon. Gentleman has just had 10 minutes, and I need to make progress.
We also need to understand that more work should have been done on the three options that were presented, because clearly only one option was looked at. I believe the Scottish Government had a responsibility to dive deeper into each of those options from the Delegated Powers and Law Reform Committee to find the right model in moving forward, and that that would have led to the safest option. We need to ensure that those options are now revisited and reviewed, to make sure proper scoping work is carried out and to understand the impact of that. If option 1, talking about the greater alignment of institutions, is taken, it might be recognised that that is as far as it needs to go to ensure complete public safety across the railway. As my hon. Friend the Member for East Lothian has highlighted, the commissioning model of Transport for London, working in an integrated, collaborative way, is another option, and there might be a hybrid model that comes forward once we have been able to review the situation as it is. We need to go back and review those options.
We also need to understand how complex the situation is, not least because we are negotiating across a range of bodies. We have to go back to the fragmented railway system as it is, with the different franchise operators servicing the Scottish railways. Labour wants to see a much more integrated, nationalised railway, which would certainly make things far simpler, but it is important that we look at these issues in the time we are in.
We must think about the specific issues that the transport police are involved in. Of course, that is not isolated from community policing. In my York Central constituency, the transport police have worked closely with the police in dealing with antisocial behaviour and tackling alcohol consumption on trains, making my city safer. That collaboration is vital, but the key is collaboration and working together. It is not changing systems to suit a particular narrative, which, I am afraid, is what this debate has steered into. We also need to be mindful of the integration of the work of the British Transport police with, for instance, that of the guards. We have seen assaults rising quite sharply on our rail network, which is why Labour is committed to ensuring that we have guards on our trains to make the public safe. It is an integrated role.
There are specific roles: dealing with missing and vulnerable children is a big issue for the transport police, as is dealing with public safety at railway stations. Mental health challenges are a big issue that the police have to address at stations, including the specifics of trying to engage with the public to reduce the risk of suicide and harm. One hon. Member raised in the debate the issue of being able to access the rail line, because of vulnerable people finding their way on to railway lines, or trespass. There are specific tasks with specific training that are done by the British Transport police. If we fragment the service, where is that specialist training going to come from without the years and years of expertise built up in providing that access?
Alan Brown
Will the hon. Lady explain why, if a specialist police division is retained within Police Scotland, suitable training on suicide prevention and the other measures she mentions cannot be provided? That issue probably cuts across Police Scotland and other measures that other officers have to take.
Rachael Maskell
I struggle again with the SNP’s intervention, because there are specific issues about not just people at risk at stations, but people finding their way on to the rail network itself and how that is addressed. We have heard about the training that is needed on access to the track and keeping the public safe.
Martin Whitfield
Is it not correct to say that, for example, when we share the east coast main line, which runs north and south, the integration has to be north and south? Events that happen in York or Newcastle have knock-on effects both in Scotland and down in London on that one railway line.
Rachael Maskell
I thank my hon. Friend for that intervention. That point came out strongly in one of the submissions to the consultation, talking about things such as the management of football fans and ensuring that that is done through co-ordination between Scotland and England. It is important that we see that integration continue.
Coming back to issues of expertise, the British Transport Police Federation chairman, Nigel Goodband, said:
“Given the recent terrorist attacks in Manchester and London, and the ongoing and significant threat from terrorism, I am writing to you as a matter of urgency to implore you to suspend the Railway Policing (Scotland) Bill.”
Here we have somebody in a lead position of expertise imploring the Scottish Government to put this proposal, as it is presented today, on ice, who is backed by the trade unions, the police and Labour.
We need to ensure greater alignment and good collaboration—I think everybody in this debate would agree with that—but we must remember that policing is needed across borders too. Rail does not respect borders, and neither does crime. If this is about keeping the public safe, we need to ensure that we have good communications between station staff and police throughout the network and on board the trains. We cannot afford to lose or regress on the skills that have been developed over time. We are talking about 284 staff and officers who have gained those skills over numerous years and built up a specialism.
We must respect specialism in the police, but many issues are now pulling that expertise away from the service. Many people say they will leave—I believe it is 16% of experienced officers and staff—with 14% going elsewhere in the British Transport police and 22% uncertain over the future. They are uncertain because there is no clarity on pensions and terms and conditions. We are talking about not only existing staff, but the future workforce, who have not been referred to in the debate.
I welcome Audit Scotland’s reviewing the debacle that this has turned out to be, but I also press it on the Minister today that we should see a pause in the laying of orders before the House and ensure that the work goes back to the scoping phase, to reflect properly on the responses to the consultation, which reject the SNP’s proposals, and instead to put forward a sensible model of greater alignment and collaboration as we move forward, thereby ensuring that public safety is put first.
The Minister of State, Department for Transport (Joseph Johnson)
I start by congratulating my hon. Friend the Member for Moray (Douglas Ross) on securing today’s debate on this important subject. I am aware of his long-standing interest in this matter, both as a Member of this House and previously while a Member of the Scottish Parliament. Before setting out the Government’s position, I would like to make a point that I am sure we all agree about: that the continuing safety and security of the travelling public and of the staff who work on our railways must remain our No. 1 priority in this matter.
As hon. Members will be aware, the decision to devolve the functions of the British Transport police honours the cross-party Smith commission agreement, which explicitly set out that
“the functions of the British Transport Police in Scotland will be a devolved matter”.
The Scotland Act 2016 gives effect to that recommendation. Legislative competence for railway policing in Scotland has been devolved. The Scottish Government have stated their intention to integrate the Scotland Division of the BTP into Police Scotland, and the Scottish Parliament has passed legislation setting out the Scottish Government’s plans for the future policing of the railway. The process of devolution is therefore under way. It is now for the Scottish Government and the Scottish Parliament to use the powers they have been given.
For our part, the UK Government are committed to devolution and to delivering the Smith commission’s recommendations in full. We have been working closely and effectively with the Scottish Government, the two police forces and the two police authorities through a joint programme board, which has been established to oversee the delivery process. We want to see a smooth transition to the new arrangements for policing the railways, with the focus on ensuring that the safety and security of rail passengers and staff remain at the forefront of the process and that the UK’s interests are fully recognised and protected.
Significant progress has been made on a number of aspects of integration, including in preparing the secondary legislation that will transfer those BTP officers and staff currently responsible for policing the railways in Scotland to Police Scotland, and on mapping their terms and conditions. The hon. Member for East Lothian (Martin Whitfield) asked when we would lay the orders in question. We had planned to lay them in the autumn, but given the delay until a new plan and timeline for the project has been determined, we do not know now when we will lay them.
It needs to be said that any deferral will be for a period of one or perhaps more years, because of the contractual arrangements through which policing costs are recovered by the British Transport police authority from train operators. The transfer can take place only at the start of any given financial year, so we need Police Scotland, working with the BTPA, to commit to a specific, achievable deadline by when it will be operationally ready to deliver the transferred functions, as and when it is in a position to actually receive them. That timeline must work for the BTPA, ensuring that the BTP can continue to focus on its critical activities.
We have been very clear throughout this process that it is our intention that the transfer should take place on an as is basis, ensuring that transferring officers and staff see no change in their terms and status. My hon. Friend the Member for Moray and the hon. Member for Edinburgh South (Ian Murray) mentioned pensions. We are currently working with the pension trustees on how best to deliver the commitment that pensions will be preserved. The question is how that can be best achieved while ensuring that costs fall where they should. The UK cannot cross-subsidise police pensions in Scotland after the transfer.
Last month, the joint programme board was advised by Police Scotland and the BTPA that a number of significant operational issues remain to be resolved, and that the scheduled transfer date of 1 April 2019 could not be achieved without undue risk to rail staff and passengers, with further time needed to deliver integration most effectively and safely for railway passengers, staff and officers.
In particular, a number of issues were raised about the integration of critical functions, such as ICT, with Police Scotland’s systems. Police Scotland has found itself unprepared to receive the transfer. Scottish Ministers accepted that advice, and a detailed re-planning exercise, supported by external advisors, will now take place to ensure that robust delivery plans are in place and to establish a new delivery date. That will allow also for increased engagement with both industry and staff.
I welcome the Scottish Government’s decision to listen to concerns and criticism and to agree to delay the transfer. I also recognise the concerns raised by hon. Members about Police Scotland’s ability to take on railway policing. Our No. 1 priority remains the safety of the public, and all parties agree that the transfer cannot take place until it is safe for that to happen. However, let me be clear: this is a delay to an agreed process. The Scottish Government have been clear that the transfer will still happen—that is their decision—but only when they are satisfied that all of the necessary actions have been completed.
I must again emphasise that this is devolution at work. The Scottish Government have the power to take decisions and therefore have to take responsibility for the outcomes of those decisions. For our part, the UK Government remain fully committed to delivering the devolution of railway policing, and will in due course bring forward the secondary legislation required in the UK Parliament to enable that to happen.
I assure hon. Members that, as with any effective relationship, we will continue to be absolutely clear and frank with our partners in the Scottish Government as this process continues.
Ian Murray
The Minister talks about being open and frank with his colleagues in the Scottish Government. Will he therefore use this time, while the integration programme has been paused because of the reasons outlined, to look at the commissioning model that seems to have support across the industry and the House, and to impress on those colleagues, through frank and open discussions, that that model might be the best way forward?
Joseph Johnson
Railway policing has now been devolved to Scotland, and it is therefore the domain and the prerogative of the Scottish Government to determine how best those responsibilities can be discharged. The commissioning route that the hon. Gentleman prefers is not the policy choice of the Scottish Government. It is now for them to deliver on devolution and to make it work as best they can, with the UK Government playing a supporting role.
Mr Sweeney
Does the Minister agree that devolution is not necessarily about the Scottish Government having full oversight of this, and that there is nothing to stop those of us with electoral mandates to represent the people of Scotland from offering a view? The UK Government should also not shrink from offering their preferred view of what should happen. This is not the nature or the spirit of the collaboration that should underpin devolution.
Joseph Johnson
We will continue to work collaboratively with our colleagues in Scotland to ensure the smooth transfer of powers. We all have the interests and the safety of the passengers and the staff working on our railways at heart. We want to put in place sustainable and endurable arrangements within the framework of law set by the devolution settlement.
I assure hon. Members that, working through the joint programme board, we will be ready to challenge the approach where it is necessary to do so in the interests of passengers, officers and staff and the security of the country. We will continue to ensure that the UK’s interests are fully protected, including by ensuring that the critical, specialist work of the BTP in England and Wales continues to protect rail users and staff.
Douglas Ross
First, I thank you, Mr Hollobone, for the way you have chaired this robust but respectful debate. I also thank my hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant) and the hon. Members for Edinburgh South (Ian Murray), for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald), for East Lothian (Martin Whitfield) and for Glasgow North East (Mr Sweeney). I also thank the Front-Bench spokespeople for their contributions, particularly the Minister.
I have to pick up on a couple of points from the speeches made by Scottish National party Members, which I have to say were disappointing. They mentioned that terms and conditions had been progressed. This is an issue that we have considerable concern over, but SNP Members seem quite happy. However, their own Justice Minister in Scotland, Michael Matheson, said that the pause would allow extra time to allow more engagement with the BTP Federation on pay and conditions. Even their own Justice Minister in Scotland does not think they have gone far enough on that.
The hon. Member for Kilmarnock and Loudoun (Alan Brown) mentioned IT and how that would be a positive of the merger. However, the Rail Delivery Group, in its briefing for the debate, said that the failure to progress the implantation of ICT systems was one of the biggest hazards of the merger. It went on to say that discussions suggest that the earliest an equivalence system in place would be in April 2021—two years beyond the proposed April 2019 date, which has fortunately been paused.
We are all fortunate in Scotland to have the strong influence of BTP officers in our constituencies. In my constituency of Moray, they were very active during the recent construction of the new Forres railway station. I welcome the support that we have had from pretty much across the Chamber for the pause to now be used as an opportunity to consider options going forward. I am disappointed that SNP Members trotted out the party mantra, unwilling to look at alternative options. However, there are options, and we are in a pause, so we should look at them. They would allow us to respect the devolution settlement and the views of experts.
I will use my final words to praise the commitment, dedication and expertise of British Transport police officers, and indeed all Police Scotland officers. Their unstinting service keeps us safe across Scotland and the United Kingdom.
Question put and agreed to.
Resolved,
That this House has considered proposals for the merger of British Transport Police Scottish division with Police Scotland.
Childhood Obesity: Bexley
(6 years, 9 months ago)
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David Evennett (Bexleyheath and Crayford) (Con)
I beg to move,
That this House has considered childhood obesity in Bexley.
It is a great pleasure to serve under your chairmanship, Mr Hollobone. I am particularly delighted to see here my right hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire), a constituency neighbour and personal friend; we work together for Bexley. We are glad to see him back in his seat after his recent illness; indeed, we are delighted to see him here today.
I am grateful to be able to raise what is both an extremely important health issue in my borough of Bexley and a national concern—namely, childhood obesity. This is an opportune moment to raise the issue of obesity, because today Public Health England chief executive Duncan Selbie is urging shops and food outlets to reduce portion sizes by 20% within the next six years after stating that obesity has become “the norm”. Indeed, he is today launching the One You campaign, with the slogan “400-600-600”—the number of calories that people should eat at breakfast, lunch and dinner. He says that the issue of overweight or obese children needs to be addressed. PHE nutritionist Dr Alison Tedstone says that children are consuming 500 calories a day more than they require; that is equivalent to another meal. Therefore, as I said, this is an opportune moment to raise the issue.
Bexley is a great place to live and work in, and I am delighted to have been a resident of Barnehurst for a considerable time, because there is so much to see and do. I urge you, Mr Hollobone, and my hon. Friend the Minister to come down to Bexley sometime and see the huge opportunities that there are to visit the parks, stately homes and other facilities that are so good.
James Brokenshire (Old Bexley and Sidcup) (Con)
I thank my right hon. Friend for his very kind wishes on my return to duties at Westminster. I support him in this debate and what he says about the London Borough of Bexley. He has rightly focused on the comments this morning by Public Health England. Obviously, part of this issue is what goes into ready meals and things like that. What thoughts does he have on what Public Health England has said about ingredients and what goes into so much of the food on the supermarket shelves that we buy, and the impact that that is having? He is making really important points this morning.
David Evennett
That is a very valid point. Recipes, portion sizes and calories need to be looked at and addressed. I urge all restaurants, fast food outlets and food manufacturers to look seriously at how they can reduce people’s salt, sugar and calorie intake. We have to address that, as I am sure the Minister will accept later.
The statistics for childhood obesity in Bexley are mixed when compared with those for the rest of England. There are areas of public health where we do much better, and I will highlight the stop smoking campaign, which has been very successful across our borough, but unfortunately childhood obesity is a real issue in the borough and needs attention.
It is widely accepted by health experts that once weight is gained, it is difficult to lose. The Government have called childhood obesity
“one of the top public health challenges for this generation”.
That is certainly the case for Bexley. The Government are well aware of the issue nationally and are being proactive in addressing the concerns. The childhood obesity plan in 2016 was a welcome step forward, but plans need to be actioned; we are looking for results and outcomes. Measures in the plan included the soft drinks industry levy, which will apply to manufacturers; a recommitment to the Healthy Start voucher scheme, enabling low-income families to buy fruit and vegetables; and action to increase physical activity in schools. We all appreciate that there is no quick fix, but that is the first step on a long journey that aims to
“significantly reduce England’s rate of childhood obesity within the next ten years.”
We do need an understanding and a culture change.
Jim Shannon (Strangford) (DUP)
I thank the right hon. Gentleman for bringing this matter to the House. It is in the news every day—indeed, it is in the news this morning—and it is very important for people back home in Northern Ireland. “Childhood obesity in Bexley” is the heading for this Westminster Hall debate on the Order Paper, but in Northern Ireland we have similar figures—of children aged between two and 15, 17% are classed as overweight and 8% as obese. Does the right hon. Gentleman feel that it is time for the Department for Education and the Department of Health and social care to work together to put in place a strategy to reduce childhood obesity, which would clearly involve schools?
David Evennett
I thank the hon. Gentleman for his comments and totally agree with him. I think that the Department for Education and the Department of Health and Social Care are working together, but more needs to be done. I appreciate that this is not just a Bexley issue—it also matters to the people of Northern Ireland and across the country—but I specified Bexley because it is particularly bad compared with other places.
The earlier a child is exposed to obesity, the earlier they can experience medical consequences and problems. In fact, a study by Cancer Research UK found that obesity could cause 670,000 cases of cancer nationally over the next 20 years, plus millions more cases of other diseases, including type 2 diabetes, heart disease and stroke. Obesity and the medical problems stemming from it cause problems for our whole society. It causes a loss of productivity in the workforce. It restricts opportunities for individuals. And it adds another burden on to our NHS. In fact, Cancer Research UK also claims that the cost to the NHS per year by 2035 could be an additional £2.5 billion, over and above what is already spent on obesity-related diseases. Of course, quality of life can also be reduced by being heavily overweight, as that restricts opportunities and choices.
Childhood obesity is strongly linked to adult obesity. According to the Royal College of Paediatrics and Child Health, four in five obese schoolchildren are likely to be dangerously overweight for life. Therefore, we have to act early, before there are serious consequences from something that is avoidable.
I have said that, statistically, Bexley is not performing well, unlike other areas, where provision and action are good. In Bexley, the prevalence of overweight or obesity among children in reception classes is 26.7%. That is worse than in London in general and in England in total. In year 6, the figure in Bexley increases to 39.4%, which is almost one percentage point higher than the London average and more than five percentage points higher than the England average. That is very disappointing. When we consider that in Bexley 12.3% of reception age children and 24% of year 6 children are obese, it is a real cause for concern. Let us look at the trends over time. The number of overweight or obese reception age children in Bexley increased from 20% in 2007 to 26.7% last year. That is why we are raising this issue today with the Minister—to highlight the issues that we have in Bexley.
Diets, of course, play a very important role in lifestyle. Approximately 54% of adults in Bexley meet the “five a day” recommendation for fruit and vegetables. Again, that percentage is below the London and national averages. It does not set a good example for our children. Sadly, children do follow their parents and grandparents, and when habits are formed young, the consequences are great. We need to promote and pursue the importance of fruit and vegetables. Fruit can be an enjoyable snack and an alternative to chocolate, cake and sweets, while a diversity of vegetables is essential to a balanced diet.
Bexley Council—a good, Conservative-led council—is taking action. Just over a year ago, Bexley joined the nationwide Sugar Smart campaign led by Jamie Oliver. The aims of the campaign for us are to educate people and raise awareness across Bexley about the harmful effects of excess sugar consumption, and to reduce individuals’ sugar intake across the borough. The council is encouraging local organisations and businesses to participate in the campaign and support this very important initiative. Bexley has now signed up to the campaign 16 participants, including a number of schools, and I hope that the figure continues to grow during the rest of this year, because that is a very important facility and opportunity.
I am grateful for the information that has been given to me by Dr Anjan Ghosh, who is the director of public health and deputy director of health and wellbeing at the London Borough of Bexley. Dr Ghosh advises that the Bexley health and wellbeing board recently signed off on the development of a system-wide prevention strategy that is far reaching and ambitious in scope and has the potential to harness council, NHS and community assets in improving health and wellbeing outcomes, helping Bexley residents to start well, live well and age well. The strategy is currently in development, and part of that involves developing an obesity strategy for Bexley that has the same population health focus.
Part of the work is to unpick why obesity statistics in Bexley are poor compared with statistically and demographically similar London boroughs. The programme includes a two-tier child weight management programme for children aged four to 11 and their families, a family lifestyle programme and guidance to support healthier living, eating and lifestyles. Each category programme is designed specifically to provide age-appropriate messages, activities and behavioural change that will benefit the whole family. Once the 12-week programme is over, there will still be access for the families and young people to drop in, to update themselves and take the service further.
I know that schools and teachers are doing their very best to advise children, as well as to educate and support them to eat well. However, parents, as the primary educators, have primary responsibility and we need more support from parents. The scale of the issue is huge. I will not go through the statistics of how many biscuits, cakes, ice-creams and all those type of foods are consumed by young people every year, or how many calories those foods and fizzy drinks contain.
One has to say that it is a worry to see secondary school children coming out of school in the afternoon into Bexleyheath, going to the fast food outlets in the town and consuming burgers and chips, which have an enormous calorie intake. That is a huge concern. There has been an increase in our borough of waffle shops, ice cream parlours and other fast-food outlets. While it is good to see business thriving, it is worrying that some are exacerbating the problem and increasing the sugar and calorie intake of our youngsters. Treats are fine for special occasions, but should not be the mainstay of an individual’s diet. I am not a killjoy, but everything should be in moderation. In addition, I think that many of us eat too much and have portions that are too large. That is why the report I have highlighted this morning is so important.
Jim Shannon
Further to that point, on the news this morning they were saying that they were not against the idea of fast-food outlets, but we should have smaller portions. In other words, if we start with smaller portions, it will be a step in the right direction and maybe that is the way to go forward.
David Evennett
I think that is absolutely right. The hon. Gentleman highlights the calorie content and intake, which is so important.
I also want to highlight physical activity, or inactivity, which is a huge problem that can lead to obesity and is the fourth leading cause of global mortality. Increasing activity levels could help to prevent a number of illnesses, including cancer and diabetes. Regrettably, in Bexley, over 21% of adults are physically inactive.
I was honoured and privileged to serve as Sports Minister in the then Department for Culture, Media and Sport for the first half of 2016, while covering the maternity leave of my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch). It was a brilliant experience to go around the country and see first-hand how sport can make a real, positive impact on people’s lives. We must promote the wide range of sports available out there and their benefits. Sports participation is a great way for young people in particular to become physically active, improve their health and fitness, and—depending on the sport—to be part of a team, socialise and be part of something, gain motivation and confidence, and also have fun. We all know that sport is fun.
I know that the Minister will agree with me on that. I used to be a keen tennis player. I do not get time for that now, but I am still a keen walker. We have places such as Hall Place and Danson Park in our borough, where one can have a good walk. It is a really invigorating experience. I also enjoy going to north Norfolk and Sheringham Park with my wife, Marilyn, and we have long walks along the north Norfolk coast. That is important exercise.
In conclusion, we must take action on all fronts. The concern is not only the advertising and promotion—in supermarkets we still see the calorie-laden chocolates and what have you by the check-out, which is a worry too—but what parents are feeding their children and the fast foods. The intake of sugar and salt is too high. The issue is people making sensible lifestyle choices, to ensure that they are eating healthily and looking after their health. I know that my hon. Friend the Minister is aware of the serious issues across the country. Government, industry, schools, the NHS, families and friends all have a part to play to ensure that we are eating and living healthily.
The benefits of reducing childhood obesity are clear. It will save lives, but it will improve the quality of young people’s lives, which is important. Education is the key. We need to educate our children and businesses. We need to encourage everyone to be more active and eat better. We need more promotion of sports and to continue to reduce children’s calorie and sugar intake. We need to educate parents and grandparents on the risks of lifestyle to themselves and their families. Of course, publicity and promotion are important, essential in fact. Politicians at local and national level should get on board too and need to be engaged to achieve results. For our Borough of Bexley, we need results. I look to my hon. Friend the Minister, who I know well, to take these matters seriously and give us the lead.
The Parliamentary Under-Secretary of State for Health (Steve Brine)
Let me start by repeating what was said by my right hon. Friend the Member for Bexleyheath and Crayford (David Evennett): childhood obesity remains one of the top public health challenges, if not the top one, facing this generation. I have said that in this Chamber before, and I welcome any chance to debate this subject. I congratulate my right hon. Friend on securing the debate. I also echo his words about how nice it is to see my right hon. Friend the Member for Old Bexley and Sidcup (James Brokenshire) back in his place. He is my dear friend and I worked closely with him when he was Secretary of State for Northern Ireland. We have said many prayers for him in the last few months. It is great to see him back in his place.
As right hon. and hon. Members will be aware, the latest figures, which I pore over, continue to show us that child obesity rates in England remain way too high. Almost a quarter of children are overweight or obese when they start primary school. Probably more worrying is the fact that that figure rises to around a third by the time they leave primary school.
Evidence shows us that the deprivation gap in obesity prevalence between children in the most and least deprived areas is increasing. My right hon. Friend the Member for Bexleyheath and Crayford gave figures for Bexley, and he was right to, but let me give some national averages. Obesity prevalence among children in reception living in the most deprived areas was 12.7%, compared with just 5.8% among those living in the least deprived areas. In year 6—the final year of primary school—those figures were 26.3% and 11.4% respectively. That gap worries me. It should worry us all. It continues to widen. This is one of the great burning injustices of our times; the Prime Minister has used that phrase, and she is dead right. My view is that we have not just a right to act, but a responsibility to act as a Government with a publicly-funded health system.
Bexley is fairly affluent, but there are areas of significant deprivation, as there are in all of our constituencies. Data for Bexley show higher rates of excess weight in children than the averages for London and for England. Also, obesity prevalence has remained higher than the national average, as my right hon. Friend said, for over five years, so he is right to highlight the issue. The impact for Bexley and the rest of the country was highlighted just last week through new analysis by my good friends and partners at Cancer Research UK suggesting that millennials are on course to be the most overweight generation in history. That should and does worry us greatly.
We know that obese children are much more likely to become obese adults; it is very hard to lose the weight, as my right hon. Friend said. That increases their risk of developing the serious diseases that I speak about as part of my portfolio, including type 2 diabetes. There was a lot of press coverage and an Adjournment debate in the House last week about the sheer number of people picking up type 2 diabetes, which is an entirely preventable condition. It increases your risk of heart disease and some types of cancer, including bowel and breast, two of the most common cancers, which is why CRUK are rightly so active in this space. It is also a major risk factor for non-alcoholic fatty liver disease.
We launched our child obesity plan in August 2016, as my right hon. Friend rightly said. It was a very robust piece of work informed by the latest evidence and research in the area. At the heart of the plan is a simple desire to change the nature of food that children eat and to make it easier for families and parents—who play a key role—to make healthier choices for them and for the country.
The plan is a challenge—and it is meant to be—to us in national Government as well as those in local government, which I will come on to, in businesses, in the NHS, and in schools and families. We all have a role to play in reducing child obesity levels. In developing the plan, my officials and my predecessors have been clear, as I am, that we have considered a number of different policies. We have focused on the ones that are likely to have the biggest impact on preventing child obesity.
As my right hon. Friend will remember, key measures in the plan include the soft drinks industry levy, which was announced by the previous Chancellor; the sugar reduction and wider reformulation programme; and helping children to enjoy an hour of physical activity every day, which is so important.
Since we published the plan, real progress has been made on sugar reduction. The soft drinks industry levy will come into effect in April—it is important to remember that it has not yet come into force, but it is nudging behaviour. Public Health England has formulated a comprehensive sugar reduction programme with the aim of a 20% reduction in sugar in key foods by 2020, including a 5% reduction in year one. We will be judging that shortly to see where progress has been made.
Companies, such as the makers of Lucozade, are important. I visited the headquarters of Ribena, the Suntory brand, in Uxbridge earlier this year. I pay great tribute to its work. I was in the lab testing the new Ribena, which goes live this week.
Steve Brine
It was very nice and very refreshing.
As a company, Ribena has taken a hit in doing that, but it reports great staff satisfaction and a feeling that it is doing the right thing. As the Minister, I have never been afraid to call out businesses that are making poor choices and those that are making the right choices. Ribena is making the right choices.
Kellogg’s also made a good decision about the reformulation of sugar in its cereals, which sit on my children’s breakfast table every morning. Tesco, Waitrose and Nestlé have led the way by removing millions of tonnes of sugar from their products and they deserve credit for that. We expect almost half of all drinks that would otherwise have been in-scope of the soft drinks industry levy to have been reformulated by the time it comes in. That is a crucial step towards improving our children’s health, as data shows that sugary soft drinks are the main contributor of sugar in our children’s diets.
My right hon. Friends might be thinking that we will be victims of our own success, because the industry levy will not produce the revenue so we will not be able to reinvest it. However, someone far cleverer than me, before my time, managed to persuade the Treasury—a clever, neat trick—that we will invest all the revenue we expected to get from the levy, plus what we said we hoped to raise during this Parliament, in giving school-aged children a better and healthier future, including through doubling the primary school PE and sport premium; investing in school breakfast clubs, which are so important; and providing £100 million in 2018-19 for a new healthier pupils capital fund.
As was said by my right hon. Friend the Member for Bexleyheath and Crayford and by the hon. Member for Strangford (Jim Shannon), who is no longer in his place, this work should be done between the Department for Education and the Department of Health and Social Care, and of course it is being. Our original plan was a cross-Government piece of work. Last month, I talked to the new Secretary of State for Education about the plan and introduced him to some of things that I want to do.
It is a joined-up conversation because, as my right hon. Friend said, schools have a huge role to play in teaching children about healthy eating. The national curriculum requires them to teach children about food, nutrition and healthy eating, and how to cook a repertoire of dishes as part of design and technology classes. Things have changed since my day, when a fish finger sandwich was one of my challenges in design and technology and I managed to get it wrong.
It is compulsory for pupils in maintained schools from key stages 1 to 3 to be taught about the principles of a healthy and varied diet and why that is important, and the national curriculum can be used as a benchmark for free schools and academies, which ordinarily sit outside it. Alongside our commitment to continue to provide free school lunches to infant pupils, which means that about 1.4 million more children are eating a healthy lunch, we are investing £26 million in breakfast clubs, using revenue from the soft drinks industry levy.
Our plan is not just about school-aged children. In November, we published a series of example menus and associated guidance to support early years settings, such as nurseries and childminders, to offer food and drink in line with Government dietary recommendations for infants and children from about six months to four years—a key cohort—before they get to primary school.
The guidance includes useful information for early years settings to show how they can meet the early years foundation stage welfare requirement to provide “healthy, balanced and nutritious” meals for children. They are also responsible for educating parents and carers to help them to prepare healthy, balanced meals at home and introduce their child to new foods. There has to be a consistent thread from the education setting to the home setting.
My right hon. Friend was right to mention local authorities, which have a key role to play in creating healthier local environments in our constituencies. They can have a significant impact in local communities through levers such as the planning system, urban design and transport strategies. There are great examples of that, such as the restrictions on new hot food takeaways in Gateshead, which is something that my right hon. Friend might want to look at. I was interested to hear from my right hon. Friend about the borough-wide prevention strategy. As the Minister with responsibility for prevention, I would be interested to hear more and I note his offer to visit him in his constituency.
Other local initiatives include last year’s London-wide great weight debate on child obesity, which several London authorities, including Bexley, took part in. Such events show how communities can make their own contributions. The results of that debate are feeding into the five-year obesity strategy being developed in Bexley, which my right hon. Friend talked about. I welcome that, because it cannot all be about what the national Government do. We have to set the framework and the ambition. Sometimes we can use the taxation system as we have with the industry levy, but local government has a key role to play. I am excited to see the progress being made.
We continue to learn from the latest evidence around the country and around the world, such as the very interesting whole-systems approach in Amsterdam that led to a reduction of 2,500 in the number of overweight and obese children between 2012 and 2015. I am talking to people there and I hope to visit at some point.
This week, as my right hon. Friend mentioned, to implement part one of the child obesity plan, we launched our ambitious calorie-reduction programme alongside Public Health England. It is ambitious: it challenges all sectors of the food and drink industry to reduce calories in everyday food by 20% by 2024. I absolutely believe the sectors can do that—we have had a brilliant and positive response from them—and yesterday’s announcement, which is in the newspapers today, is very welcome. We are confident that those measures can make an impact.
All the reports and data that we publish on our progress in delivering our world-leading childhood obesity plan will be open to scrutiny and, I hope, to further debates in this place. That will include Public Health England’s assessment of progress on sugar reduction, which I mentioned earlier and which will be published in the spring. The Obesity Policy Research Unit’s evaluation of that research will be published as individual projects are completed. We are deliberately publishing and being measured all the time, and we will use that to decide whether sufficient progress has been made and whether we need to go further.
I thank my right hon. Friends the Members for Bexleyheath and Crayford and for Old Bexley and Sidcup for their contributions, and I look forward to continuing the conversation in coming months.
Question put and agreed to.
Fire Safety and Cladding
(6 years, 9 months ago)
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Mr Gary Streeter (in the Chair)
Before I call Mr Reed to open our debate on this important matter, you can all see that there is a cast of thousands. This is a very important subject. When Mr Reed has sat down, I will let you know exactly what the time limits will be. You should plan for three or four minutes, and we will see how we go.
Mr Steve Reed (Croydon North) (Lab/Co-op)
I beg to move,
That this House has considered cladding and remedial fire safety work.
Thank you for calling me to speak, Mr Streeter. It is a pleasure to serve under your chairmanship. I am grateful so many colleagues have turned up to the debate, which emphasises how significant this issue is for so many of our constituents.
I first came to the issue because of a block called Citiscape in my constituency. A group of residents came to see me because the block has the same kind of cladding on it as Grenfell Tower: aluminium composite material—ACM—cladding with a polyethylene core. Polyethylene is a kind of compressed paraffin. At Grenfell, this cladding had the equivalent combustibility to 32,000 litres of petrol over the outside of the building, so it is understandable that Citiscape’s residents were so concerned.
The residents were told that it would cost them as leaseholders up to £31,000 per flat to remove the cladding—a bill many of them simply could not afford—and that if everybody did not pay, none of the work would start. One older resident had to cancel his move to a care home because the flat he was going to sell to pay for that move was unsellable because of the cladding on the building. These people are stuck in a building that they describe as a deathtrap, unable to move and unable to afford the cost of making their homes safe.
The industry estimates that some 800 blocks across the country have flammable cladding: 300 are council-owned and will eventually be made safe, although it is worrying that nine months after Grenfell only three have so far been completely re-clad, and around 500 blocks are privately owned, but the Government are doing nothing to help the people living in them.
John Howell (Henley) (Con)
The hon. Gentleman has made a good start to an important debate. Does he have ideas for what more could be done to encourage owners and landlords to improve or replace the cladding on the buildings that they own?
Mr Reed
I am grateful for that question; I intend to cover exactly that in my speech. I am going to argue that it is the Government’s responsibility to remove the cladding because their flawed regulatory system is what allowed it to go up in the first place.
When I challenge the Secretary of State on this, he justifies doing nothing by pointing the finger at freeholders, whom he claims have a moral responsibility to replace the cladding. The problem is that a moral responsibility is not the same as a legal responsibility. Freeholders, like leaseholders, developers, managing agents and insurers, all deny legal liability, and so do the Government. It could take years for the courts to resolve this and all that time people would be left living in fear. On average, there is one fire every month linked to this kind of cladding. Eventually, one will not be put out in time. Is the Minister really going to do nothing and risk a second Grenfell Tower fire?
Emma Dent Coad (Kensington) (Lab)
Decades of inaction led to the fire at Grenfell Tower and the loss of, now, 72 lives. All the fine words and sympathy in the world will not save lives. We need regulation now and a commitment of Government finance. What are we waiting for?
Mr Reed
I completely agree. I hope colleagues will forgive me if I restrict the number of interventions I take. There are so many people trying to get in on the debate that I would like to leave room for them if I can.
The Housing Minister told the House of Commons last month that he recognises no systemic problem with the fire safety regime. Let us look briefly at what he thinks is good enough. The Building Research Establishment’s fire testing system is so weak that manufacturers can design the testing rigs that test their own materials, and can then keep quiet about how many tests their materials fail before they eventually get a result they want. Developers, builders and buyers are never told, because the test results are treated as commercially confidential. Conflicts of interest are everywhere in this system. The BRE makes money by running tests on flammable materials—
Mr Reed
I agree, but I hope that we will hear from the Minister that things have changed.
The BRE makes up to £40,000 per test that it conducts for manufacturers. As it also drafts the guidance, as an organisation it has a financial interest in permitting the use of combustible materials that it then tests. The fire safety tests after Grenfell were carried out by Kingspan, which manufactured part of the materials on Grenfell in the first place. Some individuals from the BRE who drafted the Government’s flawed guidance are now advising Ministers that there is not a problem with the regulations that they drafted. What a surprise! It is even possible to bypass safety tests completely by paying somebody to carry out a desktop study, which does not involve doing any testing whatever. The privatised National House Building Council makes money by signing off flammable cladding that has never been tested, and because flammable materials—combustible materials—are cheaper to make, the industry has a perverse incentive to keep costs down by using combustible cladding.
No other country in the European Union permits a system this lax. Many EU countries do not permit the use of combustible cladding at all. The UK building industry has alerted the Government to materials authorised by the BRE that subsequently failed fire safety tests in other countries. The Government chose to do nothing. The Association of British Insurers, the Royal Institute of British Architects, the Association of Residential Managing Agents and other building industry groups all want flammable cladding banned.
Back in 2013, the coroner investigating the deadly Lakanal House fire in Southwark told the Government to amend fire safety guidance
“with particular regard to the spread of fire over the external envelope of a building”.
She said that BRE Approved Document B, which relates to fire safety, was unclear and needed to be reviewed. However, the Communities Secretary at the time, Eric Pickles, did not do that. Nor have a string of Housing Ministers—every one since then—taken any action, including the Prime Minister’s chief of staff, Gavin Barwell. The current Housing Minister is relatively new in post. He could take a different course. I hope he will, but it is a worrying start that a consultation is under way on further weakening these already weak fire safety regulations by extending the use of desktop studies instead of insisting on rigorous, independent fire safety tests every time.
The industry has repeatedly asked the Government for clear and unequivocal advice on how to deal with the various forms of flammable cladding being found on hundreds of buildings. I wrote to the Secretary of State in January asking for the same on the industry’s behalf. As of today, the Government have given no direction at all on how these cases are to be dealt with.
After Grenfell, the Government said that cladding with a polyethylene core, like that on Citiscape in my constituency, does not comply with the guidance. The Prime Minister repeated that claim, yet I have here a certificate signed by Sir Ken Knight, chair of the Government’s independent expert panel on fire safety and a director of the BRE Trust, that says that it does comply. Quite simply, the Government are all over the place. They do not have a clue what is going on. Every single loophole and error that led to Lakanal House and Grenfell Tower is still in place. This is no one else’s fault and no one else’s moral responsibility except the Government’s.
Thousands of frightened people living in blocks with flammable cladding need to hear from the Minister today that it will be taken down without delay. They do not need any more buck-passing. They cannot afford to spend years in the courts while the cladding remains on their buildings. The Government’s flawed fire safety regime created this mess; the Government must now clear it up. We cannot risk a second Grenfell Tower. The time for the Minister to act is now.
Mr Gary Streeter (in the Chair)
Thank you, Mr Reed. Colleagues can do the maths for themselves. I am going to impose a voluntary time limit of three minutes to start, but let us see how we get on.
Robert Neill (Bromley and Chislehurst) (Con)
It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate the hon. Member for Croydon North (Mr Reed) on securing this debate on an important issue that affects my constituents in Bromley.
Let me say something about the tone of the debate. It appears that there have been failings in relation to regulation, perhaps partly because technology has moved on and awareness is greater, but the building that I am concerned with is Northpoint on Sherman Road in Bromley, a block of 57 flats that were converted from offices 15 years ago, and to suggest that responsibility lies with any one party is inaccurate. When the flats were converted in 2003—under a Labour Government, as it happens—the cladding was considered acceptable according to what was known at the time. A subsequent inspection in November 2017 led the fire brigade to conclude that it was not acceptable, so an enforcement notice was served.
Whatever the history of the 57 flats, the residents are now placed in an impossible financial situation. The flats are on lease from a private freeholder, a commercial company. The leaseholders have spent some £80,000 on a two-man, 24-hour “waking watch” on the premises, and if the building has to be re-clad, the costs are likely to be in the hundreds of thousands. They are in a difficult situation, because the developer’s 10-year guarantee is out of date and the freeholder is a commercial company.
