Grand Committee
The Deputy Chairman of Committees (Lord Haskel) (Lab)
I apologise for my late arrival—I was stuck in the Chamber and unable to get out. If there is a Division in the House, the Committee will adjourn for 10 minutes.
European Union (Definition of Treaties) (Strategic Partnership Agreement) (Canada) Order 2018
Baroness Goldie
That the Grand Committee do consider the European Union (Definition of Treaties) (Strategic Partnership Agreement) (Canada) Order 2018, the European Union (Definition of Treaties) (Framework Agreement) (Australia) Order 2018 and the European Union (Definition of Treaties) (Partnership Agreement on Relations and Cooperation) (New Zealand) Order 2018.
Baroness Goldie (Con)
My Lords, the international agreements under consideration today have all been negotiated between the European Union and its member states on the one hand, and third countries on the other. These third countries are, of course, some of our closest partners. Each agreement provides an enhanced framework for regular political dialogue at ministerial, official and expert level.
The EU-Canada Strategic Partnership Agreement will enhance political co-operation on foreign and security policy. The agreement has been negotiated alongside the EU-Canada Comprehensive Economic and Trade Agreement, the order for which was debated in the House on 25 and 26 June 2018. The EU-Australia Framework Agreement and the EU-New Zealand Partnership Agreement on Relations and Cooperation will consolidate and strengthen co-operation in a range of sectors of mutual interest, and mark the first step towards EU-Australia and EU-New Zealand free trade agreements, for which negotiations have recently been launched.
The agreements are an important tool for promoting British and European values and standards. They have been under negotiation for a number of years, so successive UK Governments have all been involved in shaping the EU’s approach to negotiations. The EU has numerous similar agreements with other third countries around the world, all of which have passed through this ratification process in the House. So, although this is an unusual time in our relations with the EU, this is a case of business as usual—in the interests of both the UK and the EU.
Approval of these draft orders is a necessary step towards the United Kingdom’s ratification of these agreements, through designating them as EU treaties under Section 1(3) of the European Communities Act 1972.
The third countries concerned have all chosen to pursue closer ties with the European Union and its member states. The Government welcome this and we believe that by building on our shared western values—and, I must say, our shared Commonwealth values—with Canada, Australia and New Zealand, these agreements are firmly in our national interest.
As we head towards our departure from the EU, I am conscious that noble Lords may have questions about its impact on the status of these agreements and our ratification of them. I will briefly clarify the process for the benefit of your Lordships. As noble Lords will be aware, until we leave the EU on 29 March next year, the UK remains a full member state and all the rights and obligations of EU membership remain in force. During this period the Government will continue to negotiate, implement and apply EU legislation.
I am advised that it is unlikely that the agreements before us today will enter into force before the UK has left the EU. After our departure in March 2019, we will no longer be able to ratify EU third-country agreements. However, the draft withdrawal agreement includes provision that during the implementation period the UK will be treated as if it were an EU member state for the purposes of international agreements, with the effect that the UK will be bound by agreements which enter into force during the implementation period. If any of these agreements were to enter into force during the implementation period following UK ratification, the UK would not need to adopt further domestic legislation to ensure that it can apply and be bound by the agreement, in compliance with the terms of the withdrawal agreement.
Nevertheless, the impact of our departure from the EU is a peripheral issue for us today. I urge noble Lords to focus on why implementation of these agreements is firmly in our national interest. First, these agreements formalise hugely positive relationships on which the EU is embarking with third countries around the world. They seek to strengthen democratic values, the rule of law and environmental protections, and make trade and investment more predictable for businesses, including our own. It is in the UK’s interests as a leading advocate of democratic values and a rules-based international system to support the passage of these agreements.
Secondly, it is important—including for our own departure negotiations—to deliver on our Prime Minister’s commitment to continue to be a supportive EU member state until we leave. Ensuring that the UK does not block, delay or disrupt EU business as usual is crucial to that commitment.
Thirdly, as an EU member state the UK has been a key driver in all these agreements. At a time when we are strengthening ties with countries around the world, it would be wholly counterproductive to be seen in any way to be hindering the aspirations of those countries to have closer relations with the European Union. The timing of this discussion is particularly welcome in the case of Australia, whose Foreign and Defence Ministers will be our guests this week for the annual Australia-UK ministerial summit.
I welcome this opportunity to hear the views of noble Lords on these draft orders. I beg to move.
Baroness Ludford (LD)
My Lords, I thank the Minister for explaining what these agreements are and the context for them. I was wondering quite how the Canada one fitted with CETA, the economic and trade agreement, but she has explained that it is complementary. She has also explained, which is useful, that this step of classifying these treaties as defined under Section 1(3) of the European Communities Act is a necessary step towards UK ratification. Perhaps she can give us an indication of what the time lag is going to be between us approving these SIs and UK ratification. I confess that I am not clear what more has to be done for the agreements to be ratified.
On behalf of my group, I have no hesitation in welcoming these agreements, which are a great success for the European Union—including, as the noble Baroness said, the fact that the UK has been a great driver of them. No doubt I am being predictable, but that shows what value the EU adds to the UK in the world and the big role that the UK can play within the EU in its international relations. It is a win-win, or rather a triple win, for the UK, the EU and our international partners that we should be in the European Union helping to forge these valuable arrangements. It is sensible that we should have talks with Canada about human rights and democracy, peace and security, and sustainable development, along with justice, freedoms and security. I am sure that the other agreements are similar. The agreement with Australia includes discussing problems around the proliferation of weapons of mass destruction, the illicit trade in small arms and light weapons and taking action against serious crime and terrorism. These are extremely valuable flanking measures or, in the case of Australia and New Zealand, preparatory measures for the free trade agreements on which the EU has launched negotiations.
The EU has just signed a very important agreement with Japan, and no doubt the UK contributed strongly to that achievement. As I say, I am not reluctant to point out that not only are these agreements welcome, but the value to the UK of being a part of the EU process with these partner countries in the developed world is a very important dimension of our EU membership.
Can the Minister say what effect any of these agreements will have on the matters covered in the White Paper concerning the continuation of international arrangements? Am I right in assuming that these agreements, because they are not economic and trade agreements, are not relevant to the aspiration set out in the White Paper to continue to take advantage of rules of origin provisions in free trade agreements? It is all about diagonal cumulation, for which I need to put a wet towel on my head. I assume that these agreements do have relevance to this area of the UK’s aspirations as regards post-Brexit arrangements because they are about political dialogue, human rights and so on.
Perhaps I may ask what is possibly an uneducated question. I have lost sight of the terminology used in the EU, but the Canadian one is a strategic partnership agreement, the Australian one is a framework agreement and the one for New Zealand is a partnership agreement without the strategic element. Does anything account for the difference in terminology? I think that the content is somewhat different in each agreement, although those for Australia and New Zealand appear to have similar coverage. According to the summary, the Canadian one is slightly different. Why is the Canadian agreement strategic while the one for New Zealand is not? Perhaps the noble Baroness will explain that to us.
To sum up, however, these are very valuable and important agreements to go alongside an economic and trade relationship. It is a pity that the Government want to leave the EU and the benefits of these agreements, which would be difficult to replicate—at least without going through a new process. Finally, will the Minister say whether these agreements will fall under the rubric of those that the UK Government will seek to roll over during the transition period—and even beyond—and to continue to take advantage of even after next March?
Viscount Waverley (CB)
My Lords, my remarks have been very hastily put together because I had not intended to speak to this group of ratification processes, although I will speak to the others. I do so because of the relevance and importance of this plank of the EU-UK negotiations, in so far as it impacts security. One need look no further than the multilateral agreement for joint co-operation in signals intelligence between the UK, Canada, Australia and New Zealand, whose importance cannot be overstated. Recently the lid has somewhat come off the importance and understanding of this association. The UK, and by extension the EU, can be beneficiaries of the Five Eyes in matters of security.
Baroness Ludford
I have one other point. Paragraph 7(4) of the Explanatory Memorandum refers to how the Government notified the Commons of their decision to opt in to Article 18(2) of the Canada agreement, which relates to judicial co-operation in civil and commercial matters. In the Government’s view, this falls within Title V of Part III of the TFEU, and they claim that the UK has an option to choose whether or not to participate.
If memory serves, there is an area of dispute between the UK Government and the Commission about whether or not the JHA opt-in applies in international instruments. Has the European Commission accepted that the UK can choose whether or not to participate? I am not up to date with where that disagreement got to. I seem to remember that the view in Brussels was that, as this was an international agreement, it was not covered by the opt-in arrangements for justice and home affairs, which are about internal EU arrangements. Has that argument been resolved, and has the European Commission, and perhaps the Council, accepted that the UK can choose whether or not to participate—or is their line that you lump it or leave it: you do not have an option on that aspect of the Canada Strategic Partnership Agreement?
Lord Collins of Highbury (Lab)
My Lords, I thank the Minister for introducing these orders, which we support and welcome. One advantage of having this House debate these issues after the House of Commons is that I have had the opportunity to read the response of the Minister, Sir Alan Duncan, in Hansard. I will, therefore, raise questions that he refused to answer—because the Commons have much stricter rules than the Lords. They have a chair conducting these matters, who can rule things out.
These agreements cover a broad range of issues, including security and foreign affairs. Sir Alan Duncan said in the other place that that is nothing to do with these statutory instruments, but what assessment are the Government making of the effect these agreements might have on any future or existing bilateral relationships that we have? If, after Brexit, we have relationships with European countries, these important, long-term allies of this country—Canada, Australia and New Zealand—will have these agreements. I am keen to understand, especially since the Prime Minister’s Munich statement, how the Government see these future relationships, bearing in mind that there are international obligations under these treaties that might impact on any bilateral relationships we will have. I am taking the liberty of asking that question so we can better understand the Government’s approach.
My other question relates to one that has already been asked. I am not certain why these agreements have a different status. Why is it a “strategic partnership” with Canada, a “partnership agreement” for relations and co-operation with New Zealand and a “framework agreement” with Australia? Perhaps the noble Baroness can explain that in better detail and the stages to it.
Sir Alan Duncan said in the other place that these agreements will likely not apply until we have left the European Union, but stressed that it was important that we pass these regardless as part of our commitment to be a supportive EU member state. Obviously, we have obligations right up to the date that we might leave. As part of that commitment, I hope the Minister can tell us what our current role is, as part of the EU, in the EU’s preparations for the implementation of these agreements. As she said, we have been a key player in ensuring that they are negotiated and in place. The fact that we have declared that we are leaving does not mean that our obligations to push these matters forward stop. I hope the Minister can respond to that comment.
Another thing that the noble Baroness, Lady Ludford, referred to is the opportunity of the transition period. Sir Alan mentioned that we would have left before these come in, but they might come in during the transitional period. Will there be no opportunity simply to roll over these agreements? They might be a precursor to trade, but one thing people clearly will be looking at is the fact that Australia-EU bilateral trade is worth approximately £40 billion, compared with the £13 billion of UK-Australia bilateral trade. It is important to understand where Australia’s priorities will be post Brexit. How do we address that in these agreements?
I had a number of other specific questions, but they have been partly answered already in the other place. I will leave it at that for now.
Baroness Goldie
I was anticipating a volley of keen interest. I am very grateful to noble Lords who have contributed to the discussion and, indeed, for the welcome that the noble Baroness, Lady Ludford, and the noble Lord, Lord Collins, have extended to these important orders. A number of questions have arisen that I shall try to deal with.
I will start with the technical question asked by the noble Baroness, Lady Ludford—and it was a very technical question about the detailed issue of the opt-in. We will endeavour to write to the noble Baroness on that, because there is not an immediate and extensive answer available to give her. I hope that she will forgive me if I deal with that in correspondence.
The noble Baroness also raised the issue of process. These SIs were considered and approved in the House of Commons just this morning, as it happens. Following approval in this House, the SIs will be considered by the Privy Council before ratification is concluded, which is most likely to be in the autumn of this year. The noble Baroness also raised a question, as did the noble Lord, Lord Collins, about the effect of these agreements; for example, on rules of origin, currently under discussion in the trade discussions. There is no connection between these agreements and rules of origin in the trade discussions. These issues will arise in discussion of the related trade agreements whenever they are negotiated and formulated.
Both the noble Baroness and the noble Lord raised the matter of the terminology being used. I understand that there is no significance in the different names for the agreements; the names were negotiated and agreed in discussion with the different partners, and they were apparently content with that nomenclature. I hope that that provides an answer.
The noble Baroness and the noble Lord raised the important issue of how all this connects with arrangements after we have left the EU. As we leave the EU, we are determined to provide as much certainty to businesses and individuals as we can. These agreements will lay the foundations of our future relationships with international partners across the world. In parallel, we are engaging with partner countries to put in place arrangements that will come into force following the implementation period, with the aim of ensuring continuity of effect of the existing agreements.
The noble Lord raised issues about dialogue with Australia. We have substantial bilateral dialogues with each of the countries covered by the orders—Australia, New Zealand and Canada. I referred to the Australian Ministers’ visit to the UK this week, which is an example of that dialogue. The Prime Minister established a number of sectoral dialogues with Canada when she visited that country last year. As has been mentioned, we co-operate very closely with them; for example, in the Five Eyes format. That co-operation will continue after we leave the EU, and these agreements provide for the EU to formalise dialogues with the partner countries.
The agreements are not yet ratified by all member states, so as yet they are not being implemented. Ordinarily, as a member state, we would be involved in preparing the EU side’s positions—and we will be a member state up until we leave. I hope that that has covered the points raised by the noble Baroness and the noble Lord. I thank them both for their helpful contributions.