I understand the Secretary of State’s point about a moral duty, but as the hon. Member for Croydon North rightly said, a moral duty is not legally enforceable. In any event, the directors of a commercial company have a fiduciary duty to their shareholders, so they face a conflict. That creates a bind for the residents, who are forking out £6,000-odd a month for the ongoing costs of the waking watch. The normal sinking fund that they prudently set in place has long been exhausted. Their own funds will soon be exhausted, too, and the flats are unsaleable because no one will buy them in the circumstances. Many of the residents are young professionals; I received a letter from one constituent whose flat was the first home that she and her husband were able to buy. They have no chance of moving on—they are stuck with an asset that has turned into a liability.
I hope the Minister will come up with something more specific than what has been proposed. I understand that interest-free loans have been suggested, but a lot of these people are already suffering, so how will they repay the capital? I am glad that additional funding has been made available to the Leasehold Advisory Service, but again, that does not address the underlying situation. A failure of regulation is a failure of governance, whoever was in government at the time, so ultimately the Government need to stand behind those affected, rather than expecting the costs to be picked up by individuals who did nothing and had no control over what happened.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
It is a pleasure to see you in the Chair, Mr Streeter. I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this important debate.
I will be brief, Mr Streeter, as you have told me to be. I have two questions for the Minister. First, who should pay for the removal and replacement of unsafe cladding and for the interim remedial measures, such as fire marshals and temporary alarm systems? Secondly, when will we see progress on the review of Approved Document B, and can we have an update on the BS 8414 test?
On the first question, the Government are clear that they want landlords to pay, as they have repeatedly exhorted them to. In the social sector, with registered social landlords and local authorities, they have been largely successful, but in the private sector the opposite is true. Many freeholders and property management companies take the view opposite to the Government’s. As the Leasehold Knowledge Partnership has reported to my hon. Friend, it is leaseholders who are picking up the tab.
One thing is for sure: leaseholders have no blame in this. They did not design the buildings, choose the construction materials or draft, monitor or enforce the defective regulations, so why are they the victims? As the Minister has rightly said:
“We have been very clear that, morally, such costs should not be passed on to leaseholders.”—[Official Report, 5 February 2018; Vol. 635, c. 1237.]
However, that is exactly what is happening. Leaseholders are financially stretched to the full to meet mortgage payments for years ahead. They face huge bills, as we have heard. The Government need to do something for them now.
On Approved Document B, the all-party fire safety rescue group has sought a review of the statutory guidance and the building regulations. The last review was in 2006. Historically, reviews were carried out every five years, or at least every 10, but it has now been 12 years. New materials and construction methods mean new risks.
The Government must do more. The interim report of the Dame Judith Hackitt review called for a complete cultural overhaul. Dame Judith’s work has been widely praised and much has gone on behind the scenes, but we have heard nothing from the Government on simple matters such as the BS 8414 test or the ban that the Royal Institute of British Architects, the Association of British Insurers and the Fire Protection Association have called for on using combustible materials on the outside of buildings.
In conclusion, I would welcome the Minister’s comments on the BS 8414 test, on the review of Approved Document B and the building regulations, and on how the Government intend to protect leaseholders, who are in such a vulnerable position.
Lucy Powell (Manchester Central) (Lab/Co-op)
I, too, will keep my comments brief. I welcome this debate and agree with the contributions of other hon. Members. I particularly support the emphasis on leaseholders of private blocks, whom Inside Housing described this week as being stuck in the middle of a battle between freeholders, the insurance industry, developers and lawyers about who will keep their blocks safe.
There are 283 high-rise residential blocks in Manchester City Council’s area, of which 223 are in private ownership. The social sector and the council are to be commended for their quick response to the need to remove and replace cladding, but the response in the private sector has been woefully poor. It has been very hard to get hold of many of the owners of the blocks, and it has been hard to get answers from managing agents about what they will do. Leaseholders and homeowners have been left to bear the brunt.
I want to highlight two specific cases in my constituency. The cladding on the Chips building has been deemed non-fire-retardant. That was known at the time, but it was still signed off, and leaseholders are now being charged well over £5,000 each to put it right. The cladding on the Little Alex block was within regulations at the time, but following an inspection it has now been deemed to fall outside them. A prohibition notice has been issued; again, it falls on leaseholders to meet the costs, which will be well in excess of £175,000. That is just unacceptable. It is not the leaseholders’ fault, yet they are footing the bill.
Who foots the bill is one issue, but I really hope the Minister recognises that this is not just about money. Leaseholders have no right of recourse. Who are they supposed to go to? The Government say that developers and owners have a moral duty to take action, but there is no body to which leaseholders can turn for recourse. Bodies such as first-tier tribunals are frankly toothless; they do not follow through and are very bureaucratic.
Hundreds of people in Manchester and elsewhere are now stuck between a rock and a hard place. As the hon. Member for Bromley and Chislehurst (Robert Neill) rightly said, this is a failure of governance and of regulation. It is our job in Parliament, and the Government’s job, to put that right for the people who are now stuck in unsafe buildings that they are unable to sell.
Sir Peter Bottomley (Worthing West) (Con)
I hope that hon. Members will accept that I may not be able to stay until the end of the debate: I am on an extended convalescence from a bad leg. I welcome the initiative of the right hon. Member for Tottenham (Mr Lammy) to address low standards—a point also raised by the hon. Member for Croydon North (Mr Reed).
I have one or two points to make to the Government. First, the cost of remedy, especially for the leaseholders I am concerned with, in addition to everyone else affected, could be reduced if the Government waived the VAT on the cost of remedial works. That would reduce a £120,000 charge to £100,000, which would be worth while for all concerned. The second point is that leaseholders, apparently, do not have a right to get in touch with anybody legally about these issues; they are not party to the insurance or to the building and they are not written in anywhere. I ask the Government to find some way of deeming that leaseholders do have an interest and retrospectively have had an interest in the people who put up these blocks and the people who run them.
I have a third suggestion; many of my suggestions come from the Leasehold Knowledge Partnership, which has already been mentioned by the hon. Member for Poplar and Limehouse (Jim Fitzpatrick). It is that every freeholder of every block affected should declare who they are and how they can be contacted. There must be no more hiding behind offshore entities. The managing agents should make sure they declare who these people are. Let us have them in front of Select Committees talking about who they are and how they will respond to this issue.
We accept that there will be many legal disputes. My suggestion is that the Government should get all the parties together and try to get a test case in front of the Supreme Court as quickly as possible, preferably within the next six months, to determine who has what liabilities. Once that is settled, it will be easy to see the people who are left out.
Whether the developments are the converted office blocks mentioned by my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) or purpose-built residential blocks, we ought to be able to recognise an analogy with cars. Even if a car passed the tests for it to be sold new, if a defect turns up the car manufacturer still has the responsibility to put it right. Martin Boyd of the Leasehold Knowledge Partnership has made that point very clearly—I make it, too, on behalf of the all-party group on leasehold reform.
The leaseholders are particularly stuck. In social housing, we know that the tenants will not have to pay. We also know that by law a leaseholder is a tenant. I think we should put leaseholders in the same situation as social housing tenants, otherwise we will freeze too much of our housing.
I am grateful to have had the chance to make some of these points at length; one could make them at greater length. Nevertheless, the hon. Member for Croydon North has done a favour to the House and to the country in securing this debate, and I hope that the Government will be able to move forward today and in days to come.
Andy Slaughter (Hammersmith) (Lab)
Someone living in a high-rise flat in Hammersmith or Shepherd’s Bush looks at Grenfell Tower every day; a year before the Grenfell Tower fire, they will also have seen the very serious tower block fire at Shepherd’s Court on Shepherd’s Bush Green.
There has been a response from the local authority and from public landlords to what has happened. Shepherd’s Bush Housing Group told me today that it has spent almost £1 million so far on remedial works post-Grenfell. It will not charge its leaseholders for those works, but ultimately the money for them will come from its tenants. The Government should be responsible for funding this work, but they are showing a lack of leadership and of responsibility in this regard.
Let me be specific and give the example of two blocks, both of which were built in the last 10 years. One is owned by Shepherd’s Bush Housing Group and is called Kelway House. After initially failing the Buildings Research Establishment test, it passed it. However, residents do not know whether those tests are robust or not and they are still concerned about them.
The second block is Cranston Court in White City, which is owned by Notting Hill Housing, and it failed those tests. Notting Hill Housing is removing the cladding on Cranston Court and it has acted responsibly in doing so. It is putting up temporary cladding, so that it can remove fire wardens, but it does not know what to do next. It has now resolved that it will put up non-combustible solid aluminium panels. However, that is because there is no guidance; it is taking what it hopes is the safest option.
There are some simple remedies. However, like my hon. Friend the Member for Croydon North (Mr Reed), who secured this debate, I do not know why we allow combustible or limited combustibility cladding and insulation to be used any more. It is not used in other European countries, as has been said. That is why I am glad to see that public landlords have taken the advice not to use such cladding and instead are using mineral wool or other forms of cladding or insulation that are available.
However, I am afraid that these issues have to be addressed, and addressed now, by the Government. As we have seen in the trade press recently, the idea that desktop studies will be extended, and will become the norm rather than just being used occasionally, is horrifying.
Also, regarding the conflicts of interest at the BRE and the inadequacy of Approved Document B, some of us have known about them for many years and we have all known about them since Grenfell. As I understand it, although the Hackitt review is good as far as it goes, it does not look as if the final report—let alone the interim one—will give us clear guidance on these issues. It will say that the culture is wrong, but what it will not do is tell landlords—responsible landlords—what they should do. Has that review of Approved Document B got under way and, if it has, when is it due to report and when can we actually tell our landlords what should happen?
I commend the all-party group on fire safety and rescue for the work that it has done on this issue. I have attended a number of seminars on it. However, the Government have to act on it. It cannot be left to the industry alone or to us alone. We must have a solution.
Bill Wiggin (North Herefordshire) (Con)
I will speak very briefly, because a great many lives were lost and that always makes debates run hot. Also, given that there is an important theme to this debate about who is going to pay for works, I have no wish to divert the Chamber’s attention from that.
However, I wish to follow the hon. Member for Hammersmith (Andy Slaughter), who has just made comments about insulation, because BS 8414 is a tough test. It also failed cladding that was non-combustible. The reason for adding this observation to the debate is that the situation is not as clear cut as we would all like it to be. This is an extremely difficult subject.
For that matter, the hon. Member for Croydon North (Mr Reed), who opened the debate, said that the cladding on Grenfell Tower was made by Kingspan. Kingspan has a factory in my constituency and that cladding was not made by Kingspan—it was made by a company called Reynobond and the majority of the insulation in Grenfell was made by a company called Celotex. I feel that it is helpful, given that all the experts are here, just to put a few of those facts on the record.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this very important debate.
I will highlight the plight of leaseholders in Heysmoor Heights, Liverpool—it is a 16-storey building. Those leaseholders are now being presented with bills for £18,000 each to replace dangerous cladding and to provide fire safety measures that have been deemed essential following the Grenfell Tower disaster. I commend the very swift action taken by Merseyside fire and rescue service; it acted very quickly. The dangerous cladding has now been removed from Heysmoor Heights and alternative covering is now in the process of being put up. However, as I say, the leaseholders are facing these bills.
I wrote to the Secretary of State for Housing, Communities and Local Government about this issue and on 11 December he replied. He stated that, in such situations:
“I urged those with responsibility to follow the lead from the social sector and private companies already doing the right thing, and not attempt to pass on costs to leaseholders.”
That is simply not happening. At Heysmoor Heights, leaseholders of modest means are being asked to find £18,000 each, and the fact that payment plans are being discussed does not make any difference to that essential figure. That is a bill for £18,000 to keep people safe in a situation that they could not possibly have anticipated.
Sir Peter Bottomley
Is that situation not an illustration of the terrible leaseholder landlordism, which treats leaseholders as tenants when it is convenient for the landlord and as property owners when it is not?
Mrs Ellman
The hon. Gentleman makes an important point. I call on the Minister to honour the commitment that the Secretary of State made in his letter to me. This issue is about leaseholders. They face paying bills to keep them safe and they could not possibly have anticipated this situation. I call on the Minister to honour what has been said. Leaseholders should not face these bills.
Mr David Lammy (Tottenham) (Lab)
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this debate. I would also like to show my appreciation of all the work that my hon. Friend the Member for Kensington (Emma Dent Coad) has done since this terrible, terrible fire, which brings us here this afternoon.
The fire was a moment when I think that most of us across the House thought there would be a cross-party response showing huge urgency. We should keep in mind the 72 people who lost their lives and also keep in mind two very real issues. The first is genuine fear. There is very likely no one in this Chamber this afternoon who lives in a council tower block estate or who is a leaseholder of a former council building that they have bought. So there will be no one really in the Chamber who can speak to that issue, other than perhaps those of us who have grown up in council homes.
The second issue is trust. The Secretary of State said on 3 July last year that the Government would take every precaution in relation to this cladding. The Government said also on 26 June that they would put in place support for councils that could not pay for remedial works. As has been discussed, indifference to the context is now such that we might be moving to a situation in which desktop studies are done. Let us not dress that up in fancy language. It means that someone can sit in their office and determine a building’s fire regulations without going out and getting into the detail. That is extraordinary, in light of the loss of life. None of us would have thought it possible that nine months later we would even be debating that possibility.
What has happened in relation to the dignity of those souls and lives lost? What has happened in relation to the successive reviews of and inquiries into fire regulations in this country? Why are we going to dismiss what came out of the Hackitt review? How do we breach that trust? How do we meet the fear of those who are in these buildings at this time? How do we keep it in our minds that we are talking about mothers on the 20th or 22nd floor who are worried about how they will get their children down and out of the building? We are talking about some councils that had a policy of putting old-age pensioners in those buildings. How do the Government live up to those expectations? That is what we wait to hear from the Minister.
Mr Gary Streeter (in the Chair)
I call Marsha De Cordova. Take your time. People have been so very good that we have an extra couple of minutes, which the hon. Lady may take if she wishes.
Marsha De Cordova (Battersea) (Lab)
Thank you, Mr Streeter. It is a pleasure to serve under your chairmanship.
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this important and timely debate. I have heard from many of my constituents in Battersea, including leaseholders, who are concerned about the fire safety of their homes, and the answer to those concerns is clearly stronger regulation and better enforcement by the Government. Many leaseholders are discovering not only that their buildings do not meet fire safety standards but that they will incur eye-watering bills to remedy the failings. It cannot be right for the Government to allow leaseholders to pay for failures that are not of their making.
This is not the first time I have raised the issue. In December last year, I asked what plans the Government had to ensure that private sector leaseholders were not held to ransom by freeholders over fire safety repairs. The Minister for Housing responded by talking about increased funding for the Leasehold Advisory Service, and about how the Secretary of State would “encourage” private sector freeholders not to pass on their costs, but gentle encouragement has achieved nothing, and that is a potential catastrophe for the leaseholders of the blocks. Constituents have told me that they felt physically sick when they heard that they might have to meet the costs.
In Battersea, the leaseholders of Sesame Apartments—a block completed only in 2014—face the prospect of being asked to pay an eye-watering £40,000 per flat to ensure that their block meets fire safety standards, news that came after a fire there last year revealed that fire safety standards were not being met, as did subsequent testing of the cladding. That cladding must now be replaced; a fire alarm system is due to be installed and a round-the-clock warden has been introduced. However, the block’s safety should never have been in doubt, and the cost of remedying the failures should be borne not by the leaseholders but by those responsible for them.
The London Borough of Wandsworth is seeking to retrofit sprinklers in all blocks of 10 storeys or higher, which is a good thing, but they wish to pass on the costs to the leaseholders and have sought guidance on how to proceed from the first-tier tribunal. While the legal questions remain unresolved, people are still living in unsafe buildings, and every day that goes by there is the risk of a disaster. It is only right that the Government do everything they can to ensure that repairs are carried out as soon as possible, but we need more than Government loans that leave leaseholders footing the bill. That is why, for the second time in four months, I ask the Minister what concrete action the Government are taking to ensure that homes are safe and that families and leaseholders are not held to ransom. The Government cannot go on simply applying gentle pressure on freeholders and talking about learning the lessons of Grenfell. Nearly a year has passed. Residents deserve to live in safe buildings and we need to find a way of protecting leaseholders from being hit by life-shattering bills. The Government need to accept that they are responsible and that they must take action.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
It is a pleasure to serve under your chairmanship again, Mr Streeter. I thank my hon. Friend the Member for Croydon North (Mr Reed) for securing the debate.
Last June, the nation was horrified to see images of smoke billowing out from Grenfell Tower, with residents trapped inside. It felt as though what was a national tragedy would be met by a national response, to ensure that such circumstances would never happen again, in London, or in Devon. In Mount Wise, in Devonport in my constituency, we have three tower blocks with combustible cladding, housing both leaseholders and social renters and, eight months on, too little has been done by the Government to prevent a similar tragedy from unfolding.
The grime artist Stormzy made his views clear at last month’s Brits. I think he spoke for most of us here when he said, “Theresa May, where’s the money for Grenfell?” I have a similar question for the Minister. Where is the money that was promised to support local authorities and housing associations in the removal of combustible cladding and the re-cladding of tower blocks in Plymouth? The most outrageous thing about this injustice is that there is money to pay for it. We know that, because last week the Secretary of State for Housing, Communities and Local Government gave £1.1 billion of the money in his budget that could have been spent on re-cladding back to the Treasury, as reported by HuffPost on 4 March. His decision was based on the idea that the money was no longer required. His memorandum for the 2017-18 financial year stated:
“The Department has surrendered £817 million of budget that is no longer required in 2017/18”.
I think that residents of Lynher House, Tavy House and Tamar House in Mount Wise would say that the money was urgently required and that it should have been spent on re-cladding tower blocks. I think that hon. Members right across the House will agree that the money was required and that it could have been used by Ministers.
Small housing associations, such as Plymouth Community Homes, have done a fantastic job of securing and making safe as much of the tower blocks as they can—we have 60-minute fire doors, sprinklers being installed and 24-hour fire marshals—but Plymouth cannot afford the £13 million to £20 million it will cost to re-clad the three tower blocks. Will the Minister confirm that his Department returned that money to the Treasury, and will he ask for the money back, so that it can be spent on re-cladding tower blocks, not only in Plymouth but right across the country, to ensure that people can live in safe homes?
In her statement on 22 June 2017, the Prime Minister said:
“We cannot and will not ask people to live in unsafe homes.”—[Official Report, 22 June 2017; Vol. 626, c. 169.]
However, that is precisely what will happen if money is not spent to take action. There is an opportunity here, as was mentioned earlier, for this to be a cross-party moment, with all parties uniting to ensure that everyone lives in a safe home. That opportunity has not yet been taken by politicians, but it is being taken by people in communities who are fighting to secure their homes. Minister, please get that money back and let us spend it on cladding.
Jim Shannon (Strangford) (DUP)
I congratulate the hon. Member for Croydon North (Mr Reed) on securing the debate and on laying out the scene so very well, and also right hon. and hon. Members who have contributed so passionately on an issue that they have lived.
I am chair of the all-party parliamentary group for healthy homes and buildings and the issue is of great personal interest. Moreover, the tragedy of Grenfell continues to resonate with me and with all Members of the House, and some of them have said that several months later they are wondering just what is going on. That is the question. This is one of those times when actions speak louder than words, and what would be better than to see the actions of people who are in a position to change things? That is why I am sincerely grateful that the hon. Member for Croydon North has brought the debate to Westminster Hall.
Most of us typically live and spend 90% of our time inside buildings of one sort or another, so our homes and buildings should first and foremost be designed for people and have the safety of residents at their heart. I am all for beauty and aesthetics, but as the good book so aptly puts it, man looks on the outward appearance but God looks at the heart. The outside might be the first thing that people see, but the important thing is what the structure is below the outer core, and we are here today to see what is happening down below.
The dangers of constructing substandard buildings were tragically demonstrated in Grenfell last year. The fact that the aesthetics that were put in place to pretty the building up made the danger much worse makes it clear that we must have stricter controls in place to ensure that the frame and design is not compromised or scrimped on for any reason. Although we understand that the aim of fitting exterior cladding was to increase the lifespan of the tower blocks and improve their thermal efficiency, it also provides a protective outer skin to protect them from the elements. However, the results of that have been horrendous—that is a fact—and we must find another way of elongating the lifespan of the building and better insulation.
Such cladding appears to have health ramifications, with numerous examples of residents experiencing the stress and anxiety of living in dangerous accommodation —some Members have referred to that—and facing the financial burden that that has the potential to impose on them. All those issues, aside from the cladding, need to be taken on board. A key recommendation by the all-party group for healthy homes and buildings—I look to the Minister for his response, please—was that the Government commit to making housing and building renovation a central infrastructure priority and develop plans for retrofitting the current housing stock that take a holistic approach to maximising health and wellbeing. Events such as those that took place on 14 June demonstrate the need for the UK Government to get behind and back such a scheme.
In Northern Ireland, an independent report suggested that social housing, or local housing authorities as they are called here, must consider installing sprinkler systems in tower blocks. Again, I look to the Minister. The report concluded that the housing body’s four Belfast tower blocks that have cladding are safe and comply with regulations, but that there were some contraventions that hamper smoke extraction and ventilation. Automatic fire suppression systems such as sprinklers are mandatory for high-rise residential buildings in Scotland and Wales, but not in England and Northern Ireland. That must change. I look to Northern Ireland to make the changes as much as I look to England to make the same changes.
A terrible tragedy occurred, and I do not want to see anything similar on the shores of Northern Ireland. The report carried out by the University of Ulster on social housing also noted November’s blaze at the 14-storey Coolmoyne House in Dunmurry, outside Belfast, where four people were treated by paramedics, and indicates that communications with tower block residents must be improved. I look to the Minister to make sure that that happens.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this important debate. Like him, I have in my constituency of Slough a residential building with aluminium cladding material. The building is called Nova House, a privately-owned seven-storey block of 68 flats in the town centre. Post the Grenfell horror, in the summer of 2017, that aluminium composite material cladding failed two of the tests conducted at the BRE on behalf of the Department for Communities and Local Government. In August last year, the Secretary of State wrote to all local authority chief executives about residential tower blocks with ACM cladding, telling them to take active steps and stating:
“If private sector building owners do not comply with your requests, I will look at what further action can be taken to support you in carrying out your responsibilities.”
To protect the safety of residents, Slough Borough Council has spent half a million pounds in making the building safe and funding a qualified and staffed fire vehicle at the building 24/7. The council’s work has avoided the need for the evacuation of the building. Further, Slough Borough Council developed an ambitious plan to take ownership of the block’s freeholding company, which will allow it to ensure the cladding is removed quickly and to carry out other critical safety work without delay.
Such a move by a local authority is without precedent, and I am sure the Minister will join me in commending Slough Borough Council for its commitment to the safety of constituents. The council has not hesitated to act. Now I want to see the support promised by the Secretary of State. That should include contributing towards the costs incurred in protecting the safety of residents, rather than those extraordinary costs falling on the local council tax payer.
What would have assisted the council is the disclosure of documents from the building control inspector. However, approved inspectors are not required to provide anyone other than their client with copies of approvals or the reasoning behind them. What happens where a client no longer exists? Such documents might never be made available. Information in those documents might be critical for safety. Local authorities and other agencies should surely have sight of everything they need to protect residents. Will the Minister therefore introduce measures to ensure that critical safety information in relation to privately owned buildings is shared with local authorities carrying out their responsibilities?
In the meantime, what support and advice will the Minister give to local authorities when they need to secure vital documents? Will the Department write to building control inspectors and stress the importance of liaising with local authorities? In addition to the cladding, survey work has established that there are other serious deficiencies outside Nova House, calling into question whether it met building regulations when it was converted.
The Minister knows that wider concerns about the current system of building control have been raised by the Local Government Association, which might be a hindrance to effective inspection. The LGA warned that pressure to lower costs can lower standards and lead to fewer, less rigorous inspections. Will the Minister now commit to a review of the system of approved inspectors for building control checks, including the control and supervision of them, as well as the quality of their work?
Finally, building and fire safety are crucial for public safety and go to the heart of the purpose of Government. An increase in the effectiveness and quality of inspection regimes is crucial. Again, I commend Slough Borough Council for its proactive and innovative stance. Now let us see the support promised by the Secretary of State.
Karen Lee (Lincoln) (Lab)
I thank my hon. Friend the Member for Croydon North (Mr Reed) for securing this important debate. I will be brief. Lots of people have said things that I agree with, so I will not repeat them.
The cladding situation is deeply concerning. Remediation work is very limited, and where it is occurring it is failing the tenants involved. The Grenfell Tower fire happened on 14 June. Nearly nine months later, if anyone is listening, of the 314 buildings installed with ACM cladding that we know of, only 13 meet building regulations guidance. That presents fire hazards in 301 buildings more than 18 metres high. As Labour’s shadow fire Minister, I have spoken with the Fire Brigades Union and it has advised me that had that tragedy occurred outside central London, it might have been much worse owing to a lack of resources. I hope the Minister is listening to me, because that paints a worrying picture.
For all the sympathetic noises, the Government’s inaction is clear. The tragic fire at Grenfell has not pushed the Department into action. I find the pace of the Government’s action extremely questionable, as do other people. At the heart of the matter is the Government’s complete lack of direction. Ensuring the public’s safety would undermine their austerity project and be averse to their cuts in every other sector. I urge movement on this issue as it is their moral duty to demonstrate clear leadership and ensure the matter is resolved in the interests of tenants’ safety.
I went to Grenfell last June and laid flowers. I went on the silent vigil last month. The last thing that people see when they get to the end of the march is the tower —a truly shocking and haunting sight. For the sake of those who died in the fire and for the people left in the area who have to get up every morning and look at that tower, it is the Government’s duty to act now.
Dr Matthew Offord (Hendon) (Con)
We all certainly felt the terrible tragedy at Grenfell. I remember waking up, watching the television and seeing the appalling conditions. I have not been to visit the tower, but I have seen it from a distance and it is an appalling sight. I certainly agree with the hon. Member for Lincoln (Karen Lee) about that.
Many Members have rightly spoken about local authority properties, but I want to raise the issue of leaseholders. In my constituency, just over two years ago, Premier House was converted from commercial to residential with 121 flats. We all know what it is like to raise the money for a mortgage and stamp duty, and in the first few months or years money is often quite tight, so I was shocked to find that at the beginning of January this year the people who had just moved into those properties were told that the service charge in the block had doubled from £2,200 a year to £4,200 a year because the cladding has to be removed, just two years after the property was converted.
In addition, the managing company is also hiring four fire marshals to patrol that building constantly. That is causing my constituents huge concern. Many are self-employed or have only just got a mortgage. Some are one-parent families and are struggling to keep up with their payments. A lot of them have formed an action group and want to take the matter to a first-tier tribunal. The problem is that, if the tribunal rules in favour of the freeholder, residents will be forced to pursue their solicitors and surveyors on the question of what the problem was with the building. Ultimately, if they refuse to pay the service charge or fall into any arrears, the freeholder can take the property back.
I sympathise with those in local authority housing, but those in the private sector, equally, face a difficult situation, which I want to bring to the Minister’s attention.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on bringing the debate to the House, and on all the work he has done in his constituency. His constituents are lucky to have him fighting their corner; I am sure they know that.
I will mention once again Stormzy’s intervention at this year’s Brit Awards, which secured headlines not just because of his profile, but because he articulated how the British people feel about many of the issues that have been discussed today and how, nine months on, as many hon. Members have said, many questions remain unanswered and the victims of Grenfell have not received justice.
I want to talk about a case study in the Borough of Camden in my constituency. It relates to the human experience at the heart of the cladding question and the enormous financial burden being placed on local authorities in dealing with the matter. Many hon. Members will know that Camden Council took the urgent decision to evacuate more than 3,000 people from the Chalcots estate following tests on cladding. The tragedy at Grenfell prompted the tests, but it was the London fire brigade that ordered immediate evacuations following an assessment. The evacuation was carried out throughout the night, and has caused serious distress to residents. The upheaval of decamping to a hotel for several weeks was difficult enough, but cladding removal during the bitter cold of winter was even more difficult. Many residents’ heating systems are not strong enough to heat their homes, now that they are so exposed.
I raise those experiences to underline the need for action on building regulations, but also to stress the trauma that my constituents on the estate have experienced owing to cladding replacement. They live with cold and with seemingly endless construction. Compensation is missing, and there is a 24-hour security presence months after buildings were declared fit for purpose. That is not a normal way to live, but it has been the reality facing nearly 3,000 of my constituents since July 2017. I am speaking on their behalf today.
Replacement is a protracted process. According to a recent Camden housing scrutiny report, the new cladding will not be fully fitted across the estates until August next year, so it is not hard to understand why councils are begging for the kind of political will that would confront contractors and create a clearer set of standards on fire safety practices.
Good financial management means that Camden has taken on the costs without cutting frontline services. I commend its decision to stop payments to the company that put up the flammable cladding on the Chalcots and endangered residents’ lives. Camden hopes to spend the millions of pounds saved from abandoning the previous contract on safer cladding. The operation has cost more than £50 million and breaks down as £12 million for evacuation and safety management, including fire marshals; £9 million on repairs, including emergency repairs and doors; £10 million on cladding removal; and £22 million on cladding replacement. However, as my local newspaper, the Camden New Journal, put it, the council should not have had to do that. Had the Government kept their promise after the inferno at Grenfell, the council would not have had to drain its reserves and foot the bill.
At the heart of the debate is the question of how we make our constituents feel safe in their own homes. Replacing combustible cladding is an obvious and immediate place to start, but so too is addressing the reduced resources of the emergency services and local authorities. In the days following the Grenfell disaster, many promises were made about rehousing vulnerable residents and recouping the cost of new cladding, but that has not been the experience in my constituency. It is possible that the promise made by the Government has been forgotten, but proactive campaigners, MPs and councillors will not let it drop.
Mr Gary Streeter (in the Chair)
The Scottish National party spokesman has graciously given us a few extra minutes, for which I am grateful.
Sarah Jones (Croydon Central) (Lab)
I congratulate my hon. Friend and neighbour the Member for Croydon North (Mr Reed) on his speech and on securing the debate. I welcome the contributions that have been made so far. Many thousands of residents face huge legal fees and potentially thousands of pounds of costs to remove ACM cladding from their buildings. Freeholders, developers and insurers will not take responsibility, nor will the Government. We are here today because the buck stops with the Government to sort the mess out.
In my constituency, there is a block of flats built nine years ago with ACM cladding. At least, we are as sure of that as we can be; residents were told that one set of cladding was ACM, and then that another set was ACM. They have been confused and let down from the start. The cladding needs to be replaced. There is a 24-hour waking watch, but residents are understandably nervous and of course anyone who wants to sell their flat clearly has no hope of doing that. The freeholder—Wallace Estates —has washed its hands of responsibility. The director told me in a letter that
“it is the case that the building is now deemed to be unsafe because of a belated recognition by those in authority that the standards governing building safety at the time of the development were inadequate”
and that those with
“responsibility for setting the standards should be liable”.
The developers, Durkin, have also washed their hands. I wrote to them but have not received a reply. They rang my office—I am not sure, but perhaps they were being careful not to put anything in writing—and said they had not done anything wrong. The insurers, NHBC, are considering the claim, but it has been with them for months and nothing has been forthcoming.
The Minister, in a letter to me today, has also washed his hands of responsibility, saying:
“I am clear that the morally right thing for building owners to do is take responsibility for meeting the costs of remediation and interim safety measures”.
So my constituents, living in an unsafe block, are left to sit in it and pay the bill for the cladding removal and replacement. They have already been asked to pay thousands of pounds and have been told that they will face a bill for thousands more. They are having to club together to pay legal bills. They have all the tea and sympathy in the world from everybody, but they still have to pay. The system has failed, and when that happens it must be the responsibility of the Government to step in and provide clarity or resources, or both, to resolve the issue.
There are big policy questions: how can Government let the legal system take over when their own testing process has been shown to be insufficient? If leaseholders are found liable, are the Government really content that residents should be made homeless—something the LGA has warned about? What about desktop studies? They have already been mentioned, so I will not go into detail.
I want briefly to suggest some things that the Minister might this afternoon commit to doing. Will he meet my constituents to learn about the pressures they face? Will he start a proper dialogue with freeholders? I thank him for his response to my letter and his agreement to arrange a phone call with Wallace Estates. I agree with my hon. Friend the Member for Croydon North that the Government should take the lead, but if they feel that the moral responsibility sits with landlords, they have to act to ensure that action is taken on behalf of residents.
The Government should sit down with insurers to find out what is going on. There are many claims in play, and that is leading to months of uncertainty and legal wrangling, which does not help anyone.
The Government should look at ownership rules for property. As the hon. Member for Worthing West (Sir Peter Bottomley) said, there should be no more hiding behind offshore entities. One of the problems that we have had is working out who owns buildings and freeholds. There are shell companies and offshore companies that are impenetrable. Details cannot be obtained from the website. It is complicated to get through to them.
The Prime Minister yesterday addressed the issue of land banking, opening up the possibility that developers who sit on land might face restrictions in getting planning permissions. Will the Minister take a similar approach to developers, stopping planning permission being given to them if they sit on their hands and leave dangerous cladding in place?
The buck stops with the Government. If they believe that other people are responsible, they have to make sure action is taken. My constituents, who are the least able to pay and the least to blame, are in the firing line. The Minister must surely accept that that is not fair.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
I congratulate my hon. Friend the Member for Croydon North (Mr Reed) on securing this timely debate and on his wider efforts to co-ordinate Members who are concerned that the Government should step up and do more. Two hundred and sixty-four days have now passed since we watched flames engulf the Grenfell tower block in north Kensington, yet on private freehold developments across the country hundreds of thousands of residents still live with the knowledge that their homes are covered in lethal material. New Capital Quay, a vast 980-home development in my constituency, is only one of hundreds of such cases, although it is perhaps the highest-profile.
Cladding on the site failed tests carried out by the Department in July last year, and eight months on that cladding and insulation remain in place with no timescale for their removal and replacement, and with an inadequate and expensive waking watch fire safety patrol still in place. Residents are left in limbo while the freeholder, Galliard Homes, and the National House Building Council tussle over whether there was a breach of building regulations at the time of construction, and about who is liable—this tussle might be settled out of court, but it might ultimately be resolved only through lengthy litigation.
Residents stuck in the middle of that messy squabble are terrified at the thought that their families are not safe, and leaseholders are anxious that they will be hit by the full costs of the work. At a public meeting last week, one elderly resident told me that she is resigned to the fact that she will not make it out of the building if there is a fire, even with the waking watch in place.
What has been the Government’s position throughout? It has amounted to little more than a muffled and infrequent plea to the private companies involved not to pass on costs to leaseholders. No attempt has been made to ensure that the dangerous cladding is removed as a matter of urgency. In many ways, however, that is no surprise because the Government are deeply compromised on fire safety. In 2013, they failed to act on recommendations made after the 2009 Lakanal House disaster, and they chose not to rewrite procedural guidance set out in Approved Document B. They did nothing to prevent the installation of combustible polyethylene ACM cladding of the type found on New Capital Quay.
Presumably on the basis of advice from the BRE Group, in 2006 the Government opened the door to combustible insulation material such as the K15 Kingspan insulation found on New Capital Quay. That was approved as compliant through testing, when previously it had been impossible to meet the guidance by that route.
The Building Control Alliance determined to introduce a new route to compliance through desktop studies, but as the market became increasingly competitive its members began to approve cladding without even the need for such a desktop study. It is hard to believe that the Government were not aware that that was taking place, yet they failed to amend Approved Document B to respond to it.
If one steps back from all the legal wrangling between private companies about cladding and insulation on private freehold developments, one notes the flawed nature of the building regulations regime, the inadequacy of procedural guidance within that regime, and the passive response of Government to the behaviour of the combustibles industry since 2014. That explains why dangerous, combustible cladding and insulation of the kind that surrounds the homes of my constituents were signed off as compliant.
Let me be clear: the fault does not lie only with Conservative Governments since 2010, because successive Governments have failed to ensure that the building regulation regime was fit for purpose. However, the Government have a duty to act—if not a legal duty, then certainly a moral one—and they can do so speedily in a way that will make a big difference to my constituents by issuing clear, prescriptive advice about the final date by which dangerous combustible cladding must be removed from developments such as New Capital Quay. That is the least my constituents, and others across the country in a similar situation, deserve.
Mr Gary Streeter (in the Chair)
I thank all hon. Members for collaborating on timing.
Martyn Day (Linlithgow and East Falkirk) (SNP)
It is a pleasure to serve under your chairmanship, Mr Streeter, in this well-attended and well-informed debate. I am grateful to the hon. Member for Croydon North (Mr Reed) for securing it, and for his clear and detailed summary of the situation. The statistic that he mentioned of one fire every month is alarming, and it certainly focuses the mind.
It is essential that everyone has a safe, warm and affordable home, but following the tragedy at Grenfell last year, many uncertainties remain about how safe properties throughout the country actually are. Building and fire safety are critical components of public safety, not just in residential flats but in hotels, student accommodation and even hospitals—indeed, anywhere someone may be staying. It is concerning that so far only a fraction of that cladding known to be unsafe has been replaced throughout the country, and questions still remain about which materials are safe to use. The issue of flammable or combustible cladding must be clarified and, in my opinion, its use should be prohibited.
Further questions about who should pay—this is particularly an issue in privately owned blocks, where costs could be passed on to leaseholders—are alarming. That is not so much an issue in Scotland because the Abolition of Feudal Tenure etc (Scotland) Act 2000 and the Tenements (Scotland) Act 2004 effectively brought the last vestiges of leasehold to an end. However, the problem of owners being financially trapped in buildings affected by these issues does apply, and that has been further complicated by changes over the years to building regulations, and by responsible reconsiderations about the retrospective materials used. What may have been deemed acceptable in the past might not be now.
I represent a constituency that has no high-rise domestic buildings. Nevertheless, following the Grenfell tragedy there was considerable anxiety among many constituents living in lower level multi-story flatted accommodation. I am grateful to both local authorities in my area—Falkirk and West Lothian—for reviewing the fire safety arrangements after Grenfell, and for confirming that all council properties have appropriate fire safety arrangements in place, including both annual and five-yearly fire safety assessments. There are issues in other parts of Scotland. For example, Glasgow City Council has identified two buildings where PE ACM has been used.
Carol Monaghan (Glasgow North West) (SNP)
Some Glasgow Harbour flats in my constituency have that ACM cladding. The residents have no recourse with builders or insurance companies, and they have to pay for fire wardens. They now face enormous bills for replacement of the cladding. With no one claiming responsibility, does my hon. Friend agree that residents should be receiving financial support for this remedial building work?
Martyn Day
I certainly agree with my hon. Friend—the issue of who pays has been raised yet again.
In Scotland, since 2005 building regulations have required all new build high-rise domestic buildings to be fitted with sprinklers. In January, Labour MSP David Stewart proposed a Member’s Bill that aims to make the installation of sprinklers mandatory for all new build social housing. The consultation document also considers the retrofit of sprinklers to social high-rise blocks. In September last year the BBC broadcast a programme that stated how out of 15 fatalities and 480 injuries in high-rise fires in Scotland since 2009, only one of those casualties occurred in a flat fitted with a sprinkler system. That is a significant statistic, although sprinklers are only one of a number of fire safety measures that may or may not be installed in any particular building.
The Scottish Fire and Rescue Service has commissioned research into a targeted approach to fire safety, based on a detailed analysis of Scottish fire deaths and serious injuries between 2013 and 2016. That research will include a forensic assessment of whether residential sprinklers would have been effective in preventing death or injury. The outcomes of that research will help to inform future Scottish Government and Scottish Fire and Rescue Service policy, and to reduce fire deaths and injuries in the future.
This issue does not just affect residential buildings. The Queen Elizabeth University Hospital and the Royal Hospital for Children in Glasgow will have a small amount of cladding panels removed and replaced at a cost of £6 million. That work will be completed early next year, and the Scottish Government have committed to pay for it.
In conclusion, many issues of fire safety guidance have been raised from Members across the House. I was particularly interested in the point raised by the hon. Member for Worthing West (Sir Peter Bottomley) about the possibility of excluding VAT from remedial works. I would support such a measure, and I look forward to hearing the Minister’s response.