As I outlined in my opening speech, these agreements will support our values and objectives long after we have left the European Union—it is important to emphasise this—and by ratifying them we are demonstrating our good will as a supportive partner of the European Union and those countries that seek to expand their relationships with the EU. The agreements are fully consistent with our prospects outside the European Union and we are enhancing our co-operation with partners across the Commonwealth as we leave the EU, in line with our ambitious vision for a global Britain.
I was very interested in the contribution of the noble Viscount, Lord Waverley, but I did not pick up on any specific questions.
Baroness Goldie
I am very glad to be reassured that I am not suffering from amnesia. I did not detect any specific question to respond to but I enjoyed his contribution.
Viscount Waverley
Before the Minister sits down, I want to make a point of order. As I understood it, the Privy Council will look at this after Parliament has determined whether or not to ratify it. The Minister may not immediately know the answer to this, but does that mean that Privy Council members can overrule the will of Parliament?
Baroness Goldie
I suppose that may be possible, technically, but it is virtually unheard of, constitutionally. In terms of manifestly technical procedures, such as those we have dealt with today, that would be almost unimaginable, frankly. I beg to move.
European Union (Definition of Treaties) (Political Dialogue and Cooperation Agreement) (Cuba) Order 2018
Baroness Goldie
That the Grand Committee do consider the European Union (Definition of Treaties) (Political Dialogue and Cooperation Agreement) (Cuba) Order 2018, and the European Union (Definition of Treaties) (Association Agreement) (Central America) Order 2018
Baroness Goldie (Con)
My Lords, very much in line with the previous orders, these agreements have been negotiated between the European Union and its member states, on the one hand, and third countries on the other. Each agreement provides an enhanced framework for regular political dialogue at ministerial, official and expert level.
The EU-Cuba Political Dialogue and Co-operation Agreement commits the EU and Cuba to co-operate on a range of issues. It promotes trade through enhanced exchanges of information and technical assistance to reduce non-tariff barriers to trade. The EU-Central America Association Agreement will enhance co-operation in areas of common interest, including counterterrorism, human rights and migration. It may be helpful for your Lordships to know that the EU-Central America Association Agreement reflects the central American nations of Costa Rica, Guatemala, Honduras, Nicaragua, Panama and El Salvador. I am very pleased that Her Excellency the Ambassador for El Salvador is on the public benches. We are very glad that she could join us.
That agreement also makes extensive provision for future trade relations, with an estimated net benefit to the UK of between £714 million and £1.1 billion over a 10-year period. An increase in exports by UK manufacturers is expected to account for 80% of this projected benefit, with the remaining 20% coming from increased agricultural exports and reduced tariffs on UK exports to central America.
As I stated previously, the agreements are an important tool for promoting British and European values and standards. Some have been under negotiation for a number of years, so successive UK Governments have all been involved in shaping the EU’s approach to negotiations. I remind your Lordships that the EU has numerous similar agreements with other third countries around the world, all of which have passed this House’s ratification process. Although this is an unusual time in our relations with the EU, as I said earlier, this is a case of business as usual in the UK’s and the EU’s interests.
The purpose of these orders is the same as I earlier described for the Australia, Canada and New Zealand orders. Approval of these orders is a necessary step towards the UK’s ratification of these agreements through designating them as EU treaties under Section 1(3) of the European Communities Act 1972.
Again, and helpfully, the third countries concerned have all chosen to pursue closer ties with the European Union and its member states. The Government welcome this; we believe that, by bringing countries closer to the orbit of European values and standards, these agreements are firmly in our national interest. The provisions of each of the agreements covered by these orders are not identical. They are the result of years of negotiation; they reflect the differing priorities that we share with each partner country and the varying depth and maturity of the relationship that the EU and its member states already enjoy with them. For example, EU third-country agreements with emerging democracies include a significant focus on supporting reforms and democratic institutions, whereas agreements with long-term partners focus to a greater extent on international co-operation to address broader global challenges.
On the implications of our departure from the European Union, I have already set that out in considerable detail this afternoon. With your Lordships’ forbearance, I do not propose to insult noble Lords’ intelligence by repeating verbatim what I have already said, but if anyone has any particular questions, they should not hesitate to raise them. As with the previous orders, I am advised that, for these orders, it is also unlikely that the agreements before us today will enter into force before the UK has left the EU. Again, I have already explained in relation to the earlier orders the consequences of our departure from the EU in March 2019. For these orders before us the implications are the same.
The reasons for agreeing these orders are exactly the same as I outlined earlier: they formalise hugely positive relationships that the EU is embarking upon with third countries across the world. Your Lordships are familiar with what the individual orders seek to do. It is important that we deliver on the Prime Minister’s commitment to continue to be a supportive EU member state until we leave the EU. It is very important that the UK is not seen to be obstructive, difficult or disruptive in relation to these matters. Also, as an EU member state the UK has been a key driver in all these agreements. I would repeat that, at a time when we are strengthening ties with countries around the world, it would be wholly counterproductive to be seen in any way to be hindering the aspirations of those countries to have closer relations with the European Union.
I have just been issued with a note of correction: these orders will not enter into force before we have left the EU. Sorry, I must have been so busy trying not to repeat great chunks of text that I misspoke. Misspeaking is clearly fairly fashionable these days, so I do apologise. These orders will not enter into force before we have left the EU.
To conclude, I will take this opportunity to discuss these two orders and answer questions from your Lordships.
Viscount Waverley (CB)
My Lords, I sat in the other place last Wednesday and followed the same procedure that it adopted when considering the ratification of all the agreements before your Lordships’ House. As much as anything, I have some remarks for the record as well, since the opportunity presents itself. The Minister has kindly taken us through the Government’s thinking and I thank her for that, but perhaps I might explore this further.
What is the central American instrument expected to achieve in both purpose and benefit, given the slide towards an unsettled region? I recognise that central America is 50 million people strong and might be considered a key future partner for the UK. It should also be remembered that countries at peace with themselves form a part of the region at large. One could imagine Belize and Costa Rica being in that bracket, though I recognise that they may not form part of the exact agreement itself. Nevertheless, I place on record my disquiet as to the goings on in the region. El Salvador is having its challenges. Events in Nicaragua are troubling. There are ominous signals from Panama and Honduras. Venezuela is not before us, but, with all its well-documented instability, it is making active overtures to Cuba, which is.
Cuba is a Caribbean island extending into a peaceful region with which the UK has a more direct association. Anglophone neighbours have long expressed anxiety as to the effect that that country will have on the economies of the islands when it enters fully the mainstream economic affairs of the region. There is nothing wrong with that in principle, but it should start to be a concern when we factor in Venezuela’s ever-closer ties with Iran and so, potentially, with Cuba. This week’s Economist has surmised:
“Although it has … far less attention, Nicaragua is following”,
the lead,
“of Venezuela, in which an elected dictator clings to power through repression and at the cost of economic destruction”.
I trust that this ominous assessment proves to be wide of the mark and not the manner of things to come in the region. Those of us of a certain age will remember the Iran Contra hearings of 1987, addressing covert arms transactions with Iran. We should now add to that the current United States policy of expelling immigrants back to El Salvador, which has the possibility of giving the US nightmare scenarios on its border regions and of further flaming regional discontent.
While distress signals are on the horizon, nevertheless, not ratifying will have a negative effect on the countries in that region and on the UK. I therefore offer support, somewhat guardedly, to these instruments, but I respectfully request of the Government, as we move on from this being an EU instrument to a post-Brexit bilateral circumstance, that we make this ratification process work to the benefit of the region and of the UK—and, of course, the EU. At the very least, it fulfils my core belief in the principle of engagement.
It may be remembered that President Obama underlined in a now famous speech delivered in Cairo that if a policy has not worked for 50 years it is perhaps time to think again. Cuba, a part of the region to which I have referred, is testament to that. Let us hope that those aspirations come into being in central America and become a lesson for all of us in other geopolitical arenas. My negative remarks should not distract from the importance of this agreement.
Baroness Ludford (LD)
My Lords, I again thank the Minister for her introduction and explanation. I think that this is the first ever EU-Cuba agreement. Before this, Cuba was the only country in the region not to have a legal basis for co-operating with the EU. It is very welcome that this is now happening. Obviously, some change has happened in Cuba. I hope that this agreement will help to promote more change and the reform process in Cuba. It is indeed welcome.
I am curious about the timeline. I believe that this was approved by the European Parliament a year ago. I wonder why it has taken a further year for it to reach the Westminster Parliament. I am sure that the political and human rights dialogue will be challenging because, although it is starting to change, there are still a lot of repressive measures in Cuba. I hope that there will be a monitoring mechanism to track progress and that there will be some reality and substance to the human rights clauses. Although this is not particularly my area of expertise, I know that MEPs used to deplore the rather window-dressing nature of human rights clauses in the EU’s international agreements. Everyone declared that they were all in favour of human rights, but there were not any real levers of influence and change in the country. So I hope that the Cuba one will make a reality of the political and human rights dialogue.
Of course, I welcome the fact that this agreement extends to trade and the reduction of non-tariff barriers to trade. So it represents a good step forward in having, for the first time, a legal framework for EU-Cuba co-operation. Compared to where we were 20 or even 10 years ago, it is good progress.
Viscount Waverley
I have in mind the date of 2015 for the central American agreement, so I concur with the noble Baroness that it would be more helpful if the agreements came before us on a speedier basis. I want to say something to government at large on upcoming bilateral agreements. I know that the Security Minister will address certain issues in the coming months and years. He mentioned a period of 90 days for bilateral agreements to go through before coming to Parliament for ratification. We would all welcome that.
Lord Collins of Highbury (Lab)
My Lords, I thank the noble Viscount, Lord Waverley, for his intervention. I had 2012 in mind for when the agreement was first signed. I start by saying that we very much welcome any arrangements that allow for the further integration of Latin American countries into the global economy and that encourage improvements in human rights, democracy, good governance and regional and political relations. All those aspects are very welcome.
As the noble Viscount said, since 2012 some countries have not moved in a particularly positive direction, which is extremely worrying. The noble Viscount mentioned Nicaragua, where we have seen further unrest and the deaths of around 300 people. It is important that the international community takes the initiative. The Opposition welcome the fact that the United Nations is now on the ground and able to make a full and proper assessment of the problems there. We do not support calls from some parts of the US Administration that seek a non-democratic change of government. I know that the Minister has responded to all the questions on this subject, but I hope that she can assure the House that we will remain committed to United Nations action in this regard rather than any unilateral action that may be considered by the US Administration.
I share the comments made by the noble Baroness, Lady Ludford, in relation to issues such as the increase in gender violence in some countries, which I hope the Minister will respond to. I also reiterate the concerns of the noble Baroness about the human rights of central American migrants. In particular, the agreement contains a commitment to ensuring effective employment protection and promotion of human rights for all migrants. How does that compare with the US Administration’s record on the human rights of central American migrants?
I also want to pick up the point about Cuba. Progress is being made on integrating Cuba into the global economy and its positive impact. Of course, we remain concerned about its human rights record—particularly, from my personal viewpoint, its attitude to LGBT rights. I do, however, accept that engagement has resulted, and will result, in progress. Again, this agreement was signed some time ago, and we now have a new US Administration who have decided to reinstate restrictions on Americans travelling to and having business dealings with Cuba—another possible policy rift between the EU and the US Administration.
I ask the Minister: what is our response to these potential rifts over the policy that we have worked with and supported within the EU? How will they impact our foreign and security policy post Brexit, particularly with regard to the US Administration? This relates to my original question about the Government’s assessment of future foreign and security policy. It is not so much about how it affects our attitude to bilateral relationships—we can certainly have those, and I welcome the commitments that the noble Baroness has made on ensuring that we maintain our strong relationships with old allies—but about the consequence of our not influencing EU policy, and the impact of a possible divergence of policy in the future. That is the sort of assessment we would like to hear about.
I respect the Minister’s ability to respond to questions, but doubt her ability or willingness to answer that specific question. It is, however, a matter which all opposition parties, certainly in this House, will be pressing the Government to address over the coming months. It is vital for our security. We are close neighbours of the European countries and—as the Government have repeatedly said—whether in or out of the EU we need to make sure that we have the strongest possible relationship with them.
I had a couple of other points, but I think that the noble Viscount, Lord Waverley, and the noble Baroness, Lady Ludford, have addressed them, so I look forward to the Minister’s response.
Baroness Goldie
My Lords, I once again thank the noble Baroness, Lady Ludford, the noble Viscount, Lord Waverley, and the noble Lord, Lord Collins, for their contributions. A number of important points arose and I will deal with them as best I can.
The noble Viscount, Lord Waverley, raised the legitimate question of what the EU-Central America association agreement does. It is a perfectly proper question. The agreement is intended to strengthen relations between the EU and its member states and central America, by promoting political dialogue and co-operation in areas of common interest, including climate change and the environment, counter-narcotics, counterterrorism, human rights and migration. It also makes extensive provision for future trade relations. The noble Viscount did the discussion a service, because his question made it clear that beneath these agreements —and which may at first look less than visible—there are some very strong subliminal factors that can only make a contribution.
That leads me to the next important point raised by the noble Viscount: regional issues. Where is all this in relation to central America? I would suggest that these orders are a positive contribution. He will understand that respect for democratic principles and fundamental human rights is an essential element of the agreement. A significant number of central American countries are now prepared to sign up to that, which is extremely positive and encouraging, and I am sure that others will look and want to follow by example.
Of course, these agreements contain clauses giving prominence to upholding human rights. This issue was raised by the noble Baroness, Lady Ludford, and the noble Lord, Lord Collins. They also introduce measures to tackle poverty and inequality, strengthen civil society and consolidate democracy. We believe that the political dialogue established by the agreement will be an effective forum for the promotion of human rights in the region.
European Union (Definition of Treaties) (Partnership and Cooperation Agreement) (Turkmenistan) Order 2017
Baroness Goldie
That the Grand Committee do consider the European Union (Definition of Treaties) (Partnership and Cooperation Agreement) (Turkmenistan) Order 2017, the European Union (Definition of Treaties) (Enhanced Partnership and Cooperation Agreement) (Kazakhstan) Order 2017 and the European Union (Definition of Treaties) (Comprehensive and Enhanced Partnership Agreement) (Armenia) Order 2018.
Baroness Goldie (Con)
My Lords, very much as with the preceding orders that we discussed this afternoon, these agreements have all been negotiated between European Union member states on the one hand and these third countries on the other. Each agreement provides an enhanced framework for regular political dialogue at ministerial, official and expert level. The EU- Turkmenistan partnership and co-operation agreement will support reforms and help build Turkmenistan’s economy in line with market principles. The agreement provides for EU technical assistance to reinforce democratic institutions, as well as encouraging economic reforms and strengthening protection for European investors in Turkmenistan.
The EU-Kazakhstan Enhanced Partnership and Cooperation Agreement updates and augments the existing partnership and co-operation agreement agreed in 1996. It will contribute to modernising the commercial environment in Kazakhstan, and will increase the ease of doing business for UK and European firms. Finally, the EU-Armenia Comprehensive and Enhanced Partnership Agreement provides a foundation for enhanced political and economic co-operation, and will support reform of the commercial environment in Armenia.
I do not propose to repeat at length text to which I have already subjected your Lordships. The purpose of these orders and the necessity for them is exactly the same as I described for the previous set of orders. Again, approval of these draft orders is a necessary step towards the UK’s ratification of these agreements through designating them as EU treaties under Section 1(3) of the European Communities Act 1972. The provisions of the agreements covered by the draft orders are not identical. They are the result of years of negotiation and reflect differing priorities that we share with the partner countries and the varying depth and maturity of the relationship that the EU and its member states already enjoy with them.
I have already set out at length the implications of our departure from the European Union in relation to the orders we are discussing. I do not propose to repeat myself. I am advised that it is unlikely that the agreements before us today will enter into force before the UK has left the EU. I have already covered the consequences of our departure from the EU in March 2019 in relation to these orders.
The motivation, purpose and reason for these orders is very much as I have previously stated: namely, to formalise positive relationships with these third countries and deliver on the Prime Minister’s commitment to continue to be a supportive EU member until we leave. It would be wholly counterproductive to block the aspirations of these countries to have a closer relationship with the European Union. I welcome this opportunity to discuss these three draft orders and to answer questions from your Lordships. I beg to move.
Viscount Waverley (CB)
My Lords, the Minister spoke about the need for positive relations. I totally concur. I will make some remarks, particularly in relation to Kazakhstan. The Minister commented on the road map for foreign policy. I have no doubt that, as we move to a post-Brexit global world, the United Kingdom will be working hard on its relationships, instilling a sense of urgency and looking to up our strategic play in an opportunistic manner.
Remarks during consideration of these instruments in the other place last week, beyond Sir Alan’s ministerial introduction and response, were reserved mostly for Armenia. I wish to turn attention to what should be seen as a key component of the UK’s future—our relationship with Kazakhstan—and take this opportunity to expand on the strategic and beneficial nature of that relationship.
As we have heard, the EU instrument before us could serve as a framework to move seamlessly into part of a future bilateral instrument. We have built the relationship with Kazakhstan into one of comparative advantage. Over the past 26 years, our two nations have co-operated closely on a wide range of issues, making Kazakhstan a key regional partner.
Among many priorities is a determination to focus on what more can be done to counter the global threat of terrorism and extremism. This includes increased efforts from both regional neighbours and the wider international community to help stabilise Afghanistan. Both these goals are, I understand, supported strongly by the UK.
Baroness Cox (CB)
My Lords, I add my thanks to the Minister for introducing these agreements. I will speak briefly to put on the record my welcome for the agreement signed between the European Union and the Republic of Armenia in November 2017. I have visited Armenia many times and I have developed a profound respect for the ways the people, who have suffered so much, including genocide and a horrendous earthquake, are developing a democratic nation full of hope for the future. This agreement will strengthen the economic, political and cultural relations between the parties involved. It marks the beginning of a deeper political engagement, and it provides new opportunities for stronger collaboration in various key sectors, including education, energy, transport, the environment, trade and infrastructure.
Relations between the United Kingdom, Armenia and the European Union are based on genuine friendship founded on mutual trust and a strong commitment to shared values. We need to support engagement with Armenia since its prospects for the future are compatible with our commitment to a democratic state based on the rule of law, democracy and human rights. I therefore believe that it is in our interest to assist Armenia to implement this agreement effectively.
Baroness Ludford (LD)
My Lords, colleagues have spoken much more knowledgeably than I possibly could on Kazakhstan and Armenia, so I will not attempt to repeat what they have said. Perhaps I may add a word about Armenia. It is clear that Armenia is an important country as regards EU relationships in the region. Could the noble Baroness tell us whether this agreement would have any influence on other efforts being made to try to resolve what is often called the “frozen conflict” between Armenia and Azerbaijan over Nagorno-Karabakh? It may be that every bit helps. If she has any knowledge of that it would be useful.
I will say something about Turkmenistan. One can understand why this agreement has not been enforced 20 years after it was signed and that the delay in ratification arises out of concerns about Turkmenistan’s human rights record. Perhaps I may quote from an article which is about 18 months old by the Carnegie Endowment for International Peace:
“Twenty-five years after the breakup of the Soviet Union, Turkmenistan holds the title of the most authoritarian of all former Soviet states … a political system based on repression and hydrocarbon wealth … an internal security apparatus, an omnipresent propaganda machine … Freedom of speech, the press, association, and religion remain curtailed in Turkmenistan to such an extent that Freedom House puts the country in the same category of dictatorships as North Korea, Sudan, and Syria, at the very bottom of its 2016 Freedom in the World index. The ability of Turkmen to travel overseas is restricted, and the country remains largely closed off to most foreigners, making it the most isolated of all former Soviet states”.
There is quite a challenge in having any meaningful influence on changes in Turkmenistan. I realise that there is always a dilemma with countries which come from a very poor human rights and democracy background. At what point do you say that things are moving enough to make it worth while to have an agreement with the EU, which of course will be taken as some kind of status, and when do you say it is of no use and it will just legitimise further a regime which should not be legitimised?
I ask the Minister: what is the greater scope that is claimed to encourage progress on human rights and good governance in Turkmenistan? It is very dependent on China. Russia is competing for economic power there. If I was being cynical, I would wonder whether this is the EU wanting to get in on the action with regard to energy and investment opportunities. This is not a very encouraging scenario for an EU agreement.
I am curious why the Turkmenistan and Kazakhstan SIs are dated 2017—leaving aside the 20-year delay on the agreements, which, as I say, is perhaps understandable. These things have been hanging around. Are there others in the pipeline that are going to be put through before next March? Have these been lying in a dusty drawer in Whitehall and suddenly, because of the prospect of Brexit, there is a rush to get them all through so that they will apply before 29 March next year? Am I being unjustifiably cynical and suspicious? Are there any others? Perhaps the Minister could explain.
Lord Collins of Highbury (Lab)
My Lords, every opportunity that I can have to debate with the noble Baroness, Lady Goldie, I would like to take, so the more statutory instruments we have, the more pleasure it will give me. I will be the only one who will find it pleasurable, I expect. But there is little between us on these instruments. I think we all welcome the potential for engagement that will result in improvements in governance and human rights. The noble Baroness, Lady Ludford, highlighted the human rights record of Turkmenistan but all three countries have human rights issues. It is important that we work with our partners to ensure that we can address the need to strengthen democracy and the rule of law in all these countries. That is what these agreements are doing.
Of course, there is another issue, highlighted by the noble Viscount, Lord Waverley: corruption is another important feature of these countries. I hope that complying with these agreements and having closer ties will enable us to properly address or support those Governments in tackling corruption. I hope the Minister will tell us exactly how we are doing that. It is important that we develop those structures.
Baroness Goldie
My Lords, I again thank noble Lords for their contributions. As ever, they have raised important issues and I will do my best to address them.
I start with the noble Viscount, Lord Waverley, who rightly pointed out that there is a positive relationship with Kazakhstan, with opportunities for the United Kingdom. I totally agree, and this agreement cements the relationship: it will bring Kazakhstan more closely into alignment with a rules-based international system. That includes supporting Kazakhstan in meeting its WTO commitments, which is extremely important.
The noble Viscount also referred to the Astana International Finance Centre. I am delighted that the noble and learned Lord, Lord Woolf, was appointed chair of the court of commercial arbitration there, which, as the noble Viscount pointed out, is underpinned by English common law. As a Scot, I have to say that if you cannot have Scots law you had better make do with the next best thing, but I am sure that we are all very pleased and proud about that. It underpins the desire to see a rules-based, solidly based judicial system.
The noble Viscount is correct in saying that we engage extensively with Kazakhstan: we are one of its top six investors and we support its aspiration to become one of the top 30 developed economies in the world. We have always been clear that to do this Kazakhstan needs to develop an open political system that guarantees fundamental rights and provides a firm basis for future prosperity and stability. To this end, the UK supports economic and judicial reform in Kazakhstan. I have just alluded to an important component of that. We are confident that all this will help to boost the country’s future prosperity and democracy. To illustrate the strength of the relationship between the UK and Kazakhstan, last year we celebrated the 25th anniversary of UK-Kazakhstan relations, and we look forward to the next 25 years of strong relations, not just in trade and investment but on the international stage.
The noble Baroness, Lady Cox, raised important issues about Armenia, and I will address her question about that agreement. The agreement is geopolitically important because it supports Armenia’s interest in maintaining a close relationship with the EU and its member states, as well as with Russia and other regional partners. It also helps Armenia to diversify its political and trading relationships while enabling it to fulfil its obligations as a member of the Eurasian Economic Union.
In this context, the noble Lord, Lord Collins, raised the important issue of rights. He specifically mentioned corruption—I now have his undivided attention, which is something I seldom achieve, but I am pleased to have done so on this occasion. He raised an important point. The agreement supports Armenia’s internal reforms. These include anti-corruption measures and improvements to governance in areas such as taxation, public administration and the civil service. Importantly, the agreement supports institution building and the strengthening of civil society, democracy and human rights, and it is designed to bring Armenian law gradually closer to the EU acquis in certain areas. To avoid doubt, it does not go so far as to establish an association between the EU and Armenia, but it is certainly a strong step in the right direction.
The noble Baronesses, Lady Cox and Lady Ludford, also raised the Nagorno-Karabakh dispute. The UK supports the peaceful resolution of that conflict by the co-chairs of the OSCE Minsk Group. We have strong bilateral relationships with both Armenia and Azerbaijan, and we believe that continued engagement is key. With Armenia, this means engagement on good governance, democracy, and political and economic reform. The agreement calls for a peaceful and lasting resolution to the conflict through the negotiations of the co-chairs of the OSCE Minsk Group, and the UK fully supports this approach.
The noble Baroness, Lady Ludford, raised issues relating to Turkmenistan, with particular reference to its human rights record. Turkmenistan remains a human rights priority country for the Foreign and Commonwealth Office. Although the human rights situation continues to be a cause for concern and progress has been slow, our judgment is that the structured engagement that the partnership and co-operation agreement provides will give us and EU partners greater scope to encourage progress on human rights and good governance, rather than placing restrictions on engagement. It is a challenging place to operate, with a difficult business environment, and it currently faces economic challenges. The agreement makes some improvements to the business environment and puts in place an institutional framework to support further reform. It provides for engagement across a wide range of issues, including energy, business and the environment.
The noble Baroness, Lady Ludford, and the noble Lord, Lord Collins, asked what the agreement does specifically for human rights and democracy in Turkmenistan. It provides for technical assistance programmes to reinforce democratic institutions, to strengthen the rule of law and to protect human rights and freedoms; for instance, to support the drafting and implementation of laws and regulations. That might sound very dry and arid to the onlooker, but it is key to the ability to write good constitutional law. It will enhance expertise on the role of the judiciary and of the state in questions of justice, and on the operation of the electoral system.
The noble Baroness, Lady Ludford, who is never one to miss the difficult question, asked what else is in the pipeline. Depending on the noble Baroness’s perspective, I might have good news. Due to time restrictions, it will not be possible for the UK to ratify any further FCO-led EU third-country agreements before the UK leaves the EU in March 2019. It was an important question to ask and I hope that that answers it.
Baroness Ludford
Which agreements that have been reached with external partners of the EU will we not have ratified before Brexit?
Baroness Goldie
I am checking with my officials. It is my understanding that none is in the pipeline.
Baroness Goldie
We will put in writing to the noble Baroness what the situation is.
The noble Baroness, Lady Ludford, also raised the issue of timing in relation to the Turkmenistan partnership and co-operation agreement. Apparently, all the EU member states initially delayed its ratification to signal their concern about human rights abuses in that country, but over time they all decided to ratify it because the agreement would enable greater scope to influence Turkmenistan’s development in a positive direction. In 2013 the UK also agreed to ratify it because, on balance, the Government agreed that entry into force of this agreement would allow a closer relationship with Turkmenistan and potentially greater scope to encourage progress on human rights and good governance.
I was asked about how these agreements would progress UK objectives. As the agreements provide for a broad framework to reinforce political dialogue, they provide EU member states with a range of tools for influencing reform, including institutional links that allow for regular discussions, including on human rights reform as well as technical co-operation programmes.