Tony Lloyd (Rochdale) (Lab)
It is a pleasure to serve under your chairmanship, Mr Streeter, and the fact that you managed to allow 19 people to contribute to this debate is significant. I congratulate my hon. Friend the Member for Croydon North (Mr Reed). He spoke only briefly today, but I know the assiduous work that he has put into this issue over a long time. His constituents should be proud of what he is trying to achieve. This has been a rightly challenging debate, and I hope that the Minister will take that on board. He is relatively new in office and has the capacity to begin to effect a change and recognise that this challenge is legitimate. This is not moral panic or outrage; this is a basic safety case that we must take on board.
Many years ago we had a major fire in Manchester—the Woolworths fire—and those of us of an older disposition, like myself, remember it well. People died and as a result the law was changed and polyurethane foam was banned for use in domestic furniture. We must be prepared to be radical if we are to make our safety case. My hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook) made a point about fire marshals. It is good to see those marshals, but they cannot be a permanent solution—it is a short-term safety case. We must look towards the longer term, which is about ensuring that those buildings are safe from fire as far as is humanly possible. That will mean the removal of existing cladding where that is inappropriate, and its replacement with more suitable materials.
I want to begin by talking about the question of responsibility, which has engaged Members from all parts of the Chamber. It is important to say that leaseholders cannot seriously be expected to foot these enormous bills. I think it was my hon. Friend the Member for Croydon Central (Sarah Jones) who quoted from the Minister’s letter, which used words identical to those of the Secretary of State in a letter to my hon. Friend the Member for Croydon North. I say this kindly to the Minister, but it is not enough to write that
“I believe that the morally right thing is for the building owner to take responsibility for meeting the cost of remediation”.
The Minister is a lawyer, so he will know that moral rectitude will not stand up in court or pay the leaseholders’ bills. I am not sure whether this still applies, but in the early moments of the situation with Citiscape, the freeholder was saying to leaseholders that unless they were prepared individually and collectively to agree to pay for the remedial works, no remedial work would take place. That is not moral responsibility; that is an outrage. We collectively have to do something about it.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
On this issue of moral and legal responsibility, does the hon. Gentleman agree that we can learn lessons from the private rented sector? It has taken legal measures to force landlords to bring properties up to basic safety standards, with fire alarms and improved insulation for energy-poor households. Does he agree that in this matter, moral responsibility will not work? Legislation from the Government is needed to sort the problem out.
Tony Lloyd
I hope the Minister is listening, because that demand is coming from all parts of the House. At this level, the matter is not party political; we have a recognition that we need the Government to act as the Government. They are the only responsible agency that can begin to show the determination.
We cannot wait for the courts. My hon. Friend the Member for Croydon North said that the property managers had referred the Citiscape case to the first-tier tribunal, but as a lawyer the Minister knows that the matter could be with the courts not for weeks and months, but years—it could be years before we get resolution. We cannot wait for some sedentary legal process; we need action to determine where the responsibility lies.
I have great sympathy with the point that my hon. Friend the Member for Hammersmith (Andy Slaughter) made: that it is unreasonable for social landlords, whether they are local authorities or housing associations, to have to pick up the tab. That would mean we were saying to a subset of British society—tenants of a particular landlord—that they will pay for the cost of remediation, when the responsibility does not lie with the tenants or the social landlords any more than it lies with the leaseholders.
Importantly, as my hon. Friend the Member for Greenwich and Woolwich said, the responsibility comes back to failures of Governments of all descriptions. The reality is that the failure is recognisable here and now, and the responsibility has to be picked up here and now. It is incumbent on the Government to ensure that the matter is resolved. It is not about moral responsibility, but practical action that says to leaseholders, “You will not have to face bills of £40,000-plus.” That is what the amount is in some cases, and frankly people cannot afford that.
Has the Minister had any contact with the insurance industry? That is not about the responsibility for paying for the work that needs to be done, but about whether it will be prepared to insure buildings in the longer term. It would be significant if the insurance industry walked away from insuring buildings that we know have difficulties. We have to sort out the question of responsibility. In the end, that falls on the Government because of the past failure of the regulatory system.
We need to look at some of the wider issues that have emerged. This month the Peabody Trust found that one of the cladding materials it was using to replace the Grenfell tower cladding—Xtratherm—is no longer an acceptable material, as it is flammable. Peabody faces the bizarre situation of having to remove things that it used to replace what it had already removed. Who picks up the consequences of that? In the end, we have got to give people living in our tower blocks some certainty that their homes are safe, and that brings us to the question of how quickly we will see removal and replacement. Fire marshals are useful, but removal and replacement has to be part of where we move to.
Do we now have absolute accuracy about which materials are potentially affected? Do we have absolute accuracy about the number of tower blocks that may be affected across the country? That basic information will determine whether we can move forward. I may be wrong, but I am not certain that the Ministry has knowledge of all the private buildings out there that may be affected. That is a significant challenge. It means that people are living in blocks and do not know that they may be affected. Indeed, there may be private owners who do not know that their property is affected.
We have got to begin to go beyond the question of the building regulations and bringing them up to standard. A report said:
“Advice from the independent expert advisory panel set up to ensure buildings are safe and published by MHCLG in December 2017 tells building owners they can still rely on desktop assessments.”
It is not enough for the Ministry to say that to the world. Desktop assessments are only credible in this country; I understand that they would not be allowed anywhere else in Europe. Also, the building regulations are only advisory. We cannot have a situation where people can pick and choose which bits of the regulations they apply.
We have to move on to something that takes us away from the failures of the past. As some of my hon. Friends have said, we need transparency about what has happened to know what the technical specifications should be. We need to ensure that we do not have this conflict where the Building Research Establishment is taking money from its clients to be part of the testing process. We have got to ensure that the regulations are fit and proper for the future.
This has been an important debate. When we look to the longer term, the question of cost arises. A number of Members—I know that my hon. Friend the Member for Croydon North raised this issue with the Secretary of State—have asked whether the cost could be removed from recladding. While there may be legal issues around European legislation, the Government can get around that by simply putting that 20% back into the pot where remedial work is taking place. Government can do that.
I come back to the point that my hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) made. When the Government can return hundreds of millions of pounds to the Exchequer, the money is there to do this kind of remedial work. We owe it not simply to those who died in Grenfell tower, but to all those living in tower blocks to say that the time has come for the Government to act. Only the Government can act. We look to the Minister to say now how they will act.
The Minister for Housing (Dominic Raab)
It is an honour to serve under your chairmanship, Mr Streeter. I pay tribute to the hon. Member for Croydon North (Mr Reed) for securing this debate and speaking powerfully about the situation his constituents find themselves in. I am very grateful for the contributions of Members from all parts of the House. I will try to address as many of them as possible in the limited time available.
Before I address squarely the issues facing residents in Croydon and people in other residential buildings we have heard about today that have rightly been raised, I want to give a little bit of wider context. The fire at Grenfell Tower was a terrible tragedy—a tragedy that should not happen in 21st-century London or anywhere in this country. The Government are committed to learning the lessons from Grenfell and ensuring that nothing like that can ever happen again. Like the hon. Member for Lincoln (Karen Lee), I have been down there and seen the devastation. I have talked to residents of the Lancaster West estate. I am personally committed to learning the lessons.
Immediately after the fire, the Department set up a building safety programme with the aim of ensuring that all high-rise residential buildings are safe from the threat of fire and crucially, as Members have rightly said, that residents can feel safe and can rest assured in their homes. To support that, the Secretary of State appointed an expert panel to ensure that the necessary steps are taken to ensure the safety of residents of high-rise buildings. We have consistently relied on that expert advice, because the issue of public safety is central to what we need to achieve.
Through screening tests, we swiftly identified social housing blocks and public buildings with unsafe cladding. Working with the expert panel, the Government provided advice to building owners on the interim measures that they should put in place to ensure the safety of their residents. Of course, that depends on the individual property, as hon. Members have rightly said, but interim measures can include warden systems, measures to prevent the spread of fire to or from car parks, and all sorts of other things. All the affected social sector buildings that have been identified have those measures in place. We are confident that that addresses the immediate issue of safety for residents. I do not think that that should be elided or confused with the wider remediation efforts that, quite rightly, also need to take place. We can give that assurance to residents.
At the same time, we tested different combinations of cladding and insulation to see which met the building regulations guidance. We published consolidated advice last autumn confirming the results of those tests, with advice for building owners, as the hon. Member for Hammersmith (Andy Slaughter) discussed. Since then, we have been working with building owners and the industry to support remediation work. The hon. Gentleman suggested that the Government have not provided clear guidance on the materials for remediation. Actually, the expert panel published advice on 5 September, and further advice was published in December, including an information note for building owners. The Building Research Establishment has also published a catalogue of past BS 8414 tests to assist building owners choosing compliant materials. I hope that that gives the hon. Gentleman some reassurance.
We have been working with local authorities to help them identify private residential buildings with similar cladding, and to ensure that they, too, are made safe. At the same time, as hon. Members know, we have asked Dame Judith Hackitt to undertake an independent review of building regulations and fire safety, to ensure that buildings are safe in the future, in recognition of the clear flaws that have been discovered in relation to the previous system. We welcomed her interim report, which was published in December, and have committed to implementing all her recommendations.
The suggestion that we are sitting on our hands, that we have not looked at this matter soberly, properly and carefully, or that we are not taking action is quite wrong, as the action in relation to Dame Judith’s review illustrates. We look forward to the publication of the final report later in the spring. Obviously it is a detailed piece of work, which needs to be done carefully and properly.
The hon. Members for Croydon North and for Hammersmith asked about the role of desktop studies. We will consult on that shortly in response to the recommendations from the Hackitt review, so we are already taking some of the findings forward. The hon. Members for Greenwich and Woolwich (Matthew Pennycook) and for Croydon North mentioned the tragic Lakanal House fire in Camberwell in 2009. Just for the record, and as a matter of balance in today’s debate, it is right to point out that the shadow Housing Minister, the right hon. Member for Wentworth and Dearne (John Healey), refused extra funding for fire safety measures when he was the Housing Minister, because he did not deem them necessary. I am not saying that to score political points. [Interruption.] I am making the argument—
Dominic Raab
I am saying it for balance. Any hon. Member in the post of Minister would look at the matter carefully and responsibly, and take the expert advice. That is what the right hon. Gentleman did, and that is what we have done.
Let me turn to some of the specific points that have been raised today, starting with the identification of buildings with unsafe cladding. We believe that we have identified all affected social housing blocks and public buildings, and interim measures are in place as and where necessary, suitable to the individual buildings, as I have described. With regard to private sector buildings, the Government made the testing facility at the Building Research Establishment available free of charge. We continue to urge all building owners to submit samples for testing if they think that there is any reason to believe that they may be unsafe because of cladding.
In addition, the Secretary of State wrote to local authorities in August asking them to identify privately owned buildings with potentially unsafe cladding. It is their statutory responsibility to do so. The majority of local authorities recognised the urgency of that work, and provided relevant information. We are very grateful for all their hard work, and I pay tribute to the hon. Member for Slough (Mr Dhesi), who talked about some of the good work that has been done by his local authority.
This is not a straightforward task. We have been in continual dialogue with local authorities ever since that point. The collaboration is close and constant, and it continues. In fact, an event is taking place a few hundred yards from here as we speak, bringing together the Ministry and its experts, local authorities, officials and the fire and rescue service to discuss best practice.
In response to the question asked by the hon. Members for Manchester Central (Lucy Powell) and for Slough, just last week we announced a financial support package of £1 million to assist the most affected local authorities in identifying private high-rise buildings with potentially unsafe cladding. We are also looking at the statutory guidance and the statutory operating directions for local authorities in their relationship with those private sector building owners. Those measures will reinforce local authorities in carrying out that work. I assure hon. Members that as soon as we are notified of buildings with potentially unsafe cladding, we will work with the owners and the relevant fire and rescue service to ensure that those interim measures are put in place.
Dominic Raab
I will make a bit more progress, given the time available, and the need to allow the hon. Member for Croydon North a bit of time to wind up. Our No. 1 priority is the safety of residents, and the interim measures ensure that that is the case.
Dominic Raab
I want to address not just the points that the hon. Lady has made, but those made by all hon. Members in the debate.
The Government have been very clear that the remediation should be done as swiftly as possible, but it must be done properly—precisely because we are talking about the long-term public safety of residents. Let us be clear: the remediation of buildings with aluminium composite material cladding is a complex process. It involves major construction work that needs to be planned, consulted on, and carried out professionally and carefully.
Planning alone can take up to a year. It is not just a case of ripping down the cladding then deciding what to do next. I am encouraged that remediation is already under way in 58% of affected social housing buildings, and that seven have finished their remediation work already. Clearly, there is a long way to go, but that is significant progress. At least one or two hon. Members in today’s debate seemed to be blithe about the work that is under way, how difficult it is, and how important it is to do it properly.
Let me turn to the issue of funding.
Dominic Raab
I am not going to; I will address the direct questions asked by the hon. Member for Croydon North and others about funding. In the social sector, all the local authorities and housing associations that we have spoken to have indicated that they are choosing not to pass on the costs of essential remediation to individual flat owners within their buildings. We will also consider financial flexibilities for local authorities to fund essential fire safety works to buildings that they own. We have not yet declined a single request. We are taking this very seriously, and have engaged in protracted dialogue with those people who have come to us.
In the private sector, of course, the allocation of responsibility depends on the terms of the leasehold arrangements, as qualified by general law. The determination of the legal position will obviously need to be settled ultimately by a court. Proceedings are under way in the constituency of the hon. Member for Croydon North, as I am sure he knows. I took the point that my hon. Friend the Member for Hendon (Dr Offord) made: that it cannot be right for a Minister to pre-empt or prejudge the legal determination of a relationship, where it is not only spelled out in the leasehold arrangement, but qualified by general law.
In some cases, the costs fall, in practice, to landlords or building owners; it may be clearer in some leases than in others. Where the costs do not fall to landlords or building owners as a matter of strict law, we continue to urge those with responsibility to follow the lead of the social sector. We urge those private companies to do the right thing, and not to attempt to pass the costs on to residents. They can meet some of those costs—hon. Members asked about this—through alternative routes such as insurance claims, warranties or legal action. It is rightly for them to pursue those avenues. They have the financial means, the relationship—legal or otherwise—and the wherewithal to do so. The Secretary of State and I have been clear about that in direct conversations, including with those who own the property in the constituency of the hon. Member for Croydon North. Where building owners are seeking to pass on remediation costs to leaseholders, it is important that leaseholders are able to get specialist advice. The Government have provided free legal advice and support through a range of measures, including the Leasehold Advisory Service, or LEASE—a free and tailored service.
In the time available, I hope that I have illustrated not just the complexity of the challenge that we face across the private and social sectors, but the Government’s concerted effort to deal with the immediate issue of public safety and to ensure that the allocation of responsibility sits in the right place, which in our view is with the building owners.
Mr Reed
I am grateful to everybody who has taken part in today’s debate and provided such powerful testimony from across the country. The Minister seems to be heavily relying on the expert panel that he mentioned, but that panel is chaired by the man who signed off the kind of cladding on Grenfell as safe—I have the document that shows it here, and will give it to the Minister afterwards. I wonder whether he should question a little more, rather than just listen to the advice that he is receiving.
The industry is still very confused about what it needs to do when this kind of cladding is found on buildings. The Department needs to issue clearer advice. Finally, we bailed out the banks when they broke the banking system. Why can we not bail out leaseholders, who are innocent victims of the Government’s failed, flawed fire safety regime?
Question put and agreed to.
Resolved,
That this House has considered cladding and remedial fire safety work.
NHS Wholly Owned Subsidiary Companies
(6 years, 9 months ago)
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Liz Twist (Blaydon) (Lab)
I beg to move,
That this House has considered wholly-owned subsidiary companies in the NHS.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am glad to have secured this albeit brief debate on the issue of NHS wholly owned subsidiaries, and this fairly recent but rapidly developing situation spreading across the NHS. What are these companies? They are organisations set up by NHS trusts as subsidiary companies to the trust, into which a range of NHS facilities management staff are transferred. When I say facilities management staff, I mean all the porters, cleaners, catering staff, estates and maintenance staff, and others who keep our hospitals going. Those staff are an essential part of the NHS.
Rachael Maskell (York Central) (Lab/Co-op)
York Teaching Hospital is about to enter into an alternative management company for the facility staff there. Those are staff that want to work for the NHS, not least because they get the benefit of NHS terms and conditions and pensions. Does my hon. Friend agree that the loopholes in the taxation of the NHS need to be addressed so that those people can remain working for the NHS?
Liz Twist
I most certainly do agree with my hon. Friend. We know that NHS trusts are under incredible financial pressure and are looking for ways to stretch the available funds. Some trusts have seen wholly owned subsidiaries as a way of reducing costs. Those trusts include the Gateshead Health NHS Foundation Trust, which provides excellent hospital services to many of my constituents.
The cost savings come about in two main ways: through saving VAT and by saving on staffing costs. For some, there may be a third area of income—advising other NHS trusts on going down the same path, which is one of the reasons why they are spreading across the country. In November 2017, the then Health Minister, the hon. Member for Ludlow (Mr Dunne), stated that:
“NHS Improvement is aware of 39 subsidiaries consolidated within the accounts of foundation trusts”—[Official Report, 14 November 2017; Vol. 631, c. 129.]
We know that more are being created even now.
Jim Shannon (Strangford) (DUP)
The issue of pensions is very much at the forefront of the minds of myself and others in this House. Does the hon. Lady agree that it is essential that staff working through the front door of the NHS or the back door of the wholly owned subsidiary company must be entitled to retain their NHS pension? Any attack on the pension scheme must be wholly rejected and the trusts must all be made to understand the position on pensions when these types of actions are taking place.
Liz Twist
I most certainly do agree, not just for pensions but also for terms and conditions.
What is the problem with these companies? First, it is that they come at a price, which for the most part is met by the staff who work for them. Secondly, the VAT saved by trusts with these companies is not new money coming into the NHS—the money that trusts save will be lost elsewhere in public services. Already, the Department of Health and Social Care has reminded trusts by letter that they should not engage in any activities that may be construed as tax avoidance, and the loophole could be closed in the future. Thirdly, the establishment of wholly owned subsidiaries leaves the services open to privatisation in the future, continuing the fragmentation of our NHS.
Alex Cunningham (Stockton North) (Lab)
The North Tees and Hartlepool NHS trust set up a limited liability partnership last week. Even according to its own published material, it provides no guarantee of job protection beyond a few months and will create a situation with different employees on very different terms and conditions. Is this not all about Government cuts? Does my hon. Friend not agree that we could see even more staff transferred into this sort of arrangement in order to meet the Government’s cuts agenda?
Tulip Siddiq (Hampstead and Kilburn) (Lab)
My hon. Friend is being very generous in taking interventions. Unite points out that over the past five years, more for-profit companies have won contracts to run NHS services, with the total value of contracts awarded in 2016-17 standing at a staggering £3.1 billion. Does my hon. Friend agree that the Government must compel Her Majesty’s Revenue and Customs to close this tax loophole, so that NHS trusts are not forced to consider outsourcing NHS services?
Liz Twist
I most certainly agree that the issue is a dangerous one that needs to be looked at, and it is a very worrying one because, whatever happens, the staff who have transferred are in a very difficult position.
In the longer term, the establishment of the wholly owned subsidiaries leaves services open to privatisation in the future, continuing the fragmentation of our NHS, which is not in the long-term interests of all who use the NHS. There is no evidence that the plans will improve efficiency or productivity in the NHS. They exploit a tax loophole and seek to exploit the future workforce.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
The hon. Lady and her colleagues are right to highlight the fact that the financial pressure on the NHS is the main driver for this situation. Does she agree that it is very difficult in some services to differentiate between administrators and back-office services, and frontline services? Sometimes, administrators and back-office workers are embedded in clinical teams, and this actually worsens fragmentation and makes it much more difficult to deliver high-quality patient care.
Liz Twist
The hon. Gentleman makes an excellent point. NHS staff, whatever their job, are all part of a team that delivers a service, and they all work together. For example, the catering and cleaning staff who looked after my mum’s hospital ward when she was in hospital recently were also a part of the NHS caring process. I think that is a really important point.
Judith Cummins (Bradford South) (Lab)
One of the major problems with the creation of these wholly owned companies is that they lead to a two-tier workforce in which often the lowest paid staff, such as domestics and security guards, are on worse terms and conditions than other staff. Does my hon. Friend agree that that represents a race to the bottom and is not just bad for those moved over to the new companies but bad for the NHS overall?
Liz Twist
I most certainly do agree, and I will expand on that point shortly.
I want to speak about the impact on staff—some of the same staff we have all been praising in recent days for turning up to work in the snow and coping when we have the only too frequent crises. They are an integral part of the NHS team, as the hon. Member for Central Suffolk and North Ipswich (Dr Poulter) said, making it possible for nursing and medical staff and other allied health professionals to do their bit in caring for patients.
On transfer to a wholly owned subsidiary company, staff already employed by the trust will be transferred on their existing terms and conditions. That is, on “Agenda for Change” terms and conditions and pay rates, negotiated nationally and checked to ensure equal pay for work of equal value. They will retain their membership of the NHS pension scheme and a set of decent terms and conditions applying to all NHS staff. The main way that trusts can make savings through these companies is by employing new staff on different, and worse, terms and conditions.
Mike Hill (Hartlepool) (Lab)
On the point made by my hon. Friend the Member for Stockton North (Alex Cunningham) about North Tees and Hartlepool Solutions, as the LLP is called, does my hon. Friend agree that its immediate intention to introduce worse terms for new starters sets a dangerous precedent?
Alex Cunningham
Further to that point, is my hon. Friend aware that the question and answer document produced by the North Tees and Hartlepool NHS Foundation Trust says that NHS staff transferred into the new company can expect a pay rise this year, but nothing is guaranteed in the future? They are already seeing their future conditions eroded, unless the new company awards them the pay rise they will get under the current system.
Liz Twist
That is absolutely correct, and I have raised with my local trust the potential move away from NHS pay rises.
The main way trusts can make savings is by employing the new staff on worse terms and conditions, which means lower pay rates, less holiday, inferior sickness schemes and no access to the NHS pension scheme. As colleagues said, even transferred staff may be moved on to the worse terms and conditions over time. Trusts are doing that to the lowest-paid workers, who are essential to keeping our hospitals going.
Mike Amesbury (Weaver Vale) (Lab)
Does my hon. Friend agree that doctors and clinicians should prescribe only medicines that have a strong evidence base and have been shown to be effective in trials? On that basis, does she agree that wholly owned subsidiaries for the treatment of illness would be ineffective?
Rachael Maskell
The last time there was a segmentation of facilities management, we saw the rise of MRSA and other communicable diseases, so the evidence shows that this is a bad move.
Liz Twist
That is a very valid point, and it must be considered carefully.
We are creating divisions between staff in the facilities management companies and other NHS staff by introducing a two-tier workforce, which health service unions such as Unison—my union—have worked hard to move away from. The setting up of these wholly owned subsidiaries is a retrograde step. It insults and undervalues the staff who do essential but less visible jobs in the NHS. It deprives them of the pension scheme that their colleagues have access to and exposes trusts to equal pay claims. Equally important, it risks breaking up our NHS—perhaps not today, but in the near future.
I have been looking at the health press in preparing for this debate, and I have seen that there are plenty of companies out there willing to advise on setting up NHS subsidiary companies and look at the benefits of such companies. There are no such advantages. There is no reason why NHS staff working together cannot produce a better NHS. Indeed, they are doing so all over the country. We need to stop this trend of establishing wholly owned subsidiaries in the NHS. We must respect all our hospital staff and prevent the fragmentation and privatisation of our NHS.
The Minister for Health (Stephen Barclay)
It is a pleasure to serve under your chairmanship, as always, Mr Hollobone. It is also good to see a number of Members from across the House in the Chamber to debate this important issue. I congratulate the hon. Member for Blaydon (Liz Twist) on securing this debate. I am pleased to be able to join her in discussing an issue that is of concern and interest to many in the House.
I understand that Gateshead Health NHS Foundation Trust established its wholly owned subsidiary company, QE Facilities, in 2014 to provide estates, building and engineering services to the trust and cleaning services to the new emergency care centre building. QE Facilities is a separate legal entity, which operates along commercial lines. It has separate governance arrangements and the ability to employ its own staff and deliver services to other organisations on a commercial basis. As the hon. Lady said, a number of staff from the Queen Elizabeth Hospital in Gateshead transferred under TUPE rules to the new organisation in December 2014. I will respond to her points.
A number of hon. Members raised the concern that what happened amounts to privatisation, but I must point out that the legislation enabling NHS organisations to create subsidiaries of this sort was put in place by the Labour Government in 2006. If it is privatisation, it is privatisation enabled by Labour legislation, and I do not think that is the way Ministers described it to the House at the time. The subsidiaries are also 100% owned by the trust, so they are within the NHS family.
It is right that the board of the Queen Elizabeth Hospital was able to use the powers enacted by the previous Labour Government. It did so because creating a subsidiary is, in its view, the most effective and efficient way of maintaining the trust’s hospital estate, which includes several new buildings. Again, that is consistent with the previous Labour Government’s approach, which was to allow local trusts to determine the best manner of managing their own estates.
Alex Cunningham
I do not care which Government provided the enabling legislation. Surely the Minister agrees that the intention was never to undermine the working terms and conditions of people within the NHS just to enable trusts to cut the amount of money they need to spend?
Stephen Barclay
I will happily address that. The hon. Member for Bradford South (Judith Cummins) also made that point and said that this is about exploitation. The hon. Member for Stockton North (Alex Cunningham) may not care whether the legislation was introduced by a Labour Government; I was merely drawing hon. Members’ attention to the fact that when the legislation was passed it was not described as privatisation. It is obviously a leap to describe the legislation as enabling privatisation when the subsidiaries are wholly owned by the NHS.
Alex Cunningham
I am grateful to the Minister for giving way again. The North Tees and Hartlepool NHS Foundation Trust said in its question and answer document that such an organisation could be taken over by another organisation—in other words, it could be privatised. This is one step along the way to the potential privatisation of all those services.
Stephen Barclay
The trust has stressed that the organisation remains in public ownership. Let me deal with the hon. Gentleman’s substantive point—it was also raised by the hon. Member for Bradford South— that this is about exploitation. I discussed that point with the trust ahead of the debate.
Previously, the trust had difficulty in attracting and retaining quality maintenance staff because the salaries paid in the local market were about £19,000 per annum. Under the subsidiary company, multi-skilled craftspeople are employed at about £25,000 per annum, plus a performance bonus, attracting better-qualified staff and ending retention issues, in exchange for the fact that they do not have access to the NHS pension.
Stephen Barclay
I will happily give way to the hon. Lady in due course.
That is not about exploitation; it is about empowering members of staff. They get higher pay in the short term in return for a less generous pension. The hon. Member for Stockton North might disagree—
Stephen Barclay
I signalled that I will give way to the hon. Member for Blaydon. She called the debate, so she should go first.
It is not accurate to say that this is simply about exploiting people if their base salary is increasing from £19,000 to £25,000, as it is in that trust. One can look at the wider bundled package of benefits and total remuneration, but one cannot describe a salary increase of £6,000 as exploitation.
Liz Twist
The Minister is raising an issue of great concern to me, which I have discussed with the chief executive of the foundation trust, so this is not coming as news to him. If we move away from a structured pay system and give additional salary payments over and above allowed recruitment and retention bonuses, we are laying the trust or the organisation open to the claim that they are not providing equal pay for work of equal value. A huge amount of work went into creating “Agenda for Change” to avoid exactly that problem and to address recruitment and retention.
Stephen Barclay
The hon. Lady is ignoring the fact that that already happens in the NHS, for existing trust staff: some staff opt out of the NHS pension, and not all the staff who TUPE-ed across in this arrangement were in the NHS pension. Once again, those on the Labour Benches want to deny the choice and options that apply to NHS staff.
Judith Cummins
I thank the Minister for giving way, because he has heard me twice now, but I welcome the opportunity. Does he not agree that the difference between then and now is that NHS trusts now are being forced down the path of wholly owned subsidiary companies because of financial constraints? It is not good enough for the Government simply to stand by and watch that happen.
Stephen Barclay
Again, that is a complete misrepresentation. The trust itself has pointed to the benefits of the arrangement. Let me give a concrete example of how the arrangement is delivering to the trust savings in the interests of patients.
Under the previous delivery system, local pathology samples were sometimes lost and delayed—that is not in the interests of patients. The QEF brought in a revised system of procuring all sample containers and issuing those to GPs across the region before delivering samples to the hospital pathology laboratory hubs within four hours. The trust forecasts that that will deliver significant benefits—indeed, other trusts are interested in the services. By operating on a more commercial model, therefore, not only has the trust improved how it deals with samples and prevented those samples from being lost as in the past, but it has put in place a system that is better for patients and attractive to GPs in other trusts who now want to contract the services.
Dr Poulter
The Minister is slightly at odds about the point being made. The point is not how it is open to the trust to procure the best clinical services but how, later, through a company, staff might be re-employed on a lower salary. Clearly, trusts already have flexibility through “Agenda for Change” to start people on a higher pay point, but I wondered more generally whether my hon. Friend supports national pay bargaining and “Agenda for Change”.
Stephen Barclay
The Chancellor made his support for the “Agenda for Change” programme clear in the Budget. My hon. Friend is aware of the commitment that the Chancellor made to fund that outwith the spending review 2015 process. That is a matter of record and one my hon. Friend is well aware of. The point being made, however, is that the flexibilities are popular with staff within the trust. Again, that is not simply a matter of me saying that; it is reflected in the staff survey of those working at the trust.
Several hon. Members rose—
Stephen Barclay
I will happily take interventions, but first I will finish this point, addressing the previous issue. The recent staff survey was extremely positive: 86% felt part of the Gateshead Health NHS Foundation Trust group. Furthermore, the figure for those with a positive response to the level of pay was 15% higher than the NHS comparator. The idea that the arrangement is exploiting people when the staff survey shows them to be 15% more approving than in other areas is again not a fair representation of the case.
Karin Smyth (Bristol South) (Lab)
In the short time remaining, I would like to move the Minister on to the issue of accountability for public money. Following a freedom of information request, in the case of Yeovil we understand that the benefit to the trust is several million pounds-worth of income, which is a lack of income from the Treasury—I have written to the Minister about this and I will be grateful for an answer. Is the Government’s position that they would be happy to forgo the expected income to the Treasury so that those companies can be set up to undercut wages?
Stephen Barclay
As I set out in my reply to the hon. Lady, the Department has been clear that setting up a subsidiary is not a vehicle to avoid VAT—that is not acceptable. In the autumn, we sent out guidance to make that clear. As a former Treasury Minister myself, I assure her that Treasury Ministers would take a very close interest if they felt that an abuse of VAT was taking place.
The reality is that commissioners and regulators are responsible for ensuring that NHS providers act in the best interests of patients and taxpayers. We would expect providers to work closely with their employees in any developments.
Stephen Barclay
I am conscious of the time, but I am very keen to take an intervention from the hon. Gentleman.
John Grogan
The Minister is being very generous. Clearly there is a substantial difference of view here, but would he agree that given that public money is involved, it is very much in the public interest that the business plans that the trusts are producing for the wholly owned subsidiaries are published and public, so that they can be scrutinised? In the case of the Airedale trust in my constituency, we discovered that 60% of the savings on purchasing are in VAT. Those figures should be in the public domain, so people can see what is being done with public money in their interests.
Stephen Barclay
The slightly puzzling issue here is that the savings accrued from the subsidiaries are for the benefit of the local health economy, of the trust. This is a subsidiary company 100% owned by its host trust. The more efficient the subsidiary is, the better it is at dealing with things such as its pathology—not only do we avoid samples being lost, but we run a more efficient system in a more commercial manner, which brings more money into the healthcare economy and gives the flexibility to compete effectively in the local job market for maintenance staff and others.
The benefits of those arrangements accrue to the trust that owns 100% of the subsidiary. That is why, under legislation of the previous Labour Government—correctly in my view, but clearly not in the view of the Labour Members—the local trust is empowered to empower in turn the local members of staff. That is then reflected in the staff survey, which shows a more favourable result in this trust.
Rachael Maskell
I am grateful to the Minister, who has been generous with his time, but does he not acknowledge that the failing finances of the NHS are forcing trusts down that route? I am meeting the Minister next week to talk about York Teaching Hospital’s failed finances. That is the driver of the changes and, therefore, the fundamental issue still has to be addressed.
Stephen Barclay
I do not know whether we are moving away from the subject to a wider debate about finance, but the Chancellor’s Budget settlement makes the Government’s finance commitment clear. The fact is that the issue of subsidiary companies is about using the resources of the NHS in the most efficient manner. That is the view not just of the Government and of the previous Labour Government, but of the trust itself. It is delivering a better outcome for patients and delivering savings—I repeat, the savings accrued go to the benefit of the trust that owns 100% of the subsidiary. It is a shame that those on the Labour Benches seem to want to deprive staff of choice and opportunity. Staff are benefiting, and that is reflected in the staff survey.
I hope that in responding to the debate I have allayed a number of the concerns of the hon. Member for Blaydon about the setting up of subsidiary companies by trusts. I am sorry that there is such concern about the legislation put on the statute book by the previous Labour Government and that it is being deemed to be a form of privatisation.
Alex Cunningham
Does the Minister think it is fair for one of two different people in an organisation to receive a defined benefit pension scheme with a 50% contribution and the other to get 3% into a defined contribution scheme worth a fraction of the other in pension terms?
Stephen Barclay
Within the NHS as a whole—nothing to do with subsidiaries—there is a range of treatment of staff on pensions. First, there are the legacy pension arrangements for staff in previous schemes and, secondly, people opt out of existing pension arrangements in the NHS. Again, it is a complete mischaracterisation of this debate on subsidiaries to suggest that there are differences. The point, however, is that there are also differences in pay, as has come out of this debate: the maintenance staff for whom the trust is paying a premium can be paid so because of the subsidiary.
Liz Twist
I thank the Minister for giving way—the only way I can get a response in is by intervening. I have a few separate points. First, on the Labour legislation, is it not strange that the subsidiary companies have only started to appear in this form since 2014? As my colleagues said, that is a reflection of the fact that we have a shortfall in funding for the NHS. Secondly, I want to mention the path lab example the Minister gave. As I said in my speech, there is no reason why existing NHS staff in the NHS trust cannot make the improvements—they do all the time—
Motion lapsed (Standing Order No. 10(6)).
Police Station Closures: Solihull and West Midlands
(6 years, 9 months ago)
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Julian Knight (Solihull) (Con)
I beg to move,
That this House has considered the proposed closure of police stations in Solihull and the West Midlands.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am sure I am not alone in saying that crime is one of the issues that people most frequently raise on the doorstep and in constituency surgeries. Few things matter more to my constituents than knowing that the streets are safe and that Solihull remains a peaceful, welcoming and vibrant community. That is why I have made standing up for local police services one of my top priorities. Since being elected in 2015, I have fought successfully to prevent cuts to our local team of police community support officers and I have supported calls for Ministers to increase police funding across the west midlands. In that same period, David Jamieson, the police and crime commissioner, quite clearly has been running down police services in Solihull, cutting the number of patrol cars in the borough and closing one of my constituency’s two police stations in 2015.
Emma Reynolds (Wolverhampton North East) (Lab)
Will the hon. Gentleman confirm that West Midlands police has lost £145 million in funding, through decisions made by the Tory Government and, before them, the Tory-Liberal Democrat coalition from 2010?
Julian Knight
The Government have been pretty clear that police funding has been protected in real terms once local funding is taken into account, and they are investing £1 billion more in policing in 2017-18 than in 2015-16, despite continued pressure on public finances. Labour always likes to insist that someone else will pick up the tab, but if PCCs want the power to help their police forces, they must expect the responsibility that comes with it, including questioning by Members of Parliament.
Mr Jamieson has announced plans to close Solihull police station, leaving my constituency without a single proper police space. The commissioner claims that it is under-utilised, but why should that come as a surprise when he has been paring back our local police services for years?
I strongly believe that for local politicians to be held accountable, the devolution of power must be accompanied by the devolution of responsibility, including financial responsibility. The public elect representatives to take decisions, not simply to shift blame and demand more money from someone else. In 2015, I joined my hon. Friend the Member for Dudley South (Mike Wood) in urging Mr Jamieson to take responsibility for his powers and to raise the funds needed by the West Midlands police, and lobbied Ministers to grant our region an exemption from the usual 2% ceiling on raising the precept.
Jack Dromey (Birmingham, Erdington) (Lab)
The hon. Gentleman says that police funding was protected. He has just referred to the precept—the precept flexibility raises £9.5 million. The police service needs £22 million to stand still. It is not true, therefore, that police funding has been protected, is it?
Julian Knight
The £9.5 million is a significant sum in that respect; I will move on to where, specifically, I think the money should come from, in terms of the police and crime commissioner.
Devolution does not mean leaving each region simply to sink or swim on its own. At Westminster, we help to oversee the pooling and sharing of resources across the UK. I was therefore pleased that the Government recently announced hundreds of millions of pounds in extra cash for policing, including a £9.5 million boost for the West Midlands police, which the hon. Member for Birmingham, Erdington (Jack Dromey) has just referred to. I was confident, along with many of my constituents, that that had put our vital police services on a secure footing, so hon. Members can imagine my shock when I learned that the commissioner plans to close Solihull police station and many police stations across the west midlands.
Let us be clear: there is no good financial case for this closure. According to the press, Mr Jamieson is sitting on a £100 million reserve. On top of that, he recently spent an extra £10 million on non-frontline staff, many of whom do very valuable work but cannot substitute a strong, local police presence. In such circumstances, extra cuts to frontline services are completely non-justifiable. We must not underestimate the significance of this: until recently, our town had two proper community police stations.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I want to ask about the £10 million for non-frontline staff. Will the hon. Gentleman confirm that we are talking about fraud investigators, child abuse investigators, 999 call handlers and forensic scientists? Does he think that getting rid of those will help to drive crime down or up?
Julian Knight
Of course, I recognise that the non-frontline staff do very valuable work. However, as I will explain shortly, the police and crime commissioner cannot say that his cuts will make a substantive difference either to frontline services or to these non-frontline staff.
In my view, what Mr Jamieson has done is a straightforward breach of trust. When Shirley police station closed its doors in 2015, local residents were reassured that the Solihull branch offered a long-term future for a properly resourced local police presence. Now, less than three years later, it is to go, too. Instead of the Solihull branch, the commissioner proposes to have a front desk somewhere in the borough, but even though the consultation on that proposal is under way, we have not been told where that will be or what precisely it will comprise. Before Solihull police station is closed, I strongly believe that local residents have a right to know exactly what will replace it. At present, they are simply being told to trust Mr Jamieson—as I have already explained, they have no reason to do that.
Worse, research by my hon. Friend the Member for Aldridge-Brownhills (Wendy Morton), who is here today to show her strength of feeling and support—as a Whip she is not permitted to speak—raises serious doubts about the extent to which the money raised from the sale of our police station can be redirected to frontline staff. According to the Library, police and crime commissioners are allowed to move funds from their capital to their revenue accounts only in very limited circumstances—primarily to deliver structural changes and to unlock long-term savings.
My constituents deserve to know whether—and how—Mr Jamieson actually intends to use the sale to boost local policing, as I have certainly heard nothing about new capital projects in Solihull or in any of the constituencies of my hon. Friends. It will not do for our police station to be sold to finance new programmes in other parts of the west midlands. My constituents should be given clear assurances that any revenue savings made by closing the station will be spent to boost local police services, and that there is not carte blanche to redirect them all over the place.