I have tried to respond to all the questions, and as I say, I undertake to write to the noble Baroness, Lady Ludford, about the specific point she has raised. I am grateful for the contributions to the debate and, as I outlined in my opening speech, these agreements will support our values and objectives long after we have left the European Union. By ratifying them, we are demonstrating our good will as a loyal and supportive partner of the EU and of each of these countries as they seek to expand their relationships within the EU. I should say that they do not detract in any way from our own prospects outside the European Union. We are enhancing our co-operation with partners across central Asia and the south Caucasus as we leave the EU, in line with our very ambitious global Britain vision. I beg to move.
Viscount Waverley
Attention was drawn to the situation in Nagorno-Karabakh, and I note in particular the presence of the noble Baroness, Lady Cox, in the debate. Does the Minister agree—not necessarily on matters specifically to do with Nagorno-Karabakh, Armenia and Azerbaijan—that it would be extremely helpful if the UK, as a component part of the United Nations Security Council, encouraged a process to complete the unfinished Wilsonian principles on self-determination? There are many instances around the world where clarification of these issues would be helpfully addressed. I do not necessarily expect the Minister to rise to respond at this point, but it really is an issue of extreme importance and should be considered further.
Baroness Goldie
The noble Viscount is a realist, but I am going to disappoint him. Apparently there are no plans to support those principles.
Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018
(6 years, 4 months ago)
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Lord Bates
That the Grand Committee do consider the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) (Amendment) Order 2018.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, in just under five months, the ring-fencing regime will be fully in force. It requires structural separation of core retail banking from investment banking for UK banks with retail deposits of more than £25 billion.
Ring-fencing is one of the key parts of the post-financial crisis reforms and will be important in preserving financial stability in the United Kingdom. It was the central recommendation of the Independent Commission on Banking, chaired by Sir John Vickers, which the Government accepted and legislated for via the Financial Services (Banking Reform) Act 2013. It will support financial stability by insulating retail ring-fenced banks’ core activities, whose continuous provision is essential to the economy—that is, retail and small business deposits and payments services. It will protect them from shocks originating elsewhere in the global financial system.
The continuous provision of core services—namely, retail and small business deposits and payments services—is essential to the economy. Ring-fencing means that banks that provide those essential services become simpler and more resolvable, so core services can keep running even if a ring-fenced bank or its group fails. Details of the regime are set out in secondary legislation passed in 2014. As part of restructuring to comply with the ring-fencing regime, banking groups may be required to move some accounts from one legal entity to another. For example, they may need to move a retail depositor’s account into a new ring-fenced bank. However, some of the holders of those bank accounts are subject to financial sanctions, which prohibit the movement of any funds that the said account holders own, hold or control.
There is a clear conflict between the two regimes. This means that, at present, some banking groups are unable to move accounts held under sanction, which in turn means that they are not compliant with the ring-fencing legislation. The order resolves the otherwise conflicting requirements between the ring-fencing regime and financial sanctions regime by amending the Financial Services and Markets Act 2000 (Ring-fenced Bodies and Core Activities) Order 2014. The order amends the definition of “core deposit” so that accounts whose account holders are or have been subject to financial sanctions—as defined in Section 143(4) of the Policing and Crime Act 2017—at any time in the last six months are no longer included in the definition. This means that banking groups will not be required to move retail accounts whose holders are subject to financial sanctions into ring-fenced banks. They will be outside the scope of the ring-fencing regime. Banking groups will have six months from the removal of sanctions to move retail accounts of those account holders previously subject to sanctions inside the ring-fence. This ensures that the regime remains consistent once the sanctions have been lifted.
The order will ensure that banking groups that cannot otherwise comply fully with the ring-fencing regime due to sanctions legislation are not deemed non-compliant under the ring-fencing legislation. The amendment does not alter the location and height of the ring-fence or the timetable for ring-fencing: banks in scope must be ring-fenced by 1 January 2019 and, together with the Prudential Regulation Authority and the Financial Conduct Authority, we are monitoring their progress closely. I commend the order to the Committee.
Baroness Kramer (LD)
My Lords, as a member of the Parliamentary Commission on Banking Standards, I am a very strong advocate of ring-fencing. I am pleased that the process is now well under way. Obviously, I remain vigilant for any opportunity for any person to try to find a way either under or over the ring-fence. Therefore, I would look very carefully at any change or exemption. In this case, the order seems entirely logical and a suitable way in which to deal with the conflict between two good pieces of legislation, finding the simplest path to reconciling them.
I have two simple questions for the Minister. Can he give us some sense of the scale that we are talking about? To be honest, I have little idea of how many accounts are sanctioned at any typical time. I do not know if we are talking about six accounts or 6,000. The reason why I ask is that it makes a difference in monitoring—that is, whether it is a relatively small number or a challenging number. I just have no idea. I do not know if the Minister will be able to throw light on that.
There has also always been a concern, in particular from the sanctions perspective, that people who do bad things—and, typically, if you are going to be sanctioned, you will have been doing something that we think is a bad thing—will look at the opportunity to use aliases, false names and so on to front their various accounts. There is always the possibility that, if those accounts are not recognised as being linked to the individual who is to be sanctioned, they can end up being moved over into the ring-fenced bank. With accounts in two locations, it may become much harder to recognise that they are the accounts of the same individual and ought to be treated in the same way. I am fairly sure that those who are sanctioned will look for any mechanism possible to escape it, but I have no idea if there is a mechanism within all this that provides us with some comfort that we are alert to the use of this particular change as a mechanism that might make life a little easier for those who wish to avoid the sanction that they are due.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for introducing this order and the noble Baroness, Lady Kramer, for asking at least one of the questions that I had in mind, particularly on scale. I do not have quite the exalted background of the noble Baroness as being a member of the banking commission but, because I failed to duck, I have been involved with this legislation since 2010. I saw it through and feel a certain loyalty to it. When this conflict arises, like the noble Baroness, I want to see that conflict resolved. However, I did think, “Why are they going to spoil this beautiful banking legislation, which I have sought to understand over the past several years? Why can we not change the sanctions legislation?” I decided to try to understand the sanctions legislation to see if there was a way in which it could provide the flexibility rather than the banking legislation. I dived into Section 143(4) of the Policing and Crime Act 2017, but I have to say that, at that point, I hit a brick wall. For the life of me, I could not understand from that how the sanctions regime functions. I hope that the Minister can shed light on how the regime works—or perhaps he will write to me at some point.
To what extent has the alternative way of solving the problem been considered—creating flexibility in the sanctions regime to allow movements across the ring-fence that are required for other legal purposes and hence keep the accounts hosted on the right side of the ring-fence?
Lord Bates
My Lords, I thank noble Lords for their broad welcome for the order, and I recognise the expertise which they bring to this matter. I shall seek to address the points they have raised.
On the numbers and scale, which the noble Baroness, Lady Kramer, asked about, there is on the website a list of persons who are subject to financial sanctions. It has a long URL address, but it is helpfully set out on page 2 in the Explanatory Memorandum that accompanies the order. It does not list the numbers, but it does show where that information can be found. We are currently trying to get some numbers, because it is a perfectly reasonable question to ask.
The noble Baroness, Lady Kramer, also asked about the mechanism potentially to escape the sanctions. Clearly, we need to be very vigilant. The accounts are not moving; they are staying outside the ring-fence. As such, we believe that the opportunity for the kind of nefarious activity that has been suggested is minimised, but not totally removed.
The noble Lord, Lord Tunnicliffe, asked for beautiful banking legislation to be referenced in the Official Report, perhaps for the first time. He asked whether we could amend the sanctions legislation rather than banking legislation. We assessed whether there was a licensing option under existing sanctions legislation to resolve the issue, but concluded that there was not. Further financial sanctions legislation includes directly applicable EU regulations, which the UK does not have the power to amend unilaterally. In addition, it was important that this change was made to come into effect before 1 January 2019 so that banks will not be in technical breach of the ring-fencing regime once the legislation comes into effect.
On the need for specific legislation itself, as referred to by the noble Lord, Lord Tunnicliffe, we are committed to implementing a robust and successful regime. That means that we will act if we spot problems with the regime that cause conflicts in existing legislation. The Treasury and the Prudential Regulation Authority will continue to monitor closely the relevant banks’ implementation plans to ensure that they are robust. I think that those were the principal two points that were raised. I apologise for not having the information referred to by the noble Baroness, Lady Kramer, at my fingertips, but I hope that it can be found from another source.
Lord Tunnicliffe
Is there a possibility of the Minister sending us a letter on either of our points to develop his answer a little more?
Lord Bates
I can certainly do so. Noble Lords are very kind and courteous. It would be a courtesy to do it the old-fashioned way and send an email with summary statistics, rather than pointing to a URL address. That goes for any other points that have not been covered, of course.
Occupational Pension Schemes (Master Trusts) Regulations 2018
(6 years, 4 months ago)
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Baroness Buscombe
That the Grand Committee do consider the Occupational Pension Schemes (Master Trusts) Regulations 2018.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)
My Lords, subject to Parliament’s approval, the regulations will introduce a new approach to how some occupational pension schemes are regulated. From 1 October, both existing and new master trust pension schemes will be required to be authorised by the Pensions Regulator and will be subject to ongoing supervision by the regulator to ensure that they are maintaining the standards required at authorisation. Any scheme that opts out of applying for authorisation, or which fails to meet the required standards upon application, will be required to wind up and transfer its members to an authorised scheme. These regulations will fully commence the authorisation and supervision regime for master trust schemes under the provisions of the Pension Schemes Act 2017. I am satisfied that the Occupational Pension Schemes (Master Trusts) Regulations 2018 are compatible with the European Convention on Human Rights.
The past eight years have seen a significant growth in the master trust pensions market. Membership has grown from 200,000 in 2010 to approaching 10 million today. This market now accounts for assets of over £16 billion and will continue to grow over the coming years. The rapid increase in both membership and assets is irrefutably linked to the phenomenal success of auto-enrolment. As a result of this success, we are introducing the new authorisation and supervisory regime, which will ensure that these new savers have assurance that they are saving into quality schemes where their money is well managed and protected.
We have always been clear that our expectation is that a significant number of schemes are unlikely to meet these standards and will need to leave the market. The regulator has worked closely with master trusts over the last two years to help them to prepare for these changes, including offering readiness reviews, which have been taken up by 33 schemes. As a result, it has a good understanding of those schemes that are most likely to close. Where this is the case, it is likely to be because they will not meet the quality standards being introduced, for example, because of poor administration or doubts about long-term financial viability.
I know that a number of noble Lords recently met with the regulator and raised concerns about what will happen to the members of those schemes that opt to close. The Pension Schemes Act 2017 introduced some retrospective measures to help to support the market and to protect members through the transition to full authorisation. These applied from the Bill’s introduction in October 2016 and came into effect on Royal Assent in April last year. They require that any scheme which is facing a triggering event, which is one that is likely to lead to it winding up, must immediately report the fact to the regulator, and charges made by schemes to members are fixed at October 2016 rates until the full regime comes into force.
During discussions on the Bill, noble Lords were clear that our expectation is that the market will respond to these changes. The emerging evidence shows that this is the case. The retrospective measures mean that the regulator is currently working closely and effectively with 20 schemes that have already either closed or signalled their intention to leave the market. This includes assisting them with finding appropriate destinations for their members. The introduction of new provisions earlier this year to ease and speed bulk transfers into and out of defined contribution schemes offers further support to members. In addition, where a scheme has started to wind up, the disclosure regulations ensure that members are made aware, allowing them to decide individually whether to accept the trustees’ default destination or make their own arrangements.
We expect that there will continue to be further consolidation of the market as we approach the October deadline. With this in mind, we are already aware of a number schemes that plan to promote their claim as a potential destination of choice for closing schemes by applying for authorisation at the earliest opportunity. In addition to the pull from schemes looking to expand their presence in the market by taking on members from closing schemes, there is a strong push from employers participating in those schemes as, regardless of the decisions made by the scheme, they remain obligated to meet their automatic enrolment responsibilities by ensuring that their employees are actively contributing to a pension scheme. We have always known that there would be a period of flux and change for the market, requiring close and active management by the Pensions Regulator, and the regulator is delivering.
I turn briefly to the policy. My officials have been working closely with both the Pensions Regulator and the industry to develop the detailed policy design for these regulations. This culminated in a public consultation on the draft regulations which was launched by my right honourable friend in another place, the Minister for Pensions and Financial Inclusion, in November last year. The consultation was well received and generated a number of supportive suggestions for technical improvements, which were most welcome. The only real issue of concern at that time was that we were not in a position to confirm the level of the authorisation fee. This was resolved by the time we published our response to the consultation in March this year, where we confirmed that existing schemes would be charged £41,000 and new schemes will pay £23,000. We recognise that this information may have an influence on a scheme’s decision whether to seek authorisation.
Your Lordships will be aware that the regulations have been the subject of scrutiny by the Joint Committee on Statutory Instruments and the Secondary Legislation Scrutiny Committee, neither of which found reason to draw the special attention of your Lordships’ House to these regulations.
I turn to the substance of the regulations. When the Pension Schemes Bill was before the House—ably stewarded by my noble friends Lord Freud, Lord Young and Lord Henley—the scope of the new regime was the subject of considerable debate. Our aim was always to design a regulatory regime that meets the needs of a very diverse market, ranging from long-established schemes, including many not-for-profit organisations, to new schemes set up in the wake of automatic enrolment.
However, during the passage of the Bill we were not able to confirm the details of how the powers to apply the regime to schemes that arguably fall outside the definition set out in the Act and to disapply it to schemes that otherwise would fall within the definition would be used. I can now confirm that the regulations will bring certain types of non-master trusts within scope—for example, what are often known as “cluster schemes” where schemes may have single employers but are run by the same people and are subject to the same rules. They also disapply the authorisation regime to some types of scheme which have specific characteristics that mean they meet the definition but do not face the same risks as master trusts—for example, certain small schemes where all the members are trustees and the majority of the trustees are members of the scheme. The intention remains to provide member protection proportionately.
To bring clarity to the application process, the regulations specify that the scheme must have a business plan approved by the trustees and the scheme funder. This will include detailed information about the ambition and financial strategy of the scheme, as well as providing details relating to the scheme funder, the systems and processes that are used and information on trustees and others in a position of influence over the running of the scheme. In addition, schemes and scheme funders will need to provide their audited accounts and the accounts of any third party funder.
The Act identified the five authorisation criteria that schemes must meet. First, fit and proper: the regulator will need to be satisfied that everyone running a scheme has the appropriate integrity and is competent. Secondly, financially sustainable: the regulator will need to be satisfied that the scheme can fund the operating costs, as well as the additional costs should it get into difficulty and possibly wind up. Thirdly, scheme funder: the regulator also needs to be satisfied that an appropriate entity is standing behind the scheme and is able to meet certain costs. Fourthly, systems and processes: when assessing whether the IT and wider systems and processes are sufficient to ensure that the scheme is run efficiently, the regulator must take account of the scheme’s need to provide an effective service to its members and to deliver the ambitions set out in its business plan. Fifthly, continuity strategy: prepared by the scheme strategist and signed off by the scheme funder, this will need to set out how the scheme plans to respond to and protect the interests of its members in the event of a triggering event. These are circumstances that could lead to the closure of the scheme.
It has always been our intention that once schemes have met the authorisation standard, the regulator’s role will turn to ensuring that standards are maintained. In extremis, the powers in the 2017 Act will enable the regulator to initiate a triggering event and require a scheme to wind up. This is an appropriately robust backstop for the most extreme cases. However, our intention is to avoid such extreme interventions through a supervisory process that supports high standards and encourages schemes to seek support when any difficulties are first identified. The regulator will require schemes to update their business plans regularly, including when significant changes occur, when there is a change to key personnel, or failure to meet a previously declared key milestone, target or planning assumption. The regulator will also be able periodically to request a supervisory return from any scheme. This will inform the regulator’s ongoing risk assessment of schemes and will be based on the five authorisation criteria. While the regulator can only request this return at most once a year, it will have some discretion over how regularly returns are requested, based on an ongoing assessment of the level of risk each scheme is carrying.
The master trust market is growing and vibrant and it is not our intention to interfere in it. We expect schemes to continue to join and exit the market over time. I have set out the process for those entering the market; I now turn to how the regulator will support the members of schemes that exit the market.I have previously described “triggering events”, which are those likely to risk the scheme being closed and wound up. When this occurs, the scheme is required to convert its continuity strategy into an implementation strategy, including setting a clear timetable for either resolving the issue or closing the scheme. The regulator will work with the scheme to ensure that appropriate action is taken at each stage, including notifying employers and members about what has happened and what their options are if the scheme is going to wind up. The financial sustainability requirements will mean that there are sufficient funds to see the scheme through the transition period. Restrictions on charges in the Act mean that additional costs cannot be passed on to members.
In conclusion, we are ensuring that master trust scheme members—particularly members of schemes that are opting to wind up—are protected and supported before the new regime is fully rolled out in October. This new approach is widely accepted and supported by the industry, which in turn is being ably supported in its preparation for the changes by the Pensions Regulator. These regulations introduce a robust new regime for master trust pension schemes that will provide added protection for millions of people saving towards their retirement, most of whom are doing so as a result of automatic enrolment. These changes are necessary, and I commend the regulations to the Committee.
Baroness Drake (Lab)
My Lords, I welcome these regulations, and I thank the Pensions Regulator for its courtesy in providing a briefing on master trusts to interested Peers. With approximately 10 million members and £16 billion of assets under management in these trusts—which will increase even further, particularly given the rise in automatic enrolment statutory contribution levels—the need for a robust authorisation, supervision and resolution regime to protect individual savers is compelling. The risks of not having such a regime were fully aired during consideration of the Pensions Act 2017.
These regulations cover the five criteria which authorised master trusts must meet, and I will refer to two in particular. The first criterion is that the scheme is financially sustainable. This requirement expects master trusts to hold sufficient financial resources in sufficiently liquid assets to cover certain costs and is at the heart of protecting individual savers from financial detriment in the event of a triggering event such as scheme failure or wind-up. However, nearly £6 billion of assets is currently held in master trusts which do not even have a voluntary master trust assurance. I also note that the impact assessment assumes one triggering event each year after “steady state” is reached in 2019. This seems high given the regulator’s assumption that only 56 master trusts will be authorised.
The master trust authorisation regime has, understandably, the flexibility to accommodate a wide range of financing requirements and different scheme funders. That also means, however, that the public need a high level of confidence that the financial sustainability requirement will be robust throughout that wide range. In setting the financial sustainability requirement covered in Schedule 2, what assurance—or further assurance—can the Minister give about the level of prudence expected in any estimates and strategy for meeting those relevant costs?
The definition of “prudency” has become somewhat loose in the DB funding regime and the regulator is taking steps to tighten up what is expected, so reassurance on prudency in the master trust financial sustainability regime is welcome. Will the Pension Regulator’s financial sustainability regime be benchmarked, for example against the Prudential Regulation Authority’s regime for capital adequacy? If an authorised master trust subsequently closes to new business but continues to run as a closed scheme, how will that impact on the financial sustainability assessment and will the trust automatically be required to transfer the members to another scheme?
Lord Kirkwood of Kirkhope (LD)
My Lords, it is always a pleasure to follow the noble Baroness, Lady Drake. She is an expert in these matters and we are fortunate to have her to assist our deliberations. I also support the regulations. Some of us who were involved in the 2017 legislation felt that we were taking risks in that the Government did not properly address the question of gaps. Speaking for myself, these regulations ostensibly fill those gaps. Obviously there is still a degree of uncertainty because the field is new and developing and we are dealing with a specialist set of organisations.
As has been said, the stakes in this important area of public policy are extremely high when it comes to the pension security of the 10 million members of these trusts and the amounts of money that are being invested. I agree with the point made by the noble Baroness, Lady Drake, on the systems and processes that are set out clearly in the regulations. I support the consolidation that has gone into the regulations. I sit at the feet of the noble Lord, Lord Trefgarne, who is dutifully here; he is the chairman of the Secondary Legislation Scrutiny Committee and keeps us at a very high standard. As the Minister said, it is true that we found no difficulty with the regulations. They are very extensive and clear, and an example of the kind of thing that the noble Lord, Lord Trefgarne, and I would like other departments to emulate. Having said that, I think the DWP has been an offender in the past, but it has improved its ways and the evidence is in front of us in these regulations this afternoon.
I worry about the cleanliness of the data, as a former chair of the DC scheme for the General Medical Council’s staff superannuation. We always struggled, even with a really well-run scheme, to keep the data clean, keep the contribution levels accurate, and make sure that the investments were made and the administration carried out. We are operating in this new system at one level removed, if you like, because the employers are separate from the master trust administrators. The regulator will need to focus on making sure that the systems and processes that are eventually put in place, using technology, are sufficient for their purpose. As has been said, people can get seriously prejudiced against through no fault of their own, and without knowing that they are being prejudiced against until it is too late. That is a very important point.
Can the Minister say a word about the codes of conduct that will flow from the regulations? There has been a consultation—which I think I am confident about; I have heard no complaints about that and have no reason to believe that there are any surprises waiting for us in the code of conduct. Can the Minister reassure us that this work is in hand and that it will be available in time and will add the necessary detail to the schemes when they come into play in October this year?
While I am on my feet, it is not directly relevant to these regulations per se, but I think we are all very interested in pursuing the pensions dashboard. There have been rumours—I put it no higher than that, although my spies are everywhere—that the department is struggling to find the time or capacity to deliver on the promises that were made by former Chancellor Osborne all those years back. It is an important part of being able to allow people to assess what kind of living standards they will have in retirement or whether there is any backsliding or suggestion that the priority is being withdrawn from the development work on the pensions dashboard. Although it is not directly relevant to these regulations, I would like an assurance from the Minister that this work is proceeding at full speed and that we can confidently look forward to the dashboard playing a part, eventually, over the 10-year period of the impact assessment to help people understand their pension provision.
I hope that the codes of practice will make clear the practical steps that have to be taken by master trusts to make sure that their members are timeously and regularly advised with proper communications about what is happening to their investments and schemes. That is important in order to keep the connection flowing between the people administering the schemes and the members themselves. These are very important regulations; I think that they are sufficient for their purpose, but there is still some work to do because we are in new territory. We cannot be casual about 10 million people and £16 billion of assets. We must all maintain vigilance over the development of this scheme and we look forward to it being introduced, hopefully in a constructive way, in October this year.
Lord McKenzie of Luton (Lab)
My Lords, I thank the Minister for her very full introduction of these master trust regulations and for the extensive accompanying documentation made available, notwithstanding that it had to compete with tennis at Wimbledon, the World Cup and a decent game of cricket. I join my noble friend Lady Drake and the noble Lord, Lord Kirkwood, in thanking the Pensions Regulator for a briefing that provided us with an update on what is happening in the market and on what the regulator is doing to build capacity for the authorisation process.
I should say at the outset that we are, of course, supportive of the Pension Schemes Act 2017 and of the thrust of these regulations, which flow from it. We particularly support option 2 in the impact assessment, which explains, as has the Minister, the introduction of a new compulsory authorisation regime building on the framework of the voluntary master trust assurance framework.
As has been acknowledged in this short debate and previously, the growth of master trusts is associated with the success—I think “phenomenal” was the word used—of auto-enrolment, with now some 1.1 million employers automatically enrolling 9.4 million eligible workers. As of March 2017, 59% of those auto-enrolled have been enrolled into a master trust. Hitherto the regulatory regime applicable to master trusts—that applicable to DC occupational schemes—was largely designed to address risks of single employer schemes. As the impact assessment sets out, such a regime of itself is inadequate to cater for new types of business structures associated with master trusts, with changes to the relationships between key players, the introduction of the profit motive and coping with multiple employers, not to mention the scale of some of the providers. There is a need for a regulatory regime that encompasses an authorisation process, fit and proper persons requirements, financial sustainability and scheme funder requirements, a continuity strategy and an obligation to notify the regulator of significant events.
As the Minister said, we know that such a regime will hasten the process of consolidation of schemes. Indeed, this has already begun. The Pensions Regulator told us that, from a starting number of 81 schemes, some 45 are expected to go through to submit formal authorisations, although page 26 of the impact assessment refers to 87 being within the definition. Perhaps the Minister can reconcile those two numbers for us.
Some of these regulations came into force on Royal Assent, and the remainder will come into force on 1 October 2018, with the exception of Regulations 23(2)(b)(i) and (ii), which come into force on 1 April 2019. These appear to relate to the application of fraud compensation facilities. Could the Minister explain why there is this different starting date, and can she tell us under which provisions the current consolidations are proceeding? Do some precede the application of the 2017 Act and, if so, what difference does this make? Could she also say how many different master trusts have been recipients of transfers in when others have exited the market, and how these were identified? She will be aware of the discussion which took place during the passage of the Bill, led by my noble friend Lady Drake and supported by the noble Baroness, Lady Altmann, concerning a funder of last resort to manage cases where there is no trust prepared or able to take a transfer. What in these regulations will give reassurance on this point beyond what is in the Act? What is the contingency plan, where records are a shambles—the noble Lord, Lord Kirkwood, referred to those circumstances—and there are insufficient resources? When debated in the Commons, the then Minister explained that the Government were working to establish a panel of white knights. Could we have an update on progress on that?
During the passage of the Bill we debated whether it would be appropriate for the member engagement strategy to be included in the application for authorisation. Although resisted at Committee, the Government undertook to ensure that the regulator should take account of communications matters when deciding whether the scheme is run effectively. Perhaps the Minister will outline what is now proposed. She might also say something about what responsibilities might be placed on master trusts concerning communication and engagement with a pensions dashboard. I join the noble Lord, Lord Kirkwood, in probing exactly what is happening on that. Perhaps we can hear what progress is being made.
Baroness Buscombe
My Lords, I thank all noble Lords for their considered contributions to this short debate. A number of issues were raised, which I will attempt to address—I say “attempt”, thinking of the noble Baroness, Lady Drake, who I have huge respect for, given her considerable expertise in this area.
The need for financial sustainability of the scheme must be at the heart of what we are doing to protect savers. We must be sure that the scheme is financially secure. We have always been clear that we expect that some master trusts will decide to exit the market. Also, over time the market will consolidate as many of the schemes are designed to work best when operating at scale. The regulator has been working closely with schemes, whether to support them to prepare for authorisation or to leave the market. We have always known that some schemes would not meet the standards because they would not be financially viable over the longer term. There are also schemes where the administration is not of an acceptable standard or where the people running them would not meet our requirements. It is important that members’ saving schemes are financially robust and of high quality, and we believe that the measures we have introduced are proportionate responses to the risks in the market. We also expect that new schemes will enter the market over time.
I have been asked whether we can be confident that the risk of a master trust failing in a catastrophic manner, if I can put it that way, is low. The system has been designed to protect against failure to the best of our ability. Measures such as the financial sustainability requirements and the need for an implementation strategy aim to make master trust closure as orderly and well-managed as possible. As the noble Lord, Lord Kirkwood, said, this is new territory, so it is critical that, through this process and going forward, we work closely with all stakeholders and ensure that the Pensions Regulator can work closely with master trust schemes and continue proactively to assess the level of risk in the master trust market so that it is alert to any significant changes in a particular scheme. One of the important points I made at the outset is that maintaining strong oversight to the best of our ability while continuing in a sense to maintain a light touch is an important balancing act for the regulator in this market.