Not that local residents have had much of an opportunity to have their say—stakeholders have been offered only 18 working days to respond to the consultation, and originally no point of contact at all was provided for the general public. Only after a lot of chasing by my office was an email address finally provided for the public. Other concerned MPs, including my hon. Friend the Member for Aldridge-Brownhills, and I were not even given the courtesy of a call before the details were released to the press. My colleagues and I find that the commissioner is growing ever more autocratic in his dealings with us and our communities, issuing diktats from the centre against the will of local residents.
Solihull is a large town with a distinct character. Residents expect to see that fact reflected in their public services. Local Conservatives and I fought hard over the past few years to secure a devolution deal for the west midlands that brought power down from Westminster, while protecting the authority and independence of our local council. Decisions such as these will only confirm many of my constituents’ worst fears about how communities like Solihull risk getting short-changed by regional institutions that focus too heavily on major urban centres.
Mr Jim Cunningham (Coventry South) (Lab)
The hon. Gentleman must realise that West Midlands police received £444.1 million in 2017-18 and will receive the same amount under its budget for 2018-19. By any logic, that means there has been a cut somewhere. We are faced with the likely closure of at least three police stations in Coventry: Willenhall, Canley and Foleshill. Something has to give, and he should recognise that there has been a cut somewhere.
Julian Knight
I do not know whether the hon. Gentleman is arguing for the closure of his local police stations. I certainly would not do that in this respect. I agree that there needs to be a reallocation of resources, and perhaps there are older properties that might be used more usefully, but at the heart of this issue and of the real anger in my community is the arbitrary way closures have been made, the lack of proper consultation and the fact that there seems to be no real path for the future of policing in Solihull. If the police and crime commissioner had come to us and said, “This is what will replace it. We recognise that your town has a large population and a growing issue with certain types of crime,”—I am about to touch on those—I would have said, “Okay, let’s have a conversation,” but he did not call. He just decided to make closures and release the details to the press.
The difficulty is that that brings devolution into a little disrepute. Of course Birmingham has its own policing needs and the commissioner has a duty to see that those are met. I am sure that the centralised and reactive policing model he appears to favour is better suited to urban trouble spots than to suburban and semi-rural communities, but boroughs such as Solihull face discrete policing challenges of their own. Residents often tell me of their serious concerns about so-called acquisitive crime, such as burglary, and vehicle crime, which is on the increase in the borough. Another potentially serious public order problem that Solihull has faced over the years—certainly since I have represented it in this place—is the repeated occupation every summer of our parks and open spaces by unauthorised encampments. Those events are a source of enormous disruption and distress for local residents, many of whom bring their concerns to my office or tell me about them on the doorstep. A strong local police presence is crucial to protecting communities such as Solihull from unauthorised Traveller encampments. When it comes to that, the reactive approach is the wrong approach.
I will close by saying that this is not the end of the fight. Mr Jamieson may have tried to push decisions through without proper consultation, but both in this place and on the ground in the west midlands, my colleagues and I will keep his proposals under the closest scrutiny, bring him to account and continue to make the case for a wiser and fairer deal for our constituents from this police and crime commissioner.
Several hon. Members rose—
Mr Philip Hollobone (in the Chair)
Order. I am obliged to begin calling the Front Benchers at seven minutes past five. Five Members are seeking to catch my eye, so I am going to impose a five-minute limit so that everyone can get in. I call Jack Dromey.
Jack Dromey (Birmingham, Erdington) (Lab)
Thank you for calling me to speak, Mr Hollobone. It is a pleasure to serve under your chairmanship.
The last Labour Government built neighbourhood policing. We put 17,000 extra police officers and 16,000 police community support officers on the beat. We did so because we took seriously the first duty of any Government: to ensure the safety and security of their citizens. That model of detection and prevention was popular with the public and saw crime fall by 43%. That was slammed into reverse when this Prime Minister was Home Secretary. The number of police has fallen by 20,000 overall, and by 2,000 in the west midlands. Crime is up 14% overall, with gun crime up 15%, serious acquisitive crime up 17% and burglaries up 8%.
The Tories frequently praise the police but then fail to stand up for them in this place. Do they not hear what we hear in our constituencies? I organised a public meeting for local people who were deeply concerned about rising crime, and one woman had spent 66 years—
Julian Knight
The hon. Gentleman said that the Tories do not do a lot in this place to try to get the best deal for the police. He and I, and my colleagues, have worked together on this issue for a long time. Does he not recognise that decisions such as these and the way they are taken break the bonds of trust between us?
Jack Dromey
The decisions are actually proposals from the chief constable in the first instance—I do not know whether the hon. Gentleman is criticising the chief constable—and then they go to the PCC. The simple reality is that our police service in the west midlands faces increasingly impossible pressures because of the cuts that have been made by the hon. Gentleman’s Government, and he has not once stood up and opposed those cuts or voted against them.
Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab)
Does my hon. Friend recognise that my constituency, which neighbours his, has lost more than 15 community support officers, numerous police officers and a huge number of support people due to police stations closing? That is purely the responsibility of this Government, who have failed to fund the police service properly.
Jack Dromey
My hon. Friend is absolutely right. He hears in his community what I hear in mine. He hears, for example, about elderly residents’ fear of going out at night. Local retailers increasingly complain that people do not come out when it is dark, such is people’s fear of going on to the streets in some of our communities.
Do Government Members not talk to police officers like we do? One officer said to me, “Jack, criminals increasingly have free rein to do what they want, because there are simply not enough of us to keep our community safe.” Do Government Members not know that response times are going up, including for victims of domestic violence? Do they not understand that the hollowing out of neighbourhood policing undermines the struggle to combat the growing and uniquely awful threat of terrorism?
The Prime Minister said, “We cut police and cut crime, we protected budgets, and our approach is fair.” Yes, the Conservatives cut police, but she is wrong that they cut crime and protected budgets. Some £145 million has been cut overall and there has recently been, in effect, a £12.5 million real-terms cut. As for fairness, the west midlands certainly has not been treated fairly compared with Surrey, the Thames valley or Hampshire, for example.
The police also have paid a price. We do not hear Government Members standing up for them. The thin blue line is being stretched ever thinner. There are mounting problems of sickness and stress. Officers frequently put their lives on the line to protect the public, and some are seriously injured as a consequence. The hundreds of officers in the west midlands who were forced out under regulation A19 paid the price with their jobs.
What cheek Conservative Members of Parliament have to come here and protest about the impact of police cuts when they are guilty of a lamentable failure to stand up for the police service. They supported the biggest cuts since the war, including recent real-terms cuts. To blame our chief constable and our police and crime commissioner is completely wrong. We could give numerous examples of Conservative attacks—my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) mentioned back office staff—but let me quote what the Minister said about head office at Lloyd House:
“Officers and staff in the West Midlands do an excellent job keeping our communities safe and this refurbishment will not only save money, but will also mean they will have an improved working environment to carry out their vital duties.”
The Conservatives have sought every spurious way possible to escape responsibility, but they cannot. The people of the west midlands know that the Conservative party has failed to stand up for them and that Labour always will.
Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)
Mr Hollobone, £145 million has been cut from the West Midlands police budget since 2010—a truly staggering cut for a police force to absorb. To set that in context, that money could have paid the salaries of 750 police constables over the past eight years—police constables who could have been patrolling our streets, tackling crime and antisocial behaviour.
Since the Conservative Government came to power in 2010, West Midlands police has lost 2,000 officers, taking their number to its lowest since 1974—the year the force was established. The demands on our officers, however, have not fallen in a similar fashion. If anything, they have increased, with emerging issues such as cyber-crime and the persistent threat of terrorism adding to the force’s already heavy workload.
The constant pressure exacted by the Conservative Government’s never-ending diktat to do more with less is taking its toll on our overstretched and under-resourced officers. On one day last summer, a check of the force sickness system revealed that 612 officers and staff were booked off sick, with 176 suffering mental health conditions such as anxiety, depression, fatigue and stress. Given that West Midlands police now requires an additional £22 million simply to stand still, the chief constable is left with two choices, each as unpalatable as the other: to reduce manpower further or close police stations.
Let me be clear: despite efforts to blame the chief constable and the police and crime commissioner for making difficult decisions, the cuts have been inflicted on our constituents clearly and unambiguously as a result of the Conservative Government’s ideological austerity programme. As a result, the chief constable has proposed to release 24 buildings, which will save £5 million a year: enough to protect the jobs of 100 police officers. While I accept that the majority of the buildings to be closed are not open to the public, their closure will still have a detrimental impact on officers who will have to travel further to use essential services, wasting valuable police time.
We cannot ignore away the fact that the police grant settlement confirmed real-terms cuts, including a £12.5 million reduction in spending power for West Midlands police. The police and crime commissioner, David Jamieson, recently summed up the situation rather succinctly. He said:
“West Midlands police has suffered the biggest cuts in the country and now the Tory MPs who voted for those cuts recently are complaining about the consequences in their constituencies.”
It seems the irony is indeed lost on some.
The Government have argued that council tax can be increased by the PCC by up to £12 for a band D property, a measure that has been adopted by all but three PCCs. Despite that, West Midlands police has the lowest budget increase per head of population in the country, further damaging its ability to carry out its full range of duties. It has also been claimed that back-office costs have risen by £10 million, but, when one looks a little deeper, one sees that those so-called back office costs include nationally mandated pay increases, the hiring of specialist staff to allow police officers to carry out warranted duties such as arresting criminals and the hiring of call handlers to deal with the surge in demand faced by the police force.
These issues are only a snapshot of the systemic and unprecedented pressures faced by our police service. Police officers exude many of the most admirable characteristics of our society. Brave, caring and committed, they do their duty to allow us to go about our daily lives, safe in the knowledge that we and our families are safe.
Mr Jim Cunningham
Recently, in the Willenhall area of Coventry there have been public meetings where the public have voiced concern about increases in drugs, burglaries and so forth. As a result, the police have looked at the possibility of using surge tactics in those areas. That demonstrates how the public are becoming aware of the under-policing in Coventry—we have lost between 200 and 300 officers—and they are uneasy about the policing and crime situation in the west midlands, starting in Coventry.
Preet Kaur Gill
I absolutely agree. Police officers join the force because they want to make a difference, serve their communities and help people. We accept their service gratefully, but, in so doing, we also accept a responsibility to offer them the same protection and support that they provide us. Policing cannot be done on the cheap; the safety of our families is worth too much. That is why I will continue to stand up for my local police force and my constituents by continuing to oppose the Government’s damaging and dangerous cuts.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Good afternoon, Mr Hollobone. It is a pleasure to serve under your chairmanship. There are mixed views about the value of police stations. Paul Kohler, a London university lecturer who was subject to a savage beating when a gang broke into his home, has stated that he is still alive only because of the rapid response from the police station, which is 300 yards from his home in Wimbledon. It is pretty understandable that someone who has had that horrendous experience takes that view. However, my neighbours live about 3.2 miles from the nearest police station, so they could not possibly benefit similarly. The current Met commissioner, Cressida Dick, stated that she believes having police out on the streets is the best guarantee of a rapid response.
What we know about the west midlands is that the latest settlement means a real-terms cut. Even after we increase the precept for some of the poorest families, we are left with a £12.5 million gap. Forcing us to rely on the precept to fund policing means that we end up with less than Hampshire, despite its smaller population and lower levels of crime.
“Closure of police stations” is not always accurate as a description. In some situations, it refers to the closure of public desks rather than an actual facility. To return to the plans for the west midlands, I understand that only two of the 24 buildings for closure are police stations open to the public. As we have heard, the purpose is to save £5 million a year in order to protect 100 police officer posts. Given that we now have 2,000 fewer officers than in 2010, I am anxious not to see any further loss of personnel.
There are currently 10 publicly accessible front desks across the west midlands, and the proposals set out to retain 10 publicly accessible front desks. We must bear it in mind that some 361 police stations closed between 2010 and 2012. The police, to be fair, point out the cost of keeping such buildings open and the often low level of usage by the public.
Back in 2012, a report by Her Majesty’s inspectorate of constabulary warned that 264 police stations would close to the public over a three-year period, as chief constables attempted to balance the books. The then Policing Minister, the right hon. Member for Arundel and South Downs (Nick Herbert), responded by saying that what mattered was that frontline policing was preserved. That same view was expressed three years later by the right hon. Member for Hemel Hempstead (Sir Mike Penning), then the Policing Minister. He said in a Westminster Hall debate in 2015 that it was not about buildings but about people. However, the Tory police and crime commissioner for Thames Valley threatened legal action against the Home Office over cuts to his budget in the same month of that year, because he said they would force him to close three police stations with the loss of 147 jobs.
When the right hon. Member for Ashford (Damian Green) was Policing Minister, he considered the closure of police stations to be an operational matter for chief constables. And, of course, in a famous memory lapse, the former Mayor of London—now the Foreign Secretary —complained about the closure of a police station in his constituency, having forgotten that he had ordered the closure of 65 police stations.
Arguments about the closure of police stations are not new. The received wisdom of the Government to date is that it is an operational matter; that it is about putting police on the street rather than in offices and adapting to new ways of working. That is, it would appear, until we are talking about the west midlands and a Labour police and crime commissioner.
We should not be mourning the closure of police stations. The problem before the House is not local mismanagement but the culmination of a series of untenable cuts that started when the present occupant of 10 Downing Street was the Home Secretary and which continue today, destroying the capacity of our police to control the streets and protect the public from violent crime.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
It is a privilege to serve under your chairmanship, Mr Hollobone. Not so long ago, the Government invited us to believe that it was possible to cut crime and cut the police at the same time. Over the last couple of years the idiocy of that idea has been exposed for all to see. The truth is that crime—violent crime in particular—is now rising, and on the streets of my constituency there is real concern about the growth of dealing in drugs out on the streets, often in broad daylight. When people report that problem, the police simply do not have the resources to respond in the way that the community wants and expects.
In the west midlands, as I know from my constituency, we are blessed with some of the greatest police officers in the business. It was five years ago that I had to go and give thanks to PC Adam Koch, who had literally thrown himself onto a knifeman in one of our mosques in Ward End. He put his life on the line to protect the lives of the worshippers in that mosque. Today, we have great police officers such as Sergeant Hanif, who leads an extraordinary team across east Birmingham, cracking down on drugs and drug dealing, seizing the proceeds of crime and taking firearms off the streets at every opportunity. The relationship of trust that he has built with the community has transformed the amount of intelligence coming in to the police and the effectiveness of the police in response.
What great police officers such as Sergeant Hanif and PC Adam Koch need is a Government who are on their side, rather than a Government who are determined to cut their service to ribbons. As my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) so eloquently put it, West Midlands police is now the smallest it has been since it was created in 1974. It has suffered real-terms cuts of something like £145 million. The idea that somehow different decisions on the precept could have corrected a cut on that scale is frankly fanciful. Given the rise in crime that we have in the west midlands, and the fact that we are one of the most dangerous hotspots for counter-terrorism policing in the country, it beggars belief when we put that risk of harm alongside the cuts we have had, which are so different from the financial settlements that other police forces have enjoyed.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
Will the right hon. Gentleman give way?
Liam Byrne
I will happily give way; perhaps my close neighbour can tell me how it is that Hampshire can enjoy a different settlement from the West Midlands police force when we have a threat assessment that is so very different.
Mr Mitchell
I just want to be clear: the right hon. Gentleman refers, quite rightly, to the fact that the west midlands is a hotspot for some of the specialist terror policing, but will he also acknowledge that the Government have, quite separately, given significant increases of funds for that very purpose?
Liam Byrne
There has been a provision for counter-terrorism policing, but, as the right hon. Gentleman knows better than I do, neighbourhood policing is the frontline of the fight against terrorism in this country. The stronger the frontline, the safer we are. In the west midlands, our frontline is being cut to shreds.
Mr Jim Cunningham
My right hon. Friend will notice that in an intervention earlier I mentioned Willenhall in particular, where there have been public meetings. It is strange when we talk about fighting terrorism that there is a police station in that area in which high-profile prisoners are kept. I wonder where in the west midlands they will put them if there are any further arrests.
Liam Byrne
Exactly. Those threats are now multiplying across the region.
I respect the task that the Police Minister has to try to perform. He has taken the time to listen to representations from west midlands MPs of all political stripes. I am afraid that he was not backed up by either the Prime Minister or the Chancellor; they did not give the Home Office in general, and him in particular, the financial settlement that we needed in order to safeguard our communities. For us in Hodge Hill, that means that we now have the proposed closure of the Shard End police base—something that both Councillor Ian Ward and I disagree with.
We need a police base in Shard End, because—as was explained to me during my own glorious fortnight as the Minister for police and counter-terrorism, before I went on to serve a further two years as a Home Office Minister—neighbourhood policing creates a different kind of relationship between the police service and the community. It unlocks a level of trust, intelligence and insight that makes it much easier to crack down on crime. When we shut down police bases, we weaken the frontline in that fight. I do not want to see crime, drug dealing and violent crime rise any further. That is why I call on the Minister today to fix the problem in the West Midlands Police finances, give us the money we deserve and let our brave men and women of the West Midlands Police service get on with the job they are so dedicated to doing.
Mr Andrew Mitchell (Sutton Coldfield) (Con)
It is a pleasure to follow my parliamentary neighbour, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), and to congratulate my other parliamentary neighbour, my hon. Friend the Member for Solihull (Julian Knight).
I will add a few points to those that have already been made. Of course it is common across the Chamber that we support and praise the excellent work that the local police do. I pay particular tribute to Jane Bailey, who is responsible for policing in the royal town of Sutton Coldfield and is the latest in an excellent line of chiefs of police. This is also a community of Members of Parliament who, on the whole, work quite well together on common themes. I think of GKN, of homelessness and our common purpose—I say this particularly to the Police Minister—in trying to ensure proper funding for the families of those who suffered so grievously and have not yet got closure following the terrible bombings in Birmingham, many years ago.
We do co-operate, but today there is a raw party political difference between us, which was set out clearly by my parliamentary neighbour, the hon. Member for Birmingham, Erdington (Jack Dromey). I agree with quite a lot of what the right hon. Member for Birmingham, Hodge Hill said about the nature of policing. My principal complaint, however, and the reason why I am pleased to support the case put by my hon. Friend the Member for Solihull, is that does not appear to have been any proper consultation. Indeed, I learned about the proposition of closing the royal town’s police station through a leak from a Labour councillor, which then appeared in the local press. That is not the proper way to consult.
There is a consultation going on now in the royal town, through the town council, and this is the motion that was passed very strongly last week. It said:
“This Council is extremely concerned that the West Midlands Police Crime Commissioner (PCC) is proposing to close Sutton Coldfield Police Station…The Council notes that the PCC has made a number of budgetary decisions, such as investing heavily in buildings elsewhere and cutting front line policemen, that materially disadvantage our Town no longer meeting the needs of our community and demands in the strongest terms that the closure decision is reversed immediately.”
It went on to say:
“The Council further registers its disappointment that there has been zero engagement by the PCC with the residents or their elected representatives.”
It is that lack of engagement that I wish to bring to the Minister’s attention.
In her opening speech, Janet Cairns made a truly excellent point. She said:
“I understand that the service could move to another area or to another building but it would not be the same, it would not be the bespoke service that we have now. It would not give us confidence as residents”.
The other councillors who spoke made the same point. There is a strong feeling that a party political point is being made here in identifying Solihull and Sutton Coldfield as the two key targets that lose their major police facility. Councillor David Allan said, “It’s a political attack on the Tory heartlands.”
I am concerned at the lack of consultation and very specifically at the way in which it appears that Conservative areas are being targeted. No one doubts that this is a tough settlement, but I will ask the Minister three very brief questions.
Mr Philip Hollobone (in the Chair)
Order. It is not for me to interfere, but I am afraid that the right hon. Gentleman simply will not have enough time if the hon. Gentleman intervenes.
Mr Mitchell
I apologise to the hon. Gentleman. I have three questions for the Police Minister. First of all, will he confirm that, although we can do almost anything with statistics, funding this year over last year is up by £9.5 million, so those who referred to this year’s “cuts” are either innumerate or deliberately deceiving our constituents? Secondly, will he confirm that the West Midlands police has reserves of £121.1 million, or 20.2% of overall funding—the average figure across England and Wales is 15.1%—and there has been an increase of just under £27 million in those reserves since 2011? Thirdly, and finally, will he confirm that there is scope for greater efficiency, and that the report by Her Majesty’s inspectorate of constabulary and fire and rescue services on the efficiency of West Midlands police downgraded the force’s overall efficiency level rating? As I understand it, the professional opinion is that West Midlands police was not as efficient in its use of taxpayers’ money as it should be—
Mr Philip Hollobone (in the Chair)
Order. We come now to the Front-Bench speeches. I call Louise Haigh.
Louise Haigh (Sheffield, Heeley) (Lab)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Solihull (Julian Knight) for securing the debate, as it allows us to set the record straight on police station closures—not only in the west midlands, but across the country.
I start by zooming out for a second and taking a look at what has happened to police stations and front counters over the last eight years. More than 40% have been shut during the time the Conservative party has been in government. In 2010, there were 901 front counters able to deal with the public; the figure today stands at just 510. West Mercia, just next door to the west midlands, now relies on only three front counters, down from 31. Warwickshire has four, down from 14. Bedfordshire has just two to serve the entire county. In Cambridgeshire last month, Jason Ablewhite, the Conservative police and crime commissioner, was forced to announce the closure of one of only two police stations open to the public left in Cambridge as part of a massive savings drive.
Collectively, that handful of stations now serve millions of people. In those counties, stations were a fixture in each town. They have disappeared. The face-to-face contact and the trust that that engendered, as my right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) said, has gone, as officers have been reduced to offering a purely responsive service. Officers now routinely have to travel large distances to book in suspects or take evidence. Preventive and proactive crime prevention, which would have taken place out of a community hub, has now been diminished.
We could make party political points in each of these cases. After all, the closures mentioned in all those examples were under Conservative PCCs. However, the public would recognise how absurd that is—they would call me disingenuous—because the chief constables, in consultation with the PCCs, can only play the hand they have been dealt by the Government in Westminster. That hand has been anything but helping. More than £2.7 billion has been cut from the overall police budget in real terms since the Conservatives came to power, with more than 21,000 police officers lost. Meanwhile, crime has soared and demand has rocketed. Communities have noticed it; they see police officers less and they feel increasingly insecure.
The force in the west midlands knows that as well as any. The last eight years have been truly unprecedented in its history, as we have heard. It has reached the bare bones—of that there can be no doubt. The choice facing the West Midlands chief constable, and indeed the PCC, is now an unenviable one. Do they add to the toll of 2,000 officers lost, when more than 80% of the force’s budget is for staffing, or do they make savings in the estate? Is that a choice any force would like to face? Of course not, but it is a choice that has been imposed on them.
Julian Knight
Does the hon. Lady not recognise that, as my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) said, with £121 million in reserves, the police and crime commissioner could at least wait and show us precisely what he plans for my borough and its policing?
Louise Haigh
I do not know whether the hon. Gentleman has spoken to either the PCC or the chief constable recently, but I have a detailed plan from the chief constable of what he plans to spend his reserves on. The force currently has £106 million in reserves. By 31 March 2019, it will have £54 million, of which £12 million is required by the National Audit Office to be held for general reserves, and £10 million will be held for an insurance reserve. By 2020, reserves will be held only at levels legally required and necessary for day-to-day operational policing.
The hon. Gentleman mentioned earlier that he had not heard of any capital projects going ahead in the west midlands. In fact, Her Majesty’s inspectorate of constabulary has praised West Midlands police for preparing for the future and investing in a huge IT transformation project and data-driven analysis, so it is interesting that he does not know of those projects, or indeed what the reserves are being spent on.
Julian Knight
I did not actually say that there were no capital projects; I said that the money from the sale of the police stations could not be used to directly fund capital projects unless they could be shown to be money-saving.
Louise Haigh
I think the hon. Gentleman said that he was not aware of any capital projects benefiting Solihull. There are two that will directly benefit Solihull and indeed will replace the front station access that is being closed down.
Incredibly, the outlook that I just set out is set to get even worse as a result of further real-terms cuts that Conservative Members from the west midlands voted for last month. David Jamieson has warned that, after receiving the biggest cut in the entire country, West Midlands police will need £22 million just to stand still. This is not only at a time when crime is soaring: 999 and 101 calls have reached levels that only used to be received on new year’s eve; missing persons are being reported to the police at unprecedented levels; and mental health calls are being dealt with by the police at levels never seen before. Some 83% of calls to command and control centres are now non-crime, while crime and antisocial behaviour is soaring.
Counter-terror spending was also mentioned, as well as the reserves. Both are used by the Government and Government Members as a diversion, saying that money is being spent on policing when in fact, for every £1 spent on counter-terror, £2-worth of demand is generated for local forces. Neither of those can be said to be reducing demand and increasing funding to West Midlands police or any other police force across the country. The fact is that six Conservative Members from the west midlands voted for these cuts and are now crying foul when the chief constable has been forced to set out their consequences.
The 24 buildings that the chief constable plans to release will save £5 million per year. Regrettably, that will not make up for the real-terms cut in Home Office funding for West Midlands in the year ahead. Nevertheless, even while making those savings, which have been forced on the force, the plans will retain all 10 front counters, recognising the vital service that they offer to the public, while tech and data innovations will mean that the police are not required to return to the station as often as they used to.
However, with crime continuing to soar in the west midlands—14% in the last year alone—further real-terms cuts are reckless, and the public are clear that the responsibility lies with the Government and with Government Members who voted them through. It is the Tories who took a reckless gamble with public safety, and now communities in the west midlands are paying the price.
Mr Philip Hollobone (in the Chair)
Will the Minister conclude his remarks no later than 5.28 pm, to allow the hon. Member for Solihull (Julian Knight) to respond?
The Minister for Policing and the Fire Service (Mr Nick Hurd)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I start by congratulating my hon. Friend the Member for Solihull (Julian Knight) on securing the debate. In my experience, few Members pressed me harder on the case for more support for the police in the run-in to the funding settlement. He is a tireless advocate on that point.
I also associate myself with the remarks from my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and the former Policing Minister, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), in praising the work of West Midlands police, which is recognised to be one of the most effective, innovative and important police forces in the country. My right hon. Friend asked for verification, and he is right that its efficiency rating was downgraded from outstanding to good. However, it is generally recognised that West Midlands police does an extremely good job under very difficult circumstances indeed.
What is the debate about? Labour Members have tried to make it a tribal debate about police funding. Listening carefully to what my right hon. Friend the Member for Sutton Coldfield and my hon. Friend the Member for Solihull actually said, the debate is about accountability and respect to the public whom we serve as elected representatives. The point made to the House is that there has been a deficit and a failing in that respect, which I will address in my remarks. The reality is that—again, Labour Members have tried to shift around on this—we operate in a system of accountability, in which Ministers are thankfully not responsible for decisions on police stations in Solihull or anywhere else.
The accountability to the public that we serve is through the directly elected police and crime commissioners. Whether Conservative or Labour, PCCs are accountable to the public for these kind of operating decisions, which matter because the public care about them. People are sensitive about police stations, as I know from my own area. We need to be clear about where accountability lies. The attempt to blame others is disingenuous. Accountability needs to be clear: the directly elected PCCs, whether Labour or Conservative, are accountable to the public for those decisions. We do these issues a disservice if we try to fog that.
In this context, let us be clear: the PCC in this case—I would say the same whether he was Labour or Conservative —has a very difficult job to do, because resources are constrained. However, the reality is that any PCC has active choices. When they have active choices, they have to make an argument to the public about why they are taking the decisions that they are. In this case, he has active choices because there is more money in the West Midlands police system.
Again, my right hon. Friend the Member for Sutton Coldfield is absolutely right: as a result of the funding settlement, which Labour voted against, there will be an additional £9.5 million for West Midlands police, which is a 1.8% increase. As has also been pointed out, West Midlands police has significant levels of reserves—more than £100 million as of March 2017, which is 20.2% of its total cash funding and five percentage points above the national average.
Here is the critical point, which has not yet been made: those reserves have increased by £26.9 million since 2011. That is the context for all this doom and gloom about savage cuts to West Midlands policing: the police and crime commissioner has increased his reserves by £26.9 million. One can do that only by not spending the money that one has been given by the taxpayer. The police and crime commissioner has active choices at this moment in time; it is disingenuous to pretend otherwise.
Mr Hurd
In that context, I would suggest to the police and crime commissioner that instead of blaming the Government and everyone else, he has to make an argument to the people whom he serves, and there is an argument to be made. The right hon. Member for Birmingham, Hodge Hill and the hon. Member for Birmingham, Selly Oak (Steve McCabe) were actually almost thoughtful on the point about the debate that can be had about the role of police stations in 21st-century, modern policing. I am talking about looking at the data about how the public actually use them and at the potential for mobile working. There is a debate and an argument to be had. It is not good enough to fog that out by simply blaming the Government.
Mr Mitchell
The point about the reserves is incredibly important. It was made eloquently by the experienced Conservative town councillor in Sutton Coldfield, Councillor Ewan Mackey. The people of Sutton Coldfield demand an answer to the question—one of the three that I posed to the Minister—about why the reserves have had to be increased so much.
Mr Hurd
It is an active choice made by the police and crime commissioner. The irony of the situation is that the hon. Member for Sheffield, Heeley (Louise Haigh), who speaks from the Front Bench for the Labour party on the police, has more information about the police and crime commissioner’s plans for the use of reserves than the elected Member of Parliament for Solihull does. What does that say about the flows of information between the elected police and crime commissioner and the elected representatives for the west midlands? That is why I am pressing police forces across the country to be more transparent about their use of reserves—because they are sitting on £1.6 billion, and the figure has increased since 2011 by more than a quarter of a billion pounds. It is the public’s money, and they have a right to better information about how it will be used, particularly when they are being confronted with hard choices and decisions.
My final point is about the consultation. I am arguing that the PCC has to take an argument to the public. There is an argument to be made about rationalising the police estate and about the role of police stations. It is not good enough to blame others. The PCC should make the argument and—I do not want to be accused of being tribalist, because that would be unfair—he might want to take a lesson from the Labour Mayor of London, who also went out to consultation on closing police stations. He made a complete hash of it, I would say, but to his credit and that of his office, when confronted with evidence of the hash they were making, he changed his mind. He planned, in my constituency, to close all police stations apart from one.
Faced with the evidence that we presented about the folly and the lack of preparation, the Mayor has actually changed his mind and is re-consulting on Pinner, is keeping Ruislip station open and is working with Hillingdon on its plans to buy Uxbridge police station. He has been open-minded. That is a Labour Mayor of London—I do not want to be accused of being tribal—showing some genuine flexibility in the face of public opinion.
I have heard from my colleagues about the consultation. If the PCC has gone into the consultation in the way described—I have heard about Members of Parliament hearing things at second hand, from other people; I am hearing the words “zero engagement with people”; and I am hearing about a short consultation period—I suspect that he is going to fail on this, and therefore I would urge him to listen quite carefully to the people who represent the people whom he serves and to recognise that on the issue of people’s police stations, which is one of great sensitivity, he has not taken people with him. I therefore urge him to think again.
Jack Dromey
On accountability, which is very important, does the Minister accept responsibility for £145 million-worth of cuts to the West Midlands police service budget, the loss of 2,000 police officers and, more recently, a real-terms cut in funding for the police service? That is surely a matter for the Government, because the Government have made the decisions. Does the Minister accept responsibility for those decisions?
Mr Hurd
I accept responsibility for a funding settlement that will increase police funding by £450 million next year. That means that we will be spending £1 billion more next year on our police system than we were in 2015-16. It is a settlement that the hon. Gentleman and others voted against.
However, the point that I am trying to make in this debate is that I do not think that this is an issue about funding in the west midlands, because we are talking about relatively small sums of money in the context of an organisation with a budget of over half a billion pounds a year. I think that this is an issue of accountability and a flawed process of consultation with the people whom we serve and the police and crime commissioner serves. Therefore, I urge him to listen very carefully to the representations made by Conservative Members of Parliament: my right hon. Friend the Member for Sutton Coldfield and my hon. Friends the Members for Solihull and for Aldridge-Brownhills (Wendy Morton). Clearly, something has gone wrong in the process of consulting and engaging with the people whom the PCC represents.
This matter should not be shrouded in tribal rhetoric about funding the police. Funding for West Midlands police has gone up. They are sitting on large reserves that have grown since 2011. There are active choices. In that context, the police and crime commissioner should show some respect to the people whom he serves and engage in a meaningful dialogue and engagement with the people on an issue on which they are clearly very sensitive.
Julian Knight
I thank the Minister and, indeed, everyone who has spoken in a debate that has been interesting and, at times, quite feisty—that is right, because passions are running incredibly high. Police stations are hugely important to our communities. They are a focal point; they are a reassurance to our communities, and it is right that we look to defend them. At the same time, though, we must always be cognisant that there can be options whereby this can shift; things can change over time. I am very willing to talk with the police and crime commissioner properly about what we do with policing in Solihull.
However, as the Minister stated, there has been a failure of respect. That is such an apposite phrase—“a failure of respect”. That is what the consultation process has shown. The police and crime commissioner has made an active choice to close my constituency’s final police station—a police station in a borough of 200,000 people that will no longer have a police station because he has chosen to close it. He can make another choice today, after hearing this debate—to pause, to reflect, to consult properly and to use the reserves in order to have time so that he can properly map out for my constituents, and for all those who also face police station closures, what precisely he is going to do, rather than, frankly, relying on a wing and a prayer.
Question put and agreed to.
Resolved,
That this House has considered the proposed closure of police stations in Solihull and the West Midlands.
Written Statements
(6 years, 9 months ago)
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ECOFIN: 20 February 2018
(6 years, 9 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 20 February 2018. The UK was represented by Mark Bowman, director general, international and EU, HM Treasury. EU Finance Ministers discussed the following:
Early morning session
The Eurogroup President briefed Ministers on the outcomes of the 19 February meeting of the Eurogroup, and the Commission provided an update on the current economic situation in the EU. Ministers also discussed developments regarding United States tax reform.
Appointment of the vice-president of the European Central Bank
The Council agreed a recommendation confirming the nomination of Luis de Guindos as vice-president of the European Central Bank.
Financial services legislation
The Bulgarian presidency provided an update on current legislative proposals in the field of financial services.
Sustainable finance
The Council exchanged views on the recommendations of the high-level expert group on sustainable finance.
Discharge of the 2016 EU budget
Ministers approved a Council recommendation to the European Parliament on the discharge to be given to the Commission in respect of the implementation of the 2016 EU budget.
EU budget guidelines for 2019
Ministers adopted Council conclusions on the guidelines for the 2019 budget, which will serve as a point of reference in the forthcoming budgetary cycle.
Public procurement and strategic investment
The Commission presented information on the public procurement strategy it adopted on 3 October 2017.
[HCWS510]
Financial Services
(6 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen)
Following the Financial Conduct Authority’s (FCA) announcement that it has now concluded its enforcement investigations into the Co-op Bank and related individuals, I have today laid a direction before Parliament requiring the Prudential Regulation Authority (PRA) to carry out an independent review into the prudential supervision of the Co-operative Bank between 2008 and 2013, using powers under section 77 of the Financial Services Act 2012.
In November 2013, the then Chancellor of the Exchequer announced the Government’s intention to direct the regulators to launch an investigation into the events at the Co-operative Bank, following its withdrawal from the bidding process to purchase 632 bank branches from Lloyds Banking Group — known as Project Verde. It was stated at the time that this review would not take place until the conclusion of all regulatory enforcement action relating to the Co-operative Bank. Today’s announcement by the FCA means that this has now happened.
The review will look at the actions, policies and approach of the Financial Services Authority, and latterly the PRA, as the institutions with statutory responsibility for the prudential supervision of the Co-op Bank during the period in question. It will focus on the outstanding questions identified by the House of Commons Treasury Committee in its 2014 report ‘Project Verde’ (HC 728-I). As recommended by the Committee, the review will have access to all relevant documents and correspondence, including the record of Government contacts concerning the Lloyds “Verde” bidding process.
I have approved the PRA’s appointment of Mr Mark Zelmer to carry out the independent review on its behalf. The review is expected to run for 12 months, after which HM Treasury will publish a report of the review’s findings. A copy of this report will be laid before Parliament.
The Government are committed to creating a stronger and safer banking system. A vital part of this is ensuring that our regulatory system can learn from past events. The launch of this independent review is a further demonstration of this commitment.
[HCWS512]
Double Taxation Convention: United Kingdom and Mauritius
(6 years, 9 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the Double Taxation Convention with Mauritius was signed on 28 February 2018. The text of the Protocol is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS513]
Contingent Liability
(6 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Defence (Guto Bebb)
I am pleased to inform the House that I am today laying a departmental minute to advise that the Ministry of Defence (MOD) has received approval in principle from Her Majesty’s Treasury (HMT) to recognise new contingent liabilities associated with the Astute boat 7 “whole boat” contract. Negotiations are ongoing and the contingent liabilities will come into force on signature of the contract.
The departmental minute describes the contingent liability that the MOD will hold as a result of placing the Astute boat 7 “whole boat” contract, which will provide for the production and testing of the vessel. The maximum contingent liability against the MOD is unquantifiable and will remain until the out of service date of the submarine.
It is usual to allow a period of 14 sitting days prior to accepting a contingent liability, to provide Members of Parliament an opportunity to raise any objections.
Within the boat 7 contract, BAE Systems Marine Ltd limit their exposure to product liability to £1 billion per incident and £300 million in any 12-month period. This limits the contractor’s exposure for claims by the MOD for losses associated with the product being defective or deficient, and creates an exposure for MOD to third party claims against the contractor for losses associated with the product being defective or deficient. It is the view of the Department that the likelihood of any claim is remote.
The boat 7 contract also includes a narrative Shipbuilders Risks Indemnity (SRI) condition rather than Defence Condition (DEFCON) 663 which would provide a standard form of SRI.
[HCWS516]
National Employer Advisory Board
(6 years, 9 months ago)
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The Secretary of State for Defence (Gavin Williamson)
The Ministry of Defence (MOD) has conducted a review of the role and status of the National Employer Advisory Board (NEAB), a non-departmental public body sponsored by the Department.
The review found that the NEAB had made a major contribution to shaping Defence’s relationships with employers, particularly in connection with the Future Reserves 2020 White Paper (2013). However, although there was a continuing requirement for support in this area, the scale of need, in the foreseeable future, was unlikely to be sufficient to justify a standing board, constituted as a non-departmental public body, and committed to meeting a set number of times each year.
After careful consideration, I have decided that the NEAB should be dis-established with effect from 1 April 2018. In doing so, I have taken account of the growing success of defence relationship management (DRM)1, and the emergence of other ad hoc sources of advice on employer issues, which together are now well placed to meet our current requirements in this area.
I would like to take this opportunity to thank the chairman and individual members, past and present, for all they have done to support the MOD.
1 Defence Relationship Management, a Future Reserves 2020 White Paper commitment, was created in 2014 to manage the MOD’s relationship with employers in support of the Defence People objectives including the recruitment and retention of reserves; resettlement of service leavers; rehabilitation of wounded, injured and sick; and improving employment opportunities for service spouses and partners.
[HCWS514]
Water Supplies: Severe Weather
(6 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dr Thérèse Coffey)
The exceptionally cold spell last week and the rapid thaw that followed has caused widespread water supply issues in the country. Over the weekend and at the start of the week tens of thousands of people across the south-east of England have experienced loss of water supply in their homes and even more have had to cope with low water pressure following leaks from burst pipes. We recognise that this has been a difficult time for many residents and businesses.
The immediate priority is to get water back up and running for those people who have been affected, in particular vulnerable people, and businesses, hospitals and care homes. Water companies have been following standard practice including isolating bursts and redirecting water to mitigate this problem. Bottled water has been provided in the areas most badly affected and water has been provided by tanker to keep hospitals open.
Today I have chaired a meeting of water company chief executives, OFWAT and Water UK to make sure that water companies in England are working to restore supplies as quickly as possible, and that water companies in other parts of the country are preparing for the thaw as it spreads across the country, including learning any lessons from places that have already experienced higher temperatures.
The challenge the sector faces is the sheer number of bursts following the rapid change in weather across multiple companies’ networks. Many of these have been relatively small and difficult to detect; some of the loss of pressure is due to leaks in private homes and businesses.