The noble Lord, Lord Kirkwood, asked about inaccuracy of data and what processes are in place to ensure that the correct contributions are being paid if providers do not know the pensionable salary of an employee. As we know, automatic enrolment has been a great success and we have put in place a robust compliance framework, overseen by the Pensions Regulator, on how to abide by the law. An employer is required to select a qualifying pension scheme, enrol qualifying staff into that scheme and deduct any contributions payable under automatic enrolment. Employers are also required to pay those contributions across to their chosen pension provider by a set deadline. Although the deadlines for contribution payments vary depending on the type of scheme being used, there is an overall legal deadline of the 22nd day of the following month, which aligns with the HMRC deadline for paying tax and national insurance.
Qualifying pension schemes for automatic enrolment are subject to the same regulatory framework as all trust-based pension schemes, also overseen by the Pensions Regulator. There are published codes of practice on its website setting out how the trustees of defined contribution pension schemes and the managers of personal pension schemes should monitor the payment of contributions and report payment failures to the regulator.
The noble Lord, Lord Kirkwood, also asked how we can ensure that consumer interests are properly safeguarded and their information protected. We are talking about data in this context. Governance and security were considered as part of the pensions dashboard prototype project and subsequent interim phase. The recent Which? report, published in February 2018, also looked at and stressed the importance of regulation in this area to protect consumers. The Government will examine those findings alongside industry and the regulator as part of their feasibility work.
For many people, the state pension will form an important part of their overall retirement income, so people can access the online Check your State Pension service through GOV.UK to get a forecast of their state pension and information about how they might improve it, and to view their national insurance contribution record. We are considering the industry group project’s recommendation that state pension data should be available alongside private pension information from day one.
Schemes are required to provide details of the systems and processes used or intended to be used in running their scheme as part of the application. This applies whether the systems and processes used are devised, applied or maintained by the scheme or service provider. Schedule 4, on systems and processes requirements, sets out the information required, which includes the features that will be part of the system.
The noble Lord, Lord Kirkwood, referenced the pensions dashboard; I think he referenced a particular press item. We do not comment on press leaks, but I can say that the Government are working with the regulators, wider industry and other sectors on the options for the development of a pensions dashboard. We are in the concluding phase of the feasibility study and will share our findings in due course. I add to that something my honourable friend in another place said today before a Select Committee. To remind noble Lords, he said that,
“the chancellor, in 2016, set out … an enthusiasm for a dashboard”,
but,
“how it is then provided and what … form it takes, is … a matter for ongoing debate”.
There is an acceptance that there is a proper and legitimate debate as to whether this is a single, uniform dashboard. Indeed, I remember the level of detail that, for example, the noble Baroness, Lady Drake, referenced in Committee on the single financial guidance Bill, saying that we have to learn to crawl before we can walk and to walk before we can run. We have to get this right. That is as much as I am able to say.
There was also a question about the code of practice from the noble Lord, Lord Kirkwood. There is an eight-week consultation on this. The general consensus from industry is that this is an important part of the authorisation and supervisory role, but we very much have a strong eye on the application of the code of practice.
A number of questions were asked by the noble Lord, Lord McKenzie. For example, on the fraud compensation fund, he asked what happens about the levy if a scheme is waiting for authorisation under the Pension Schemes Act 2017, and why 1 April. Any master trust schemes authorised during the financial year 2019-20 can benefit from the lower levy cap of 30p per member for the whole of the year, irrespective of when during the year they are authorised. This is a transitional measure that applies only to the year 2019-20. New master trust schemes established after that financial year will be subject to the existing rules on the fraud compensation fund levy. They will pay for the portion of the year that they were registered.
It is important to reference the need for consistency when approving master trust applications. Of course, the Pension Schemes Act 2017 sets out the criteria that must be met for the scheme to be authorised. The regulator will take a risk-based approach based on the evidence provided. The evidence presented will be assessed objectively, with specialists assessing specific aspects of evidence. For example, IT specialists will be deployed to assess objectively the system schemes will use. For existing master trust schemes, the decision to authorise sits with the determinations panel—an independent committee of the regulator. For new master trust schemes, the decision to authorise will be made by the executive arm of the regulator.
Baroness Buscombe
I am grateful to the noble Lord. I will write to him and share what I write with all noble Lords who have taken part in the debate.
I want to touch on the kind words of the noble Lord, Lord Kirkwood, in reference to my noble friend Lord Trefgarne. All too often, committees that are not on the Floor of the House or in the Moses Room are quietly proceeding on the more technical and difficult issues and we do not pay them due regard in a public manner. I want to do that now. I thank the noble Lord, Lord Kirkwood, for complimenting the department on getting it right in terms of our consideration of and the detail in the regulations. That is important because we are protecting people’s lifetime savings. We want to do this to the best of our ability while allowing many more people to take part in the scheme.
I am sure I do not need to persuade your Lordships that with millions of hard-working people now saving towards their pensions, it is only fair and proper that their savings are protected and that the schemes they are saving with are of a high quality and offer good value. The regulations will help to achieve this by bringing into effect a new regulatory regime which will ensure that schemes are well run. For the past couple of years, the Pensions Regulator has been working closely with master trusts to help them prepare for these changes. Following the introduction of the regulations, my officials and staff at the Pensions Regulator will continue to work closely with the industry—that is an important point to make—to support it in its preparations for making an application for authorisation and going forward.
I wish to thank all noble Lords again for their excellent contributions. Some of their questions were very difficult, I have to say.
Investigatory Powers (Codes of Practice and Miscellaneous Amendments) Order 2018
(6 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Williams of Trafford
That the Grand Committee do consider the Investigatory Powers (Codes of Practice and Miscellaneous Amendments) Order 2018
Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, the regulatory framework governing the use and authorisation of investigatory techniques provided for by the Regulation of Investigatory Powers Act 2000, or RIPA, ensures that the public authorities empowered to use these important techniques do so in compliance with the right to privacy under Article 8 of the European Convention on Human Rights. Noble Lords will be aware of how important these provisions are, along with those in related legislation, including the Investigatory Powers Act, to the vital work undertaken by the intelligence and law enforcement agencies, as well as by other public bodies with enforcement or regulatory functions. These Acts allow for the authorisation of investigative techniques that are used by investigators to obtain intelligence and evidence to disrupt the activities of serious and organised crime groups, prevent terror attacks, establish guilt, and ensure that our agencies can locate and safeguard vulnerable and missing people.
The RIPA framework ensures that there are strong, transparent safeguards in place that are appropriate to the intrusive nature of these investigatory powers, so that they are used lawfully and proportionately. This is developed further by the significant strengthening of safeguards and changes to the oversight of all investigatory powers brought about through the Investigatory Powers Act. These strengthened safeguards, therefore, together with the clear requirements set out in the codes of practice and the rigorous independent oversight provided by the Investigatory Powers Commissioner, establish clear limits around the use of these powers, and ultimately provide reassurance to the public that the powers are being used in ways that serve the best interests of us all.
The Investigatory Powers (Codes of Practice and Miscellaneous Amendments) Order 2018 introduces three revised codes of practice, as well as making some amendments and updates to the public authorities authorised to use surveillance powers under RIPA. The order also makes a minor technical amendment to provisions on the use of combined warrants under the Investigatory Powers Act 2016. I am aware that the noble Lord, Lord Haskel, is keen that we also discuss today the Regulation of Investigatory Powers (Juveniles) (Amendment) Order 2018, which amends the existing authorisation regime for the use of people under the age of 18 as covert human intelligence sources. I thank him for giving the Committee the opportunity to hear about the extensive safeguards in place.
The revised codes of practice provide guidance on covert surveillance, property interference, covert human intelligence sources, or CHISs, and the investigation of protected electronic information—activities which are regulated by RIPA as well as by the Police Act 1997 and the Intelligence Services Act 1994.
First issued in 2002, the CHIS and covert surveillance codes of practice were last updated in 2014. They, along with the investigation of protected electronic information code, which was introduced in 2007 and has not been updated since, have all been updated, mainly to reflect the changes brought about by the Investigatory Powers Act. These include the creation of the new Investigatory Powers Commissioner, the changes made by the introduction of equipment interference as a technique separate from the existing property interference powers, and the need to mirror the strengthened safeguards for the handling of confidential and privileged material.
Other updates and clarifications have been made to the guidance to reflect and improve current operational practice. We consulted publicly on them at the end of last year. For instance, the guidance on procedures to be followed where investigators use the internet for covert investigatory purposes or where covert surveillance is undertaken by means of drones, and the provisions intended to reinforce the safety of covert human intelligence sources, have all been expanded.
In addition, we are updating the lists of the public authorities and officers able to authorise the use of directed surveillance and covert human intelligence sources. These updates ensure that public authorities can continue to authorise the use of investigatory powers following changes to their organisational structures and remove any authorities that no longer require the powers, and are in themselves a safeguard against the inappropriate or indiscriminate use of the investigatory powers. They ensure that their use is limited to specified public authorities and can be authorised only by specified officers within those authorities who have sufficient authority and expertise.
Lastly, we are correcting a technical error in the Investigatory Powers Act provisions for authorising a combined warrant, reflecting Parliament’s clear original intention that warrants should last for six months, rather than the clearly far-too-short period of two working days. This timely improvement will assist our intelligence services in their work of identifying and disrupting threats to our national security.
All the changes to the codes of practice and the authorisation framework for the powers ensure that the highest standards continue to be required of those using the powers and that they are underpinned by ever-stronger safeguards against their misuse. I commend the order to the Committee and hope that during the debate I can provide reassurance to the noble Lord, Lord Haskel, and others on the use of juveniles as CHISs. I beg to move.
Lord Haskel (Lab)
I thank the Minister for introducing the order and for raising the question of the juveniles order. I think it would be of convenience to the Committee if we debated them together.
I sit on your Lordships’ Secondary Legislation Scrutiny Committee. Our task is to consider and scrutinise all the Government’s regulations and orders—what is known as secondary legislation. We report weekly on what we think would be of interest to the House and what gives us cause for concern. Normally we do this on paper, but we thought that the regulation regarding juveniles warranted further debate.
Our committee is a mixed bunch. Our chairman—the noble Lord, Lord Trefgarne—and other members of the committee are here. We are from all sides of the House. There are some old hands, like me, and some welcome new faces. Some have had experience in government. But the one thing that most of us have in common regarding this order—and I include Jane White, our experienced and effective adviser, who worked on the order—is that we are parents and, as parents, we know that young people in their mid to late teenage years are going through a time of great change, when they are vulnerable and often need support. Our concern is that the order does not provide that necessary support and understanding.
We wrote to the Home Office, saying that the Explanatory Memorandum—EM—explained why this extension of one month to four months was administratively convenient. Yes, the Explanatory Memorandum acknowledged the need to take account of the welfare of the young people. But it was not clear how this would be achieved. We wrote to the Minister for Security and Economic Crime about this concern. In reply, he justified the use of these young people, explaining that young people are increasingly both perpetrators and victims of crime and so are increasingly able to assist in the prevention and prosecution of crime. He certainly acknowledged the need to look after the young people’s welfare and said that the code was being updated—that is the code of which the Minister has just spoken.
The Explanatory Memorandum has indeed been updated. It mentions some of the safeguards and says why they are needed. But what is still missing is exactly how the welfare and safety of these juveniles will be achieved.
Working undercover can be made to look very attractive to a juvenile, but what about the risks? There is the risk of being beaten up, of sexual exploitation, of reprisals, as well as the impact on their education and on their mental health. The Home Office reports that it has to deal with an increasing number of mental health problems. The Minister is also silent on the number of young people involved in this undercover work, so we ask: is it right to put one juvenile in jeopardy for the greater good?
Baroness Jones of Moulsecoomb (GP)
My Lords, I have been watching the Met Police moderately intensely for nearly two decades. I genuinely thought that I could not be surprised, but I have been surprised by this. I congratulate the Secondary Legislation Scrutiny Committee on bringing this to our notice, and the noble Lord, Lord Haskel, on explaining the situation so eloquently and passionately.
I was surprised and shocked to find out that the police and other public authorities are legally allowed to use children as spies, doing police work. I found out only because the Government want to change the rules so that rather than authorising a child to spy for only one month at a time, they can be authorised for four months. I want to state this very clearly because, like myself, most people will not know it: children are being used by the state to infiltrate criminal groups and do dangerous police work. I do not see how this can be considered acceptable.
The Home Office Minister has linked child spies with terrorism, gang violence, child sexual exploitation and county lines drug rings, and appears to have suggested that the impact on the child spies can be outweighed by the benefit to potential victims. I am frequently infuriated, even confused, by the things that the police and security services do, but to me this is absolutely staggering, especially when you realise how little safeguarding is in place for the affected children. The authority using the child spy has to conduct a risk assessment and then consider whether it is justified to expose the child to the identified risks. Someone has to be in charge of the day-to-day welfare and monitoring of the child spy, but we already know how badly the police have failed in such duties in the past.
For example, the ongoing “spycops” public inquiry has highlighted how the police can lose track of people and turn a blind eye to things that are potentially highly illegal and dangerous. Trained undercover police officers have gone rogue and acted beyond their authority, forming sexual relationships with women in campaign groups and even fathering children, before disappearing, never to be seen again. If this can happen when the police are watching trained police officers, what worse things could happen when children are at risk? How can we trust the police to perform their duty to the child spies whom they are recruiting and putting in danger?
How many child spies have been deployed under the power in Section 29 of the Regulation of Investigatory Powers Act 2000? What assessments have been conducted of how effective child spies are, what dangers they have been exposed to and what tangible results were obtained by their deployment? What rights and remedies do child spies have if something goes wrong or if they feel that they have been let down by their police handlers? I know the answer: almost nothing. They have no protections. We have heard from the Minister about safeguards but I would argue that not enough safeguards are in place. I think that most people would be shocked to learn that children are being used as spies and being exposed to such unimaginable risks. I doubt that it leads to any serious results in terms of fighting crime, while exposing children to real danger. This is yet another example of the inhumanity in our current system. We in your Lordships’ House have a chance not only to expose this but to attempt to correct it.
Lord Trefgarne (Con)
My Lords, I want to intervene briefly. I thank the noble Lord, Lord Haskel, for bringing this important issue of the use of juveniles for covert intelligence gathering to your Lordships’ attention. I have the honour of being the chairman of the Secondary Legislation Scrutiny Committee, as the noble Lord, Lord Haskel, was kind enough to point out. He is an experienced and distinguished member of the committee and I am grateful for his contribution to our work.
Earlier this month, the committee considered this order, along with the associated code of practice, and we decided to report the instruments not only on the grounds of policy interest but because we were disappointed by the quality of the explanatory material laid in support. The effect of the order is to increase the period for which a juvenile can be authorised for covert intelligence purposes from one month to four months. What was of particular concern was that the original Explanatory Memorandum accompanying the order appeared to justify the increase on the grounds of administrative convenience, rather than focusing on the welfare of the young person concerned.
As chairman, I therefore wrote to the Minister, Mr Wallace, to express what I described in my letter as the committee’s “considerable anxiety” about using young people in this way. The Minister told us that juveniles, in acting as covert intelligence sources, would be able to assist in both preventing and prosecuting offences such as,
“terrorism, gang violence, county lines drugs offences and child sexual exploitation”.
That may be so, but these are all very serious offences. The use of juveniles—young people under the age of 18—in such a dangerous environment is, therefore, a profoundly serious matter.
In these circumstances, the Committee will, I think, wish to hear in detail what assurances my noble friend the Minister can offer about how the welfare of the juveniles involved in covert intelligence is protected, both while it is happening and in the longer term.
Lord Judge (CB)
My Lords, until last August, I was for two years the Chief Surveillance Commissioner—an office that no longer exists under the current legislation. I will echo one or two, but not all, of the points that have been made so far. If I may say so, I thought that the Explanatory Memorandum for this proposal in relation to juveniles was thoroughly inadequate and, if it had been adequate, would have said a good deal to allay the concerns that have been expressed today. I did not think that the letter from the Minister allayed those concerns—it did not address them, it seemed to me.
There is in fact an extremely careful system for supervising, organising and taking responsibility for all CHIS. There are very few juvenile CHIS, for all the reasons that have been given; I do not think the figures have been kept, but I can say this. What may not be apparent to many people in the Committee today is that each police force is examined and inspected by independent inspectors, answerable to a judicial figure, and the inspections cover every form of intrusive investigation that has gone on and all issues relating to the use of covert human intelligence. I can say from my own experience—it is not a state secret—that in relation to any CHIS activity involving juveniles, the inspectors pay particular attention to see that the issues of welfare and so on have been properly addressed. All this could have been explained and made available to the Secondary Legislation Scrutiny Committee, which would then have formed whatever view it thought appropriate.
There is, however—I could go on for some time about this—one point that needs consideration if the Government, decide to follow the suggestion made by the noble Lord, Lord Haskel. Within the surveillance process, in relation to authorisation for intrusive surveillance, such an order, however made—even by the chief constable himself or herself—does not take effect until it has been approved by a judicial commissioner and when the notice of that decision has been given to the person who granted the authorisation. It might just be worth giving some thought to using that particular additional safeguard when we are considering the rare occasions when a juvenile CHIS is being used.
Lord Paddick (LD)
My Lords, I thank the Minister for explaining these orders, and other noble Lords for their contributions. There are some issues around the Investigatory Powers (Codes of Practice and Miscellaneous Amendments) Order 2018 that I would like clarification on before we get on to the major issue of the use of juvenile covert human intelligence sources. I therefore ask the Committee for a few moments to deal with those other issues.
I understand that this instrument brings into force the three revised codes of practice regarding the functions carried out under RIPA 2000, and that these need to be updated, not least because of the Investigatory Powers Act 2016 and the additional safeguards it introduced. One of the phrases in the Explanatory Memorandum—changes to “cover current practice”—is a little worrying, as it stands. I hope the Minister can reassure the Committee that the codes of practice have not been altered simply because law enforcement and intelligence agencies have changed how they do things. Surely the codes of practice are there to ensure compliance with government-defined best practice, not the other way around.
Baroness Jones of Moulsecoomb
I absolutely did not mean to imply that. I understand how they are recruited: I did not mean that.
Lord Paddick
I am very grateful to the noble Baroness, but I think it is important that that misinterpretation is not put on it.
As the noble and learned Lord, Lord Judge, said, yes, the Explanatory Memorandum is clearly inadequate, as is the letter from the Minister. It is almost contemptible in failing to address these issues. Clearly, it would be different if the Grand Committee had known in advance about these independent inspections of the use of CHISs, and the particular importance that inspectors pay to juvenile CHISs; but the fact remains that these inspections are post-event. These are not procedures that could prevent a juvenile being put into a dangerous situation beforehand.
The managing of informants, or CHISs, as they are now called, is one of the most sensitive areas of policing, fraught with danger—and that is just for adults. Using juveniles as CHISs is an order of magnitude more dangerous, as other noble Lords have said. Young people, through their immaturity and inexperience, are far more at risk when being employed effectively as spies, as the noble Baroness said, in criminal enterprises. They are far more likely to make mistakes and to blow their cover than mature and experienced adults. Law enforcement and other public agencies have always recognised this, and that is why, in the police service, the extraordinary step—and it is extraordinary—of employing a juvenile CHIS has to be authorised by an assistant chief constable, a commander or a more senior officer.
Until now, the authority has lasted one month. Clearly, the longer the CHIS is undercover, the greater the chance of being exposed and the greater the potential psychological strain and therefore risk of harm the young person might be subjected to. For that to be extended to four months without an officer of such seniority being asked to renew that authority is putting the young person in grave danger, in my personal and professional judgment. These decisions were always taken with the greatest care and consideration, and it was ensured that the case for engaging and renewing was taken by a very senior officer, several levels above the investigating officer, and therefore with objectivity and independence, crucial to ensure the safety of that young person.
The world is a much more dangerous place than it was when I was a police officer, let alone a detective chief inspector. As the noble Lord, Lord Trefgarne, has said, the Explanatory Memorandum talks about child exploitation, terrorism and gang and drug crime involving more and more young people. There is a real danger that juvenile CHISs could become victims of child sexual exploitation, or the discipline meted out to members of gangs by other members of the same gang, including sexual assault, rape and being stabbed in the leg. These levels of violence among juveniles were rare in my time as a police officer but are now far more common.
At a time when the threat to CHISs is increasing and the threat to an immature and inexperienced CHIS is even greater, the Government are seeking to reduce the safeguards for these vulnerable young people. That is unacceptable. I do not want it on my conscience that a juvenile CHIS has been killed or seriously injured as a result of relaxing the necessary safeguards that are in place at this time. I seriously ask the Government to rethink this provision, not least because the consultation on these changes does not appear to have included organisations or specialists in the welfare of children such as those who work with gangs, ex-gang members, or child psychologists.
Given more notice and time and at a different point in the parliamentary timetable, I would have prayed against this provision and divided the House. It is not too late for the Government to withdraw this order, at least until the Minister has satisfied herself that appropriate advice has been taken on the potential risks associated with these changes.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I thank the Minister for presenting the order to the Grand Committee. I also thank my noble friend Lord Haskel for moving his Motion and, in doing so, highlighting the issues of concern that have been raised by the members of the Secondary Legislation Scrutiny Committee in its 35th report published on 12 July. They have highlighted an issue of very serious concern for all members of the Grand Committee this afternoon.
The Grand Committee and the House are grateful for the work done by the committee, chaired by the noble Lord, Lord Trefgarne, in scrutinising every instrument that is laid before the Parliament. That is a very important job, getting into the nuts and bolts of what these orders are doing. It is able to get at what a particular instrument does and, through its engagement with Ministers and through its reports, bring matters to the attention of the House.
Covert surveillance is an important tool for our law enforcement agencies, the police and security services. It is a tool that can be used to provide evidence, to detect and prevent crime and, of course, to bring the perpetrators of crime to justice. It is a very important tool to keep us all safe. It is necessary, as there may be no other way to gather the intelligence needed. Having said that, we have to have proper codes of practice in place. When intelligence-gathering involves young people under the age of 18—people who are legally children, as we have heard—that is of serious concern to Parliament and to the Grand Committee today. How are their rights protected? Are adequate protections in place to take care of their physical and mental well-being? Is care taken, and what risk assessments are undertaken to ensure that that is the case?
As we have heard, the order before the Grand Committee today proposes to extend the period for which a person under the age of 18 can be used as a covert human intelligence source—what a name—from one month to four months. Terms such as “administrative convenience” from the Home Office do nothing to reassure members of the Committee that the Government have got the balance right here.
What should be of paramount importance is the welfare of the child who is being used as a covert intelligence source. Does the Minister accept that to seek to extend the term from one month to four months, you need to have clear reasons and to better explain what is being done, demonstrating that the welfare of the child is properly taken into account, other than it will be administratively convenient for the department? Further, can she tell the Committee how the Government have satisfied themselves that these proposals satisfy Section 1 of the Children Act 1989 and the UN Convention on the Rights of the Child, which the UK ratified in 1991? Could she also say something about how the safeguarding and protection of these children is delivered while involving them as covert human intelligence sources? I accept the point that the noble Lord, Lord Paddick, made on individual children and the wider community, but how we balance that out is very important.
Baroness Williams of Trafford
I thank all noble Lords who have taken part in this debate, in particular the noble Lord, Lord Haskel, who introduced some of the committee’s concerns. I apologise for the quite unsatisfactory Explanatory Memorandum, about which the noble and learned Lord, Lord Judge, and to a certain extent the noble Lord, Lord Paddick, gave very good explanations and far more of the context, which is a learning point for me and for the Home Office. I repeat the point that all noble Lords made about the welfare of the child being paramount. The noble Lord, Lord Haskel, said that he is a parent; I am too. It is the most important thing that we are discussing.
I will start by addressing the Regulation of Investigatory Powers (Juveniles) Order 2018, which the Secondary Legislation Scrutiny Committee expressed concern about and which has, in the main, been the subject of interventions today. Over the past 18 months, at the Security Minister’s instigation, the Government have been conducting a review with operational partners of the covert human intelligence source, or CHIS, authorisation framework to consider whether it is working as effectively as it could. This included consideration of the Regulation of Investigatory Powers (Juveniles) Order 2000 which put in place a set of enhanced safeguards that apply specifically to the authorisation of a CHIS under the age of 18, demonstrating that the ability to authorise people under the age of 18 as a CHIS is not something new. That has become clear in the course of discussions.
While investigators might wish to avoid the use of young people as a CHIS, we must recognise that, unfortunately, some juveniles are involved in serious crimes both as perpetrators and as victims. Consequently, young people might have unique access to information that is important in preventing and prosecuting gang violence, terrorism and child sexual exploitation offences. Noble Lords will undoubtedly be aware of reporting in the media recently—this was mentioned in the debate—on the escalating county lines phenomenon which, along with the associated violence, drug dealing and exploitation, has a devastating impact on young people, vulnerable adults and, of course on the communities they affect.
The existing juvenile CHIS regime allows for the use of a juvenile CHIS to be authorised for just one month at a time as compared to a 12-month authorisation for those over the age of 18. This can make their deployment more difficult to manage, which in turn can be unhelpful both to them and to law enforcement. It can also act as a deterrent to law enforcement seeking CHIS authorisation in some circumstances where immediate results might not be obtained during a one-month period, even if a longer, carefully managed deployment could provide a significant operational dividend.
To reduce the pressure to obtain immediate results from such an authorisation while still ensuring the protection of the juvenile, we are increasing the maximum length of a juvenile CHIS authorisation from one month to four months, requiring an authorisation to be reviewed at least monthly which will enable these deployments to be conducted in a more measured way. I will go into more detail on that in a second. Additionally, we have strengthened the protections around the appropriate adult required to be present at all meetings between the source and the public authority tasking them, and we are keeping the existing prohibition on all sources aged under 16 being tasked in relation to a parent or person with parental responsibility, which reflects the increasing independence of young people between the ages of 16 and 18 and that parental authority reduces accordingly—the point about 15 going on 25. I hope that reassures noble Lords that these changes are not about administrative convenience.
We think that these amendments will improve the operational effectiveness of the juvenile CHIS regime, while strengthening the protections for young people in this area and the safety and welfare of young people undertaking this important and dangerous role. This remains absolutely paramount.
Lord Paddick
Can the Minister explain how deployments are more difficult to manage if they are authorised for only one month? Presumably the deployment can continue and there is a review by an assistant chief constable or a commander to renew the authorisation, without interfering with the juvenile or the deployment. In those circumstances there would be no pressure to produce results within a short space of time if all we are saying is that the authority can be renewed by this more senior officer at the end of one month on an ongoing monthly basis, but it is very important that somebody of that seniority—that removed from the investigation—objectively decides that that authorisation should continue.