Water companies have been working hard to address the issues. This includes increasing their staff on the ground out identifying where bursts have occurred and repairing them, as well as moving water across their networks to balance supply across the areas they serve. We should recognise the efforts of the engineers and all involved working through the night to fix these problems. Once the situation is restored to normal we expect OFWAT to review the performance of the companies during this period.
This Government actively support a properly regulated water sector. We have high expectations of water companies on increasing their investment in their water and sewerage networks. This was laid out clearly in the strategic policy statement issued to OFWAT last September, and reinforced by the Secretary of State for Environment, Food and Rural Affairs last week when he addressed the water industry and said that he expects the industry to increase investment and to improve services by maintaining a resilient network, fixing leaks promptly where they occur and preparing for severe weather.
[HCWS509]
Biological and Toxin Weapons Convention
(6 years, 9 months ago)
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The Minister for Europe and the Americas (Sir Alan Duncan)
States parties to the biological and toxin weapons convention (BTWC) held their annual meeting 4 to 8 December 2017. This was the first such meeting since the convention’s eighth review conference in November 2016, on which I made a statement to the House on 10 January 2017, Official Report, Vol. 634, column 8WS [HCWS400].
The convention is one of the foundation stones of the international disarmament and arms control system. The UK, one of the convention’s three depositary Governments, is strongly committed to its effective and universal implementation as an essential instrument in helping combat and mitigate the threats posed by biological warfare. Our objectives are to enable the convention to remain relevant in addressing the evolving threats of biological or toxin weapons being developed or used, and to keep pace with the rapid and diverse advances in many fields of science and technology.
At December’s meeting of states parties, we sought to agree a substantive new programme of work to advance our objectives, through a series of expert technical meetings leading up to the next review conference in 2021. The UK, with the US and Russia, the two other depositary Governments for the convention, worked with many other states throughout 2017 to build consensus around common elements of such a substantive new work programme.
I am pleased to inform the House that this hard work is paying dividends. States parties joined consensus to agree a new programme of expert meetings each year from 2018 up to and including 2020. The meetings will discuss issues such as the preparedness and response to any potential use of biological and toxin weapons, and developments in science and technology. The agreed programme will discuss and promote common understanding and effective action on these issues, aiming to strengthen the implementation of the convention as a whole to respond to evolving challenges. Importantly, future annual meetings of states parties have authority to respond to these expert discussions, including by taking necessary budgetary and financial measures by consensus with a view to ensuring the proper implementation of the work programme.
This outcome was the product of determined diplomacy over a number of years. The achievement is all the more notable after the disappointing result of the 2016 review conference, and a cycle of relatively unproductive meetings which had lowered expectations of progress on a more ambitious work plan.
The UK will continue to work hard to support further tangible progress towards universal and effective national implementation of the convention, and to enable it to maintain its relevance and vital role as a keystone agreement in the broader international disarmament and non-proliferation architecture.
[HCWS515]
Abortions in England for Women in Northern Ireland
(6 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Health (Jackie Doyle-Price)
On 29 June 2017, the then Minister for Women and Equalities wrote to MPs and informed them that women normally resident in Northern Ireland would no longer be charged for abortions received in England. An update informing the House of progress was given on 23 October 2017. The scheme is now in place and I am pleased to provide a further update.
The three main providers of abortions in England have been awarded grants by the Department of Health and Social Care to fund service provision in England for women resident in Northern Ireland. The cost of this service will be met by the Government Equalities Office with additional funding provided by HM Treasury. A small number of procedures will continue to be provided through the NHS where this is necessary for medical reasons. NHS providers will reimbursed by the Department of Health and Social Care.
Women from Northern Ireland seeking medical support in England are eligible for:
A consultation with an abortion provider in England, including an assessment of whether the legal grounds for an abortion are met;
The abortion procedure;
HIV or sexually transmitted infection testing as appropriate;
An offer of contraception from the abortion provider; and
Support with travel costs if the woman meets financial hardship criteria.
This is comparable with the experience that women in England receive.
We have established a central booking service that will be run by the British Pregnancy Advisory Service. The central booking service will simplify the process for women who choose to access these services. It means that women from Northern Ireland will have a single telephone number to call and an appointment will be made with the most appropriate provider, based on the woman’s requirements, her medical condition and the availability of the providers. The central booking service has been up and running since 1 March 2018.
This scheme does not change the position in relation to the provision of abortions in Northern Ireland. Our scheme does not include the provision of any services in Northern Ireland.
[HCWS511]
House of Lords
Death of a Former Member: Lord Stewartby
The Lord Speaker (Lord Fowler)
My Lords, I regret to inform the House of the death of the noble Lord, Lord Stewartby, on 3 March. On behalf of the House, I extend our condolences to the noble Lord’s family and his friends.
Israel and Palestine
Lord Polak
To ask Her Majesty’s Government what action they are taking to promote coexistence between Israelis and Palestinians.
Lord Polak (Con)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I refer the House to my non-financial interests recorded in the register.
Baroness Stedman-Scott (Con)
My Lords, I thank the noble Lord for his Question. Ultimately, the only way to achieve coexistence is through a negotiated two-state solution that ends the occupation and delivers peace for both Israelis and Palestinians. This is why the UK continues to support renewed peace negotiations between the parties. The UK is also supporting work that helps create the necessary environment for a two-state solution, including by providing up to £3 million over three years to support coexisting programming.
Lord Polak
I thank my noble friend the Minister for her Answer. I warmly welcome last week’s announcement of the impending visit to the region of His Royal Highness the Duke of Cambridge—a first official royal visit to Israel and a great way to celebrate its 70th anniversary. I also welcome the Government’s support for coexistence programmes, which lay the foundation for peace. For example, Israeli doctors and nurses at the charity Save a Child’s Heart have provided life-saving surgery for over 2,000 Palestinian children at the Wolfson hospital in Holon, which many Members of your Lordships’ House have visited. Does my noble friend agree that the Government should support projects such as this?
Baroness Stedman-Scott
Save a Child’s Heart is clearly doing admirable work. We recognise that its programmes have been commended by a number of UK parliamentarians. The UK supports of coexistence work to foster understanding between communities on both sides of the conflict to help support the necessary environment for a just and peaceful two-state solution.
Lord Anderson of Swansea (Lab)
My Lords, any bridge-building on our part—I am sorry.
Baroness Stedman-Scott
It is good to see noble Lords so excited about these things. DfID’s £3 million co-existence programme will facilitate interaction between youth leaders and religious communities and strengthen co-operation in the health sector. This will help Israelis and Palestinians to work together to achieve tangible improvements in their lives and build understanding between people. There are currently no plans to fund Save a Child’s Heart as part of DfID’s coexistence programme. DfID’s programme will help tackle a neglected tropical disease with co-operative engagement from health academics and senior health representatives for the well-being of both populations. We welcome the announcement of the forthcoming visit to the region of His Royal Highness the Duke of Cambridge.
Lord Singh of Wimbledon (CB)
My Lords, does the Minister agree that two-state solutions do not have a happy record and simply turn latent ignorance and prejudice into lasting enmity? We look at the partition of India into two states, when several million people were killed immediately and tens of millions were displaced. Closer to home, we can look at the island of Ireland and the conflict that has resulted there. Would it not be much better to look for the commonalities and common aspirations of the two communities and build on those rather than to divide a country and then have permanent enmity?
Baroness Stedman-Scott
I thank the noble Lord for his question. He does well to remind us of historical difficulties, which make it hard to achieve peace in difficult circumstances. However, we firmly believe that ultimately, the best way to promote coexistence is through a just and lasting resolution that ends the occupation and delivers peace for both Israelis and Palestinians.
The Archbishop of Canterbury
My Lords, the Minister recognises the importance of coexistence, which has been supported by the status quo nunc, established at the Sublime Porte by the Sultan in 1852, which has maintained coexistence between the Christians and the other communities in the Old City of Jerusalem since that date through times of war and peace. Following the welcome announcement after the recent crisis of discussions between the municipality of Jerusalem and the State of Israel and the heads of churches, will the Minister comment on how Her Majesty’s Government will support those discussions to bring about a re-establishment of the status quo and the continued flourishing of those churches, with their charitable work for coexistence?
Baroness Stedman-Scott
I thank the most reverend Primate for his question. It is not our place to comment on internal Israeli and property matters. However, we have concerns over Israeli legislation when it is applied to the Occupied Palestinian Territories, including east Jerusalem. The consul-general in Jerusalem and embassy in Tel Aviv are following matters closely. These are complex issues but we will do all we can to help the situation.
Baroness Northover (LD)
My Lords, does the Minister accept that, while both peoples need to learn to coexist, coexistence and military occupation are not easily compatible? Can she reassure the House that no project will be funded that will in any way normalise occupation or undermine Britain’s long-standing opposition to settlements as illegal under international law?
Baroness Stedman-Scott
I thank the noble Baroness for her question. We continue to press the parties on the need to refrain from actions that make peace more difficult. Settlement construction is a significant barrier to achieving this goal, as are terrorism, incitement to violence and the refusal by some to acknowledge Israel’s right to exist. The UK’s position is clear, and our long-standing position on the Middle East peace process is clear too. We support a negotiated settlement, leading to a safe and secure Israel living alongside a viable and sovereign Palestinian state, based on 1967 borders with agreed land swaps, with Jerusalem as the shared capital of both states, and a just, fair, agreed and realistic settlement for refugees. This will be difficult but we must try.
Lord Collins of Highbury (Lab)
My Lords, I welcome what the Government have attempted to do in funding projects, but we should be trying to amplify that work by working with our allies to ensure that they, too, make similar funding arrangements, working with the European Union and, not least, the United States, which has indicated that it will stop a lot of funding for Palestinians. Just what are the Government doing to ensure that others join us in this good work?
Baroness Stedman-Scott
I thank the noble Lord for his question. Our Government will work with all our allies to make sure that everything we do, we do together to make the situation better.
Agriculture: Gene Editing
(6 years, 9 months ago)
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Viscount Ridley
To ask Her Majesty’s Government what plans they have to encourage the use of gene editing in agriculture.
Viscount Ridley (Con)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper and, in doing so, I refer to my farming interests as listed in the register.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Gardiner of Kimble) (Con)
My Lords, the Government welcome research involving gene editing in this country and overseas in helping to breed pest and disease resistance into crops and animals more efficiently than is possible using traditional breeding methods. We see technological innovation as key in increasing productivity and sustainability in agriculture. This research is being carried out under the appropriate controls. We are committed to proportionate regulation that protects people, animals and the environment.
Viscount Ridley
I thank my noble friend for that reply. On the point about regulation, is he aware that Brazil, Argentina, Chile, Canada, the US and Sweden all now say that CRISPR and other gene-editing technologies should be regulated like any other plant-breeding technology—only faster and safer—and that Australia is about to follow suit? The Advocate-General of the European Court of Justice has strongly recommended the same course of action. Therefore, does my noble friend agree that the UK should urgently make a similar announcement to encourage the development of this economically and environmentally beneficial technology here in the UK?
Lord Gardiner of Kimble
My Lords, we are in communication with the regulators in the countries that my noble friend has referred to and are aware of the decisions that they have made. Those decisions are made on a case-by-case basis and that is the approach that we are taking. We agree that gene-edited plants, for instance, which could have been produced by traditional breeding do not need to be regulated as GMOs. In fact, the Government intervened in the ECJ case. I am aware of what the Advocate-General said and thank the United Kingdom for the helpful intervention. We are now waiting for the court’s judgment.
Lord Grantchester (Lab)
My Lords, I declare my interests as listed in the register. As the Minister said, the European Court of Justice will certainly decide this year whether gene editing will fall under the EU’s genetic modification in agriculture regulatory framework. Bearing in mind the implications not only for agriculture but for food and the Irish border, is this not another reason to stay within a customs union, or will the Government wish to set a new framework in order to agree a trade deal with America?
Lord Gardiner of Kimble
My Lords, under the European Union (Withdrawal) Bill we will bring the EU regulatory framework into UK law. As I said, this matter is for consideration on a case-by-case basis. We already know that the John Innes Centre in Norwich, for instance, is undertaking work on oilseed rape. This is all about ensuring that the 15% to 25% of the pods that shatter are no longer shattered by gene editing. There are all sorts of ways in which we can gain enormous benefits from gene editing, and that is why I am encouraged by what the Advocate-General has said.
Lord Deben (Con)
Is my noble friend aware that gene editing plays a very important part in helping agriculture to fight climate change, and does he accept that we need to move fast on that if we are to meet the needs that the Government have adumbrated in their Clean Growth Strategy?
Lord Gardiner of Kimble
My Lords, I agree with my noble friend. The work undertaken in this country and around the world on a case-by-case basis could be immensely important in terms of climate change and hunger, as well as in dealing with disease and pests in animals and plants. We in this country believe that we should advance these techniques.
Baroness Miller of Chilthorne Domer (LD)
My Lords, at least gene editing does not bring with it the threat that GMO technology used to bring. Nevertheless, when the Minister uses the term “more efficiently” in relation to gene editing, I think that he means “more quickly”. However, speed can cover up some of the issues that can still arise with gene editing. Therefore, will the precautionary principle still apply?
Lord Gardiner of Kimble
My Lords, as I said, this is about different research into different areas, and we believe that this is a force for good for the reasons that I have articulated. It is about advancing our knowledge of pests and diseases and enhancing animal welfare. Whether it is the work at the Roslin Institute at the University of Edinburgh on diseases in pigs—for instance, African swine fever—or other research, all this work on gene editing could make a remarkable difference and represent an advance in animal welfare. Those are the reasons we think it is a force for good.
Lord Cameron of Dillington (CB)
My Lords, I hope the Government are aware that these techniques developed in the UK could be beneficial to the wider world and its environment. Built-in resistance to pests and diseases means a big reduction in the use of chemicals in the developing world, where it is very hard to train smallholder farmers in the use of chemicals. Are the Government aware that in-built drought resistance could be crucial for sub-Saharan Africa? I hope the Government will encourage our research facilities to become world leaders in these techniques for the sake of the developing world’s smallholder agriculture.
Lord Gardiner of Kimble
My Lords, these techniques will be a force for good, not only in this country but particularly in helping the rest of the world feed itself. Therefore, we should advance this innovation. Certainly, our industrial strategy and our agritech strategy are designed to help agriculture, both domestically and around the world.
Lord Winston (Lab)
My Lords, as a professional gene editor, I wonder if I might add one tiny comment. In spite of the massive enthusiasm for gene editing, its results are invariably uncertain and, to some extent, unpredictable. Will the Government take that into account when they consider it, particularly in respect of animals and animal welfare?
Lord Gardiner of Kimble
My Lords, your Lordships’ House has many experts and I am conscious of my lack of knowledge. However, it is absolutely crucial that there are proper procedures. That is why there are well-established controls and why the use of animals in experiments and testing is regulated under the Animal (Scientific Procedures) Act. That is precisely for the reason that we want to advance animal welfare.
Brexit: Aviation
(6 years, 9 months ago)
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Lord Kirkhope of Harrogate
To ask Her Majesty’s Government, following the appointment of their General Aviation Champion, when they will set out how future regulation of general aviation will be handled after the United Kingdom’s withdrawal from the European Union; and how this will fit in with plans to reform United Kingdom airspace policy.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, regulatory oversight of general aviation is shared between the European Aviation Safety Agency and the Civil Aviation Authority. As the Prime Minister made clear in her speech last Friday, we will seek participation in the EASA system after we leave the European Union. The UK’s airspace modernisation programme, together with the aviation strategy, aims to provide a framework that enables industry, including general aviation, and communities to continue working together to deliver airspace modernisation while managing the environmental impacts of aviation.
Lord Kirkhope of Harrogate (Con)
My Lords, speaking as a GA pilot, I am very interested in success in that sector and in controlled airspace. Can my noble friend confirm that, as the review takes place, we will be looking at the possibility of reducing, not just increasing, controlled airspace to the advantage of that sector? The Minister referred to EASA. Can she please clarify that, in our negotiations for continued involvement with EASA, we will also be negotiating our position to remain members of the various committees under EASA? Can she clarify what our proposals are for international airspace access in the wider setting outside Europe?
Baroness Sugg
I thank my noble friend for his question. The Government absolutely recognise the importance of the general aviation sector, the economic footprint of which is an estimated £3 billion. On controlled airspace, as my noble friend will know, airports often want to increase controlled airspace for safety reasons, which are of course paramount, but when making decisions on airspace changes proposals, which can absolutely consider a reduction in controlled airspace, the CAA has a duty to consider the interests of all stakeholders, including general aviation.
Lord Sugar (CB)
My Lords, in respect of airspace modification, the Americans have for many years used GPS technology for airport approaches. This has resulted in the greater movement of traffic and greater efficiency. The Civil Aviation Authority has, up until now, had two experimental GPS approaches, one in Lydd and the other in Cambridge. Does the noble Baroness know when GPS approaches will be rolled out?
Baroness Sugg
The noble Lord is right: we are currently looking to roll out GPS use as part of our programme to modernise the airspace, which is well overdue. Planes currently have to fly lower and for longer to avoid the routes, and so modernisation and the introduction of technology will benefit the environment.
Baroness Randerson (LD)
My Lords, Brexit will probably mean additional bureaucratic hurdles for leisure and private pilots and planes flying to the rest of the EU. Can the Minister confirm whether this has been discussed in negotiations so far with the EU and the US? Can she further confirm whether a report in today’s Financial Times is accurate when it states that the US has so far offered us only a “standard bilateral agreement”, which would be a problem to our major airlines which have large foreign shareholdings?
Baroness Sugg
The Government have yet to start detailed transport negotiations with the European Union. The Prime Minister confirmed on Friday the ambition to seek participation in the EASA system, and we stand ready to continue those conversations as soon as we are able. I do not recognise the description of the talks with the US on a new UK-US air service agreement. The talks have been positive, we have made significant progress and both sides want to conclude these discussions soon.
Lord Trefgarne (Con)
My Lords, I declare my interests in this matter as set out in the register. Is my noble friend aware of the threat being faced by a number of smaller aerodromes in south-east England used by general aviation and how much it welcomes the remarks made yesterday on the national policy guidelines?
Baroness Sugg
My Lords, I thank my noble friend for that question. There will always be competing needs for housing and other uses of land, including for the general aviation industry. As my noble friend has rightly pointed out, yesterday the Government launched the new National Planning Policy Framework consultation, and the draft text for this consultation strengthens the language on airfields and aviation networks. It states that all planning policy should,
“recognise the importance of maintaining a national network of general aviation facilities”.
The Government have appointed a new general aviation champion, Byron Davies, who will be looking at this.
Lord Tunnicliffe (Lab)
My Lords, in announcing the appointment of the general aviation champion, Byron Davies, the Minister acknowledged the economic importance of general aviation, particularly smaller airfields, and the need for protection of airspace. Will she make sure that the role of general aviation in creating the next generation of airline pilots is held in the balance because, without general aviation to create that new generation, British aviation in general could be seriously damaged?
Baroness Sugg
I agree with the noble Lord on the importance of supporting general aviation. The skill sector within it currently supports more than 38,000 jobs, nearly 10,000 of them directly related to flying and the remainder in manufacturing. It is key that we continue to support this industry and those who are learning their skills in it.
Baroness Tonge (Non-Afl)
My Lords, while I welcome the jolly sounding appointment of a general aviation champion, will he—I think it is a he—be able to stop the now totally unaffordable third runway at Heathrow airport and thus lift the scourge on south-west London?
Baroness Sugg
I am afraid I will have to disappoint the noble Baroness in that our general aviation champion will not be dealing with the proposed new runway at Heathrow.
Lord Balfe (Con)
My Lords, clearly general aviation is going to have its demands but also this week we have been talking about the Government’s housing policy. Can the Minister tell the House how general aviation and the housing demand will be fitted together in the move forward?
Baroness Sugg
The general aviation champion is tasked with establishing a strategic network of aerodromes which will ensure the balance between transport and housing development priorities.
Baroness Sugg
Because Byron Davies is a Welshman, and we decided to call him the general aviation champion.
Democratic Republic of the Congo
The Archbishop of Canterbury
To ask Her Majesty’s Government what is their response to the escalating violence and suppression of peaceful protests across the Democratic Republic of the Congo.
The Earl of Courtown (Con)
My Lords, the UK remains committed to supporting peaceful elections in the Democratic Republic of the Congo. We repeatedly call on the Government to respect their citizens’ constitutional right to peaceful protest. Those responsible for the violence towards civilians, including peaceful protesters, must be brought swiftly to justice. The Minister for Africa, Harriett Baldwin MP, will reiterate the importance of fully implementing the political agreement signed on 31 September 2016 when she meets Prime Minister Tshibala on 7 March.
The Archbishop of Canterbury
My Lords, given the prevailing anarchy across the country which the central Government in Kinshasa seem unable to control and of which I was reminded when in conversation with the Archbishop of the Congo this morning, and given that the war has created 2 million refugees who are now living in conditions of immeasurable suffering and 4 million casualties over the past 20 years, along with the sad weakening of the already overstretched MONUSCO forces in recent months, are the Government prepared to use their influence on the P5 to seek to reinforce those MONUSCO forces and find ways of serving the poorest and most desperate of that region? What practical steps apart from merely speaking to Prime Ministers can the Government find to ensure that the commitments to elections are undertaken?
The Earl of Courtown
My Lords, I pay tribute to the most reverend Primate for his knowledge and the many visits he has made over the years to this area of Africa. MONUSCO’s mandate will be renewed this month. We will work with our partners at the United Nations to ensure that the mission’s priority remains the protection of civilians. In order to achieve this, we believe that the key lies in making MONUSCO a more effective force. Our ambassador and his team are working with the newly appointed head of MONUSCO, Leila Zerrougui, and her team to support MONUSCO’s work in restoring stability to the country. We will also work directly with a number of provincial governors across the country in order to deliver vital humanitarian and development aid. We will focus even more of our development effort at provincial level in the coming months.
Lord McConnell of Glenscorrodale (Lab)
My Lords, the last election in the Democratic Republic of the Congo now seems a long time ago. Given the success of ECOWAS in the west of Africa in ensuring that presidents leave office at the end of their terms, is it now time—with new Governments in southern Africa and elsewhere—for us to invest more in the regional organisation SADC to build capacity for the future rather than continue to pursue a dialogue with the Government of the Democratic Republic of the Congo, which seem unwilling to listen or to learn?
The Earl of Courtown
My Lords, I thank the noble Lord, Lord McConnell, for his question. The fact is that President Kabila, under pressure from the US and the African Union, has allowed the electoral commission to put forward a calendar for elections in December. Even imperfect elections and a widely accepted transfer of power would be a measurable step forward. Our medium-term objective is to help deliver orderly and credible elections so that the Congolese people can vote for a new president. However, I have taken note of the other comments made by the noble Lord.
Lord Chidgey (LD)
My Lords, President Kabila is now protected by the so-called “M23 Rebels”, who have regrouped for “special duties” which include butchery, murder and child rape. The United States and the EU have imposed targeted sanctions, including freezing assets and on business transactions, against Kabila’s chief of staff, General Olenga, and eight other senior officials. What guidance does our Congo trade envoy receive on avoiding the officials who are associated with these sanctions? Further, when did the Government last hold discussions about this crisis with US Ambassador Nikki Haley and the Kabila critic the President of Botswana, Seretse Khama?
The Earl of Courtown
My Lords, I shall take the last question first. As the noble Lord is aware, Botswana has a strong record of supporting improved human rights in the DRC. At the Human Rights Council last June, Botswana supported a resolution that, among other things, encouraged the DRC to intensify its efforts to put an end to violence in its territory and underlined the centrality of the agreement of 31 December 2016. The noble Lord mentioned our trade envoy. In fact, at present there is no trade envoy from the United Kingdom in the Congo. As regards anyone trying to carry out work in that part of the world, we have a duty to provide frank advice to any businessmen seeking to operate in the DRC.
Lord Alton of Liverpool (CB)
My Lords, in a country where 5.4 million people died in the second Congo war, has the Minister seen the United Nations report that agents of the state have murdered more than 1,000 people in the last year, and that the mutilated body of an outspoken critic, Father Florent Tulantshiedi, was found on Friday last, recognised only by his clerical collar? Given that President Kabila is today meeting multinational mining companies to seek increased royalties—in a country where people live on less than 80p a day—is it not time that economic leverage was used to challenge and bring to an end state-sponsored anarchic violence and unspeakable corruption, which lines pockets while children starve and critics are executed?
The Earl of Courtown
My Lords, the noble Lord, Lord Alton, paints a pretty grim picture of life in the DRC. There has been some movement in bringing people to account. In the last protest on 25 February, where three people were killed, the authorities identified the officers responsible for the deaths, who are now facing judicial proceedings. This is a change from previous practice. On all occasions when we have contact with the DRC Government, we emphasise the importance of human rights and how, putting it bluntly, they have to clean up their act.
Lord Collins of Highbury (Lab)
My Lords, one of the sad facts about the DRC is that intercommunal violence has been exploited by politicians, parties and warlords, and we certainly want to ensure that people are held to account. But in terms of the longer situation, will the noble Earl pick up what my noble friend Lord McConnell said about working with the African Union and neighbouring countries to ensure that we focus on building community cohesion and peacebuilding efforts to try to stop the cycle of violence?
The Earl of Courtown
The noble Lord makes a very sound point. As he is aware, the United States has great traction in the DRC, but in reality the African Union and regional levers will potentially have the greatest impact. On conflict resolution, which both noble Lords commented on, we are part of the international security and stabilisation support strategy. This focuses on five stabilisation pillars: democratic dialogue; security; restoration of state authority; return, reintegration and recovery; and sexual and gender-based violence.
Waste Enforcement (England and Wales) Regulations 2018
(6 years, 9 months ago)
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Lord Gardiner of Kimble
That the draft Regulations laid before the House on 25 January be approved. Considered in Grand Committee on 27 February
Laser Misuse (Vehicles) Bill [HL]
Tuesday 6th March 2018
(6 years, 9 months ago)
Lords ChamberRead Full debate Laser Misuse (Vehicles) Act 2018 View all Laser Misuse (Vehicles) Act 2018 Debates Read Hansard Text Amendment Paper: HL Bill 75-R-I Marshalled list for Report (PDF, 72KB) - (23 Feb 2018)
National Planning Policy Framework
(6 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, with the permission of the House, I will repeat a Statement made in the other place yesterday by my right honourable friend Sajid Javid, the Secretary of State for Housing, Communities and Local Government. The Statement is as follows:
“Mr Speaker, with permission, I wish to make a Statement on planning reforms that will help get our country building and deliver the right homes in the right places of the right quality. It cannot happen soon enough.
An entire generation are the victims of a housing crisis as prices and rents race ahead of supply. The average house price in England in 2017 was nearly eight times average income. Families in their early 30s are half as likely as their parents to own their home. This does not just hold these people back; it holds our country back.
For young people in this country, it is frankly disheartening when you do not see your hard work rewarded and see the dream of a home of your own—something your parents took for granted—remain just that: a dream. It is hard in these circumstances to feel that you have a stake in society, and we all lose out when that happens.
That is why this Government have taken action on all fronts to turn this situation around—efforts that are starting to bear fruit. We inherited a situation in 2010 where annual housebuilding had fallen to its lowest level in peacetime. Since then, we have delivered more than a million homes. And last year saw the biggest increase in housing supply in England, of more than 217,000 new homes, for almost a decade, the biggest annual increase in all but one of the last 30 years, with planning applications on a high and set to boost these numbers even further.
We have helped hundreds of thousands of people on to the housing ladder through Help to Buy. We are working to encourage landlords to offer longer tenancies and will promote more homes for rent on family-friendly, three-year tenancies in Build to Rent schemes. We are cracking down on rogue landlords and abuse of leaseholds, and taking steps to make renting fairer and tackle homelessness through earlier intervention.
We have launched a new, more assertive national housing agency, Homes England. We have launched an independent review led by my right honourable friend the Member for West Dorset on the gap between planning permissions granted and homes built. We are putting billions of pounds into the affordable homes programme and delivering essential infrastructure through the Housing Infrastructure Fund.
However, we know that there is a lot to do to deliver 300,000 homes a year in England by the middle of the next decade. Planning is an important part of that journey. Today, we are taking the crucial next step with the launch of consultations on the revised National Planning Policy Framework—the NPPF—and the reform of developer contributions. These measures set out a bold, comprehensive approach for building more homes more quickly in the places where people want to live— homes that are high quality and well designed, that people are proud to live in and to live next door to, and that are at the heart of strong, thriving communities—with much clearer expectations on local authorities and developers to deliver on their commitments, unlock land, fulfil planning permissions, provide essential infrastructure and turn those dreams of decent, secure and affordable homes into reality.
To that end, the revised National Planning Policy Framework implements around 80 reforms announced last year and retains an emphasis on development that is sustainable and led locally. But it also involves a number of significant changes. For the first time, all local authorities will be expected to assess housing need using the same methodology, which is a big improvement on the current situation where different councils calculate housing need in different ways, wasting time and taxpayers’ money. A standardised approach will establish a level playing field and give us a much clearer, more transparent understanding of the challenge we face.
But perhaps one of the biggest shifts is a change in culture towards a focus on outcomes achieved—the number of homes delivered in an authority’s area—rather than on processes like planning permissions. As it becomes easier to make plans more streamlined and strategic, this culture change will also encourage local authorities to work together to meet their communities’ needs.
We are also confirming the important protections for neighbourhood planning—plans produced by communities—that we introduced in December 2016 to guard against speculative applications. And we are going further, beyond the reforms that we previously consulted on. We are giving local authorities the tools to make the most of existing land, with an even stronger drive for increasing density, particularly in areas where housing need is high, and supporting councils to build upwards—but it will not be at the expense of quality, with high design standards that communities are happy to embrace remaining a priority.
These reforms also include more flexibility to develop brownfield land in the green belt to deliver on affordable housing need where there is no harm to the openness of the green belt. I know that even the mention of the words ‘green belt’ may cause some concern, but let me assure honourable Members that this is about building homes on sites that have been previously developed and not about compromising in any way existing protections that govern the green belt.
Our green spaces are precious and deserve our protection, which is why the Government are delivering on our manifesto commitment to give stronger protection to ancient woodland, demonstrating that you do not have to choose between improving the environment and delivering the homes we need; we can do both. So we are raising the bar across the board—for protecting our natural world and for local authorities to be more ambitious and accountable so that places such as London no longer deliver far fewer homes than they need. In areas such as the capital, where demand and affordability are going in different directions, it is especially important that there is less talk and more action, and it must be action that is more strategic and more realistic about housing need. Stronger leadership is needed to bring people together across sectors and boundaries.
That said, it is not all down to local government. Developers must also step up to help us continue to close the gap between planning permissions granted and homes built. In doing so, it is vital that developers know what contributions they are expected to make towards affordable housing and essential infrastructure, and that local authorities can hold them to account. However, we all know of instances where developers make these promises and later claim they cannot afford them. In truth, the current complex, uncertain system of developer contributions makes it too easy for them to do this and puts off new entrants to the market. This is not good enough, which is why we are proposing major reforms to developer contributions. As part of these reforms, areas will be able to agree a five-year land supply position for a year, reducing the need for costly planning appeals involving speculative applications.
I recognise that swift and fair decisions are important at appeal. To that end I will shortly announce an end-to-end review of the planning appeal inquiries process, with the aim of seeing what needs to be done to halve the time for an inquiry to conclude, while ensuring that the process remains fair. Going forward, we will continue to explore further significant reform of developer contributions, and there are other areas where we are considering pushing boundaries to really boost housing supply, including a new permitted development right for building upwards to provide new homes and finding more effective ways of supporting farmers to diversify and support the rural economy.
We will keep a strong focus throughout on making sure that we are exploring all avenues to meet everyone’s housing needs, whether that means implementing an exception site policy to help more people onto the housing ladder, giving older people a better choice of accommodation, giving planning authorities and developers the confidence to deliver good-quality, well-managed build to rent that serves a growing number of renters, or encouraging local policies for affordable homes that cater for essential workers such as nurses and police.
By giving everyone, whether they are renting or buying in the social or private sector, a stake in our housing market we give everyone a stake in our society. That is why I encourage honourable and right honourable Members and anyone who wants to see today’s generation enjoying the same opportunities as their parents to get involved and contribute to the consultations I have announced today. They will run until 10 May and I look forward to announcing the implementation of the National Planning Policy Framework in the summer. I am confident that the bold and ambitious measures we are proposing will have a huge impact, not just on the number of homes built but ultimately on people’s prospects and our prospects as a country, ensuring that no local authorities or developers can any longer be in any doubt about where they stand, what is expected of them and what they must do to help fix our broken housing market and deliver the homes that the people of this country need and deserve. I commend this Statement to the House”.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I thank the noble Lord, Lord Bourne, for repeating the Statement delivered in the other place yesterday. I draw the attention of the House to my relevant registered interests as a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association. It is a disappointing Statement, not in all of what it proposes to do but in how timid the proposals are and with the wrong focus.
Since 2010 the number of rough sleepers in England has trebled to almost 5,000 last year. The number of households living in temporary accommodation has risen almost continuously since 2010. The latest figures had 79,000 households in temporary accommodation, including 121,000 children, as I have referred to in this House before. Wage-to-mortgage differentials are making owning your own home, as the Statement says, only a dream. The ratio of wages to affordable rents in many parts of England means that in reality these are unaffordable for most people. Some of the measures in the consultation may make a difference but, as with all the Government do in the Ministry of Housing, Communities and Local Government, it is too little, too slow and the actions never quite meet the rhetoric.
It is regrettable that, despite all of us agreeing that there is a housing crisis and that we need to build more homes, council housing and the contribution that additional council housing could make are not mentioned at all in the Statement. There is one reference to,
“in the social or private sector”,
in the concluding remarks. The solution to the housing crisis will not be found just within the planning process or with developers—affordable homes that in large parts of the country are unaffordable for most people, or increased permitted development rights, which further exclude the local community from the planning process and other measures. We need to allow local authorities to build council homes and housing associations to build more homes on social rents. It will make a real difference to the housing crisis; where people are on benefits it will help reduce the Government’s housing benefit bill; it will help take the heat out of the market; and it will contribute to delivering the improvements to housing that we all want to see in terms of the numbers and the quality of the homes built, with appropriate infrastructure.
Planning departments have taken a huge cut in recent years and the increase in fees that has been allowed is welcome but it is still not enough. Again, I have called many times for full cost recovery on fees. I have suggested that the Government should find one council to pilot full cost recovery but so far they have refused to do that. There are still more than 400,000 approved planning permissions where not even one brick has been laid. I agree very much with the comments of the Local Government Association chair, the noble Lord, Lord Porter of Spalding, who said:
“If we want more houses, we have to build them, not plan them”.
Can the Minister explain why his friend in the other place, the Secretary of State, returned money earmarked for affordable housing to the Treasury? We have a broken housing market, as the Government keep reminding us, so why is the department not making every effort to spend every single penny to build the homes we need? If one area cannot use the money why can it not be used elsewhere? Can the Minister tell the House what work the department has done to see where money could be spent quickly if it is returned from other areas?
Can the Minister give us some idea of the timescale once the consultation has finished? There are a number of consultations going on in the department at the moment—for example, on letting agents’ fees and electrical safety checks—which I have raised regularly. At some point will we get some real, concrete action? It would be helpful if the Minister could tell us.
With regard to achieving sustainable development, I warmly welcome the comments about protecting ancient woodland and veteran trees. That is very good. But can the Minister say a bit more about how the Government propose that we really do achieve sustainable development, particularly with those authorities that are under delivering on housing in their own areas?
The noble Baroness, Lady Cumberlege, is in her place. I recall our discussions about plan-making last year. Can the Minister comment on plan-making and permitted development—is there a conflict there? If we are increasing permitted development rights in local areas and a local plan has been agreed, is there a conflict? Perhaps the Minister could comment on that.
We all agree that we need to deliver high-quality homes. I am very conscious that Governments of all persuasions made some terrible mistakes in the 1960s and 1970s in the quality of the homes they built. I do not want to see us build homes that are not of good quality and in years to come our successors have to deal with another problem with the quality of housing we have in our communities.
It is not in the Statement but the consultation includes the viability of town centres. We need our communities to be sustainable in terms of infrastructure, and town centres are really important. Can the Minister say a little bit about that? It is not just the planning; issues such as business rates are also important.
Finally, the consultation also talks about sustainable transport. Transport needs to be built into communities as well. I am conscious that we have a number of new towns. Ebbsfleet is one; I have asked a number of questions about that recently. There is some more work to be done to make sure that these new towns succeed.
I will leave my comments there and look forward to the Minister’s response.
Baroness Pinnock (LD)
My Lords, I draw attention to my registered interests as a councillor in the local borough of Kirklees and as a vice-president of the Local Government Association. The consultation document that the Government have issued details new changes and collates existing measures into an amended NPPF. The details will obviously be the subject of detailed debate at a later date. Today, we have the headlines of the general thrust of government policy on the planning process and housebuilding.
Over the past few days, the media have been full of rhetoric and what I regard as the unedifying spectacle of the Government in full blame-game mode. The blame is on local planning authorities for failing to allocate sufficient land and be efficient in the planning process; the blame is on developers for failing to build allocated sites. But planning for housebuilding depends on three key players: government, the local planning authorities and developers. All need to work together if housebuilding is to achieve the targets rightly set by government. Resorting to a blame game does nothing but create a negative atmosphere.
The Government must consider and be transparent about their role in the planning process. When local authorities develop their strategic plans, it is with clear expectations of housing numbers and site allocations set by government. Once this plan is signed off by councils, it is then inspected for soundness by a government-appointed planning inspector who can, and often does, recommend changes to the plan—recommendations which are difficult to refuse. So despite the rhetoric, it is the Government who are setting the broad requirements and enabling the loss of green-belt land. Can I suggest to the Minister that some clarity of leadership in these matters would be more effective than exhortations and blame? Constructive leadership from government would be more effective in getting the minority of local authorities that have not succeeded in fulfilling government expectations to do so.
Moreover, despite their protestations, evidence shows that developers do land bank, waiting for prices and consumer confidence to rise. Developers are reluctant to build low-cost housing because profit margins are lower—thus not building all the house types in the numbers that are needed. None of this will change without government policy changes, so I welcome the proposal for an investigation into land banking, as long as it leads to actions that restrict it.
If this country is to provide an adequate supply of housing to meet individual needs, more fundamental changes are needed than are being proposed. Perhaps the Minister can respond to some of these issues. First, there is pressure on the south-east because the Government do not have an economic regional policy that draws investment away from the south-east. Developing one would be a significant aid to housing policy. Secondly, that word “affordable” should be abandoned in relation to housing. It is misleading because affordable is what it is not: it is just not as expensive. Thirdly, the National Planning Policy Framework should be amended to enable councils to specify in their strategic plans different housing types on each site allocation: for example—there is some reference to this in the consultation document—housing for older and disabled people. Councils must be encouraged to take responsibility for building homes for social rent. These changes are sadly missing from the consultation. Exhortations to use brownfield sites will fall on deaf ears if the Government fail to provide support for the remediation of sites which are severely contaminated—I speak from bitter experience in my own area.
Finally, perhaps the Minister will be able to explain the Government’s financial commitment to enabling development through providing funding for essential infrastructure. I am not referring to the infrastructure fund. Currently, government policy appears to be to pass on the infrastructure costs of the development that the Government want either to the developers via the community infrastructure levy and Section 106 funding or to local people through a new tax, the infrastructure tariff that I read is part of the proposals. Will the Government change their tune away from the destructive blame game to purposeful leadership so that we can get the housing that this country and its people need in the places that they need it in a sustainable way that does not take away precious green belt land?
Lord Bourne of Aberystwyth
My Lords, I shall respond to the contribution of the noble Lord, Lord Kennedy, and then turn to that of the noble Baroness, Lady Pinnock. The noble Lord made a very wide-ranging contribution that went well beyond the Statement. I will endeavour to pick up the points, but a lot of his contribution seemed to be on what was not in the Statement, rather than what was, but I shall try to deal with the issues he raised.