Baroness Williams of Trafford
For the convenience of the Committee, I will go through the process. Authorisations for the juvenile CHIS should be granted at an enhanced level, which is set out in annexe A of the code of practice. For example, for a police force this would be by an assistant chief constable, in comparison with the adult CHIS, where an authorisation would be considered by a superintendent. The code of practice requires that, where possible, the authorising officer who grants the authorisation should be responsible for considering subsequent reviews and renewals. That is how each month the whole thing is revisited to continue for a further month, up to four months. But all these processes need to be documented and considered by the handler, the controller and the authorising officer within the public authority and will be fully open to inspection by the Investigatory Powers Commissioner as well. This creates, in our view, a comprehensive framework of safeguards which ensure that the conduct is necessary and proportionate to protect the interests of that young person. With regard to increasing the maximum, they may not be able to finish off what they started within just one month and hence a monthly review, up to four months, is in place. The noble Lord is looking slightly confused so I will let him intervene.
Lord Paddick
Can the Minister confirm that the monthly review would be undertaken by an assistant chief constable or commander?
Lord Paddick
I still do not understand the difference between the current system, where that authorisation would have to be renewed by a commander or assistant chief constable each month, and a four-month authorisation that is reviewed every month.
Baroness Williams of Trafford
Under the current system it is only one month, whereas under the new system it would be up to four months but with a review every single month—and, yes, by the same senior officer.
Lord Kennedy of Southwark
Maybe I am being daft but I do not see the difference.
Baroness Williams of Trafford
I think I understand it. I apologise to noble Lords. The current system is limited to one month. The new system would be up to four months, but with a review every month.
Lord Paddick
I am very grateful to the Minister. At the moment, an assistant chief constable or a commander can authorise a juvenile CHIS to be deployed for a month. At the end of that month there can be an application from the handler to the senior officer to renew the authorisation so that it has the effect of continuing for another month, and so forth, for as long as it is necessary. The new system that the noble Baroness is suggesting is a four-month authorisation with a review by the commander or assistant chief constable at the end of each month. What is the difference between the two systems?
Baroness Williams of Trafford
I think I have the answer now. Removing the requirement for the activity to be authorised at monthly intervals removes the need for investigators to push for early results to justify re-authorisation—that is what I understand—thereby allowing the juvenile CHIS to be managed in a way that better suits the long-term investigation and reduces the risks to the young person.
Lord Kennedy of Southwark
This goes to the point about administrative convenience that was made at the start. It may make it more convenient for the officer concerned, but how does it benefit the child?
Lord Judge
If you have to have a review every month, why do you not conduct a renewal? What is the difference between the review and the renewal in those circumstances? That is the heart of it.
Lord Paddick
Perhaps I can assist. The handler decides that the CHIS needs to be in a gang for three months. The handler will know that, under the current system, at the end of each month, for three months, they will have to go back to the commander or assistant chief constable to renew the authorisation. What is the problem with that system that is overcome by the changes being suggested?
Baroness Williams of Trafford
I am very grateful to the noble and learned Lord, Lord Judge, because he seems to put things so clearly. I get the noble Lord’s point. Perhaps I may think about it and write to noble Lords, because I now understand exactly the point that the noble Lord is making—thanks to the noble and learned Lord, Lord Judge.
I will now move on to the appropriate adult point. We have strengthened the protections around the appropriate adult required to be present at all meetings between the source and the public authority tasking them. I think that I have already said this. We are keeping the existing prohibition on all sources aged under 16 being tasked in relation to a parent or person with parental responsibility. This reflects the increasing independence of a child approaching the age of 18.
I will now touch on the issue of consistency of approach.
Lord Paddick
I am very sorry; I know that it is late. I quoted from the draft revised code of practice. Paragraph 4.3 states:
“Public authorities must ensure that an appropriate adult is present at any meetings with a CHIS under 16 years of age”.
An appropriate adult has to be present at the interrogation of a criminal suspect under 18 years of age. My question was: why is there a difference between the two?
Baroness Williams of Trafford
The noble Lord did ask that and I did not answer it satisfactorily. I will write also on that point.
Perhaps I could move on to the oversight regime. The independent oversight of these investigative powers was first legislated for by the Police Act 1997, and the powers are now overseen by the Investigatory Powers Commissioner, who also oversees the powers provided for in the Investigatory Powers Act 2016. The commissioner, like those oversight commissioners his role has replaced, provides the guarantee of impartial and independent scrutiny of the use of these tactics. The oversight commissioners have published reports annually, and, in his final oversight report in 2017, the Surveillance Commissioner commented that,
“standards of compliance have steadily improved in my view, and addressing it generally, they are high”.
The Government accept that the Explanatory Memorandum originally laid alongside the juvenile CHIS order did not go far enough and, as the noble Lord, Lord Haskel, said, the revised version was laid last week. It provides greater detail on the changes made by the order and on the use of juveniles as CHISs more generally. However, I have to make it clear that the Explanatory Memorandum should not be read alone. As I have set out, those charged with authorising and handling young people who act as CHISs have access to extensive guidance available to them to ensure that juveniles are safeguarded. The Explanatory Memorandum is clearly not the right place for the detail that the code contains. Such detailed guidance on the use of these sensitive tactics is necessarily not in the public sphere, as to do so may undermine operational practices and have the potential of putting the CHIS in harm’s way.
The fact that these two orders were laid at the same time is not a fluke—rather, it is the continued development of a suite of statutory safeguards and associated guidance, revised and updated to ensure that these powers are used proportionately and in accordance with the law.
I will now turn to some of the issues which were raised by noble Lords. The noble Baroness, Lady Jones of Moulsecoomb, talked about using children as spies—and this relates to the numbers. I can say to noble Lords that the numbers are extremely low. We do not disaggregate by age, but as I say, the numbers are low.
Baroness Jones of Moulsecoomb
How do we know that they are low if the numbers are not kept?
Baroness Williams of Trafford
As I understand it, while we do not distinguish between different age groups, we know from discussions with public authorities that the number of juvenile CHISs is low as young people would not normally be deployed in this role, unless there is absolutely no other way to achieve the same result. That is how we know that the numbers are low.
Consideration will always be given to whether the same result could be achieved by other means, and only if it cannot is it necessary to authorise a CHIS. The police and other public authorities must conduct a risk assessment before a juvenile is deployed as a CHIS. That assessment must take into account the risks to their physical and psychological health, as the noble Lord, Lord Paddick, said. The codes of practice make it clear that the welfare responsibilities continue after the deployment ends.
The noble Lord, Lord Paddick, asked about amending the combined warrant provisions. We are making this amendment because one effect of the IP Act is that certain combined warrants that include an authorisation for intrusive surveillance that has been signed by a senior official rather than the Secretary of State would last for only two days. The shorter duration is appropriate under pre-existing legislation, RIPA, where the signature and issue of such an authorisation personally by the Secretary of State is a key safeguard. When that does not happen, the warrant has a shorter duration unless renewed by the Secretary of State personally. However, in the context of such an authorisation being included as part of a combined warrant under the IP Act, which is subject to the additional safeguard of judicial commissioner approval, it is not necessary or appropriate to limit the duration of the warrant to two days.
On consultation with organisations involved in safeguarding, there is no requirement to consult publicly on changes to the 2000 order. We did consult broadly with the operational community and the Investigatory Powers Commissioner’s office, which was involved in these discussions. All those who use juvenile CHISs have a duty of care to the CHIS and duties to safeguard children and young people. This was taken into account as part of the consultation with intelligence and law enforcement agencies. We consulted on the changes to the code of practice in late 2017 and, while that version of the code did not reflect the changes we have since made in respect of juvenile CHISs, no respondents to the consultation commented or raised any concerns about the use of juvenile CHISs more generally.
I think that I might finally be able to answer the question of the noble Lord, Lord Paddick, about who can be a responsible adult for a juvenile under the age of 18. The existing 2000 order puts in place a requirement that all discussion with a juvenile CHIS under the age of 16 must take place in the presence of an appropriate adult, who must be a parent or guardian of, or person with responsibility for, the young person, or any other adult. The order strengthens the safeguard by amending the definition of “appropriate adult” to prevent a person with no links to the young or any appropriate qualification from acting as an appropriate adult. In future, an appropriate adult would have to be a parent, guardian or person, such a youth social worker, who is otherwise qualified to represent the young person’s interests. The appropriate adult is an important safeguard to ensure that the young person is comfortable with what they are agreeing to. I have talked about the distinction between 16 year-olds and 18 year-olds and those aged under 16. Although there is no statutory requirement for those aged over 16 to be accompanied to meetings, the decision on whether to inform a parent or guardian of a source aged over 16 is taken on a case-by-case basis.
All noble Lords have referred to human rights. All public authorities must act in compliance with the ECHR as a result of the Human Rights Act 1998. The human rights obligation has been in force since 2000. As a result, the human rights of the CHIS must be complied with.
The noble and learned Lord, Lord Judge, asked about the double lock of a judicial commissioner’s approval. The Investigatory Powers Act 2016 followed three reviews into powers relating to obtaining communications. The Act, and therefore the safeguard of judicial commissioner approval, relates to those powers and does not extend to the powers being debated today.
Lord Judge
I thought that these draft regulations were meant to make things better. If it was thought to be a good idea, surely it would not be beyond the bounds of regulation-writing to write the regulation accordingly. I am on my feet, which I know I should not be. It will not be beyond the bounds of difficulty or take very long for a record to be made of every CHIS aged under 18—although not to find out how many CHISs have been aged under 18 in the past, because no records have been kept. Then we will know the facts. Next year, we should know and be able to come back and say, “Good heavens, there are far too many”, or, “Okay, there were only two, and they have been looked into”. I should have limited myself to my first point.
Baroness Williams of Trafford
I take the noble and learned Lord’s point.
The noble Baroness, Lady Jones, asked about undercover police work. The CHIS code confirms that police officers deployed as undercover officers in England and Wales must comply with and uphold the principles and standards of professional behaviour as set out in the College of Policing code of ethics introduced in 2014. The code specifies that officers must,
“not engage in sexual conduct or other inappropriate behaviour when on duty”,
and,
“not establish or pursue an improper sexual or emotional relationship with a person with whom you come into contact in the course of your work who may be vulnerable to an abuse of trust or power”.
Of course, this instruction applies as much to undercover officers as to any law enforcement officer.
The noble Lords, Lord Paddick and Lord Kennedy, asked about the best interests of the child. The code of practice requires that any public authority deploying a CHIS takes into account the safety and welfare of that CHIS and that a risk assessment is completed by the authorising officer before any tasking takes place. The order retains the requirement of the 2000 order that these risk assessments for juvenile CHISs are enhanced risk assessments. Furthermore, the code requires that the ongoing welfare and the security of the CHIS after cancellation of the authorisation be considered and reviewed throughout the duration of the deployment and beyond. These authorisations must be reviewed at least monthly and records maintained for at least five years.
The noble Lord, Lord Paddick, asked whether we are changing this because of law enforcement agencies. This is not about seeking to legitimise practice that was non-compliant with previous codes of practice; it is about reflecting the fact that new investigative techniques are being used by the police. He asked about the code changes. The overall impact of the changes to the codes will be to strengthen the safeguards provided in the codes and improve the guidance for practitioners. The changes reflect current practice and aim to improve operational practice, including expanded guidance to assist investigators in their use of these powers in an online context. It is important that investigators are able to make full use of the internet to assist their work, and equally important to take into account the privacy of people using the internet.
The noble Lord, Lord Kennedy, asked a very pertinent question about why parents might not be involved. It is true to say that in some circumstances it may not be appropriate that parents of a young person deployed as a CHIS are informed: for instance, where they support the ideology or, indeed, the criminal intent of those against whom the juvenile might be employed. He asked whether it is just for serious offences. There is no specific limitation on seriousness, but the strict tests of necessity and proportionality apply—the point about shoplifting should be seen in that context. He asked about the differentiation between “should” and “must”. The 2000 order requires that an appropriate adult “must” be present, and we have not changed that requirement.
I apologise once again for the less than satisfactory quality of the Explanatory Memorandum and for my inability to answer certain questions, but at this point I beg to move.
Baroness Jones of Moulsecoomb
Forgive me, I know it is late—and forgive also my ignorance. But, given that there are some unknown components in this, does that mean that the Government will pause?
Baroness Williams of Trafford
No. What I have offered to do is write to the noble Baroness and to noble Lords whose questions I have not fully answered. Generally, in Committee, that is accepted—but the noble Baroness may not accept it.
Baroness Jones of Moulsecoomb
I was hoping that the answer would be that these problems would be corrected in a new draft.
Baroness Williams of Trafford
No—what I was offering was to write to noble Lords on the points I could not fully answer.
The Regulation of Investigatory Powers (Juveniles) (Amendment) Order 2018.
Lord Haskel
That the Grand Committee takes note of the Regulation of Investigatory Powers (Juveniles) (Amendment) Order 2018.
Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee
Lord Haskel
My Lords, I thank all noble Lords who have spoken. By debating this, I think we have all benefited. We have benefited from the experience of the noble and learned Lord, Lord Judge, from the experience of the noble Lord, Lord Paddick, and from the forensic questioning of my noble friend. I am not sure that our concerns have been satisfied. The Minister has repeated quite a lot of what has appeared in the redraft of the Explanatory Memorandum. But I do not think that it has added very much to what we understood the situation to be.
I am glad that the Minister mentioned the human rights of young people. Because we are not very satisfied, perhaps I might ask the Minister to go away and think about whether the way to satisfy all our concerns would be to refer this to the Committee on Human Rights. I think that that would satisfy everybody and would also bring the matter out into the open. So for the time being, I beg to move.