First, his mention of rough sleepers enables me to thank local authorities and charitable workers for their magnificent response during the period of very cold weather we have just had. I know that my honourable friend the Minister, Heather Wheeler, has already spent time doing just that, and it is right that we do that. Some lessons have been learned and in that process we have been getting details of people who are rough sleepers, which will help tackle that problem. Let us be clear that it is unacceptable, and the Government have set out clear policies. We now have a Minister who is focused on the issue.
The noble Lord then turned to earnings in relation to affordability. He and others have used that phrase so I will use it, and it does describe the situation. This issue is crucial to the Statement and was dealt with in it, but I have to tell the noble Lord that the steepest earnings to affordability rise was in the Labour years, when it doubled, and the lowest peacetime build-out rates were also in the Labour years. I accept that we need to move forward and look at the issues, which we are addressing. As far as I am concerned, this is not about a blame game, and I will come to that point shortly, if I may, in answering the noble Baroness. This is about building more houses and a mix of houses and stating, once again, that the neighbourhood planning process is very much the right one. We took the Bill in question through to statute recently, and there was a consensus, largely. We are all committed to this neighbourhood approach, and I pay tribute to my noble friend Lady Cumberlege, who was very much part of that process. We are still very much committed to it; it is central to what we are doing, but that does not mean that the Government step away and do not have a policy on housing.
The noble Lord asked when some of these consultations will be ending. There are not that many consultations out at the moment. Two are referred to here, one on the NPPF, which ends on 10 May. As the Statement says, we anticipate carrying that forward in the summer. The other one is on developer contributions. That also ends on 10 May, and we would not want to hang about when it reports. A consultation is out on build-out rates and land banking. It is not announced in this Statement as it is already in process. It is an independent review being carried forward by Sir Oliver Letwin. It will report this year, I am sure, but that is a matter for him. We will want to take it forward. The other review, which was widely welcomed, is on the house-buying process, but that is a somewhat different area.
The noble Lord referred to the policy on ancient woodland, and I pay tribute to the noble Baroness, Lady Young, who evocatively referred to,
“the cathedrals of the natural world”,—[Official Report, 17/1/17; col. 161.]
and knew the way to progress this area. I am very pleased that it is included. There is, no doubt, still work to be done, but it is important. This is the first time it has been mentioned in planning guidelines, and that is also true of housing for older people, and I pay tribute to the noble Baroness, Lady Greengross, and others who helped on that. Design is also a central feature of this. Those three issues were raised and developed in the House of Lords, and I am very pleased that we have been able to carry them forward.
The noble Lord asked about the viability of town centres. The Prime Minister talked about that very issue and its importance when she launched this policy yesterday. This is something we want to carry forward: releasing property above shops and looking at whether empty shops are viable as homes if they are not viable as shops. They are very often near stations or other transport hubs, so we need to look at that, which is tied in with the issue of the future of our town centres.
The noble Baroness, Lady Pinnock, said she did not want a blame game and then proceeded to blame the Government—presumably starting from 2015 rather than 2010, when of course the Liberal Democrats were part of the Government. It is not about the blame game; it is about carrying the policy forward and ensuring that everybody does what they can to help with this issue. There are many things we can do, as a Government, as developers and as local authorities. In particular, the noble Baroness did not want us to blame developers. I hope we are not doing that, but she then went on to talk about the scandal of land banking, which sounded to me as if she was prepared to blame them. We want to look at that, and we have it under review. There is a genuine issue—I feel it too—with people who are keeping land and not developing it as they should, but that is part of the ongoing review. That was not announced yesterday, but some time ago, and is being carried forward.
The noble Baroness referred to a lack of regional policy. The policy on housing numbers is very much tied to each separate housing authority—to the price of housing in that area. The areas with the steepest prices are required to take the most action, in very broad terms, so this is integral to what we are doing. She referred to the need for housing for older people, which, as I have said, is in the National Planning Policy Framework for the first time ever. We need to work on it. She referred to the importance of brownfield sites, which I quite agree with. If she wants to address the issue of remediation, which she mentioned, I am very happy to talk to her about it and to look at it, but of course, we require local authorities to come forward with registers of brownfield land and to have a policy of building on brownfield first, before they look at green-belt land. The noble Baroness also talked about how we are looking to transfer some responsibility for delivery on to developers through the community infrastructure levy and Section 106—you bet we are. That exists at the moment, so I hope she is not suggesting we should take it away. We also have a policy of putting money in from the Government, through the housing infrastructure fund.
I do not want to indulge in the blame game. All the main parties in the Chamber have been in government since the war, including the Liberal Democrats, so blame can be fairly apportioned among political parties. This is about looking to the future and how we can deliver more houses in our country.
Lord Naseby (Con)
Is my noble friend aware that this is the first time for 25 years that we at least have a policy with hope for those who want to rent and those who want to buy? For those who want to rent, next to no council housing has been built in the United Kingdom for over 20 years—which covers the Labour Government, the Liberal-Conservative Government and the Conservative Government. On top of that, there has been no action on the ground on rogue landlords. Finally, every young couple wants to buy. They want their own home. My noble friend talked about a number of things that will be of enormous benefit, but missing from that list was a firm commitment on Help to Buy. Will that continue? Lastly, my noble friend knows that I take a particular interest in new towns and garden cities. I heard no mention of either of those two phrases. Will he confirm that they are firmly in the forefront of the Government’s thinking?
Lord Bourne of Aberystwyth
My Lords, I thank my noble friend. To deal with that last issue first, new towns are central to our delivery of additional housing. I know he has taken a particular interest in this issue so he will be aware of the progress referred to by the noble Lord, Lord Kennedy, on Ebbsfleet, which is ongoing. He will know that we are committed to new towns and new villages in the corridor between Oxford and Cambridge, which he is particularly interested in. Within the foreseeable future we are talking about not just expanded towns such as Bicester, but at least five additional new towns as part of that delivery.
He referred to rogue landlords. We are doing work on that issue, as he will know, and some of the provisions of the Housing and Planning Act concerning registers of rogue landlords will be coming into force shortly, in April. Those who suffer at their hands will be comforted by that—I know it is an issue. Also, local authorities can levy civil fines on rogue landlords of up to £30,000.
The noble Lord referred to the importance of diversity of delivery, and to help for those who want to purchase their homes. That is important but we are committed to diversity. It is not just about buying a home of your own; many people do not want that but want to rent. We need—
Lord Bourne of Aberystwyth
If I may just finish—it is good to know that this subject has excited so much interest—it is important that we recognise that there is diversity of supply, and that is central to what we are seeking to do.
Lord Campbell-Savours
My Lords, there are no real initiatives on the cost of land but we know that agricultural land fetching £15,000 to £20,000 an acre sells with planning permission for £2 million to £4 million an acre, making huge profits for landowners. Why are the Government not taking action on these excessive profits?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord for that question because we are indeed taking action. The review of developers’ contributions, which is open until 10 May, is very much looking at the issue. In addition, of course, the housing formula policy in relation to building authorities should build the price down in the areas of the greatest expense. This is very much about all parts of the housing issue, including developers, playing their part. That is why we have this review—it is about ensuring that developers contribute fairly in relation to the prices they are getting for land and the sales they make.
Lord Tebbit (Con)
My Lords, does my noble friend have any answer to the dilemma posed by the fact that any measure that might reduce the price of new houses and help first-time buyers would of itself run the risk of putting existing mortgage holders into negative equity?
Lord Bourne of Aberystwyth
My Lords, my noble friend makes a very good point, the answer to which is, realistically, that we are reversing a process. The price increase process will slow and will halt over time, but I do not seriously think that we can expect large falls. We can see a levelling off over time.
Lord Shipley
My Lords, I remind the House of my interests in the register. I welcome the Government’s proposal to get tough on viability assessments and to close the viability loophole. I thank the Minister for his letter yesterday to Members about the Statement. Why is there only an expectation that viability assessments will be publicly available? If the Government plan to increase accountability, surely there should be a requirement to make viability assessments publicly available.
I wish to ask also about the absence from the Statement of social housing for rent. There have been previous discussions about the publication date of the Green Paper on social housing. It seems to be repeatedly deferred, yet the only way 300,000 new homes, net, can be built each year is through empowering councils to build more homes—and that implies building more homes for social rent.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord for what were essentially two questions. The most important point is the assessment of viability but, if I may, I will get back to him on the transparency issue; it seems a fair point but I would like to have a look at it.
There are two specific reasons why we do not tackle the issue of social housing in the Statement. The Statement is talking about the housing need and housing delivery across the board; it does not seek to apportion it between different types of housing. However, as the noble Lord will know and I have repeated many times, we are committed to more social housing. As he has rightly said, a review is coming up. It has not been postponed: it is due in the spring—that is what I can offer him—and obviously, there will be more detail in it.
Lord Bassam of Brighton (Lab)
My Lords, the Minister referred to the need for a diverse mix of housing forms, and that is obviously a very good thing. He is very good at putting a gloss on government policy, but the fact is that since 2010 something like 60,000 social houses—council, local authority and housing association—have been sold off under right to buy, and only 10,000 new council houses have been built. When will we see a reversal of that policy and the expansion of a sector that is speediest in delivering new homes for rent at prices that people can afford?
Lord Bourne of Aberystwyth
My Lords, first, I thank the noble Lord very much for the praise, if it was such, which I am sure has done me a lot of damage on my Benches. He will know that the lowest delivery of social houses since the war was under the Labour Party. That said, we have committed to making more money available for social houses. It is about diversity, but I certainly will not make any apologies for the right to buy: it is a policy we have rightly championed because many people, possibly most, want to purchase their own homes, and anything we can do in that regard as a political party we should. I am sorry his party does not want to do the same. Yes, we need to deliver more social houses and we will do so: he can expect announcements on that.
The Countess of Mar (CB)
My Lords, is the Minister aware of the unforeseen consequences of the right to buy on rural exception sites? These are small patches of land that landowners either donate or sell at a cheap price for housing and which they understood, when they gave it, was in perpetuity. The right to buy overrides that right. This means that young people in villages who cannot afford current prices are being forced into towns. They cannot work in their home locality and villages are now becoming dormitory towns for commuters, who can afford the high prices, or for elderly people. What is happening there? Because many of these village developments are fewer than 10 houses, what will the Minister do about the loophole through which builders can get away with not building affordable housing—housing at rents or prices that people can afford, as opposed to the rather euphemistic use of the word “affordable”—in future?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Countess. The issue here is affordability for people in villages and rural areas. She will know that it was addressed, I think, in the Statement, but certainly in a previous answer I gave on the need to help people in farming communities to purchase homes in rural areas. It is something the Prime Minister gave voice to when she launched the policy and to which the Secretary of State, my right honourable friend Sajid Javid, is very much committed. We are looking at that issue but, again, I make no apology for the right to buy.
Baroness Gardner of Parkes (Con)
My Lords, my interest is already declared. Although everyone thinks—or most of us do—that it is marvellous that housing will be available, there is a hole in the bottom of the bucket where all existing leasehold properties are so much at risk and so fast being converted into tourist activities, that we have to more than counterbalance that. Why are the Government so unwilling to involve local authorities in some scheme to police that and keep such housing available for people to live in?
Lord Bourne of Aberystwyth
My Lords, without going into that issue in too much detail—not because I do not want to but because I know my noble friend has a specific Question on tourist activity tomorrow—it is possible to overstate the significance of tourist activity in encroaching on housing. If my noble friend will forgive me, I think she sometimes does that. There is an issue with compliance with the law, which is quite separate, but I have not seen evidence of such effects from tourist activity. We encourage people to take advantage of the sharing economy so that families are able to benefit from competitive prices. I think that is a good thing.
Baroness Young of Old Scone (Lab)
I thank the Minister for the Statement and for the very welcome increased protection for ancient woodland that has resulted from the useful dialogue we have had over the last year. I also welcome the toughening up of the viability assessment process. It is true that those developers and local authorities that insisted on transparency have done a great service to local people, who can understand some of the commitments included in those assessments. However, we must be very careful that the housing delivery test for local authorities does not bear down on them to the point where they are so desperate not to lose their planning powers that they simply abandon the prospect of the right home in the right place and focus instead on homes anywhere, at any cost to the environment. There is increasing evidence that local authorities feel that they simply must produce viable land commitments and local plans that deliver the housing target at the expense of environmental considerations. May I press the Minister to tell us what safeguards will be put in place to make sure that the housing delivery test does not become overbearing?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baroness once again for the work she did in championing the cause of ancient woodlands, including organising a visit for the two of us to somewhere east of Newark-on-Trent. That sounds like an Alistair MacLean novel. It was a very useful visit, and I am glad we have been able to do something in that regard.
The noble Baroness welcomed the viability test. On the housing targets that she talked about, so that housing authorities do not feel that they have to deliver homes of substandard quality, let us say, because of having to reach the numbers, we have made the importance of design integral to the NPPF. As a nation, we have not been imaginative enough on this but, of course, we need to be realistic about the demands placed on local authorities. They can work on common ground with neighbouring authorities, for example, to deliver. They are obliged to look at brownfield first; we do not want them to use green-belt land, except as very much a last resort, and that has to be justified, just as it does now. All the safeguards are there, but it is something we will watch like hawks.
Lord Stunell (LD)
My Lords, quality is important and has perhaps been somewhat set aside in the Statement made so far. The homes that we build next year will still be here in 2030 and 2050, when the Climate Change Act and the sustainable development goals kick in. Is the apparent weakening of the new-build sustainability criteria in the draft NPPF just infelicitous, accidental wording, or does it represent a change in government policy?
Lord Bourne of Aberystwyth
My Lords, the noble Lord will be reassured to hear that quality is very much central to our thinking; it is one of the things that we are very proud of in the NPPF—that we have got that there. It is something that, as a nation, as I say, we have fallen down on before. We have quite separately from the Statement, as he will know, promoted self-build, which is normally associated with higher quality by its very nature. In the Chancellor’s recent Statement, made before Christmas, we provided help for smaller builders, which again is often associated with better quality. We are also doing what we can to promote pre-build modular design, which used to be called prefabs and are now of a very significant design quality. Those things will help to ensure that we deliver far better quality and consistent quality, knowing, as the noble Lord said, that these homes are here for generations and more.
Viscount Waverley (CB)
My Lords, on the point that the Minister touched on, would it not be part of a seamless solution to make commitment and delivery central to the terms for developers being awarded licences and emulate, for example, the hydrocarbon industry in following the mantra, “use it or lose it”, with strict timing criteria agreed by all parties at the start of the whole process?
Lord Bourne of Aberystwyth
I am grateful to the noble Viscount. The “use it or lose it” mantra is a very good one. As I have indicated, this is being looked at by my right honourable friend Oliver Letwin, MP for West Dorset. He is leading this review and, I know, working hard on it. I am sure he will regard this as important and come up with some radical solutions on the work that we have given him.
Earl Cathcart (Con)
My Lords, I remind noble Lords of my interests given in the register, especially as a landlord. Given that timber-framed homes can be built quicker than, and at half the cost of, traditional ones, and being carbon neutral they are better for the environment, what are the Government doing to encourage developers to build these homes, which are cheaper, more affordable and better for the environment?
Lord Bourne of Aberystwyth
My Lords, I am grateful to my noble friend for a very constructive suggestion, which builds on our discussion of the question asked by the noble Lord, Lord Stunell. He is absolutely right that it is important to learn the benefit of timber-framed homes. This type is used a lot in Scotland and many other countries. It is sometimes appropriate to look elsewhere, and this may be so for housing design. As he rightly said, they are carbon neutral, which helps with climate change issues. Giving help for self-build and encouraging smaller builders is also part of it. I thank the noble Lord and will take his points back to the department.
Lord Howarth of Newport
Is the Minister aware that, according to Oxford Economics, the number of dwellings in London rose faster than the number of households in the period 2001 to 2015, yet house prices continued to inflate? Does he accept that encouraging more housebuilding, necessary as it is, will not be sufficient to create a market that works for everyone, not just those who are asset rich? Will he discuss with the Treasury ways to reduce the attractiveness of housing as a speculative investment, working gradually and purposefully towards the removal of subsidies and tax breaks, taxing speculative foreign investment entering the UK housing market and penalising owners of empty homes, while doing more to increase the relative attractiveness of investments that actually increase productivity in the real economy?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord for that question. I am certainly aware of some of the problems relating to London. The noble Lord, Lord Kennedy, referred to money going back to the Treasury, and I think I am right in saying that £64 million was handed back to the Treasury by the GLA and the mayor. The noble Lord might not have been aware of that. In the recent Budget, we raised the cap on borrowing by councils by £1 billion in 2019, which will help. The noble Lord is right that these things cannot be done without finance, but I think he would accept that, in a market system, ensuring that we are building more in the areas of greatest need and highest prices will have a market effect and should deliver over a period of time, though not overnight.
Baroness Janke (LD)
What plans do the Government have on the holding of vacant sites and land banking? Would they consider enabling local authorities to levy a tax on unused sites, as part of the Government’s proposals?
Lord Bourne of Aberystwyth
My Lords, the noble Baroness raises an issue of some importance. As I indicated, the issue of land banking is being looked at by a review by Sir Oliver Letwin that predated yesterday’s Statement. We want to see what his conclusions and recommendations are and then carry it forward. I know that this issue concerns noble Lords around the House. We will obviously look at it in the round when we see what Sir Oliver’s proposals are.
Secure Tenancies (Victims of Domestic Abuse) Bill [HL]
Tuesday 6th March 2018
(6 years, 9 months ago)
Lords ChamberRead Full debate Secure Tenancies (Victims of Domestic Abuse) Act 2018 View all Secure Tenancies (Victims of Domestic Abuse) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 76-R-I Marshalled list for Report (PDF, 65KB) - (2 Mar 2018)
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)
My Lords, before I speak to the amendments in my name, and with the permission of the House, I will say a few words about a number of issues which arose during debates in Committee, and which I undertook to speak to again on Report.
During the debate, I said that I would like to come back on Report and say something in relation to housing associations. I appreciate that noble Lords desire to see parity for tenants of local authorities and housing associations, but it is important to be clear that the organisations are very different. They are subject to different drivers and challenges. Local authorities are public sector organisations, and in future they will generally be required by law to give fixed-term tenancies. Housing associations, on the other hand, are private, not-for-profit bodies and will continue to have the freedom to offer lifetime tenancies where they think them appropriate. The vast majority of housing associations are charities whose charitable objectives require the organisation to put tenants at the heart of everything that they do. Their purpose is to provide and manage homes for people in housing need.
Many associations take their responsibilities for people fleeing domestic violence very seriously. For example, two leading housing associations, Peabody and Gentoo, have set up the Domestic Abuse Housing Alliance together with Standing Together Against Domestic Violence, a UK charity bringing communities together to end domestic abuse. Their mission is to improve the housing sector’s response to domestic abuse through the introduction and adoption of an established set of standards and an accreditation process.
Housing associations play a critical role in delivering the homes that we need. They can help provide a home for people fleeing domestic abuse only if they have the homes to put them in. This means ensuring they remain in the private sector able to borrow funding free of public sector spending guidelines. Unnecessary control risks reversing the ONS classification of housing associations as private sector organisations.
On the issue of doctors’ fees, which I know the noble Lord, Lord Kennedy, will also return to later, the noble Lord raised the issue of letters of evidence of domestic abuse. In my response I said that as data subjects, which we all are under the Data Protection Act, individuals can lawfully ask to be provided with their medical records without charge, thus obviating the need for a letter altogether. As I said at the time, I had not had very long to look at the issue and would like to take the opportunity to clarify the statement.
It is true that, as a data subject, an individual can ask to be provided with a copy of their medical records. From 25 May this year, when the General Data Protection Regulation becomes directly applicable, a data subject—that is, an individual—cannot be charged a fee except where a request is manifestly unfounded or excessive, or where requests are made for further copies of the same information, in which case the fee must be reasonable and based on the administrative cost of providing the information. Therefore, the law as it will stand when this Bill comes into force will allow a victim to make a request for their records and not to be charged. However, the law on data protection as it stands at present allows an administrative charge to be made. Currently, the Subject Access Code of Practice states that a GP may charge a maximum fee of up to £10 if the information is held electronically, or up to £50 if it is held either wholly or partly in non-electronic form.
I thank the House for letting me put the record straight on this point. I think many of us feel that it is a very germane issue. I am sure that many GPs do not charge for this service—I should imagine that very few do. However, as a result of the exchange that we had and the general feeling that was evident, after looking at the issue I raised the matter with the Department of Health and Social Care in relation to a review of the doctors’ contract, because this issue is part of the doctors’ contract and I can understand that it would not want to look at this on its own. Successive Governments have looked at doctors’ contracts and obviously grouped issues together, but I know that the department will look at this. I have raised it with the department. The House will want to know that the process of looking at representations about the doctors’ contract commences in April this year, as I understand it, so the department will be able to take that issue on board very shortly.
During both Second Reading and Committee, we discussed co-operation between England and the devolved Administrations where victims of domestic abuse need to move from one country to another within the United Kingdom. I said that I intended to raise this at the next meeting of the devolved Administrations round table, which is to be held in Cardiff on 19 April. I can tell the House that I have written to my opposite numbers in the devolved Administrations to ask that this issue is put on the agenda for the April meeting in Cardiff. In particular, I have let them know that I would like to explore whether we could develop a joint concordat or memorandum of understanding between the four countries of the United Kingdom on our approach to social housing and cases of domestic abuse. I will be very happy to report back on that issue after the meeting on 19 April.
The next issue that I undertook to look at during Report was in relation to training. During Committee, noble Lords discussed training of local authority officials who will be responsible for the exercise of the duties contained in the Bill. I accepted the points raised by the noble Baronesses, Lady Lister and Lady Hamwee, and the noble Lord, Lord Shipley, regarding the need for consistency in training to ensure that victims of abuse get the support they need from front-line staff, which I shared with officials responsible for the homelessness code of guidance consultation. I also set out the numerous ways in which the Government are supporting local authorities to train their front-line staff to ensure consistency, including the funding we provided to the National Practitioner Support Service for domestic abuse awareness training in 2016, which resulted in the training of 232 front-line housing staff across nine English regions and the production of an online toolkit, and to the National Homelessness Advice Service—the NHAS—to provide training, which included courses covering domestic abuse and homelessness. This NHAS training is being updated to reflect the Homelessness Reduction Act, and we will ensure that the revised material draws attention to the strengthened guidance on domestic abuse contained in the new code of guidance.
I add that we have since published the updated statutory homeless guidance on 22 February. In case noble Lords are unaware of that, I will circulate it to noble Lords who participated in the debate and will place a copy in the Library. This will come into force at the same time as the Homelessness Reduction Act comes into force, on 3 April this year, so within a month. The guidance provides extensive advice to help local authorities handle cases that involve domestic abuse, including having appropriate policies and training in place to identify and respond to domestic abuse.
Amendments 1 to 4 are in my name and in the names of the noble Baronesses, Lady Lister and Lady Hamwee; I am grateful for the support. The Bill provides that local authority landlords must grant a lifetime tenancy if they decide to rehouse an existing lifetime tenant who needs to move because of domestic abuse or who has fled to escape domestic abuse. It delivers on the commitment made during the passage of the Housing and Planning Act 2016 to ensure that, where lifetime tenants move to escape domestic abuse, they will retain their security of tenure in their new social home. Where victims are still in their property and apply to move, they will also be covered by the Bill. However, we recognise that, where a victim has fled the property, she—it will generally be she, although it need not be—will be more vulnerable, first, because there may be situations in which she may be considered to have lost her security of tenure and, secondly, because she may have lost her lifetime tenancy altogether before she is rehoused.
To give examples of this, in the first case, where the victim has a sole tenancy the local authority may consider that the tenancy is no longer secure on the basis that, having fled, she no longer occupies the property as her sole and principal home and has no intention to return. In the second case, where the victim has a joint tenancy, the joint tenant who remains in the property may have brought the joint tenancy to an end, for example, because he—it will usually be he, although it need not be—can no longer cover the rent. This is likely to be most problematic for victims who spend a lengthy period elsewhere—for example, in a refuge or temporary accommodation—before they are rehoused, or where victims move to another local authority area.
As currently drafted, the Bill would not apply in these situations. That struck me as wrong. As I said previously, the Government’s aim in bringing forward the Bill is to remove an impediment that could prevent a victim leaving their abusive situation. However, it is not right that someone who takes the difficult decision to flee their home should by so doing risk losing the protection afforded by the Bill.
Amendment 1 will address this issue by extending the Bill to those who were previously lifetime tenants, as well as those who currently are lifetime tenants. Amendment 2 removes the requirement for the tenant to have applied to move, which is no longer necessary, consequent to Amendment 1, which recognises that the tenant may have left the previous tenancy some time ago.
Amendments 3 and 4 align the existing provisions in the Bill, which relate to victims moving to a new home, with the new provisions in Amendments 5, 7 and 8, which the noble Baroness, Lady Lister, has tabled, and which relate to victims who remain in their home. This will ensure a consistent approach across the piece.
Amendment 3 makes clear that the domestic abuse must have been perpetrated by another person. This is included to prevent a perpetrator seeking to profit from the provisions in the Bill by asking for a new tenancy on the basis that someone in their household was abused by them. It is necessary to provide a link between the abuse and the granting of the new tenancy to avoid local authorities having to grant a lifetime tenancy with regard to historic domestic abuse that has no relevance to the current housing circumstances.
Amendment 4 brings the wording of the existing provision in line with that of the new provision to be introduced by Amendments 5, 7 and 8. This will ensure consistency across the Bill while retaining the necessary link between the new tenancy and the abuse. We think that this will make it easier for those who have to interpret the legislation—local authorities, victims of domestic abuse and their advisers. I hope that noble Lords will welcome these changes. I beg to move.
Baroness Lister of Burtersett (Lab)
My Lords, I am very pleased to be able to support these amendments. I shall speak briefly to Amendment 4 but will say a bit more about it when we come to the next group of amendments. The key issue here is to remove the notion of risk. Talking to Women’s Aid, it is clear that, in practice, having to prove risk creates unnecessary hurdles, and I can do no better than quote what it says in the briefing that it has provided for us:
“Women’s Aid has reported widely on the issues with a ‘risk-based’ approach to domestic abuse; static risk assessments fail to capture the changing risk and harm in these cases, and a risk based approach fails to provide appropriate support or meet the needs of victims assessed as ‘low’ or ‘medium’ risk”.
It makes the point that it places an even greater premium on good specialised training to be able to adequately assess risk in these circumstances. Therefore, I am delighted that the Minister was willing to make that change. As well as creating equivalence with the next amendment, I think that it improves the Bill overall.
Baroness Hamwee (LD)
My Lords, my name is added to these amendments. I congratulate the noble Baroness, Lady Lister, and thank the Minister for all the work that they have done.
I have just written a short piece on scrutiny and have written mostly about the need to engage with stakeholders and practitioners—people who know what they are talking about. Although I take great delight in asking whether “and” should be “or” and so on, that is not really the purpose of scrutiny. However, this seems to be a very good example of those who have experience of real situations working together to anticipate where there might be problems if the legislation is not changed, as it has been. Therefore, I congratulate them and feel rather privileged to have been able to tack my name on to these amendments.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, as this is my first contribution to the proceedings on the Bill today, I draw the attention of the House to my interests listed in the register—in particular, the fact that I am a councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.
Amendments 1 to 4, proposed by the noble Lord, Lord Bourne of Aberystwyth, and supported by my noble friend Lady Lister of Burtersett and the noble Baroness, Lady Hamwee, have my full support. The amendments in themselves might look quite small but they provide a clarity that is needed following examination of the Bill by noble Lords. A number of conversations have been held outside the Chamber to get the wording right.
I thank the noble Lord, Lord Bourne, for the clarification at the start of his contribution and for the information that he has provided to the House today. Generally, his remarks are very welcome and I thank him for them. I also thank him for his personal support in getting the Bill on to the statute book to correct an error in the Housing and Planning Act 2016. As I have said before, it is not a good piece of legislation—I think it is an example of “act in haste and repent at leisure”. There have been one or two other problems with that legislation, as the noble Lord knows. I am very happy to support these amendments.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Baronesses, Lady Lister and Lady Hamwee, and the noble Lord, Lord Kennedy, and will pick up on just a couple of points. I agree very much with the noble Baroness, Lady Lister, about the key point being to remove the notion of risk. Through her and through this contribution, I thank Women’s Aid for the positive engagement that we have had with it. As an organisation, it is exemplary in many ways and I thank them. I accept, and not grudgingly, the need for good, specialised training—that is central to this.
I thank the noble Baroness, Lady Hamwee, for generously adding her name to this amendment and for her positive contributions during the course of the Bill. I agree that, once again, working together, not just outside the House but within it, has engaged many people on the importance of tackling this issue and has been central to the passage of the Bill.
I thank the noble Lord, Lord Kennedy, for his characteristic generosity and his full support as we have taken the Bill through the House. It is very helpful to be able to engage with an opponent who is certainly not a political enemy—far from it—and who wants to engage positively. That has certainly helped with this Bill.
“(2AA) A local housing authority that grants a secure tenancy of a dwelling-house in England must grant an old-style secure tenancy if—(a) the tenancy is offered to a person who was a joint tenant of that dwelling-house under an old-style secure tenancy, and(b) the authority is satisfied that—(i) the person or a member of the person's household is or has been a victim of domestic abuse carried out by another person, and(ii) the new tenancy is granted for reasons connected with that abuse.”
Baroness Lister of Burtersett
My Lords, in moving Amendment 5, I will speak also to Amendments 7 and 8, in my name and those of the noble Lord, Lord Bourne of Aberystwyth, and the noble Baroness, Lady Hamwee. Their support underlines the fact that this is a genuinely cross-party amendment made possible by the willingness of the Minister to take on board the one substantive concern that we and the Liberal Democrat Benches have about the Bill: namely, that it did not afford protection to survivors of domestic violence who remain in their home and who are granted a new tenancy in place of an existing joint tenancy. It was extremely helpful that the Bill team was willing to engage with the lawyers advising me—Andrew Arden QC and Justin Bates; I am very grateful for their assistance—in reaching a form of wording for the amendment that was mutually satisfactory.
For the record, I want to note that the amendment I tabled in Committee was not technically deficient in the way that the Minister described. However, it did, as he pointed out, maintain an unintended link to removing the risk of further abuse. Happily, in doing so, it led me to question why that link was there at all because, as noted in relation to Amendment 4, there are problems with it. Women’s Aid then advised me that the inclusion of a reference to such a risk relies on housing officers being trained to recognise the potential ongoing risk a perpetrator may pose, which, as I said, can cause problems. I will return to the question of training in a moment, and I am grateful to the Minister for updating us on his thinking on it.
At this point, I too pay tribute to Women’s Aid, not just for the support it has provided on this Bill but for the vital work it does helping survivors of domestic abuse. It was good to hear the tribute from the Minister, and I am sure that Women’s Aid will very much appreciate it.
I will repeat briefly the case for the amendment. We tend to talk about women fleeing domestic violence, because that is the most common scenario: the woman escapes a harmful and dangerous situation and tries to find a place of safety, often in a refuge and often in another local authority area. But there are cases where the perpetrator is removed by the local authority or the police. Indeed, it would appear to be government policy to encourage this where it is safe for the woman to remain in the home and she does not want to leave it. This is partly to avoid the upheaval involved in moving home, for the women themselves and for their children, and, even under the old legislation, partly a desire not to lose the security of an existing secure tenancy. But the policy to encourage the removal of the perpetrator where safe to do so is also motivated by a desire to prevent him—we have noted at an early stage that it is usually “him”—from benefiting from the abuse by driving his partner from the home, as spelled out in the recent consultation document, Improving Access to Social Housing for Victims of Domestic Abuse.
I suspect it is a situation that might become more common, although we are talking very much about a small minority now. But even if it is a small minority, minorities matter. Where it is the perpetrator who leaves the home and there is a joint tenancy, I am advised that it is usual practice for a new sole tenancy to be granted in the name of the survivor. This amendment is crucial to protecting the rights of a survivor granted a sole tenancy in such circumstances, in line with the rights it affords to those who flee the home.
A theme running through our debate hitherto has been that in order to ensure that this very welcome legislation is effective, there needs to be adequate guidance to housing authorities and training for the officers who will be implementing it, as the Minister acknowledged earlier. At the outset he seemed to indicate that this was unnecessary because guidance and training already exist but, as is his wont, he listened and has taken on board the fact that there is considerable room for improvement in both, given the gap that exists between the theory of what is supposed to happen in local authorities and the practice of what actually happens when it comes to meeting the housing needs of domestic abuse survivors in a consistent and effective way. As a consequence, housing authorities’ responses can present barriers to survivors’ access to safety.
I was heartened when the Minister at an earlier stage said he would be taking a close personal interest in the development of the code and would consider the various submissions made by Women’s Aid and others. Officials have now had a constructive meeting with Women’s Aid to discuss this and its helpful note on training needs. Women’s Aid has emphasised to me the importance of consistency, and that requires good guidance and high-quality, comprehensive specialist training. A few examples of good practice, such as those highlighted by the Minister in Committee—welcome as they are—are not enough. Specialist training, it argues, needs to cover, among other things, the nature and impact of domestic abuse and coercive control; the links between domestic abuse and homelessness; identification of those subjected to it; recognition of the insidious effects of victim-blaming beliefs and attitudes; effective and safe practice, including risk assessment, multi-agency working and the importance of treating survivors with dignity and respect, which are crucial to a human rights culture.
On attitudes and appropriate treatment, I have learned from colleagues working in the area of poverty that the involvement of service users in training can be beneficial. A project involving people with experience of poverty in the training of social workers helped social workers understand much better what poverty means and how it can affect the people with whom they work and their behaviour. I was heartened by what the Home Secretary said in her recent Times article on the proposed domestic abuse strategy consultation. She said that,
“survivors and their children are at the heart of this consultation”,
and that,
“we will keep listening to experts and survivors”.
It is good to know that not all Ministers believe we have heard enough from experts.
However, my point is that survivors bring their own expertise to the table—expertise by experience. That expertise is invaluable both to the Government in developing their strategy—I hope that when they are developing their strategy, survivors of domestic abuse will be involved in the consultation—and to those being trained to assess the housing needs of survivors.
In Committee I raised the question of how the Government may monitor the effectiveness of this and other legislation in relation to the housing needs of domestic abuse survivors as part of the wider domestic abuse strategy. Perhaps the Minister can comment on that now.
Finally, I remind noble Lords that at Second Reading colleagues from around the House expressed concern about plans to change the funding base of refuges. In response to the opposition expressed by NGOs to the proposal for devolution of funding to local authorities—ring-fenced but, along with all short-term supported housing services, we do not know how long for—the Government have committed to considering all options. This is welcome, although it is disappointing that there was no mention of this in the Home Secretary’s Times article, which referred to the proposal in terms all too reminiscent of those used to justify the devolution of funds from the national social fund to the new local welfare assistance schemes, many of which are now being closed or drastically cut back. I do not expect the Minister to say anything about this at this stage but I hope he will take the message back to his colleagues both in his Ministry and the Home Office.
I have said more than enough, given the broad agreement on this amendment and the need to back it up with adequate guidance and training. I beg to move.
Lord Shipley (LD)
My Lords, I remind the House of my interest in the register as a vice-president of the Local Government Association and I pay tribute to the work of the noble Baroness, Lady Lister of Burtersett, and of my noble friend Lady Hamwee. They have done a great deal to secure what seems to be an agreed and agreeable outcome. The process in this Bill so far has been a good example of the House working at its best. I also want to pay tribute to Women’s Aid, in part because of the quality of its briefings and in particular for reminding us of the funding issues which still remain. I hope very much that the Minister will bear in mind the points that have been made by Women’s Aid.
I want to add only one or two points. In Committee I said that training is very important for this to work, and I was glad to hear the Minister refer to it in his opening remarks. To be effective, staff really will have to understand in great detail the processes that they should be following. I cite in particular the example of where a victim moves between local authorities with possibly a significant distance between the two. We need effective systems and networks in place for that to function properly. I have two suggestions to make as to how it might be done.
The first is one that I think I mentioned in our last debate. The training should be sub-regional; in other words, it is very important that the people in different local authorities who deal with these matters should know each other so that they know who to contact if there is an issue, and they should be trained together. Secondly, because the training is sub-regional, it would help if there were named contacts in every local authority who would be seen as the point of expertise not only within the authority concerned but also more generally. They are the people who should be contacted and they would maintain the files, particularly on difficult cases such as those requiring confirmatory evidence and so on.
With those two suggestions, I should like to thank the Minister very much indeed for getting us to this point. It is a positive outcome to our discussions over recent weeks.
Lord Kennedy of Southwark
My Lords, Amendment 5, proposed by my noble friend Lady Lister of Burtersett, is one that I fully support. She must be congratulated on pursuing this issue. As we have heard, the amendment puts into the Bill provisions to ensure that the protections set out in it apply to a victim of domestic violence who is living in a secure joint tenancy and stays in their home when the perpetrator leaves or is removed, as well as to victims who leave their homes.
This anomaly was first raised by my noble friend during the Second Reading debate on the Bill and she deserves much credit for persuading the Government that there was a real issue here and getting them to accept the amendment, as indeed the noble Lord, Lord Bourne, has done. He has shown himself to be prepared to listen carefully and look at the very real issues raised by my noble friend. I join others in paying tribute to the important work being done by Women’s Aid and I think that we all recognise the great job it does. Representatives of Women’s Aid have also engaged very positively with me during the passage of the Bill and I thank them for that.
I will not detain the House any further other than to say that I am very pleased that this amendment is going to be agreed shortly.
Lord Bourne of Aberystwyth
My Lords, as is indicated by my name being on the amendment, the Government are more than happy to accept it and the related amendments. The noble Baroness, Lady Lister, and I have worked together on them and therefore I have put my name down in support of them. As others have done, I pay tribute to her for working openly, determinedly and always pleasantly with me and my officials to ensure that these amendments are fit for purpose and improve the Bill. I also thank other noble Lords for their positive engagement.
The Government’s aim in bringing forward the Bill was to address a narrow but important issue; specifically, to remove an impediment that could prevent the victims of domestic abuse from leaving their abusive situation for fear that they might lose their security of tenure if they moved to another social home—an issue that was brought to the attention of the House by the noble Baroness, Lady Lister. We recognise that there is a strong case for extending the same level of protection to those lifetime tenants who have suffered domestic abuse but wish to remain in their home after the perpetrator has left or, having taken temporary refuge elsewhere, wish to return to their home once the perpetrator has been removed. These amendments will ensure that where local authorities offer a new tenancy to a lifetime tenant in their own home, this must be for a further lifetime tenancy where the tenant is a victim of domestic abuse.
The amendments have been drawn widely. They will protect victims of domestic abuse where the perpetrator has moved out of the property and either tenant has terminated the joint tenancy. They will also cover the situation where the landlord has sought a court order to terminate the tenancy after the victim has fled but agrees that the victim can move back into the property once the perpetrator has been evicted. The new provision applies to those who had a joint tenancy, rather than to existing joint tenants—that is to say, it requires that the previous tenancy must have come to an end before a new tenancy can be granted. I agree that this is the right approach as it will obviate the risk that there could be two concurrent tenancies of the same property. These amendments, together with Amendments 1 to 4, which we have just addressed, will ensure that the Bill covers the circumstances in which a victim of domestic abuse who has or had a lifetime tenancy seeks a new tenancy as a consequence of that abuse.
Baroness Lister of Burtersett
I thank all noble Lords who have spoken, particularly the Minister for his helpful engagement with a number of points that have been raised, including the very useful suggestion on training from the noble Lord, Lord Shipley. I am pleased that he acknowledged the national dimension of funding; I realise that there is a local dimension as well, but the national is important, particularly when survivors are moving great distances. I am delighted that he will be watching like a hawk how this works, obviously in the context of other provisions, and I welcome his commitment to keeping noble Lords updated on what is happening, which I think we all want.
At Second Reading, I said that this was a first for me in that I more or less unequivocally welcomed a Bill in your Lordships’ House. I am happy that I can now say that I totally unequivocally welcome this Bill with the addition of this amendment. That is thanks to a number of people: to noble Lords across the House who have supported me in pressing for the inclusion of such an amendment—I am thinking particularly of colleagues on the Liberal Democrat Benches, as well as my noble friend—and the Bill team and lawyers, who were willing to engage with what I call my informal legal advisers. Together, they agreed wording that we are all happy with. I thank once again Women’s Aid, which has been supportive to all of us with its briefings, and, last but very much not least, the Minister, because if he had not been willing to listen and engage I do not think that any of this would have happened. Clearly, officials have to take their lead from the Minister. His openness and willingness to listen to what we have said and to see where changes needed to be made, have made this possible. I am very grateful. It seems odd to say “with” as opposed to “against”, but it has been a pleasure to work with him in this situation.
Lord Kennedy of Southwark
“(2AA) The person making the application for an old-style secure tenancy under subsection (2A) must not be charged for obtaining any evidence of domestic abuse if this evidence is required to make the application.”
Lord Kennedy of Southwark
My Lords, Amendment 6 raises the issue of victims of domestic violence being charged a fee to provide evidence by way of a letter or some other acceptable form of confirmation to the authorities that they are a victim of domestic violence. That fee can range from £75 to £100 or even more. I think that it is completely wrong.
Certainly some GPs charge this fee. I accept that it is a minority of GPs, but it is wrong for any GP to charge it. I raised the issue both at Second Reading and in Committee, and I do so again today.
When the amendment was discussed in Committee, I had support from noble Lords around the House, and I am grateful to all noble Lords who spoke in that debate. I read again yesterday the response of the noble Lord, Lord Bourne of Aberystwyth, to the debate in Committee. He agreed with me that charging a fee to a victim of abuse who is seeking evidence of their abuse to access a service is,
“far from an ideal situation”.—[Official Report, 24/1/18; col. 1058.]
I would go further than that and say that, in 2018, when domestic violence is centre stage—no longer an issue not talked about but out in the open, with perpetrators rightly condemned and brought to justice for the disgusting crime that it is—to charge victims a fee to provide evidence to prove that they are a victim so that they can get help is unacceptable.
The good news that the Minister gave the House the last time he spoke on the issue just does not go far enough. I note that the noble Baroness, Lady Bertin, has tabled a Question on domestic violence that will be answered in the next day or two. I will raise the issue again if I can get in at that Question Time.
If you have been a victim of a crime and been beaten, distressed or frightened, it is not good enough to say that you can get around the issue of a fee by putting in a subject access request for your medical records. I have no idea what you would do with your medical records: I assume that you get a big pile of papers giving all your medical history and stuff. So for me it would be my blood pressure, and I am a diabetic so there would be issues about my feet, but I am not sure that medical records would say that you had been beaten, that you have a cut or that you have been bruised. Would they actually say that you had been a victim of domestic violence? If not, we are again in the situation where you might hand your medical records to the authority who might say, “Yes, it says you have a bruise to the head; it does not say that you have been a victim of domestic violence. You might have fallen over”. So there are some issues even with using the records. Will they actually deliver what the noble Lord says?
I think we should be very clear that no victim should ever be charged for a letter or any other form of evidence to say that they are a victim of domestic violence. We need to ensure that that happens. I accept that it is about the doctors’ contract and I am pleased that that is going to be reviewed in April, because it is certainly an issue. I accept that it is the Department of Health, not the noble Lord’s department, but this is an issue that we cannot let go: it is totally wrong that anyone is charged a fee to prove that they are a victim of a crime.
Baroness Hamwee
My Lords, the Minister spoke at the outset of this afternoon’s proceedings about the Data Protection Bill—the Act as it will soon be—and data subjects’ rights of access to information. I share the concerns of the noble Lord, Lord Kennedy, about the extent of notes that doctors may keep. I have no expertise in this area but I know that I can sit in a doctor’s surgery and witter on for seven or eight minutes and it comes out, perhaps, as a reference to a consultant in two lines. I assume that the two lines are much closer to what is kept in the notes than my seven minutes of semi-articulate complaints.
I am also concerned about whether doctors, GPs particularly, will feel able to keep notes about their assessment, which might be just a guess, as to the reason for the injuries which they are considering. Some may, some may not, and some may be concerned about the implications for them if they get it wrong. Again, it is not something that I have come across, but in other walks of life, such as universities, where teachers may keep notes about students’ attainments or otherwise, I understand that there are concerns not to say anything that might come back to bite the writer of those notes. I certainly do not think it is something we can assume will be covered by the data protection provisions that will shortly be coming into effect.
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Kennedy, for bringing this amendment forward and the noble Baroness, Lady Hamwee, for her contribution on Amendment 6, which deals with the subject of GP letters. In fact, noble Lords will appreciate that the amendment is drawn much more widely—it refers, I think, to other professionals as well. I am sure that the noble Lord did this quite deliberately; it would apply, for example, to solicitors’ letters and accountants’ letters as well, where there are obviously rather different considerations, because we have a more direct route in relation to GPs’ contracts.
As I said previously and I am very happy to repeat, the noble Lord is quite right to say that the wording is far from ideal; that is absolutely right. I accept the point that the noble Baroness has just made, and was made by the noble Lord as well, about the data. It is hard to know without seeing doctors’ notes: sometimes it may cover the case very well, sometimes it may not. I also take the noble Baroness’s point that doctors may be reluctant to commit to writing something relating to domestic abuse, but I suppose that that could also apply in relation to the letter itself. It is certainly a consideration, I accept that. The early sounding I had when I raised this matter with the Department of Health was that it has the same view that we do. It considers that this issue needs looking at. I have not yet had a detailed response to the points I made but I am very happy to share the general thrust of that as soon as I do, because this is a very reasonable point and one that I am sure the vast majority of GPs would go along with.
On the basis that I undertake to update the House on the discussions that we are having with the Department of Health—recognising, as the noble Lord indicated, that it is the lead department on this—I ask the noble Lord to withdraw his amendment.
Lord Kennedy of Southwark
I thank the noble Lord for that response. I am happy to withdraw the amendment—I am not going to push it to a vote today—but this is a really important issue. I accept that the Minister’s department is not responsible, but it is just wrong. It is a minority, although a pretty large one, who will charge for these letters. It is unacceptable that that happens in today’s world.
The issue about the medical records—what is the point of a medical record? Is it being able to use it for other things or is it accurately recording the treatment that has been given? I do not think it is as simple as the record itself will necessarily be helpful enough. People may be reluctant to do that anyway. I do not know what the Department of Health intends to do.
I am happy to withdraw the amendment today but I am certainly going to keep raising this issue. If I get a Question later in the week I will raise it then. We have to get this changed. I accept that that involves the GP contract. At this stage, I am happy to withdraw the amendment.
Water Supply Disruption
(6 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Gardiner of Kimble) (Con)
My Lords, with the leave of the House I will now repeat a Statement made by my honourable friend the Parliamentary Under-Secretary of State for the Environment in the other place. The Statement is as follows:
“I would like to take this opportunity to update the House on the water supply situation following the severe weather experienced last week. The exceptionally cold weather and the rapid thaw that followed have caused widespread water supply issues in the country. Over the weekend and at the start of this week, tens of thousands of people across southern England have experienced loss of water supply in their homes, and even more have had to cope with low water pressure following leaks from burst pipes. I entirely recognise that this has been a stressful and difficult time for many residents and businesses.
The immediate priority is to get water back up and running for those people who have been affected—in particular, vulnerable people—and businesses, hospitals and care homes. Water companies have been following standard practice, including isolating bursts and redirecting water, to mitigate this problem. Bottled water has been provided in the areas most badly affected and water has been provided by tanker to keep hospitals open.
This morning I chaired a meeting with water company chief executives, Ofwat and Water UK to make sure that water companies in England are working to restore supplies as quickly as possible and that water companies in other parts of the country are preparing for the thaw as it spreads across the country. This will include learning any lessons from places that have already experienced the thaw due to higher temperatures.
The challenge that the sector faces is the sheer number of bursts following the rapid change in weather across multiple companies’ networks. Many of these have been relatively small and difficult to detect, and some of the loss of pressure is due to leaks in private homes and businesses. As of 10.30 am today, based on the information provided by the chief executives on the call, we are aware of 5,000 properties still affected in Streatham. The principal source of this problem is air locks in the water network, which Thames Water is acting to remove. We expect that to be completed today. Southern Water reconnected supply to more than 10,000 properties overnight, but 867 properties in Hastings are still experiencing problems. We expect everyone there to be reconnected this afternoon. South East Water has identified approximately 2,000 properties spread across Kent and Sussex that are still without supply. Again, we expect that they will be reconnected today. South West Water has approximately 1,500 properties affected, but this is changing on a rolling basis as the thaw progresses west. Yorkshire Water has identified 13 affected properties.
That said, some water companies have identified higher demand than usual on service reservoirs, which indicates that burst pipes need to be dealt with. I want to encourage householders and businesses to report leaks and burst pipes, including those on their property and not just on public highways.
Water companies have been working hard to address the issues for customers, though I recognise the frustration that many have had in contacting their water companies. I have been assured that companies have increased their staff on the ground who are out identifying where bursts have occurred and repairing them, as well as moving water across their networks to balance supply across the areas they serve. We should recognise the efforts of the hard-working engineers and all involved in working through the night to fix these problems.
Once the situation is restored to normal, we expect Ofwat to formally review the performance of the companies during this period. This will be a thorough review and, as well as identifying problems, I want to see excellent examples of practice and preparation shared across the sector. The Government will consider any recommendations from the review and act decisively to address any shortcomings exposed. As part of the review, Ofwat will decide whether statutory compensation should be paid. Of course, water companies will want to consider—I have already discussed this with chief executives this morning—how they compensate customers on a discretionary basis.
This Government actively support a properly regulated water sector. We have high expectations of water companies increasing their investment in their water and sewerage networks. This was laid out clearly in the strategic policy statement we issued to Ofwat last September, and reinforced by my right honourable friend the Environment Secretary when he addressed the water industry last week. He said that he expected the industry to increase investment and improve services by maintaining a resilient network, fixing leaks promptly where they occur and preparing for severe weather. As my right honourable friend said, we want a water industry that works for everyone, is fit for the future, improves performance and makes sure that bill payers are getting the best possible value for money. Ofwat will be given any powers it needs and we will back any action it needs to take to ensure that water companies up their game”.
My Lords, that concludes the Statement.
Baroness Jones of Whitchurch (Lab)
My Lords, I thank the Minister for repeating the Statement and I pay tribute to the emergency services, who once again made us proud of their dedication and humanity when struggling in the worst of weather to provide healthcare and reach out to people cut off by the snow. I also thank many of the staff in the utilities—the engineers and the linesmen who worked in atrocious conditions to try to repair services, so that supplies of heating and water were retained. But the individual commitment of the staff cannot disguise the huge failings in the response of the water companies themselves in the recent bad weather.
I appreciate the update that the Minister has given today but as of yesterday, 5,000 homes were still without water in Kent and thousands of properties across Wales, parts of the Midlands and Scotland were waiting to have their supplies reconnected. In London, 12,000 households were still without water last night and relying on bottled water, but even supplies of bottled water were running out at some of the distribution points. This really is a very poor response. It is not as if the bad weather was a freak occurrence. The Met Office was warning of the predicted freeze weeks in advance. Yes, of course pipes are liable to freeze when the temperature drops but, equally, we should measure water companies’ success by the speed of their response and the interim help and support they provide to their customers.
I absolutely agree with Rachel Fletcher, Ofwat’s chief executive, who is quoted in the Financial Times today as saying:
“While the recent severe weather conditions have undoubtedly had an impact on pipes and infrastructure, water companies have been warned time and again that they need to be better at planning ahead to deal with these sorts of situations, including proactively communicating with customers when they anticipate issues”.
I really struggle to understand why the water companies are so poor at this. Anyone with any business involvement knows that risk assessments and the mitigating actions that follow are fundamental to the planning process, as is having in place a proper disaster recovery system. This should be ingrained in the systems of utilities because, for example, water companies are inevitably at risk of extremes of weather, whether flood, drought or snow. I hope when the Minister met Ofwat and Water UK today they were able to reassure her that supplies will have been reconnected to all affected homes by the end of the day and that, despite the review the Minister referred to, compensation will be provided to individuals and businesses affected by the loss of supply on this occasion.
There is a wider challenge here. It is not just about the aftermath of one week of bad weather. The performance of the water companies has been under criticism for some time. Six companies missed their leakage targets for 2016-17, with Thames Water’s performance data showing that 670 million litres are being lost to leakages every single day. This total works out at an average of 180 litres per day being lost for each property the company supplies. Despite these failings on leakages, water bills have increased by more than 40% since privatisation, with many consumers set to have another rise in a few weeks’ time. Meanwhile, rather than fix the problems the private water companies are paying out huge dividends to investors. For example, the owners of the top nine water companies paid out more than £18 billion in dividends in the 10 years to 2016, and their CEOs are being paid huge salaries and bonuses. Clearly, these companies have got their priorities wrong.
I therefore have to say that the Secretary of State was quite right to criticise the water companies in his speech last week, including their tendency to avoid paying tax and to hide their earnings offshore, but like many of his speeches it lacked a follow-up action plan. These problems have been known about for some time. I hope the Minister can also confirm that as part of the review, Ofwat will be given new powers to tackle excessive pay in this sector and to require a greater proportion of profits to be reinvested in service delivery and resilience. I hope he can also confirm that Ofwat will be instructed to use its existing powers more actively to ensure that water companies plan effectively for adverse weather events in future, as we all expect of them. Finally, can the Minister confirm that Ofwat will take a more active role in overseeing companies’ delivery of leakage repairs, intervening where necessary and increasing fines for missed deadlines so that real incentives are put in place to deliver the change that we should all expect? I look forward to his response.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for repeating the Statement and the noble Baroness, Lady Jones of Whitchurch, for her comments. I agree with everything she said. The freezing weather at the end of last week was not a surprise—it had been well trailed and advertised for some time. It is therefore extremely disappointing that some water companies did not appear to respond quickly to the demand on their services by identifying and correcting burst pipes and leaks. This has caused great distress and inconvenience to thousands of households. It is unacceptable that water bill payers have been left without running water while schools and businesses across the UK are being forced to close because of water shortages. While this is a period of extreme short-term pressure, the vast amount of water that leaks from companies’ pipes every day has not decreased for the past four years. Data from the water industry regulator Ofwat shows that more than 3 billion litres leaks every day. What are the Government going to do to ensure this problem is addressed in the long term?
While expressing disappointment at the response of the water companies, I pay tribute and express the thanks of these Benches to the engineers who have worked long hours, often through the night, to reconnect households to their water supplies and to mend burst pipes and leaks. Their efforts should be recognised.
There is a real gap in the market when it comes to providing capital for critical infrastructure. A housing investment bank is needed to provide long-term capital for major new developments, to guarantee proper infrastructure and services. Locally led housing delivery must be integrated into infrastructure delivery to ensure vital utilities such as water are available at all times.
A public awareness campaign is needed to help residents insulate pipes to prevent bursting in extreme weather conditions. Can the Minister give a commitment that such a campaign will receive priority before we suffer another freezing spell from Siberia?
Lord Gardiner of Kimble
My Lords, I entirely agree with the noble Baronesses about the courage and fortitude of the emergency services, often in very difficult circumstances, and I begin by thanking them. I was on the conference call with the chief executives of the water companies, Ofwat and Water UK, and from the update that I have received during the course of the day it is very clear that the priority is to restore the water supply, particularly for vulnerable people and for hospitals and other institutions in the care sector. I think we are all in agreement—which may be an inconvenience—that the water companies clearly need to do better. Some are better than others. It is very important that Ofwat conducts a review and looks at the issues of preparedness and lack of preparedness. We are expecting an interim report on that by the end of the month so that we are clear about this. I emphasise “interim”—obviously we want a thorough report but we want early consideration of those matters. There have undoubtedly been some failings, and I think some of the water companies have acknowledged that as well.
The noble Baroness, Lady Jones of Whitchurch, in particular asked for some reassurances. I have outlined the numbers of households that were without supply this morning and the intelligence that we got from the water companies at the 10.30 am meeting as to their plans for restoration of supply during the day. I will obviously get constant reports on that, as will my honourable friend.
I think there has been general reflection on this—indeed, my right honourable friend reflected on it in his speech last week at the Water UK City Conference. He called on the boards of water companies to address urgently pay, terms and conditions and so forth, to demonstrate value for money, to up their game and to lower bills. Ofwat will report to the Secretary of State on corporate behaviour by the beginning of April. If Ofwat needs further powers, it should include that in that report.
Ofwat is taking enforcement action. For instance, a large fine was imposed on Thames Water for missing the leakage target and it has set the lowest cost of capital ever for the 2019 price review. I should say that water bills have in fact fallen in real terms over the last five years by 5%, and since 1994 bills are 3% higher. Since privatisation, £140 billion has been invested in infrastructure, but we need to do more. Simply put, in a country like ours we need to invest more, and we are going to look to the water companies to do so.
I was quite shocked by some of the leakage figures and tried to imagine what they meant in terms of millions of litres per day; it is really extraordinary. Ofwat has set a challenging target of 15% by 2025, and the 25-year environment plan also set out that leakages should be minimised and go down year on year. We will ask Ofwat to consider the campaign on insulating pipes, which was mentioned by the noble Baroness, Lady Bakewell, as part of its review. That is something else that we need to work on.
The points that the noble Baroness has made have been absolutely fair. I thought it was very interesting to see different chief executives’ reports into the issues that they were facing. One of the things that we are continually assessing is the situation with the thaw. As we all know, the pipes burst on the thaw, and of course the rapid thaw has probably precipitated some considerable bursts in smaller pipes rather than in the mains. This has been one of the practical issues; there have been many small bursts as the thaw has been so rapid. I think we all look forward to hearing more about what Ofwat reports on preparedness, and on what better work needs to be done in preparing should we have a similar occurrence in future, as undoubtedly we will with the climate as it is.
Lord Berkeley (Lab)
My Lords, I am grateful to the Minister for repeating the Statement and for his explanation of all the work that the water companies and their engineers are doing to reinstate supplies. It must have been a very hard job, day and night in pretty horrible conditions, and the engineers deserve all our thanks. Whether the water companies deserve our thanks is a completely different issue. It is obvious that when the temperature gets cold, the freezing depth goes down and eventually will probably hit a pipe; whether it is a quick or a slow thaw probably does not matter very much. I was cycling through Trafalgar Square this morning and there were two enormous floods coming out of manhole covers that looked to be nothing like water company manholes, so God knows what is happening to the rest of the services in Trafalgar Square. Not that that matters—it is just that it is near here.
My worry is that while Ministers are quite rightly saying that they are going to get a grip on Ofwat and the water companies—I was pleased that the Minister talked about the strategic policy statement and ended up by saying that the water industry works for everyone—that is not what has happened in the last five years. Ofwat, and to some extent the Ministers, have been asleep on the job. I have been saying for the last five years that Thames Water needed looking at because Macquarie bank has managed to reduce its level of assets to about 25% of what they were when it started, and then promptly went after the money to somewhere more attractive and sold Thames Water to the extent that it could not fund the Thames Tideway tunnel on its own and had to seek a government guarantee. That investment could have gone into improving the quality of the pipes, reducing leakages and so on. As the noble Baroness, Lady Bakewell, said, it needs more capital, but there really needs to be a massive change of attitude on the part of Ofwat to do what the Minister said and hold the water companies to account so that we never have this again. The companies should have enough assets to invest so that they can produce a much better system where the leakages are less; the charges, hopefully, are less; and it is about what the customer wants rather than what suits the companies in making the most massive amount of money in salaries and so on in the City. I look forward to the Minister’s comments.
Lord Gardiner of Kimble
My Lords, again, so many of the noble Lord’s comments are in line with what I said and what the Secretary of State was very clear about last week. Some water authorities are, in my candid view, better than others. I have a list of some of the many projects that certain water companies are undertaking, whether investment or dramatically improving water on beaches. There are some very good examples of where that investment of £140 billion since privatisation has undoubtedly borne fruit, whether it is in sewers, flooding, pollution or reduction in nitrates. But there is no doubt that the game needs to be upped, and that improvements in certain water companies need to be considered.
As I said, Ofwat has already given Thames Water a substantial fine for missing leakage targets. When one thinks of water shortages in the south-east and other places with large populations, it is imperative to bear down on continuing leaks very strongly. We need to ensure that water companies are investing properly. In fairness, I have to say that leakage levels are down by a third since privatisation and bills since 1994 are but 3% higher—but there is room for considerable improvement. That is what my right honourable friend the Secretary of State is looking for. We are clear that if Ofwat needs any further powers, we will actively look at them.
Baroness Pinnock (LD)
My Lords, I draw attention to my entry in the register of interests as a non-executive director on the board of Yorkshire Water until September last year.
My understanding is that water companies have to agree a five-year plan for investment in water infrastructure with Ofwat, which is a balance between investment, priorities for improvement such as those to which the Minister referred—sewage systems, clean bathing water, the freshwater river directive and all the rest of it—and cost to the consumer. That is the balance that has to be reached, and those plans are agreed with Ofwat. I am not saying that there ought not to be significant improvements, because there always ought to be, but we need to look at the reality, which is that it is a three-way balance between national government priorities, consumer cost and Ofwat agreeing to the cost of capital.
When I was on the board of Yorkshire Water, I was always going on about leakage, on which I think it is now one of the better companies at about 19%. Water is actually quite cheap—it costs about a penny a litre out of the tap—so the cost of repairing Victorian pipes in many of our towns and across the country is not economic for the water saved, certainly in the north of England where we have plenty of water. It is probably different in the south. Perhaps the Minister could comment on that.
Lord Gardiner of Kimble
I am tempted to say that Yorkshire Water is planting millions of trees to help reduce the risk of flooding and control surges in the flow of water. On leakage, the target was 297 million litres per day, which sounds a lot, but the actual was 295 million, so Yorkshire Water, under the previous custodianship of the noble Baroness, is obviously working extremely hard on some of the issues that she rightly outlined as a balance with other work, working with natural capital and so forth, that water companies are doing.
The first thing to say on the five-year business plans agreed with Ofwat is that they have tough performance commitments, and we agree that they should balance resilience and affordability in the priorities in the strategic policy statement .
On the point about leakage and the cost of the leakage, the noble Baroness may be right that water is cheap, but it is also very precious. I am thinking about the ways in which I would feel very uncomfortable about taking the foot off the pedal in bearing down on leakages and the targets, as we all ought to be doing—and, indeed, upgrading our infrastructure. In previous years, all the streets of London were up because Victorian main drains were being replaced, and so forth. The investment of £140 billion since privatisation has gone on upgrading the infrastructure, and we undoubtedly need to do more.
Government Policy towards Russia
The Earl of Courtown (Con)
I shall with the leave of the House repeat in the form of a Statement the Answer given to an Urgent Question in another place. The Statement is as follows:
“I am grateful to my honourable friend the Member for Tonbridge and Malling for raising this important matter. Although he asks a general question about Russia, let me immediately say that there is much speculation about the disturbing incident in Salisbury, where a 66 year-old man, Sergei Skripal, and his 33 year-old daughter, Yulia, were found unconscious outside the Maltings shopping centre on Sunday afternoon. Police, together with partner agencies, are now investigating.
Honourable Members will note the echoes of the death of Alexander Litvinenko in 2006. Although it would be wrong to prejudge the investigation, I can reassure the House that, should evidence emerge that implies state responsibility, Her Majesty’s Government will respond appropriately and robustly, although I hope that honourable Members on both sides of the House will appreciate that it would not be right for me to give further details of the investigation now, for fear of prejudicing the outcome.
This House has profound differences with Russia, which I outlined in the clearest terms when I visited Moscow in December. By annexing Crimea in 2014, igniting the flames of conflict in eastern Ukraine and threatening western democracies, including by interfering in their elections, Russia has challenged the fundamental basis of international order. The United Kingdom, under successive Governments, has responded with strength and determination, first by taking unilateral measures after the death of Litvinenko, expelling four Russian diplomats in 2007 and suspending security co-operation between our respective agencies, and then by leading the EU’s response to the annexation of Crimea and the aggression in Ukraine by securing tough sanctions, co-ordinated with the United States and other allies, targeting Russian state-owned banks and defence companies, restricting the energy industry that serves as the central pillar of the Russian economy, and constraining the export of oil exploration and production equipment.
Whenever those sanctions have come up for renewal, Britain has consistently argued for their extension, and we shall continue to do so until and unless the cause for them is removed. These measures have inflicted significant damage on the Russian economy. Indeed, they help to explain why it endured two years of recession in 2015 and 2016.
As the House has heard repeatedly, the UK Government have been in the lead at the UN in holding the Russians to account for their support of the barbaric regime of Bashar al-Assad. The UK has been instrumental in supporting Montenegro’s accession to NATO and in helping that country to identify the perpetrators of the Russian-backed attempted coup. This country has exposed the Russian military as cybercriminals in its attacks on Ukraine and elsewhere.
As I said, it is too early to speculate about the precise nature of the crime or attempted crime that took place in Salisbury on Sunday, but Members will have their suspicions. If those suspicions prove to be well founded, this Government will take whatever measures we deem necessary to protect the lives of the people in this country, our values and our freedoms. Although I am not now pointing fingers, because we cannot do so, I say to Governments around the world that no attempt to take innocent life on UK soil will go either unsanctioned or unpunished. It may be that this country will continue to pay a price for our continued principles in standing up to Russia, but I hope that the Government will have the support of Members on both sides of the House in continuing to do so. We must await the outcome of the investigation, but in the meantime I should like to express my deep gratitude to the emergency services for the professionalism of their response to the incident in Salisbury”.
Lord Collins of Highbury (Lab)
I thank the Minister for repeating that response to the Urgent Question. All noble Lords will share his extreme concern about the incident in Salisbury and our hope is for a full recovery for the victims. The investigation is urgent and must be thorough, but speculation today will not help the authorities to do their job. Despite these horrific events, we share the view of the Commons Foreign Affairs Committee that some interaction with Russia is preferable to none. Theresa May said, “Engage but beware”. However, we need to hear from the Minister just what impact our engagement has had. Rather than the off-the-cuff remarks made today by Boris Johnson, we need to hear just how robust he was on human rights when he met the Russian Foreign Secretary in Moscow in December.
One way to show real strength would be to address this issue in the Sanctions and Anti-Money Laundering Bill, currently in Committee in the other place. Despite the opposition of the Government, this House inserted human rights as a principal objective of the sanctions regime in the Bill. Why, therefore, are the Government still resisting an amendment which would enable Britain to sanction individuals who perpetrate gross human rights abuses, like those who tortured Sergei Magnitsky to death in a Moscow jail in 2009? I hope the Minister and the Government will support the principle of a Magnitsky amendment to the Sanctions and Anti-Money Laundering Bill.
In a speech yesterday, President Putin boasted about the proficiency of Russia’s nuclear weapons systems. I hope this Government’s response will be robust and that the Minister will be able to tell the House just what we have said to the Russian Government about their need to comply with the non-proliferation treaty.
The Earl of Courtown
I thank the noble Lord, Lord Collins, for his questions. He is quite right that this investigation is urgent; it must be thorough, and speculation does not help at this moment. The noble Lord also made the point that some interaction is important and he is right on that too. We have to remain open to dialogue to reduce risk, talk about our differences and co-operate for the security of the international community. The noble Lord also raised the subject of the meeting in December. It is important that two P5 countries have these conversations. It is vital for international security that we continue to talk to each other and work together on important international security issues.
The noble Lord mentioned the Sanctions and Anti-Money Laundering Bill. We also amended the Criminal Finances Bill during its passage, receiving cross-party support. It allows law enforcement agencies to use civil recovery powers to recover the proceeds of human rights abuses or violations, wherever they take place, if property is held in the UK. The Sanctions and Anti-Money Laundering Bill will provide the power for the UK to impose sanctions regimes after the UK has left the EU, including against a person involved in gross human rights abuses. Where a person has been designated under the Bill, they may also be defined as an exclusive person for the purposes of Section 8(b) of the Immigration Act 1971 and subject to a travel ban, preventing them being granted leave to enter or remain in the UK.
Baroness Northover (LD)
My Lords, I too thank the noble Earl for repeating the Answer to the Urgent Question. We share the concerns expressed regarding the two victims. I also pay tribute to the emergency services for their work in what may be an extremely dangerous situation. Although we do not know for sure what has happened, there are clearly concerns, so will the noble Earl tell us why last summer’s report that 14 people may have been murdered here by the Russians has not yet been investigated? Given the importance of London as a financial centre, does he agree that the Government can do much more to tackle money laundering and the evasion of sanctions by Russia? Will he clarify the comments of his right honourable friend the Foreign Secretary in relation to participation in the World Cup? What assistance will be given to the Intelligence and Security Committee, which wishes to instigate an inquiry into Russia’s covert activities?
The Earl of Courtown
I thank the noble Baroness for her questions. On her point about my right honourable friend’s comments on the World Cup, the hosting of sporting events is principally a matter for the relevant sporting authorities. A boycott by England is not in the Government’s gift. The noble Baroness also referred to money laundering. Of course, the Sanctions and Anti-Money Laundering Bill is at the forefront of any future sanctions and actions concerning money laundering and is completing its passage through both Houses. I note what the noble Baroness said about the Intelligence and Security Committee. I will pass her comments to the department and see what action we are taking.
Lord Elystan-Morgan (CB)
My Lords, I invite the Minister to revisit very thoroughly the public inquiry conducted in 2016 into the case of Litvinenko, which sat for some five months and surprisingly came to the conclusion that in all probability this assassination had been carried out under the direct order of Mr Putin—a very unique condemnation of a head of state or Government. Will the Government do that?
The Earl of Courtown
My Lords, the noble Lord brings up the case of Alexander Litvinenko and the subsequent report. As he will be aware, we have demanded, and will continue to demand, that the Russian Government account for the role of the FSB in the murder of Alexander Litvinenko. We have taken a series of significant steps in response to Litvinenko’s death: expelling four Russian officials from the UK; tighter visa controls on Russian officials in the UK; suspending discussions on the development of a bilateral visa facilitation scheme; and putting in place international arrangements so that the main subjects can be extradited to the UK if they travel abroad. We have demanded, and continue to demand, that the Russian Government account for the role of the FSB in the murder. The findings of the Litvinenko inquiry, although not surprising, have raised serious concerns and inevitably caused tension in the bilateral relationship.
Lord Robathan (Con)
My Lords, I commend the Government for their position on Russian sanctions. I particularly commend the Foreign Secretary for the robust attitude that he took with Lavrov back in December, for which he was much criticised in the media. I urge the Government and my noble friend to be absolutely resolute. Should it be the case that this attack has been sanctioned—not even sanctioned but carried out by Russian agents—it is essential that we ramp up the sanctions in whatever way we can. On this occasion I support the Labour Front Bench, which has asked for exactly that.
The Earl of Courtown
My Lords, as my noble friend will be aware, investigations are continuing on the recent case and it would be inappropriate to comment further at this time. As the noble Lord, Lord Collins, said, the investigations must be thorough but urgent. Once they have been completed, Her Majesty’s Government will decide on our actions.
The Lord Bishop of Leeds
My Lords, it is clearly important, as has already been observed, that speculation is not always helpful. One of the important questions to be asked in this case is what the Russian Government and Putin himself might have to gain from this. It is not clear. Was it vengeance? If so, why wait till now? Is it deterrence? Any beans these guys have to spill have already been spilled. Is it to exploit the UK’s apparent weakness or our distraction because of Brexit? I am not speculating but asking some questions that need to be asked before we come to conclusions. A phenomenological comparison with Litvenenko may be convenient, but a correlation is not a cause. It will be helpful if we could have some response on the caution that needs to be exercised before proof is brought.
The Earl of Courtown
I thank the right reverend Prelate for his points and his questions. As other noble Lords have said, the results of the investigation, which is urgent, have to come out before any actions can be decided on. However, he raises a good point about why that happened. I do not have the answer. It is understood that the Russian Government have got involved with projects overseas, but I do not have the answers to why on earth they would do this.
Renewable Transport Fuels and Greenhouse Gas Emissions Regulations 2018
(6 years, 9 months ago)
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Baroness Sugg
That the draft Regulations laid before the House on 15 January be approved.
Relevant document: 17th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, I ask that the draft Renewable Transport Fuels and Greenhouse Gas Emissions Regulations be considered.
Lord Tunnicliffe (Lab)
I believe that the Minister does not want them considered but approved. The Minister’s civil servants are always right for the Moses Room, but we are in the Chamber rather than there.
Baroness Sugg
I thank the noble Lord for that correction. I therefore ask that the draft Renewable Transport Fuels and Greenhouse Gas Emissions Regulations be approved. These regulations will amend two pieces of legislation relevant to suppliers of fuels: the Renewable Transport Fuel Obligations Order 2007—the RTFO Order; and the Motor Fuel (Road Vehicle and Mobile Machinery) Greenhouse Gas Emissions Reporting Regulations 2012—the greenhouse gas reporting regulations. In September, the Government set out a 15-year strategy for renewable transport fuels. This is an ambitious strategy to support investment in sustainable advanced fuels of importance to the UK and to help meet our carbon budget commitments. These regulations are the product of that strategy and are key to its implementation.
It may be helpful at this stage for me to provide an overview of the current regulatory framework. Under the Renewable Transport Fuel Obligations Order, suppliers of fossil fuel have an obligation to demonstrate that the equivalent of 4.75% of their fuel supply is from renewable sources. Suppliers of biofuel that meet sustainability criteria are rewarded with renewable transport fuels certificates, which can be traded on the open market. The greenhouse gas reporting regulations operate in parallel with the renewable transport fuel obligations scheme, and require fuel suppliers to report the amount and type of fuel they supply and its greenhouse gas intensity.
Under the Renewable Transport Fuel Obligations Order, the greenhouse gas emissions savings from renewable fuels have improved year on year. Last year, the average greenhouse gas saving of a litre of renewable fuel was 71% compared to petrol and diesel. The draft regulations build on that success. They would amend the Renewable Transport Fuel Obligations Order to increase the targets for renewable fuels to 9.75% of fuel supplied in 2020 and 12.4% by 2032, providing investment certainty; increase incentives for new fuels of strategic future importance to the UK, known as “development fuels”; make certain renewable aviation fuels and make renewable hydrogen eligible for reward; and place a limit on the contribution that biofuels produced from food crops can make to meeting targets.
The draft regulations will amend the greenhouse gas reporting regulation to create a new greenhouse gas credit trading scheme. Key features of this new scheme are an obligation on fuel suppliers to reduce the overall greenhouse gas emissions of the fuels they supply by 6% compared to 2010 levels, and incentives to suppliers through rewarding with greenhouse gas credits for fuels with lower greenhouse gas emissions than petrol and diesel, electricity used in vehicles and reductions in emissions from the extraction of crude oils.
The serious groundwork for these amendments began in 2014 and there has been input from industry and NGO experts throughout. The department has, rightly, taken time to build consensus in a controversial and complex policy area. In 2014, there was no final agreement in the UK or at EU level over how best to address negative indirect land use change impacts associated with some crop biofuels, no broad agreement on how to increase renewable transport fuel targets or on what the long-term strategy should be, and no firm proposals on how to incentivise novel renewable fuels or advanced development fuels of strategic importance to the UK.
These regulations set a 15-year strategy, mitigate indirect land use change risks and promote advanced development fuels, and they are the most ambitious in this area to date. They also strike a balance between maintaining support for an established UK biofuel industry which faces challenging market conditions and setting ambitious, stretching targets to support new development fuels.
The Government recognise both the environmental and the wider economic benefits of established UK biofuel production. The department has listened to suppliers and is now proposing that the Renewable Transport Fuel Obligations Order obligation level will reach 12.4% in 2032, providing longer-term certainty. Rather than set a 2% crop cap in 2018, that cap should reduce gradually from 4% in 2018 to 2% in 2032.
The department is aware that the UK bioethanol industry and its partners would have preferred a different approach on the crop cap and are seeking support for a rollout of E10 fuel. These regulations will not contract the market for UK bioethanol made from crops and will provide space for a market for E10, should suppliers choose to deploy it. Moving to E10 fuel could make achieving our renewable energy targets easier and provide an economic boost to domestic producers of bioethanol and UK farmers in the supply chain. The department therefore remains committed to working with industry to ensure that any future introduction of E10 is managed carefully and that E5 remains available for vehicles not compatible with E10.
In conclusion, the regulations before your Lordships will accelerate the delivery of sustainable development fuels, enabling the UK to lead in developing and deploying those fuels. They also take into account the wider economic importance of existing UK biofuel production and seek to maintain that market. I beg to move.
Baroness Randerson (LD)
My Lords, I think you could sum up what I feel about these regulations by saying, “At last!”—because this legislation has been delayed for many years. It goes back to the 2013 directive and we are now in something of a race against time to get it approved before next month, I believe, when a new year of target implementation comes into force. So it is very welcome, because the uncertainty has had a significant economic impact on the renewable transport fuel industry.
Interestingly, the aviation industry has also been asking for this for a long time and has warned that we are being left behind by a number of other countries. So I am pleased to see aviation included here, but I would ask the Minister for more detail on the Government’s plans for aviation. Sustainable Aviation has also called for government to de-risk investment in sustainable fuels by underwriting the risk and prioritising research into sustainable fuels to bring the UK into line with our competitors. What other measures are the Government taking to encourage sustainable aviation fuels?
My general comment is that, although the legislation is welcome, as ever it lacks ambition in its targets and timings. For instance, paragraph 8.9 of the Explanatory Memorandum explains the Government’s amended targets. There will no longer be a 2% interim target for greenhouse emissions in 2018, and the interim target will be left at 4% for 2019. Is that because the Government have run out of time to do it in 2018 or is it because, as the Explanatory Memorandum suggests, we are already at 2%? I would like some clarity on that, please, from the Minister.
As the Minister has just told us, the proposals include a crop cap, which the industry is of course unhappy with. Does the Minister believe that the proposal to put that cap at 4%, reducing to 2%, is stretching enough, and at the same time reasonable?
Throughout Europe, the United States and Australia, E10 is commonly used, and it is more environmentally friendly. Will the Government be introducing it later this year when the new regulations on fuel pump labelling come into force? I remind your Lordships that, in the past, British Governments have led the way—for example, on the introduction of unleaded petrol. Those were difficult decisions to make, but they were of huge importance for human health. This is a similar decision that needs to be made.
Behind all this is the force of EU law and requirements. I regret to say that the Government can no longer pretend to be at the forefront of EU policy on this, so I am anxious to get the Minister’s commitment that this is one area of EU environmental regulations where we as a nation will continue to shadow the leadership of the EU.
Finally, it is quite possible that the Minister will not be able to answer this now and might wish to write to me, but I would like a little information from her. In point 15 there is a reference to reporting on electricity usage by a supplier for the charging of electric vehicles. With the AEV Bill also before us, I am keen to see how exactly this requirement will work with that and how the data requirement in the Bill fits with these regulations. In asking this question I bear in mind, of course, that an electric car is really only as clean as the electricity that goes into it. The question of how electricity is generated is key, and in due course I would be grateful for further information on that.
Lord Berkeley (Lab)
My Lords, I follow the noble Baroness with a similar question. I was at a meeting this morning about electric cars, which was a sort of precursor to the Committee stage of the Automated and Electric Vehicles Bill. My question is about the addition of biofuels. Obviously I support the percentage increase up to 9.75% by 2020, but can the Minister tell me whether there are any types of motor that use this fuel that are adversely affected by it? The noble Baroness mentioned the aerospace sector. I understand that, among some parts of our large boating industry, which obviously uses lots of engines, there is a big worry about even the existing proportion of biofuels in the fuel because it adversely affects the engines. I do not know—if the Minister cannot answer this, perhaps she will write to me—whether it is because of the type of engine or because many boat engines spend most of the year doing nothing: it may be something to do with that. Manufacturers did not like the previous fuel and were even asking for two sets of fuel pumps, one with the biofuel addition and one without, which of course would cost an enormous amount of extra money.
I do not know whether this applies to any other type of motor. The railways are probably all right, as I suspect are most of the road transport and car industries, but it is important to know which type of motor and which type of use is adversely affected by this and what the manufacturers can do about it. Obviously it is good to increase the percentage, but if it is going to wreck engines in the process we will have to find a solution. I look forward to the Minister’s response.
Lord Tunnicliffe
My Lords, I, too, support the instrument—indeed, as has been pointed out, we should be celebrating it, given how long it has taken to achieve.
I have worked hard to understand the instrument and its accompanying memorandum and I would probably have had many questions to ask. However, the Secondary Legislation Scrutiny Committee’s report rather effectively had that debate for us in some depth. At the end of the day I agree with its general conclusion, despite the industry intervention, that the balance is about right.
However, the instrument is directive driven and the targets are only made by the dependence on non-crop double incentive—and by the time I had got to a non-crop double incentive I thought perhaps it was time to retire. I say it is directive driven because I would have valued seeing somewhere the department’s long-term vision for biofuel. Most forms of transport have credible non-hydrocarbon solutions, at least in embryonic form, but aviation, with its requirement for very high fuel density, needs to look forward hopefully to biofuel, which can be 100%. So I would be grateful if the Minister could set out the department’s thinking about the long-term use of biofuels, particularly in aviation.
From reading the Explanatory Memorandum and the correspondence with the sub-committee, it seemed to me that one problem was with the potential feedstocks for non-crop biofuels. Asked for examples, we were given cooking oil and tallow—but there are only so many fish and chip shops generating used cooking oil. Is there a viable long-term source of feedstocks for non-crop biofuels that could start to contemplate meeting the volumes of fuel that would be needed if biofuels, particularly non-crop biofuels, became the preponderant fuel for aviation?
Baroness Sugg
My Lords, I thank all noble Lords for their contributions and for their broad welcome and support for these regulations. The noble Baroness, Lady Randerson, mentioned the delay in passing them, and I acknowledge that there has been a slight delay. The regulations have been informed by extensive consultation with industry experts and NGOs and they represent a complex set of changes. We felt that it was right to build consensus wherever we could in this area.
The noble Baroness asked how we can help new suppliers, particularly to aviation, get from the demonstration scale to the commercial one. Under our second competition, up to £22 million of government funding will be matched by private sector investment to construct a first-of-a-kind fuel production facility in the UK which will enable the demonstration of technical and commercial viability, including for aviation fuel. She also asked why we did not propose a target in 2018. Time would have been tight for a 2018 target. During the consultation there was little support for targets before 2020 and we therefore decided not to introduce one for this year.
The noble Baroness raised the point about the crop cap and asked whether the percentage we have set is correct. It is different from that in other member states. We have taken into account the consultation responses to the regulations and we have set the cap at 4% in 2018; it will be reduced gradually from 2021 to 2032. To put the figures into perspective, total UK bioethanol production capacity at the moment is equivalent to a little more than 1% of the transport energy requirement, and the current proportion of crops being used to produce biofuels is equivalent to less than 2% of the UK fuel supply. As I say, I acknowledge that the cap is lower than that set in some member states, but they are already using more crop-derived biofuels. The changes proposed in the regulations continue to support our existing bioethanol industry by encouraging future investment in waste-derived fuels. We think that a higher crop cap in the UK could result in more fuels being supplied that can cause an increase in greenhouse gas emissions.
The noble Baroness asked whether we will deploy E10 fuel. I hope that the Government have been clear that deploying E10 fuel is an option for suppliers in meeting their obligations and it may well be the best and most cost-effective option, but at this stage the regulations do not mandate E10 fuel in the sense of requiring that petrol should be blended with 10% bioethanol. The regulations provide the flexibility for fuel suppliers to determine how best to meet their obligations, and we think that flexibility will enable the costs to be kept down and allow suppliers to react to changes that impact on the market.
On exiting the European Union, I can confirm that the Government have no plans to change their policy in this area and the amendments have been designed to achieve our domestic carbon budget commitments and provide UK industry with the long-term investment certainty it needs, but as with any policy, we will keep it under review to ensure cost-effectiveness. On the question raised by the noble Baroness on the generation of electricity for electric vehicles, with her permission I would like to consider further how we can address this in the AEV Bill, and I will write to her on the issue.
The noble Lord, Lord Berkeley, raised the issue of compatibility of the various different engine types with this new fuel. We recognise that the owners of vehicles, be they regular cars, vintage cars or indeed boats, will ask whether they will be compatible with E10 and indeed E5 fuel. We are committed to working with industry to ensure that any rollout of E10 is carefully managed and that information on compatibility is made available to vehicle owners. We intend to consult very soon on proposals that will require that E5 fuel remains available to motorists, and how best to provide information on it. I am not aware of the detail concerning boat engines, so I will write to the noble Lord.
The noble Lord, Lord Tunnicliffe, talked about the long-term proposal. Obviously, as we transition to ultra-low emission vehicles, we will continue to need low-carbon liquid and gaseous fuels for decades to come, particularly in the aviation sector. In the absence of new measures and given the expected growth in the aviation sector, emissions are likely to increase, so low-carbon fuels such as biofuels are considered the only viable source of energy available to significantly limit aviation emissions by 2050. Electric airplanes are in development, but I think they are some years off. The UK aviation industry has for some time advocated its eligibility for an award under the RTFO because it would help to provide the support needed, as the noble Baroness, Lady Randerson, also mentioned, to kick-start the use of aviation biofuels which at present are not produced or supplied in the UK. The regulations before us will enable renewable aviation fuels to receive RTFO incentives for the first time, and we hope very much that that will encourage the industry to grow.
The noble Lord asked about the availability of waste feedstocks and the number of fish and chip shops both in this country and abroad, given that we import some of our feedstocks. We have carried out scenario testing to look at different waste supply potentials. Stakeholders have been helpful in confirming that the volume of waste feedstocks we think we will need to meet the higher targets is likely to be available, and we therefore continue to assume that the waste feedstocks can be supplied. There is some uncertainty over exactly which feedstocks will be supplied—noble Lords have mentioned cooking oil and tallow—but we anticipate that much of the increase will come from the waste already being used to make biodiesel. Furthermore, given the post-consultation changes to the crop cap, which, as I said, will start at a high percentage and gradually reduce towards 2032, we consider that the risk of waste biofuels becoming more expensive than the buyout is reduced. The development fuels sub-target is also designed to increase the diversity of feedstocks used to produce fuels.
I hope I have answered all noble Lords’ questions; if not, I will follow up in writing. I thank noble Lords for their contributions to the debate. The regulations are needed to support investment in sustainable advanced fuels for automotive, aviation, road freight and maritime; to provide certainty to UK producers and the farms that will supply them that existing bioethanol capacity will be fully utilised; and to help us meet our climate change commitments. In meeting our commitments, low-carbon fuels will be needed for decades to come, not least in the sectors that are harder to decarbonise through electrification, such as heavy goods vehicles and aviation. We feel that the targets in these regulations are ambitious and will provide an important contribution to UK carbon budgets. The amendments build on the success of the RTFO to date in delivering significant greenhouse gas emissions reductions. I hope your Lordships will agree that the regulations are the best way to proceed with our renewable transport fuels strategy. I beg to move.
Seafarers (Insolvency, Collective Redundancies and Information and Consultation Miscellaneous Amendments) Regulations 2018
(6 years, 9 months ago)
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Baroness Sugg
That the draft Regulations laid before the House on 15 January be approved.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, these regulations will amend the Employment Rights Act 1996, the Trade Union and Labour Relations (Consolidation) Act 1992 and the Information and Consultation of Employees Regulations 2004. Together with the Seafarers (Transnational Information and Consultation, Collective Redundancies and Insolvency Miscellaneous Amendments) Regulations 2018, they will transpose the requirements of the seafarers directive into Great Britain and UK law. Northern Ireland is making provisions to transpose those elements for which it has devolved responsibility.
In simple terms, the purpose of both sets of regulations is to ensure that seafarers and share fishermen, where employed, are provided the same level of employment protection as those working on UK soil with regard to insolvency, collective redundancies, transfers of undertakings, information and consultation, and works councils. They further demonstrate our commitment to ensure that employment rights are protected in the UK.
The European Commission, through a special task force, identified five employment directives that contained derogations for seafarers and therefore allowed land-based workers greater employment rights than those at sea if member states chose to apply them. The purpose of the seafarers directive was to remove these derogations and address the anomaly that land-based workers may enjoy greater employment rights than those at sea. Member states have been able to apply derogations on an ad hoc basis. The result has been that businesses in one member state have been able to comply with less favourable social protection for seafarers than those in another member state, such as the UK.
The Government have been fully supportive of the seafarers directive and have engaged with UK social partners, such as Nautilus International, which is the officers’ union, the RMT, which is the ratings’ union, and the UK Chamber of Shipping. UK social partners were at the forefront of the discussions with the European social partners and were instrumental in steering the discussion in those fora.
I will not detail all of the amendments as most of them simply omit previous clauses. I will instead draw attention to the reason for some of them. The UK had previously made use of the derogations relating to share fishermen as it considers them to be self-employed. Share fishermen are fiercely protective of their status, and I should be clear that these regulations do not amend their employment status. However, it is recognised that in certain circumstances a share fisherman may be considered to be employed and, in such circumstances, should have the same rights as those who are employed in other forms of work. These regulations amend the Employment Rights Act 1996 and the Trade Union and Labour Relations (Consolidation) Act 1992 to include share fishermen, where employed, in matters relating to insolvency and collective redundancies.
Part XI of the Employment Rights Act 1996 provides protection for employees in the event of a redundancy, which may, among other things, arise in the context of the insolvency of an employer. Regulation 2(2) removes the exclusion relating to Part XI in relation to employed share fishermen. Part XII of the Employment Rights Act 1996 provides protection for employees in the event of insolvency in Great Britain. This had previously excluded employed share fishermen, but Regulation 2(2) will amend Section 199(2) of the Act by removing the exclusion relating to employed share fishermen. Regulation 2(3) corrects a previous omission and brings merchant seamen within the scope of Part XII of the Act.
The UK had not relied on the derogation for the crews of sea-going vessels in relation to procedures for handling collective redundancies, and this was removed by the seafarers directive. However, an amendment is made to Section 284 of the Trade Union and Labour Relations (Consolidation) Act 1992 to bring employed share fishermen within scope of the collective redundancy requirements.
Baroness Randerson (LD)
My Lords, we should congratulate the Minister on bringing this legislation here. Since she took up her role as Minister, it is clear that she has looked into the dark corners of the Department for Transport’s cupboards, dusted off some badly overdue legislation and brought it into the strong light of day. I regret having to say this, but I have to ask again: why is it so late? I understand that this measure is based on the seafarers directive of 2013. It should have been transposed into UK law by October last year. So we are now six months overdue. I know that the Government are distracted by Brexit, but it is a bad symptom of a situation where a Government are really struggling to cope.
Of course, I support the proposals here; on these Benches, there is strong support for the principle behind the regulations. The big issue is whether they really equalise rights for seafarers, bringing them fully into line with those who work on land. We all realise that it is a much more complex issue, because if you work at sea national boundaries are crossed less obviously and supervision of terms and conditions of employment is probably much more complex. There are also complex employment patterns, as the Minister has pointed out.
One can therefore do nothing other than welcome the increased job security that there will be for seafarers as a result of these regulations—and perhaps dwell for the moment on the fact that it is quite ironic they have been introduced as a result of an EU directive at a time when many fishing and coastal communities are among those in the UK where support for leaving the EU was strongest. I fully support the regulations and thank the Minister for her explanation.
Lord Tunnicliffe (Lab)
My Lords, I come to these regulations still intellectually exhausted from biofuels and have set myself the minimum objective of trying to understand them. My few questions for the Minister are therefore just to understand them better.
The regulations and their accompanying Explanatory Memorandum seem, as far as I can see, to talk solely about share fishermen, where employed, and I am not clear whether the regulations affect anybody else. I thought that the easiest way to understand this might be to turn it on its head. The objective, we are told, is to turn the rights of seamen into the same rights that land-based workers have. Paragraph 7.3 of the Explanatory Memorandum identifies five directives, which are set out, covering five areas where in the present situation there is a difference between seamen and land-based workers. I was not clear whether all five were covered by the regulations. In simple terms, asking the obverse question, following the approval of the measure, what differences remain between seamen and land-based workers? If there are any differences, why have they been retained?
Lord Hylton (CB)
My Lords, these regulations are, no doubt, narrowly drawn and seek to improve protection for at least some seafarers using our ports. There are, however, some wider problems. Foreign owners and companies bring fishing vessels to British ports. They are often largely crewed by people from south-east Asia and the Indian subcontinent. When, from time to time, the owners become insolvent or the vessels break down, the crews can be left in very difficult situations. Their wages may be unpaid for long periods. They may or may not receive the redundancy payments that should be due. They may be asked to work on land or may choose to do so, even illegally, because of the threat of destitution. They may have serious difficulties in communicating with their families and their Governments.
I therefore ask the Minister: what representations have HMG received on these issues from voluntary organisations working with fishermen and seafarers? Do the Government now have proposals, other than those included in these limited regulations, for dealing with the very real, human problems—for example, over repatriation of crews? Do foreign Governments help with this, and what provision do our Government make for meeting the costs, particularly of repatriation in cases of bankruptcy when crews are stranded here through no fault of their own? The people who are affected by the problems I have mentioned are, by themselves, almost voiceless. They therefore deserve better protection than they have now.
Baroness Sugg
My Lords, I thank all noble Lords for their contributions this afternoon.
Again, I can only apologise to the noble Baroness, Lady Randerson, for the late transposition: it is always regrettable when transposition is late. Although the changes are minor, they impact a number of complex areas of employment legislation, and we felt it was necessary to ensure that the changes made did not have unintended consequences in other areas. I thank the noble Baroness for her comments, and I assure her that I, along with the department, will continue to look into dark corners and ensure that we bring secondary legislation before the House as soon as we can.
The noble Lord, Lord Tunnicliffe, turned the question on its head and asked whether any difference between rights remains. The seafarers directive, this regulation and the accompanying negative SI remove the derogations for merchant seamen and/or share fishermen from the protection afforded by the five European directives. We have already covered what those rights are. The aim of the EU review of the employment of seafarers was to identify just those areas where there were differences between the rights of seafarers and those of land-based workers, and those were the five directives it came up with. Removing those derogations was the main aim—to remedy those differences—and now the employment rights of seafarers match those of land-based workers, as far as we know.
The noble Lord, Lord Hylton, asked about the insolvency of foreign vessels coming to our shores. We are in the process of implementing the 2014 amendments to the Maritime Labour Convention, which ensures that ship owners have financial security to meet seafarers’ entitlements. If the ship owner abandons the seafarers, they have the right to make a claim to the financial security provider. These regulations are expected to come into force in July 2018. Obviously, it can be a very distressing situation, and the MCA and the Department for Transport are in regular contact with the maritime charities, which form an important part of the dialogue we undertake in this area. If the ship owner and flag state of a non-UK ship in a UK port both fail to repatriate seafarers, the UK, as the port state, can indeed step in, and this is often done in conjunction with the welfare organisations. We are working on ratification of the International Labour Organization’s Work in Fishing Convention, which is expected to be completed, and we are also working on amendments to the ILO’s Maritime Labour Convention. Both conventions set minimum international standards with regard to welfare and social conditions. I hope that that addresses the noble Lord’s points.
I hope that I have answered fully the questions raised today. I hope your Lordships will agree that the objective of these regulations—to bring employment standards for seafarers to the same level as those in other areas of employment—is desirable. Given the long and important role that maritime, and in particular seafarers have played in this country’s prosperity and standing on the global stage, it is absolutely right that they are given the same employment standards as those on land. I beg to move.
Enhanced Partnership Plans and Schemes (Objections) Regulations 2018
(6 years, 9 months ago)
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Baroness Sugg
That the draft Regulations laid before the House on 17 January be approved.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, the Bus Services Act 2017 contains a range of options to improve local bus services in England. In addition to franchising, there are new and improved options to allow local transport authorities to enter into partnership with their local bus operators to improve services for passengers.
One of these, the enhanced partnership regime, allows local authorities to define a geographical area in which they provide new facilities such as bus priority measures or take other measures that would make buses more attractive, such as reducing car-parking provision or increasing its cost. In return, local bus operators are required to meet service standards that are specified as part of the scheme. This can include a multi-operator smart-ticketing scheme or a requirement to operate cleaner vehicles or provide comprehensive timetable and fares information. The partnership can also limit the number of vehicles that operate along specific corridors to reduce congestion or improve air quality, or require the buses to co-ordinate their timetables with other modes, such as rail services.
The draft regulations, which were laid before the House on 17 January, set out the mechanism by which bus operators can formally object to the package of proposals during the development of an enhanced partnership scheme. A key element of enhanced partnerships is that only the majority of bus operators need to agree to the proposals for them to go ahead. This means that improvements to bus services that are supported by the local authority and the majority of bus operators cannot be prevented from being introduced by a “blocking minority” of operators which, for whatever reason, do not wish the partnership to be introduced.
The 2017 Act provides a mechanism allowing individual operators the opportunity to object to the proposals to make an enhanced partnership plan or scheme at two key stages. The first opportunity to object arises when the proposal for an enhanced partnership is subjected to a formal public consultation, and the second arises if the plan or scheme is modified following the consultation.
The regulations set out the process for determining if the number of operators objecting to the enhanced partnership plan or scheme, as proposed or modified, is sufficient to stop it proceeding any further. If this happens, the partnership would need to renegotiate the package until the objections fell below the statutory thresholds.
The regulations provide two criteria that need to be satisfied to determine whether there are a sufficient number of objecting operators to stop the partnership proposals. Both criteria need to be considered and either one, if met, would be enough on its own to stop further progress. The first criterion is that, for objections to be sufficient, the objecting operators together must represent 25% of operated bus mileage in the partnership area and at least three bus operators must be objecting. If there are fewer than three operators running bus services in the area, the regulations require them to object for this criterion to be satisfied. This ensures that objections are raised by operators with a significant stake in the local bus market while preventing a single operator, or pair of dominant operators, from exercising an effective veto.
The second criterion is that objections are received from 50% of local bus operators that, together, operate at least 4% of operated mileage in the partnership area. This prevents a large number of operators that together have only a relatively small stake in the bus market from objecting to a partnership that is supported by the local authority and the operators with the largest stake in that bus market.
I will now explain how those thresholds were arrived at. The bus market in England has been deregulated since 1986 and the number and size of bus operators in individual areas varies greatly. The objection thresholds in the draft instrument cater for this and were arrived at following detailed analysis of real-world bus markets by officials in the Department for Transport, and discussions with key stakeholders such as bus operators and local authority stakeholder groups. This objection mechanism was then subject to a full public consultation between 8 February and 21 March last year. While some respondents suggested alternative figures for the thresholds, there was no consensus on what they should be and it did not convince us to alter our proposed figures.
Following our detailed analysis and the results of the consultation, we believe these figures are the right ones to use for the objection mechanism. However, the mix of bus operators varies hugely up and down the country, as I said, and it would not be possible for any statutory criteria adequately to cater for all the ones where enhanced partnerships may develop. That is why the 2017 Act also allows for further flexibility. The statutory objection thresholds in this instrument are required to apply only when a plan or scheme is introduced. An enhanced partnership can also include a bespoke objection mechanism for use when an existing scheme is varied or discontinued. This allows individual partnerships to adopt an objection mechanism that better suits their needs.
The draft instrument also sets out those services that are not eligible to take part in the objection mechanism. The first is community bus services which, under the 2017 Act, are not required to meet the requirements of an enhanced partnership scheme. It also includes tour buses, services that operate less than 10% of their mileage in the partnership area and services paid for under subsidy by the local transport authority.
Since the Bus Services Act came into force in June last year, nearly 30 local authorities up and down the country have either expressed an interest in, or are actively pursuing, an enhanced partnership with their local bus operators. However, there will inevitably be some operators that seek to block progress, perhaps because the improvements proposed are not in their commercial interest or because they prefer the freedom to operate in a fully deregulated market. These regulations seek to strike a balance between ensuring that the partnership has broad support from local operators and not allowing a minority to block vital improvements that will make local bus services better for passengers. I ask the House to approve the regulations and I beg to move.
Baroness Randerson (LD)
My Lords, I thank the Minister for her introductory comments. One of the big questions when we debated the Bus Services Bill last year was exactly how the Government were going to devise a scheme that allowed existing operators to object to a proposed partnership without allowing them to act as a complete block on progress towards improved bus services. We all hope that the enhanced partnerships will provide those improvements, so I strongly welcome the Minister’s realistic analysis of what the regulations seek to do. It seems that the scheme as outlined here is quite a cunning plan, which is well balanced between the operators and the local authorities.
However, we will see how well it works in practice. I am delighted to hear that 30 local authorities are already working on this. One hopes that they are successful because the others, the less adventurous ones, might perhaps follow suit. Given that the Government declare in the Explanatory Memorandum that a review is not appropriate, will the Minister assure us that there will be an element of informal review to assess how well this is working after a couple of years? There might be some unintended consequences or the need for some adjustment, so it is only sensible to allow for review—although I understand the Government not wanting to commit to a formal review process.
The plans set out five stages in the life cycle of an enhanced partnership. The first is when the local authority proposes a plan, the second is when it makes a plan and the third is when it proposes to vary a plan. How will that work in practice? Suppose at stage 1, when the local authority proposes an enhanced bus partnership, the bus operators object. Is there sufficient flexibility in the process for the local authority and the bus operators to meet and discuss the plan, for the local authority to amend it and for the bus operators to withdraw their objections without having to go back to square one? I fear that in practice some local authorities might look at a plan and, if the bus operators object, they might just retire from the field and say that they will not bother with enhanced partnerships again. I am concerned that we have a system that is sufficiently simple and flexible to allow both sides to address issues and concerns and to move on through the process without having to go back to the start.
I hope the system is flexible and that this is a successful way ahead, because the decline in the number of bus services, particularly in rural areas, indicates that for many areas this is the last opportunity for decent bus services to survive—and we know that when a bus service goes, it strikes at the heart of a rural area.
Lord Tunnicliffe (Lab)
My Lords, I am afraid that the Minister has not really made my day since she has answered all the questions in my original speech. I shall not waste the time of the House by repeating them. Suffice it to say that I commend the realistic attitude that the Government have taken to how bus companies might behave. I shall press the point made by the noble Baroness, Lady Randerson, about a review. I am not pressing the Government to commit to a review, but should the carefully researched numbers in these regulations prove not to achieve the Government’s objectives, what complexity would there be in changing the numbers? Would it be possible within the parent legislation to bring forward new orders if the reaction of bus companies was excessively to veto apparently viable schemes?
Baroness Sugg
My Lords, I again thank the noble Baroness, Lady Randerson, and the noble Lord, Lord Tunnicliffe, for their broad support for these proposals. On the flexibility point, the legislation allows operators and local authorities to negotiate a deal through the objection system. They can reach this agreement in advance of a formal objection—so we think there is enough flexibility there. As to the review, yes, we absolutely will keep the thresholds under review and will bring forward amendments if necessary.
Enhanced partnerships are a new type of partnership agreement that did not exist prior to the 2017 Act, and we are encouraged by the interest and progress that has already been shown by local authorities and bus operators. The objection mechanism is a key part of the regime, and it is important that we strike the right balance between allowing operators a fair say on what should go into the schemes while at the same time preventing a minority from blocking improvements.
As the noble Baroness, Lady Randerson, said, we will need to see how these work in practice. The fact that this mechanism is in secondary rather than primary legislation gives us flexibility to amend and further debate the rules in future. My department will not hesitate to do so if that is required to ensure the ongoing success of the schemes. I beg to move.
Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2018
(6 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
That the draft Regulations laid before the House on 15 January be approved.
Lord Young of Cookham (Con)
My Lords, these draft regulations, which have passed in the other place, make no changes to the structures of the national insurance and benefits systems, and are a routine annual exercise to account for the rise in prices. As noble Lords know, this Government are committed to a welfare system that is fair to the taxpayer while also protecting Britain’s most vulnerable.
To put the regulations in context, the Welfare Reform and Work Act 2016 legislated to freeze the majority of working-age benefits, including child tax credit and working tax credit, for four years—in other words, up to 2020. The Act helped to put our welfare system on a sustainable long-term path. Exempt from the freeze are the disability elements of the child tax credit and working tax credit. The guardian’s allowance is also exempt. As in previous years, we are now legislating to ensure that the guardian’s allowance and the disability elements of child tax credit and working tax credit increase in line with the consumer price index, which had inflation at 3% in the year to September 2017. Alongside our commitment to fiscal discipline, the Government, through the draft regulations, are exercising their demonstrable commitment to protecting those who need protection the most.
What the regulations mean in practice is that we will maintain the level of support for families with disabled children in receipt of child tax credit and for disabled workers in receipt of working tax credit. The regulations also sustain the level of support for children whose parents are absent or deceased. To add further context to these regulations, universal credit is replacing a number of means-tested working-age benefits, including tax credits. Once all tax credit claimants have migrated on to universal credit, the uprating of tax credit elements will no longer be necessary.
The social security regulations make changes to the rates, limits and thresholds for national insurance contributions and make provision for a Treasury grant to be paid into the National Insurance Fund if required. These changes will take effect from 6 April 2018. Re-rating increases these figures by inflation to protect taxpayers from rising prices and increases to the costs of living.
These regulations will result in around £130 billion of national insurance contributions to the Exchequer, working directly to support the NHS, pensioners and the bereaved. On class 1 national insurance contributions, the lower earnings limit is the level of earnings at which employees start to gain access to contributory benefits. These include the state pension, contributory employment and support allowance and contribution-based jobseeker’s allowance. The lower earnings limit will rise in line with inflation from £113 to £116 a week, or £6,032 on an annual basis.
Employees have to pay class 1 NICs at 12%. The primary threshold is a level of earnings—£8,424 on an annual basis—above which class 1 NICs have to be paid. The threshold will rise with inflation to £162 a week. The upper earnings limit is the level at which employees start to pay class 1 NICs at 2% instead of 12%. The Government have committed to align this threshold limit with the UK’s higher income tax threshold of £46,350 on an annual basis.
Employers have to pay national insurance at a rate of 13.8% from an earnings level called a “secondary threshold”. This threshold will also rise with inflation to £162 a week, as it has been aligned with the primary threshold for employees since April 2017. The Government are also committed to reducing the cost to businesses of employing young apprentices and young people. The level at which employers of people under 21 and of apprentices under 25 start to pay employer’s contributions will therefore rise from £866 to £892 a week.
Class 2 NICs provide access to contributory benefits for the self-employed—in other words, the state pension. The weekly rate of class 2 NICs that has to be paid will rise in line with inflation to £2.95—a flat rate for all the self-employed. The small profits threshold is the level of profits above which the self-employed have to pay class 2 NICs. This threshold will rise with inflation to £6,205 a year.
The self-employed also have to pay class 4 NICs, at a rate of 9% on profits above £8,164 a year. That limit will now rise with inflation to £8,424. The self-employed then pay 2% instead of 9% above what is termed an upper profits limit. That limit will rise from £45,000 to £46,350 a year. Finally, class 3 contributions allow people to voluntarily top up their national insurance record. This allows access to the state pension. The rate for class 3 will increase in line with inflation from £14.25 to £14.65 a week.
The regulations also make provision for a Treasury grant of up to 5% of forecasted annual benefit expenditure to be paid into the National Insurance Fund, if needed, during 2018-19. This would be a routine transfer with no wider fiscal impact. A similar provision will be made in respect of the Northern Ireland national insurance fund.
I trust that this has been a useful overview for noble Lords of the changes that we are making, and I commend the draft regulations to the House. I beg to move.
Baroness Primarolo (Lab)
My Lords, I do not wish to detain the House for long today but I want to ask the Minister some questions specifically about the tax credits and guardian’s allowance regulations. I should say that I asked a Minister similar questions in a debate last week on social security. I had asked her some questions about the freeze on tax credits, child benefits and child tax credits, and she responded by saying:
“I respond by simply saying that the Treasury is responsible for these benefits and it announced the 2018-19 rates”,—[Official Report, 27/2/18; col. GC 13.]
and so on. I decided that as a former Treasury Minister it was a good idea to come today to ask a former Treasury Minister, and a current Treasury Minister in this place, some questions about child benefit.
I am grateful for the noble Lord’s introduction of the orders, but I want to focus on the question of rising inequality and poverty among children in our country. According to the Resolution Foundation, inequality is projected to rise to record highs by 2022-23, and it says that this is a sad,
“story of the poorest working-age households being left behind”.
The driver of this is the freeze in most working-age benefits. According to the Resolution Foundation, by 2020, child benefit beyond the first child will be worth less than 32 years ago and child benefit for the first child will be at its lowest level in real terms in the past 20 years.
Child poverty is on the increase, and absolute child poverty, in particular, is rising. Yet we see the shocking prospect, in a country which has the sixth-largest economy in the world, of more and more children’s and families’ lives being blighted by poverty. The Child Poverty Action Group says that as a result of the cumulative cuts to social security, we are pushing more children into poverty. Its analysis is that 1 million more will be in poverty, two-thirds of them in working households.
Does the Minister accept those figures as correct? Does he accept that as a result of the freeze, 10.5 million households will see their average yearly income cut against a backdrop of rising food prices, now standing at 4.1%, at exactly the same time as the Treasury is saving £4.7 billion, more than originally estimated, by the freeze in those benefits?
I am sure that the Minister will say, and I would not disagree, that the best way out of poverty is work, but he knows as well as I do that families face precarious work situations, zero-hours contracts and rising inflation. It is a heady cocktail that they cannot fight by themselves, and the Government need to step in.
The Explanatory Memorandum which accompanies the orders makes it clear that the Treasury was not required to review the impact of the freeze on child benefit, as the decision had been taken before. I ask the Minister three simple questions. How will the Government stop the rise in child poverty? Will he agree to publish an assessment of the benefit freeze and its impact on child poverty? Finally, will he go back to the Treasury to persuade it that it needs to reconsider the decision to freeze child benefit, bearing in mind the vast amount of money that it has saved, to share some of it with mothers by giving it to them as an increase in their child benefit so that they can spend it on their children in times of desperate challenge for families?
Lord Kirkwood of Kirkhope (LD)
My Lords, it is a pleasure to follow the noble Baroness, Lady Primarolo, who has a lot of experience, having been a Treasury Minister. I agree largely with her plea for a better context in which to consider these orders. Like her, I was in the Grand Committee last week when we looked at the social security uprating order, which is a sister order. In the normal annual review that we have had in the past, they are normally considered, pari passu, together, in a way that enables a more joined-up debate to take place. I absolutely agree with what has just been said about the importance of the context of what we are considering.
The Minister, in his usual efficient way, explained exactly what these orders are doing, and he is right. I am perfectly prepared to believe that the orders are legal and accurate and what is required by law. But if we are talking about £130 billion of contributions through the national insurance fund, £24 billion of which is allocated now to the National Health Service, I think we deserve a better context in which to discuss these things.
This is a procedural point rather than anything else, but I am getting more and more worried about how the deregulation provisions that we passed in the Act some years aback are now being used more and more to deflect some of the routine things that Parliament needs to be consulted about. It is called “ambulatory provision”, for those who are students of these things. I am getting frightened that the consideration of these important orders, including the social security uprating orders that we considered last week, is being pushed further and further into the long grass. I do not need to tell the Minister, because he was there at the time but, in the old days, when we were all in the House of Commons, these were big debates. It was understood that it was a significant sum of money. The biggest spending department in the Government by a mile was under examination and scrutiny in Parliament. We now do that through these restricted orders, which, stricto sensu, as the noble Baroness, Lady Primarolo, said, is technically out of order. I agree with her—and in a moment I shall indulge in the same kind of latitude that she took.
My point is that the Minister is a very experienced hand in this. Will he go away and reflect how we can, particularly at the beginning of a Parliament—and this is a new Parliament, with its first Budget—think about sustainability and affordability and about the adequacy of benefits, child benefit being principal among them, as well as about the social change that surrounds that? The world of work has changed quite dramatically in a number of respects, particularly in relation to self-employment. I want to talk about class 2 and class 4 contributions in a moment.
The Minister understands these things perfectly well. There should be some occasion, maybe a day in government time, to which these uprating orders are appended, when we can have a proper discussion on the context in which these contributions are being raised and the benefit spend is being agreed. That would give some of us more confidence, at least once at the beginning of every Parliament, that the Government were willing to open themselves and be transparent about their longer term aims and ambitions. Basically, I guess that they would say that they were doing their best with universal credit and doing their best to try to understand the challenges when disability costs are increasing. But we should have a grown-up discussion about that—it is not for now, but I hope that he will go away and reflect on that carefully.
Lord Tunnicliffe (Lab)
My Lords, I am not having a good afternoon. The Minister stole my speech on the previous set of regulations and my noble friend on the Back Benches has stolen most of my speech on these regulations, so I will not repeat her remarks.
I largely agree with the general point made by the noble Lord, Lord Kirkwood, that these regulations, together with the measures we discussed last week, are part of a very big debate. We should have that debate. I shall certainly press through my channels for a day’s debate in government time on the whole issue of the charges, the uprating and the overall problems. As the Minister well knows, there is not the slightest chance of this Front Bench opposing these regulations because, if we did so, we could win a vote. That would produce a constitutional crisis for which I would be drummed out of the House of Lords so, of course, we will not object. However, I have a technical question: to what extent are any of these regulations, and the parts thereof, anything more than a formality, because as far as I can see they simply approve measures that have already been announced and do not include any discretionary decisions that would alter previous government statements.
These regulations are, of course, a small part of the total picture and a small part of a massive and highly successful programme, to which I think the Minister referred as fiscal discipline and I refer to as a programme to take from the poor and give to the rich. As the noble Lord, Lord Kirkwood, said, the four-year freeze has not been debated: that is, the four-year freeze on child benefit, jobseeker’s allowance, employment and support allowance, income support, housing benefit, women’s state pension age, local housing allowance rates, child tax credit, working tax credit and universal credit. These regulations contain only one substantive element—namely, that CPI inflation is 3%, which is a great deal higher than the 1.7% figure which I believe was envisaged when the freeze was first introduced. Indeed, for the people concerned, for whom food is a very high proportion of their expenditure, food inflation was 4.1% over the period when CPI inflation was 3%. Therefore, the people in the freeze zone are getting substantially poorer. Indeed, the Resolution Foundation takes the view that the freeze will save the Government some £4.7 billion by 2020, and this saving will fund tax cuts for middle and higher-income earners. Austerity has not worked. The Government—be it the coalition Government or the present Conservative Government—have missed every fiscal target they have set. In fact, I am not quite sure where we are now; it is possible that the Government have given up setting targets, which at least aligns with reality. Our failure to oppose these regulations does not mean that we in any way support the evil policy of which they are part.
Lord Young of Cookham
My Lords, I am genuinely grateful to all noble Lords who have taken part. We have had a thoughtful debate, with no specific objections —on the contrary, with welcome for the measures in the regulations before us. However, noble Lords have pegged on to that some broader issues which deserve a response, and I will do my best to address them.
The noble Baroness, Lady Primarolo, and I have been debating these matters for over 20 years. Sometimes she has been the Minister and I have been in opposition, and sometimes the roles have been reversed. However, it is good to see that dialogue being maintained in this House, in the same cordial way that it was in the other place.
It may be helpful if I first put in the broader context the reasons for the freeze on certain benefits, because that is the backdrop, then address specifically the points that fall within that of the impact on child poverty, and then address some of the issues that have been raised during the debate.
First, I quite understand the points noble Lords made about the impact of the freeze of in-work benefits on families now that inflation is higher than it was, although I note that it is predicted to fall back to 2% next year, having peaked at 3% in the final quarter of last year. However, just to put that decision in context, spending on welfare had trebled in real terms between 1980 and 2014, and had contributed to a record level of debt: 83.7% of GDP in 2015-16. This was unsustainable. Also, in 2013, the UK had the highest spending on the family out of all OECD countries as a percentage of GDP. That is the backdrop.
Secondly, between 2008 and 2015, average earnings went up by 12%, whereas most working-age benefits, such as JSA, increased by 21%, and child tax credit rose by 33%. A four-year freeze helped to reverse that trend and reinforce the incentives to work.
Thirdly—this has not been mentioned during the debate—the Government have taken steps elsewhere to help the incomes of those in work by raising the national living wage to £7.83 per hour and by making progress on the manifesto commitment to raise the personal allowance to £12,500. Put in that overall context, and with the exemptions we are debating today, the policy is defensible.
I will address some of the issues raised during our debate. Real household disposable income grew at its fastest rate in 2015 to reach its highest-ever level. On the specific issues around child poverty, the noble Baroness quoted the Resolution Foundation; other reports by the Institute for Fiscal Studies and the Child Poverty Action Group focused on the issues raised by the noble Baroness. Since 2010, there are 200,000 fewer children in absolute poverty, before housing costs, and 608,000 fewer children living in workless households, which is a record low. We are committed to taking action to help the most disadvantaged, with a focus on tackling the root causes of poverty in workless households. As the noble Baroness anticipated, it is indeed our view that work remains the best route out of poverty. In 2015-16, 9% of children were in households where all adults were working with relative low income before household costs, compared with 48% in workless households. Since 2010, there are over 3 million more people in work and 954,000 fewer workless households. Therefore we are taking action to ensure that work always pays.
The noble Baroness asked whether we could publish an assessment of the benefits freeze. I understand that it is quite difficult to isolate its impact but, when the freeze was announced, an impact assessment was published, and the Treasury publishes a wider distribution analysis at the Budget.
It seemed to me that some of the strategic issues that the noble Lord, Lord Kirkwood, raised could be dealt with by the Select Committee in the other place that he chaired so ably. In another place one could have Opposition day debates on the more strategic issues, but I take his point, which was raised by others in the debate, that there might be value in a broader debate about social security. I am more than happy to raise that issue with the business managers to see whether that might take place.
We do not consult on the specific measures. They are routine and everybody expects them. I am not sure that it would be a tremendously valuable exercise to consult on the rather narrow annual uprating each year.
The noble Lord, Lord Kirkwood, said that the whole range of benefits is subject to the freeze. However, I am sure that he knows that pensioner benefits and benefits for the additional costs of disability and care are exempt from the freeze and continue to be uprated as part of our commitment to protect the most vulnerable.
He mentioned the quinquennial GAD report, which estimates that the NIF will run out of money in the 2030s. Looking to the foreseeable future—to 2024-25—we expect the fund to have a surplus. However, in the long run he is right: life expectancy and other demographic trends will continue to pose a challenge for the public finances. He mentioned my noble friend Lord Willetts, who came up with his own solutions to how those challenges might be responded to. Again, that is the sort of issue that might be raised in the broader debate that he would like to get under way.
We are committed to the triple lock for the duration of this Parliament. It has been an invaluable element in addressing the issue of pensioners living in low-income households. That peaked in the late 1980s at over 40% but the proportion of pensioners living in low-income households is now down to 16%.
Finally, the noble Lord, Lord Tunnicliffe, complained that he had been robbed by the first-class speeches from those on the Opposition Benches. He asked whether there was an element of discretion in the measures before us. The Explanatory Memorandum says that Section 41 of the Tax Credits Act 2002 requires a review of certain monetary amounts in each tax year to determine whether they have retained their value in relation to prices. Therefore, we have to do that. We discovered that they have not retained their value, so the Government have taken the action that they have. In one year, we did not uprate because inflation at the time was negative. It is government policy to uprate in line with the regulations before us, and I suspect that if we did not, we would be before the courts.
I have tried to answer all the points raised and commend the regulations to the House.